________21064 LCSHD Paper Series 54 Department of Human Development Public Policies in the Pharmaceutical Sector: A Case Study of Brazil Jillian Clare Cohen January 2000 The World Bank - , Latin America and Caribbean Regional Office Human Development Department LCSHD Paper Series No. 54 Public Policies in the Pharmaceutical Sector: A Case Study of Brazil Jillian Clare Cohen January 2000 Papers prepared in this series are not formal publications of the World Bank. They present preliminary and unpolished results of country analysis or research that is circulated to encourage discussion and cominent; any citation and use of this paper should take account of its provisional character. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors and should not be attributed in any manner :to the World Bank, its affiliated organization members of its Board of Executive Directors or the countries they represent. The World Bank Latin America and the Caribbean Regional Office Public Policies in the Pharmaceutical Sector: A Case Study of Brazil Table of Contents Summary 4 1 Introduction 6 1.1. Context and Health Institutions 6 1.2 Health System Weaknesses 7 2 The World Bank Involvement in the HNP and Pharma Sectors 8 2.1 Background on the Bank's Activities in the Brazil HNP Sector 8 2.2 The Bank's Activities in the Pharmaceutical Sector 8 2.3 Rationale for Bank Activities in the Pharmaceutical Sector 8 3 Understanding the Pharmaceutical Sector in Brazil 10 3.1 Background on the Pharmaceutical Sector in Brazil 10 3.2 Pharmaceutical Expenditures by Income Group 12 4 Main Sector Issues 14 4.1 The Main Problems 14 4.2 Equity and Efficiency of Public Pharmnaceutical Expenditures 14 4.3 Pharmaceutical Supply and Distribution 15 4.4 Drug Laws and Regulations 17 4.5 Counterfeit and Sub-Standard Drugs 18 4.6 Pharmacovigilance 20 4.7 National Health Surveillance Agency (ANVS) 21 4.8 Drug Registration Procedures 21 4.9 Pricing Policies 22 4.10 TRIPS and Generic Drugs 23 4.11 Priority Setting 24 5 Suggested Activities 25 5.1 Recommendation for Future Bank Activities in the Pharmaceutical Sector 26 2 Public Policies in the Pharmaceutical Sector: A Case Study of Brazil Currency Equivalents (Exchange Rate Effective May 7,1999) Currency Unit =Real (R$) R$ 1.70 = US$ 1.00 Abbreviations and acronyms ABIFARMA Pharmaceutical Industry Association of Brazil ANVS National Agency of Sanitary Surveillance CEME Central Medicines CENABAST Chilean Central Drug Purchasing Agency COFINS Social Security Tax ECDS Eastern Caribbean Drug Service FIOCRUZ National School of Public Health FURP Sao Paulo Public Drug Manufacturer GDP Gross Domestic Product GMP Good Manufacturing Practices GPTIUM The Group to Prevent the Inappropriate Use of Medicines HNP Health, Nutrition and Population LCR Latin America and the Caribbean Region PAB Per Capita Transfer to Primary Care PSF Family Health Programme MERCOSUR Southern Common Market R & D Research and development SUS Unified Health Care System TRIPS Agreement on Trade-Related Aspects of Intellectual Property Rights UNIDO United Nations Industrial Development Organisation WHO World Health Organisation WTO World Trade Organisation 3 Public Policies in the Pharmaceutical Sector: A Case Study of Brazil Summary This discussion paper provides an overview of pharmaceutical sector trends in Brazil. It focuses on three key areas in the pharmaceutical sector: supply and distribution, financing, and institutional capacity. The paper concludes that focusing on: (a) strengthening the enforcement of drug regulations and (b) building public procurement capacity could improve the availability of cost-effective and appropriate quality drug supplies for the poorest members of the population. Public-private partnerships in pharmaceuticals could contribute to greater effectiveness in both sectors. This paper was based on consultations with stakeholders in Brazil and Washington from September 1998 - March 1999, as well as on policy documents and legislation relevant to the pharmaceutical sector. This paper was prepared by Jillian Cohen, Pharmaceutical Policy Specialist, LSCHD. It was financially supported by the Canadian international Development Agency (CIDA). 