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Broadening healthcare access in Brazil through innovation

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This is a research report written by the Economist Intelligence Unit, sponsored by Roche. Brazil's economy is booming on the back of deepening credit markets, a growing middle class and rising …

This is a research report written by the Economist Intelligence Unit, sponsored by Roche. Brazil's economy is booming on the back of deepening credit markets, a growing middle class and rising investment in physical infrastructure, but serious shortcomings in its healthcare sector represent one of the key constraints on attaining developed-country standards of prosperity. Making the healthcare sector more effective--and innovative--will require sweeping changes to the business practices of healthcare providers and life science companies. This report analyses three significant challenges to achieving this goal: inefficient provision of care in both public and private sectors; lack of innovation; and insufficient and low-quality data in all areas of provision.

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  • 1. Broadening healthcare accessin Brazil through innovationA report from the Economist Intelligence UnitSponsored by
  • 2. Broadening healthcare access in Brazil through innovation Preface Broadening healthcare access in Brazil through innovation is an Economist Intelligence Unit research report, sponsored by Roche. The Economist Intelligence Unit conducted the research and analysis and wrote the report. The author was Daniel M. Branco and the editor was Katherine Dorr Abreu. The Economist Intelligence Unit would like to thank all those who contributed their time and insight to this project. November 20101 © Economist Intelligence Unit Limited 2010
  • 3. Broadening healthcare access in Brazil through innovation Introduction B razil’s economy is booming on the back of deepening credit markets, a growing middle class and rising investment in physical infrastructure, but serious shortcomings in its healthcare sector represent one of the key constraints on attaining developed-country standards of prosperity. Making the healthcare sector more effective—and innovative—will require sweeping changes to the business practices of healthcare providers and life sciences companies. Global demand for commodities and an expanding domestic market are powering growth of Brazil’s diversified economy. In the last 20 years, the country has put its economic and political house in order, adopting stable policies that have given investors confidence to establish and expand businesses. A burdensome bureaucracy and tax regime, and underinvestment in infrastructure remain significant constraints, but unfavourable comparisons with the dramatic growth rates of other emerging powerhouses such as China and India are not entirely appropriate: per head income levels in China and India are much lower than in Brazil. Thanks to its solid policy mix, financial system and economic diversity, Brazil came through the financial crisis of 2008-09 almost unscathed. The Economist Intelligence Unit forecasts a rise in real GDP growth of 7.8% in 2010, only in part as a result of spending in the run-up to the presidential election in October this year. Brazil’s economy will outpace neighbors’ through 2020 (% change in real GDP) Brazil Argentina Mexico India China U.S. 12 10 8 6 4 2 0 2005 2008 2010* 2012* 2014* 2016* 2018* 2020* * Forecast Source: Economist Intelligence Unit2 © Economist Intelligence Unit Limited 2010
  • 4. Broadening healthcare access in Brazil through innovation Long-term economic prospects are also favourable: we forecast an annual average GDP growth rate of 4.4% over the next decade. By 2030, Brazil is expected to have the fifth-largest economy in the world, valued at US$3.7trn. Its population will grow from an estimated 197m in 2010 to 220m in 2030. The middle class is expanding, and this is feeding demand for consumer goods as well as for better education and healthcare. Nearly 60% of all households in Brazil now earn between US$5,000 and US$10,000 annually, a figure that is expected to grow until 2020. Conditional cash transfer programmes such as “Bolsa Família” have helped to improve the lot of the very poor, encouraging families to keep children in school and to make sure they are vaccinated. Indeed, Brazil’s notorious income inequality has declined in the past decade as a result of these policies, although it remains high by global and even regional standards. Brazil’s economy among most unequal in the world Gini index* Sweden 25.0 India 36.8 US 40.8 Mexico 46.1 China 46.9 Argentina 51.3 Chile 54.9 Brazil 57.0 * The Gini index measures the extent to which the distribution of income among households or individuals in a country deviates from a perfectly equal distribution. 