Hinnovic » From National Health System to the Health Industry Complex

From National Health System to the Health Industry Complex

From National Health System to the Health Industry ComplexThe Brazilian government has faced challenges emerging from its health extensive obligations such as national health coverage along with free and universal access to AIDS medicines. Both the burdens of high cost drugs on public finances and concerns over the stability of supply prompted the government to act. The Ministry of Health introduced measures to stimulate the industrial health complex, that is, the local production of medicines and medical devices. Usually, developing countries are discouraged to adopt industrial policies for this sector as it could lead to the acquisition of national products at higher prices than those available in the global market; on the other hand, initiatives such as 3 by 5 from the WHO encourage developing countries to promote access to medicines. If few developing countries consider the local production of medicines a high priority, how can we understand this innovation in public policy in Brazil?

 

Solutions to unstable supply of medicines

Weaknesses in the local pharmaceutical sector created vulnerabilities for the government’s flagship health policies. During the 1990s, problems with the supply of AIDS medicines led the Ministry of Health to promote a significant investment in public labs to produce off-patent versions of antiretroviral drugs (ARV). Indeed, there was concern with the stability of the supply of Indian companies — the main producers of generic drugs. Furthermore, India was about to introduce a patent law in 2005, which would limit the production of generic drugs onwards.

 

In the mean time, local public labs struggled to provide more sophisticated and complex drugs, revealing another fragility in the manufacturing process: they were unable to produce raw materials, which had to be imported. A study sponsored by the United Nations Program for Development found that the share of local suppliers of raw materials for public labs dropped from 27.4% (volume) in 2003 to 8.0% in 2005 (Programa das Nações Unidas para o Desenvolvimento 2006). Simply put, most local firms were drug formulators, producing final versions of drugs in different presentations (e.g. capsules, tablets, suspensions, and so on), but they lacked the necessary technological capabilities to produce the key inputs for pharmaceutical manufacturing, such as active pharmaceutical ingredients (APIs) and other raw materials (Hasenclever 2002).

 

It was in this context that the Ministry of Health chose to establish an agreement with Abbott to reduce the price of a crucial AIDS drug, Kaletra, instead of suspending its patent rights and producing it in public labs. By contrast, the patent rights of Efavirenz, another important ARV, was declared to be of public interest in 2007 and the country found itself unable to produce its generic version: importation was once again necessary.

 

Improving the production process to support health policies

As a response to the growing demand for imports and the need to improve the production process to supply drugs needed to support its health policies, the government decided to include the pharmaceutical sector in the Industrial, Technological and Foreign Trade Policy of 2003. Importantly, the National Development Bank created a credit line (Profarma) for the sector. The changes were also reflected in a shift in the Ministry of Health’s priorities with the development of a policy that promoted the Industrial Health Complex. Through partnerships with private companies, public labs began an aggressive program of technology transfer and production of higher added value drugs, with a guarantee of purchase by the government. The Ministry of Health publicly declared that this policy aimed to reduce vulnerabilities in health policy and align the National Health System objectives with the necessity to transform the country’s productive capacity and innovation structures.

 

Responses to new regulation of generic drugs

Steps to improve the capabilities of local producersAnother fragility in the pharmaceutical sector became apparent with the introduction of new regulations of generic drugs in 1999, which altered the technical requirements for production and registration, to increase the safety of these products. This norm threatened to exclude many local producers from the market, as they would be unable to adapt their manufacturing processes to satisfy the new and costly regulatory requirements. Thus, the government took steps to improve the capabilities of local producers, through the creation of new measures and the use of existing instruments such as Profarma. In its initial years, roughly half of the loans disbursed through Profarma assisted manufacturing plants in adapting to the new requirements.

 

In sum, being able to secure stable supplies of affordable medicines across a wide range of therapeutic classes was crucial for the effectiveness and sustainability of health policies in Brazil. The government’s extensive interventions in health have, in turn, catalyzed actions to promote the pharmaceutical industrial complex. In this sense, health policies have triggered industrial policies in Brazil.

 

     
 

The results of this study can be found in: Shadlen, K; Fonseca, E. (2013). Health Policy as Industrial Policy: Brazil in Comparative Perspective. Politics & Society, 41: 560-586.

 
     

 

Author : Elize Massard da Fonseca, Ph.D.
Center for Metropolitan Studies, Brazil
  Kenneth C. Shadlen, Ph.D.
London School of Economics, UK

 

REFERENCES

  • Hasenclever, L. (2002). Diagnóstico da indústria farmacêutica brasileira [Diagnosis of Brazilian pharmaceutical industry]. Rio de Janeiro, Instituto de Economia/UFRJ.

  • Programa das Nacoes Unidas para o Desenvolvimento (PNUD) (2006). Avaliacao tecnica, economica e legal da capacidade de produccao de antiretrovirais no Brasil [Technical, economic and legal evaluation of the capacity to produce antiretrovirals in Brazil]. Brasilia, PNUD.

 

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  1. […] Brazil has chosen to encourage and develop local production of drugs, vaccines and medical devices. Elize Massard da Fonseca from the Center for Metropolitan Studies in Brazil and Kenneth Shalden from the London School of […]

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