Report Summary

Brazil continues to be one of the most dynamic large pharmaceutical markets in the world. It delivered albeit one whose strong dollar growth performance in 2007, which saw the total market grow by 17.0% year-on-year. BMI’s latest forecast sees expansion of 21.5% this year. This reflects the strength of the Brazilian real – local currency growth rates were a more mundane 4.6% and a forecast 7.7% respectively – but we see a steady five-year annual average growth moving forward for the period 2008 to 2012 of 7.4% in dollar terms and 5.6% in real terms. Continued dynamic growth in the generics sector, government investment in healthcare and steady economic growth create strongly positive momentum for the market, which, with a forecast total value of US$15.7bn by the end of 2008, is the largest in Latin America.

An increase in healthcare provision has been a major achievement of the administration of President Luiz Inácio Lula da Silva to date. Brazilian lawmakers recently passed a law obligating the government to increase healthcare spending to a minimum of 10% of GDP. In mid-May, the government was reportedly seeking to increase tobacco taxes and introduce a new tax on financial transactions in order to increase overall healthcare funding. Still, conflict with the research-based pharmaceutical industry remains a concern, although there are some clearly positive trends. Brazil’s heavy investment in its own state-run pharmaceutical industry and support for the local private sector has inclined it to cooperate with global players, particularly in developing vaccines, as it seeks to wean itself from export dependency over the longer term. Also, Brazil has sought to develop a legitimate generics industry with export potential, which has led to adopting the toughest bioequivalence regime in Latin America.

Nonetheless, tensions over patents continue. The government declared Gilead's AIDS drug Tenofovir (disoproxil fumarate) ‘in the public interest’ in April, indicating it could reject a patent request and seek to import a generic version. After the compulsory licensing of Merck’s efavirenz in May 2007, and Brazil’s sabre-rattling over the wider international patent regime, such moves make drugmakers decidedly nervous Brazil’s US$6bn healthcare deficit in 2007, up by around 36% y-o-y, reflects the long-term challenge of creating a regional export leader in the pharmaceutical sector. But while the growing market saw the trade deficit in finished pharmaceuticals rise to around US$2.7bn, exports are rising rapidly too, ranging between US$800mn and US$1.02bn, depending on the source. The strong domestic market and reasonably strong IP protections continue to draw international players. The country is a safe export base for the wider region. Bayer-Schering saw its exports increase 283% in 2007, while generics giant Ranbaxy saw sales growth of 75% in Brazil in Q108. Novo Nordisk and Boehringer Ingelheim have become other major exporters. Brazil’s route to a more favourable trade balance remains openness and stability, rather than ugly public spats over patent rights.