0=absolute equality, 100=absolute inequality. Most recent data available. Source: World Bank The country is reaping the benefits of a young population. Brazil’s potential workforce—those between 15 and 64 years old—is expected to continue to expand more rapidly than the overall population before peaking in 2029. This “demographic dividend” will spur growth, but its impact will depend on the country’s ability to use its resources effectively. This depends to a large extent on the quality of Brazil’s workforce—how healthy and skilled it is. Although Brazil has made significant efforts to improve the health of the population, more is needed. The healthcare sector faces several challenges to achieve the goal of universal access to good-quality healthcare and a competitive life sciences industry. The following sections deal with three of those challenges: l inefficient provision of care in both public and private sectors; l lack of innovation; l insufficient and low-quality data in all areas of provision.3 © Economist Intelligence Unit Limited 2010
  • 5. Broadening healthcare access in Brazil through innovation Brazil’s healthcare system: the gap Brazil’s indicators show healthcare between aspiration and reality system’s weakness Infant Mortality (per 1,000 births) Number of Doctors (per 1,000) Number of hospital beds (per 1,000) In theory, Brazil has one of the most inclusive India 30.1 healthcare systems in the world. The 1988 constitution 0.6 0.6 guaranteed universal and comprehensive care, from Brazil basic prevention to organ transplants. To meet this 1.3 22.6 obligation, which includes efficient and effective access 2.2 for all, it created the Sistema Único de Saúde (SUS), a China 20.2 1.7 government-run public healthcare system. 2.5 In many ways, SUS is a model of universal care. Mexico 18.4 Municipalities and states are given autonomy to 1.1 2.2 administer healthcare as needed, while the federal Argentina 12.1 government provides financial and technological 3.2 4.0 support. And the system has seen success. The nation’s US 6.2 HIV/AIDS programme, for example, is considered one 3.3 3.0 of the best executed in the world. Only 1% of Brazil’s Italy 5.5 population lives with AIDS, well below the world 6.0 3.9 average. Looking at the broader picture, SUS can be Canada 5.0 considered an accomplishment for Brazil. 1.9 3.4 For the individual relying entirely on the system, Spain 4.2 however, the picture is quite different. There are only 4.6 3.4 1.3 doctors per 1,000 inhabitants, one-half of whom Sources: Economist Intelligence Unit; World Health Organisation. 2009 data. work in the private sector, and just 2.2 hospital beds per 1,000 inhabitants. Healthcare spending in Brazil as a percentage of GDP Intelligence Unit estimates that in 2009 8.4% of Brazil’s compares favourably with that in other Latin American GDP was spent on healthcare by the private and public countries, yet healthcare indicators show that it is sectors, compared with 9.3% in Argentina, 7.3% in not garnering the necessary results. The Economist Chile and 6.4% in Mexico. Nevertheless, infant mortality Healthcare indicators by region in Brazil Infant mortality Mortality by Mortality by Number of Number of hospital beds (per 1,000 infectious and conditions doctors (per 1,000)3 births)1 parasitical originating in (per 1,000)2 diseases1 prenatal period1 Overall Overall Brazil 20.7 4.92 2.99 1.74 2.41 2.04 North 22.8 6.89 7.19 0.85 1.85 1.59 Northeast 29.8 5.49 4.40 1.03 2.27 2.19 Southeast 15.0 4.67 2.17 2.33 2.44 1.93 South 13.3 4.00 1.90 1.81 2.76 2.22 Centre-west 17.1 5.35 3.27 1.76 2.62 2.25 1. Source: DataSUS, 2006 figures 2. Source: DataSUS, 2007 figures 3. Source: DataSUS, 2005 figures4 © Economist Intelligence Unit Limited 2010
  • 6. Broadening healthcare access in Brazil through innovation is estimated at 23 per 1,000 births in Brazil, higher than country’s total healthcare spending. The remaining that of Argentina, Chile, Costa Rica and Mexico, and life 56% is private, and of that, two-thirds is paid out expectancy, although improved, is among the lowest in of pocket by consumers. In contrast, among OECD Latin America, at an average of 72.3 years.1 countries, governments account for 70% on average of Regional differences within Brazil are stark. In the all healthcare spending. wealthy south and south-east regions, infant mortality Brazil’s life sciences industry is significant, rates are 13.3 and 15 respectively, in sharp contrast to but it is not a leader in innovation. Both domestic the poorer north-east and north regions, with 29.8 and and multinational companies fill the country’s 22.8 respectively. Access to healthcare remains limited pharmaceutical and medical technology needs. Brazil despite programmes such as Bolsa Família, a focus on boasts the tenth-largest pharmaceutical market in the prevention and primary care, and innovative efforts world, but per head spending on pharmaceuticals is such as the pooling of municipal resources to provide just one-half of the levels in Mexico and only 5% of the services that a single municipality would not be able to levels in the US. According to ANVISA (Agência Nacional fund. de Vigilância Sanitária, a semi-autonomous