Brazil Tax Reform Plans Target Cheaper Medicines

A proposal to reform a major tax in Brazil, the ICMS sales levy, could imply a significant reduction on prices of basic medicines in the country. Plans under discussion in the country's Congress envisage that drugs such as anti-infectives which are part of Brazil's "basket" of basic treatments, could carry a minimum 7% rate after the reforms or even be exempted from the tax.

The potential cost of the measure in terms of lost revenue to Brazil's states could be as much as BRL3.5bn (US$1.27bn), with retail sales of basic anti-infectives alone totalling some US$350mn in 2004. Nevertheless, many states are likely to resist the proposals, despite central government pledges to offset any losses with new spending or allow greater taxation of other products.

Brazil's government is currently attempting to widen public access to healthcare, particularly among lower-income groups. However, recent initiatives have achieved only limited success, and the significance of the latest tax reforms remains to be seen.