Entering the Brazilian Pharmaceutical Market

Many analysts argue that the future for Brazil, which has been called for decades “the country of the future,” has finally arrived. With inflation under control and economic growth above the world average (5.4% and 5.3% in 2007 and 2008, respectively) its considerable population of almost 200 million presents very attractive prospects for pharmaceutical companies all over the world.

The health sector as a whole represents 8% of the Brazilian GDP, around US$80 billion per year. Government purchases represent 50% of the market for medical equipments, and more than 90% of the vaccines and 25% of all drugs (Brazilian Ministry of Health).

In 2008, the Brazilian pharmaceutical market was estimated to reach US$ 14.9 billion, 34% of Latin America, jumping 23% from 2007 (IMS Health). Twenty percent of that is made up of generic drugs, which cost on average 35% less than reference drugs (Progenericos). Brazilian companies have a market share of around 20% only.

On the foreign trade side, Brazilian products totaled more than US$961 million in exports in 2008, a 29% increase from 2007. The main export markets are Venezuela (14%), Argentina (13%) and the USA (12%). On the other hand, imports amounted to US$ 4.28 billion, an increase of 21% year over year, coming mainly from the USA (19%), Germany and Switzerland (13% each). For example, all 450 tons of amoxicillin (antibiotics) consumed per year are imported.

Estimates point out that 30% of the drugs sold in Brazil are not registered. According to the Brazilian Federal Police, 500 thousand units (130 tons) of non-registered and counterfeit medications were seized in 2008, mainly amphetamines, steroids, contraceptives and drugs for erectile dysfunction. New legislation (to be implemented gradually during the next three years) was passed in January of 2009 by the Senate to enforce monitoring of medical products via electronic bar code systems on the production, commercialization, distribution, and medical prescription of drugs.

Federal regulatory bodies

The National Health Surveillance Agency (ANVISA), created in 1999, is the equivalent of the American FDA. ANVISA is an independently managed, financially-autonomous regulatory agency, with security of tenure for its directors during the period of their mandates. ANVISA is managed by a board of directors, comprised of five members. Within the structure of Federal Public Administration, the Agency is linked to the Ministry of Health, under a Management Contract.

The agency incorporates additional mandates: coordination of the National Sanitary Surveillance System (SNVS), the National Program of Blood and Blood Products and the National Program of Prevention and Control of Hospital Infections; monitoring of drug prices and prices of medical devices; attributions pertaining to regulation, control and inspection of smoking products; technical support in granting of patents by the National Institute of Industrial Property. ANVISA is headquartered in the capital of Brazil, Brasilia, presently the fourth-largest city in the country.

In addition, ANVISA exercises control over ports, airports and borders and also liaises with the Brazilian Ministry of Foreign Affairs and foreign institutions over matters concerning international aspects of sanitary surveillance. More information, as well as many relevant laws in English can be obtained from the agency’s website. [1]

US Pharmacopeia recognized the value of the Brazilian market by opening its fourth overseas location (after Switzerland, India and China) in Sao Paulo last August. “Brazil has one of the fastest-growing pharmaceutical industries in the world, [and] is increasingly adhering to international quality standards,” said Dr Flavio Vormittag, MD, MS, VP, international, for USP.

Key trade associations include Febrafarma, the Brazilian Pharmaceutical Industry Federation, Interfarma, the Brazilian Researched-based Pharmaceutical Manufacturers Assn., and ProGenericos, the Brazilian Assn. of Generic Drugs Industry (see box). Interfarma is the representative organization to the U.S.’s Pharmaceutical Research and Manufacturers Assn. (PhRMA).

Intellectual property rights

In Brazil, no health-related product can be produced, imported, exposed for sale, or delivered for consumption before a registration is obtained from ANVISA. Before that, a company has to be first registered with the state level health authority and then in the Federal level (done by ANVISA). If a company does not want to start formal operations in the Brazilian territory and only export products to the country, there is the possibility of hiring a company or finding a distributor already legalized to become an exclusive distributor of the foreign products in Brazil.

The registration of a drug is valid for 5 years, and the costs vary according to the size of the company requesting it. A large company (revenue above US$25 million) for example, would spend R$8,000 (US$4,000) for licensing a new product, while the registration of a “family” of products (same drug with different sizes and presentations) would cost R$ 12,000 (US$6,000). Just to receive a visit from an ANVISA technician to obtain a “Certificate of Good Manufacturing Practices,” a company will have to spend US$18,500, regardless of its size.

One point of concern for foreign companies is the observance of intellectual property rights. At least in comparison with Russia, India and China, Brazil is best positioned in regards to the TRIPS (Agreement on Trade-Related Aspects of Intellectual Property Rights) norms. Nonetheless, in emergency situations, national legislation allows the cancellation of patents (or “compulsory licensing” as it is called), as seen in May 2007, with the anti-AIDS drug Efavirenz, produced by Merck Sharp & Dohme, even after an offer was made by the company to lower the price by 30%.

A major criticism of the legislation (which provides that the Agency has 90 days to assess the processes filed with it) is that it does not mention a deadline for the evaluation of technical requirements, which causes some petitions to take more than a year to be finalized, since they enter a waiting list with no regulation.

Doing business in Brazil

Many positive aspects of the Brazilian pharmaceutical market draw the attention of foreigners. Most senior officials in the Ministries and Regulatory Agencies do not speak English. However, some junior officials can be found with good knowledge of the language. Although the country is still placed in intermediary positions of world corruption rankings, the fact that the Brazilian Federal Government pays employees salaries sometimes 3 to 4 times higher than those found in the private sector on an entry level acts as an important disincentive. With qualified professionals from top universities competing for a public job, private companies in some industries have a hard time to find qualified professionals.

Brazilians, culturally speaking, are always very open and receptive to foreigners in informal social environments as well as in the corporate realm. One thing to be highlighted, however, is that companies need to establish a public perception of generating jobs and promoting public health, and not of putting profitability first.

One of the most complex and highest tax burden in the world also poses serious challenges for companies operating or planning to start activities in the Brazilian territory. According to a report by the World Bank, a company can spend up to 72% of its profits on taxes and take 2,600 hours per year to fulfill bureaucratic obligations, compared to 430.5 hours in other Latin American Countries and 202.9 in the developed world. PC

ABOUT THE AUTHOR

Marcelo Sicoli is executive manager of EnterBrazil Consultancy (enterbrazil.com, tel: 55(61) 3361 1869, e-mail, [email protected]), in Brasilia. EnterBrazil specializes in market studies, direct contact with importers/exporters, and the complete implementation process of opening and managing a business office in the Brazilian territory. Recent clients include Schering-Plough (USA), Tate & Lyle (England), Fedex (USA), Serum Institute-Vaccines (India).