TCS Daily

Brazil's dangerous denial

By Roger Bate - June 27, 2005 12:00 AM

When is a life-saving intervention somebody else's responsibility? From the example of Brazil, the answer seems to be: When it's expensive.

Brazilian Health Minister Humberto Costa has declared that the price of a new anti-retroviral drug developed by Abbott Laboratories of Chicago is so high that it is a risk to public health. He has given Abbott until the end of this week to offer an acceptable price or Brazil will start producing a generic drug at a state-run laboratory in Rio de Janeiro, according to BBC News online.

The threat is credible, and it unfortunately appears to be legal under the World Trade Organization's Doha Declaration (an amendment to the WTO's TRIPS agreement on trade-related intellectual property rights). That declaration was designed to allow for compulsory licensing and parallel importing of patented drugs in health emergencies in poor countries. Anti-retroviral virus treatment for HIV was the main impetus for this initiative and so this drug, Kaletra, falls within its realm. Abbott is already supplying drugs to Brazil at a loss, so there is every reason to expect the company to give away the drug rather than giving up the exclusive right to produce it, and have Brazil establish a worrying precedent.

Initially, this process may seem to be a triumph of fair play. But those with a longer view may draw parallels with the goose that laid the golden eggs.

Abbott is a private company; it funds its own research and, crucially, the onerous regulatory process required to register a drug, as do all pharmaceutical companies. The average cost of bringing a drug to market is $860 million. These costs are funded by the profits from successful products, and few can expect a Viagra to land in their laps (as it were).

If it can't cover even its costs for drug development, any drug company can not reasonably be blamed for losing enthusiasm for developing any more anti-retrovirals or, indeed, anything else that might be deemed by a health bureaucrat to be essential to public health. And my own research shows that there are 27% fewer companies working on AIDS research since 1997. Brazil's threats will only hurry more companies away from this largely unprofitable enterprise.

The principle of Brazil's action seems to be: "You will give up your property if I really need it." But has anybody really thought this through? Should that approach apply to anything? In all other areas of human interaction, there are laws against that sort of thing.

Brazil has won praise internationally for providing free anti-retroviral drugs to anyone who needs them, but if it carries out its threat it will have requisitioned a newly-developed product in which it has invested nothing. In the meantime, it also will collect revenue for its program from tariffs on other drugs, which in effect denies others access to the medicines they need. Brazil ordinarily imposes an 8.8% tariff on drug imports, a policy that has profited Brazil's treasury. Waiving the tariff for high-profile HIV drugs demonstrates that this practice is hard to defend, yet it continues.

There are 183 million people in Brazil; 600,000 are estimated by the health ministry to have HIV/AIDS. Not all will need anti-retrovirals, but many may require more immediate treatment for opportunistic infections such as tuberculosis - even if the TB drug imports have tariffs slapped on them.

Meanwhile, Brazil has an even more basic requirement for life and health for which it lacks a comprehensive plan. Some 43 million Brazilians currently do not even receive water supply services, never mind sewage treatment, Olivio Dutra, the Minister of Cities, told an UNCTAD meeting in September 2004.

Water-borne diseases are an immediate threat to life and the worst affected are children. Brazil's infant mortality rate of 30 deaths per 1,000 live births is 50% higher than Mexico's and more than four times that of the United States.

So clearly, there is much to be done. And Brazil wants outside for assistance. And, so far, it's gotten it.

The Inter-American Development Bank has pledged $95 billion to Brazil over the next 10 years to assist in water supply and treatment costs. The lenders include European countries, Canada, Israel and Japan, with the United States being a 30% shareholder.

Now, nobody's expecting countries to grovel in gratitude, but Brazil's belligerent attitude in snapping at and biting the very hand that feeds it - while a recognisable human trait - has begun to grate. What would the world think if the U.S. government pulled support from these efforts if Brazil continues to threaten its drug companies?

Brazil is in dangerous denial. It denies responsibility for paying for HIV drugs and responsibility over letting its poorest die from entirely preventable water-borne disease. Only those who want fewer HIV drugs can welcome Brazil's actions, everyone else should be worried.

Dr Roger Bate is a fellow of the American Enterprise Institute


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