Introduction

The year 2025 marked a decisive turning point for Brazil’s Productive Development Partnerships (PDPs). Throughout the year, 30 PDPs were approved by the Ministry of Health targeting strategic products for the Unified Health System (SUS), from biosimilars and vaccines.

Unlike previous cycles - when multiple partnerships were structured amid significant regulatory gaps, limited oversight, and weak compliance mechanisms - the government is implementing a more structured and cautious approach.

This institutional shift occurred after the setback the original PDP program suffered following an audit conducted by Brazil’s Government’s Accountability Office (GAO), which identified a series of systemic weaknesses and led to the suspension and termination of multiple partnerships.

Among the most critical findings, the TCU concluded that PDPs lacked an established methodology for determining the economic value of the know-how embedded in the partnerships (tech transfer value). This finding is of relevance to justify the pricing methodology practiced during Phase III of PDPs: acquisition of medicines by government.

The GAO–Ministry of Health Debate: Pricing Complexity Versus Accountability

In 2023, within the context of the ongoing audit proceedings, the government argued that uniform pricing models were unworkable due to the wide variability in technologies and agreements. However, the GAO while acknowledging that a single pricing formula might be impractical, emphasized that his did not exempt the government from establishing general pricing principles to ensure transparency, accountability, and fiscal responsibility. In other words, the problem isn’t the complexity of pricing, it’s the absence of a system to make pricing decisions accountable.

The GAO further stressed that the price to be paid for the know-how (tech transfer) should be assessed based on its strategic value to the public health care system. This should not be merely limited to the cost of merely transferring the technology. This principle was deemed key to determining whether a PDP delivers value for the public healthcare system.

In response to concerns that leveraging technology value could lead to inflated product prices, the GAO pointed out that acquisition costs should reflect the full cycle of product development and technology absorption, not just the market cost of the medicine. It further clarified that excessive pricing would still be constrained by the requirement that final prices remain compatible with those practiced within the SUS.

Another major sticking point was the Ministry of Health’s claim that much of the data necessary for valuation is either incomplete or confidential. The GAO rebutted by noting that lack of information cannot be equated with trade secrets, and that no requirement has been made to publicly disclose proprietary information.

Note No. 17/2025 and the Pricing Criteria to be followed

What for years appeared unfeasible - at least according to the Ministry’s own institutional discourse - materialized on the final day of 2025. The Ministry of Health issued Informative Note No. 17/2025, establishing methodological criteria for calculating the cost of technology transfer in PDPs, applicable to both public institutions and private partners.

The Note is grounded on a central premise: technology transfer must be priced in a manner that preserves the economic and financial balance of the technology transfer agreement, which necessarily requires transparency regarding what is being contracted and how each value component contributes to the overall PDP price.

The document expressly acknowledges that technology transfer costs may vary significantly depending on the nature of the product or technology involved, and that substantial differences may exist between chemical medicines, biological products, and medical devices. Variability, however, does not negate the need for developing a methodology.

Price Decomposition: Supply and Technology Transfer

Under the model proposed by the Ministry of Health, the price of a PDP product is composed of two primary components:

F (manufacturing) corresponds to remuneration for the supply of the product, encompassing costs related to manufacturing and delivery of batches to the public partner.

BDI (Indirect Benefits and Expenses), corresponds to remuneration for expenses associated with the execution of the PDP, including technology transfer. The BDI is further decomposed into the following elements: CI – Indirect Costs; T – Tax Costs; MC – Contribution Margin for the Public producer; CA – Training and Capacity Building; D – Regulatory Development; L – Technology Licensing; Ce – Valuation of Technology for Definitive Assignment.

While the F, CI and TI components may fluctuate throughout the PDP in response to market price variations, the remaining components (MC, CA, D, L, and Ce) are treated as fixed, non-fluctuating values. Among them, L and Ce constitute the primary benchmarks for calculating reimbursement or indemnification in the event of unsuccessful technology transfer.

The Note reiterates that the overall PDP price must be equal to or lower than the average price practiced within the SUS, calculated in accordance with Normative Instruction SEGES/ME No. 65/2021.

This framework, together with the recent CMED resolution establishing the new regulation on drug pricing, requires patent holders and technology owners to adopt a strategic, forward-looking approach. In practice, pricing decisions made at the time of marketing approval - particularly those submitted to CMED as maximum prices - must already take into account the potential structuring of future PDPs, given that PDP prices may not exceed those practiced within the SUS and are expected to already internalize the value of licensing and technology transfer.

Understanding Indirect Costs (CI), Licensing (L) and Definitive Assignment (Ce)

Indirect Costs (CI) encompass expenses essential to the execution of the PDP that cannot be directly attributed to a specific input, stage, or batch, such as central administration, institutional capacity building, regulatory activities, and development efforts. Due to their diffuse and non-individualizable nature, CI are not subject to reimbursement, in line with consolidated TCU precedent.

Technology licensing (L) typically enables the final stage of the PDP and is often implemented through a “clone” sanitary registration in the name of the Official Pharmaceutical Laboratory (LFO) or through co-ownership arrangements. The Note emphasizes that licensing arrangements must clearly define scope, duration, conditions of use, regulatory obligations, and performance milestones.

Definitive assignment (Ce) corresponds to the full and irrevocable transfer of technology, resulting in the private partner’s disengagement and the public producer’s full autonomy. The minimum package includes the assignment of technical and industrial documentation, productive and regulatory know-how, and the transfer of intellectual property rights.

Pricing disputes in a concrete case

Issued before the Min. of Health’s publication of Note No. 17/2025, a trial decision concerning a PDP between a generic company and a public partner sets up an interesting precedent. The court concluded that while medicines were supplied, technology transfer had not occurred, frustrating the essential purpose of the contract.

The judgment indicates that the private partner may be held liable for damage to the public treasury. The compensable harm corresponds to the portion of PDP payments that cannot be justified by the mere supply of the product. Because the value of the technology was not contractually discriminated, the court used the prices practiced in the first public bid after the PDP termination as an objective benchmark for market value.

For private partners, this litigation underscores the need for a strategic approach to risk allocation in PDP contractual architecture, including precise pricing definition of tech transfer and IP ownership. Contracts should be designed to require the private partner’s active participation in resolving implementation constraints, reducing performance risk and liability exposure.