Breaking into the Brazilian pharma market

To succeed in Brazil, find the right partner, the right product mix, and the right pricing. Rajesh Chhabara reports.

To succeed in Brazil, find the right partner, the right product mix, and the right pricing. Rajesh Chhabara reports.

The pharmaceutical market in Brazil, the second largest among the seven pharmerging markets (which also include China, India, Russia, Turkey, Mexico and South Korea), is expected to grow by 7 to 10 per cent annually between 2008 and 2013, according to IMS Health, a leading provider of market intelligence to the pharmaceutical and healthcare industries.

IMS estimates that total sales in Brazil could grow from $19 billion in 2008 to over $27 billion in 2013, making the country the eighth largest market in the world and the second largest among the seven pharmerging nations, after China.


Look for local partners

Forging strong partnerships with local companies is key to success in Brazil for multinational companies, according to Kleber Oliveira Miranda, managing director of Molkom Marketing, Consulting and Representation Ltd, a Sao Paulo-based pharma advisory firm. Foreign companies can benefit from the local companies knowledge of local market issues and available opportunities and their strong relationships with distributors, pharmacy chains, government and hospitals, says Miranda.

According to Miranda, local companies, too, are keen to establish partnerships with global companies: The local players are interested to start to develop a business network worldwide with potential companies with strong R&D activities to supply differentiated products as well as low cost generic and branded generic products.

Opportunities for investment in Brazil include alliances with local laboratories for broader medical detailing and greater agility at the point of sales, adds Mandy Chui, senior principal at IMS Health, as well as an increase in public awareness and diagnosis rates through public relations.


Build the right product portfolio

Foreign firms should consider licensing and contract manufacturing arrangements with local companies as the starting point, Miranda says: Once they have acquired the knowledge and understanding of the market, they can come to Brazil to set up their operations in collaboration or joint venture with the local partner. Miranda adds that acquisition of local companies is another option for multinational companies wanting to quickly build operations in the country using existing platforms.

But building the right product portfolio is crucial. According to IMS, the top five therapy classes in Brazil include Angioten II Antag, anti-ulcerants, oral anti-diabetics, lipid regulators, and muscle relaxants.


Niche opportunities

According to Miranda, opportunities also exist in niche products, such as drugs for cardiovascular diseases, diabetes and obesity.  Foreign companies will have to come with differentiated and innovative products, he says. Otherwise, they will face strong competition from local players and multinationals with similar products.

For example, Indian-owned Torrent Pharmaceuticals entered the Brazilian market in 2002 with a focus on cardiovascular, central nervous system and oral anti-diabetic segments. With over $60 million in annual sales, Brazil now contributes 17 percent of Torrents worldwide sales of $351 million. The companys sales in Brazil grew 45 percent in 2008-2009 compared to the preceding year.

Of course, the price has to be right. IMS estimates that 80 percent of Brazilian patients pay out of pocket for treatment. Affordability is therefore a key issue if a company wants to build sales volume.


The role of government

Brazilian President Luiz Inacio Lula da Silva has called for more investment from big pharma in his countrys pharmaceutical industry. In the government sector, vaccines and generics present the main opportunities. According to Brazils Ministry of Health, government purchases account for 90 percent of vaccines and 25 percent of other drugs sold in the country.

As the state and federal governments continue to increase spending on healthcare, the public market is becoming increasingly attractive, with opportunities for generics and branded generics. But again, Miranada stresses, competitive pricing is crucial to get a foothold. The government is also improving the regulatory environment to support the expansion of the pharma industry.

Government support, through various regulations such as the generics law of 1999, has created a huge generics market in Brazil. A 2008 study by the research firm RNCOS estimated that the country could become one of the world largest generics markets by 2011, with generics accounting for 23 percent of the total Brazilian pharma market. Expiring patents for some of the blockbuster drugs is likely to provide a further boost. 

However, tightening of other rules, such as the new advertising regulation that came into effect last June and the new dispensing practices rules announced in August, may have an impact on OTC sales.


Growth prospects

Healthy growth prospects are prompting a number of foreign drug companies to increase their presence in Brazil. For example, GlaxoSmithKline has partnered with the Oswaldo Cruz Foundation (Fiocruz) to develop dengue fever vaccine.

Novartis plans to set up a vaccine plant and is expanding production of active pharmaceutical ingredients, including a chemical precursor of Diovan, the world's top-selling blood pressure medication.

Sanofi-aventis is set to increase its market share after it acquired Medley. Daiichi-Sankyo, a Japanese drugmaker, is expanding its manufacturing operations in the country. Europes wholesale giant Celesio has acquired a majority stake in the Panpharma group and Boehringer Ingelheim has signed a third-party manufacturing agreement with Zambon.

Local companies are also expanding. Cristlia recently opened a new R&D center; Hipolabor is setting up its second plant for making antibiotics; and government-owned Fundao para o Remdio Popular (FURP) has established a new manufacturing plant for generics.

In fact, the government is actively seeking to expand public sector pharma manufacturing as a cost containment measure.  So foreign companies can expect stiff competition from the government-owned firms.

The ability to influence legislation and increase government spending, along with the growth of private health insurance, are a plus but must be weighed against intensive competition among other entrants as well as government cost-containment initiatives and investment in public laboratories," cautions Chui of IMS Health.

For more on the pharmerging markets, see How To Get Ahead in 'Pharmerging' Markets.

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