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October 12, 2005
The Undefeated Brazilian Team
I wrote earlier this year about the showdown between Abbott and the Brazilian government over the price of the antiretroviral Kaletra. After several weeks of rumors, the deal has been struck. And as far as I can see, Abbott did most of the caving in.
Kaletra will now be down to 63 cents a dose in Brazil, down from the previous $1.17. It's interesting to note that back in the summer, press reports had the Brazilian government asking for a price of 68 cents. I don't know if the latest figure reflects a further price break or inaccurate earlier reporting. The new price is less than the American one by a factor of four or five, and this deal sure isn't going to send the price here any lower. In the end, money will be transferred from Abbott's existing customers to the government of Brazil.
This looks like another victory for the "Lower your price or we'll break your patent" strategy that Brazil has used before. They've never gone through with the threat, but it's clearly a real one. Abbott has apparently decided that it's better to make 63 cents a pill in Brazil than to make nothing, and (worse yet) to have Brazilian generic drug makers cranking Kaletra out for the rest of the world. And they've got a point there, of course, even after assuming that this deal could set off more price negotiations in other countries.
But this is worth thinking about next time you hear about the evils of pharmaceutical patents - you know, licenses to print money and all that. There is a trump card, and it's just been played again. Back into the deck it goes until it's needed
(Much, much more on drug pricing can be found in the blog archive here. This very point about national health plans and price-setting came up, for example, in this post from February of 2004.)
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