Government tech transfers hijack IP rights in Brazil
November 10, 2017

Otto Licks and Carlos Aboim The Brazilian government has been attacking the intellectual protection afforded by the WTO TRIPS Agreement to the research-based pharmaceutical industry. One of the means used to implement this policy is the nationalization of the production of drugs still protected by patents and data package exclusivity. The nationalization program is called PDP/PPP, by which a government owned pharmaceutical company enters into an exclusive contract with a Brazilian national pharmaceutical company for the monopoly of the sales of particular drugs to the government. Some of these nationalization efforts have a severe impact on drug quality, increasing the risk of distribution of substandard drugs in the country. The Interamerican Society of Sanitary Surveillance (SIVS), a non-governmental organization dedicated to the fight against substandard pharmaceutical drugs and to the implementation of worldwide regulatory standards based on the International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH) and best practices of pharmacovigilance, achieved an important victory against a public call for 17 tech transfers—worth approximately $500 million in annual sales for the federal government—between the Official Laboratory of the Brazilian Air Force (LAQFA) and private laboratories. The complaints were filed before the Federal Accounts Court (TCU) and the military attorney’s office. After being summoned to answer the complaints filed by the SIVS, the LAQFA revoked the public call due to reasons of “public interest”. These tech transfers use the government’s purchasing power to nationalize the production of medicines. These partnerships are getting increased attention because (i) the selection of partners is not preceded by public procurement competitive tenders; (ii) the private partner becomes the exclusive supplier of the drug to the government; and (iii) the private partner will be kept as the active pharmaceutical ingredient (API) supplier to the public partner. Moreover, once a medicine or an API is manufactured in Brazil, priority is given to this manufacturer to the detriment of foreign manufacturers. The waiver of tender and the choosing of an exclusive supplier for the federal government, the main purchaser of medicines in Brazil, leads to several illegalities. The most common are: i. The medicines are not actually essential; ii. The private partner does not possess the technology that it is supposed to be transferred to the government; iii. The government does not have the infrastructure necessary to receive technology in order to manufacture; iv. The private partner does not own a marketing approval for the manufacture of the medicine, the necessary plant certifications, good manufacturing practice, etc; and v. The medicine subject of the agreement is covered by patents or a pending application, subject to data package exclusivity, among others. The intervention of a non-governmental organization before the bodies responsible for overseeing public procurement is a new development. In the public call promoted by LAQFA, the SIVS pointed out that the medicines were not essential and that a contract for ‘joint development’ of a medicine could not benefit from the waiver of tender, since a tech transfer requires a party that already owns the technology and is capable of transferring it. The TCU summoned the LAQFA to answer the complaint filed by the SIVS. After it was summoned, LAQFA published the cancellation of the procedure due to reasons of “public interest” on August 1, 2013. It is good news to see the Brazilian institutions fulfilling their institutional goals towards the protection of the law and the promotion of public health. The use of tech transfers solely to attain waivers of tenders and to become an exclusive supplier is detrimental to the public interest. Other economic considerations should be also made, such as the drawbacks of investing in the transfer of technologies that will be obsolete at the time that the transfer is complete, but the victory of the SIVS shows that demanding, at least, compliance with the law, can make a significant difference towards the protection of the public interest and the enforcement of IP rights in Brazil.

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This article was originally published in “WIPR”, World Intellectual Property Review. For further information, please access the following website:

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