Over-Regulation Blamed for Brazilian Pharma's Woes
Brazil's system of drug-price controls has come under attack from all sides of the debate, with members of both the left-wing ruling party and industry associations adding to the criticism. The claims make widespread use of studies indicating that drug consumption has barely increased in the country since the imposition of price controls in December 2000.
Indeed, some surveys point to a contraction in the market since that time, although it should be remembered that controls were introduced at a time of severe economic difficulty. Nevertheless, price controls have been directly blamed for local drug firms' soaring debt in recent years, as well as a drop in average drug company profit margins from 13 percent to a loss of 4 percent between 1998 and 2002.
Meanwhile, it is claimed that producers' failure to submit to government price controls is undermining the sector. Further, a tax burden that accounts for up to 30 percent of retail drug prices has been cited as a further motive for tax evasion and failure to restrain prices. Local industry association Febrafarma claims that if the high taxes were discounted, Brazil's retail drug prices would be the world's fifth lowest, even with the current price-control scheme.
This, in turn, has led to failure to register products in order to avoid tax obligations, threatening the viability of the legitimate pharmaceuticals sector. Clearly, if Brazil's government expects market forces and targeted regulation to bring a greater level of drug provision to its citizens, current evidence suggests that scaling back the tax burden would be a positive first step.