THAILAND PREPARING COMPULSORY LICENSE FOR HIV/AIDS DRUG

UNCLAS SECTION 01 OF 02 BANGKOK 007133

SIPDIS

SENSITIVE

SIPDIS

STATE PASS USTR FOR B. WEISEL, S. MCCOY
STATE PASS USPTO FOR K. HAUDA, K. FERRITER, P. SALMON
HHS/OHGA FOR AMAR BHAT, ERIKA ELVANDER
USDOC FOR JKELLY

E.O. 12958:N/A
TAGS: ECON ETRD KIPR TH

SUBJECT: THAILAND PREPARING COMPULSORY LICENSE FOR HIV/AIDS DRUG


(U) This document is sensitive but unclassified, please protect
accordingly.


1. (U) This is an action request, see paragraph 9.


2. (SBU) Contacts at the Thai Department of Intellectual Property
(DIP) told Embassy that the Ministry of Public Health (MoPH) may
announce on December 1 that they plan to pursue a compulsory license
for efavirenz, an antiretroviral used to treat HIV-positive
patients. The announcement would be timed to coincide with World
AIDS Day on Friday.


3. (SBU) Merck & Co., a U.S.-based pharmaceutical manufacturer,
holds the patent for efavirenz in Thailand and distributes it
locally under the trade name Stocrin. Efavirenz is a first-line
AIDS drug, used primarily for the five or ten percent of patients
who have had an adverse reaction to other first-line combinations.
Thailand widely uses a domestically produced generic antiretroviral
known as GPO-vir to treat its large HIV-positive population;
substituting efavirenz greatly increases the cost per patient.
Merck estimates purchases of efavirenz account for approximately 25
percent of expenditures on all antiretrovirals in Thailand.


4. (SBU) Article 51 of the Thai Patent Act spells out procedures for
a compulsory license. The Act allows for an RTG ministry or
department to "exploit any invention under any patent" for a variety
of reasons, including "for the sake of other public interest", the
justification the RTG will most likely use. Merck's local legal
counsel believes that the MoPH must apply to the DIP to issue the
compulsory license and enter into royalty negotiations in advance of
issuing the license. The DIP, on the other hand, asserts that under
Thai law, MoPH can publicly announce its plans to issue a compulsory
license and negotiate the royalties afterwards. Article 31 of the
WTO TRIPS agreement would normally require MoPH to first request
authorization from Merck to produce or import under "reasonable
commercial terms", however, DIP says MoPH plans to skip that step
using exceptions under Article 31(b) for "public non-commercial
use". The lead actor in importing generic product or ingredient
would be the Government Pharmaceutical Organization, a
revenue-earning state-owned enterprise whose activities may not
qualify as public non-commercial use.

Why this drug? Why now?
--------------


5. (SBU) Merck's local representatives are perplexed why the MoPH
has decided to break their patent on efavirenz. As a middle-income
country with a greater than one percent prevalence of HIV cases,
Thailand qualifies for Merck's lowest price offered under its
pricing policy. Merck reports to us they sell the drug at a
no-profit price to NGOs, approximately 1000 baht per month (USD
27.50),less than half the price sold at in other middle income
countries such as China and Brazil. Merck also sells to the
government for 1300 baht per month (USD 35.80),the higher price
reflecting additional local costs imposed by the RTG.


6. (SBU) It is unclear yet whether the MoPH would seek to import a
generic version of the drug or produce it locally. Merck believes
an Indian generic firm may be able to supply efavirenz at a slightly
lower cost, but believes the savings would be minimal and hardly
worth the effort. Contacts at the Government Pharmaceutical Office
say they would need approximately a year to perform the necessary
testing and receive approval to begin domestic production. However,
MoPH believes GPO could eventually produce a generic copy of
efavirenz for 30 to 50 percent less cost than the original drug.


7. (SBU) According to a MoPH source we believe credible, local
public health NGOs instigated the proposal for the compulsory
license and may be pushing the idea as much as a political test as
for the possible cost savings to AIDS patients. Although the MoPH's
Department of Disease Control initially rejected the idea, the NGOs
succeeded in submitting their proposal directly to the Minister.
There still appears to be a lack of consensus within the MOPH on the
wisdom of pursuing a compulsory license and it is not yet clear
whether a final decision has been made to push ahead with the plan.
DIP has expressed its own reservations and is sensitive to how a
compulsory license could affect Thailand's image regarding
intellectual property protection.


8. (SBU) Embassy has been in contact with officials at Ministry of
Commerce and Ministry of Foreign Affairs to ensure they are aware of

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MoPH activities and the full implications of any actions they may
take. We understand an MoPH meeting will take place November 29 to
discuss the issue further.


9. (SBU) Embassy requests Washington agency guidance on how to
proceed and what message we should communicate to the RTG on this
matter. We note that during FTA negotiations with Thailand the
issue of pharmaceutical patents was highly controversial and
engendered large protests. Thailand is rightly proud of its efforts
to slow the spread of AIDS and the Thai public looked dimly on the
FTA's possible effects on access to antiretrovirals. AIDS
organizations and public health activists hold widespread sympathy
in and out of the government and we suspect a compulsory license
would meet with public approval. A compulsory license case would be
watched closely both in Thailand and globally to gauge USG reaction
and commitment to the public health provisions in the WTO. We are
under no illusion that any USG action to prevent a compulsory
license could be kept out of the public eye.
ARVIZU