regulatory The main reason for these challenges is that SUS has agency), there are 1,398 pharmaceutical manufacturers been inadequately funded. Private plans, conceived in in Brazil, and a 2009 report by ABIMO (Brazilian the constitution as supplemental to public insurance, Association of Manufacturers of Medical Devices and have become a parallel system used by those who can Materials) identifies 448 manufacturers of dental, afford to pay for care. About 22% of Brazilians pay for medical and diagnostic equipment and materials. private health insurance; the remainder depend on 1. Brazil’s relatively low life expectancy also reflects the country’s SUS. Yet the government accounts for only 44% of the high murder and accident rates.5 © Economist Intelligence Unit Limited 2010
  • 7. Broadening healthcare access in Brazil through innovation Challenge 1: Inefficient provision of care B razil’s constitutional guarantee of universal healthcare is not being fulfilled. According to analysis by André Medici, senior health economist at the World Bank, almost 20% of Brazilians were not covered by health services in 2008, often as a result of economic, institutional or even geographical barriers.2 This can be explained to a significant degree by insufficient funding and inefficiency in the provision of healthcare. Limiting people’s access to healthcare can help public and private insurers make ends meet in the short term, but simply delays the day of reckoning. In the end, keeping people away may only aggravate the problem: inadequate treatment results in sicker people, requiring more expensive care. This approach clearly undermines the goal of keeping people healthy. In Brazil, both the public and private sectors suffer from insufficient funding. SUS has been underfunded since its inception in 1988. A tax on financial transactions, designed specifically to support healthcare, was later revoked after funds were mostly diverted to other purposes. A constitutional amendment (EC-29) approved in 2000 defined minimum contributions to healthcare for all levels of governments, but neither the federal nor state governments have fulfilled their obligations. According to a congressman, Darcisio Perondi, the leader of the Frente Parlamentar de Sáude (a non-partisan group in Congress focused on health issues), EC-29 brought greater stability to the public funding of healthcare but requires urgent reform. “Ten years ago, the federal government accounted for 75% of total public healthcare spending, which corresponded to 10% of its tax revenue. Today, it accounts for 48% of total spending and contributes just 7% of its tax revenue. In addition, only ten states meet their obligation.” The burden for financing healthcare thus falls on municipal governments. According to a recent World Health Organisation (WHO) report, 98% of the municipalities meet their obligation,3 but the quality of care varies widely, reflecting their relative wealth. The private sector has moved to fill the gap in the public healthcare system. Originally, private plans were to provide supplemental coverage, according to the Brazilian constitution. Today, these plans,2. http://www. regulated by the Agência Nacional de Saúde Suplementar (ANS), cover 43m people, up from about 30m inmonitordesaude.blogspot.com/August 1st 2010. 2000. They are the primary if not only coverage used by the privately insured.3. http://www. But funding is also a problem in the private sector, and many health plans and hospitals have closedsaudebusinessweb. down as a result. In 2000 there were more than 2,000 registered health plan operators; today, there arecom.br/noticias/index.asp?cod=71618 fewer than 1,200. Health insurers have raised their premiums by more than the overall inflation rate,6 © Economist Intelligence Unit Limited 2010
  • 8. Broadening healthcare access in Brazil through innovation Making the most of little: India explores new models are salaried, carried out 3,174 cardiac bypass surgeries and operated on 2,777 paediatric patients in 2008, more than twice the volumes achieved in leading specialised hospitals in the US. Their success rate India faces many of the same challenges as Brazil and provides is higher than that of their counterparts in New York State, and the an example of an innovative approach to healthcare. The country mortality and hospital-acquired infection rates equal those of the is leveraging its role as a contract researcher and manufacturer best hospitals worldwide. The hospital reports a 7.7% profit margin, of generic drugs to increase the value of its output, for example higher than the average for US hospitals, but charges US$3,000 or by developing branded generic drugs and new formulations for less per surgery, compared with US$5,000-7,000 in private hospitals existing drugs. Through “reverse pharmacology” it is developing in India and up to US$50,000 in the US. With further changes in and launching medications based on its traditional treatments at processes, negotiations with suppliers and creative partnerships, a fraction of the cost of drugs developed by Western companies— Narayana Hrudayalaya plans to reduce its costs even further.5 US$50m, compared with US$1bn respectively.4 Indian companies By applying such an innovative perspective, Brazil can leverage its such as Glenmark are already operating in Brazil and looking to own competitive advantages to raise its global profile. expand this business model there. 