Evaluating the Brazilian Market Deep Brain Stimulation for Parkinson’s Disease

Team Canarinho

Executive Summary

Exec Summary

Brazil’s Health System

HC Trends Reimburse

ment Care

Pathway DBS Market

Business Case

Recommendations

Risks Summary

Key Findings about the

Brazil Market

Growth Strategy

Recommendations

• Fraction of the population can benefit from DBS, due

to cost, awareness, and access constraints

“Start small” by developing relationships with

key surgeons at academic health centers

• Market presents strategic opportunity for Medtronic

to develop a neuro foundation

• Untapped potential due to lack of infrastructure

Leverage DBS treatment for PD to build

awareness of company and other therapies

• Patients and providers need to be educated about

DBS

• Relationships important for business

Utilize neurological organizations in Brazil and a

contract sales force to invest in training and

awareness

• 12th largest economy in the world

• Growing middle class, can afford good healthcare

• Decentralized universal health coverage, room for

improvement

Long-term, invest in infrastructure and build a

Medtronic presence in Brazil

74% 26%

Public Sector Private Sector

Primary Care

Hospital Ownership 37% 63%

80% 20% Insurance Coverage

Health Expenditure 55% 45%

• 66% of private

spending is out of

pocket

• 7,500 hospitals; 70%

have <100 beds

• 181 teaching

institutions

• Public system only

covers basic &

preventive care

The growth opportunity for DBS in Brazil lies in the wealthy privately-

insured population

Health Spending per

Capita $240 $1200

Source: Frost & Sullivan; team analysis

Brazil’s Healthcare System

Exec Summary

Brazil’s Health System

HC Trends Reimburse

ment Care

Pathway DBS Market

Business Case

Recommendations

Risks Summary

Healthcare Trends in Brazil

Source: Frost & Sullivan; Bloomberg

• Expected to reach $113.7 Billion in 2011 and growing at 7.6% CAGR

Rising Health Expenditures

• By 2012, the population over 60 is expected to reach 24 million due to increasing life expectancy Aging Population

• Middle class purchasing power is growing

• Demand for private insurance coverage is expanding Increasing Wealth

• Low reimbursement in the public sector

• Cost containment efforts in the private sector

• Vertical integration may assist in market penetration Health Insurance

Exec Summary

Brazil’s Health System

HC Trends Reimburse

ment Care

Pathway DBS Market

Business Case

Recommendations

Risks Summary

Reimbursement

Public (SUS) Private Insurance

• Requires preapproval by BMA

• Restrained adoption of new medical

devices

• Low reimbursement

• Reimbursed based on expenses

• Compensation tied to price indexes

• Report is either approved or rejected

by insurance

DBS is not covered by most private insurance; it is necessary to make a special request

Dr. Juliana Zuiani

Neurosurgeon, Hospital

Das Clinicas, Campinas

Source: Frost & Sullivan; Interview with Dr. Zuiani

SUS covers the full cost of the procedure, including the device, but it can only occur at certain centers and they are always overbooked

Exec Summary

Brazil’s Health System

HC Trends Reimburse

ment Care

Pathway DBS Market

Business Case

Recommendations

Risks Summary

Care Pathway Patient Primary Care

Misdiagnosis

Neurologist Neurosurgeon

Referral Referral Appointment

Drug

Therapy

DBS

Procedure

PD is major health concern but often misdiagnosed

Dr. Juliana Zuiani

Neurosurgeon, Hospital Das Clinicas, Campinas

We are working on a project to make DBS procedures more accessible by comparing the procedure cost to the amount spent on medications, even for epilepsy!

Source: Interview with Dr. Zuiani

Exec Summary

Brazil’s Health System

HC Trends Reimburse

ment Care

Pathway DBS Market

Business Case

Recommendations

Risks Summary

The Brazil DBS Market

201 Million Total Population

252,460

PD Prevalence

75,738

Surgery Candidates

1,131 Market Size

$38 MM Market Size

0.1%

30%

1.5%

Source: Frost & Sullivan

Exec Summary

Brazil’s Health System

HC Trends Reimburse

ment Care

Pathway DBS Market

Business Case

Recommendations

Risks Summary

Growth Strategy Recommendations

Exec Summary

Brazil’s Health System

HC Trends Reimburse

ment Care

Pathway DBS Market

Business Case

Recommendations

Risks Summary

SHORT TERM

Invite 10 thought-leader surgeons to US for training

Employ contract sales force to develop provider relationships

Develop referral pipeline by marketing to neurologists

• Hospitalar Tradeshow in June 2011

• SBN (Brazilian Neurological Society)

• Associacao Brasil Parkinson

• Brazilian Journal of Neurosurgery

Focus on patients with ability to pay out-of-pocket

Differentiate by offering financing options

Develop training center in Sao Paulo

Seek further private insurance reimbursement approval

Partner with local governments to develop new procedure sites

Seek new indications to expand market size (e.g. Epilepsy)

