Hellen Berger

	Brazil’s turbulent presidential election in October 2014 shed some light on the country’s political landscape causing some to view the country differently. Has this change affected how the market views the industry and its potential? Experts say it is still too early to tell, adding that they would not risk an answer or figure projection at this point.
	
	The facts about Brazil and its potential have not changed, as well as the natural resources available, interest in consumption of goods and medicines, growth potential of lower and middle classes, population statistics (which now have become harder to obtain). In Brazil, however, the market is influenced by many factors including news and misinformation. The following facts may show what the scenario might be for Brazil in 2015.
	
	


	
	The gross domestic product (GDP) in Brazil expanded 0.10% in the third quarter of 2014 over the previous quarter, according to the Brazilian Geography and Statistics Institute (IBGE) (1). GDP growth rate in Brazil averaged 0.71% from 1996 until 2014, reaching an all time high of 4.5% in the third quarter of 1996 and a record low of -4.2% in the fourth quarter of 2008.
	
	Brazil was still the seventh largest economy in the world in 2014, according to the World Bank, and the largest in Latin America, with the country considered one of the fastest-growing economies in the world mainly due to its export potential (2). According to projections by 

 Intelligence Unit, however, negative figures in 2014 would push the country down in the ranking (3).    
	
	Brazil’s trade is driven by its natural resources, and agricultural and manufacturing production and foreign investment have recently been attracted by scientific and technological development, rising domestic demand, and an increasingly skilled workforce. Struggling infrastructure, extreme bureaucracy, and corruption, however, remain great challenges to companies as well as to the country’s economic development.
	
	What experts and journalists hoped was that the popular government party would look after the population and improve the quality of life, while moving persons from the poverty level to the middle class and transforming them into great consumers, making the economy thrive and investments to flow in. What experts, as well as the population, have recently observed, however, is that the challenges are not exactly being addressed in the way the country had hoped and may not be resolved any time soon.
	
	Also, inflation is on the rise as well as infrastructure and utility fees, while bureaucracy continues growing and corruption spreads even deeper, instead of being properly halted.
	
	And the government has not changed. President Dilma Rousseff was re-elected and took office in January 2015 with the smallest margin since 1994, with 54.5 million votes (51.6%), while her opponent, Aécio Neves, a senator from the state of Minas Gerais, received 51 million votes.    
	
	The small margin proves the country does want changes and Rousseff will probably face her own challenges ahead. She will have to face the Congress, for example, which now has a stronger opposition presence.
	
	Trading markets will be hard to appease as well. Proof of that is that after election results were announced, the selloff of local assets brought Brazil’s Bovespa down more than 5% early in the trading. Also, the Real currency immediately dropped to a nine-year low against the US dollar.
	
	


	
	Brazil’s pharma sector has been observing the political movements and hoping for the best. Pharmaceutical figures from late 2014 show that earnings plunged in November for the fourth time in the year.
	
	Revenues for November were US$2 billion (Brazilian Real 5.468 billion), down 8.1% compared with October, according to IMS Health (4). In volumes, revenues dropped by 8.8%.
	
	Revenues also fell in the months of February, June, and August of 2014. The industry, however, had grown 12.9% in sales and 7.4% in units sold until November 2014, according to IMS Health figures.
	
	Growth in 2014 was expected to be around 13%, IMS Health reported. The final growth figure for 2014 had not been released before the publication of this article.
	According to the Brazilian Pharmaceutical Trade Association (Sindusfarma), the industry does not expect 2015 to be that great overall. The sector may tend to contract with a slower job growth rate, they believe.
	
	Data seem to indicate that pharmaceutical companies should continue looking at the generic-drug market in Brazil, which, as a bonus, has the support of the government in any hard times to come. The generic-drug market continues growing and boosting the sector’s figures, with generic revenues increasing by 17.9% from January to November 2014. In November, the figure dropped 7.8% compared with the previous month. The sector currently holds 25.4% of the market share in Brazil.
	
	A McKinsey research report unveiled that, during early 2011, better healthcare and education were increasingly important to Brazil’s middle class. Sixty-three percent considered brand drugs relevant for medicine and would pay a premium for certain ones (5). The researchers said they believed that high-quality patented medicines were a profitable opportunity.
	
	In 2010, however, the value of prescription drugs sold to Brazil’s middle class was $8 billion, mostly for unpatented medications. Global pharma executives thought this group would be more interested in spending money on consumer electronics, cosmetics, and travel other than on healthcare. According to the McKinsey report, executives said that the local middle class preferred to purchase generic drugs. Even when physicians prescribed branded drugs, some patients would switch their medications to less expensive generic options.
	
