IVDT_In Vitro Diagnostics Technology

IVD Technology, Fall 2013

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Sector Reais US $ Percentage Chemistry 316,050,000 180,600,000 17% Hematology 208,757,500 119,290,000 11% Immunochemistry 1,016,400,000 580,800,000 55% Molecular testing 80,500,000 46,000,000 4% Segments not covered Total 210,000,000 120,000,000 11% 1,831,707,500 1,046,690,00 100% Table I. The value and annual growth rates of the primary IVD sectors in Brazil. Current as of May 2012, when the exchange rate was 1.75 reais to the dollar. Incidentally, contracts in Brazil must be in the real. Contracts denominated in dollars cannot be enforced. Local Diagnostic Product Manufacturing Competition from local reagent and kit producers is formidable in certain areas. More than 20 Brazilian manufacturers produce more than 30% of Brazil's chemistry reagents, about half the hematology reagents, and at least 10% of the immunoassays consumed in the country. Te range of producers runs from small companies replating imported culture media or relabeling imported urine strips to manufacturers of small instruments and some of the leaders in chemistry and hematology reagents. In addition to local manufacturing by domestic frms, several international diagnostic companies do some local production in Brazil, especially in the hematology reagents sector. We expect to see more local manufacturing done by international companies because of the inspection requirement of ANVISA. Much of this probably will be very superfcial. Tenders and Negotiations In 2001, a new law made the government's tender procedures transparent by putting the information on the Internet (the "electronic board"), where it can be viewed by all interested parties. Tis was supposed to eliminate corruption, and while it has helped, it is not perfect. Te most cynical observers say that the winner of the tender is always known. Either the bid is determined to be an "emergency classifcation," which needs no bids, or the bid timing is not publicized and is very short. If troublesome bids do manage to come in, they can simply be "disconnected" and ignored. Most participants in the system, however, say it works reasonably well. Tis is especially true for public sector buyers, who will often publicly open the bids and then hold a "reverse auction" to see who will bid less until only one supplier is left. Private labs negotiate with companies individually, using their volume to extract the lowest price, which varies from lab to lab. Suppliers often say it is better to sell to the public labs because once you get a contract you can expect it to be honored. With a big private lab, the supplier may get a call at any time saying it would like to renegotiate the deal and lower the price. Te biggest of the private labs have so much market power that they can do this with little fear of repercussion from their suppliers. Unfortunately, the Brazilian government has been showing some of its old protectionist instincts. Recently the government passed a law that allows it to pay up to 25% more for products that are manufactured in Brazil, as long as at least two frms respond to a tender. If the product is 100% locally made, it receives the 25% advantage; if it is packaged from a bulk import, it receives 15%; and if only labeling is done locally, it receives a 10% advantage. Tere is no existing process for verifying local content. Tis requirement has not had a signifcant impact on the IVD market, since any tender requiring automation does not have a domestic alternative. Reagent Rental Aside from small labs, most of which are not potential customers for the multinational diagnostics companies, the market is almost entirely done on a reagent rental basis. Tis is true of both the public and private sectors. Tat said, many of the rentals are done by the distributor, not the manufacturer. So from the manufacturer perspective, these are instrument sales. Most public sector contracts are for a single year, which makes them a risk for investment in instrumentation. However, public labs often prefer to keep their existing instrumentation rather than deal with the disruption of switching systems constantly, so this often gives the existing company an advantage. Also, the government has recently been willing to do tenders for two years, or 1+1, as it seems to be called. And it is always possible to extend the current tender if the government is not yet ready to prepare a new one. Conclusion Brazil is not without its difculties. Wikipedia has an entry under Brazil cost, a term that refers to the increased operational costs associated with doing business in Brazil. It then goes on to list 20 reasons for this cost. Te World Bank places Brazil 130th in its "ease of doing business" rankings. Tis is ahead of Nigeria but behind Bangladesh. Even getting a Brazilian visa takes more time than for almost any other country. But this beautiful country is flled with the world's friendliest people and it now has a billion dollar IVD market that is set to continue to grow for the foreseeable future. It would be a big mistake to ignore Brazil. IVD Carl McEvoy is President, McEvoy & Farmer (Seattle, WA). He can be reached at carl@mcevoyandfarmer. com. I VD T EC H N O LO G Y | FALL 2 0 1 3 2 7 magenta cyan yellow black ES323644_IV1309_027.pgs 09.24.2013 02:24 UBM

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