The Brazilian pharmaceutical market remains our favorite regional market in Latin America due to its large market size and strong domestic demand for innovative, high-tech products. The government is increasingly investing in the healthcare sector and pharmaceutical industry to reduce the financial burden of diseases, and the country’s private healthcare sectors provide opportunities for foreign companies. However, the increasing drug rebate level has significantly undermined the profits recorded by generic drug makers. The more aggressive government technology transfer deals with multinationals as well as the drug approval delays due to bureaucracy and staff shortages at ANVISA have also dampened multinationals’ revenue-generating opportunities.
Headline Expenditure Projections
Pharmaceuticals: BRL48.10bn (US$28.72bn) in 2011 to BRL51.76bn (US$25.88bn) in 2012; +7.6% in local currency terms and -9.9% in US dollars terms. Forecast down from Q412 due to less optimistic industry projections.
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Healthcare: BRL378.63bn (US$226.04bn) in 2011 to BRL416.46bn (US$208.23bn) in 2012; +10.0% in local currency terms and -7.9% in US dollars. Forecast upwards from Q412 due to more optimistic historical data.
Medical Devices: BRL7.45bn (US$4.45bn) in 2011 to BRL8.31bn (US$4.15bn) in 2012; +11.5% in local currency terms and -6.6 in US dollars terms. Forecast revised downwards from Q412 due to analyst intervention.
Risk/Reward Rating: Brazil’s position in the Americas Pharmaceutical Risk/Reward Rating (RRR) system – which ranks markets according to attractiveness to multinational drug makers – has remained in fifth place for Q113. Brazil is no longer as prominent as it once was in the Latin American region, particularly now the outlook for Mexico is more optimistic. BMI’s RRR ranking in Q113 highlights an opportunity for multinational drug companies to re-evaluate their long-term regional strategy in Latin America if further significant changes occur.
Key Trends and Developments
In October 2012, BMI revised down Brazil’s pharmaceutical market size and its growth rate. The increasing number and extent of drug rebates in Brazil’s pharmaceutical market has significantly undermined the profit recorded by drugmakers, reduced the overall market value and lowered market growth prospects. Generic drug makers have been particularly hard hit by these rebates. However, we still believe that Brazil’s pharmaceutical market remains the most attractive to multinationals in Latin America, because the large patented drug subsector (the most profitable part of the industry) is the least affected by these rebates, due to the non Brazil substitutable nature of medicines with intellectual property protection. In addition, drug prices in Brazil are still increasing steadily, while medicine prices have stagnated or even fallen in many developed countries.
In November 2012, Brazil’s Health Minister Alexandre Padilha signed agreements to formalize 20 new domestic production development partnerships, involving 12 public pharmaceutical companies and 17 private drugmakers during the third meeting of the Executive Committee and Council of Competitiveness of Industrial Health Complex (Gecis). The deal comprises 21 medicines targeting 11 therapeutic areas including neurology, respiratory diseases, immunology, hematology, HIV/AIDS, and oncology. Currently, most of these products were imported by the health ministry for the users of the Single Health System (SUS). The ministry estimated that domestic production of these products will save the government approximately BRL940mn (US$462.5mn), nearly 40% of what it has spent on these medicines.
In October 2012, UnitedHealth Group, the biggest US healthcare insurer by revenue, was to acquire a 90% stake in Amil Participações, a Brazilian insurance group and hospital operator, for US$4.9bn as part of its plans to increase its presence in emerging markets.
In October 2012, the Association of Pharmaceutical Industry Research (Interfarma), a non-profit organization representing the research-based pharmaceutical industry, reported that between August 2011 and August 2012 the average time for a generic medicine to receive approval increased to up to two years. For innovative drugs it has increased from seven months to 16 months. Biological products now take over a year to be authorized. Interfarma believes bureaucracy and staff shortages at the National Health Surveillance Agency (ANVISA) are the main reasons for the approval delays. It also attributed the delay to the increasing number of
medicine approval applications. Nevertheless, ANVISA said it would improve its regulatory framework, restructure the agency and implement electronic drug registration to match the growing demand for drug registration.
Weak private consumption and industrial production data, combined with
continued infrastructure project delays, point to a more modest increase in economic activity during H212 than we had been expecting. As such, we have revised down our 2012 real GDP growth forecast to 1.8%from 2.4%.That said, with significant stimulus in the pipeline and construction in advance of the 2014 World Cup set to bolster growth in several sectors, we maintain our 3.7% real GDP growth forecast for 2013
Brazil’s socialist party, Partido Socialista Brasileiro, posted strong gains in the
October 7 2012 municipal elections, supporting our view that it will become an increasingly important national political player over the coming years. That said, President Dilma Rousseff’s Partido dos Trabalhadores also performed relatively well in the contests, increasing the number of mayoralities it controls, such that both the president and her party look poised to post a strong showing in the 2014 general election.
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