Increasing Government Investment In Local Biotechnology Sector


BMI View: The Brazilian government is determined to encourage the country's capacity to develop and produce innovative products and services. The domestic production of biosimilars is of great interest to the government, as it can expand local patients' access to many essential medicines and strengthen the domestic industry. However, multinationals - even biosimilar manufacturers, who had been hoping to cash in on blockbusters - will suffer from the accelerated market share loss to local manufacturers.

Brazil's Health Minister, Alexandre Padilha, has announced that the government will allocate more resources to stimulate innovation in local companies producing biological drugs. This is especially for drugs treating cancer and arthritis, as well as biotechnology firms. The National Bank of Economic and Social Development (Banco Nacional Desenvolvimento Econômico e Social - BNDES) will provide a total BRL5bn (US$2.53bn) worth of credits and the Ministry of Health will add another BRL2bn (US$1.02bn) to the fund. The Ministry of Health estimated that this will save the public health service BRL354mn (US$180mn) over the next five years.

We previously highlighted that the Brazilian government has a long-term commitment to reduce its reliance on imported medicines and cut down public pharmaceutical spending by supporting its domestic pharmaceutical industry. Technology transfer partnerships are an important way the government can accelerate its incorporation of advanced technology in domestic production and guarantee local medicine supply for essential medicines within a short space of time. Currently, Brazil has 63 agreements with 15 public companies and 35 private drugmakers to produce 61 medicines, saving the country BRL2.5bn (US$1.27bn) in public medicine expenditure.

We note that the Brazilian government is a major producer as well as consumer of medicines, which has saved a significant amount of public expenditure on medicines. These savings are even true of high-value, imported medicines, even though the government has expanded public access to these medicines through the Unified Health System (SUS). We note that total government spending on medicine, including specialised medicines, treatments of rare or chronic diseases or diseases that require special treatment including biologics, has increased consistently. However, expenditure on strategic medicines, defined as higher-value drugs listed according to Decree GM/MS No. 1.284, has fallen.

Reduced Spending On High-Value Strategic Medicines
Spending On Medicines By Brazilian Ministry Of Health (BRLbn)

It has been the Brazilian government's priority to boost its local pharmaceutical industry, through direct investment, special credits, low tax rates and forming technology transfer deals with multinationals to stimulate domestic innovation. In March 2013, Brazil's federal government has launched the Inova Empresa Plan, investing BRL32.9bn (US$16.6bn) between 2013 and 2014 to boost productivity and competitiveness in various sectors through technological innovation. The plan includes four credit lines to fund research, development and innovation (RD&I) activities: BRL1.2bn (US$606mn) in economic subsidies to companies; BRL4.2bn (US$2.1bn) in incentives for partnership projects between research institutions and corporations; BRL2.2bn (US$1.1bn) for shareholding in technology-based companies; BRL20.9bn (US$10.5bn) in loans to businesses with subsidised interest rates (2.5%to 5% per year), a four-year grace period and a payback period of 12 years. The executing agents are BNDES and the Studies and Projects Financing Agency (Financiadora de Estudos e Projetos - FINEP), linked to Brazil's Ministry of Science, Technology and Innovation.

This article is tagged to:
Sector: Pharmaceuticals & Healthcare
Geography: Brazil, Brazil, Brazil, Brazil