Guest Column | June 24, 2020

Brazil's Medical Device Market: Patient Demographics, Healthcare System, And Outlook

By Julio G. Martinez-Clark, CEO, bioaccess

Comprising 3.28 million square miles and 209 million citizens, Brazil is the world’s fifth-largest country in both area and population. Brazil also boasts one of the largest gross domestic product (GDP) outputs on Earth, fueled in part by Latin America’s largest medical device market (and one of the largest device markets in the world) in terms of revenue, manufacturing output, and imports.

Rising GDP, an expanding middle class, increasing life expectancy, and increasing disposable income is driving greater demand for medical devices throughout Latin America, especially in Brazil. This greater demand makes Brazil one of the best opportunities for medical device manufacturers in the world, meaning medtechs should expect an evolving regulatory system and a competitive environment.

This article — the second in a two-part series — analyzes Brazil’s medical device market, including patient demographics and challenges that manufacturers, importers, and distributors need to understand and/or overcome to commercialize their devices freely. Part one in the series examines the current state of Brazil’s medical device regulation, clarifying the general registration and certification process.

Healthcare Providers and Patient Demographics

Universal health care is free for all Brazilians. The Brazilian state finances it through the Sistema Único de Saúde (SUS). The Agência Nacional de Saúde Suplementar (ANS) is a government agency responsible for regulating health plan providers and health insurance companies to protect the interests of the population. The National Health Fund (FNS) collects public funds and transfers resources to each state's health fund to be used to provide local healthcare services under SUS. ^{10, 7}

SUS has brought quality health care to millions of lower-income people who were previously denied even basic care. Currently, 27,000 family health teams — doctors, nurses, dentists, and other health workers — are active across almost all of Brazil's 5,560 municipalities, each serving some 2,000 families or 10,000 people. The family team set-up has decreased the infant mortality rate to 10.72 deaths per 1,000 live births in larger cities, and 13.82 in all other cities.

SUS provides patients with free medications for hypertension, diabetes, asthma, and other chronic conditions. Patients receive other drugs at a discount of up to 90 percent. Patients also receive special or expensive medications free of charge if a physician prescribes them. Life expectancy has increased from 64.4 years in 1988, when SUS was established, to 75.3 years in 2017, and remains on the rise. Brazil has made great progress in reducing infectious diseases, as well, despite the constant threat posed by yellow fever, dengue fever, measles, and the Zika virus. ^{11, 7,}²⁷

SUS has reduced inequality in access to health care, decreased preventable deaths and hospitalizations, and provided almost universal access to health care. It provides the connection between the public system and the private health sector by linking the state (hospitals, primary care networks, family health programs) and private services (clinics, laboratories, and doctors’ offices, as well as services provided by health plans and insurance). SUS is an example of health system innovation for Latin America and a reference for the world. ^{28, 29, 30}

That said, in 2016, due to a chronic budget deficit, the Brazilian government imposed harsh austerity measures, and now SUS is underfunded in many parts of the country. In Brazil, family clinics and health centers are flooded with patients and often lack essential supplies because local councils don't have enough money to fund them adequately. This situation forces many patients to travel hundreds of miles to specialized clinics. As a result, a specialized clinic may end up serving an entire sector of the country.

The Brazilian government now sends more funds to the cities, leaving family clinics and small-town health centers chronically underfunded. Presently, the situation in Brazil is such that government-funded health centers have undermaintained infrastructure and equipment, insufficient hospital beds, an inadequate number of health care workers, stifling bureaucratic processes, an overflow of patients waiting for treatment, unjustified deaths, etc.

Tellingly, the doctor/patient ratio in Brazil is low, at 2.1 doctors per 1,000 people in 2017. Per capita spending also is low, at US $848 per person per year. The nation’s total expenditure on health amounted to 8.6% percent of GDP in the same year. ^{27, 10, 12}

About 70 of Brazil's population receives care from this system, while the rest — empowered by rising incomes and new or improved employment — are turning to private providers because they understand the services provided higher quality compared to those offered by the public system. This dynamic has grown Brazil's private health insurance market to second largest in the world, trailing only the United States.

It’s worth noting that the private and public systems work separately, apart from SUS agreements with private companies for services such as diagnostics. There is a great demand for private services, and private health plans have become the second-most-desired consumer goods product among Brazilians.

