R 131556Z – October 13, 2005
FM AMEMBASSY BRAZILIA
TO SECSTATE WASHDC 3176
SUBJECT: ABBOTT AND GOB REACH DEAL TO AVOID COMPULSORY LICENSE
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 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 of 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 and 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 the other two companies. While the shape and outcome of the 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 international NGOs and domestic political forces to issue a compulsory license. [paragraph excised].
Meanwhile, we are trying to get in touch with the local Merck representative to get a better idea of that company’s next steps.