(Adds minister not ruling out new offer, recasts) By Natuza Nery BRASILIA, May 3 (Reuters) - President Luiz Inacio Lula da Silva is to decide this week whether Brazil will sidestep an AIDS drug patent held by Merck & Co. Inc. <MRK.N> after the health ministry rejected the company's price-cut offer on Thursday. "We consider the offer insufficient, and we told the manufacturer," Brazil's health minister, Jose Temporao, told Reuters on Thursday. "The decision (on whether to break the patent) is now being analyzed by the president." Brazil offers free universal access to AIDS drugs. Temporao said he is still waiting for a new proposal from Merck to materialize "at any moment." The government rejected a Merck offer that cut the price 30 percent, according to Brazilian officials. They expected Lula's decision on Friday. The company said it made a fair offer. "We at Merck are disappointed to have had what we considered to be a fair offer rejected by the government of Brazil," Merck spokeswoman Amy Rose said. "The company has repeatedly requested a face-to-face meeting (with the health ministry) where we could further explore a mutually acceptable agreement with the Brazilian government that helps achieve its objective of universal access for HIV-AIDS treatment," she added. The government said last week it was considering importing generic versions of the drug, Efavirenz, for Brazil's lauded AIDS treatment program if it decides not to honor the patent. It has not mentioned any plans to make the drug locally but said it was possible. Brazil has threatened to sidestep patents before, but has hammered out deals in the end. Brazil guarantees free anti-AIDS drug cocktails to patients in Latin America's most populous country. Under World Trade Organization rules, a country can sidestep patents by issuing a "compulsory license," which allows production and imports of generic drugs for public health and national emergencies. Brazil declared the drug "in the public interest" and too expensive to buy. Brazil wanted Merck to cut the price of Efavirenz to 65 cents per pill -- the same price paid by Thailand -- from US$1.57 per pill paid by Brazil. A source close to the negotiations said the New Jersey-based drugmaker has since come back with an offer of $1.10 a patient per day, but Brazil rebuffed that bid. The source said the talks were at an impasse. Merck said it sells the drug for $1.80 per day in most middle-income countries. Supplying a patient with Efavirenz for a year costs Brazil $580, compared with $166 for a similar generic drug. Importing the cheaper version will save Brazil $30 million a year, the health ministry has said. The country's spending on antiretroviral drugs doubled to nearly 1 billion reais ($495 million) in 2005 from 2001, according to a Brazilian report for the United Nations. Brazil has defied 1990s forecasts that the AIDS epidemic would ravage its young, sexually active population. It has stabilized the share of infected adult population at 0.6 percent -- in line with the proportion in the United States. Begun in 1997, Brazil's free universal access to AIDS drugs has become a U.N.-recommended model for the developing world. The program also distributes free condoms and syringes. (Additional reporting by Kim Dixon in Chicago and Ricardo Amaral in Brasilia)