	As a result, global pharma companies, according to the report, had concluded that they should focus on Brazil’s wealthiest consumers and would reach the middle class only through generic and branded generic drugs, a market that was growing at a 28% compounded annual rate in 2010/2011.
	
	Now, with branded medications requiring strong research, development, and high levels of investment, that type of business may not seem so immediately rewarding after all or could even be a bit risky considering the steep downfall of the local economy.
	
	


	
	1. Brazilian Geography and Statistics Institute, Data on gross domestic product, 

www.ibge.gov.br/home/estatistica/indicadores/pib/defaultcnt.shtm

, accessed Jan. 21, 2015.
	2. World Bank, Brazil Overview, 

www.worldbank.org/en/country/brazil/overview

, accessed Jan. 21, 2015.
	3. Intelligence Unit, Brazil,

  accessed Jan. 21, 2015.
	4. Brazil National Laboratories Association, 

, accessed Jan. 21, 2015.
	5. McKinsey & Company, Unlocking Pharma Growth, Navigating the intricacies of emerging markets (McKinsey & Company, 2012), 

www.mckinsey.com/~/media/mckinsey/dotcom/client_service/pharma%20and%20medical%20products/pmp%20new/pdfs/emerging_markets_compendium_2012.ashx

-Hellen Berger is a business news correspondent based in São Paulo, Brazil.


	Vol. 39, Issue 2
	Pages: 26-27
	Citation: When referring to this article, please cite it as H. Berger, "Finding Opportunities in Brazil," 

Articles

Changes in the country’s political landscape may affect the pharmaceutical industry market in the future.

Finding Opportunities in Brazil

The Brazilian economy is being impacted by internal and external factors, and forecast figures are being quickly revised downwards. Market research released by Brazil’s Central Bank revised average analysts’ projections for economic growth in 2014 down to 0.70% from 0.90% four weeks earlier (1). In June 2014, the Hong Kong Trade Development Council (HKTDC) stated that the local economy was projected to grow by 1.8% in 2014. Projection figures keep slipping on a weekly basis (2).

The HKTDC research identifies moderation in local industrial production and a slower inflow of foreign capital as reasons for Brazil’s economic boom cooling off after recording growth levels of 7.5% in 2010. The research shows, however, that because there are signs of worldwide economic recovery and sustained commodity demand, the economy could see growth of approximately 2.1% in 2015, “as the world economy improves” (2). 
After hosting the World Cup in 2014, the country’s presidential election in October 2014, and the planning of the Summer Olympics in 2016, the economic situation has become unstable, unpredictable, and uncomfortable for companies, consumers, and investors. These players all await political, social, and economical clarification to go forward with start-ups, investments, and acquisitions, including the pharmaceutical sector. Analysts believe the sector will continue its growth pattern, however, due to the country’s strong domestic demand and large foreign reserves as well as wide potential for growth as the Brazilian population ages and becomes wealthier.

Growth linked with wealthy and aging population


Specialist Rodrigo Leifert, intelligence analyst at São Paulo-based consulting company Tendências Consultoria Integrada, told 

 that the sector’s growth is directly linked with how much the population earns and how wealthier it becomes as it ages, needing and wanting more pharmaceutical products and services. Leifert expects pharmaceutical production to grow approximately 3.8% in 2014, and to maintain a similar growth pattern for the next five years, considering Brazil’s Statistics and Geography Institute (IBGE) projections for the sector.

“Brazil’s pharmaceutical sector might not grow as strongly as years before, but should continue growing at positive figures,” he told 


. According to Leifert, one of the reasons why the growth patterns for the sector slowed down is that during the World Cup, there were fewer working days. He said the scenario started to deteriorate in the beginning of 2014’s second quarter, as fewer working days meant less production of pharmaceuticals.

The analyst expects this year’s figures will reflect uncertainty amid the political scenario while 2015 might show a few adjustments to the political and economic scenario. In 2016, Brazil could see benefits from adjustments and definitions, Leifert said. “It will all depend on how Brazilian families adjust to the scenario and how they cope financially,” he said. Leifert explained that, when it comes to the pharmaceutical sector, how well families do financially directly impacts the growth of the sector. Leifert believes most pharmaceutical projects will be resumed after political definitions are unveiled following presidential elections in October.

