BMI View: With a focus on increasing foreign investment, an expansion of telehealth and a steadily growing burden of chronic diseases, Brazil will continue to offer commercial opportunities as the demand for medical provision as well as access to necessary healthcare improves in the country. Limited drug approvals and the Ministry of Health's implication within the Petrobras scandal will, however, continue to generate risks within the market.
Headline Expenditure Projections
Pharmaceuticals: BRL62bn (USD26bn) in 2014 to BRL66bn (USD21bn) in 2015; +6.2% in local currency terms and -2.6% in US dollar terms. Forecast in has been revised upward from Q 115 due to historic data.
Healthcare: BRL501bn (USD213bn) in 2014 to BRL545bn (USD173bn) in 2015; +7.1% in local currency terms and -1.8% in US dollar terms . Forecast in local currency has been revised upward from Q115 due to historic data.
Brazil scores 61.1 in BMI's Pharmaceutical and Healthcare Risk/Reward Index, making it the fourth most attractive pharmaceutical market in the Americas. We highlight that Brazil will continue to be the most important market for multinationals in Latin America. Its position has been very well reflected by this quarter's scores.
Key Trends And Developments
In May 2015, Lupin announced its entrance into the Brazilian market through its acquisition of medquimica Industria Farmaceutica in order to expand it s presence within the emerging market.
In May 2015, Interfarma announced that the Brazilian Ministry of Health had rejected over 50% of new drug applications between 2012 and 2015, limiting the country's market access.
In April 2015, Brazil's Ministry of Health established the Oracle Healthcare Master Person Index on Oracle engineered systems to improve health data interoperability. The system will help to enhance nationwide e-health initiatives designed to improve care quality and reduce costs.
In April 2015, the corruption investigation of Brazil's state-run oil giant Petroleo Brasileiro (Petrobras) spread to the country's health ministry and state-owned bank Caixa Economica Federal. The cost of advertising contracts were found to have been inflated by as much as 10% at the health ministry and Caixa Economica, with the surplus also passed along to politicians, according to prosecutors.
In March 2015, the Brazilian Ministry of Health announced a BRL14mn (USD4mn) investment for the digitisation of pharmacies and medicine supply facilities in 485 cities as well as the Federal District.
BMI Economic View
We expect that price pressures will begin to readjust downward in the latter part of the year in Brazil, with deterioration in economic activity set to begin to undermine demand-pull inflation, especially in the services sector. In 2016, a further cooling in price pressures and sluggish growth will spur monetary easing. The most substantial impact from electricity hikes and the real's sell off will have already filtered through to price dynamics, underpinning our view that inflation will average within the target band, at 5.7%. With economic activity poised to remain sluggish - we forecast real GDP growth of just 0.9% - this will spur more accommodative monetary policy by the BCB.
BMI Political View
Weak consumer and investor confidence, slow growth and a less favourable external environment will keep the economy high on the policy agenda during President Dilma Rousseff's second term. Critically, public protests against the poor quality of public services, specifically healthcare and education, will persist intermittently in the coming years. This in turn will put pressure on the government to continue improving the quality and availability of these services. Indeed, the demonstrations in June 2013 marked a turning point for the electorate, underpinning our view that healthcare and education will remain hot button issues for years to come.