Government Seeks To Further Reduce Dependence On Medical Device Imports

Espicom View: Brazil is set to further reduce its dependence on imported medical devices as a result of government efforts to expand domestic production through co-operation agreements between public and private enterprises. The move, which comes in response to a growing trade deficit in the medical device sector, is intended to ensure the long term financial viability of the Brazilian National Health Service (SUS) and to expand the range of treatments provided.

The Ministry of Health is further expanding local production of medical devices considered strategic to the Brazilian National Health Service (SUS). Productive development partnerships (PDP) have been signed with public and private companies for the production of 15 medical devices. These include seven partnerships for the production of cardiology devices, covering pacemakers, defibrillators, stents and balloon catheters. Other partnerships cover dialysis equipment, surgical staplers, ophthalmology equipment and patient monitors. Companies participating in these projects include Medtronic, which is partnering with the São Paulo-based Foundation for Public Medicine (FURP) for the production of single chamber and dual chamber pacemakers and Johnson & Johnson, which is partnering with FURP for the production of surgical staplers. Johnson & Johnson already has well established manufacturing operations in Brazil, including a suture manufacturing facility in São José dos Campos operated by its subsidiary Johnson & Johnson Productos Professionais, which is one of the company's three key sites for the production of sutures and needles. Medtronic has directly served the Brazilian market since 1997, but its operations to date have been confined to commercial activities.

Local companies participating include Scitech, which pioneered the production of stents in Brazil through the Ministry of Health sponsored National Stent Development Programme established in 2004. Scitech is partnering with FURP for the production of coronary and arterial stents and associated balloon catheters. Meanwhile, the Brazilian company Lifemed is partnering with the state pharmaceutical company LAFERGS to produce haemodialysis machines and dialysers and with the State University of Paraíba for the production of a multiparameter monitor and a cardioverter defibrillator. Lifemed has previously partnered with the start-up firm Toth Technologia and the Pontifical Catholic University of Rio Grande do Sul (PUCRS) for the development of the LifeshockPRO automated external defibrillator launched on the Brazilian market in 2013 in a project supported by the innovation agency FINEP.

Partnerships To Reduce Dependence On Imported Medical Devices

The PDPs aim to substantially reduce Brazil's dependence on imported medical devices with anticipated savings of between 15% and 25% depending on the product. In total, the latest 15 projects are expected to generate savings to the SUS of BRL365mn (US$166mn), of which BRL226mn (US$103mn) will come from cardiology products. Espicom notes that unlike most Latin American countries that typically rely on imported products to supply 90% or more of the medical device market, Brazil already has a low level of import reliance with the medical device market split roughly evenly between domestically produced devices and imported devices. Only Japan and the USA have a lower level of import reliance.

The government now has 104 PDP agreements to produce 97 health products involving 19 public and 60 private entities, including 30 companies with foreign capital. PDPs have only recently been extended to medical devices, having been initially developed to stimulate drug production. Prior to this latest round of agreements, only six PDPs for medical devices had been signed with the first medical devices produced by these partnerships due to become available in 2014. These include hearing aids produced by FURP in collaboration with Politec, a leading importer and supplier of high tech medical devices. Currently around 160,000 hearing aids are supplied each year through the SUS. The locally produced hearing aids are expected to meet 50% of this demand, generating savings of BRL57mn (US$26mn). At the same time, the Ministry of Health has more than doubled the number of products considered strategic to the SUS from 188 to 303, of which 187 are drugs and 116 are medical devices and IVDs.

Widening Trade Deficit

Increasing support for the domestic manufacturing industry comes in response to a widening medical device trade deficit, which increased to US$2.5bn in 2013. Espicom notes that spending on imported portable aids, one of the main product areas targeted by the latest round of PDPs, has increased sharply in recent years, particularly in local currency terms due to the weakening of the Brazilian real against the US dollar. The major exception is stents where spending fell in 2013 reflecting growing market share for domestically produced devices, which have been available since 2010, with the first Brazilian manufactured drug-eluting stent launched in 2012.

Medical Device Trade Deficit, 2004-2013
Portable Aid Imports By Type, 2008-2013
2008 2009 2010 2011 2012 2013 CAGR
Hearing aids 41,488 38,640 51,437 62,608 65,258 65,338 9.5
Pacemakers 34,200 38,166 42,334 44,085 48,804 48,211 7.1
Other portable aids 165,100 192,226 222,199 245,093 283,298 260,459 9.5
Of which:
Stents 93,182 108,778 117,293 135,594 171,259 129,011 6.7
Automatic cardiac defibrillators 16,949 21,019 25,937 26,035 26,420 33,261 14.4
Pacemaker parts & accessories 16,219 17,646 20,600 21,416 21,597 23,766 7.9
Hearng aid parts & accessories 7,217 8,689 18,395 19,798 14,690 19,942 22.5
Total 240,788 269,032 315,970 351,786 397,360 374,008 9.2
Hearing aids 74,463 76,022 90,112 104,212 126,764 140,168 13.5
Pacemakers 61,383 75,090 74,165 73,380 94,802 103,426 11.0
Other portable aids 296,323 378,195 389,270 407,962 550,309 558,755 13.5
Of which:
Stents 167,244 214,015 205,486 225,699 332,672 276,763 10.6
Automatic cardiac defibrillators 30,420 41,354 45,439 43,336 51,321 71,354 18.6
Pacemaker parts & accessories 29,110 34,718 36,089 35,647 41,952 50,984 11.9
Hearng aid parts & accessories 12,953 17,095 32,226 32,954 28,535 42,781 27.0
Total 432,169 529,307 553,548 585,555 771,876 802,348 13.2
Source: BMI Espicom

Other recent government initiatives to stimulate local production include the use of preference margins for locally-manufactured products and the use of state purchasing power to support the health products industry. The industry association, ABIMO has welcomed the additional support for the domestic manufacturing industry but continues to call for domestically produced devices to be given the same tax advantages as imported medical devices, which are not liable for sales taxes (ICMS, IPI, PIS, COFINS) when purchased by public and non-profitmaking hospitals operating in the SUS. These taxes can add around 20% to the total purchase price.

This article is tagged to:
Related sectors of this article: Medical Devices, Patient Aids, Cardiovascular
Geography: Brazil

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