Renato Tamarozzi, executive director of the Brazilian Association of Pharmaceutical Commerce (ABCFARMA), is also optimistic for the future of retail sales. Tamarozzi told 

 that he expects retails sales of pharmaceutical products to grow approximately 12% in 2014 and believes the two-digit pattern should continue for the next five years. Tamarozzi explains that there is a positive trend related with the sector’s growth, which is the access and globalization of health information for both patients and doctors.

“An informed patient will tend to take better care of his own heath, while a doctor who has more access to information (on health and drugs) will tend to write more prescriptions,” said Tamarozzi. That alone, added to an aging population, could increase sales by meeting “restrained demand,” he says.

Tamarozzi says Brazil’s growth potential in terms of retail sales could lie in the poorer areas of the country, as these needy areas tend to grow faster than the richer southeast where access to pharmaceutical drugs is easier and the competition is fierce.

“Larger retail groups are present in only 450 municipalities, from a total of 5.564 municipalities in Brazil … [therefore], we cannot say that larger retail groups have consolidated the local market,” said Tamarozzi. Difficulties regarding regulatory issues and bureaucracy, however, many times end up slowing retail growth in the country. “Structural, political, and bureaucracy issues directly affect retails sales,” he adds.


Brazil had total revenue of $25.4 billion in 2013, up 17% from the previous year, making Brazil the sixth largest pharmaceutical sales market globally, according to Emerging Markets Information Service. Brazil’s pharma market is expected to move up the ladder a bit more by 2016.

According to public information offered by Marketline from April 2014, population growth and economic stability produced a robust pharma market in recent years, helped also by import tariffs on pharma products, which aided the local industry (3). According to the research, the performance of the market is expected to accelerate during 2013-2018, driving the market to a projected value of $24.2 billion by the end of 2018.

Public figures from Visiongain’s Brazilian Pharmaceutical Market Report predicted that the country’s pharma market would reach $41.3 billion in 2017, with fast expansion, and by 2024 would contribute strongly to world medical revenues (4). The research stated that manufacturers of generic and biosimilar drugs would stand to profit. The study concludes that patients, healthcare providers, and pharma companies would benefit from progress in Brazil, citing population size as the biggest driver. The research indicates that the generic-drug segment would continue growing and projects that the southeastern region of the country, with approximately 40% of the national population, would contribute with over half of pharmaceutical market revenues.


Hellen Berger is a business correspondent based in São Paulo, Brazil.

The Brazilian economy is being impacted by internal and external factors, and forecast figures are being quickly revised downwards.

Pharma Industry Growth Slows in Brazil


Specialist Rodrigo Leifert, intelligence analyst at São Paulo-based consulting company Tendências Consultoria Integrada, told 


Brazil's pharmaceutical industry is optimistic, but is the pharmaceutical market growing steadily or showing signs of instability?

Economic Growth Stalls in Brazil

It is well known that Brazil has an immense biodiversity and that the Amazon is the largest tropical rainforest in the world. Traditional Brazilian medicines include African elements, rooted on indigenous groups. Few pharmaceutical companies, however, know at what level phytotherapic drugs are commercialized in the country, how much regulation is imposed for herbal medicines, and if there are any opportunities in this unspoken, mysterious market in Brazil.

Dozens of studies link Brazil’s herbal medicines to successful treatments and cures of various ailments. According to Japanese scientists, there is strong anticancer activity in certain Brazilian traditional medicines (e.g., basic and applied studies for physiological activities of Brazilian traditional medicine). Another study analyzed antifungal properties of plants used in Brazilian traditional medicine against clinically relevant fungal pathogens. One more study made a comparison between ethnopharmacology in traditional Chinese medicine and Brazilian popular phytotherapy.   

One would suppose that due to the potential of the market, there would be dozens of companies investing in the sector. This potential, however, is not translating into market growth, according to industry sources. 

So why is the herbal drugs market in Brazil almost completely undiscovered and profoundly undeveloped? Is there any real potential for new or existing companies to enter this market? 

There are few figures available on the local herbal drugs market, and its evolution is not officially followed, according to the Brazilian Health Surveillance Agency (Anvisa). It appears that most of the investment in the Brazilian herbal market has come from the cosmetics sector and not directly from the pharmaceutical industry. 

A December 2011 study conducted by the University of São Paulo concluded that the number of patents filed at the Brazilian patent bank (76 patents) was much lower than that observed in its American (279) and European (328) counterparts and did not show clear signs of growth (1). The study was based on Brazilian, European, and American patent banks, with the objective of evaluating herbal extracts applied in cosmetics.       

