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Pharmaceutical Industry Pharmaceutical Industry in Brazilin Brazil

Josimar Henrique da SilvaJosimar Henrique da Silva

ViceVice--President of the Director CouncilPresident of the Director Council

josimarhenrique@febrafarma.org.brjosimarhenrique@febrafarma.org.br

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Global Global Pharmaceutical MarketPharmaceutical Market(12 months - December 2007 – Retail Sales)

Source: IMS Health - World Drug Purchases

Country Sales 2007 – in Billions of EUR

% of Total Share

North America 161,384 52,86

United States 150,020 49,13

Canada 11,364 3,72

Europe (Top 5) 78,905 25,84

Germany 23,067 7,55

France 21,388 7,00

United Kingdom 12,745 4,17

Italy 11,680 3,83

Spain 10,025 3,28

Japan 42,6999 13,98

Latin America (Top 3) 17,169 5,62

BrazilBrazil 8,8788,878 2,912,91

Mexico 6,332 2,07

Argentina 1,959 0,64

Australia / New Zealand 5,178 1,70

Total 305,335 100,00

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Pharmaceutical Industry Total SalesPharmaceutical Industry Total Sales (Drugstore; Pharmacy Channel) Amounts X units

Source: IMS Health (*)Moving average last 12 months – until May 2008

4,881

4,286

4,745

6,392

7,852

8,878

8,967

1,278

1,219

1,333

1,374

1,437

1,515

1,556

2002

2003

2004

2005

2006

2007

2008*

bbbbffff

EUR (bi)Units

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Cutting taxes down and transferring savings to consumers.Single ICMS tax rate applicable all over the country. Taxation reform.

Flexibility in price control, mainly in most competitive, non discretionary items (non essential to health).Cooperation mechanism between industry and Government to increase the population access to medication.

Optimization of Governmental budget earmarked for medication; partnerships with the private sector.

Definition of clear rules and regulations for the economic-sanitary regulatory framework; compliance with intellectual property and its agile enforcement. Industrial policies.

Access to Medication

Industrial Development

Tax Burden

Regulation of the Economy

The SectorThe Sector’’s Agendas Agenda

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Access to medication

The SectorThe Sector’’s Agendas Agenda

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LowerLower--income social strata with restricted access to medicationincome social strata with restricted access to medication

Source: Target; IBGE; GRUPEMEF; Ministério da Saúde, IMS PMB; análise BCG

13 30 46 61 26

Total MarketEUR per capita per month)

Total Population l (M)Σ

=177M

3,8

12,4

7,7

6,4

4,9

0

2

4

6

8

10

12

14

A B C D E

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Among the reference countries, Brazil is the only one that spends less with medication than its taxation income.

Government Expenditure

Access to medication

The SectorThe Sector’’s Agendas Agenda

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36%

30%

19% 17% 17%

70%

52%

60%62%

65%66%67%

73%75%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Gré

cia

Esp

an

ha

Ale

man

ha

Japão

Fra

nça

(m

édia

)

R. U

nid

o (

média

)

Port

ugal

Hola

nda

Itália

Can

adá

Arg

en

tin

a

EU

A

Méxic

o

Bra

sil

Expenditure with medication(% of total market)

Note: For Germany and Italy it was considered the total taxation income from pharmaceutical sales, including government expenditure. For the remaining countries, it was used the same taxes as in medication. In cases where there are different tariffs (France, for instance: 5.4% for

non-reimbursed drugs and 2.1% for reimbursed ones; UK, 7.5% for non-reimbursed drugs, 0% for reimbursed drugs; and Sweden: 25% for non-reimbursed drugs and 0% for reimbursed ones, it was used an average of the tax amounts.

Brazil is the only country that spends less with medication than its taxation income from medication

4% 3%0% 0% 0%

16%

5%5%6%6%8%

15%

21%

35%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Bra

sil

Arg

en

tin

a

Ale

man

ha

Itália

Gré

cia

R. U

nid

o (

média

)

Hola

nda

Japão

Port

ugal

Esp

an

ha

Fra

nça

(m

édia

)

EU

A

Méxic

o

Can

adá

Income from taxation on medication

Source: OCDE Health, BCG Knowledge Group, BCG Analysis

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Brazil has the highest tax burden among reference countries.

Tax Burden

The SectorThe Sector’’s Agendas Agenda

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Taxes levied on medication in BrazilTaxes levied on medication in Brazil are far beyond other reference countriesare far beyond other reference countries

0,0

25,0 25,0

18,012,0

1,5

12,0

0%

5%

10%

15%

20%

25%

30%

Gasol

ine

Alcoh

olic B

ever

ages

Drugs

Cars

Food

Diam

onds

Veter

inar

y Dru

gs

Fuel

Liquor and Spirits

Drugs

Cars Diamonds

Foodstuff

8.4(1)

Veterinary medication

ICMS Tax on some products in the state of São Paulo

0%

5%

10%

15%

20%

25%

30%

35%

40%

Rein

o U

nid

oC

an

adá

Colô

mbia

Su

éci

aEU

AM

éxic

oV

en

ezu

ela

Fra

nça

Su

íça

Esp

an

ha

Port

ugal

Japão

Bélg

ica

Hola

nda

Gré

cia

Fin

lân

dia

Tu

rqu

iaIt

ália

Ale

man

ha

Ch

ile

Au

stri

aA

rgen

tin

aB

razi

l

Taxes on medication in some countries(Average tax burden for Brazil)

