Watch CBSN Live

Brazil's Drug Copying Industry

Inside a laboratory in Brazil's coffee- growing region, scientists painstakingly replicate brand name drugs and oversee mass production of cheap copies to treat ailments ranging from Parkinson's Disease to AIDS.

In three decades, Laboratorio Cristalia has grown from a tiny company making one cloned anti-hyperactivity medication to a firm with 1,200 workers churning out 150 drugs, illustrating the exponential growth of the generic drug industry in countries like Brazil and India.

Now Cristalia and its competitors are trying to figure out how to profit from the World Trade Organization's recent agreement allowing impoverished nations to bypass big pharmaceutical companies and import copied patented medicines to fight killer diseases.

The WTO's 146 member countries reached the agreement last month, a week before the group's talks on trade and agricultural issues collapsed at a summit held in Cancun, Mexico.

Although there are challenges that might make the medication plan unworkable, getting the business could be a big moneymaker for Cristalia, founded in 1972 by Dr. Ogari de Castro Pacheco to make cheaper drugs for patients with mental illnesses at his private clinic next to the drug lab.

Before the decision, Cristalia was free to sell its copied versions of patented drugs in Brazil and ship them abroad after the patents expired.

But the agreement opened a huge potential new market by allowing generic drug makers to export drugs still under patent protection to treat diseases such as AIDS, tuberculosis and malaria when needy countries declare they can't afford prices charged by multinational pharmaceutical corporations.

Millions of patients need the drugs, and tens if not hundreds of millions of dollars in sales are possible. Despite doubts from the pharmaceutical industry that the developing world's generic drug makers can handle the demand, Pacheco said it would be easy for him to increase production.

"If they asked me for the level of consumption in Brazil for the AIDS cocktail, I could deliver it in three to six months," said Pacheco, Cristalia's chief executive and principal shareholder. "For what's consumed in all of South America, I'd need a little more time."

But Pacheco and his counterparts in Brazil and India face potential political, bureaucratic and financial obstacles that could prevent them from selling a single dose of a lifesaving AIDS medication. Under the WTO agreement, poor countries that want the drugs must prove they don't have manufacturing capability, then issue a special license to a generic drug maker.

Notification to the WTO is mandatory, and the drug maker must then obtain an export license from its government. Each country that embarks on the effort must review its generic importation process annually, and complaints can be taken to the WTO's committee on intellectual property "with a view to taking appropriate action."

Experts say poor countries will have to negotiate first with the patent holders to try to get the drug companies to slash prices, and may end up using the threat of deals with the generic drug makers as bargaining leverage.

The WTO agreement has "not simplified things, it's been complicated and only the large companies benefit," said Yusuf Hamied, chairman of Cipla, one of India's largest generic makers. "Who wants this red tape? We need predictability for supply. We don't want the headaches and the litigation."

And even if a generic drug maker succeeds in landing a contract to supply a poor African country with AIDS drugs, it won't start production without guarantees of payment from groups like the Global Fund to Fight AIDS, Tuberculosis & Malaria, which is seeking $3 billion in pledges from developed countries to fund the drug needs of poor countries around the world.

"Let's not kid ourselves, the generic producers are in it for business and they want to know they will get paid," said Eric Noehrenberg, director of international trade and market issues with the International Federation of Pharmaceutical Manufacturers' Association, which represents research pharmaceutical companies that hold drug patents.

Noehrenberg downplayed Brazil's ability to produce enough generic drugs for countries that need them. In an ongoing dispute with three large pharmaceutical companies over prices of three patented AIDS drugs imported into Brazil, the government is considering breaking patents by importing the drugs from India or China because Brazilian health authorities say the country's generic makers don't have the capacity yet to produce enough for the 140,000 Brazilians with AIDS.

So if Brazil can't make enough AIDS drugs to fulfill domestic needs for its internationally recognized free treatment program, Noehrenberg said, how can it ship them abroad?

Pacheco and AIDS activists insist the capacity can be increased because established generic drug makers can start production lines quickly. Even if Brazil can't handle the load, the medical aid group Doctors Without Borders says countries like Brazil can somehow help less developed countries meet their pharmaceutical needs.

"There's increased funding for AIDS, and more and more countries are talking about providing more AIDS funding," said Ellen 't Hoen, a Doctors Without Borders spokeswoman. "Brazil could play a big role with exports, but Brazil also has the knowledge and the technology to help other countries to start production sites and their own programs."

Pacheco, Cristalia's president, figures he would only be able to make thin profit margins because AIDS groups will make sure generic drug makers provide the crucial anti-retroviral drugs used in the AIDS cocktail at the cheapest cost possible. So the secret to making money by selling generic drugs to poor countries will be big volume.

"Meeting Africa's needs with anti-retroviral drugs may be a dream, but it's possible," Pacheco said. "It's certainly a challenge I am determined to take on."

By Alan Clendenning

View CBS News In