4. Preparing for a Demographic Dividend roundtable, Strategy+Business, India has also made innovations in the provision of healthcare. May 2010. The 1,000-bed Narayana Hrudayalaya Hospital in Bangalore provides 5. Wall Street Journal, November 2009; Health Economics, Wharton School of high-quality yet very inexpensive heart surgery. Its surgeons, who Business, July 2010. albeit less than healthcare inflation. ANS limits premium increases, differentiating between individual plans (contracts between individuals and insurers) and collective contracts (those between corporations and insurers). Nevertheless, raising premiums is only a short-term solution. Restrictions on premiums can further reduce access; plans have worked around them by creating long waiting lists (a practice that was recently regulated by ANS) and limiting the therapies they cover. Meanwhile, hospitals face their own funding challenges and have restricted access to capital, in part because no foreign national can own equity in Brazilian hospitals. Focusing on hospitals, which can account for up to 70% of costs in private health plans, can provide large returns in terms of optimising the use of available resources by Brazil’s healthcare providers, from government-run community health units to technologically advanced private hospitals. Hospitals are difficult to manage because of their complexity and the conflicting financial interests of stakeholders. In Brazil, this has been aggravated by inefficiency, which results in part from those conflicts and in part from the lack of professional management. According to ANAHP (National Association of Private Hospitals), for example, materials used by doctors account for 35% of a hospital’s total costs. Yet doctors are usually self-employed professionals with no responsibility for the hospital’s financial sustainability. They are trained to provide their patients with the best possible care, regardless of costs. High-quality care is often equated with more technology and more intervention, although there is growing evidence that quality is not directly linked to cost. Hospitals, in turn, are usually paid by the quantity of procedures and materials used. No hospital is paid to get the best results and, in fact, very few measure outcomes. This misalignment of interests is not restricted to Brazil, of course, but scarcity of funding makes it even more important to avoid costs that result from conflicting interests.7 © Economist Intelligence Unit Limited 2010
  • 9. Broadening healthcare access in Brazil through innovation Proposed solutions Improving the public healthcare system must begin with the full implementation of EC-29. This will help to ensure that all states and municipalities have adequate resources to meet the needs of their population. To improve its efficiency and stretch existing resources, Brazil’s public healthcare system should adopt public-private partnerships (PPPs) more widely. A study by the World Bank found that hospitals structured as PPPs have made more intensive use of installed capacity, hired fewer medical services, increased patient turnover and reduced average cost per patient. At the same time, they follow more protocols to achieve medical excellence and use better-qualified personnel, thus improving the effectiveness of existing resources. In Brazil, hospitals operating under a PPP model have been successful, particularly in the city of São Paulo. World Bank data show that they achieve better outcomes than non-PPP hospitals, with higher yearly discharges per bed (60 per year compared with 46), lower length of hospital stay (3.3 days compared with 5.2 days), fewer C-sections (25.5% compared with 77.1%), lower cost per patient (R3,300 compared with R3,600), higher occupancy (80.9% compared with 72.1%) and lower intensive-care unit (ICU) daily costs (R978 compared with R1,197).6 This is particularly relevant because they provide services to the needy. For example, Albert Einstein Hospital is leveraging its renowned medical and managerial expertise in managing the 300-bed public hospital of M’Boi Mirim, one of the city’s poorest districts. The use of sophisticated management tools, ranging from disease management (remote follow-up of chronic patients) to cost-effectiveness controls to novel medical reimbursement models, can help health plans that survive the current wave of consolidation ensure their sustainability. Some service providers have already identified opportunities: Fleury, Brazil’s second-largest diagnostics company, has partnered with Healthways, the largest disease management company in the US, to provide Brazilian payers with disease management services. Penetration of such services in Brazil is still very small (0.09% of the privately insured population compared with 4% in the US), but is growing. SUS can also benefit from these tools, which would improve its efficiency. As Brazil’s healthcare system becomes more efficient and better managed, more of its companies are likely to gain global stature. DASA, Brazil’s largest diagnostics company, is already the world’s fourth- largest in revenue. Others can follow suit.6. http://siteresources.worldbank.org/INTLAC/Resources/257803-1269390034020/EnBreve_156_Web_Port.pdf8 © Economist Intelligence Unit Limited 2010
