Brazil ready to infringe US drug patents

Brazil is preparing to infringe patents on US pharmaceutical products, in retaliation against subsidies for US cotton farmers, according to the Brazilian press.

The World Trade Organisation is expected to rule on Monday that Brazil can contravene the drug patents, say the reports.

Brazil led a challenge against US cotton subsidies in 2002 and, two years later, the WTO ruled that about $3bn paid to US cotton farmers each year distorted global prices and violated trade rules.

The US has continued the subsidies, arguing that the measures were consistent with its WTO obligations. But the WTO has supported Brazil’s case. It allowed Brazil to retaliate in 2005 but Brasília has instead sought a negotiated settlement to avoid damaging relations with the US, until recently its biggest trading partner.

However, Brazil has become increasingly frustrated by the US refusal to remove its subsidies and, under pressure from its own cotton growers, is reported to be preparing to retaliate.

One option would be to raise import tariffs against US goods. But Brazil is a relatively small US market, taking $32bn out of $1,287bn of US exports last year.

Instead it is preparing to take action over intellectual property, an area of much greater significance to the US. The WTO is expected to include this possibility in its ruling on Monday. According to a report in a Brazilian newspaper the government has prepared a “provisional measure” – a presidential decree that takes immediate effect, although it must later be ratified by Congress – to allow Brazilian pharmaceuticals companies to copy medicines protected by US patents.

In 2007 Brazil followed Thailand in overriding a patent on a pivotal HIV medicine, allowing it to buy equivalents of Efavirenz, patented by Merck, from rival generic suppliers under provisions permitted by WTO rules.

The move followed years of brinkmanship during which Brazil achieved steep discounts on HIV drugs by threatening to break patents.

Its expected move on Monday comes in the context of growing frustration in Brasília at the Obama administration’s reluctance to act on farm subsidies affecting cotton and other sectors of Brazilian agribusiness, especially sugar and ethanol.