1. Brazil's ARV production technology transfer strategy: could it transform the AIDS treatment landscape in Sub Saharan Africa? Giuliano Russo 1,2, Lícia de Oliveira 3, Alex Shankland 2, Tania Sitoie 4 1 Instituto de Higiene e Medicina Tropical (Portugal) 2 Institute of Development Studies (UK) 3 Farmanguinhos, Fundação Oswaldo Cruz (Brazil) 4 Direcção Nacional de Assistência Médica, MoH (Mozambique) Pharmaceuticals and Global Health: Inequalities and Innovation in the 21st Century The Pharmaceutical Industry and Global Health: Emerging Models of Pharmaceutical Development and Production

2. Introduction The Brazilian Government is helping the Government of Mozambique to set up an ARV factory in Maputo Brazils recent experience in medicine manufacturing, HIV/AIDS fight and South- South cooperation This particular experience provides an insight into local production of pharmaceuticals (LPP) in Africa 1

3. Framing the issue Net trade flow (exports minus imports) by value of medicinal and pharmaceutical products, by groups of countries (USD million, at current prices) 2 Source: UNCTAD 2013

4. Local production of pharmaceuticals in LICs Past consensus that LICs lack critical mass to produce quality medicines at competitive prices (Kaplan and Laing, 2005; Rovira, 2006) However, 38 countries in Africa have now pharmaceutical factories (UNIDO 2011), especially in North Africa, South Africa, Uganda, Kenya (Ogunye et al, 2009) Zimbabwe and Nigeria (UNIDO 2010) Recent research has shown prices for locally produced drugs not necessarily higher (Kuanpoth, 2007; Mackintosh and Mujinja, 2008, Kaplan, 2011) New UN and AU initiatives to study and support local production of pharmaceuticals (WHO/PHI, EU, UNIDO and African Union) Recent changes in demand, funding and patent rules for AIDS drugs (Anderson, 2010) 3

5. The Brazilian experience with production of pharmaceuticals Relevance of state-owned pharmaceutical industry in Brazil (eg. Farmanguinhos, although representing 5% of drugs) Threat of compulsory licensing for ARVs helped bringing down prices in Brazil (Flynn 2008; Galvao 2002) National pharmaceutical industry instrumental in rolling out the national AIDS policy of universal access to treatment (do Lago and Costa 2009) 4

6. The Brazilian experience with South-South cooperation Focussing on Portuguese-speaking African countries and Latin America to strengthen its international standing and access to markets (Russo and Shankland, 2013) Aimed at reproducing domestic success stories (the cerrado revolution, SUS, AIDS, malaria and human milk banks) Brazils notions of state-capitalism, health diplomacy (Kickbush et al, 2007), industrial health complex (Gadelha, 2006) andStructuring Cooperation in Health (Buss, 2011) 5

7. The ARV factory project in Maputo Born as an informal agreement between former presidents to reduce dependency (De Oliveira, 2013) The factory, called SMM, will be owned 100% by the Mozambican Govt through its State Shareholding Management Institute (not MoH) USD 34.6 million overall cost of the project so far, sponsored by Brazil, GoM and VALE (de Oliveira, 2012) 21 generic drugs agreed with MoH to be produced for high-burden of disease conditions Construction of a medicine quality control lab 6

8. What has been achieved so far Factory infrastructure has been completed and equipped – factory was inaugurated in July 2012 Medicine quality control lab has been set up 70 staff have been trained in Brazil and Moz in pharma production and management Application for WHO quality certification (expected in 2014) Donation of 8 medicine production files (technology transfer) In Jan 2013 secondary and tertiary production was started for some of the 21 drugs planned (among which, 6 ARVs) 7

9. Retail prices of selected locally produced and imported ARVs ProductSMM 1 CHAI 2 WHO 2 PEPFAR 2 MSH 3 MinMaxMinMaxMinMax 3TC - Lamivudine 150mg (60 cps) 0.0450.0440.0400.0500.0511.6250.04080.1578 NVP - Nevirapeine 150mg (60 cps) 0.0490.0500.0400.0500.0571.9280.04520.2596 AZT - Zidovudine + NVP + 3TC (300+200+150mg) (60 cps) 0.2050.1860.1800.2000.2860.9710.14880.3006 AZT - Zidovudine + 3TC (300+150mg) (60 cps) 0.1680.1460.1300.1500.1582.9050.14460.4629 8 Source: 1 SMM Financial Department; 2 CMAM; 3 Management Science for Health International Price indicator guide.

10. Outstanding issues Financial sustainability (100% of ARVs are paid and procured by international agencies) Ownership of the factory and GoMs willingness to lead (what institution will be responsible for managing the factory within the GoM?) Access to markets (local private market is crowded out by donations, and there is a lot of competition in the rest of Southern Africa) 9

11. Insights on LPP in LMIC from the Maputo factorys experience Production costs may be overcome by tinkering with the cost structure (tax breaks, investment subsidies and profit) Lack of flexibility of current drugs financing arrangements may be the key hurdle for local production of pharmaceuticals The ARV market is too narrow a niche for local producers, as it is marred by decreasing margins (Nakakeeto et al, 2013) and distorted by external funds (Izazola-Licea et al, 2009) The info benefits from local production may be further reaching than expected for local govts (Flynn, 2008) 10

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