This is a research report written by the Economist Intelligence Unit, sponsored by Roche.  Brazil's economy is booming on the back of deepening credit markets, a growing middle class and rising investment in physical infrastructure, but serious shortcomings in its healthcare sector represent one of the key constraints on attaining developed-country standards of prosperity.  Making the healtcare sector more effective--and innovative--will require sweeping changes to the business practices of healthcare providers and life science companies. This report analyses three significant challenges to achieving this goal: inefficient provision of care in both public and private sectors; lack of innovation; and insufficint and low-quality data in all areas of provision.

Challenges to Brazil's healthcare system

Brazil is reaping the benefits of a young population. Its potential workforce—those between 15 and 64 years old—is expected to continue to expand more rapidly than the overall population before peaking in 2029. This “demographic dividend” will spur growth, but its impact will depend on the country’s ability to use its resources effectively. This depends to a large extent on the quality of Brazil’s workforce—how healthy and skilled it is.

Although Brazil has made significant efforts to improve the health of the population, more is needed. The healthcare sector faces several challenges to achieve the goal of universal access to good-quality healthcare and a competitive life sciences industry. These include:

• inefficient provision of care in both public and private sectors;
• lack of innovation;
• insufficient and low-quality data in all areas of provision.

Efficiency and resources: Brazil’s healthcare system, public and private, is heavily underfunded. Improving the public system must begin with the full implementation of Constitutional Amendment 29 (EC-29). This will help to ensure that all states and municipalities have adequate resources to meet the needs of their population.

Adopting public-private partnerships (PPPs) more widely can also help stretch scarce resources and improve the quality of care. A study by the World Bank found that hospitals structured as PPPs in São Paulo are more efficient and provide better quality care, thus improving the effectiveness of existing resources. This is especially important because hospitals account for a large proportion of healthcare spending.

The use of sophisticated management tools, ranging from disease management (remote follow-up of chronic patients) to cost-effectiveness controls to novel medical reimbursement models, can also improve effectiveness and help health plans that survive the current wave of consolidation ensure their sustainability. Some service providers have already identified opportunities and others should follow their example.

Innovation: For Brazil to gain relevance in the global life sciences market and compete with other emerging countries, it will have to invest in people, facilities and technology. Barriers to the industry’s emergence include lack of managerial expertise in Brazilian companies, especially with respect to innovation, and a paucity of knowledgeable investors who understand and are willing to take on the risks involved in developing products in the life sciences industry. Furthermore, Brazil’s infrastructure for developmental research (laboratories, animals for testing and other) is inadequate, and start-ups often carry out trials abroad.

There are institutional barriers as well. These include burdensome tax and labour regulations; a slow approval process for new drugs and devices; and complex processes for obtaining funding, making it difficult for smaller firms to compete.

Brazil now has the regulatory and legal structure necessary to develop a strong life sciences industry, but more must be done to ensure that those measures translate into innovation and growth. Policies should promote the development of skilled researchers as well as professionals specialised in innovation management who know how to assess risks and the value of projects that have high levels of uncertainty. This will help to optimise funds invested in innovation and increase the flow of capital into the industry.

Policies must also encourage companies that are qualified to compete abroad, but lack the leadership to venture into the global market. As the sector—and its leadership—matures, it will be better equipped to compete with countries like China and India. Leveraging the industry’s expertise in “frugal engineering”, companies could become more profitable domestically and more competitive on the global stage.

Information: Improving the quantity and access to information in Brazil’s healthcare system is obviously a long-term project. The creation of standardised metrics on quality, costs and outcomes is an important and feasible first measure. Ultimate responsibility for these standards rests with the federal government, which should delegate their development to qualified organisations. There is a precedent for this in Brazil. The Society of Health Informatics—SBIS (through the Federal Medical Council)—has created standards for managing medical data in information systems. This important advance, which has laid the foundation for a yet-to-be-implemented unified national medical records system, can serve as a model for the development of other standards.

Payers—public or private—must also push for better information. They can do so by creating incentives for healthcare providers to measure and disclose data according to government-approved guidelines and standards. This can be done by offering differentiated reimbursement for providers that publish their data. Taking this a step further, regulations should allow higher reimbursement rates for providers with high-quality and cost-effective service, as measured by government-endorsed generally accepted standards.

Increasing the amount and quality of information in the entire healthcare system is essential to improve both quality of and access to care. This should extend from the analysis of drugs and technologies to be covered in private and public health plans to the evaluation of healthcare providers.

Brazil’s healthcare system: the gap between aspiration and reality

In theory, Brazil has one of the most inclusive healthcare systems in the world. The 1988 constitution guaranteed universal and comprehensive care, from basic prevention to organ transplants. To meet this obligation, which includes efficient and effective access for all, it created the Sistema Único de Saúde (SUS), a government-run public healthcare system. In many ways, SUS is a model of universal care. Municipalities and states are given autonomy to administer healthcare as needed, while the federal government provides financial and technological support. And the system has seen success. The nation’s HIV/AIDS programme, for example, is considered one of the best executed in the world. Only 1% of Brazil’s population lives with AIDS, well below the world average. Looking at the broader picture, SUS can be considered an accomplishment for Brazil.For the individual relying entirely on the system, however, the picture is quite different. There are only 1.3 doctors per 1,000 inhabitants, one-half of whom work in the private sector, and just 2.2 hospital beds per 1,000 inhabitants.

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Healthcare spending in Brazil as a percentage of GDP compares favourably with that in other Latin American countries, yet healthcare indicators show that it is not garnering the necessary results. The Economist Intelligence Unit estimates that in 2009 8.4% of Brazil’s GDP was spent on healthcare by the private and public sectors, compared with 9.3% in Argentina, 7.3% in Chile and 6.4% in Mexico. Nevertheless, infant mortality is estimated at 23 per 1,000 births in Brazil, higher than that of Argentina, Chile, Costa Rica and Mexico, and life expectancy, although improved, is among the lowest in Latin America, at an average of 72.3 years.[1]Regional differences within Brazil are stark. In the wealthy south and south-east regions, infant mortality rates are 13.3 and 15 respectively, in sharp contrast to the poorer north-east and north regions, with 29.8 and 22.8 respectively. Access to healthcare remains limited despite programmes such as Bolsa Família, a focus on prevention and primary care, and innovative efforts such as the pooling of municipal resources to provide services that a single municipality would not be able to fund.

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The main reason for these challenges is that SUS has been inadequately funded. Private plans, conceived in the constitution as supplemental to public insurance, have become a parallel system used by those who can afford to pay for care. About 22% of Brazilians pay for private health insurance; the remainder depend on SUS. Yet the government accounts for only 44% of the country’s total healthcare spending. The remaining 56% is private, and of that, two-thirds is paid out of pocket by consumers. In contrast, among OECD countries, governments account for 70% on average of all healthcare spending.Brazil’s life sciences industry is significant, but it is not a leader in innovation. Both domestic and multinational companies fill the country’s pharmaceutical and medical technology needs. Brazil boasts the tenth-largest pharmaceutical market in the world, but per head spending on pharmaceuticals is just one-half of the levels in Mexico and only 5% of the levels in the US. According to ANVISA (Agência Nacional de Vigilância Sanitária, a semi-autonomous regulatory agency), there are 1,398 pharmaceutical manufacturers in Brazil, and a 2009 report by ABIMO (Brazilian Association of Manufacturers of Medical Devices and Materials) identifies 448 manufacturers of dental, medical and diagnostic equipment and materials.

[1] Brazil's relatively low life expectancy also reflects the country's high murder and accident rates.