This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 08 BRASILIA 002157 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR WHA/BSC, WHA/EPSC, AND EB/TPP/IPE 
USAID FOR LAC/AA 
DEPT PLEASE PASS TO USTR FOR SCRONIN, LEYANG AND BPECK 
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D 
USDOC FOR 3134/ITA/USCS/OIO/WH/RD/DDEVITO/DANDERSON/EOL SON 
NSC FOR KBREIER 
 
E.O. 12958: N/A 
TAGS: KIPR ETRD IPR
SUBJECT: Brazil's National Health Council Recommends 
Compulsory Licensing of Antiretrovirals 
 
Ref:  Brasilia 1716 (Notal) 
 
¶1.  SENSITIVE BUT UNCLASSIFIED 
 
¶2.  (SBU) Summary.  Adding to the tension surrounding 
negotiations between the Ministry of Health and U.S. 
pharmaceutical companies over potential compulsory licensing, 
on August 11, Brazil's National Health Council approved a 
resolution in which it recommended that the Ministry of Health 
immediately issue compulsory licenses for antiretroviral drugs 
produced by Abbott Laboratories, Merck Sharp & Dohme, and 
Gilead Sciences, and that the issue, in general, of patents 
for medicine be subject to a wider debate.  The resolution was 
sent to the Minister of Health, who has 30 days in which to 
sign, not sign, or suggest modifications to the resolution. 
An accompanying document on the Ministry of Health website, 
"The Sustainability of the Universal Access to Antiretroviral 
Drugs in Brazil," presents a justification for compulsory 
licensing of anti-retrovirals.  A Ministry of Foreign Affairs 
interlocutor reports that the Council resolution is not 
legally binding and claims the Minister of Health is serious 
about continuing negotiations with the pharmaceutical 
companies.  While the Council's action does not represent a 
GoB decision on compulsory licensing, it further aggravates 
the negotiating environment and is yet another example of 
mounting pressure in Brazil to issue compulsory licenses for 
AIDS anti-retrovirals. End Summary. 
 
¶3.  (U) During a meeting on August 10, Brazil's National 
Health Council (CNS-portuguese acronym) unanimously approved a 
Resolution that calls for the Ministry of Health to 
immediately issue compulsory licenses for antiretroviral drugs 
Kaletra (combination Lopinavir/Ritonavir), Efavirenz, and 
Tenofovir, which are produced by Abbott Laboratories, Merck 
Sharp & Dohme, and Gilead Sciences, respectively.  The text of 
the resolution was released by the Ministry of Health's 
Secretariat of Health Protection - National DST/AIDs Program 
 
SIPDIS 
Press Office; see para 11 for an unofficial translation.  The 
resolution was sent to the Minister of Health, who has 30 days 
in which to sign, not sign, or suggest modifications to the 
resolution. 
 
¶4.  (U) The Ministry of Health has been actively engaged in 
pricing/licensing negotiations with these U.S. pharmaceutical 
companies since March of this year (see reftel).  Text in the 
press release envelope for the CNS resolution specifically 
cites Abbott and Merck as being uncooperative (Merck had an on- 
going dialog with the GoB on potential voluntary licensing 
prior to March).  Negotiations with Abbott intensified after 
June 24, when the Ministry of Health singled out Kaletra in a 
"declaration of public interest" to legally pave the way for 
compulsory licensing of the drug; the Ministry then pressed 
the company to agree within 10 days to a per unit price for 
Kaletra of US$0.68, compared with a current price of US$1.17, 
to avoid compulsory licensing. 
 
¶5.  (SBU) Shortly after taking office July 8, new Minister of 
Health Saraiva Felipe announced the MoH was re-opening an 
agreement that out-going Minister Costa and Abbott had 
reportedly reached on the day of Felipe's swearing-in.  In 
public statements, Felipe justified the action by asserting 
that no written agreement existed and that Abbott and the 
Ministry did not agree on what terms had been reached on July 
¶8.  (An Abbott representative told post there was a written 
agreement, but it was not signed.)  Negotiations have 
continued, most recently on August 10, however Abbott has 
complained that the MoH is now pressing the company to drop 
the per unit Kaletra price to US$0.41, based on a new estimate 
of production costs for Brazil's national laboratories, and to 
agree to some form of technology transfer.  Post understands 
that Abbott plans to provide another proposal to the MoH the 
week of August 15. 
 