Average without Brazil

= 6.1%

Brazil = 35%

Three possible alternatives:

•ICMS exemption with transfer to consumers

•Single ICMS tax rate throughout the country

•Tax collection at the beginning of the chain

(1) Average

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Note: Medication: Effexor, Prozac, Zoloft, Generic Fluoxetin, Lexotan, Rivotril,Celebra, Vioxx, Voltaren, Amoxicillin, Viagra, Cialis, Lipitor, AdalateNorvasc; prices as per exchange rate

in June 2004

Manufacturer’s price Retail prices

USA / Brazil =4.8x

USA / Brazil =2.8x

USA

MexicoCanada

Italy

PortugalAustralia

FranceNew

ZealandSpain

GreeceArgentina

Class.Class. Class.Class.11 22 33 44 55 66 77 88 99 1010 1111 1212 11 22 33 44 55 1111 77 99 88 1212 1010 66

USA

MexicoCanada

Italy

PortugalAustralia

FranceNew

ZealandSpain

GreeceArgentina

Brazil

Brazil manufactures medication at lowBrazil manufactures medication at low--cost, by cost, by this efficiency this efficiency

is not transferred to consumersis not transferred to consumers

Fonte: IMS PMB; Talogdata; Interfarma; Anvisa; MoH; PMPRB; Rmianz; SFEE; análise BCG

Brazil

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Research-related regulatory issues: Conep, Inpi, Anvisa.

Definition of price readjustment.

Rules for launching new products.

Medication registration: Uniformity of criteria, terms and tax rates.

Patent analysis and awarding: Anvisa’s agreement, terms and data protection.

Transfer prices: Alignment with international rules (OECD).

Regulatory Framework

Definition of clear rules and regulations for the economic- sanitary regulatory framework; compliance with intellectual property and its agile enforcement. Industrial policies.

Industrial Development

The SectorThe Sector’’s Agendas Agenda

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Doctoral Papers Presented

10 Largest Universities10 Largest Universities(Per number of PhDs)(Per number of PhDs)

Adapted from Brito Cruz, 2005

1. Universidade de São Paulo - USP 2,180

2. Universidade da Califórnia, Berkeley 767

3. Universidade de Campinas – UNICAMP 747

4. Universidade New Southeastern 675

5. Universidade do Texas, Austin 674

6. Universidade do Estado de São Paulo - UNESP 663

7. Universidade do Wisconsin, Madison 653

8. Universidade Federal do Rio de Janeiro - UFRJ 643

9. Universidade do Illinois, Urbana Campus 618

10. Universidade de Michigan 615

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0%

2%

4%

6%

8%

Brazil USA UK Germany France Italy Israel Korea Japan

% m

undi

al d

e A

rtigo

s e

Pat

ente

s

% Papers

% Patents

pap

Scientific Papers and PatentsScientific Papers and Patents

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94.333

29.086

51.527

90.635

5.92413.913

0

20.000

40.000

60.000

80.000

100.000

Brazil (2000) Korea (2000)

Scie

ntis

ts a

nd E

ngin

eers

Companies Universities Institutes

Source: Br 1996: Anpei, INEP; Br 2000: MCT, Inep; Korea: http://www.most.go.kr/

Brazil and Korea: Brazil and Korea: Scientists and EngineersScientists and Engineers

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• 20 big and medium sized companies produce phytotherapic medicines (Under ANVISA

standards edict - RDC 48 and attachments);• Gross sales US$ 550 mi;• Estimated US$ 1 bi in 2010.

Research in Phytotherapy Research in Phytotherapy

Amazon:20% of all sweet water in the planet35% of vegetables superior species

There are 220 thousand new living organisms already catalogued in the country.

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Why do we have such good scientific Why do we have such good scientific production and so few production and so few

patents/products ?patents/products ?

Lack of investments

Gap between University and Industry

Lack of articulated structure

Lack of political decision-making

Lack of legal assurance

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Definition of clear rules and regulations for the economic-sanitary regulatory framework; compliance with intellectual property and its agile enforcement. Industrial policies.

Industrial Development

The SectorThe Sector’’s Agendas Agenda

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Price Control is not the ideal mechanism to discipline the market and control disbursements.

It is inefficient to expand access.

Other government initiatives have proven ineffective to expand access.

Flexibility in price control, mainly in most competitive, non discretionary items (non essential to health).Cooperation mechanism between industry and Government to increase the population access to medication.

Regulation of the Economy

The SectorThe Sector’’s Agendas Agenda

Price Access and Control Initiatives

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Cutting taxes down and transferring savings to consumers.Single ICMS tax rate applicable all over the country. Taxation reform.

Flexibility in price control, mainly in most competitive, non discretionary items (non essential to health).Cooperation mechanism between industry and Government to increase the population access to medication.

Optimization of Government budget earmarked for medication; partnerships with the private sector.

Definition of clear rules and regulations for the economic-sanitary regulatory framework; compliance with intellectual property and its agile enforcement. Industrial policies.

Government expenditure

Regulatory framework

Tax Burden

Price Access and Control Initiatives

Topic:Topic: Main ChallengesMain Challenges::

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JosimarJosimar Henrique da SilvaHenrique da Silva

ViceVice--President of the Director CouncilPresident of the Director Council

josimarhenrique@febrafarma.org.brjosimarhenrique@febrafarma.org.brAugust 2008August 2008

www.febrafarma.org.brwww.febrafarma.org.br