US embassy cable - 05BRASILIA2729

UNCLAS SECTION 01 OF 02 BRASILIA 002729 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR EB/IPE, WHA/EPSC AND WHA/BSC 
DEPT PLEASE PASS TO USTR FOR MSULLIVAN, JMENDENHALL 
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D 
USDOC FOR 3134/ITA/USCS/OIO/WH/RD/DDEVITO/DANDERSEN/EOL SON 
NSC FOR SCRONIN 
AID FOR LAC/AA 
DHHS FOR STEIGER 
 
E.O. 12958: N/A 
TAGS: KIPR, ETRD, ECON, IPR & Biotech 
SUBJECT: ABBOTT AND GOB REACH DEAL TO AVOID COMPULSORY 
LICENSE 
 
REF: BRASILIA 2157 (NOTAL) 
 
1.  SENSITIVE BUT UNCLASSIFIED -- PLEASE TREAT ACCORDINGLY 
 
2.  (U)  Summary.  On October 10, Abbott Laboratories and 
Brazil's Ministry of Health reached an agreement on pricing 
and supply of the AIDS treatment drug Kaletra, ending 
seven-months of intense negotiations under the threat of 
compulsory licensing (see reftel).  Now that talks with 
Abbott have concluded, the MoH will likely turn its attention 
to pending negotiations with Merck, Sharp & Dohme and Gilead 
Sciences over their AIDS anti-retrovirals.  While the 
negotiated resolution with Abbott does not guarantee a 
positive outcome for these firms, it provides some grounds 
for optimism.  End Summary. 
 
3.  (U)  An October 11 press release from Brazil's Ministry 
of Health confirmed Abbott's communication to the USG the 
previous day that it had reached an accord with the GoB on 
its AIDS treatment drug Kaletra.  The MoH claimed victory in 
reaching an agreement that would help guarantee the continued 
viability of Brazil's universal access AIDS treatment program 
by substantially reducing drug costs; according to the 
Ministry, the agreement will provide savings of $339 million 
between 2006 and 2011. 
 
4.  (U)  Post did not receive details of the deal from 
Abbott, but the MoH release claimed the company had agreed to 
drop the per unit price for Kaletra from the current $1.17 to 
$0.63, beginning in March 2006.  The change-over would begin 
in February when the MoH would purchase 9 million capsules at 
the current price and an additional 2.8 million at the 
reduced price.  Thereafter, all sales would be at the $0.63 
price, without any link to volume.  In comparison, a 
short-lived, informal deal struck on July 8 by Abbott with 
the then outgoing Minister of Health had envisioned fixed GoB 
annual expenditures for the drug, only producing a reduction 
in per unit price over time -- the MoH had projected an 
average per unit price of $0.81 for the 2006-2010 period. 
Subsequently the MoH had pressed for a price of $0.41 per 
unit. 
 
5.  (U)  As part of the October 10 agreement, the MoH said 
Abbott had agreed to donate $3 million worth of medicine or 
inputs.  The MoH also claims it will enjoy some advantage in 
acquiring the new formulation of Kaletra, Meltex, that is 
currently undergoing FDA approval. 
 
6.  (SBU)  Although letters threatening compulsory licensing 
were also sent in March 2005 to Merck, Sharp & Dohme and 
Gilead Sciences regarding their anti-retrovirals Efavirenz 
and Tenofovir, respectively, the MoH has only held 
discussions with Abbott since June.  Now that those talks 
have concluded, the MoH is expected to turn its attention to 
these other two companies.  While the shape and outcome of 
those negotiations will depend on the particular business 
considerations of each firm, there is reason to be hopeful 
that a negotiated resolution is possible, given that in its 
talks with Abbott, the MoH did not succumb to intense 
pressure from international NGOs and domestic political 
forces to issue a compulsory license. 
 
7.  (SBU)  Per our October 13 conversation with Gilead, 
company representatives are currently weighing how to move 
forward with the MoH.  It is unclear whether recent negative 
comments by Health Minister Felipe about Gilead's pricing of 
Tenofovir referred to pricing under the company's current 
contract or to its late May offer to the GoB - to which, to 
date, the MoH has not provided an official response. 
Meanwhile, we are trying to get in touch with the local Merck 
representative to get a better idea of that company's next 
steps. 
Danilovich