Pablo Halpern and Benny Spiewak
How many countries do you know that have a population over 100 million, cover a geographical area larger than 2 million km2 and record a nominal GDP over US$600 billion? Only five countries fulfill these three criteria: the United States and the four BRIC countries (China, India, Russia and Brazil). In most sales and marketing plans that we have seen during our professional careers, Brazil has been traditionally considered part of the South American group of countries, and one of the last markets to contemplate.
Brazil has a population of over 190 million, of whom more than 50% are middle class and 26 million (14%) upper class, totaling more than 125 million people in the upper and middle classes. This population has many needs, and an improving healthcare system is growing constantly to answer some of those needs. Some data from the World Bank for the year 2010:
- total expenditure on health is 9% of GDP
- spending is US$990 per capita
- the private sector accounts for 4.9% of GDP and covers 23% of the population (46 million people)
- the public sector (4.1% of GDP) covers everyone else and often fills gaps in private care
- the medical device market represents US$4 billion in imports and US$700 million in exports.
Healthcare is one of the most important targets of the Brazilian government, and fundning is available to develop, improve and support local manufacturers of medical equipment and pharma products.
Generally speaking, local manufacturers are trying to close the technology gap between themselves and foreign manufacturers, looking for new and revolutionary (not just me-too) products. These manufacturers are backed by government incentives aimed at improving product quality and expanding exports.
Brazil’s enormous territory (8,514,215 km2), comparable in size to the United States (9,158,960 km2), has forced Brazilian distributors to invent their own model for importing, transporting and selling in Brazil, which has no similarity to systems in use in other countries. These distributors are also constantly improving their model to adapt to changing laws and rules, which makes it difficult for principals abroad to understand.
But there are some challenges in this market
Brazil has a series of regulations on the import and sale of medical equipment. Applicants must go through a registration process with Brazil’s health regulatory agency (ANVISA) in addition to obtaining licenses to sell their products. All products must be registered with ANVISA before being introduced to the Brazilian market. The definition of market introduction is broad and can include advertising activities and effective marketing actions.
All medical devices are classified into four classes—Class I, Class II, Class III or Class IV—based upon their risk to the human body. Class I devices represent the lowest risk whilst Class IV devices pose the highest. The classification rules are very similar to those of US FDA and the European Union’s Medical Devices Directive (MDD) but do not always align with them. Electronically controlled medical devices will also require Inmetro certification as part of the regulation process. The length of time between filing an application for registration and final approval by the government varies and can take six months to two years to complete.
Manufacturers must also prove compliance with good manufacturing practices (GMP). GMP inspections of the manufacturing sites (in Brazil or abroad) conducted by Brazilian auditors take place prior to filing for product registration with ANVISA. This is clearly a way to tell medical device companies that manufacturing in Brazil might expedite the ANVISA permit process. It is easier, cheaper and faster to visit a local manufacturing site than one situated abroad.
Brazil does not take into account previous FDA clearance or CE marking in the regulatory filings. The process for registration of medical products has been harmonised across the MERCOSUR countries in the past few years, and efforts are being made to harmonise it with the European and US regulatory schemes. We believe that lobbying by local medical device organisations and industry will bring about change. When? Well, that’s a more difficult question to answer at this point in time.
To add some more challenges, taxation and tarifs are very high, and the structure varies according to the product, making it almost impossible to know in advance what the landed cost or end-user price will be.
Regardless of the challenges, it is obvious that Brazil cannot be overlooked, and it hasn't been: Brazil has attracted almost all of the large medical device companies to manufacture or open subsidiaries in Brazil. Examples include GE Medical, Phillips Medical, Toshiba Medical, Siemens Medical, Kodak, Shimadzu, Beckton Dickinson, Baxter, Edwards Life Sciences, Johnson and Johnson, 3M Medical, Hollister, Smith & Nephew and Fresenius.
The Brazilian government is committed to improving public healthcare. The public reimbursement system (called SUS) is considered a citizen’s right and the state’s duty. A growing private healthcare market adds demand for innovative and competitive medical devices. Brazil today is well positioned to be the launching pad for other South American countries, an added strategic value that should not be underestimated. It should also be noted that Brazilian culture is closer to the Western way of life than any other BRIC countries.
Our recommendation is to approach the Brazilian market with patience, seriousness, determination and the needed resources to support such a large and important market. Bring with you someone that can help you overcome the cultural and language barriers, regulation and bureaucracy, and the frustration of long timelines and delays. In the end, it will be worthwhile.