SHIPPING UP, SHAPING UP
If growth is to continue, a big driver will be more remote locations in the North and Northeast, where there is need to bridge
not only gaps in policy, but more literal, physical gaps as well. For instance, Manaus, the largest city in the Brazil's North
region (which comprises 45% of the country's surface area), is nearly 2,500 miles from São Paulo in the country's industrial
southern heartland—slightly farther than the distance from New York to Los Angeles. These areas, also the least developed,
create an infrastructure bottleneck.
Anecdotally, managers joke it costs more to ship from the interior to Brazil's biggest port at Santos than it does from Santos
to China. Looking at hard numbers, compared to the 1970s, the country as a whole actually counts fewer miles of railroad.
Fortunately, the pharmaceutical industry in Brazil relies predominantly on road transport and air, such as Guarulhos International
Airport, Brazil's main hub located on the outskirts of São Paulo, though there are still issues; Atlanta's Hartsfield-Jackson
airport, by itself, has more air traffic capacity than the whole of Brazil.
Jose Correia da Silva, president, Abiquifi
Rafael Martau, as the commercial director of Bomi Farma, the country's largest specialized healthcare logistics and distribution
provider, whose fleet serves a recently expanded primary facility (from nearly 800,000 square feet to over 900,000 square
feet, with a further 160,000 square feet in the last year in Santa Catarina), is qualified to speak on how he hits the road.
"It's obvious there is work to be done when trucks are forced to drive on two-lane highways, or even one-way streets," Martau
notes. "When we get that fixed, it's an issue of airports reaching full capacity. The biggest worry right now is the following:
What will happen—if they are at maximum capacity now—during the World Cup in 2014, and the Olympics in 2016?"
The problem is not only the capacity per se. "Today there is pressure not only on runways but associated transfer infrastructure.
Due to ANVISA (Brazil's FDA equivalent) requirements, many shipments are carefully climate-controlled, which means that shipments
must be rapidly transferred at the Infraero (a Brazilian government corporation responsible for Brazilian commercial airports)
checkpoints upon landing, or we risk losing the shipment. It's a big challenge, and a big worry," he says.
Odnir Finotti, president, Pró Genéricos
Fortunately, according to Martau, in addition to public expenditures on roads and airports, "there are companies like Luft
Group, of which Bomi Brazil is a part, which are family businesses with a consistent strategy of investing to take advantage
of market growth. In fact, Luft Group invests the most in health logistics in the country, and uses market demand as a way
to spur growth and investment. In 2011 alone, Luft Group will invest over R$30 million (US$17 million), and in the past three
years, we have invested R$170 million (US$97 million), in not only warehouses, but in truck fleets. By the end of 2011, we
will have opened an affiliate in Recife to better serve clients in the fast-growing and remote Northeast of Brazil, because
decentralization of stock is another way of absorbing growth." And at Bomi there is much growth to absorb: in 2007, the company
counted 16 clients. "Now, we have 52, and the complexity and quantity of our clients is increasing every day," Martau says.
ATTACK OF THE TAXES
The complexity and quantity of Martau's clients is perhaps only matched by that of Brazil's taxes. Somewhat counterintuitively,
the country maintains the highest end-user tax burden on medicines in the world, amounting to an average of 33.9% on final
SINDUSFARMA, founded in 1933, represents all the pharmaceutical companies in the state of São Paulo, the country's most economically
important state, and a traditional center of industry from which 70% of Brazilian GDP originates. The state accounts for some
80% of the pharmaceutical companies of the country, and associated hospital and academic infrastructure, and SINDUSFARMA is
the body which represents the São Paulo industry in front of the government, and negotiates with ANVISA, unions, and tax authorities,
in a broad spectrum of influence.
Claudio Bergamo dos Santos, ceo, Hypermarcas
One of those areas of influence it hopes to impact is taxation. Nelson Mussolini, executive vice president of the association,
is mystified when asked to explain. "We don't understand why," he says. "It's completely crazy. Looking at the rest of the
world, the average rate is 6.3%. In many countries, like the U.S., Canada, and the U.K., the number is 0%."
Amazingly, even veterinary products are taxed at a lower rate, which gives rise to the common joke: If you go into a pharmacy
and bark, you pay a lower price for your medicines.
Lauro Moretto, SINDUSFARMA's other executive vice president, invokes a French muse, maybe in the hopes that the government
will respond to another language: "I saw one proverb in a French review many years ago: 'Rien n'est bon pour l'homme qui souffre,'
(Nothing is good for the man who suffers). Therefore, while there are still many people who suffer, what we are doing is not
And nor, Moretto says, is the government. According to him, they have no strategic plan. "When you return to the past, say
20 years, there was big inflation and big social problems," Moretto notes. "These have been solved, but now we need to reorganize
the government and decide how they will act with the important sectors, and how they will promote and develop social organizations.
Lula's took the direction of assisting the people in the most need; now it's time to take the next step."
That next step was most clearly evinced in the first months of Rousseff's term, when she fulfilled a campaign promise to reduce
taxes to bring medicines to the most vulnerable. The result, in February 2011, was the announced reduction of a copay in Farmácia
Popular (a government program offering low-cost drugs for low-income citizens), for the most important strategic areas of
diabetes and hypertension, in a program called "Saúde Não Tem Preço."
Rubens Lima, general manager, Ipsen
Assuming office in January 2011, Rousseff has stated the government's No. 1 priority is poverty reduction, and such programs
will clearly contribute to this end. Some 16 million people, a staggering 59% of whom live in the Northeast (which accounts
for just 28% of the population), live on R$70 (US$40) or less per month. Therefore it is unsurprising that, because of their
lower price, generics are expected to surpass 20% overall market share by year-end, and have achieved 53% annual growth in
the past year. Reducing corruption, which has seen in 2011 the resignation of six ministers, including those of agriculture,
transport, tourism, and most recently sports, will see Rousseff consolidating her government to take that next step.
Hagop Barsoumian, general manager, Chiesi