4 Public Policies in the Pharmaceutical Sector: A Case Study of Brazil Acknowledgements The author is grateful to the following persons for their comments and/or advice: Xavier Coll, Charles Griffin, Gobind Nankani, Chris Parel, Varun Gauri, Hernan Montenegro, Kristina Lybecker, Patricio Millan, Andre Medici, Roberto Iunes, Enrique Fefer, Anabela Abreu, Jean-Jacques de St. Antoine, Daniel Whitaker, Jose Eduardo Bandeira de Mello, Maria-Luisa Escobar, Patricio Marquez, C. Nigel Thompson, Linda Horton, Robert Sherwood, Kees de Joncheere, Nelly Marin, David Henry, Phil Musgrove, Rosaly Correa-de-Arujo, Jerry Norris, Maria Miralles, Joao Vasconcellos, Jacques Tapicro, Jorge Raimundo, Luiz Violland, Marcos Levy, Ramesh Govindaraj, Caroline Cederlof, Raul Molina, Carlos Vidotti, Sergio Piola, Phil Budashewitz, Muriel Haim-Nemerson, Jorge Carikeo, Rosa Puech, Alexandre Mansur, Marcos Guttmann, Jose Mauro Hemandez, David Greeley, Carol Adelman. Thanks to Sarah Menezes for logistical support, Ramiro Nunez for information technology support, and Rosana Moreira for teaching me how to comrnunicate in Portuguese. The author also would like to thank the representatives from the Federal Government of Brazil and the State Governments of Bahia, Ceara, and Sao Paulo, who provided her with their insights on the pharmaceutical sector. 5 Public Policies in the Pharmaceutical Sector: A Case Study of Brazil Introduction 1.1. Context and Health Institutions 1. Brazil is a middle-income country1 with a population of 166 million in 1998. Brazil has a persistent poverty problem, which the Bank attributes to years of poor economic performance. Brazil also has one of the most skewed income distributions in the world. The highest 10 percent of the income distribution in Brazil receives almost half of the income, 47.9 percent, compared to 42 percent in Mexico, 37.4 in the Russian Federation, 28.5 percent in the United States, and 23.8 percent in Canada.2 2. Pursuant to Article 196 of the 1988 Constitution, health services (including access to basic medicines) are considered a constitutional right in Brazil. Universal access is the central principle of the system. As the Constitution expresses: "(h)ealth is a right of all and a duty of the State and guaranteed by means of social and economic policies aimed at reducing the risk of illness and other hazards and all the universal and equal access to actions and services for its promotion, protection and recovery." The delivery of public health care services is formally shared equally by the different levels of government: federal, state, and municipal. The government health financing system (Sistema Unica da Saude (SUS)) is organised to reflect this. In practice, the delivery of health services is increasingly being decentralised to the state and municipal levels. 3. In 1999, the federal health budget represented 3.3% of the GDP, or RS 14.2 billion. Health revenues are derived from taxes for social security, corporate taxes, financial transactions, and others. All of these are deposited in a social security account, which includes financing for pensions, health services, and social assistance. The federal government provides the majority of the financial resources for the public health expenditure in Brazil - about 71%. States contribute about 15% and municipalities the remainder - 14%.4 States and municipalities also have the right to specific tax and expenditure functions, and are entitled to take over full management of basic health care for their respective health systems. They also can choose to "opt-out" of managing health services, and let the federal government take responsibility for their provision. 4. Although SUS is responsible for financing health care for all of the population, its clients are mainly the 123 million Brazilians (74%) who do not have private insurance. (World Bank, Brazil Health Sector Strategy, 1999). The SUS contracts out a large majority of inpatient care and outpatient care to a network of private and philanthropic hospitals, clinics and other facilities. The public sector, in fact, only manages and owns 31% of the hospital beds SUS supports. GNP per capita of Brazil is US$ 4,570 per capita (World Development Report 2000). ' World Bank Development Indicators, 1999. 3 The Brazil Health System: A Sector Impact Study, Washington, World Bank, Operations Evaluation Department. 4 World Bank, Brazil Country Management Unit, Brazil Health Sector Strategy, Draft, 1999. 6 Public Policies in the Pharmaceutical Sector: A Case Study of Brazil 5. Joint management commissions have been established to facilitate the coordination activities among the various levels of government. For the health sector, there is a tripartite joint management commission comprised of equal representation from the Ministry of Health, the National Council of State Secretaries of Health, and the National Council of Municipal Secretaries of Health. The members of the bipartite joint commissions are the state secretariat of health and the municipal representatives of health.5 Health councils, permanent bodies at each level of government, are also in place. They are charged with overseeing the implementation of health programmes and have user representation (e.g. labour unions, patient groups) as well as representation from the health sector. Despite these institutional arrangements, it is not always clear who is developing health policy. 