Alexandros Botsaris, president of the Brazilian Phytotherapy Association (Abfit), stated in an interview with 

 that there are various barriers in Brazil related to registration, environmental legislation, and local production of raw materials, which end up slowing down the availability of quality products in the local market. “Without a proper supply of products, no market is able to grow consistently,” said Botsaris. 

Anvisa has imposed regulation processes that include the registration of herbal medicines, according to Abfit. 

“However, Anvisa was excessively strict regarding safety and efficacy criteria, which caused many smaller laboratories that produced traditional products to shut down,” said Botsaris, adding that was the main reason why the volume of herbal drugs available in the local market reduced significantly in the past 15 years.  

Botsaris adds that another issue is which products should be named “phytotherapic”, as the term could include herbal extracts, ‘in natura’ products, or even items sold though network/pyramid marketing. “Brazil’s herbal industry is in a very early stage if compared with other developed countries,” says Botsaris. Brazil tends to follow guidelines published in the US, which could influence the Brazilian herbal market in the long term, he adds. 

Also, according to Botsaris, environmental legislation made the use of Brazilian biodiversity extracts on commercialized products or research more complicated. “The CeGen (Cultural and Genetics Heritage Council) aggressively fined researchers and companies that invested in plants considered of Brazilian heritage, which has greatly inhibited the production of herbal medicines made with Brazilian plants,” said Botsaris. 


According to Ana Cecília Carvalho, phytotherapic coordinator for the Brazilian Health Surveillance Agency (Anvisa), difficulties in the production of herbal remedies may arise due to legislation, which may not be changed by Anvisa. According to Carvalho, there are new norms being edited aiming at meeting other points not foreseen by the Brazilian Law to harmonize the legislation with international standards of quality, safety, and efficacy control.

 “We hope these changes will make it possible for more herbal remedies to be available in the market and [guarantee] that every product will meet current international quality standards,” Carvalho told 

The local legislation for herbal drugs has evolved since 1967 in a few aspects to level itself a little more with international standards. In the past eight years, Brazil expanded its regulation principles regarding raw materials and created its good practice rules and other specific rules for herbal remedies to standardize the sector. 

Since then, Anvisa updated and re-edited rules such as the 

Guideline to Herbal Medicine Registration

 (Director’s Collegiate Resolution [RDC] 14/10) and the 

 (RDC 17/10), among others. “This is the fifth time the Herbal Medicine Registration is being re-edited ... the last version was RDC 14/2010,” said Carvalho.

According to Carvalho, one of the main changes to the rules is related to the splitting of herbal products into two classes: one that passes all clinical studies needed for the new drugs registration to be granted and another for lower-risks products. “Lower-risk products do not need complete testing,” she said, adding that the data from more than 30 years of usage on human beings is considered. 

According to Carvalho, this makes approval of lower-risk herbal drugs a quicker process, with follow-up control by Anvisa itself. “The legislation update is needed in order to make sure that the consumer understands how the product purchased was registered … if it was through standardized clinical trials or safe and effective usage, which is not clear today,” said Carvalho. 

To re-edit the rules, Anvisa analyzed various points of the international legislation from the World Health Organization (WHO), European Community, Canada, and Australia and extracted “the best” safety, efficacy, and quality principals from each, Carvalho said. According to Anvisa, various associations, scientists, and communities participated in the process. 

Botsaris, however, states that Abfit was not happy with the process. “We have sent various suggestions to Anvisa and never had any idea actually used by them. We currently do not feel any type of proximity with the agency,” he said.    

“Abfit favors legislation and market systems similar to the ones found in Europe, where the government is active in validating traditional products, while there is also more flexibility for registration and prescription of [herbal] products,” Botsaris added. 


Brazil’s pharmaceutical market has grown in the past years as the volume of products available increased and new products emerged, especially those that were patent-protected, according to Abfit data. The association estimates, however, that the herbal drugs market has not followed the same trend. According to Abfit, the number of new registrations dropped by 50% at Anvisa in the past 14 years.  

 that there has been a reduction in the number of registered herbal drugs from manufacturers. “However, we have no means to offer [comparative] information on whether [the drop] was related with herbal drugs sales or financial values as Anvisa does not follow herbal drug sales and finances [/figures],” said Carvalho. 

Despite the lack of statistics, it is possible to notice that the growth of herbal medicines in Brazil did not follow the evolution of the regular pharma market. On the other hand, according to Botsaris, Brazil historically follows international trends in this sector, and the search for natural drugs is increasing locally and worldwide so there are various good reasons to believe that the herbal industry in Brazil will offer great opportunities ahead and should receive more investments in the years to come.


