IVDT_In Vitro Diagnostics Technology

IVD Technology, Fall 2013

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GLOBAL DIAGNOSTICS (www.hermespardini.com.br) of Belo Horizonte is second in volume, followed by Laboratório Fleury (www. feury.com.br) of São Paulo. AFIP Diagnostic Medicine (www.afp.com. br), just outside of São Paulo, is fourth. Tere is also a growing trend for public hospitals to outsource laboratory services to private companies. Tis is particularly pronounced in São Paulo state—within a few years, it is possible that half of the testing in public and nonproft institutions will be done through private sector subcontracting. DASA is active in this area, in part as a result of its 2007 purchase of CientifcaLab, which had been a public sector provider. Fleury is also active in subcontracting. Tere is no meaningful physician ofce testing market in Brazil. Product Registration To sell diagnostic products in Brazil, a company must get a state license and on the federal level an Authorization of Functioning (AFE). Finally, the company needs a license to sell a particular category of products. Te categories of medical devices, instruments, and IVD reagents are all combined into one product group. All diagnostic products must be registered. IVD product registration is done by Agéncia Nacional de Vigiláncia Sanitária, or ANVISA (www. anvisa.gov.br). ANVISA is a branch of Brazil's Ministry of Health. Approvals for blood-screening products are conducted through the National Institute for Quality Control in Health (INQCS) and are assessed by Fiocruz. Registration must be done by a Brazilian company. Tis involves a signifcant amount of documentation. If a mistake is made in the documents, they may be returned and will need to be resubmitted. Multiple companies can register the same product; if the frms are cooperating, they can use one registration. All products must be registered anew every fve years. One option for companies new to the Brazilian market that are unsure with which distributor (or distributors) they want to work is to have a nonIVD frm register their products and simply hold them for the manufacturer. Any company can then import the product, and the issue of exclusivity and any rights the distributor has are established by the commercial contract between the manufacturer and its local distributor. We should note, however, that this process is very unpopular with ANVISA and may not continue. In general, it takes about six months to register reagents and about a year to register instruments. Until the notice of registration is published in the Ofcial Gazette (Diario Ofcial), a company cannot sell, advertise, or send out samples of a product. Once registration has been submitted, the product can be used in responding to tenders, but registration must be completed before sales can begin. As of May of 2010, ANVISA required GMP certifcation by Brazilian authorities of the manufacturing plants of IVD products being imported into the country. Tis involves a visit by Brazilian ofcials to each plant. Te cost of a site visit is R$27,000. Tis pays for the ANVISA inspector, but it is also generally a good idea for the company to send along one of its employees, as the inspector often will not speak the language of the manufacturing country. Te inspection is valid for two years, at which point there must be a new inspection. Payment has to be made in advance, even if the inspection is delayed signifcantly. During this period, the company can continue to sell the imported products. It is difcult to say how long it now takes for an ANVISA inspection of foreign manufacturing sites. Tis is because the agency is grouping factories by region and making trips to clusters of applicants. It could take two or more years. Te one thing that is known is that inspections of domestic manufacturing sites take much less time—in the range of six months, though this varies among states. By adding a signifcant cost to the registration process, products with smaller potential sales and companies with modest sales expectations will reconsider entering the Brazilian market. We expect to see many small frms drop out, making the market less competitive. Tis is, perhaps, a beneft to those remaining, but it will increase prices and reduce the choices available to labs. Taxes Trade liberalization in Brazil began in 1990. In four years, practically all the nontarif barriers were removed. Te result was an extraordinary rise in labor productivity. Productivity growth per year between 1990 and 1995 is estimated at 6 to 7%, compared with 1.4% per year between 1986 and 1990. Average tarifs declined from 16.5% in 1992 to 13% in 1997. Unfortunately, taxes remain high and can add 70 to 100% to the original invoice price. Tis is true for both instruments and reagents. As has been noted by some importers, Brazil has a cascade of taxes. First, freight and insurance are added to the invoice price, and the import duty is added to this subtotal. Ten there are fve to six subsequent small taxes added in a sequential order, with each additional tax including the amount of all previous taxes. Tese all add around 20% to the cost. Finally, there is the state sales tax, or ICMS. Tis varies from 12 to 18%, depending on the state, with the large states of São Paulo and Rio de Janeiro at the high end. Te painful part of this tax is that it is collected upon importation based on the fully taxed import value and then collected again on the full value when the product is sold. Companies can then seek a tax credit for the portion of sales tax they have already paid. But the cash-fow implications are harsh and this method of taxing prior to sale also increases the cost of holding inventory. Furthermore, Brazil has the slowest customs clearing process of the major Latin American markets. It takes fve to six days to get products through customs. 26 IVD TEC HNOLO G Y | FA L L 2013 magenta cyan black ES323642_IV1309_026.pgs 09.24.2013 02:24 UBM

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