6. Decentralisation has also been supported through the Basic Care Floor (Piso de Atencao Basico (PAB)) and the Family Health Program (Programa de Saude da Familia (PSF)). The PAB guarantees the financing of select ambulatory services for municipalities capable of managing them. The federal government transfers resources to the municipal governments on a per capita basis. This ranged between R$ 10 to R$ 18 in 1998 or about US$ 8 to US$ 15. The PSF is designed to promote community care and has a strong educational component. The cornerstone of this programme is the health team, whose members include a medical doctor, nurse, nurse auxiliary, and six health agents, who monitor health indicators and provide basic health services at the local level. The state of Ceara in Northeast Brazil is considering including a pharmacist per four health teams (or one pharmacist per 20,000 persons). 1.2 Health Sector Weaknesses 7. Democratic decision making and decentralisation of core public service responsibilities have not yet produced greater equity,7democratisation of resource allocation, nor necessarily better quality in the provision of products and services in the health sector. A recent Bank report acknowledged that with the complexity of the Brazilian health system, it is hard to tell what incentives are being offered to different actors and what distortions they face.8 8. The World Bank Operations Evaluation Department (OED) conducted a study of the Brazilian health sector and identified four problem areas in the health sector. They are: (1) severe under-financing of the public system resulting in regional inequalities, arbitrary rationing in facilities, and a perceived decline in quality; (2) weak incentives for cost-effectiveness and quality; (3) tension between decentralisation and the provision of the quality of care; and, (4) an over emphasis on curative services.9 Brazil also has geographic disparities in the quality of public health services. PAHO, Health in the Americas, Volume II, Brazil, pp. 122. 6 Proposed Social Protection Special Sector Adjustment Loan, Report No. P723 1, BR., p. 42. The US dollar equivalents are calculated at the November 1998 rate of R$ 1.19 = US$ 1.00 7See Kurt Weyland (1996) Democracy Without Equitv: Failures of Reform in Brazil. Pittsburgh: University of Pittsburgh Press. World Bank, Brazil Social Spending in Selected States, Chapter 3, draft, Washington, 1998, pg. 44. The Brazil Health System, op.cit., p. 19. 7 Public Policies in the Pharnaceutical Sector: A Case Study of Brazil 2. World Bank Involvement in the HNP and Pharmaceutical Sectors 2.1 Background on the Bank's activities in the Brazil HNP sector 9. Brazil is one of the Bank's largest recipients of HNP financing (see Table 1 below). During fiscal years 1988-1998, Brazil was the recipient of US$ 935 million in commitments and had 5 active HNP projects. In the Latin America and Caribbean region (LCR), Brazil is the second largest recipient of HNP financing, after Mexico. Table 1. Largest Recipients of HNP 1988-98 Sn,iIIlonx ' No. ot I ndia' 2777 Projects Mexico 1215 Bazil 935 Indiet 20 Argentina 691 China' 594 Argerdna 6 Bangladesh 490 Brazil S Indonesia 445 Russia 336 Mexico 4 Vnezueba 248 Nigeria 244 rl0A or mainly IDA] 10. Since 1983, Brazil has had four Bank health projects with direct lending for the pharmaceuticals -- The Northeast Endemic Project, Amazon Basin Malaria, AIDS 1, and the Northeast Basic Health Services II. Indirect lending for pharmaceutical activities has been provided to the govemment through the Reforsus I project. Total commitments to the sector thus far has been about US$ 93 million. 2.2 The Bank's Activities in the Pharmaceutical Sector 11. Since the early 1980s, the Bank has supported improved pharmaceutical policies in its client countries through policy dialogue on pharmaceutical issues with governments and through its lending practices. One estimate is that the Bank commits about USS 220 million annually for project components related to pharmaceuticals, or about 17% of new health lending.10 Financing includes support for drug procurement, related medical supplies, computers, civil works, technical assistance, and training. In LCR from fiscal years 1983-1997, 15 health projects in the region included a pharmaceutical component. Estimated committed lending to pharmaceuticals in the region during this period was USS 184 rnillion. 2. 