¶6.  (U) The National Health Council is a private-public sector 
advisory body, principally comprised of labor, social, 
economic, and health representatives from civil society. 
Twenty of CNS' forty counselors were present for the August 10 
vote. 
 
¶7.  (SBU) According to Henrique Choer Moraes of the Foreign 
Ministry's IPR Division, the resolution is a recommendation 
and is not legally binding on the Minister of Health. 
Furthermore, he reported that his MoH interlocutor had 
emphasized to him that Minister Felipe remains "very much 
interested in pursuing negotiations with the companies in 
order to reach mutually satisfactory results."  Brasilia's 
paper, Correio Braziliense, quoted Felipe in its August 12 
edition as saying he is not going to sign the resolution now 
and that he is going "to evaluate it before taking any 
decision." 
 
¶8.  (U) Nonetheless, the trend is not encouraging.  An 
accompanying document of unknown authorship on the Ministry of 
Health website, "The Sustainability of the Universal Access to 
Antiretroviral Drugs in Brazil," presents social and legal 
justifications for compulsory licensing of antiretrovirals 
(see para 12).  The analysis suggests that "public interest" 
is only satisfied through compulsory licensing and the details 
make quick implementation appear likely should a decision be 
made to issue a compulsory license. 
 
Comment 
------- 
 
¶9. (SBU) While the CNS resolution does not represent a legal 
step in the process toward issuing a compulsory license, and a 
GoB decision on the matter has not yet been taken, it further 
aggravates the negotiating environment.  In particular, so 
publicly asserting the Ministry's goal of a $0.41 unit price 
for Kaletra may further harden the MoH's pricing position, 
eliminating crucial flexibility.  Furthermore, the resolution 
throws Merck and Gilead into the same boat with Abbott, even 
though the MoH has not been actively engaged in negotiations 
with these companies while it has focused on Abbott. 
 
¶10. (SBU) Concentration of this issue within the Ministry of 
Health has made finding knowledgeable and effective GoB 
interlocutors challenging.  Commercial ministers, such as 
Finance Minister Palocci and Minister of Development, Industry 
and Trade Furlan have not been inclined to become involved; a 
July 28 note from Minister Furlan to Secretary Guiterrez 
unrealistically suggested that negotiations between the MoH 
and Abbott appeared "very close to a satisfactory agreement." 
We will continue to consult with Washington agencies on the 
most appropriate and effective means for USG officials to 
interact with the GoB on the matter.  The Ambassador will meet 
Minister Felipe in a courtesy call August 25, but the issue 
may be OBE by then. 
 
¶11. Informal English-Language Translation of National Council 
of Health Resolution No. X with press release envelope: 
 
Ministry of Health 
Secretariat of Health Protection 
 
SIPDIS 
National DST/AIDS Program 
Press Office 
 
Anti-Retrovirals 
 
National Council of Health Recommends Issuance of Compulsory 
License 
 
August 11, 2005 
 
The National Health Council (CNS) approved this Thursday 
(8/11) a resolution recommending that the Minister of Health 
immediately issue a compulsory license for the anti-retroviral 
medicines lopinavir/ritonavir, efavirenz and tenofovir.  The 
recommendation is also valid for other patented drugs used in 
the treatment of AIDs and which place an excessive burden on 
the purchase of medications to fight the disease.  In 2005 
alone, the total cost of anti-retrovirals will reach R$1 
billion.  Together, the three drugs cited consume 80 percent 
of the budget. 
 
The text was approved unanimously during the 157th ordinary 
meeting of the CNS, in Brasilia.  The 20 counselors that were 
in the plenary during the voting gave a favorable 
recommendation to the document.  The resolution now goes to 
the Minister of Health, who presides over the Council, for 
formal confirmation.  The resolution also directs the Minister 
to close the negotiations with the pharmaceutical companies 
producing these medicines. 
 
