The Battle for Cheap Aids Drugs

In the past five years, developing countries and pharmaceutical companies have come into conflict over the huge costs of providing drug treatment to rising numbers of people living with HIV/Aids.

Since 2002, 12 countries in Africa and Asia have broken Aids drug patents and either produced their own generic versions of the drugs or bought them from generic drug manufacturers, according to the aid agency Oxfam.

The two latest countries to take this step - known as compulsory licensing - are Brazil and Thailand, both of which say it is the only way for them to maintain their policy of providing free Aids treatment to all sufferers.

Dr Tom Melman, the HIV adviser at aid agency Médecins Sans Frontieres (MSF), said: "The threat of compulsory licenses has been used by developing countries to try to get pharmaceutical companies to negotiate lower prices. It's deplorable that it's necessary but we applaud the decision to take this step."

While the move has provoked protest from the pharmaceutical industry, both countries claim they are acting within international law. According to World Trade Organisation agreements, governments can issue compulsory drug licenses for non-commercial use in their countries, allowing the manufacture, import and sale of cheaper generic versions of patented drugs in case of a national public health emergency.

The cost of Aids medication for developing countries is rising as more and more patients develop resistance to first-line anti-retroviral drug treatments. Second-line drugs - used when patients develop resistance - can cost 10 to 15 times more than first-line drugs, according to MSF.

Around 39.5 million people worldwide are living with HIV/Aids, according to the World Health Organisation. Of those, 4.3 million were infected in 2006 - 400,000 more than in 2004.

The growing need for these drugs threatens to bankrupt the health departments of many developing countries. Brazil's health ministry estimates that more than 80% of its $445m (£223m) budget will be spent on imported drugs, with half spent on just three medicines - tenofovir, efavirenz and Kaletra.

President Luiz Inacio Lula da Silva of Brazil said the country would now import a cheaper, generic version of efavirenz from India rather than buying the drug from the US pharmaceutical giant, Merck.

Brazil has repeatedly used the threat of compulsory licensing as a bargaining chip to reduce the price of Aids drugs. Merck had offered Brazil a 30% discount to buy the pills at $1.10 (55p) each, but the country will now source the Indian-made version for just 45 cents each.

With around 75,000 Brazilians using efavirenz, out of a total of 180,000 people who receive free anti-retroviral drugs, the deal represents a huge saving for the government.

Meanwhile, a report last August by the World Bank on the Thai government's Aids treatment programme predicted that compulsory licensing would reduce the cost of second-line drug treatments by 90%, saving the country $3.2bn over 20 years.

Brazil and Thailand received a boost yesterday when the charitable foundation of former US president Bill Clinton announced it had struck a deal with two Indian drug companies to provide cheap generic first and second-line drug treatments to 66 developing countries.

Rohit Malpani, the trade policy adviser for Oxfam US, said the Clinton Foundation's willingness to buy the generic drugs from the Indian manufacturers Cipla and Matrix would give developing countries greater leverage in bargaining with American pharmaceutical companies for lower prices on branded drugs.

But Mr Malpani said developing countries could still face the threat of US trade sanctions and retaliation from drug companies. Earlier this year, Abbott Laboratories, based in Illinois, halted plans to introduce new drugs, including those for Aids, in Thailand in a bid to force the Thai government to reverse its decision to ignore the patent on Kaletra.

The US government has previously put pressure on developing countries through its trade representatives, political lobbying and attempts to tie them into free-trade agreements that undermine compulsory licensing.

But Mr Malpani believes such action will decline in the wake of the US congressional elections. He said: "Since the elections, there isn't a majority who support stricter and stricter intellectual property protection."

The bigger threat to the availability of cheap drugs could come from the tightening of drug laws in India. Two years ago, India became a full member of the World Trade Organisation, meaning it must respect pharmaceutical patents.

Mr Malpani said: "India can still produce generic versions of brand drugs. But it now has to justify why it wants to break a patent, or not grant one, on a case-by-case basis."