1. W. Magalhães et al., “Patenting in the Cosmetic Sector: Study of the use of herbal extracts,” 

 47 (4), University of São Paulo (October/December 2011). 


  Hellen Berger is a business news correspondent based in São Paulo, Brazil.

Is there potential for growth in Brazil's phytotherapic drug market?

Brazil's Phytotherapic Drug Market and Regulation

Brazil is the world’s seventh richest country by gross domestic product (GDP) with $2.422 trillion, according to International Monetary Fund statistics from October 2013. In that same year, the country’s GDP rate was the world’s third best at 2.3%, only lower than China and South Korea among 13 economies analyzed by Brazil’s Geography and Statistics Institute (IBGE).   

The Brazilian economy, however, slowed significantly between 2011 and 2012, according to World Bank figures. GDP growth of 7.5% decelerated to 2.7% in 2011, dropped to 0.9% in 2012, and grew back to 2.3% last year. Growth was smaller than 1% in 2012. As figures plunged, the Brazilian pharmaceutical industry feared that the economic instability seen in emerging markets could affect the sector as well; it was clear that industrial output and investments were being impacted nationwide.       


As the country prepares to host the World Soccer Cup in 2014 and the Olympic Games in 2016, investments in general infrastructure are needed. General positivity, however, began slipping as numbers dropped amid loud criticism regarding such events.                   

When GDP and pharmaceutical industry figures came out, however, the pharmaceutical sector could breathe after all. Revenues for 2013 were reported to be in line with market expectations. Local pharma revenues grew 17% last year, reaching (Brazilian Real) R58 billion (US$136 billion). The country’s pharmaceutical market had continued its double-digit growth pattern in 2013, according to IMS Health data. 

In 2013, according to IMS Health, 2.9 billion units of pharmaceutical drugs were sold. The figures showed a 11.6% growth in terms of units sold compared with 2012 results. Not that bad considering the effects of global instability on other sectors of the economy. 

According to The National Pharmaceutical Laboratory Association (Alanac), the sector’s growth reported for 2013 was said to be positive, considering that products underwent strong sales and cost pressures in the period.    

According to the World Bank, while the slowdown was driven by domestic and external factors, signs already suggested that growth patterns could finally reoccur. The Bank says the country has been less vulnerable to external drops due to Brazil’s stable economic growth, lower inflation rates, and overall social improvements. 


  The generic-drugs market segment reported the highest growth in terms of revenues and units sold, according to IMS Health. In units, the sector grew 16% to 788.6 million units sold, meaning generic drugs took as much as 27% of the industry’s market share in 2013. In terms of revenues, these drugs grew 22% at R13.7 billion (US$32 billion).   
  
IMS Health figures do not consider that the industry offers the retail market a 50% or more discount on generic drugs and its results are based on prices of products registered by laboratories at the pharmaceutical market regulation chamber (CMED). Nevertheless, according to the Brazilian Generic Drugs Industry Association (PróGenéricos), results were in line with the growth expected by the association for 2013, between 15% and 20%. 


For 2014, Brazil’s generic-drugs association expects the sector to maintain the same level of growth compared with previous years, while it bets that the association’s current policy of lower prices (compared with traditional brand drugs) and best quality will continue attracting consumers all over the country. Undoubtedly, uncertainty is still present and has been a reason for worry. While the Brazilian government expects GDP growth to be approximately 2.5% in 2014, local consulting firm Focus has projected a lower GDP growth of 1.7% in 2014. 

In terms of macro economy, the World Bank considered Brazil a “solid” market, adding that the country’s outlook risks would lie in its limited trade openness and high foreign reserves. While such issues are still unresolved, the World Bank states that its mission for Brazil, through the support of the local government and the private sector, includes improving services to the poor, strengthening public and private investment, as well as regional and territorial development. One of the active projects includes The Family Health Program, which aims to increase access to primary care, raise patient satisfaction, and improve efficiency and effectiveness of health-service providers.

It is clear why emerging markets, even with their uncertainties and difficulties, are considered a new hope for the global pharmaceutical industry, as mature markets manage stagnation and seek new partnerships overseas. Brazil is one of these markets, but drug makers need to acknowledge the steep changes to be faced as the industry in this diverse country becomes increasingly competitive and, therefore, should also consider locally focused strategies to help avoid unexpected risks along this 
  bumpy road.    
  
  


  Hellen Berger is a business news correspondent based in São Paulo, Brazil.       


How badly is Brazil's pharmaceutical market suffering from the global instability of emerging markets?