Brazil’s pharmaceutical market – Full of promise but can it get past its demons?

Cathy Robertson examines the pharmaceutical industry's prospects in one of the most highly profiled emerging markets - Brazil.

As one of the most highly profiled emerging markets and one “most likely to succeed”; Brazil fell hard when the global recession of 2009-2010 occurred. Rocked by not only economic problems but also political scandals, the country finally emerged from its worse recession ever in second quarter 2017. Still fragile, Brazil hopes to return to its economic glory days of the early 2000s.

Brazil’s pharmaceutical industry looks to take advantage as well. Ranked as the world’s 10th largest in 2011, it moved up to eighth place in 2016 and is forecasted to claim the fifth spot by 2021 according to IMS Health Institute. Additionally, GlobalData estimates Brazil’s pharmaceutical market at $25.5 billion in 2016 and to grow to $29.9 billion in 2021. According to the research company, key drivers include changing demographics and when combined with the availability of universal healthcare, this is likely to drive further demand for healthcare services. Still, the pharmaceutical industry like many other Brazilian industries continues to face restrictive regulations as well as the need for investments.

The Regulatory Ties

Câmara de Regulação do Mercado de Medicamentos, CMED, regulates price increases on medicines. Each year, CMED, a division of Agência Nacional de Vigilância Sanitária, ANVISA, sets a maximum price increase that drugmakers have to follow.  In addition, Brazil’s tax code is highly restrictive. With about 90% of active pharmaceutical ingredient imported into Brazil, drug development as a result, is expensive. As such, investment in the Brazilian pharmaceutical industry has been slowed.

However, things are changing. Government initiatives such as the Growth Acceleration Program and the Greater Brazil Plan are promoting the increase in domestic production. The former is focused on modernizing public infrastructure while the latter encourages local production of innovative drugs and promotes public-private partnerships.

To secure the pharmaceutical supply chain, the government officially started a pilot in September 2017 of its National Drug Control System (SNCM) traceability system with intent to be effective in May 2018.

The SNCM requires the addition of 2D barcodes to individual medicine packs that will include a unique randomized serial number, national registration number, lot number and expiry date. Scanning the code will allow the packs to be tracked through the drug supply chain, with each supply chain member required to capture transaction data and communicate it to a central government repository.

In addition, generics are the fastest growing segment of the Brazilian drug market thanks to a growing middle class and the passing of the 1999 Generic Medicines Policy. However, time to market is often tied up in regulatory long, drawn out processes. In early 2017, ANVISA signed an ordinance with the National Institute of Industrial Property to improve the review process of patents for pharmaceutical products and processes. This move, in particular, was made to modernize and reduce the bureaucracy that new generic medications face when entering the Brazilian market.

Logistics

Poor infrastructure has always been a problem in Brazil. Roads, rail, ports and airports have all suffered from lack of meaningful investment and too much bureaucratic red tape.

However, a promising move came in 2016 when Rio de Janeiro’s international airport, RIOgaleo, was awarded IATA’s Center of Excellence for Independent Validators (CEIV) Pharma certificate. As noted by a spokesperson for the airport at the time of the certification announcement, “Obtaining the CEIV Pharma certification, together with the investments we are making in the cargo terminal, will certainly consolidate  our position as one of the main gateways for pharmaceuticals  in Latin America.”

Indeed, a year prior to the certification, the airport opened a second pharmaceutical facility which tripled cold storage capacity to 17,000 cubic meters at the cargo terminal and added 1,400 additional pallet positions.  Additionally, the facility features a fully automated cargo storage system and comprises two temperature environments, 2°C to 8°C and 16°C to 22 °C as well as temperature controlled anterooms and docks.

Temperature-controlled pharmaceuticals is a growing percentage of RIOgaleo, making up about 25% of its cargo’s revenues. In addition the airport is the country’s main gateway for government vaccination campaigns.

Numerous international logistics providers offer specialized pharmaceutical solutions for the import/export Brazilian market. Notable acquisitions by such providers as TNT (Now a part of FedEx), FedEx, DHL and UPS have expanded domestic services within Brazil. The most recent of such was made by DHL Supply Chain Solutions in 2017. It acquired its local service provider, Polar Transportes, a Sao Paulo-based road carrier that specializes in temperature-controlled transportation of biologic drugs and vaccines. Specializing in shipments of both active pharmaceutical ingredients (APIs) and finished products to customers’ plants from Brazilian ports and airports, the company has a network of 300 trucks with a national coverage in particular with Sao Paulo, Rio de Janeiro and the Goias State.

The IMF forecast 2018 economic growth of 1.5% for Brazil. However, Brazil’s Finance Minister expects growth of 3% for the year. The Finance Minister’s may be too optimistic.

Despite Brazil's government pledging a host of reforms, it is not guaranteed, particularly given the country's upcoming presidential election in October 2018 which will pit the unpopular incumbent Michel Temer against the scandal-ridden former president Lula da Silva. How this will affect the country’s pharmaceutical industry remains to be seen - Great opportunity, but any volatility could bring back past demons.