BRAZIL: MERCK REPORTS IMMINENT COMPULSORY LICENSING

UNCLAS BRASILIA 000787 SIPDIS SENSITIVE SIPDIS DEPT PASS DHHS DEPT FOR EB/TPP/IPE JENNIFER BOGER DEPT PASS USTR FOR VICTORIA ESPINEL, CHRIS WILSON, SUE CRONIN AND JENNIFER CHOE GROVES USDOC FOR ITA/MAC/OIPR CASSIE PETERS USDOC FOR ITA/MAC/WH/OLAC/MCAMPOS AID/W FOR LAC/AA E.O. 12958: N/A TAGS: KIPR ETRD ECON BR SUBJECT: BRAZIL: MERCK REPORTS IMMINENT COMPULSORY LICENSING ACTION Ref: A) Brasilia 769 B) Previous Embassy emails ¶1. (SBU) Merck representatives have told EmbOffs that the GOB informed their company on May 3 that it would initiate a compulsory licensing order for Merck's HIV drug Stocrin (Efavirenz) as early as May 3 or the morning of May 4. According to Merck officials, the GOB communicated that any additional offer the company might make at this point would be rejected. The Brazilians use the drug in their acclaimed free public treatment program for HIV victims. ¶2. (SBU) Since autumn 2005, Merck has been involved in intermittent negotiations with the GOB concerning the price of its HIV treatment drug. On April 24 of this year, the GOB served Merck (in accordance with TRIPS compulsory licensing requirements) with a "Notification of Public Intent" at the end of a negotiating session giving the company seven days to respond. The impetus behind the GOB action appears to be its desire to emulate Thailand's recent success in reducing the price paid for Stocrin (Efavirenz) to 65 cents per pill. GOB officials have emphasized to EmbOffs that reducing costs is the motivation behind their drive towards compulsory licensing. ¶3. (SBU) The purported GOB move comes on the heels of an April 26 Merck offer to cut the price of 30 percent (to $1.10 per pill), increase local product of the drug, and provide technology transfer two years ahead of the 2012 expiration of the drug's patent. The GOB, however, has rejected this offer. ¶4. (SBU) Separately, in a May 3 meeting, Sao Paulo based representatives of Pfizer and Bristol, Myers, Squibb (BMS) told EconOffs that they felt new Minister of Health Jose Gomes Temporao was driven more by ideology than by any concerns regarding future damage to Brazil's investment climate as a result of a compulsory licensing action. Both corporate representatives implied that Merck's situation was a result of the company's rigid negotiation policies over the past few years (strictly protect). Sobel