Just over 20 years ago, the pharmaceutical industry went through a vital moment of transformation for its modernization. The creation of Anvisa (National Health Surveillance Agency) in 1999 occurred in a scenario of adapting the national pharmaceutical industry to the guidelines of the World Health Organization (WHO), at the beginning of Fernando Henrique Cardoso's second government. Part of a series of economic liberalization policies combined with the expansion of the national productive inspection network, the constitution of a body focused on the country's sanitary management promoted a dynamic of raising the level of inspection of drug quality control, conforming domestic production to international regulatory standards of the pharmaceutical chain.
Furthermore, Anvisa was also tasked with monitoring the prices of health-related products, an intention seen as a counterpart to the rise in drug prices associated with the sanctioning of the Patent Law in 1996. The agency contributed significantly to the implementation of generic drugs after the sanctioning of the law that regulated them in 1999, ensuring their suitability to efficiency and efficacy requirements.
The Generic Drug Law, which turned 20 last year, thus emerged as an attempt to increase the population's access to medications equivalent to branded ones, with drugs at more accessible prices; being, to a certain degree, a compensation for the Patent Law. Even though it impacted the profitability of large pharmaceutical industries in the country, this impact was relatively marginal, such that the law enabled a strengthening of national capital companies and was able to increase the attraction power of foreign companies to the Brazilian market, making it more competitive.
Amid this, the pharmaceutical industry consolidated itself in Brazil as one of the sectors with the greatest economic-commercial potential, having low sensitivity to crises and a growing area of activity, with broad social reach (also sustained by generic drugs) and potential associated with the dynamics of the inverted age pyramid, which Brazil currently experiences, like a number of countries around the world. Furthermore, the segment has stood out as a sector with the highest rates of investment in innovations, which propel such expansion potential.
Focusing on the generic drug scenario, then, according to a study published by PróGenéricos, the generic industry recorded a 6.43% growth in the number of units sold in 2019 compared to 2018, with the association pointing out that 1.482 billion drug units were sold in that interval. As for the monetary counterpart of this volume, the value of generic sales recorded a 14.87% growth, reaching the mark of R$ 9.82 billion sold in 2019 (already considering discounts granted to retail). Still according to the PróGenéricos report, since they arrived on the market in 2000, generics have generated savings of over R$ 150 billion in drug spending for Brazilian consumers, with the data supporting the consolidation of the expected benefit with the sanctioning of the law, in terms of providing drug alternatives.
The sector, even among generic companies, amid this considerable volume of capital moved, also stands out for the allocation of revenue to research and innovation, having invested hundreds of millions of dollars for this purpose since 1999.
Trends
The magnitude of the pharmaceutical sector and its remarkable stability can be indicated by the simple fact that it has performed above the GDP in recent years. Still, it can be pointed out that its potential has not yet been fully explored, with an overview outlined by the multinational IQVIA showing that the expectation for 2020 is that Brazil will have approximately 29.8 million inhabitants over 60 years old, an age group that tends to allocate a higher percentage of its income to medicines and items associated with the healthcare field compared to other age groups. By 2050, this same number should reach 60 million.
The perspective, therefore, is of a massive increase in production in the pharmaceutical sector, with the trend being an even greater development in segments related to the production of drugs for the treatment of chronic diseases, as such types of illnesses are common characteristics among the elderly, with patients from age 65 having already manifested, on average, four chronic diseases, this number growing for even older ages.
Current Industry Scenario within national politics
Given such economic power and growing potential, the pharmaceutical industry has developed a broad lobby within the National Congress and across the different scales of the national legislative power: the so-called "Bancada da Bula" (Prescription Caucus).
Actions by the pharmaceutical sector in the political environment usually turn towards the search for tax incentives for the sector, which is still highly dependent on the importation of inputs, both in terms of seeking to reduce production costs and for the construction of new manufacturing units in national territory. Moreover, bills involving the expansion of drug sales in spaces like supermarkets tend to be controversial within the sector, with business owners linked to pharmacies opposing such increased competition, while drug producers tend to have a more favorable view of such bills.
Perspective on the reaction to epidemics
With this extensive pharmaceutical industry, Brazil has been placing itself as one of the countries with the greatest relevance in the sector, there being, in addition, a considerable production and marketing system for generic drugs. The country thus presents a healthcare market potentially characterized by greater accessibility to drugs compared to economies without this type of more accessible option. Furthermore, such a resource may prove to be of special value in a scenario like 2020, where a global pandemic strongly hits the country's main urban centers. This is because the generic products system enables a potential acceleration of the expansion of treatment for epidemic diseases, increasing productive capacity and accessibility to treatment, avoiding catastrophic scenarios among less affluent social strata in terms of income.
Impact of Covid-19 on the industry
The current global crisis undoubtedly represents a possibility for advancements for the pharmaceutical industry. The world, of course, still needs to discover or develop drugs related to the control and fight against the novel coronavirus, requiring treatments, vaccines, and tests. Dozens of companies are now competing for these opportunities, in a race with a high level of uncertainty and, simultaneously, enormous profit potential; which has been driving the union of large pharmaceutical companies.
Even so, the pharmaceutical industry is already feeling some positive reverberation from the crisis currently experienced. Companies that produce hydroxychloroquine have seen the demand for drugs with such active ingredient grow exponentially in recent months, even without full scientific proof of its positive effects. Thus, the scenario is already positive for some companies, even with social circulation restrictions, but the possibility of future growth is a hope for many firms in the sector.
On the other hand, the coronavirus crisis imposes some difficulties on the pharmaceutical area. Among them, the pressure to revoke patent rights, made by members of the European Parliament and some groups, such as Doctors Without Borders (MSF), who share the thought, arguing that the application of such a model would be an unethical move in the current catastrophic context. First suggested by the Costa Rican government, that monopolies should not be allowed in the fight against the novel coronavirus, the proposal was linked, in the country, to a suggestion of a union among pharmaceutical industries to share all information about the coronavirus. Another bottleneck is the dynamic of drug price freezing, already suggested in the Brazilian Congress, which could have a negative impact on company results.
Furthermore, pharmaceutical companies also incur the same risks as industries in other sectors, which may have infected employees and, consequently, closed factories. Therefore, even though the scenario shows highly positive potential for the sector, the short term is marked by risk and uncertainty.
*Bernardo Zanardo Lisboa
5th-semester Economics student at Insper
Projects Director at Consilium Insper
*João Vitor Melo
5th-semester Economics student at Insper
Vice President of Consilium Insper