  • 10. Broadening healthcare access in Brazil through innovation Challenge 2: Lack of innovation A side from a few islands of excellence in areas such as green energy, aerospace and agribusiness, Brazil does not have a highly innovative economy. It punches well below its weight on the global stage: a 2009 study by the Economist Intelligence Unit ranked the country 49th out of 82 countries in innovation performance, behind Russia (39th) and China (46th). Although the country is the eighth- largest economy in the world, its investment in research and developmentBrazil’s R&D gaining ground—but slowly (R&D) is less than 1% of the global total, according to the National(R&D expenditures as % of GDP) 2007 2000 Association for Research and Development of Innovative CompaniesSouth Korea (ANPEI). Brazil is ranked only 24th in patent registrations, according to 3.47 2.39 the World Intellectual Property Organisation (WIPO).Japan 3.45 Brazil’s life sciences industry underperforms other sectors, registering 3.04US few innovative drugs and devices. In fact, only 3.2% of Brazilian 2.67 2.75 companies’ patent registrations are related to healthcare and lifeFrance sciences, according to a study by São Paulo-based Prospectiva Consultoria. 2.10 2.15 This is despite the fact that of the patents registered by BrazilianCanada 2.03 universities, 25% are related to healthcare and life sciences, a much 1.91UK higher percentage than for companies. This suggests that knowledge 1.84 1.86 produced in academia is not finding its way into the market.China These are symptoms of a very young industry. Laws to promote 1.49 0.90 innovation and safeguard intellectual property were only passed in theBrazil last 15 years. From 1945 to 1996, Brazil did not recognise international 1.02 0.94 patents on drugs, and for many years it actually forbade patentingIndia 0.80 of molecules developed in the country. Even today, the government 0.77 leverages the exception in article 31 of the World Trade OrganisationTurkey 0.48 0.71 (WTO) Trade-Related Aspects of Intellectual Property Rights AgreementArgentina (TRIPS), which allows for cancellation of patent rights under certain 0.51 0.45 conditions, to press companies to manufacture drugs needed to fulfilMexico 0.50 social policies in Brazil. 0.37 Brazil’s Intellectual Property Law was passed in 1996, but moreIndonesia 0.05 0.07 progress is needed to change the attitudes and structure of an industrySource: World Bank, 2007 figures. that grew by copying intellectual property developed elsewhere. The law9 © Economist Intelligence Unit Limited 2010
  • 11. Broadening healthcare access in Brazil through innovation Brazilian “frugal engineering” performed particularly well, and is the only sector of the medical devices and materials industry that has an international trade surplus. Acquisitions of Brazilian companies by multinational corporations Brazilian companies could benefit from a significant competitive are testament to the country’s potential in this arena. Philips alone advantage in the global market: their mastery of frugal engineering. has made four major acquisitions in Brazil in the past three years. Cutting costs and increasing access to good-quality healthcare are One such deal allowed the company to begin producing high-tech twin imperatives worldwide. In this environment, the dissemination magnetic resonance imaging (MRI) machines locally, based on of cheaper technology is a winning proposition. Despite a lack of locally developed technology. This suggests that Brazil can establish resources, many companies have successfully developed equipment a strong presence globally through reverse innovation, a process that uses simple technologies to achieve the same results as more by which inexpensive products developed in emerging markets are sophisticated devices. The Brazilian dental device sector has offered as low-cost innovative solutions in industrialised nations. needs to be strengthened and made fully compatible with international patent laws. The judicial system needs to improve its efficiency, which will help to overcome company distrust of its ability to enforce intellectual property rights. Other legislation has focused on innovation. In 2004 the Innovation Law was passed to facilitate the collaboration between universities, technology institutes and companies, and to stimulate the creation of investment funds targeting innovation. (It is not clear