3 Rationale for Bank Activities in the Pharmaceutical Sector 12. As long as the Bank continues to invest in the health sector, it will be involved in the pharmaceutical sector because drugs are critical inputs of a health system. Pharmaceuticals can both cure and prevent diseases, and if used appropriately, can 10 Michael Reich, Ramesh Govindaraj, and Jillian Cohen, Draft Document, World Bank Pharmaceutical Discussion Paper, January 2000. 8 Public Policies in the Phanmaceutical Sector: A Case Study of Brazil intensify investments made in other areas of the health system.1 Because pharmaceuticals lie at the nexus of the health and commercial sectors, pharmaceutical policies can also create tensions between the two sectors. The challenge, then, is for governments to develop pharmaceutical policies which support public health goals and the development of private industry. 13. Information asymmetry between pharmaceutical manufacturers and regulatory agencies in developing countries is also an obstacle for the effective regulation of these companies, because regulators have limited capacity to know what the true costs of production are. 12 Production costs for pharmaceuticals vary according to whether the firm does research and development, or manufacturers generic drugs. In developing countries, there are distortions between the "need" (as measured by priority health problems) and the demand (as reflected by consumption patterns) for pharmaceuticals. These distortions and inequities exist by disease, by income, by the age distribution of patients, by geographical area, and by level of care. "3 14. Pharmaceutical budgets are often not maximized because of erratic supply, poor quality, and the irrational use of drugs. The risk of these problems have been articulated in a number of World Bank policy papers. 14 They could be minimized through efficient procurement procedures and distribution systems. 15 Good procurement practices in particular can generate savings which, ideally, can be used to purchase more basic drugs for those in need. 16 BestiPracticet#l Estimating Saf6ty Stock The&minmum safty stoc needed to avoid . a stockoutis the quantit of stock used on average duringthe average lead timefrm tihe :g current supplier: This means that if an order is placed as soon as the stock level fallsto X thesafetystocklevel, if demand isno greater than averageduing the lead time, and if the supplierdSelivers wiihin the caverage lead time. a stockout will be avoided. The:most common method for estimating safety stock needs isjto determine the average lead time e for each itern fromn the current suppplier and the average consumption (per month oriper week). If there were stockouts consumption must be adjusted to what would have been used. Thteformula for settig the basic safety stock(Ssl levdtl islead time(L T )! multiplied by the average consumption (Ca): SSLT x Ca. SouTce: Managing Drug Supply, 1997, Box 15.2 Pharmaceuticals can improve life expectancy and reduce the need for hospitalization. "Jean-Jacques Laffont and Jean Tirole. A theory of incentives in procurement and regulation. Cambridge, Mass. MIT Press. 1993. 13 Govindaraj et al., 1999. 14 See the World Development Report: Investing in Health (1993) and Better Health in Africa (1994). '5 Better Health in Africa, World Bank, 1994. 16 Based on recommendation of Helen Saxenian "Getting the Most out of Pharmaceutical Expenditure" Human Resources Development and Operations Policy Working Papers, September 1994, No 37. 9 Public Policies in the Pharmaceutical Sector: A Case Study of Brazil Understanding the Pharmaceutical Sector in Brazil 3.1 Background on the Pharmaceutical Sector in Brazil 15. The pharmaceutical sector in Brazil is undergoing changes in the organisation, financing, and delivery of basic medications to the population. Since January 1999, states and municipalities have been responsible for the purchase and distribution of basic medications. Formerly, this was managed centrally by CEME (Central de 17 Medicamentos), and then under the national Farmacia Basica programme. The government has also created a new health agency - the Agencia Nacional de Vigilancia de Sanitaria (ANVS) to oversee the quality of health services in Brazil, including pharmaceuticals (See 4.7). Legislation to promote generic drugs has also recently been approved by the Congress. 16. The pharmaceutical sector in Brazil is the sixth largest in the world in terms of value and is the leading market in Latin America.18 The research based pharmaceutical industry has targeted Brazil as one of its global "strategic markets" given its potential for growth.)9 Although Brazil has good human resources, laboratories, and institutions (e.g., FIOCRUZ), the pharmaceutical sector has many weaknesses. Two of these are insufficient quality assurance and inconsistent supplies of essential drugs in the public health system. 