| The
main legacy of the former Brazilian Health Minister has
been the rapid introduction of a generic pharmaceutical
policy. While the original intent had been promoted as improving
access to healthcare, the government's generics policy is
perceived by many as being a cost-saving exercise.
Development
of the generics sector has been assisted by the government's
public education campaign, complemented by pharmacy promotion
of generics. Heightened consumer awareness is the main driver
of generic
sales, with 95% of Brazilians familiar with the concept
of a generic, according to a national survey by the Ministry
of Health in 2002. Furthermore, the availability of a broad
range of generics has been boosted by the rapid regulatory
approval process and the influx of products from foreign
generic companies.
Over
the 12 months to September 2002, IMS HEALTH data suggests
that generic sales reached US$205.7 million, a growth of
45.3% over the 12 months to September 2001. This represents
an increase in the generic segment's share of total sales
from 3.2% to 5.0%
Downward
pressure on prices
Competition
from copy products and generics has contributed to price
erosion of original brands, whose average prices have declined
in US$ terms since 1999, when devaluation of the real
had a significant impact on prices. Among others, Merck
& Co's (MSD) Renitec (enalapril) and Bristol-Myers
Squibb’s Capoten (captopril), both ACE
inhibitors for
hypertension, have seen their prices cut by 50% in an attempt
to compete with generics.
Some generics are now priced
higher than original brands. Although generic prices are
on average around 40% below branded products' prices, there
are wide variations in the prices of generic versions of
the same drug, reflecting differing company approaches to
gaining market share. With the decline in the price of copy
products, in the last four years the differential between
generics and copies has similarly eroded to reach parity
by 2002.
Battle for market share
Manufacturers are exploring
various options in an attempt to secure market share, and
as the generics market develops the potential for a price
war will increase as price will be the sole competitive
advantage.
In line with the government’s
policy to increase access to cheap generics, a concentrated
effort will be made to reduce the cost of producing generics
locally, with a view to lowering generic prices even further.
This will exert greater downward pressure on prices, while
the level of discounting will intensify as more companies
and products enter the market. As a result the number of
competing generic versions will be limited by economic feasibility.
Generic
approvals
Since
the first bioequivalent generics were approved in February
2000, the number of marketing authorizations has risen exponentially
as ANVISA (Agencia Nacional de Vigilancia Sanitaria) has
given priority to processing generic applications in line
with government policy. The monthly rate of approval has
steadily increased over the last two years, reaching 32
new generic registrations in March 2002 compared with 21
in March 2001.
The most commonly registered generics are antibiotics, antihypertensives
and anti-ulcerants.
Captopril, amoxicillin and enalapril are the drugs with
the highest number of generic competitors, each with over
50 registered presentations. Whether the market can support
so many versions of the same ingredient is doubtful, particularly
as price competition in over-crowded product areas will
render sales unprofitable.
Industry
structure
The
Brazilian pharmaceutical market is changing structure as
generic companies take market share away from original brand
manufacturers. Although copy drugs have maintained a constant
share of the market in both volume and value terms during
the last three years, their share will begin to erode in
the future from the combined impact of patents and generics.
US$
value shares by licensing category for years to September
30
(Retail
market at ex-manufacturer prices)
(Retail
market at ex-manufacturer prices)
*Products not yet assigned to a licensing category and non-patentable
products
Source: MIDAS
Local companies are actively
investing in modernizing and building new production facilities
to step up their output of generics. They currently dominate
the Brazilian generic market, with EMS and Medley together
accounting for over 50% of sales. Although there are over
30 players in the market, some 80% of sales are achieved
by just five companies.
International companies muscle
in
Some R$400 million was invested
in increasing generics production in 2001 and a further
R$300 million is scheduled for 2002. Attracted by financial
incentives, major international generics companies are setting
up local production facilities in Brazil to reduce their
dependence on imports. Canada’s Apotex has spent R$8 million
on a new production plant, and both Ranbaxy of India and
Hexal of Germany are due to open new facilities in 2003.
Other companies, such as India's Cadila Healthcare and Germany's
Stada are also investing in Brazil, and local production
facilities could be used by these foreign concerns for exports
to Mercosur countries in the future.
Multinational suppliers are also
seeking to gain a share of the expanding market, with Novartis
and Abbott, for example, already present. This trend is
expected to continue as demand for generics increases. Multinationals
inactive in the generics market will inevitably face further
erosion of their profits in Brazil; this may cause companies
to rethink their marketing and sales strategies.
Further information on the Brazilian
pharmaceutical market is available in the IMS
Market Prognosis Latin America
report, which also covers: Argentina, Chile, Colombia, Mexico,
Peru, and Venezuela. |
