Abbott Laboratories faced with anti-Aids drug dilemma

The Latin American emerging economy served notice last month it would use powers under global trade rules to break Abbott's patent and make a generic copy of the Kaletra pill to cut the costs of its fight against the disease.

Abbott issued a vitriolic response last week, accusing Brazilian politicians of putting "short-term manoeuvring" over the interests of its own people.

It has to decide within 10 days of the request whether to cut its prices or lose its business to a Brazilian manufacturer that will make them for half the $1.17 Abbott charges. The deadline is understood to fall on Wednesday.

The spat is a test case that will have huge implications for both the global fight against HIV/Aids and the biotech industry in the UK, US and Europe.

It would be the first time a country has invoked its rights under concessions won during World Trade Organisation negotiations that allows governments to make cheap copies of drugs needed to tackle local health emergencies.

The Brazilian government says that as many as 600,000 Brazilians carry the virus and forecasts that by 2008 it will be spending $520m (£290m) a year on a cocktail of drugs including Kaletra.

"Brazil is concerned about doing a good job of treating those Brazilians who need it, with the proper medication," said Humberto Costa, the country's health minister.

Health and poverty groups fully support Brazil's action. Jim Kim, director of the department of HIV/Aids at the World Health Organisation in Geneva, said: "The Brazilian government is perfectly within its rights to suspend the patent of Kaletra ... so as to develop it at more accessible prices."

Oxfam said buying Aids drugs from Abbott and its fellow US giants Merck and Gilead Sciences used up 67 per cent of the country's budget for tackling the disease.

In its statement, Abbott said that as the world's ninth-largest economy, Brazil's demand for the same rights as the poorest countries was "against the spirit" of the agreement. It said: "Such a mis-step puts short-term manoeuvring ahead of the access to new and improved treatments."

It said compulsory licensing would have "significant negative consequences" for the development of future treatments for a range of diseases.