Much has been said about the Brazilian market and the significant conquests its health sector has recently made compared with past decades. In order to be successful, it is imperative to know the singularities of the market

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BRAZILIAN MARKET FAVOURS ENTRY OF FOREIGN GROUPS - MULTI-INDUSTRYMULTI-INDUSTRY
Brazilian Market Favours
Entry of Foreign Groups
In order to be successful, it is imperative to know the
singularities of the market
M
uch has been said about the Brazilian market
and the significant conquests its health sector
has recently made compared with past decades.
As the seventh largest in the world, it is a
promising and consolidated market, and one that is very
competitive. The improvement of the population’s acquisitive
power, the growth of formal employment, the aging of the
population, and the introduction of generics more than a
decade ago, have allowed increased access to healthcare services
and have contributed to a higher per-capita consumption of
medication and health services by the population. This growth
is reflected in high occupation rates in hospitals, specifically
privately-owned facilities.
According to IMS Health data, the accumulated growth in the
last five years of the prescription and purchase of medication is
approximately 16% in Brazil. This rate is 2 or 3 times higher
than the global average.The estimated world sales accumulated
growth projection for 2015 is 5% in the most developed
countries, making it 12.6% for Brazil.
The State’s role
Even with Brazil’s already significant victories, there is a lot to
be done.There is still limited access to healthcare by Brazilians,
with approximately 60 million people on private medical plans
or insurances, and the rest, about 130 million, using the public
system. The public healthcare system is efficient in some
aspects, but has some considerable flaws. The early detection
of diseases in the population is still lacking, as well as structural
matters relating to poor allocation of public budgets, and frauds
in public bids - all of which jeopardize the population’s care.
The Farmácia Popular do Brasil Program (Brazilian Popular
Pharmacy Program), which has already accumulated 5 million
registered users, is a clear example of how the government
is acting to solve these problems. Through this program,
the government makes low-cost drugs available for some
therapeutic classes. It acts as a distribution regulator, acquiring
medication for public pharmacies for up to 90% less than
those provided by non-registered pharmacies. This program
attends to the population that suffers from diseases such as
hypertension, diabetes and Parkinson’s disease, among others.
It is a praiseworthy government operation to increase the
population’s access.
Although there is still the need for free competition in the
healthcare services area, there are some sectors in which the
government does need to have a stronger presence. For certain
industries, such as the pharmaceutical industry, state-run
regulation can be beneficial to ensure safety and accountability.
Brazilian challenges and particularities
The Brazilian health market and its high added-value sectors
strongly depend on imports, while research still depends on
external investments. It is a segment in which the commercial
balance is unfavorable. The segment with the most growth -
generics - depends on the expiration of patents on medications.
Biotechnology products represent a vacant opportunity
for Brazil. Of the few initiatives that have involved high-
technology transference, none of them offered a real
transference of technology, nor induced significant innovation
in the country.
Recently, two large private companies have formed a
group, with the government’s support, in order to become
a biogenerics conglomerate. Brazil is just starting in this
market, but regulatory movements in this arena have already
been implemented in the United States and Europe. This is
an exciting opportunity for Brazil, but will certainly require
massive investments and a change to its pharmaceutical
market.
Before now, Brazil has not been the producer of active
principles. Ready raw materials were imported, transformed
and then commercialized. Only a select few in the industry
were able to synthesize them and therefore an important
knowledge basis of infrastructure and technology was not
developed. In the biotechnology case, considerable efforts will
be necessary so that it becomes stable in the country and not
abandoned as in past instances, like synthetics.
New law in 2014
The Brazilian market relies heavily on similar or “branded”
generics that are found on drugstore shelves and depend
exclusively on medical prescriptions. These kinds of
singularities are nonexistent in other, more developed,
markets of the world. These products will suffer the
impact of a new law that will be implemented in 2014
which will demand bioequivalence between drugs.
They will most likely be interchangeable in drugstores,
in the same way it is done today between reference
and generics medications. With this, the influence
of the sales counters is maintained, especially the
large groups that are consolidating, thus benefiting
the product segment that is believed to be the most
profitable.
Many opportunities
Studies have shown that generics are the most
profitable products for drugstores going through
consolidation. The industry is being modernized and
now has the expansion capabilities and resources to
make the change.
It is an ideal moment for companies to extend the
benefits of private health plans to larger sectors of the
population, as well as to build hospital beds outside
large population centers that are better able to attend to the
existing demand. There needs to be more access for those
who are not covered by private plans and the availability of
new products, mainly OTC and nutraceutics - segments still
underdeveloped in Brazil.
The Brazilian market at this time favors the entry of foreign
groups who recognize that eventual assets will be directly
related to what they offer, the results they generate, and the
sustainability of their business before the changes take place.
Entering the Brazilian market depends on a thorough
understanding of the industry,including knowledge of Agência
Nacional de Vigilância Sanitária, commercial, accounting,
financial, and juridical practices. It is fundamental to know all
particularities and subtleties of the market you are entering
and to count on executives who “speak the local language”.
Wolney Alonso is partner director at Entregga (www.entregga.com.br), Brazilian Consultancy, Management and Investments Company focused on the
Healthcare sector. Along with a group of experienced executives led by businessman Omilton Visconde Jr., he participated in last decades of two of the most
important asset acquisitions in the Brazilian Healthcare sector (Biosintética and Segmenta). wolney.alonso@entregga.com.br
To enter Brazil, it is
necessary to count on
deep knowledge on
the Brazilian market...
And if the sales’ accumulated growth projection until 2015 is
of 5% in the most developed countries, it is of 12.6% for Brazil,
ratifying the optimism felt in the segment.
by Wolney Alonso
August 2012