HEALTH-BRAZIL: Cardoso Defies Pharmaceutical Industry

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Dec 19 2000 (IPS) - Brazil’s pharmaceutical industry will only be able to raise prices by 4.4 percent next year, President Fernando Henrique Cardoso announced Tuesday, as part of his fight to curb the high cost of medicines.

That means prices will remain stable, given that inflation is projected to stand at four percent next year, said the president, who turned a deaf ear to protests by drug companies, which accuse the government of imposing a “freeze” on prices that they say will “roll back” free-market reforms.

By presidential decree, each laboratory will be able to increase its prices by no more than 4.4 percent up to Jan 15, with an upper limit of 5.94 percent in the case of medicines whose prices have not been raised in the past 16 months. Prices will then have to remain steady until the end of 2001.

Failure to comply will be punishable by fines of up to 5,100 dollars a day.

The measures were previously negotiated with the industry, and do not amount to a “freeze”, said Cardoso. However, the secretary of the Brazilian Association of the Pharmaceutical Industry, Ciro Mortela, denied that an agreement was reached, and threatened to turn to the courts.

The prices of medicines have been frozen in Brazil since last August as a result of negotiations between the pharmaceutical industry and authorities. The looming expiration date for the agreement – Dec 31 – spurred the government to seek a formula for extending it for the length of the coming year.

Health Minister José Serra launched an all-out offensive to contain the prices of pharmaceutical products last year. He began by forcing companies to manufacture generic products without the brand-names that drive up prices.

Generic products, which currently account for a mere five percent of all medicines sold in Brazil, should account for 40 percent a few years from now, the minister hopes. He attributed the slow impact of the measures adopted by the Health Ministry to resistance by the pharmaceutical industry and drug retailers to any reduction in their profit margins.

Importing generic products, especially from developing countries like India, is one alternative the Health Ministry has resorted to in order to get around obstacles set in place by a sector dominated by a few large companies, said Serra.

The minister also threatened to invoke compulsory licensing, which would permit the manufacture of generic drugs without the agreement of the patent-holder, in the case of laboratories that refuse to produce affordable antiretroviral drugs for AIDS patients.

Brazil’s industrial property legislation allows the government to resort to compulsory licensing in situations of emergency.

The United States is pressing the Brazilian government to revoke the law permitting compulsory licensing, and has threatened to file a complaint with the World Trade Organisation.

To reduce the costs of the antiretroviral drugs, which the Health Ministry provides free of charge to anyone testing positive for the AIDS-causing human immunodeficiency virus (HIV), the Institute of Technology of Medicines, a leading state laboratory based in Rio de Janeiro, has stepped up production of the anti-HIV medicines.

The Far-Manguinhos laboratory – as it is known – and other state laboratories currently produce eight of the 12 drugs used in the antiretroviral cocktail therapy. State manufacture of such drugs, which began in 1998, has led to a 75 percent reduction in the prices of anti-HIV remedies.

In an even more vigorous “war cry” against transnational drug giants, Far-Manguinhos has decided to export its generic anti-HIV medicines, announced the laboratory’s director, Eloan Pinheiro.

The aim is to force transnational corporations to lower prices on the international market, by offering cheaper versions of the same drugs, he said. Countries in Africa and Latin America, such as Congo, Colombia, Chile and Venezuela, have expressed interest in importing Far-Manguinhos products, and are also interested in cooperation based on the transfer of technology.

The struggle to pull down the cost of other frequently used drugs led the Health Ministry to push a law providing the industry with tax exemptions through Congress.

The new law will help drug companies reduce the cost of 1,200 medicines, which represent 40 percent of the industry’s sales, by 11 percent from April, said Serra.

But the tax exemptions will only be extended to those companies that effectively cut consumer prices. The measure will especially benefit the elderly and those who need to take medication on a regular basis, the health minister pointed out.

The battles waged by the Health Ministry, especially against drug companies, run counter to the free-market prescriptions of economic and financial authorities, who are opposed to state interventions in the market.

Serra, a social democrat with close ties to President Cardoso, is seen as a possible presidential candidate for the 2002 elections. His efforts to cut the costs of pharmaceutical products are largely responsible for his popularity and the image he has earned as one of the government’s most effective ministers.