Pharma battles in Brazil

Although it has recently been surpassed by Mexico in terms of value, the Brazilian pharmaceutical market remains of key importance to companies establishing themselves in Latin America. The Brazilian government has focused heavily on improving the healthcare system and this should lead to long-term benefits for its citizens. The Ministry of Health has also attempted to decentralize the management of the healthcare system to more regional and local levels. This has been necessary to account for the different healthcare priorities in different parts of the country.

Figure 1 Life expectancy in Latin America.

The population is growing and ageing rapidly (Figure 1), which will result in increased demand for new medicines and thus provide the pharmaceutical industry with great opportunities; for example, between 1970–1991, the Brazilian population grew from 93.1 million to 146.8 million — an increase of nearly 58%.¹ The changing epidemiological profile of the population has been accompanied by a rise in chronic diseases, particularly cardiovascular and respiratory conditions, and a persistence of diseases associated with poverty and social inequality.¹

Despite the potential opportunities for pharmaceutical companies, the Brazilian market will present several challenges, given the government's tough line on pharmaceutical pricing, intellectual property and cost containment. Nevertheless, companies focused on the future will benefit from remaining committed to the Brazilian market.

Healthcare challenges

Brazil's size makes the provision of affordable healthcare for all citizens a difficult commitment for the government to fulfill. It has been described as a country that exhibits some of the most profound social inequalities to be found across the world. According to figures from the UK's Department for International Development Health Resource Centre, across Brazil there is a 63.4% degree of income inequality.² The scale of the difference is highlighted by the fact that the median income of the wealthiest 10% of the Brazilian population remains 30 times greater than that of the poorest 40%.

Successive Brazilian governments have attempted to improve this situation and a key step forward was the 1988 constitution that created a new health system, the Sistema Único de Saúde ([SUS] literally the Single Health System).³ The SUS brought together a number of healthcare institutions and hospitals across the nation under a single body of control for the first time.⁴ In 1990, Brazil's Congresso Nacional (National Congress) passed additional legislation that detailed how the new system would operate.

Public health services, in conjunction with the private sector, work under contract to the government and it is estimated that healthcare coverage is now about 75%.⁵ Much of the work being carried out by the government to improve healthcare services is focusing on the poorest sections of the population in areas such as combating vitamin deficiencies and reducing child mortality rates. Over 75% of the financing for the public health sector comes from the Brazilian treasury, with the remainder provided by states and municipalities.

Although much has happened since the establishment of the SUS, the healthcare situation in Brazil is changing slowly rather than dramatically. This is partly because of factors such as the country's economic crisis, which disrupted the government's more ambitious plans. In 2002, Brazil's healthcare spending as a percentage of GDP was only 5.2%. This put it behind countries such as Argentina (8.0%), Chile (6.0%) and Mexico (5.5%).⁶ Brazil's per capita spending on healthcare was estimated at $50 per annum, which put it far below the $500 recommended by the World Health Organization.

Pharmaceutical potential

The economic problems that Brazil suffered during 2002 contributed to significant disruption of healthcare services and stagnation of the pharmaceutical market.^7,8 At one point during August 2002, the Brazilian currency, the Real, lost 13% of its value.⁷ The weakening of the currency made it more difficult for the country to pay its debts and growing unemployment led to further uncertainty. The persistence of this uncertainty contributed heavily to the election of a new President in the subsequent elections, but his social policies appeared to alienate foreign investors. Economic troubles in neighbouring Argentina and Uruguay only served to prolong any recovery in the Brazilian economy, as investors moved funds out of Latin America.

The economic problems naturally affected the funding of healthcare and the pharmaceutical market. In 2002, Brazil's pharmaceutical net sales were estimated at $3.9 billion, whereas in 2001 they had been around $5.7 billion.⁸ However, currency fluctuations are reported to have made the drop in pharmaceutical sales appear more dramatic. In December 2002, the government appeared to address some of the pharmaceutical industry's worries by allowing an 8.63% price increase for many products sold in pharmacies.⁹ Furthermore, although Brazil has now slipped behind Mexico as the leading market in Latin America, it is recovering strongly. IMS Health reported that in the twelve month period leading up to February 2005, sales through retail pharmacies in Brazil rose by 19%, which surpassed the 9% sales increase seen in Mexico and the 13% increase in Argentina.¹⁰ The most popular therapeutic categories in terms of sales were cardiovascular, central nervous system (CNS) and alimentary/metabolism.

