Emerging market: Brazil

Brazil is one of the fastest growing global economies and boasts not only being the biggest country in Latin American but also the most influential. The second most attractive BRIC (Brazil, Russia, India, China) nation in the eyes of the pharma industry, Brazil enjoyed huge economic growth in the first half of 2010 emerging from the downturn faster than its closest Latin American rivals in terms of demand for pharmaceuticals.

The nation also swore in its first female premier, Dilma Rousseff: a former chief of staff who is committed to revolutionising the healthcare sector with the help of domestic industry body Associacao da Industria Farmaceutica de Pesquisa (InterFarma) which spent much of 2010 forging close links with the biotechnology sector and continued open dialogue with the Federal Medicine Council (CFM) to foster ties between industry and healthcare professionals with the aim of developing patient and public health initiatives.

In the last 10 years the pharma sector in Brazil has undergone radical change as the political restructuring, deregulation and decentralisation of power that followed the end of the military coup in 1988 resulted in a breakdown of state-led development and production. The redemocratisation process led to a new federal constitution that introduced state-funded healthcare for all: the first initiative of its kind, not only in Brazil but also across the BRIC nations. The integrated system, known as SUS, focused on prevention offering comprehensive cover providing a basic level of care to all, in addition to more costly treatments such as antiretroviral therapy for HIV.

The system, while providing care free at the point of need and reducing inequality ensuring that lower income families had access to healthcare, caused the cost of imported products to rocket, signalling a trade deficit.

According to Business Monitor International, pharmaceutical imports grew by almost 150 per cent to US$2.63bn between 2004 and 2008. Keen to reduce its reliance on imported medicines, the Brazilian government committed to supporting the consolidation of the national pharmaceutical industry, with the Brazilian Development Bank (BNDES) allocating over BRL1.3bn (US$734m) since 2007 for the development of a national pharmaceutical industrial complex (Profarma).

Regulatory agencies have also joined the party and are looking to reinforce good manufacturing practices (GMP) for active pharmaceutical ingredients (APIs) with the aim of improving quality standards and boosting global competitiveness. The moves have reduced Brazil's reliance on imported raw materials but it still relies more heavily on imports than its fellow BRIC nations, taking the lustre off its market strength.

Treatment demands
In Q1 2010 Brazil enjoyed the quickest GDP increase in 15 years as it rose 9 per cent year-on-year, according to Business Monitor International, which forecasts pharmaceutical sales will increase at a compound annual growth rate (CAGR) of 9.44 per cent in local currency terms through to 2014. It also expects sales in Brazil to reach US$31.01bn by 2014 and US$47.26bn by 2019. Much of this growth is forecast to stem from increased demand for cancer drugs as the incidence of the disease gathers pace, as well as treatments for lifestyle diseases such as obesity and smoking-related illness. With a steadily ageing population, there is also likely to be greater need for drugs indicated for rheumatoid arthritis and Alzheimer's disease.

The role of generics
Brazil is home to the largest generic medicines sector in Latin America: in 2009 it was valued at BRL5.08bn (US$2.54bn) after yet another year of strong gains, according to figures from Business Monitor International. In the first half of 2010, generic drug sales rose 34.1 per cent by volume and 38.1 per cent by revenue compared with the same period in 2009. Business Monitor International forecasts generic drug sales to grow at a US$ CAGR of 17.3 per cent until 2019; the prescription drugs market valued at BRL20.41bn (US$10.21bn) in 2009, is expected to increase by 9.06 per cent in the same period.

The untapped potential of Brazil's generic market garnered much attention in 2010 with major players claiming their slice of the action through acquisition. Following sanofi-aventis' acquisition of Medley – Brazil's largest generics manufacturer – in 2009, Valeant acquired two generics manufacturers (both unnamed) in the first half of 2010 and Pfizer bought a 40 per cent share in Teuto in November of the same year. According to analysts Espicom, in just two years multinationals increased their presence in the market from 12 per cent in 2008 to 40 per cent in 2010.

The deals strike at the heart of government plans to increase the international competitiveness of local domestic pharma manufacturers, which it intends to achieve in part through the Oswaldo Cruz Foundation (Fiocruz) that houses the research and production facilities of Brazil's domestic pharma sector and aims to increase R&D.

Fiocruz has been instrumental in establishing numerous public–private partnerships with both domestic and multinational manufacturers, providing big pharma with the opportunity to enter the country with a public health agenda, not just a product strategy, and securing technology transfer, while benefiting the population. This is especially true in the case of partnership with GlaxoSmithKline (GSK) which in 2009 pipped Pfizer to the post for the contract to supply a pneumococcal vaccine for dengue fever, a mosquito-borne disease that globally places 2.5 billion people at risk of infection. As part of the partnership GSK will provide Fiocruz with access to the technology behind Synflorix, 10-valent conjugate vaccine for paediatric pneumococcal disease, and supply the drug to Fiocruz until the technology transfer is completed.

Healthcare
The introduction of a state funded healthcare system has signalled significant improvements in health outcomes in Brazil but disparities still exist with health status and access to healthcare linked closely to income, education, race and region, according to senior health specialist Frederico C Guanais writing in the British Medical Journal.

State healthcare system SUS aims to blend curative and preventative services with the purpose of reducing the risk of disease (through education) and providing healthcare accessible to all. The infrastructure comprises a mix of health facilities run by federal, state and municipal revenues (funded from taxes that are allocated to different segments of the health service and social services), and private and non-profit institutions. According to Ministry of Health figures in 2009 SUS funded 11.5 million hospital admissions to 6003 hospitals almost half of which (48.9 per cent) were state run; the remaining being split relatively evenly between private and non-profit facilities.

In 1994, following the adoption years earlier of a primary care style healthcare model, the Ministry of Health established the family health programme in an effort to provide care to underserved communities. The initiative, which saw a team of family health professionals (commonly a doctor, nurse, medical assistant, social worker and a number of community workers) assigned to specific geographic areas, centred on disease prevention and management.

According to Guanais, the most effective initiatives to improve health since 1988 have been those 'that reached the poor first'.

Opportunities for pharma
Economic and market growth forecasts aside, Brazil is an increasingly attractive place to do business. Once a nation with scant regard for patent rights (in 2007 the government issued a compulsory licence under World Trade Organization rules effectively to void the patent on Merck's HIV treatment Efavirenz in order to purchase lower-priced generics), Brazil has now introduced tougher patent laws.

In addition, in 2010 InterFarma established three partnerships with the research community forming foundations with Biominas and Bio-Rio institutes dedicated to creating biotech firms and the Innovation, Entrepreneurship and Technology Center (Cietec), a business incubator based on the University of Sao Paulo campus.

The Author
Clare Bates is editorial director at PMGroup

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