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The Healthcare Market in Brazil

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The Healthcare Market in Brazil www.pwc.com.br The Healthcare market in Brazil Brazilian Healthcare market: one of the most promising and attractive in the world Context Fifth largest country in area and global financial crisis - intensified population, with 8.51 million square in Europe - the Brazilian territory kilometers and about 196 million was the main destination for direct inhabitants, Brazil recorded in 2012, a foreign investment in Latin America, Gross Domestic Product (GDP) of receiving $ 65.3 billion. US$ 2.2 trillion, the seventh largest on the planet. Market estimates indicate Brazil has a fast growing consumer that, in this decade, the country may market, positioned in several be consolidated as the fifth largest segments as one of the largest in the global economy. world. The power of its domestic market in consumer goods and For almost two decades the country services has been particularly has been undergoing a process of promising in the healthcare and economic stabilization which ensured pharma industries. tremendous social advances to Brazilians. Most notably, for over two Based on those macroeconomic years national unemployment rate indicators an outlook for the hovers around 5% of the economically Brazilian healthcare industry is also active population, which represents, in optimistic, considering the market the view of many experts, a situation growth drivers listed below: of full employment. This improvement • purchasing power increase is also reflected in rising wages and escalating consumption, boosted by • new entrants into the strong credit growth combined with emergent middle class lower interest rates and government tax incentives for durable goods, the white • consumers are willing line, automobiles and construction. to pay for better healthcare services/treatment That meant, over time, an amazing and positive process of development • favorable demographic and social evolution, which allowed conditions the entry of 40 million Brazilians • increasing elderly population into the middle class, strongly boosting the consumer market. In • government initiatives 2012, consumption of 194 million attract investments Brazilians accounted for 61% of the national GDP, and even in a year • consolidation driving of recovery from the effects of the strategic movements The Healthcare market in Brazil 1 Our vision Understanding the Brazilian In the Brazilian pharma industry, healthcare market as complex, the government plans to attract local asymmetric, fragmented, with production and research centers high demand, and government focused on value added medicines, involvement/support, amongst others, which will increase the importance of may be a starting point to better Brazilian pharmaceutical market. understand the opportunities and challenges to whom intends to be, or is Primary healthcare program is key already part of it. to prevent diseases, shifting from a model based on curative care in The drivers of demand mentioned hospitals to a preventive care in local above together with strong communities, reducing costs and government support has been a pressure on clinics and hospitals. growth propellant. Public and private interests have been joined through Finally, on certain segments of the PPP´s (Public Private Partnerships), Brazilian healthcare industry it is still rising investments, increasing possible to find competitors with huge efficiency and reducing gaps in the discrepancies in terms of facilities, healthcare public system. technology, management etc.. So, issues like cost reduction, process In parallel, strategic and financial players review, upgrade in management are leading the consolidation process. By information system, training of acquiring or merging companies, these medical and administrative teams, groups or platforms have been created in updating of equipment, are just varied segments of the health industry, part of a long list of gaps commonly like medical or dental plans, hospitals, found in most of the companies, clinics, laboratories (diagnosis/ public or private, profit or non-profit imaging), pharmaceuticals, drug organizations. wholesale, pharmacy chains, medical devices and others. Finally, on certain segments of the Brazilian healthcare industry it is still possible to find competitors with huge discrepancies in terms of facilities, technology, management etc. 2 PwC The Healthcare market in Brazil The Healthcare sector in Brazil is marked Structure by a significant number of particularities The private market is distributed and for being very complex. However, among individual agents, whereby this sector has undergone profound the service user payindividually or changes and a new business paradigm, collectively paying through groups or making the Brazilian Healthcare market health insurance plans administered one of the most promising and attractive by private companies, cooperatives in the world. medical organizations philanthropic or Among the local characteristics, is self-management. On another side lie the fact that it is the only country in the service providers: hospitals, clinics, the world to have a system of free laboratories, pharmaceutical industry and universal public health - ie, taxes and others. paid by Brazilians cover all types of The regulation of activities is different consultations and treatments offered for each sector agent. Administrators by System Unified Health System and health insurance plans are highly (SUS) without charging any additional standardized and supervised by the user - but at the same time, private National Health Agency (ANS), while sector spending is greater than that of providers are supervised mainly by the government. For example, in 2009, the National Agency for Sanitary the Union, states and municipalities Surveillance (ANVISA). allocated around R$ 79 billion ($ 39 billion) to SUS, while the private In the field of public health, NHS network contributed approximately management focuses on the Ministry R$ 91 billion ($ 45 billion). of Health, which transfers revenue to states, municipalities and university The SUS is a fundamental structure hospitals, and charities, supervising for healthcare in Brazil, as an the activities. important part of the Brazilians are not able to access the private system. However, with income growth and the expansion of the labor market, more and more people choose to hire private planes because they understand that the services provided are of higher quality compared to those offered by the public system. The Healthcare market in Brazil 3 63% The increase in health plans is principally related to collective contracts business. In Brazil, providing a Plans and health insurance As an example of the private private health plan is one the largest company does not have healthcare market, operators and even 8% of market share. Due to of the benefits most valued insurers ended 2012 with about this fragmentation, the ANS has by employees. Therefore, 48 million beneficiaries of medical encouraged consolidation and 63% of contractors have plans only. In 2009 there were has given significant sanctions to 41 million, which meant, in three collective business plans and groups that do not meet regulatory years, an increase of 17%. There the terms, including price requirements and quality standards. is also the private dental segment, adjustments, are established which ended 2012 with approximately Operators have been more concerned by agreement between 18.44 million beneficiaries, a market with improving their management and the operator and the plan with annual growth in recent years, operational control in order to remain beneficiaries. above 10%. profitable in a highly competitive environment. A tremendous challenge, The increase in health plans is it is worth emphasizing, because in principally related to collective line with the global trend, industry contracts business. In Brazil, providing costs in Brazil are on the rise, mainly a private health plan is one of the due to the ongoing technological benefits most valued by employees. developments and human longevity. Therefore, 63% of contractors have collective business plans and the The country still has a so called terms, including price adjustments, are “demographic bonus”, estimated established by agreement between the to last until 2025, whereby the operator and the plan beneficiaries. population of working age is greater The segment of individual plans, than the general population. It is in which an individual acquires the expected that by 2025, Brazil go into plan directly, has lost share in recent an aging period, greatly expanding years. Because it is a niche in which the participation of the elderly in there is greater regulation by the the total population. Even the end ANS, including control of annual of the demographic bonus period price adjustments by the regulator, represents, according to experts, a many companies stopped using these significant market opportunity for products, although this type of contract Brazilian Healthcare, as the aging still accounts for 21% of the market. population will increase demand for health services. In this situation, given The market is highly fragmented: the weaknesses of the public service, the seven largest operators, all with beneficiaries will give preference to more than a million lives insured, private plans. hold 29.2% of all beneficiaries and 4 PwC Hospitals, clinics and Pharmaceutical industry Public health laboratories The pharmaceutical industry in Brazil The pressure of high costs and the Another field that already shows signs
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