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Transforming the Brazilian domestic pharma industry through PDPs

23 July 2015 Angelica Kershaw

Among the markets in Latin America, Brazil is a leader in implementing a strategy of building up a domestic pharma industry through Productive Development Partnerships (PDPs). Last week, Brazil's ministry of health published a detailed report addressing the key achievements of the PDPs and the prospects of the coming PDPs under new regulations in force since last year.

These agreements involve local companies entering into partnership with international companies with expertise in producing innovative medicines. In accordance with Brazil's ministry of health PDP regulation, the private pharmaceutical company is in charge of the production of the medicines and, after 10 years, the firm is required to transfer the technology to the Brazilian public company.

With the PDP policy, the MoH has been using the purchasing power of the Unified Health System (SUS) to promote industrial development in the health sector in Brazil, reducing healthcare expenditure. According to the MoH, with the implementation of these partnerships the Brazilian government has achieved BRL2.5 billion (USD782.2 million) in savings during the last four years.

Growing domestic industry
The country has heavily invested in PDPs as a means to help improve its biotechnology and bio-manufacturing capabilities, and reduce its reliance on high-priced, foreign-branded biologics.

As a result of these interchanges between domestic and international producers, several domestic players have consolidated their position in the biotechnology industry. There are currently 10 Brazilian companies involved in high-tech medicines development, including PharmaPraxis, Fiocruz, Libbs, Cristalia, and the two recently formed partnerships BioNovis (Aché, EMS, Hypermarcas, and Union Chemical Laboratories) and Orygen (Biolab and Eurofarma). The focus of nearly all of these companies is developing biosimilar versions of blockbuster monoclonals such as Enbrel, Avastin, and Herceptin.

Brazil's national pharma industry association, FarmaBrasil, which represents nine of the largest local pharmaceutical firms in the country, has reported that these local companies invested BRL538 million (USD174 million) in the first five months of 2015 to produce biotechnology medicines, mainly biosimilars, as part of PDPs signed between private companies, the federal government, and public laboratories.

According to FarmaBrasil, although the Brazilian economy is showing signs of recession, domestic pharmaceutical companies' investments grew by 52% compared to the first five months of 2014. Additionally, FarmaBrasil has forecasted that combined annual investments could total BRL1.9 billion by the end of the year, if the investment pace is maintained.

Many of the biotechnology projects started on paper and resulted in companies initiating clinical research, product development, and the construction of appropriate industrial plants for the production of these highly complex medicines, so investment is, in a sense, catching up with the needs of projects already under way. For instance, BioNovis - a joint venture between Ache, Uniao Quimica, Hypermarcas, and EMS - has invested more than BRL739 million in a biological drug laboratory in Valinhos, São Paulo, with the bulk of production already sold to Brazil's health ministry.

Threat or opportunity for international pharma companies?
Despite the positive effects that the PDPs could have for domestic firms, these PDPs can negatively affect the international pharmaceutical industry based in Brazil as increased production capacity of the domestic laboratories begins to eat into their market share.

Nevertheless, some international pharma companies have seen the PDPs as a useful opportunity to expand their position in challenging markets such as Brazil, through entering into partnership with local producers. Take for instance the case of the German pharma company Merck Serono that is currently developing six biological medicines with Bio-Manguinhos/Fiocruz and the Vital Brazil Institute. This has in turn led to partnerships with other developing markets such as between Eurofarma (Brazil) and South Korean company Dong-A to produce molecules for treating diabetes.

2015 outlook
Last week Brazil's Minister of Health Arthur Chioro reported that 39 PDP proposals were submitted by the pharma industry between January and April for producing innovative medicines included in the list of innovative medicines selected by the government as essential for the Brazilian Unified Health System (SUS).

Under the 2014-PDP regulation, the MoH is required to publish annually a list of essential medicines in the SUS that would be a priority for PDP agreements: .the MoH selected 21 products for technology transfer in January 2015 as priority items for the country's healthcare service.

With the release of an annual list of strategic products for the SUS, the Health Ministry aims to actively steer PDP proposals, with the government now telling the industry which products to prioritise and setting the timetable for submission of projects. According to the MoH, this gives more transparency to the process and secures equal opportunities for all pharma companies that want to enter into these agreements.

Among 39 PDP requests between January and April, biologics drugs were the products that have attracted the most interest from public and private laboratories at the proposal stage of the 2015 selection of PDPs. Out of the 39 proposals, 23 would focus on producing biologics. Key projects include PDPs for producing adalimumab, infliximab, rituximab, somatropin and filgrastim.

Angelica Kershaw is a life sciences analyst for IHS
Posted 23 July 2015


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