Brazil has rejected a U.S. drug maker's offer of a 30 percent discount on an anti-AIDS drug, Efavirenz.
President Luiz Inacio Lula da Silva's office is now deciding whether to break the drug's patent by making it or buying generic versions.
A spokesperson from Merck expressed disappointment at Brazil's rejection of the offer and said Merck had repeatedly asked to meet with Brazil's Health Ministry to reach an agreement.
Under rules of the World Trade Organization, a country can sidestep patents by producing and importing generic drugs for emergencies. Brazil has declared Merck's drug "in the public interest" and too expensive to buy.
The country's anti-AIDS program, which provides free medication to anyone in need, pays more than one-and-a-half dollars per pill, but has asked for a 60 percent discount.