Brazil and the Productive Development Partnerships (PDPs): setting up pricing for tech transfer and IP protection

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 or TCU), 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.

The government’s position is that compatibility with SUS prices does not preclude the inclusion of technology value, but rather imposes limits and demands technical justification. The PDP price cannot be assessed solely as the cost of the medicine; it must be understood as the result of a complex contractual arrangement in which supply and technology transfer are legally and economically inseparable obligations.

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, as it is not possible to objectively quantify and link them to a specific contract.

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, allowing continuous supply after the private partner’s gradual disengagement. Historically, licensing of regulatory dossiers has been a common practice within the pharmaceutical industry. The Note emphasizes that licensing arrangements must clearly define scope, duration, conditions of use, regulatory obligations, and performance milestones, ensuring traceability and governance.

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, guarantees of autonomy in registration and post-registration procedures, and the transfer or appropriate licensing of intellectual property rights, with clearly defined scope and limitations.

The Note further clarifies that this model will serve as the basis for revising the regulatory framework governing PDPs (GM/MS Ordinance No. 4,472/2024), with the issuance of supplementary regulation aimed at strengthening PDP governance and enhancing legal certainty.

Pricing disputes in a concrete case

Issued before the Min. of Health’s publication of Note No. 17/2025, the trial decision issued on legal action concerning a PDP between a generic company and a public institution partner for the production of a cancer product, sets up an interesting precedent addressing who may be held liable - and how liability is to be quantified - when the technology transfer process is not fully concluded.

The plaintiff argued that technology transfer had been remunerated but not executed, seeking full reimbursement of all amounts invoiced under the PDP. The court, however, found that between 2013 and 2018 the medicines were effectively delivered to the Ministry of Health in adequate quantities and regularly supplied to SUS patients. At the same time, it concluded that technology transfer had not occurred, thereby frustrating the essential purpose that justified the differentiated contractual structure and the payment of prices above market levels.

In this context, the judgment indicates that the private partner may be held liable for damage to the public treasury even in the absence of a finding that it directly caused the interruption of the technology transfer process. The compensable harm corresponds to the economic value attributed to the technology-transfer obligation, i.e., the portion of PDP payments that cannot be justified by the mere supply of the product where the promised transfer - serving as the causal basis for the exceptional procurement arrangement - is not effectively delivered.

With respect to the allocation of responsibility, the decision established that even if the failure to conclude the transfer resulted from circumstances external to the private partner, knowledge of the impediments triggered a duty to act.

Accordingly, the private partner should have proposed concrete alternatives to enable contract performance or, if performance proved unfeasible, suspended execution and returned amounts unduly received. The judgment thus articulates a positive legal duty on the private partner not to allow the unjustified continuation of a contractual execution that frustrates technology transfer.

Recognizing the strong public interest underlying the contracting - namely, the regular and continuous supply of an essential oncological medicine to the SUS - the court held that full nullification of the contracts and related acts would be disproportionate and incompatible with legal certainty. Consequently, it determined that the amounts paid by the Union could be analytically decomposed into two legally distinct portions:

(i) a first portion corresponding to the value of the medicines effectively supplied, which remunerates an obligation duly performed; and

(ii) a second portion corresponding to the overprice paid in relation to market values, which exclusively remunerates the obligation to transfer technology.

However, because the value of the technology was not contractually discriminated, the court held that, absent clear and unequivocal documentary evidence of accounting separation between supply payments and technology-transfer remuneration, the liquidation phase must necessarily adopt an objective benchmark: the prices practiced in the first public bid conducted after the termination of the PDP (Public Bid No. 98/2018), whose prices were deemed to reflect market values under free competition, without embedded technology-transfer costs.

In the motions for clarification, the plaintiff argues that reimbursement should be integral, on the grounds that the PDP constitutes an indivisible administrative contract and that failure to transfer technology triggers the contractual clause providing for the reversal of all public resources disbursed, thereby directly challenging the partial-reimbursement logic adopted in the judgment.

The case should be closely monitored as it progresses through the pending motions for clarification and appellate review, particularly because Informative Note No. 17/2025 may operate as a persuasive interpretive benchmark for how technology-transfer value ought to be identified, justified, and—where applicable—reimbursed. 

For private partners, the litigation underscores the need for a strategic approach to risk allocation in PDP contractual architecture, including pricing definition of the tech transfer and IP ownership: responsibilities must be precisely allocated and operationalized through governance mechanisms, clear escalation duties, and enforceable remedial pathways. Contracts should also be designed to enable - and, where appropriate, require - the private partner’s active participation in resolving foreseeable implementation constraints on the public partner’s side, particularly those affecting the receipt, absorption, and operationalization of the transferred technology, thereby reducing both performance risk and potential ex post liability exposure.