More than 70 percent of Brazilian hospitals are in the private sector. In 2015, there were 77,000 public hospitals and 200,000 private hospitals. This situation also has afflicted Brazil with disproportionate distribution of its physicians. More than 461,600 (54.6 percent of doctors in the country) work in the southeast, in the country’s wealthiest states. Only about 4.5 percent of the country’s physicians serve the north (in the Amazon rainforest).

Still, the current Brazilian president has promised to increase investment in primary care, and the private sector may play a greater role in providing public services more evenly. ^{11, 2, 27, 7}

The effort to strengthen Brazil's national health system faces serious challenges, though, including an aging population, cancer, trauma resulting from violence and accidents, and infectious diseases. Among these, the issue of health care for the elderly has received little attention. Brazilian health education focuses on child health and early life, a focus that has significantly and detrimentally affected the health service received by the older population in Brazil.

Additionally, the problem of an aged populace will only worsen. Latin America is undergoing a demographic change; more than 10 percent of its current population is over 60 years old, and this figure will triple by 2050. Modernization of the economy and improvements in health care have resulted in increased life expectancy from 40 years in 1940 to 80 years in 2017.

In Brazil, the elderly population has doubled in the last 40 years, and life expectancy has increased by 40 percent during the same period. There are more than 23 million people in Brazil aged 60 or over, 70 percent of whom depend on public health care. The elderly population of Brazil will likely triple in the next 30 years, representing one-third of the country's population by 2050 and making it the sixth-largest elderly population in the world by 2025.

The above trends also portend an epidemiological transition. Previously, infectious and contagious diseases were Brazil’s overwhelming health problem. Now that ignominious distinction belongs to non-communicable, chronic, and degenerative diseases. This is because the aging process often is accompanied by deterioration of physical functions, such as visual acuity, contrast sensitivity, accommodation, color discrimination, reaction time, short-term memory, divided attention, etc.

In Brazil, 68 percent of individuals with any type of disability are over 65 years old. The most common are visual disabilities (50 percent), dexterity problems (38 percent), hearing loss (26 percent), and cognitive disability (3 percent). Only recently have accessibility policies for people with disabilities being a concern for S.U.S. ^{13, 11,}¹⁴

Key Challenges

For Brazil's healthcare system to flourish the following issues must be addressed:

SUS does not guarantee an efficient, effective, and equitable use of public resources;
There exists insufficient public health funding and inadequate allocation of essential resources, an issue exacerbated by the austerity measures introduced in 2016;
Brazil lacks an integrated network of service providers;
There is a lack of integration between primary, secondary, and tertiary services, and insufficient regulation of the private sector has caused fragmentation, redundancy, and large gaps in health care;
The Brazilian government does not provide compensation to reduce financial and technical disparities among municipalities since it uses the revenues of high-income medium- and large-sized cities to support low-income municipalities that depend on governmental transfers for health care. This disparity puts medium- and large-sized municipalities at a disadvantage, as they attract fewer inter-governmental transfers and use a larger portion of their revenues for health care.
There is a lack of investment in the health sector and in strengthening economic, technological, industrial, and social policies, as well as regulatory frameworks that affect the production and valuation of technologies, health services, and intellectual property.
There is little to no social dialogue around healthcare; a robust dialogue is crucial to learn from national and international experience on universal health coverage and to develop values and vision.

Brazil is an example of a healthcare system that may be failing because it has not adapted to the fact that current global health problems are primarily chronic. Chronic disease patients require a plan of care tailored to the particularities of the disease type, and the dominant model of care for acute conditions does not work for the chronic patient. ^{30, 12}

An Economy and Domestic Medtech Sector on the Rise

As a whole, the Latin American medical device market is worth about $30 billion, and imports represent between 85 percent and 90 percent of this market. However, Latin America is very sensitive to global economic contractions. In recent years, Brazil has gone through one of the deepest recessions in the country's history.

In 2015, Brazil's economic recession was the harshest, causing the value of imported medical equipment in Brazil to drop double digits each year, with a compound annual growth rate (CAGR) of -10 percent from 2014 to 2015. According to market research service ShareScope, Brazil’s overall number of imported medical devices fell 23 percent in 2015 and 3 percent in 2016. ^{6, 9, 21, 4}

Brazil’s current medical device market worth is approximately $10.5 billion,²³as the nation’s economy has recovered since 2017 with consecutive periods of GDP growth. This explosive growth has made the Brazilian medical device sector one of the country's main growth areas. In 2017, Brazil experienced a 43 percent increase in its total number of medical devices imported, versus 2016. Further, import prices of medical supplies into Brazil are now lower than those of other Latin American countries because Brazil has a large and vibrant domestic medical device production industry.