who owns the patents that result from such collaboration, which creates a high risk for companies.) The 2005 Law of Goods (Lei do Bem) provides tax incentives to companies that invest in technologically innovative R&D, and enables the government to invest directly in private start-ups. (Through an “economic subsidy”, the government provides money for companies to hire researchers and scientists.) These incentives are slowly being adopted. More recently, the federal government has engaged in a broad project to develop the so-called Health Industrial Complex (HIC), which encompasses pharmaceutical and medical devices companies. According to Franco Pallamolla, president of ABIMO, “there is an understanding in the federal government that healthcare technology is strategic for the country and can help boost the development of many other complementary industries”. Through the Profarma programme, the government’s development bank, Banco Nacional de Desenvolvimento Econômico e Social (BNDES), is injecting about R3bn (US$1.7bn) in the industry. The incentives have been so favourable for companies that it has been difficult for private equity funds to get in. But small companies may be left out if they are unable to fulfil the bureaucratic requirements for obtaining financial support. Given all the recent measures to increase innovation in life sciences, the industry is attracting new investments. Its emergent biotechnology segment, fuelled by strong government incentives, can provide a platform for Brazil to compete globally in all life sciences sectors. This will take time to build, however, and other countries are not standing still. India has mastered the development of raw materials and generics, but is now moving up the value chain. China’s position in the global pharmaceutical market has been tarnished by quality issues. Nevertheless, it retains a cost advantage in some areas, and is the largest exporter of medical equipment and devices among emerging economies. Brazil ranks second, although imports of medical devices still heavily outweigh exports and result in a trade deficit that exceeds US$2.2bn.10 © Economist Intelligence Unit Limited 2010
  • 12. Broadening healthcare access in Brazil through innovation For Brazil to gain relevance in the global life sciences market and compete with other emerging countries, it will have to invest in people, facilities and technology. Barriers to the industry’s emergence include lack of managerial expertise in Brazilian companies, especially with respect to innovation, and a paucity of knowledgeable investors who understand and are willing to take on the risks involved in developing products in the life sciences industry. Furthermore, Brazil’s infrastructure for developmental research (laboratories, animals for testing and other) is inadequate, and start-ups often carry out trials abroad. There are institutional barriers as well. These include burdensome tax and labour regulations; a slow approval process for new drugs and devices; and complex processes for obtaining funding, making it difficult for smaller firms to compete. Proposed solutions Brazil now has the regulatory and legal structure necessary to develop a strong life sciences industry, but more must be done to ensure that those measures translate into innovation and growth. Policies should promote the development of skilled researchers as well as professionals specialised in innovation management who know how to assess risks and the value of projects that have high levels of uncertainty. This will help to optimise funds invested in innovation and increase the flow of capital into the industry. Policies must also encourage companies that are qualified to compete abroad, but lack the leadership to venture into the global market. As the sector—and its leadership—matures, it will be better equipped to compete with countries like China and India. Furthermore, Brazil traditionally imports rather than produces high-tech medical devices. While there is demand for such products domestically, financial viability often requires targeting external markets as well. Lack of experience in doing business globally holds back investors and managers from expanding and innovating. Leveraging the industry’s expertise in “frugal engineering”,7 companies could become more profitable domestically and more competitive on the global stage. A revision of Brazil’s notoriously burdensome tax system could also help to fuel growth in the industry. Today, it is more advantageous for tax-exempt hospitals and public institutions to import equipment directly than to buy it locally; laws exempt them from import taxes. That benefit does not extend to products bought domestically, which incur sales taxes. Small innovative companies could also benefit from import tax exemptions. In addition, approval and registration of new drugs and devices should be expedited. It currently takes between eight and twelve months to get a product through the registration process. Furthermore, political and social pressures are brought to