P 011726Z SEP 05 –September 5, 2005

1. (SBU) Summary.  On August 30, DCM, accompanied by selected members of Country Team, met with Ministry of Health Executive Secretary Jose Agenor da Silva to discuss implications of any potential GoB move towards compulsory licensing of pharmaceuticals.  Embassy message was that: a) USG values our cooperation with the GOB on health issues but that the ongoing debate on compulsory licensing is worrisome, b) any GOB decision to embark upon compulsory licensing would likely deter pharmaceutical makers from introducing new drugs into the market and would make it more difficult for the GOB to attract badly-needed foreign direct investment, and c) [4 lines excised] Da Silva repeated the official GOB line that the Ministry preferred a negotiated solution to the Abbott controversy, but could not precluded the possibility of a compulsory license.  He pledged, however, that whatever decision the Brazilian government reaches would be a reasoned and informed one, fully vetted within the GOB – and not based upon politics or emotion.  End summary.

2.  (SBU) in the cordial 45-minute session, Da Silva was joined by Moises Goldbaum (the Ministry’s Secretary for Science, Technology, and Strategic Resources), and Amb. Santiago Alcazar (International Affairs Advisor).  While neither Da Salva nor his colleagues in the meeting appear to have been present at all of the previous negotiating sessions with Abbott, they did appear to be fully informed about the state of play with that company.

3.  (SBU)  DCM opened the meeting by noting that the USG has a wide range of cooperative health and research programs with the GOB on issues such as HIV/AIDS, tuberculosis, and vaccine development.  While we would like to expand cooperation with Brazil, he said, the current debate on compulsory licensing worried USG policymakers. [4 lines excised].  Specifically, compulsory licensing would likely deter pharmaceutical makers from introducing new drugs into the market and would make it more difficult for the GOB to attract badly-needed foreign direct investment.  [3 lines excised].  DCM strongly urged the GOB to pursue a negotiated solution, as it had initially done earlier in the failed July 8 accord with Abbott.

4. (SBU) In response, Da Silva made the following points:

— The GOB was very much interested in continuing its scientific/health cooperation with the USG, including the joint programs with USAID, CDC, and the National Institutes of Health.  Indeed, Brazil wanted to increase the NIH research projects in country beyond the current roster of 60 programs.

— The Ministry was well aware of Abbott’s sixty year investment in Brazil and the degree to which the company generated employment in the pharmaceutical sector.  However, the capacity of the MOH to purchase expensive anti-retroviral drugs was limited and if Abbott was not able to offer its product at a low enough price it could be be that the Ministry would seek a compulsory license.

— The June 22 New York Times editorial urging Brazil to embark upon compulsory licensing, if necessary to save its internationally-recognized AIDS treatment program, showed how divided opinion was on this issue within the U.S.  For instance, the Clinton Foundation had recently told the GOB that it could provide Abbott’s Kaletra drug at US$0.41 per pill now and at US$0.25 per pill in six to nine months.  (When asked how an NGO could supply a pharmaceutical currently under patent, Goldbaum clarified Da Silva’s statement, noting that the Clinton Foundation had merely stated that it could help the GOB in finding reasonably-priced active ingredients and provide technical assistance regarding the manufacture of generics).

— The GOB had changed the focus of its negotiations with Abbott.  Before, politics and emotion had held sway.  Now, all Ministries within the government would be consulted and all facts proffered would be documented.  The GOB was collecting all the information available so that the best technical decision could be made.  A meeting between the Minister of health and ForMin Amorim and FinMin Palocci to discuss the implications of compulsory licensing was set for September 1.

5. (SBU) While both Da Silva and Alcazar stated that they understood the Embassy’s advocacy role, they nevertheless requested that post make clear to Abbott that it needed to take a more flexible stance in the negotiations.  Da Silva opined that if both sides, the MoH and Abbott, were willing to compromise, there would be space for an agreement [2 lines excised] Goldbaum then observed that the GoB’s demands included not only the price concessions but technology transfer as well.  The patent for Kaletra expires in 2013 (the date, per Abbott, is 2017), but the GoB wants to be in a position to manufacture that drug domestically well before then, he said.  Goldbaum opined that the reason the CDC and NIH research/assistance programs were so favorably viewed within the GoB was because they offered technology transfer.

6.  (SBU) In response to a query from Embassy reps as to whether we could share the substance of the discussion (as appropriate) with the affected U.S. firms, Da Silva replied in the affirmative.  Indeed, the GOB wanted any arrangement agreed to be fully transparent, he said.  One of the problems with the July 7 accord, he declared, was that Abbott had wanted it to be secret- which was something that the GOB could not accept.

7.  (SBU) Comment: [4 lines excised] Similarly, the involvement of ForMin Amorim and INPI President Jaguaribe (see septel) is on balance positive.  While the world-view of both is that developing countries should not have to provide the IPR protections that developed countries do, they also will be able to inject into the debate concerns over the effect of compulsory licensing upon foreign direct investment and trade relations.

8. (SBU) Nevertheless, the worrisome element – which Goldbaum’s comments brought into stark relief – is the demand for technology transfer.  Assuming that the pricing issue was resolved, the GOB would still want early access to Abbott’s formula (and possibly manufacturing processes) for Kaletra.  In an industry where intellectual property is key to survival, surrender of technology could be a pill that neither Abbott, nor Merck and Gilead, can accept.