HospiScope claims, between 2016 and 2017, Brazilian hospitals grew their installed equipment by: 34 percent in electrocardiogram machines; 10 percent in endoscopy machines; 9 percent in MRI equipment; 7 percent in C.T. scanners; and 4 percent in X-ray machines. Electronic health record system penetration reached 81 percent in 2017, up from just 66 percent in 2014.^{6, 9, 22}

Consumption of medical products in Brazil increased by 13.3 percent in 2018, and imports of medical devices rose by 21.8 percent to US$ 5.4 billion. Exports of medical devices from the United States to Brazil reached US$ 953 million in 2018, 9.6 percent more than the previous year. There also were approximately 4,000 medical device factories in Brazil in 2018.

One analysis of medical equipment imported into Brazil in 2018 discovered an 89 percent increase in the number of ultrasound devices, a 65 percent increase in the number of endoscopy devices, and a 13 percent increase in the number of magnetic resonance devices. The drug delivery device sector also has growing promise in Brazil as, with $18 billion in drugs sold in 2018, Brazil became the largest drug market in Latin America, growing 11.73 percent between 2016 and 2017.

These increases were driven by rises of 6.5 percent in domestic production and 20.8 percent in imports, according to data from the Brazilian Association of High Technology Industry for Health Products (ABIMED). In the same period, imports of dental equipment grew 41.7 percent, imaging equipment 27.6 percent, and orthopedics and audiology 20 percent each.

Finally, Brazil’s medical product manufacturing sector created around 63,000 jobs in 2018. This increase was due to a) 8.9 percent growth in the electromedical, electrotherapeutic, and radiation industry; and b) 4.8 percent growth in the medical and dental instruments and optical products industry. ^{8, 23, 22,}^{24, 25, 26}

Market Outlook

Research indicates Brazil could build a $1.8 billion medical device market during the 2018-2023 period, claims Market Research Future, while ReportBuyers projects that health spending in Brazil will increase significantly over the next two years, with a 5.8 percent CAGR by 2020. This expanding market value is generating jobs and therapy area opportunities, allowing new companies to emerge and intensifying competition. ^{6, 9, 8, 25}

Imported medical devices account for 80 percent of the market in Brazil, and the United States accounts for 29 percent of this share. Brazil is the fourteenth-largest medical device market in the world and the second-largest in Latin America (after Mexico). According to the latest update from Brazil’s export.gov, the country represents the largest healthcare market in Latin America.

Further, Brazil spends about 9.1 percent of its GDP on healthcare (2019). Of the 6,400 hospitals, 70 percent are private. There are approximately 495,000 hospital beds, 96,000 supplemental health services — services and medical technologies for exceptional cases on top of those provided by SUS — 432,000 doctors, 144,000 dentists, and 70,000 pharmacies. ²³

Natural or synthetic materials used for medical devices are an area of growth in Brazil since 2019. The Brazilian biomaterials market, valued at $1.89 billion in 2016, is expected to reach $5.18 billion in 2022. That's an annual growth rate of 18.3 percent. ²²

New health technologies also are gaining ground in Brazil, which boasts more than 250 newly created companies in the field of health technology. Their areas of focus include mobile health applications, on-demand healthcare, telehealth, and artificial intelligence. This market is expected to grow by about 27.9 percent by 2024. ²²

According to Brazilian Health Devices — a project of the Brazilian Association of Medical, Dental, Hospital and Laboratory Equipment Industries (ABIMED) together with Apex-Brazil — the medical equipment industry can satisfy 90 percent of the national demand and export to more than 180 countries, generating more than 60,000 jobs in Brazil. ²⁵

Conclusion

The Brazilian health care industry is buoyant. Its positive indicators of increased purchasing power, a growing middle class, consumers willing to pay for better health services, favorable demographic conditions, increase in the elderly population, and government initiatives that attract investment, among others, make Brazil one of the world’s most attractive investment destinations.

Health expenditures are growing in Brazil because it needs new solutions for its emerging problems. Innovative health care companies can thrive, but only if they understand the culture and business environment in Latin America.

About the author

Julio G. Martinez-Clark is C.E.O. of bioaccess, a U.S.-based contract research, regulatory, and market access consulting company focused on Latin America. Julio is also the host of the L.A.T.A.M. Medtech Leaders podcast and holds a bachelor's degree in electrical engineering (B.S.E.E.), and a master's degree in business administration (M.B.A.).

References

[Editor’s note: References are included below for both articles in the series]

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