Brazilian market access and regulation article pack

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1 Brazilian market access and regulation article pack Teva takes it step by step in Brazil While Teva is known as a generics giant in most markets, in Brazil things are different. Here the firm is more active as an innovator, although not for want of trying to make its mark in the Brazilian generics space. The firm talked to Scrip about its step by step approach and why this challenging market is still worth the trouble. "Even though Teva is a generics company, here in Brazil we don't have many generic products on the market yet, here we are an innovator company," said Andrea Montragio, Teva's legal manager in Brazil. The company's branded generics line is focused solely on oncology, and the firm's main presence is in innovator treatments for MS (Copaxone) and women's health. This was not by design, however. Tough conditions, worse for multinationals, have made it difficult for Teva to establish itself as a leading company. The opportunities in Brazil are ripe for follow-on drugs (see below for figures). The Brazilian government is keen to widen access to medicines and conscious that it has to foot the bill, it is particularly keen to push generic medicines. Similarly, there is much potential for biosimilars, which so far have had very low penetration. Brazilian patients have little access to biologics, especially new ones, and although keen to expand access, the government is also acutely aware of their cost. In 2011, just 2% of the drugs available through the national health system were biologics, and these took 41% of government spending on drugs. Monoclonal antibodies alone took 33% of the drug spending, even though they represented just 1% of the medicines available through the national health system. Biosimilars (simply called biologics in Brazil) are the big hope and the government wants to see more in Brazil. But it is not plain sailing for companies wanting to enter the market. The government particularly wants local firms come up with the goods, which makes it harder for foreign-owned firms like Teva to compete. Teva has launched just one biosimilar, TevaGrastim. After six months on the market progress has been slow, even though the product has no direct competitors. "Multinationals are still from time to time seen as young kids invading the country, it's an old attitude, but it's still out there," says Benny Spiewak, one of Teva's legal advisors from the law firm ZCBS Advogados. Local companies have long dominated the generics market, but the problem, for the government, is that local companies cannot always compete in the Informa PLC SCRIP Intelligence

2 biosimilar space on a level playing field with the MNCs. According to Spiewak, they lack the experience and funds. So that is where the government steps in. Most recently the government said it would put up R$20 billion for the formation of BioBrazil, a giant, 100% Brazilian pharmaceutical company, formed of the biggest local companies, Ache, EMS, Uniao Quimica and Hypermarcas. The government hopes it will eventually be able to produce biosimilars to be bought for the national healthcare system. The government has also been forming partnerships with local companies to develop generic/biosimilar versions of drugs on its priority list. The multinationals collaborate in terms of technology transfer but only local companies tend to be involved in the development of the follow-on product, not foreign owned generics firms, like Teva. But the perfect storm is brewing. In Brazil there are two approaches to approving a biosimilar, in accordance with the 2010 biologics regulations (RDC55/2010). The first is the seldom used "stand alone" approach which requires companies to conduct clinical trials and submit regulatory data. The second is the far less rigorous and most frequently used "biosimilar approach", which allows companies to rely on the innovator's paperwork, rather than any tests carried out by the company. The concern is that when the government starts approving biosimilar versions of the blockbusters, they will not actually be interchangeable in practice and many safety issues will arise. Many industry commentators in Brazil have long expressed concern that the government overlooks the poor quality of generics or biosimilars produced by local companies. One industry source, who declined to be named, said the government was only implementing such a faulty policy to benefit 100% Brazilian companies. The policy means they can better compete with multinationals because they do not have to conduct expensive clinical trials or invest large sums in R&D. Government preference for Brazilian companies shows in other ways too. Despite the big talk on expanding access to medicines, there are many obstacles for generics firms, particularly those that are not 100% Brazilian. For one thing, regulatory approval times are a real problem, says Montragio. Interfarma, which represents pharmaceutical companies in Brazil, agrees. In October it complained that approval times were far too long for innovative medicines, particularly biologics, and generics. The association is calling for less bureaucracy in the system and says that ANVISA has a shortage of staff. The problem is worse for multinationals. While it can take years for regulator ANVISA to approve a marketing application from a multinational, it takes it just months to approve a generic from a local company. One Teva generic, which Montragio declined to name, took nearly five years to get through the system. To launch a product quickly in Brazil it is often best to buy one that has already been approved as timelines can be difficult to predict, she said. Informa PLC SCRIP Intelligence

