India's new clinical trial rules establish an accelerated pathway for new drug approvals, but affordability remains… https://t.co/uhVXDZGLfr
The cross currents at play in the Brazilian retail pharmacy market
Retail medicine prices are soon expected to increase for the Brazilian consumer, with the pharmaceutical industry admitting last month that discounts usually offered to distributors and retailers will be slashed. According to Nelson Mussolini, head of the Industry Syndicate of Pharmaceutical Products in the State of Sao Paulo (Sindusfarma), the next 60 days will see a dramatic reduction of discounts to pharmacy, as reported by local newspaper Folha de Sao Paulo. Price changes are usually more prevalent in April, shortly after the inter-ministerial Pharmaceutical Price Regulation Board (CMED) undertakes the annual price readjustment based on a complex formula delineated in 2003 legislation. The annual readjustment has generally tended to correspond to price increases.
But these price rises will be felt sooner by the consumer, according to Sindusfarma, due to pressure from higher energy prices on production costs, as well as the value of the dollar making imported raw materials much more expensive. In Brazil, about 90% of active pharmaceutical ingredients (APIs) used in medicines are imported. These factors have reduced the usually aggressive discounts offered to retail pharmacies, which will result in a drug with a higher consumer price but nevertheless one lower than CMED's cap or maximum commercialization price for the private sector. These earlier-than-usual price alterations are also likely to counterbalance the lower percentage rise permitted by the annual price readjustment calculation, which was perfected in February 2015. They are also likely to take into account the dramatic rise in taxes imposed by the drug regulator Anvisa to register new medicines.
This is set against large retail pharmacy chains' sales growing at rates above two digits despite Brazil officially being in an economic recession. According to the Brazilian Association of Pharmacy Chains and Drug Stores (Abrafarma), the large chains had sales of BRL 23.4 billion (USD 6.1 billion) from January - August 2015, a year-on-year rise of 12.75%. However, the sale of medicines dropped by 1.51% in August and 0.99% in terms of commercialized units. This deceleration is perhaps the reflection of a more cautious consumer with lower purchasing power due to growing income restrictions and increasing unemployment rates. While retail medicines are essential items and rely on a strong degree of inelasticity, consumers will scrutinize the price and the brand much more thoroughly before a purchase during an economic crisis. Pharmacies have grown the most amongst retailers in recent years, stimulated by accelerated consumption growth mainly due to the increase in income within the Brazilian middle classes.
Appetite for mergers and acquisitions cools down
The retail pharmacy scenario remains optimistic for 2015, although the enthusiasm for mergers and acquisitions (M&A) appears to have calmed down after a previous consolidation period. The only exception is the chain Drogaria Pacheco e da Drogaria Sao Paulo (DPSP) which had been in talks since February 2015 with the US pharmacy chain giant CVS Caremark. CVS already controls 80% of Brazilian pharmacy chain Onofre. However, CVS reportedly decided in June 2015 to put on hold plans for new acquisitions and interrupted the DPSP-related negotiations, according to local newspaper Valor Economico. Despite not knowing the true reasons for the halted negotiations, the same source allege that CVS needs to consolidate, having recently splashed out on the acquisitions of US-based pharmaceutical services supplier Omnicare and the pharmacy chain Target.
In order to survive, pharmacy chains such as Pague Menos are differentiating their business by investing in new pharmacy outlet models with more personalized pharmaceutical services, in line with CVS's concept of the Minute Clinic which has embraced the historical role of the pharmacy as a health establishment. During the economic crisis, pharmacies could also entice consumers to return with offers of longer payment deadlines, lines of credit or greater discounts. Amongst these offers are likely to be access to several discount programmes run by manufacturers for branded drugs to treat a range of diseases based on the patient's socio-economic profile.
This represents a form of intra-country tiered pricing (ICTP) that is a commercial strategy based on charging different prices for a drug to different segments of the same market. However, ICPT can only be practiced in Brazil when hidden in the form of discounts behind a uniform list price, since currently the CMED's private market maximum commercialization price is published. You can learn more about this commercial strategy in our study Intra-Country Tiered Pricing: Optimizing Pricing Strategies in Emerging Markets.
Tania Rodrigues is a senior life sciences research analyst for IHS
Posted 10 November 2015
- India issues new clinical trial rules to expedite new drug approvals
- Medicare X
- Pharmacare for all in Canada: Unlikely proposal to imminent threat
- Accuracy check: Norwegian health expenditure data
- Budget impact of passing a share of negotiated manufacturer rebates to patients at POS
- United States experience dramatic shift in public share of healthcare spending
- Population health outcomes of American patients under different drug access conditions
- Improving Access to Medication-Assisted Treatment for Opioid Use Disorder among the Commercially-insured US Population
Democrats explore creative ways to expand health insurance access with Medicare X https://t.co/kAsNBvtiuz
The creation of the Canadian Drug Agency and Pharmacare could mean big changes for drug prices https://t.co/8uMsHLXiAE