Government Under Pressure To Provide More Advanced Medicines

BMI View: Multinational pharmaceutical companies should promote the public awareness of the diseases treated by their innovative medicines as an important marketing strategy to enter Brazil's public health sector. However, foreign drugmakers will encounter issues such as strong government negotiation power and the risk of potential production technology transfers to local rivals.

The Brazilian government has encountered increasing pressure to provide more advanced medicines in the Unified Health System (Sistema Único de Saúde, SUS) or drugs not yet approved by Brazil's National Health Surveillance Agency (ANVISA) but available in the country. According to data from the General Attorney Office, in 2013 there were approximately 18,000 claims from patients demanding access to innovative medicines through the public health system. The federal government alone could face monetary penalties of up to BRL3.93bn (USD1.73bn) to satisfy these claims. The government has already lost some lawsuits filed against the public health system, and has considered the possibility to modify national policies for medicine allowances in the public sector.

We note that patients in Brazil can access to advanced medicines through lawsuits, as the Brazilian Federal Constitution dictates that access to healthcare is a social right and independent of financial capacity. According to a study from the SUS, in 2011 the government spent BRL266mn (USD135.4mn) in total on the purchase of drugs by court decisions. During the same period, one-third of patients who receive government funding for a targeted cancer drug do so through a court order.

Strong Growth
Brazilian Pharmaceutical Market Outlook

Government Under Pressure To Provide More Advanced Medicines

BMI View: Multinational pharmaceutical companies should promote the public awareness of the diseases treated by their innovative medicines as an important marketing strategy to enter Brazil's public health sector. However, foreign drugmakers will encounter issues such as strong government negotiation power and the risk of potential production technology transfers to local rivals.

The Brazilian government has encountered increasing pressure to provide more advanced medicines in the Unified Health System (Sistema Único de Saúde, SUS) or drugs not yet approved by Brazil's National Health Surveillance Agency (ANVISA) but available in the country. According to data from the General Attorney Office, in 2013 there were approximately 18,000 claims from patients demanding access to innovative medicines through the public health system. The federal government alone could face monetary penalties of up to BRL3.93bn (USD1.73bn) to satisfy these claims. The government has already lost some lawsuits filed against the public health system, and has considered the possibility to modify national policies for medicine allowances in the public sector.

We note that patients in Brazil can access to advanced medicines through lawsuits, as the Brazilian Federal Constitution dictates that access to healthcare is a social right and independent of financial capacity. According to a study from the SUS, in 2011 the government spent BRL266mn (USD135.4mn) in total on the purchase of drugs by court decisions. During the same period, one-third of patients who receive government funding for a targeted cancer drug do so through a court order.

BMI highlights that multinational pharmaceutical companies should promote the public awareness of the diseases treated by their innovative medicines as an important marketing strategy to enter Brazil's public health sector. Just as the Brazilian government can exercise its significant purchasing power to negotiate prices with drugmakers, multinational companies can leverage public pressure to close favourable deals with the government. The free distribution of Roche's Herceptin (trastuzumab) in the SUS is an interesting case study for multinationals to potentially emulate.

Previously, trastuzumab was the seventh most requested drug by judicial action to the government, costing the public healthcare system BRL4.9mn (USD2.5mn) in 2011 to meet 61 purchase orders of the drug. In February 2013, the Brazilian government made it available to public healthcare patients for free and planned to spend at least BRL130mn (USD188mn) per year on the drug. We note that through this deal, Roche has secured a steady revenue stream from the local public healthcare system and extracted more profit in Brazil before Herceptin loses its patent in 2014.

We believe that as President Dilma Rousseff is widely expected to seek re-election in October 2014, the government will continue to increase the federal budget on healthcare, which has taken priority over many other matters. Although the Brazilian government's fiscal policy has increasingly come under scrutiny in recent months, it is very unlikely that the government is going to tighten medicine access for patients in Brazil. The pharmaceutical industry in Brazil will continue to enjoy strong growth and the government's full support as it is also one of the key strategic industries for the government to revive the Brazilian economy.

BMI calculates that sales of patented pharmaceuticals in Brazil reached BRL19.7bn (USD9.1bn) in 2013, having more than doubled in US dollar terms since 2006. For 2013-2018, BMI forecasts a compound annual growth rate of 7.6% in local currency terms and 7.5% in US dollar terms, with patented drug sales reaching a value of BRL28.4bn (USD13.1bn) in 2018. The projected continuation of sales expansion is one of the key reasons that multinational research-based drugmakers continue to invest in Brazil.

Strong Growth
Brazilian Pharmaceutical Market Outlook
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