bear on the approval process, sometimes impinging on technical recommendations as to which and when drugs and devices are approved. This places an additional burden on budget-constrained companies that make all R&D investments upfront. Finally, the special challenges of small and medium-sized companies must be addressed. Most local7. Frugal engineering isan approach to product companies are family-run and struggle with issues of governance and succession. They need access todevelopment that focuses a pool of skilled management professionals that can help them to evolve. Furthermore, the process foron essential characteristicsand low costs, designed for accessing public funding must be simplified for smaller companies that lack the personnel and structure toemerging-market customers. navigate compulsory bureaucratic requirements.11 © Economist Intelligence Unit Limited 2010
  • 13. Broadening healthcare access in Brazil through innovation Challenge 3: A critical lack of information G ood-quality information is essential to every business, but in healthcare it can have life-and-death implications. When prescribing a treatment, for example, a doctor must know what other medications the patient is taking in order to avoid creating other health problems. In France, individuals carry the carte vitale, a credit card that has their medical records on a chip. In Brazil, by contrast, patients in SUS hospitals carry folders brimming with medical records, X-rays, and requests for services. Poorly organised patient records are just one aspect of the problem with healthcare information in Brazil. Other gaps include a lack of information about the prevalence of diseases, the evaluation of treatment outcomes and insight into the true cost of procedures and treatments. Improving the flow of information in the system can reap dividends for governments that need to spur growth while optimising limited resources. It can help policymakers better understand the scope of health challenges, improving decision-making on resource allocations. It can make stakeholders more aware of the implications of treatment options and choices, and their informed decisions can lead to better outcomes. In addition, improvements in the flow of information among healthcare providers enable them to cut costs. An experiment in the US highlights the value of such transparency, and makes it clear that “expensive” and “excellent” are not synonymous. Data gathered from hospitals in Wisconsin show that the average cost of treating pneumonia at one medical centre in 2008 was half that of another, yet the less expensive centre achieved 96% of the quality goals specified for treating the disease compared with just 91% at the other. (This is an example of the quality versus cost trade-off discussed in Challenge 1, Insufficient provision of care.) Making such data public encourages low-rated providers to improve their performance, and expensive providers to focus on cost-effectiveness. It can help to identify the best hospitals, which health plans are most appropriate, and which treatments, devices and drugs provide the best outcomes. In Brazil, a lack of transparency has a direct impact on the amount and distribution of healthcare spending. It has not only resulted in higher overall expenditure, but has also favoured the rich over the poor. This is evident in the issue of payment for medicines. SUS provides coverage of prescription medicines, but the extent of that coverage—whether only for essential drugs or for all—is open to interpretation. In 2008 medicines accounted for about 49% of total household spending on healthcare (up from 45% in 2002), according to the Instituto Brasileiro de Geografia e Estatística (IBGE, the national8. http://monitordesaude. statistics agency). The burden was higher for the poor: medicines accounted for about 76% of their totalblogspot.com, September12th 2010. spending on healthcare, compared with 34% for wealthier groups.812 © Economist Intelligence Unit Limited 2010
  • 14. Broadening healthcare access in Brazil through innovation Patients are suing health departments (secretarias de saúde), demanding that they pay for medicines that are approved by ANVISA but not included in the local authorities’ budgets. Judges frequently approve such payments, despite the lack of authoritative information to back up their decisions. In 2008 the Ministry of Health spent R52m as a result of these lawsuits, up from R188,000 in 2003. Such spending by all levels of government surpassed R500m in 2007, and the trend is rising.9 This diverts government resources, often inefficiently, to those who can afford legal recourse.10 It is essential, of course, that available information be of good quality. Although measuring the performance of a healthcare system is challenging, there are several examples of initiatives that have yielded important results. The Canadian Agency for Drugs and Technologies in Health (CADTH) conducts health technology assessments (HTA), which analyse the clinical and economic implications of drugs