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Trade envoy galvanises UK firms to invest in Brazilian healthcare

06 March 2013 Tania Rodrigues

After a swift passage through the security check-point, that included an airport style search, I was officially inside the UK House of Commons on 25th January. Not only was this my first visit to the House of Commons, but also the first time a Brazilian Health and Life Sciences Seminar has taken place in the UK parliament.

Brazilian Health and Life Sciences Seminar
The right honourable Kenneth Clarke, member of parliament, was acting as host at the seminar for UK Trade and Investment (UK TI) and the Brazilian Chamber of Commerce in Great Britain. Clarke kicked off the seminar by underlining its key objective of "trying to help British industry to get a greater foothold in the strongest emerging market of the world".

As trade envoy, Clarke was asked by UK Prime Minister (PM) David Cameron to play a role in the government's export effort in Brazil. This followed a recent visit to Brazil by the PM, who returned very enthusiastic about great opportunities for British investment and trade. Clarke said he had helped focus interest on healthcare not only in Brazil but also India and China.

The future looks bright
The scene was set by the first speaker John Doddrell, the director for UKTI in Brazil, who reassured the audience that the Brazilian economy is forecasted to grow by 3-4% in 2013 after a slight slump in 2012 with a growth of around 1.6%. The overall Brazilian health economy is predicted to be valued at US$85 billion by 2015, according to Doddrell.

The head of the Brazilian UKTI highlighted that both countries have a universal healthcare system currently facing similar challenges, including an ageing population and chronic diseases (such as obesity and diabetes) etc. Ever since the Brazilian SUS was created in 1998 based on the UK's National Health Service (NHS), there has been a strong bi-lateral collaboration, including a 2011 Memorandum of Understanding.

Opportunities and challengesBrazilian biotechnology market
Besides projects of public private partnerships (PPPs), another UK export; the take home message is that there are opportunities in the Brazilian biotechnology market. According to Doddrell, Brazilian firms are seeking to partner with world-leading UK firms, particularly for R&D collaborations.

As Brazil seeks to reduce dependency on imported healthcare products, there are benefits that could be exploited by British firms, including tax incentives and special initiatives to promote biotechnology innovation at state and federal levels. Plus, there is a national policy in biotechnology, created in 2007 with a funding commitment of £3.7 billion (USD 5.6 billion) up to 2017.

Brazilian medical device market
There is also money to be made in medical devices, which are predominantly purchased by the private health insurance sector that covers 25% of the Brazilian population. Whilst low-technology medical devices are mainly produced in Brazil, opportunities for UK firms lay as a manufacturing source of the usually imported more sophisticated high-end products.

In fact, the second speaker Jaime Gornsztejn, head of the Brazilian Development Bank (BNDES)'s UK subsidiary of and the chairman of Brazilian Chamber of Commerce in Great Britain, launched a merger and acquisition (M&A) invitation for British firms as a "fast-track" into the Brazilian medical devices market. With more than 500 medium-to-small size firms, Gornsztejn said the "fragmentation of this market could be attractive" for a newcomer.

This invitation emerged when Gornsztejn spoke of the role BNDES plays in making equity investments and forging M&A as a way of creating more scale and competition in this market. Stimulating industrial competition along with making high value products to cater for the demand of a fast growing market is one the main priorities of state-owned BNDES.

BNDES PROFARMA
Whilst viewed as the largest development bank in Latin America, BNDES's mandate in Brazil is to support industry policy and provide key financial support. As life sciences are a priority arena for the Brazilian government, healthcare-only projects via the BNDES PROFARMA are financed at a lower cost than those in other sectors. Gornsztejn also highlighted that BNDES finance any firm independent of where they are registered provided there is a Brazilian interest.

Partnerships for productive development
With the Brazilian government as only shareholder, the BNDES is also interested in encouraging partnerships and "value added products made in Brazil" so that pharmaceutical/biotech sector technology development has a "spill-over effect to other sectors", the bank executive explained. This ethos drives the establishment of Partnerships for Productive Development (PDPs), an industry policy pillar promoting collaborations between state-owned laboratories and private manufacturers.

There are 55 PDPs formalised and in process (47 drugs; 5 vaccines; 2 health devices; and 1 R&D project for a new drug), according Gornsztejn statistics. Under this framework, the government makes a commitment of at least 5 years to purchase a specific drug, vaccine or device at the centre of the PDP. In exchange, the manufacturer commits to undergoing a technology transfer of the product in question to the public manufacturer.

PDPs represent an interesting partnership prospect for UK manufacturers but one of the major stumbling blocks is the weak technological infrastructure of the state-owned laboratories. This is a subject I explored in much greater detail in the Brazilian chapter of our multi-client study on Payer-Industry Partnerships in the Emerging Markets: Best Practices for Successful Market Access of New Pharmaceuticals

Tackling bureaucracy is key
Aside from infrastructure problems, healthcare firms hoping to conduct business in Brazil will have to endure amongst other obstacles, a heavy tax burden derived from a complicated tax system, import duties and a high cost of borrowing. But a major barrier named by most, if not all speakers, was the culture of bureaucracy prevalent in the country, which in healthcare is synonymous with the national regulator ANVISA.

As the Brazilian government tackles the endemic bureaucracy at ANVISA with a concentrated recruitment drive, there has been a simultaneous and considerable legislative push for greater transparency in healthcare decision-making, in general. This is testament to Brazil's overall move to become more transparent, which is an important attractive factor compared to other BRIC economies that are also competing for investment from healthcare firms.

Posted 6 March 2013

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