In the case of efavirenz, whose patent belongs to the 
laboratory Merck Sharp & Dohme, the negotiations have lasted 
for two years.  With respect to Abbott Laboratories, holder of 
the patent for lopinvir/ritonavir, known as Kaletra, the 
Ministry has tried to come to an agreement since March of 
¶2005.  "If the Ministry doesn't take a firm position, the 
sustainability of the AIDs program will be threatened," warned 
Counselor Carlos Alberto Duarte.  He is President of the 
Support and Prevention of AIDs Group of Rio Grande do Sul 
(GAPA-RS) and represents, in the Council, the civil society 
organizations that work with HIV/AIDS. 
 
On this occasion, Minister Saraiva Felipe was emphatic.  He 
said that if Abbott Laboratories offers Brazil conditions to 
sign a contract in the short-term for the acquisition of 
Kaletra, with a price equal to that proposed by the national 
laboratories (US$0.41), there will be no reason to issue a 
compulsory license.  If not, I will not hesitate in defending 
the public interest." Two weeks ago, at the closing of the 
third conference of the International AIDS society, Minister 
Saraiva Felipe affirmed that "the only patent inviolable is 
that of life." Today Brazil buys a capsule of Kaletra for 
US$1.17. 
 
National Production. - A resolution of the CNS also proposes 
the initiation of local production of the drugs, with 
investment in and strengthening of the government-owned 
laboratories, and increased resources aimed at research, 
including the production of active ingredients.  In accordance 
with the Director of the National DST/AIDs program, Pedro 
Chequer, once it produces the patented anti-retrovirals, 
Brazil would not have any interest in selling them.  "Our 
intention is to supply the national demand and attend to the 
six countries which which we maintain accords for the supply 
of treatment." Brazil furnishes anti-AIDs drugs to Cape Verde, 
Guinea Bissau, Sao Tome and Principe, East Timor, Bolivia and 
Paraguay. 
 
Today, Brazil has 163 thousand persons undergoing treatment 
with anti-retrovirals.  The country distributes 17 
medications, eight of which are produced by national 
laboratories.  The average cost of a patient per year, which 
was US$6.2 thousand in 1997, dropped to the level of US$1.3 
thousand at the beginning of this decade.  However, with the 
incorporation of new latest-generation drugs, at the beginning 
of 2003, the annual expense per patient rose again and 
currently is around US$2.5 thousand. 
 
Upon voting the text of the resolution, the National Health 
Council took care to include a recommendation to the effect 
that after the adoption of compulsory licencing any commercial 
retaliation against Brazil would be consider disloyal and 
illegal.  The clause was included based upon Brazilian law, 
upon TRIPS (which deals with intellectual property rights 
related to commerce), and upon the DOHA Declaration (which 
applies TRIPS to questions of public health). 
Brazilian legislation permits compulsory licensing in cases of 
public interest, which encompasses questions of health, 
nutrition, environmental protection, and technological or 
socio-economic development of the country.  The authorization 
is in Article 71 of the Brazilian Law of Patents (9279/96), in 
Decrees Number 3201/99 and 4830/03, and, as well, in the 
international TRIPS accords and in the DOHA declaration. 
 
Following is the complete text of the resolution approved by 
the National Health Council.  In order to take effect, the 
document still needs to be signed by the Minister of Health, 
Saraiva Felipe. 
 
 
National Health Council 
 
Resolution No. X, of August 11 2005-08-11 
 
The Plenary of the National Health Council in its one hundred 
fifty seventh ordinary meeting, realized on August 10 and 11 
of 2005, under the competencies and authorities conferred by 
Law No. 8.080, of 19 September 1990, and by Law No. 8.142 of 
December of 1990, and 
 
Considering that universal access to anti-retroviral drugs for 
the treatment of HIV/AIDS in Brazil is assured in the Federal 
Constitution and in Law. N8.080 and Law 9.313/96; 
 
Considering that the policy of free distribution of anti-AIDS 
medications have a positive impact in increasing the quantity 
and quality of life of persons living with HIV/AIDS in Brazil; 
 