Cost containment and controversy

There is no doubt that the Brazilian pharmaceutical market offers considerable commercial opportunities to the pharmaceutical industry, but what is of concern to companies is the attitude that the government has taken towards pricing issues and intellectual property. The immense scale of the AIDS crisis in Brazil has largely driven this process (Figure 2) as the country has the highest number of AIDS cases in Latin America.^11–13

Figure 2 Expenditure by the Brazilian government on antiretrovirals.

Brazil has implemented one of the most effective anti-AIDS strategies in the world by making affordable treatments available to sufferers despite opposition from the global pharmaceutical industry on the strategies employed. The pharmaceutical industry has been critical of the Brazilian government's attempts to produce its own generic versions of antiretroviral drugs. Brazil exploited a time lag until international patent rules applied in the country. This has meant that a generic version of an antiretroviral combination cocktail that sells for $10000–15000 a year in the USA can cost $3000 in Brazil.^11,12 This situation came about from enacting a law that "guaranteed every AIDS patient [in Brazil] state-of-the-art treatment".

In August 2001, there was controversy when Brazil's health minister threatened to strip Roche pharmaceutical's patent on the anti-AIDS drug Nelfinavir after six months of negotiations failed to lower the price. By manufacturing the drug locally, the minister estimated that the price could be reduced by 40%. Although Brazil has manufactured generic versions of antiretrovirals, it was the first time it had openly threatened to strip a patent.

Although the approach that the Brazilian government has used is highly controversial, its effects have been dramatic. The decline in hospitalizations from opportunistic infections from 1997–1999 is estimated to have saved the country $422 million.

Another challenge for the pharmaceutical industry is the overt attempt by the government to promote the usage of generics to drive down healthcare costs. In public hospitals, doctors are required to prescribe generically and the government has been running a public campaign to educate consumers about generics.^6,14 The official backing of generics has also been seen in the approval process. The Agencia Nacional de Vigilancia Sanitaria (ANVISA) has visibly increased the number of generic applications that it has approved.

Outlook

Brazil represents an important market for the pharmaceutical industry. There is a strong demand from the growing population for new medicines, but any commercial opportunities in this area will be strongly affected by the government's attempts to drive down prices through cost containment measures. Pharmaceutical companies will need to carefully assess the market for their products to deal with these difficult challenges. Dealing with government cost control measures is not a new experience for international companies, and so overall Brazil still has plenty to offer the pharmaceutical industry.

References

1. L. Lobato, Reorganizing the health care system in Brazil in S. Fleury, S. Belmartino and E. Baris (Eds.) Reshaping health care in Latin America: A comparative analysis of health care reform in Argentina, Brazil, and Mexico (International Development Research Centre, Ottawa, ON, Canada, 2000).

2. UK's Department for International Development Health Resource Centre, Brazil health briefing paper (2004). www.dfidhealthrc.org/shared/know_the/publications.html

3. Ministério da Saúde 2005). http://portal.saude.gov.br/saude/

4. A.C. Medici, Financing Health Policies in Brazil: Achievements, Challenges and Proposals (The UN Development Programme Poverty Centre, Brasilia, Brazil, 2002). www.undp.org/povertycentre

5. Brazil: Country Health Profile. The Pan American Health Organization (2001). www.paho.org/english/sha/prflbra.htm

6. E. Sandullo, Latin America lagging behind in health care provision (IMS Health, 2003). www.imsglobal.com

7. Brazil's looming economic crisis (BBC News, London, UK). http://news.bbc.co.uk

8. J. Oliveira, Brazil: Market overview of drugs and pharmaceuticals (US & Foreign Commercial Service and US Department Of State, 2003). http://strategis.ic.gc.ca

9. L. Miranda, El aumento de precios de medicamentos en las farmacias tendrá lugar en diciembre (2002).

10. IMS Retail Drug Monitor: Pharma Sales Growth Continues at 6 per cent Pace in 13 Major Markets (IMS Health, 2005). www.imshealth.com

11. E. Bailey, The Pharmaceutical Pricing Compendium (Urch Publishing, London, UK, 2003).

12. F. Kermani, Neglected and Emerging Diseases: The Next R&D Challenge (Chiltern International, 2004).

13. AIDS drugs policy — Ministry of Health/Brazil (2000). www.aids.gov.br/assistencia/aids_drugs_policy.htm

14. Generics take off in Brazil (IMS Health, 2004). http://open.imshealth.com