ARV Drugs : Brazilian Innovation System and the Importance for BRICS Countries

1. ARV Drugs:Brazilian Innovation System and the Importance for BRICS Countries José Eduardo Cassiolato Luiz Antônio Elias Graziela Ferrero Zucoloto

2. Main objective: to present the Brazilian Innovation System in ARV Drugs:

3. General characteristics: World: - 40 million people living with Aids - Sub-Saharan Africa: around 2/3 of total cases in the world (25,4 million); 3/4 female. Brazil: 433 thousand cases of Aids (1980-2006 / Health Ministry)

4. Public Expenditures on the Aquisition of ARV Drugs Source: Health Ministry

5. ARVs Producers 70,0% 59,9% 59,3% 60,0% 53,9% 56,9% 56,3% 51,0% 48,6% 52,0% 50,0% 43,4% 37,3% 40,8% 43,1% 43,1% 45,7% 47,2% 40,0% 39,5% 39,1% 38,3% 38,3% 36,4% 30,0% 20,0% 15,8% 12,3% 10,0% 4,3% 1,8% 1,9% 2,3% 0,0% 7,1% 7,7% 6,4% 0,0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005* Public Labs Private Domestic Labs Foreign Labs Participation of labs in the production of ARVs purchased by “National Program / Aids” (Health Ministry) units Source: Health Ministry Obs: in 2005 the aquisitions were complemented by Unicef and other institutions.

6. Production of ARVs 90,0% 77,0% 77,7% 75,5% 81,7% 80,0% 70,0% 70,7% 57,7% 57,8% 72,8% 55,4% 60,0% 63,7% 50,0% 39,4% 40,0% 34,7% 27,3% 25,6% 30,0% 23,6% 25,1% 19,5% 16,6% 20,0% 22,0% 19,6% 11,2% 7,7% 18,9% 5,5% 10,0% 3,5% 2,0% 2,8% 0,8% 1,7% 0,3% 0,0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Public Labs Private Domestic Labs Foreign Labs Participation of labs in the production of ARVs purchased by Health Ministry - Value of production Source: Health Ministry

7. Active Pharmaceutical Ingredients Public laboratories purchases 2005 2004 2003 Total Nac. Import. Total Nac. Import. Total Nac. Import. API (US$) (%) (US$) (%) (US$) (%) Anti-retrovirais 20.306.497 8,9% 91,1% 6.508.519 24,6% 75,4% 14.979.657 27,4% 72,6% Didanosina 2.627.384 3,6% 96,4% 457.771 10,5% 89,5% 0 - - Estavudina 1.157.894 49,5% 50,5% 316.576 90,0% 10,0% 226.953 49,3% 50,7% Lamivudina 4.425.345 1,7% 98,3% 2.481.393 18,2% 81,8% 3.213.662 45,2% 54,8% Sulfato de Indinavir 2.131.448 0,0% 100,0% 0 - - 1.691.207 0,0% 100,0% Zidovudina 9.964.426 10,7% 89,3% 3.252.779 25,0% 75,0% 9.847.835 25,7% 74,3% Outros APIs 811.225 15,0% 85,0% 930.925 28,8% 71,2% 558.434 29,6% 70,4% Total 21.117.722 9,2% 90,8% 7.439.444 25,1% 74,9% 15.538.091 27,4% 72,6% . . Source: Abifina

8. S&T Public Infrastructure: Internationally, universities and public research institutes : - are responsible for most innovations in the health sector. -- ARVs (AZT, ddI, ddC e Abacavir) were created by North American public organizations - concentrate the basic research (riskier and more expensive) - are responsible for the most innovative discoveries, while the private enterprises are proportionally more concentrated in “me-too” -> Private enterprises: their costs are not as high as they say!

9. S&T public infrastructure: Brazil: - highly qualified research institutions in the health area: -- Fiocruz; -- 546 research groups in HIV and other STDs; - partnership between universities and private enterprises

10. The role of the State -> Public purchases (Law 8.666): obtain the lowest price (without considering the industrial development) -> Products specifications (APIs): - legally: same technical specifications - Imports do not respect the required specifications (around 30%) - Domestic enterprises: purify these APIs -> ↑ costs not considered. -> Trend: weakness in national production -> ↓ in bargaining power of the government ->Tendency: national production not viable -> ↑ costs

11. Possibilities: - Law of Innovation: If a competitive company realizes locally its R&D, the criterion of the lowest price is eliminated; -- An increase in the partnerships between companies, universities, and public research institutes. - Law 11.196: Public bodies can create auctions for the acquisition of products made in Brazil that involve high technology.

12. In summary: The segment could become competitive if its relationship with the government were altered: - Alteration in the policy of public purchases; - Stimulation of industrial and technological development; - Equal laws with imported products – taxing is qualitative. WHO Goal: to attend until 2010 to the seven million individuals carrying the HIV virus - With the productive capacity of ARVs presently existing in the world, this goal will not be attained -> there exists space in the international scene for new producers.

13. Intellectual Property - New rules have not increased the technological activities in Brazil. There exist legal resources (flexible with safeguards) permitted by TRIPS that are not being explored in Brazil: • Compulsory Licensing -> local production of drugs patented without authorization by the holder of the patent. Threat from CL: • Believable only if the country has productive capacity; • Fundamental to negotiate with the MNCs. • Chance of retaliation?

14. Conclusions - Presently, Brazil has the capacity to produce ARVs. - There are few technical bottlenecks. - But Brazil tends to lose this capacity for the following reasons: - Public policies don’t give enough privileges for technical-industrial development - It doesn’t utilize the flexibility permitted by TRIPS.

15. Brazil, India e South Africa Main interests in the production of ARVs: - Lowering the costs, making the treatment viable • Strengthen national industries. IBAS: - Generate new partnerships between these countries on questions related to AIDS. - Negotiation with multinational companies. South Africa: - AIDS : a grave epidemic - Strict patent legislation without this having culminated in a strengthening of national production.

16. Brazil, India and South Africa India: - took advantage of the period of transition permitted by TRIPS. - Via reverse engineering, India developed a competitive industry of generics and API: - Currently, it possesses several prominent pharmaceutical companies. - With complete adoption of TRIPS, how will this industry continue being competitive? - Could the Indian competitiveness be a threat to the development of the Brazilian industry?