17. Many of the problems in Brazil's pharmaceutical sector are found in developing countries. For example, the poor spend a higher percentage of their family income on pharmaceuticals, at rates which are growing through time (see Medici below). And, although there is legislation specifying that only a pharmacist has the right to register a pharmacy, in practice, it is rare to find a pharmacist employed in a private pharmacy. Self-medication is common throughout Brazil, and can result in the development of drug resistant bacteria. Drug use does not always match health needs; many doctors feel compelled to prescribe medicines to their patients, even if there is no health need, because patients tend to associate the quality of a health professional with their willingness to prescribe drugs. Another problem is that physicians sometimes prescribe a drug, based on the purchasing power of the patient, rather than on their health need.20 17States and municipalities have different levels of autonomy in terms of how well they are able to manage, plan, and deliver health care activities. At ex-manufacturing prices and including both the public and private sectors. Source: ABIFARMA, 1998. 19A conservative estimate is that about 10% or some 16 million persons do not have financial and\or physical access to drugs. 20 Booz, Allen & Hamilton, The Healthcare Industry in Brazil, Sao Paulo, 8/9/98. 10 Public Policies in the Pharmaceutical Sector: A Case Study of Brazil Pharmaceutical Expenditure as Percentage of Family Income 95. 4.5 3.5 - . +- 1987 % - [996 2.5- 1.5- 0.5 Up o +2 to +3 to +5 to +6 to +8 to -10 +15 +20 '30 2 3 5 6 8 10 to to 20 to 30 No. ofMinimna Wages Source: Andre Cezar Medici, 0 SUS e a Politica Hood Robin de Saude, mimeo, Washington, 1998.21 18. In 1998, world sales of pharmaceuticals were estimated at US$ 302.9 billion. Although the proportion of world sales which are in developing countries tends to be small, Brazil is the exception. 22 The value of both the public and private pharmaceutical market in Brazil was estimated at US$ 10.3 billion in 1997, with international and domestic pharmaceutical companies respectively commanding about 70% and 30% of the total market. In 1996, original and licensed brands had a market share of about 58% whereas unbranded and "other" brands had about 42%.23 The market in Brazil is fragmented; no firm commands more than 5% of the market, which is a common feature of the pharmaceutical market throughout the world.24 The sub-markets for specific products, on the other hand, are less competitive given that companies tend to specialise in therapeutic categories.25 19. Latin America's 32 countries comprised only 8% of the global pharmaceutical market in 1998.26 But it is the fastest growing regional pharmaceutical market in the world. From 1989 to 1994, the market.grew by 136%. This meant that Latin America exceeded the growth of all other regions by such an extent that even its nearest competitor, Japan, expanded its sales by a considerably less 73% in the same period.27 21 Minimum salary is equivalent to about US$ 100 per month. 22 Scrip Magazine, January 1999. 23 Source: Richard P. Rozek and Ruth Berkowitz " The Effects of Patent Protection on the Prices of Pharmaceutical Products - Is Intellectual Property Protection Raising the Drug Bill in Developing Countries?' The Journal of World Intellectual Property, Geneva, March 1998, Volume 1. No. 2, Annex 11. 24 Booz, Allen & Hanilton, The Healthcare Industry in Brazil, Sao Paulo, 8/9/98. 25 See Medici, Andre Cezar, Kaizo Iwakami Beltrao, and Francisco de Oliveira. "Pharmaceuticals Policy in Brazil," Policy Document no. 9, Sao Paulo, Brazil, Institute of Applied Economic Research - IPEA, March 1992. 26 Scrip Magazine, January 1999, p. 30. 27 http:l/www.ifc.orgfPUBLICATFDINEWS/VOL 12/VOL 12.HTM#anchor578766. 11 Public Policies in the Pharrnaceutical Sector: A Case Study of Brazil 3.2 Pharmaceutical Expenditures by Income Group 20. In Brazil, like most countries in the Latin America region, over 80% of drug expenses are paid for by private means; most of this is out-of-pocket spending.29 Private health insurance is growing for the wealthiest members of the population. In 1988, 1 1 million persons subscribed to a health insurance scheme; it is estimated that about 45 million Brazilians pTesently subscribe to private health insurance schemes, which do not tend to cover pharmaceuticals. Some plans offer discounts on drugs if they are purchased at a particular pharmacy, or pharmacy chain. 