Brazil Government Drug Sector Strategy Questioned

Industry groups and media sources are increasingly questioning the Brazilian government's role in the domestic drug sector. Pharmaceuticals are one of four industries targeted by the government's industrial policy, which appears to have little regard for foreign multinationals.

Since 2004, Brazilian authorities have pledged to invest BRL700mn (US$259.34mn) on a series of strategic projects in the sector. The so-called Profarma initiative, financed by national development bank BNDES, is focusing on private raw materials and active ingredients makers to boost Brazil's homegrown output. The local sector is generally reliant on raw materials imports, and is reported to have suffered severe financial pressures from high raw materials import costs, estimated at US$1.8bn in 2004.

This strain has been largely a result of the devastating effect on raw materials makers of the opening of Brazil's economy in the 1990s, which led to the collapse of roughly 1,000 producers. The few surviving domestic firms, such as Libbs and Nortec, have now become the chief beneficiaries of the scheme. Libbs received US$6.68mn in government funds last year, and BNDES owns a 20% stake in Nortec. Leading local generics maker Eurofarma has also received US$13.8mn.

The targeting of raw materials production indicates that, despite claims of a "confused" government sector policy, Brazil is purposefully pursuing generics, hoping to emulate the success of countries such as India. Further, recent action to pressure multinationals into voluntarily licensing life-saving patented drugs also indicates that, faced with a financially distressed state-owned drug sector, generics and copying is set to become a key plank in the government's plans to expand treatment and build a viable domestic industry.