Abbott Laboratories has reached agreement with the health authorities in Brazil which will see the firm sell a new version of its AIDS treatment Kaletra at a price discounted by around 30%, thus ending a stand-off between drugmaker and government.

The deal was revealed at a press conference in Brasilia attended by Health Minister Jose Gomes Temporao and Abbott officials as the firm announced that the price of Kaletra (lopinavir/ritonavir) will fall from $1.04 to $0.73 for the rest of this year and $0.68 in 2008. The agreement should reduce Brazil's drug costs by some $11 million this year and represents the end of a long-running battle between the government and Abbott.

In July 2005, Abbott negotiated an agreement with the Brazilian government regarding Kaletra after the latter threatened to grant a compulsory license to the product and slashed the cost of the drug to Brazil by 42%, to $1.17 per pill. Since that deal, however, Brazil has again been putting pressure on Abbott, and other drugmakers, to lower their prices so that the country’s policy of providing free AIDS treatments to everyone who needs them can continue.

However in April, Abbott decided to offer Kaletra to the governments of more than 40 low and low-middle income countries (as defined by the World Bank) and to non-governmental organisations for $1,000 per patient per year and Brazil has now shaken hands on such a deal. Mr Temporao said that the US firm “created a positive atmosphere of discussion and cooperation with the government, which allowed us to reach an agreement'' and he suggested that other laboratories should follow Abbott's example.

Abbott also seemed pretty happy with the accord and Heather Mason, vice president of Latin American and Canada operations, said that "the signing of this agreement symbolises what can be achieved when governments and companies negotiate with the interests of patients in mind".

Abbott will also be happy that Kaletra has not suffered the same fate as Merck & Co’s HIV treatment Stocrin/Sustiva (efavirenz). Two months ago, Brazil’s president Luiz Inacio Lula da Silva issued a compulsory licence which gave the government’s health ministry the green light to import a generic version of Sustiva from India at around $0.45 per pill. The move followed lengthy talks which saw the government reject what Merck claimed was a fair offer on the drug, thought to be a 30% discount to around $1.10 per tablet. "The difference between the two cases”, said Mr Temporao, “was that Abbott sought an understanding with the Brazilian government".