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EF: What are the necessary requirements to turn Brazil into a global supplier of medical devices?
PF: The pandemic allowed governments to mandate the construction of national infrastructures and reposition themselves on the international stage. Within this context, smaller to medium-sized national companies have become increasingly important in their local markets due to their heightened awareness of specific healthcare needs within the country.
It is important to acknowledge the small and medium-sized enterprise associates in the industry, who must first hold significance in the national business arena before becoming significant globally. Brazil's current production output of $5-6 billion may appear modest compared to larger international corporations, but the priorities of our associates are increasing production to cater to the local market.
First, we must address the current challenge, which pertains to the state's policy on healthcare. Despite the appointment of a new health minister on January 1st, the Brazilian government has not yet unveiled detailed proposals on their plans to promote local production. Nevertheless, there is a positive development, as the president, health minister, industrial minister, and the current regulation president have all concurred in their commitment to prioritize consolidating this goal.
At Abimo we recognize the importance of concrete steps toward realizing the goal of 70% local production, and we are committed to working with the government to achieve it. By fostering a supportive environment for local production and establishing programs that incentivize innovation, we can create a sustainable medical device industry that benefits both companies and consumers. Ultimately, our shared objective is to improve the availability and quality of medical devices in Brazil. We believe that prioritizing local production is the most effective way to achieve this.
From our side, we propose a program for medical devices like the one established for generic drugs. The government pushed a program for generics two decades ago. This program successfully closed a crucial gap in the industry by incentivizing companies to produce generics and simultaneously committing the federal government to purchase a sizable portion of this production. Similarly, in the medical device industry, we require two fundamental pillars to strengthen production: a government program that can encourage investment and a plan to ensure that public hospitals and central clinics are prepared to purchase these devices.
As for an international expansion of the business portfolio, it is crucial to consider the barriers that may hinder progress. Two critical factors are obtaining FDA approval to export from the United States and securing the CE mark for European countries. Getting the regulation mark for exporting products to European countries can be a costly endeavor, and for Brazilian companies considering international markets like Asia, Africa, or South America may be more profitable.
Meanwhile, our national regulatory agency, Anvisa, is highly regarded for its strong stance on safety and efficacy. To increase business opportunities from this aspect, Anvisa must align its priorities for global companies must align with those for national companies. Moreover, the Brazilian government has initiated the Apex program, which is responsible for implementing medical devices. The federal government has allocated approximately $4 million over the next two years to support national companies participating in international fairs promoting products made in Brazil.
Brazil currently exports $1 billion worth of orthopedic gloves, medical equipment, oxygenators, surgical instruments, and ICU beds. However, for more sophisticated equipment, there is a high potential for international companies already assembled internally in Brazil.
Meeting the demands of South America and other regions remains challenging. But continued efforts and collaboration with global companies will lead to more significant involvement.
EF: How do you see the role of smaller enterprises attracting investment to Brazil?
PF: When the pandemic began in March 2020, we only had four plants producing ventilators; however, within three months, the number increased to 11. At the beginning of the pandemic, we relied on imports for 95% of our mask supply, but after three months, we were able to produce about 60% of our demand domestically. Additionally, we have three glove plants that can meet around 60-65% of our demand and can supply gloves for procedures and surgeries entirely.
Although these developments are positive, the government's decision to allow zero import duties for these products has made it difficult for international and national companies to continue investing in local production. Instead of creating rules to facilitate exportation, the government has given priority to importation. Only a few days ago, the government agreed to stop this policy and fully support domestic production.
So far, importing products has presented more advantages than producing locally. Public hospitals provide services to the government through the SUS (Sistema Único de Saúde) and can import products without paying taxes, while purchasing locally requires full taxation. As a result, importing products becomes more financially favorable.
It is crucial to establish a level playing field for national and international companies to encourage the growth of the medical device industry in Brazil. If national companies can thrive, they will have the opportunity to expand their international presence.
Overall, establishing a stable and supportive environment for local production in Brazil is essential for the growth and success of the medical device industry. As we reflect on the pandemic and its impact, it has become clear that the existing system was fragile, prompting the need for a new framework. This presents a historic opportunity to build a solid foundation to support strategic growth.
EF: When you look into the future in 2030, and we have achieved all the sustainable development goals, what would the perfect industrial policy look like to you?
PF: As we navigate these uncertain times, survival should be the priority. Conversations with government officials have highlighted the urgency of establishing rules and programs to address our difficulties while preparing us for future challenges. Building a strong national production framework takes time, but we must begin now to avoid similar predicaments in 2030.
There is a need to establish a solid foundation that can strategically grow and sustainably strengthen from within. Implementing long-term plans and policies prioritizing national production, education, and innovation is imperative to secure a better future.
More investment in education is necessary to equip the workforce with the skills and knowledge needed to thrive in today's complex global economy. Additionally, there is a pressing need for government programs to prioritize the modernization of public hospitals and incentivize industries to produce innovative products.
In the current situation, we must prioritize actions to prevent further deterioration. The Minister of Health's acknowledgment of the need for increased local production is a crucial first step. Additionally, the MedTech industry, including local and international companies such as Abimed and Abimo, are drafting an industrial policy to support this effort. The COVID-19 pandemic exposed the fragility of relying solely on international companies, making now the opportune time to reintroduce industrial policies for a post-pandemic world.
As a former president of an international company, I have experienced the challenges of establishing local production for certain products. Clear regulations and taxes in Brazil can help the implementation of such programs. However, seeing the current efforts to increase local production and move towards a 70% made-in-Brazil target is encouraging. Ambitious as it may seem, it is a step in the right direction and shows progress.