Considering that, to guarantee access to 170,000 patients, the 
Unified Health System (SUS) foresees spending around R$ 1 
billion in 2005, with 80 percent of these resources destined 
to the importation of only three patented drugs:  efavirenz, 
Lopinavir/r and Tenofovir; 
 
Considering that the elevated prices of patented drugs has 
already compromised the sustainability of the Brazilian 
program to combat AIDS; 
 
Considering that the XII National Health Conference (Art. 52, 
Axis VIII) declared that "the right to life and to health 
preceeds any commercial agreement"; 
 
Considering that the compulsory licensing and the consequent 
local production of anti-retrovirals is totally compatible 
with Brazilian legislation and with the flexibilities 
contemplated in both the TRIPs agreement of the World Trade 
Organization and the DOHA declaration; 
 
Considering that Brazil possesses the infrastructure and 
technical capacity for national production of safe, quality, 
low-cost anti-retrovirals; 
 
Considering that the SUS does not possess sufficient resources 
and that the economies flowing from national production will 
be invested in other health actions. 
 
Resolves: 
 
a)  In the face of the failure to negotiate significant price 
reductions for the medications efavirenz, Lopinavir/r and 
Tenofovir, the Ministry of Health and the federal government 
should close negotiations with the laboratories holding these 
patents. 
 
b)  Compulsory licenses of the medications efavirenz, 
Lopinavir/r and Tenofovir should be issued immediately, as 
well as other patented anti-retrovirals which burden or might 
come to burden the budget of the SUS. 
c)   Local production of medications should begin, with 
investment in and strengthening of the government-owned 
laboratories, and increased resources aimed at research, 
including the production of active ingredients. 
 
d)  That, in the face of International Treaties, after the 
adoption of compulsory licencing any commercial retaliation 
against Brazil would be consider disloyal and illegal. 
 
e)  That the Ministry of Health should promote an ample debate 
over the impact of patents on the access to medicine in the 
country, an analysis and review of Brazilian patent 
legislation, as well as the regulation and implementation of 
such legislation. 
 
¶12. Document: "THE SUSTAINABILITY OF THE UNIVERSAL ACCESS TO 
ANTIRETROVIRAL DRUGS IN BRAZIL" 
 
Document elaborated for the 157th Ordinary Meeting of 
Brazil's National Health Council - Brasilia, August 10, 2005 
 
Brasilia, August 9, 2005. 
 
"Life is the only unbreakable patent" 
Saraiva Felipe 
Brazil's Minister of Health 
 
¶1. Legal foundations 
 
The incorporation of the TRIPS Agreement (Trade Related 
Aspects of Intellectual Property Rights) 1 in the legal 
agenda of member countries of the World Trade Organization 
(WTO) has significantly restricted their autonomy towards the 
definition of strategic materials for the understanding of 
their Public Interest. TRIPS consists of one of the Marrakesh 
Agreement annexes, which has established the WTO in 1994, and 
rules the management of intellectual property rights within 
the Organization. By becoming a signatory to TRIPS Agreement 
in 1994, Brazil, in opposition to the previous Code of 
Industrial Property of 1971, started recognizing 
pharmaceutical and food products and processes as patentable 
materials. Despite the fact that the Agreement establishes 
minimum conditions in reference to the management of 
Intellectual Property Rights (IPR), these have shown to be 
considerably most restrictive than those established in the 
1971 Code. 
 
The Agreeement anticipates the IPR licensing through two 
mechanisms: voluntary licensing and compulsory licensing. 
With the voluntary licensing, the patent holder may friendly 
negotiate the transfer of technology, know-how, technical 
assistance, and the use of its property by third parties, 
through the payment of royalties to be agreed between both 
parties. 
 
With the compulsory licensing, also known as "Compulsory 
License", the IPR may be used by third parties without the 
holder's consent, aiming to restrain the abusive privilege 
exercise. In this case, TRIPS indicates five possible reasons 
for the adoption of such measurement, such as: (i) patent 
holder's refusal to negotiate that third parties have the 
right to use IPR; (ii) cases of emergency or extreme urgency; 
(iii) anti-competitive practices; (iv) non-commercial use and 
(v) existence of depending patents. Despite being a privilege 
usage without the need for patent holder's consent, the 
licensee should still pay royalties to use it, even though 
they are reduced. 
 