Investigate partnerships with Philips and GE

LONG TERM

Educate, Train, and Invest in

Infrastructure

Risks

St. Jude could move aggressively

and capture share Competition Focus on developing provider

relationships & expand training

Type of Risk Description Mitigation Plan

Patients and/or providers may

not adopt DBS as therapy Acceptance Invest in provider education and

clinical evidence

Healthcare administration shifts

to municipalities Decentralization Partner with local regulatory

bodies to minimize impact

Increased utilization of DBS

procedure may lead SUS or

insurers to deny reimbursement Reimbursement

Develop additional clinical

evidence on DBS benefits and

publish in neuro publications

Exec Summary

Brazil’s Health System

HC Trends Reimburse

ment Care

Pathway DBS Market

Business Case

Recommendations

Risks Summary

Summary

Contract Brazilian Sales Force

Train Physician/Sales Force in US

Training Center

Build Local Relationships

Build Reimbursement Approval

Short-Term (1-2 Years) Long-Term (3-5 Years)

Financials

Relatively Untapped

Market

Maintain Market Share

against St. Jude

Foundation for DBS therapy for

other applications

Promote sales of other Neuro

therapies

Springboard into other Mercosul countries

Strong Case to

Grow Brazil

DBS Market Patient

Hospital

Physician

SUS

ANVISA

Sales Force

MDT

Partners

Local Orgs

STRATEGY

OPPORTUNITY KEY STAKEHOLDERS

Exec Summary

Brazil’s Health System

HC Trends Reimburse

ment Care

Pathway DBS Market

Business Case

Recommendations

Risks Summary

APPENDIX

Dopamine Agonists

Levodopa / Carbidopa

MAO-B Inhibitors

COMT Inhibitors

Surgery

Brazil Parkinson’s Disease

Quality of Life Study

(144 Patients)

•87.5% Levodopa

•29.2% Dopamine

•9.7% COMT inhibitors Carod-Artal et al, 2007 Move Disorders

Disease Progression

Mild PD Moderate PD Severe PD

13% Patients 17% Patients 70% Patients

Barbosa et al, 2006 Move Disorders

Clinical Pathway

High Industry Attractiveness Bargaining power of customers

(High)

• Few patients qualify with indicators

and contra-indicators for therapy

• Switching costs very high: $33.5k vs.

generic drug pricing for 1-5 years in

Brazil

Competitive Rivalry (Medium)

• St. Jude’s Libra and LibraXP DBS

vs. Medtronic’s Activa DBS

• Beginning stage of growth

• Physician training opportunity

Substitutes (Medium)

• National branded drug launch deterrent =

price controls

• Physician willingness to switch is low

• Patient incentives to switch are high

• DBS - effective, reversible, tailored

• Dopamine – liver and kidney risk

• Apomorphine – 70+ Demographic, low life

quality

Threat of New Entrants (Medium)

• Reimbursement already established by

SUS

• Hospital and payer vertical integration

• High cost of infrastructure and

distribution

• Learning curve/device expertise high

• Long development period

Supplier Power (Low)

• Medtronic vertical integration

• No threat of forward integration

The Patient Purchase Funnel

Sources: Frost & Sullivan; team analysis

Synovate Global Healthcare Survey Reveals Patient

Power

*US prevalence percent applied to brazil

Tactics *585,000 Potential (Diagnosed +

Undiagnosed) PD Prevalence

252,460 Primary Care Diagnosed PD

75,738 Neurologist Diagnosed

Surgery Candidates

75,738 Surgery

Candidates

1,131

Awareness

Conversion

Commitment

Purchase

Free Family Counseling (Brazilians 2X as

likely vs. the world to consult family)

Neurologist Comparative Effectiveness

Training

Patient special circumstances financing

options

Neurologist training and referral

pipeline - tradeshows

Primary Care Physician training and

referral pipeline - tradeshows

Sponsored awareness campaigns

Diverse in nature Mix of Native American, Portuguese, and Africans form bulk of population

Also includes Italian German, Spanish, Arab, and Japanese immigrants

Religion: Mainly Catholic, has largest catholic population in the world

Communication Style Informal; no strict rules of protocol

Opinionated- will say how they feel

Steady/Direct gaze associated with sincerity (face to face conversation= sincere)

Views on time Time is somewhat flexible

More emphasis placed on people, relationships, completion of transactions

Human needs more important than schedules

Taboos Don’t start business discussion before the host does; meetings usually begin with casual chatter.

Wait to bring up the topics related to politics, poverty, religion, etc until trust has been established

Meetings Allow for a good amount of small talk before speaking about business.

Turn up on time, especially if you are the one seeking the goods and/or services from a Brazilian

counterpart.

Interrupting someone who is speaking is common behavior.

Avoid confrontations. It is best not to appear frustrated with your Brazilian colleagues

Brazilian Culture

SUS = Unified Health System in Brazil

• Has one of the largest public health systems in the world->

agreement with almost all hospitals in Brazil

• In network are public hospitals, private and university, which

guarantees citizens the constitutional right of access to health care.

• 6,500 hospitals in the country available to the SUS, 48% of them

private hospitals. Offer simple outpatient care to organ transplants.

• 69 federal, 618 state and 2,278 municipal hospitals

• 190M people, 80% of whom depend totally on SUS

SUS