and other health-related technologies. The results support decisions about coverage in public insurance policies in Canada. The rise of evidence-based medicine is driving demand for HTA worldwide, although there is growing recognition that political and societal issues influence the process. In Brazil, HTA is conducted by the Comissão de Incorporação de Tecnologias (CITEC), part of the Ministry of Health. Brazil’s private plan regulator, ANS, has implemented a Policy of Quality in Supplemental Health, which began with an index measuring the performance of payers, the Índice de Desempenho de Saúde Suplementar (IDSS). But information on the quality and performance of providers is more relevant. It can enable the insured to evaluate plans based on access to the best providers. The Centers for Medicare and Medicaid Services, which provides healthcare coverage for the elderly and poor in the US, has such a system. It regularly collects and reports on more than 375 healthcare quality measures, including efficiency, structure, process, intermediate outcome, outcome and patient-centeredness, to evaluate cost-effectiveness of providers. Proposed solutions Improving the quantity and access to information in Brazil’s healthcare system is obviously a long-term project. The creation of standardised metrics on quality, costs and outcomes is an important and feasible first measure. Ultimate responsibility for these standards rests with the federal government, which should delegate their development to qualified organisations. There is a precedent for this in Brazil. The Society of Health Informatics—SBIS (through the Federal Medical Council)—has created standards for managing9. “Rational use of anticancer medical data in information systems. This important advance, which has laid the foundation for a yet-to-drugs and patient lawsuitsin the state of São Paulo, be-implemented unified national medical records system, can serve as a model for the development ofSoutheastern Brazil”, Revista other standards.de Saúde Pública, August2010. Payers—public or private—must also push for better information. They can do so by creating incentives10. Patients are suing to for healthcare providers to measure and disclose data according to government-approved guidelines andget coverage of medicinesclassified as “exceptional”— standards. This can be done by offering differentiated reimbursement for providers that publish their data.those that are used to treat Taking this a step further, regulations should allow higher reimbursement rates for providers with high-rare conditions or for whichcheaper alternatives have quality and cost-effective service, as measured by government-endorsed generally accepted standards.not been effective—and that Increasing the amount and quality of information in the entire healthcare system is essential toare not listed in the protocolsand directives issued by the improve both quality of and access to care. This should extend from the analysis of drugs and technologiesMinistry of Health. to be covered in private and public health plans to the evaluation of healthcare providers.13 © Economist Intelligence Unit Limited 2010
  • 15. Broadening healthcare access in Brazil through innovation Conclusion B razil could become a world leader in healthcare. Its growing economy, advantageous demographic profile and universal system of coverage create favourable conditions for the emergence of world- class companies in the sector. But at the moment, there are only pockets of excellence. This study has highlighted three problems that need fixing, but in effect they are closely interwoven. Better, faster flows of healthcare information will help to improve efficiency. Innovations in hospital procedures will help to reduce lengths of stay and reduce costs. Greater accountability in healthcare will reduce waste and encourage innovation. More needs to be done to overcome the inertia of Brazil’s healthcare system so that it can contribute effectively to raising the country’s status in the global economy. This will require the concerted efforts of government officials, healthcare providers, insurance companies and life sciences firms. But if Brazil can excel in agribusiness and aerospace, it can do so in healthcare as well. Adequate funding is a necessary first step. It must be complemented by greater visibility into such things as costs and outcomes through objective metrics and standards. The power of innovation must also be brought to bear, whether in the development of new drugs and devices or in establishing processes that optimise resource use.14 © Economist Intelligence Unit Limited 2010
  • 16. Whilst every effort has been taken to verify the accuracyCover image: iStockphoto.com of this information, neither The Economist Intelligence Unit Ltd. nor the sponsors of this report can accept any responsibility or liability for reliance by any person on this white paper or any of the information, opinions or conclusions set out in the white paper.
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