In the Brazilian legal system, the compulsory licensing is 
found on chapters 68-74 of the Industrial Property Law # 
9279/96, some of which have later been amended by the Decrees 
# 3201/99 and # 4830/03, aiming to clarify its application in 
specific cases. 
 
- Public Interest as a legal reason to issue the compulsory 
licensing 
 
The issuance of compulsory licenses based on the Public 
Interest reason is found on chapter 71 of the Industrial 
Property Law # 9279/96, according to text that follows: 
 
"Chapter 71. In cases of national emergency or public 
interest, stated through Federal Branch Act, as long as the 
patent holder or licensee cannot meet such need, a temporary, 
non-exclusive, compulsory license can be granted, officially, 
with no harm to the rights of its respective holder. 
 
Only Paragraph. The granting of license will establish its 
expiration date and the possibility of extension." 
 
Decree # 3201/99, through its second chapter, has brought a 
more detailed definition of the National Emergency and Pubic 
Interest concepts, in addition to clarifying the necessary 
mechanisms to issue a compulsory licensing, to be officially 
announced. 
 
- Other mechanisms 
On August 30, 2003, the WTO General Council approved of a 
resolution in reference to chapter 6 of Doha Declaration, 
which states the possibility of issuing a compulsory 
licensing to meet the demands of relatively less developed 
countries and developing countries, which had none or little 
technological capacity to manufacture essential drugs. 
However, it is necessary to be included in the national 
legislation so that Brazil is able to enjoy such mechanism. 
 
¶2. The critical situation as to the STD/AIDS Program 
sustainability 
 
Even if the country was able to benefit from the transition 
period of 10 years to adapt its legal system, only two years 
have passed so that the new Industrial Property Law # 9279 
was published, on May 14, 1996. On this same year, the 
Brazilian government adopts an innovative and daring 
initiative to fight the HIV/AIDS epidemics, by approving Law 
# 9313, known as "Lei Sarney" (alluding to Brazil's former 
President), that rules over the State duty to distribute 
drugs to treat HIV and AIDS patients universally and freely. 
Since then, the Brazilian government has tried to establish a 
balance between the private rights originated from the 20- 
year monopoly granted to the patent holder, on one side, and 
the social rights in reference to the warranty of access to 
treat chronic diseases to the Society, on the other side. 
 
Brazil's decision - certainly, resulting from the pressure of 
the same actors that make it difficult the effective 
implementation of compulsory licensing of the patented ARV 
drugs - of not making use of the transition period allowed by 
the TRIPS agreement to developing countries, has resulted in 
a premature and incipient legislation in meeting the needs of 
national interest, especially in reference to Public Health. 
As for the national response to AIDS epidemic, the 
incorporation of new patented drugs in the Therapeutic 
Consensus means a significant greater public budget designed 
to acquire antiretroviral drugs and committed to the 
sustainability of the national response to HIV/AIDS. Today, 
in order to guarantee the universal and free access to 
170,000 patients currently under therapy, approximately 80% 
of the around US$ 430 million designed to purchase these 
drugs are used to importing patented drugs, while only 20% 
are used to purchase 7 antiretroviral non-patented drugs, 
manufactured in the country.  Such proportion tends to be 
reduced in the next few years. With the progressive inclusion 
of patients under therapy in the next 3 years, the total 
spending with the universal purchase of only 3 antiretroviral 
patented drugs (Efavirenz, Lopinavir/r and Tenofovir) is 
estimated to increase substantially, from US$ 147.5 million 
in 2006 to US$ 242 million in 200102. Whereas if there is 
national production along the next five years, it is 
estimated a saving of US$ 645 million. Additionally, the 
inclusion of new-patented drugs in the Consensus will imply 
in a considerable increase in the cost of therapy/year, 
incompatible with the currently available budget and with the 
expectations of a future budget. (Figure 1). This problem is 
already experienced in 2005 when we had a budgetary dotation 
of approximately US$ 242 million for an effective spending 
over US$ 430 million. Such measure could compromise the 
performance of other Programs. 
 
