Brazil decided to break the patent on the HIV drug Storcrin (the brand name for efavirenz), becoming the second country to challenge the pharmaceutical industry in seeking a drastic reductions in drug costs. Brazil’s President signed a compulsory licence for efavirenz to purchase from generic suppliers under provisions permitted by World Trade Organization rules.

Brazil has repeatedly managed to win price reductions in recent years from big pharmaceutical companies by threatening to break patents but has never actually done so. Earlier, Brazil threatened to break a patent for Kaletra, one of three anti-retrovirals made by Abbott Laboratories Inc.

While Merck was willing to offer a 30% discount on its $1.59 per pill price, the Brazilian government wanted it at $0.65 per pill — the rate at which the company supplies the drug in Thailand.

The motivation is clear. Brazil would save $30 million this year alone and up to $237 million by 2012. Currently 75,000 of the 180,000 Brazilians with HIV who receive the free cocktail of anti-AIDS drug, use efavirenz.

Merck argued that Thailand received a lower price due to a much higher prevalence of HIV, which put it into its category of sales for Efavirenz at cost price. Merck contends that emerging economies such as Brazil must work with developed countries to not only cover production costs but also fund future drug development.

The Thai government has already bypassed patents in two HIV drugs—Merck’s Storcrin and Abbott Laboratories’ Kaletra and one heart drug Plavix by Sanofi-Aventis SA.

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