Increased Government Funding and Ageing Population Expected to Boost Brazilian Healthcare and Pharmaceutical Industries
After a wave of protests in more than 100 cities the Brazilian government has finally taken steps to improve public services. On 3 July 2013, Congress approved a proposal to allocate oil royalties from deposits of the Atlantic coast to a welfare fund, 25% of which will be allocated to healthcare. To allocate more revenue in the short term, 50% of oil royalties from the pre-salt deposits should be assigned to the welfare budget. What effect will these changes have on Brazil’s healthcare and pharmaceutical industries?
The Brazilian healthcare system is riddled with problems, this being one of the issues which sparked the protests. Healthcare services in the country are unequal, with hospitals in more affluent states having better medical facilities. In addition, medical treatment centres in provinces are unable to cope with demand. As a result, wealthier Brazilians chose private healthcare while the poorer opt for self-treatment or no treatment at all rather than the healthcare services provided by the government.
Brazil’s population is ageing, thus increasing the demand for preventative healthcare. The average age in Brazil in 2012 was around 30 years. Due to a declining birth rate and rising life expectancy, average age is forecast to gradually increase to 38 years by 2030. The most significant growth is forecast for those aged 65+, with this age group set to more than double by 2030. Despite these changes, preventative healthcare is almost non-existent.
However, it is expected that healthcare will improve due to increased government spending. Healthcare, hospitals, medical and dental services are all expected to more than double in size over the next five years (reaching a turnover of R$442 billion in 2018). Healthcare in poorer states is expected to benefit the most as the majority of oil royalties will be allocated to these poorer areas.
In 2012, Brazil’s pharmaceuticals market was worth R$114 billion, making it the largest in Latin America and the largest pharmaceuticals consumer among the BRIC countries.
Medicine reimbursement is not a common practice in Brazil. Instead, the government runs a programme which enables lower-income citizens to obtain basic medicines. However, most of the medicines available on the programme are to treat chronic diseases. More pharmaceutical products are expected to be added to the reimbursement list thanks to the increase in funding.
Generic pharmaceuticals are expected to benefit the most as the price of medicines will continue to be an important issue. Domestic producers are likely to take advantage of growing demand for generics while multinational players are more likely to target the middle-classes with higher disposable incomes instead of competing with low-end brands.
As a result, the local pharmaceuticals industry is expected to post a 10% CAGR over the next five years, reaching a turnover of R$92 billion by 2018.