The doubtful future of public private partnerships
In Brazil, this can be divided into four different groups: research-based; foreign generics; local branded copies without interchangeability (known as similares); and government-owned pharmaceutical industries.
The Brazilian government is the largest player in the market, controlling 17 industries and the regulator (responsible for marketing approvals, pharmacovigilancy and price controls). It is also the country’s largest client. This unique combination has fostered the development of public private partnerships (PPPs) in the pharmaceutical industry, diverting the statutory intent of the law on PPPs.
When the law was enacted, its purpose was to implement PPPs to allow public services to be explored by private companies by means of concessions. Article 2 allowed for an ‘administrative concession’. A private company is hired to assume several public service obligations on behalf of a government entity.
A presidential decree on May 12, 2008 created the Executive Group of the Health Industrial Complex (GECIS). GECIS’s main purpose was to promote the development of the Brazilian national pharmaceutical complex, taking advantage of the country’s enormous health budget to finance technological development.
After the decree, PPPs were diverted to enable Brazilian governmentowned pharmaceutical industries to manufacture and distribute ‘strategic medicines’, according to Health Ministry orders.
Press reports suggest that Merck is finalising a PPP with the LAFEPE official laboratory of the State of Pernambuco to transfer technology and enable the laboratory to manufacture the AIDS drug Raltegravir (brand name Isentress). Government purchases could increase from $40 million to approximately $140 million a year once the drug is manufactured by the Brazilian official laboratory.
Keeping in mind that the main purpose of the PPP and of GECIS is to foster the development of the Brazilian pharmaceutical complex, it is clear that the participation of owners of innovative drugs, such as Merck, is indispensable. This is a win-win example.
“If official laboratories establish poor requirements for prospective bidders, it may allow dealer companies opportunities to participate, even if they do not own the technology to manufacture drugs.”
However, several PPPs are being finalised with Brazilian private local industries that do not have marketing approvals for innovative drugs, but only for generics and similares from China or India. These do not possess technology to transfer to official Brazilian laboratories. These companies simply import the active ingredient from foreign countries and market the products in Brazil. This is less a of win-win situation and a violation of the country’s government public bid legislation, supported by several articles of the Brazilian constitution.
As an example, a recent PPP for the Brazilian Army’s Chemistry and Pharmaceutical Laboratory was won by a private company with headquarters in a Caribbean tax haven. The company does not have a single marketing approval for any drug in Brazil, or even an authorisation to operate in the country.
Curiously, that did not stop the company from claiming eligibility to provide the army laboratory with technology to manufacture four different pioneer drugs in violation of intellectual property right on patents, data package exclusivity and copyrights.
After several lawsuits were filed against the bid, the army decided to revoke it and make changes to the initial proposition. If official laboratories establish poor requirements for prospective bidders, it may allow dealer companies opportunities to participate, even if they do not own the technology to manufacture drugs. This would promise a damaging future for Brazilian patients.
In addition, once the official laboratories start manufacturing the drugs, it is likely that the government will stop acquiring drugs through public bids, and research and development-based pharmaceutical companies will lose an important piece of the market, without compensation for the use of their IP rights.
Research and development companies should pay very close attention to public bids made by official laboratories for technology transfer using PPP. It is clear that, at this moment, political reasons may hinder the true purpose of the proposal, as well as affecting the market and intellectual property enforcement.
Otto Licks is a partner at Momsen, Leonardos & Cia. He can be contacted at: oblicks@leonardos.com.br
Felipe Mesquita is an associate at Momsen, Leonardos & Cia. He can be contacted at: fvmesquita@leonardos.com.br