21. ABIFARMA (Associacao Brasileira da Industria Farmaceutica) has developed a profile of the Brazilian market that offers some telling insights into the tiered nature of the pharmaceutical market, which is representative of basic economic trends in Brazil. It classifies the consumer into one of three income groups: A, B or C. Group A represents 15% of the population; its members consume about 48% of all pharmaceuticals sold. Spending per capita of Group A is R$ 205 per capita. (This consumption pattern is similar to the pattern in Spain or in the United Kingdom). Group B represents 34% of the population; its members consume about 36% of all pharmaceuticals sold. Spending per capita of Group B is R$ 68. Finally, Group C represents 5 1 % of the population and they consume 16% of all pharmaceuticals sold. Spending per capita of Group C is R$ 20 per capita (see Table 2 below). 22. The striking difference in drug consumption among the Brazilian population demonstrates that the pharmaceutical consumption rates are closely related to income group. This poses the question of whether the government should consider reallocating its pharmaceutical resources more heavily towards lower income groups or select groups of the population, such as the elderly and children? 28 Booz, Allen & Hamnilton, "The Health Care Industry in Brazil" 8/9/98. 29 Pharmaceuticals and Health Sector Reform in the Americas: An Economic Perspective, WHO, p.27. 12 Public Policies in the Pharmaceutical Sector: A Case Study of Brazil Table 2. BRASILIAN PHARMACEUTICAL CONSUMER PROFILE30 A; I 0 r0 ::tglO mlirurnn 15 48 R.S 205 :i0t000 0000yt0;0 salanies + Bt 0 4- l O miruimum 34 36 RS 68 C 0-4mmunum salanes Source: ABIFARMA 1998 23. The consumption of pharmaceuticals is concentrated in Brazil, with a little under half of the market share is situated in the states of Sao Paulo and Rio de Janeiro. The pattern of pharmaceutical activity is not surprising because it corresponds to more general economic trends and market demand.31 This geographical concentration could be offset by a government that ensures the provision of basic medicine supplies throughout the country and/or to creates incentives for the private sector to assume a greater role in drug supply and distribution in less populated areas, particularly in the interior of the country. One possible option is for the government to consider is the creation of tax incentives for the private sector to enter into under-served markets. td j .by0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ... Tabie 3. A Sector Snarshot Manufacturers (Public and Private) r 400 Pharmacies 45, 000 Hospitals, Health Centers 5, 000 dWholesalers\Distributors 1, 000 Numaber of Products $, 200 Number of Presentations 9, 200 Firms Directly Involved in Sector 47, 100 Firms Indirectly Involved in the Sector 250, 000 Source: ABIFARMA, 1998 30 Minimum salary is about USS 100 per month. 3' The States of Sao Paulo and Rio have a collective population of about 71million (based on 1998 figures). 13 Public Policies in the Pharmaceutical Sector: A Case Study of Brazil Main Sector Issues 4.1 The Main Problems 24. Based on interviews with stakeholders, there are five main weaknesses in the pharmaceutical sector which are relevant for the Bank's broader health sector work: (1) the insufficient implementation and enforcement of drug regulations which can assure that quality standards are in place (such as Good Manufacturing Practices (GMP)); (2) insufficient and sometimes inappropriate supplies of publicly funded basic medicines; (3) weak human and institutional capacity for drug procurement at the federal, state and local levels; (4) self-medication which can lead to drug resistant 32 viruses if only a partial course of treatment is consumed; and, (5) an absence of bioequivalence and bioavailability testing for generic drugs. 4.2 Equity and Efficiency of Public Pharmaceutical Expenditures 25. The public expenditure allocated to pharmaceuticals represents a small percentage of the federal health budget (about 5%). Th-e table below shows estimates of federal expenditures on drugs for 1999. Precise public expenditures on pharmaceuticals are difficult to assess in Brazil, as they are dispersed among different health programmes at the federal level (e.g. strategic drugs, communicable diseases, and basic medicines). Real federal drug spending, then, is higher than indicated in the data shown, because the data do not include the drug funding which the government pays to public and private hospitals and clinics, contracted by SUS. The municipalities and states also supplement pharmaceutical budgets; their