Figure 1 - Average annual cost of antiretroviral therapy per 
patient/year (in US$), Brazil, 2005  (Not included in cable.) 
 
Source: Chequer, 3rd IAS Conference on the Pathogenesis and 
HIV therapy (2005) 
 
¶3. National technical capacity 
 
Since late 1998, Brazil's Department of Health has invested 
in infrastructure and in making official pharmaceutical 
laboratories capable to manufacture antiretroviral drugs. The 
first public laboratory to manufacture them was the Instituto 
de Tecnologia em Frmacos (Far-Manguinhos), the official 
laboratory of Brazil's Department of Health. So, the 
laboratory has made investments to improve the 
infrastructure, from its facilities to the WHO and ANVISA 
requirements related to the Good Manufacturing Practices, as 
well as the quality control. 
 
From 2002, public/private negotiations have started (official 
laboratories and international and domestic generic private 
companies), aiming to the establishment of technical 
cooperation agreements and technology transfer to strengthen 
local capacity. In 2004, from September on, by initiative of 
the PNDST/AIDS, several Workshops and meetings have been 
carried out between public laboratories and local 
pharmochemical companies, including the BNDES participation, 
to define public-private partnerships to locally produce 
active principles and antiretroviral drugs. With the results, 
the definition of local capacity installed to locally produce 
active principles and antiretroviral drugs has been reached, 
according to Table 1 below: 
 
(Table 1 not included in cable) 
 
¶4.  Economic Gains of local ARV production 
 
The strategy adopted by the Brazilian government aiming to 
promote national technological autonomy for the production of 
principal active (ingredients) and antiretroviral drugs 
doesn't constitute only an action for strengthening the 
installed technical capacity, but also as an a;ternative for 
the effective reduction of prices. 
 
According to preliminary projections of PNDST/AIDS, taking as 
base prices those at which Far-Manguinhos can produce 
Efavirenz, Lopinavir/Ritonavir, Tenofovir, the Ministry of 
Health is estimated to save a total of R$ 1.6 trillion in the 
period 2006-2010, as compared with the values currently paid 
by the Ministry of Health for the purchase of the same drugs. 
 
¶5. Conclusions 
 
The commitment of the Brazilian government to make sure the 
universal and free access to antiretroviral drugs to treat 
HIV/AIDS patients to the Brazilian population is established 
in the Federal Constitution of 1988, and regulated in 
specific legislation.  Therefore, Brazil's DST/AIDS Program 
understands that, considering the unquestionable evidences as 
for the huge increase of prices of these drugs, originated 
from the monopoly granted through patent and, in order to 
maintain the sustainability of the national response to 
HIV/AIDS in the medium and long run, it is necessary: 
 
(i) The issuance of compulsory license of antiretroviral 
drugs that most significantly impact the budget of Brazil's 
Department of Health to purchase these drugs; 
 
(ii) The immediate beginning of local manufacturing of 
antiretroviral drugs above mentioned, with the establishment 
of public-private partnerships between national 
pharmaceutical companies and government pharmaceutical 
laboratories, for a significant reduction of prices; 
 
(iii) The strengthening of local technological capacity to 
manufacture active principles of patented antiretroviral 
drugs, in terms of making verticalized local production of 
these drugs feasible and also the reduction of international 
technological dependance. The adverse scenario observed 
towards global production of raw material, according to WHO 
itself, takes us to an extremely concerning picture in its 
perspective, in the medium and long run; 
 
(iv) The narrowing relation between local public and private 
pharmaceutical productive segment with the BNDES PROFARMA 
Program. Despite the successful pricing negotiations along 
the period, Brazil is still paying huge and unacceptable 
prices, equivalent to 8 times the amount practiced globally. 
 
The Brazilian experience in the process of voluntary 
licensing has been extremely harmful to the public interest, 
since it only makes abusive prices last when dealing with the 
Department of Health, without seeing a concrete perspective 
in relation to Efavirenz and the chronic process of 
negotiation with Merck. 
 
The adoption of compulsory licensing, however, meets full 
backup in national legislation and is in consonance with the 
international agreements settled with Brazil, in the light of 
TRIPS and the Doha Declaration. 
 
LINEHAN