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. YearValue (R$ millon) 199614 1997149 1998219 1999487 2000556 2001515 2002612 2003551 2004621 2005945 Source: Health Ministry Public Expenditures on the Aquisition of ARV Drugs

5. ARVs Producers 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 Participation of labs in the production of ARVs purchased by Health Ministry - Value of production Source: Health Ministry

7. Active Pharmaceutical Ingredients

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. - 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. - 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 - 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: 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: 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?