contributions vary widely. Drug expenditures should be assembled into a central data base, so more precise estimates are made possible. Table 4. Brazil's Federal Drug Budget 1999 ITEM Amount in R$ AIDS and STD Drugs 315,677, 535 Essential and Other Drugs 375, 416, 520 Source: Ministry of Health 26. The policy implications of the above data are many, even with the knowledge that the numbers do not represent total drug expenditure. Is the government spending its pharmaceutical budget efficiently and equitably, particularly when it has little control over its priorities given the constitutional right of health care? Is it maximizing the impact of its pharmaceutical budget? How will the government cope with some of the financing precedents it has set? Because of the strength of the AIDS lobby, the government commits about one-third of its total drug budget for AIDS drugs, which are consumed by a small number of the population (about 536, 000). The development of new drug technologies, which can improve quality of life of persons and reduce the need for costly health services, will continue to present challenges for 32 Poor quality drugs can also lead to viruses which are immune to all treatment drugs. 14 Public Policies in the Pharmaceutical Sector: A Case Study of Brazil the government about how it chooses to spend its pharmaceutical budget, and who should have access to new drug therapies. 4.3 Pharmaceutical Supply and Distribution 27. The decentralisation of the pharmaceutical supply and distribution system has not lessened the rigidity of the delivery system, and has resulted in ambiguity about the specific duties and responsibilities of the municipal, state, and federal governments. This has been addressed recently by the development of a National Drug Policy (Regulation 3916, October 1998). Pursuant to it, the roles and responsibilities of the three spheres of government are clearly defined for the management of medicines. The approach taken by the Departamento de Assistencia Farmaceutica of the State of Ceara could be a model for others. State and municipal financial resources are itemized specifically for drug procurement, and spheres of authority for the sector are defined clearly for each level of government. Best Practice #2 Features of a Well-Run Distribution S stem Source: Managins Drug Supply Second Editon, 1997, MSH and WHO. 28. Until May 1997, the public pharrnaceutical supply system in Brazil was centralized under CEME (Central de Medicarentos), which was set up by the military goverrnent in 1971. The rationale for CEME was that it would function as a complement to the existing health ins-urance system by providing medicines for those who were too poor to buy ther. CEME soon expanded from supply to production. By 1973, it was not only acting as a phar9maccutical supplier, but also supportin research on basic pharmaceutical inputs, such as raw yaterials. National self- sufficiency in medicines was perceived as a strategic, national security and sovereignty issue, as well as a vital component of a national health policy. 29. CEME was viewed by many as an ineffective and corrupt agency, which had particularly deleterious consequences for the poorest. In part, this was because CEME's institutional logic became more directed towards satisfying the interests of the public and private Brazilian manufacturers, than towards meeting the needs of the state and city health departments, by supplying them with essential drugs for their populations.33 Losses of medicines distributed by the agency were high owing to expiration of products and unsuitable storage conditions. The procurement methods which the agency applied were viewed as non-transparent and corrupt. i3 Peter B. Evans " Foreign Investment and Industrial Transformation: A Brazilian Case Study." Journal of Development Economics 3 (1976) p. 133. 15 Public Policies in the Pharmaceutical Sector: A Case Study of Brazil 30. After CEME's closure in 1998, the federal government developed a transitional drug supply programme, Farmacia Basica, which supplied a kit of essential drugs (3240 items) to municipalities with populations under 21,000 persons. Approximately 75% of the municipalities in Brazil fit this category. The Ministry of Health reported that the number of municipalities it indirectly supplied through this programme was 1,467 and it directly distributed to 2,732 municipalities. The drug kits supplied by the programme were selected on the basis that they could cover the basic health needs of about 3,000 persons for a period of three months. The interim programme was viewed as ineffective by some health specialists because the pharmaceutical needs of the country vary from region-to-region and the uniform drug kits did not reflect the different epidemiological profiles found in the country. As a result, there were problems of wasted drugs and unmet basic pharmaceutical needs for the population. Despite its imperfections, the programme was a necessary part of transforrming the government's pharmaceutical supply system from a centralised to a decentralised model. 