KAI RYSSDAL: The Brazilian government's been in negotiations with the U.S. drugmaker Merck over cheaper AIDS drugs. Specifically an anti-retroviral called Efavirenz.
Talks haven't been going so well. So today Brazil's president Lula da Silva took matters into his own hands. He signed something called a compulsory license. It lets Brazilian companies break Merck's patents, manufacture the drug themselves, and sell it for far, far less than the brand-name pill.
It's the second time this year Merck's been on the receiving end of a compulsory license. We asked Helen Palmer at the Marketplace Health Desk at WGBH to check out the medical patent trade.
HELEN PALMER: Brazil made its decision after failing to persuade Merck to cut the price per pill of Efavirenz by more than half. Harvard economist Frederic Scherer says Brasil's move is perfectly legal under international trade rules.
FREDERIC SCHERER: When those negotiations have failed to yield a satisfactory conclusion, then the recipient nation has the right to issue a compulsory license.
About 75,000 Brazilians take Efavirenz. If Brazil did produce a generic version, Merck would lose about $250 million over five years. But analyst Mark Ravera of Strategic Pharma Consultants says lost revenue is not the main danger here.
MARK RAVERA: The biggest risk comes more from the overall precedent that this may be setting for Brazil and other developing markets.
Brazil has used the threat of compulsory licensing before to get a good price deal on drugs. And when Thailand signed a compulsory license for Efavirenz in January, Merck slashed the price to 65 cents a pill — the deal Brazil wants. So this may not be the end of the story.
Mark Weinsteen of the AIDS Healthcare Foundation, says this drug's been around for eight years, and Merck's just trying to squeeze more cash out.
MARK WEINSTEEN: This is gravy for the drug companies and it's all going to drop to their bottom line.
Weinsteen says Merck and the drug companies trying to protect their markets are on the wrong side of history.
In Boston, I'm Helen Palmer for Marketplace.