Medical Devices in Brazil – Problem, Challenge or Opportunity? – written by Mr. Pablo Halpern, published on EMDT’s website.
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Published on EMDT – European Medical Device Technology (http://www.emdt.co.uk)
Medical Devices in Brazil – Problem, Challenge or Opportunity?
We have been hearing a lot about emerging markets and their growth potential for medical devices companies for a decade now. In the last five years, and due to the economic problems that plague the USA and Europe, the emerging markets have been even more in focus as a potential source of growth and revenue. As the saying goes – “All that glitters is not gold”, so we have decided to evaluate Brazil’s potential for Medical Devices, as objectively as we can.
Pablo Halpern, CEO and President, Atche Medical and Benny Spiewak Adv., Partner at ZCBS – Zancaner Costa, Bastos e Spiewak Advogados (ZCBS)
How many Countries do you know have a population of over 100 million, geographical area over 2 million km2 and a nominal GDP over US$600 billion? Only five Countries fulfill these three criteria: USA, and the four BRIC countries (China, India, Russia, and Brazil). In most sales and marketing plans that we have seen during our professional careers, Brazil has been traditionally considered part of the South American group of Countries, and one of the last markets to contemplate.
You better think again
Brazil has a population of over 190 million, of whom more than 50% are middle class and 26 million (14%) upper class, meaning more than 125 Million people in upper and middle class.  This population has many needs. including an improving healthcare system that is growing constantly to provide answers to those needs. Some data from the World Bank (2010): Total expenditure on health was 9% of the GDP, spending of US$ 990 per capita, the private sector accounts for 4.9% of GDP and covering 23% of the population (46M), and the public sector (4.1% of GDP), which covers everyone else and often plugs gaps in private care. The medical devices market represented US$ 4 billion in imports and US$ 700 million in export. Healthcare is one of the most important targets of the Brazilian Government, and they have many available funds to develop, improve and support local manufacturers of medical equipment and pharma products.
Generally speaking, local manufacturers are trying to close the technological gap that exists between the locally manufactured products and the products available abroad, looking for new and revolutionary (not me-too) technologies. These manufacturers are backed by governmental incentives aimed at improving the products quality and exporting them to other markets.
Brazil’s enormous territory (8,514,215 km2), comparable in size to the USA (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 other countries in the world. These distributors are also constantly varying and improving their model to adapt it to the changing new 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 imports 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. Definition of introduction to the market 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 amount of health risks, whilst Class IV devices pose the highest. The classification rules are very similar to those of the U.S. FDA and the European Union’s Medical Device 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 is variable and can take six months up 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 personnel, take place prior to filing a product to ANVISA. This is clearly a way to tell medical devices companies that if they manufacture in Brazil they might expedite the ANVISA permit process. It is easier, cheaper and faster to visit a local manufacturing site than one situated abroad (needs more coordination, international travel, etc.).
Brazil does not take into account previous FDA clearance or CE-markings in their regulatory filing today. The process for registration of medical products has been harmonized across the MERCOSUR countries in the past few years, and efforts are being made to harmonize it also with the European MMD and FDA. We believe that pressure exerted by local medical devices organizations and industry will prevail, and the change will happen. When? Well, that’s a more difficult question to answer at this point in time.
To add some more challenges, the taxation and import customs fees are very high, and 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 otherwise – why has Brazil attracted almost all large medical devices companies to manufacture or open subsidiaries in Brazil? (Some examples: GE Medical, Phillips Medical, Toshiba Medical, Siemens Medical, Kodak, Shimadzu, Beckton Dickinson, Baxter, Edwards Life sciences, Johnson and Johnson, 3M Medical, Hollister, Smith & Nephew, Fresenius).
First of all, the Brazilian government is committed and has proven its commitment in improving public healthcare. The public reimbursement system (called SUS) is considered a citizen’s right and the State’s duty. Secondly, a growing private healthcare market adds demand for innovative and competitive medical devices. Thirdly, Brazil today is well positioned to be the launching pad for other South American Countries, and this is an added strategic value one should not underestimate. And lastly – the Brazilian culture is closer to the Western than any other of the 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, the regulation and the bureaucracy, and the frustration of long timelines and delays: In the end it will be worthwhile.
Atche Medical is a management consulting practice that provides worldwide services to the Medical Devices industry focusing on expansion into new markets and new venture development. With over 30 years of experience in Medical Devices, Atche Medical‘s team has worked with small startups as well as midsize companies around the globe. We offer practical tailored solutions based on proven personal experience within a cost-effective and prompt framework. For more information visit: www.atchemed.com