3 Meanwhile, Teva is considering how to pursue growth and get its medicines to patients. Other foreign-owned firms have achieved success in Brazil through acquisition. Most notably, Sanofi rose to the top of the market when in 2009 it bought Medley, the biggest local firm. But the pool of acquisition possibilities is getting smaller and this is not always a viable option. According to Montragio, the remaining possible targets are already too big. Another option might be to buy a plant so that Teva can benefit from its own local production line. ANVISA site inspections are a prerequisite for approval in Brazil, and having facilities in the country would speed the process up somewhat. The firm has not ruled out partnerships, although nothing is on the horizon. "There are a lot of things we have not done because the right opportunity has not come up," she added. Worth the bother? Brazil is certainly a challenging market, but it is worth the trouble, as long as you do not expect to make a quick buck. Spiewak adds that Brazil is a market for the future. "If you want to come and stay for five years, don't bother. You need to plan in Brazil, it is a country of the future, you need at least 10 years." Teva is taking it slowly. "We have been in the country for six years, and we are going step by step to grow our business, said Montragio. There is certainly potential for growth. The government is making more medicines available and since 2010 the number of medicines offered on the national health system has grown by 47%. Some 810 products are now on offer, says the health ministry. According to a Scrip Business Insights report, Key Findings: Brazil Pharmaceutical Market Overview ( generic medicines were the fastest growing segment of the retail market, which in 2011 was in total worth $25.8 billion (including prescription drugs and OTCs). Generics, worth $5.2 billion, some 25% of the total prescription retail market, grew by 43%. Although similares (which are effectively branded generics) took a bigger share of the market (34%), they grew at the comparatively lower rate of 19%. Branded drugs, worth 41% of the market saw the slowest growth at 8%, according to Scrip Business Insights. Figures for biosimilars were not available. Informa PLC SCRIP Intelligence

4 If FDA could veto patents Brazil shows how that might work Authorities in Brazil are ploughing ahead with draft legislation to entrench the right of Brazilian medicines regulator to reject patents on medicinal products and processes. This runs counter to legal opinions received by the Brazilian government (and backed by R&D-based industry) that the regulator ANVISA should be more or less removed from the patent granting process. Commentators believe that entrenchment of ANVISA in the IP process would have relatively immediate consequences. Patents for antiretrovirals and treatments for non-communicable diseases are likely to come under more scrutiny, as these are big public health concerns in Brazil. Benny Spiewak from the Brazilian law firm Zancaner Costa, Bastos and Spiewak also expects a "big" change in the approach to treatments for rare diseases and personalized medicines. The background to the draft legislation is that since around 2001, Brazil's IP laws have stipulated that ANVISA needs to give the green light to a patent already okayed by the patent and trademark office, INPI. The 2001 change came after Brazil s health ministry applied pressure to prevent delays to the entry of generics onto the Brazilian market. AVISA's role in patents has always been controversial: industry has always wanted it revoked. Relatively recently, it looked as if matters were going industry s way. In 2011, the Brazilian government highest legal authority the Advocacy-General of the Union said that the patent office, INPI, should remain responsible for reviewing whether the subject of the patent complied with legal requirements for patentability. ANVISA, for its part would be responsible for matters concerning health, in particular, analyzing whether a product was safe and efficacious or harmful. ANVISA's role was to be limited largely to co-ordinating marketing authorizations (scripintelligence.com, 22 February 2011). However, ANVISA and the government have seemingly ignored the AGU: the draft legislation now in the pipeline assert that ANVISA has a right to deny consent to a patent application if the application runs counter to the interests of public health, i.e. if it interferes with the government's policies providing universal access to healthcare and treatment. Nelson Mussolini, executive vice-president of Sindusfarma, the association which represents the pharmaceutical industry in Sao Paulo and Brazil points out that the AGU and ANVISA are two independent organizations and ANVISA is under no obligation to follow the AGU's advice. Response for companies has been mixed. "The new decision obviously frustrates the R&Dintensive pharma industry, said lawyer Benny Spiewak. On the other hand, the local generic industry was delighted." The dilemma is clear from the response of Brazil s industry association, Sindusfarma. The association, which represents both R&D-based firms and generics manufacturers, foreign owned and local, has not issued an official policy on the matter because of the different views among its members, says Mr Mussolini. Mr Spiewak believes the move was motivated by the desire to keep costs down. As he points out, the government is by far the biggest buyer of complex, high-cost drugs. "No patents means no barriers for competition and therefore possibly more attractive prices." Informa PLC SCRIP Intelligence

