Brazil Pharmacy Sector Accused of Profiteering

May 27, 2005

In the wake of recent stellar growth in Brazil's US$5bn retail drug market, a local consumer group has criticised apparently "infralegal" practices that have boosted profitability in the pharmacy sector. According to IDUMI, a consumer watchdog, few retailers are choosing to comply with would-be stringent government profit controls.

Under a law issued in March 2004, the so-called Resolution 4, retailers are permitted a margin of roughly 40% over the manufacturer's price of pharmaceuticals. However, according to IDUMI, the official producer price list stated in the Brazilian Pharmacy Association's gazette is often double the real price paid to drug firms. IDUMI claims this means that a typical product with a selling price of BRL7, on a wholesale price of BRL5, costs consumers up to BRL14.

The body also claims that this amounts to an unofficial incentives scheme for the mutual benefit of some 70 drugmakers, as well as pharmacy owners and store clerks, affecting up to 30% of all drugs sold in Brazil. Under this system, known locally as "BO drugs," retailers are able offer consumers a discount price that is in fact higher than the legally sanctioned price. Nevertheless, whether the Brazilian government will choose to act on this alleged behaviour remains to be seen, in view of likely opposition from an already hostile drug retail sector.