5 ANVISA claims that its role in the matter doesn't affect many patents. According to Sindusfarma, since 2001 when ANVISA took up the role of issuing prior consent, INPI has granted 1,346 patents, 106 of which the drug regulator barred. But for Mr Spiewak, whether or not many patents have been affected is beside the point as the "underlying rational" of prior consent is "way too troublesome." The AGU's opinion created discontent among NGOs and civil society, which threatened to take the matter up with the United Nations. Meanwhile, Brazil's government has for sometime made universal access to healthcare a top priority, and it is going to some lengths to fulfil its promises to the public. Its HIV/AIDS program is internationally lauded for its success. To further the good work, the government has initiated a number of public private partnerships to bring the technology for manufacturing certain key drugs, including biologics, to Brazil, in the hope that the country will one day eliminate its pharmaceutical trade deficit. More controversially, Brazil issued a compulsory license for Merck & Co's ARV efavirenz (Stocrin) back in Before the draft legislation is finalised ANVISA must first issue a resolution explaining its workflow, and then a federal decree must be enacted. Informa PLC SCRIP Intelligence

6 Head Ache: The thinking behind the next big acquisition in Brazil Rumor has it that that Ache, one of Brazil's local giants could soon be snapped up by a multinational in a deal worth $5 billion. The firm is an exciting proposition that could give the lucky firm a stake in a big, government-backed joint venture. Multinationals have seen the benefits of buying up local firms in Brazil rather than trying to establish a wholly new presence. Local firms bring local contacts and Brazilian market knowhow, important in a tough-to-navigate environment which can differ from region to region. As Benny Spiewak, of the Brazilian law firm ZCBS Advogados points out, it is easier to buy market knowledge than it is to grow it from seed. Sanofi-Aventis has not looked back since it bought the generics firm Medley in 2009 for 500 million, he says. The move gave Sanofi access to a very well respected name and cemented the company s position at the top of the Brazilian market. According to Mr Spiewak the Sanofi/Medley machine became a "real regional pharma power" that is now selling in several Latin American markets. Other notable deals include Pfizer buying a 40% stake in Teuto for $240 million (scripintelligence.com, 21 October 2010). Now, Reuters says that Pfizer, Abbott and Novartis are bidding for the privately-owned Ache, valued at around $5 billion. Ache is the fourth biggest company in Brazil with EBITDA of around $300 million. Some of the excitement about Ache may also spring from the fact that Ache is part of a joint venture made up of four large Brazilian firms (EMS, Ache, Hypermarcas and União Química). Called Bionovis and dubbed Superlaboratorio, or the Superlab, the joint venture aims to solidify Brazil's capacity to produce biologic drugs. Over the next five years the project will receive R$500 million ($250 million) from the four firms and from the Brazilian government. Odnir Finotti, president of Bionovis, says the investment in the venture is the most important investment in the history of the Brazilian pharmaceutical industry. Bionovis' primary customer will be the government, but it also expects to export its products, the first of which could be available within two or three years. The Brazilian government is very keen to increase the country's biologics capacity, particularly in biosimilars. It is the biggest buyer of pharmaceuticals and in 2011 spent around R$6 billion on biologics. Biologics account for 46% of government drug spending although they only accounted for 2% of in volume. According to União Química, Brazil's biologics market is worth R$10 billion. Bionovis could therefore provide ample market opportunities, as well as a way to get closer to local authorities. União Química says that Bionovis is not to be sold outright to an MNC, but it is unclear if there are any provisos on foreign ownership of one of the partners. Indeed, MNC expertise might prove attractive to the project. A takeover could also be good for Brazil. Mr Spiewak believes that the acquisitions have generally been a good thing for the local market. "The Brazilian pharma market has got more Informa PLC SCRIP Intelligence

7 sophisticated and competitive with the deals. MNCs come with very challenging targets, which ensures a highly competitive market." He added that the MNCs bring other benefits, like higher standards for manufacturing processes. Your next move? Subscribe Click here For more information contact us at scrip@informa.com Informa PLC SCRIP Intelligence