31. As of 1999, the Government transfers funds for basic medicines directly to the states and municipalities. On a per capita basis, the federal government finances R$ 1 and the state and municipal governments finance at least R$ 1 together (states and municipalities negotiate how much they contribute). The federal government's contribution is R$ 160 million for basic medicines in 1999, a significant increase from 1 998--R$ 45 million. R$ 2 is budgeted for each person's basic drug needs or about R$ 320 million. The federal government continues to finance strategic drugs for diseases such as AIDS, TB, diabetes, and leprosy. 32. It is still to early to tell how the new system will impact the poorest members of the population, particularly for those in remote regions in the country, such as Amazonas, even if the federal government still assumes responsibility for the drug supplies in these areas. Unless good procurement techniques are used (see below), the consequences of the decentralisation could be damaging from both an economic and health point of view. As Medici and others have emphasized, decentralisation of the pharmaceutical supply to the municipalities is desirable only for those larger cities which have sufficient managerial autonomy (and capacity). 16 Public Policies in the Pharmaceutical Sector: A Case Study of Brazil Best Practice #3 Core Principles of Public Pharmaceutical Procurement D Procure the most cost-effective drug in the right quantities to treat prevailing health problems in the majority of patients served. O Assure drug product quality throuah supplier selection, monitorin of supplies, and quaity assurance programmes. 0 Ensure timely delivery of poducts to health facilities and to patienits. :0 Achieve the lowest possible total cost taking into account purchase price, hidden 'costs, holding costs and4operating costs. SOURCE: Guideliesfor Good Procurement Practices, Interagency Pharmaceutical] Coordination Group 33. Most local governments in Brazil do not have the human and institutional capacity to manage the procurement and distribution of pharmaceuticals effectively.34 The administrative work required in this type of set up is likely enormous. There are some 5,500 municipalities in Brazil and the government is supposed to draw up a contract with each one. Should the procurement and logistics be performed by the government if quality and low prices through the exercise of market power are the goals of the government? Strengthening drug procurement capacity will require a change in the "rules-of-the-game," and training of personnel to ensure that capacity is built. The use of contracting out procurement processes to private procurement agents could also be considered in some cases. 34nBsead, ioatsan intermiewsdiahryepresenthtie hsia uaes (whth opbli toueiand prv thesetr drug szii rega lationsis an ageat -hfr its entified cnteremt ai seak Evaluat iosnl d rhatrthey n,surveilplaunce, audiret a rm aneuticarl notbeingcarried produtas diheotlyt ;shud pAar-tlyasarsultof-ovement-a sbudgts. constransade inufiieti;000 therlntolsT is eleoni liddim sstem on bal e hmoninaspsecto set up ic efforttes their n r prhaiing p e. s r aic tio an eamle, 4.4 Drug Laws and Regulations 34. Based on interviews with representatives from the public and private sector, drug regulations is an areas which is identified commonly as weak. Evaluation, registration, surveillance, audits, and inspections are not being carried out as they should, partly as a result of government budget constraints and insufficient technology. There is also a limited knowledge base among inspectors, which indicates their need for training. Inspectors require basic education, as an example, on what a reference standard is, and what it is used for. Good career incentives are also required for them to do their job professionally. The enforcement of drug regulation depends heavily on the strength of the judicial system as well. 34 Ibid. 35 Jorge Carikeo Monyota, "El Analisis de la Reforma del Sistema de Abastecimiento del Sector Salud en Chile." Draft, 1/08/98. 17 Public Policies in the Pharmaceutical Sector: A Case Study of Brazil 35. Lessons learned from other countries, and even from other sectors, such as telecommunications, could be instructive for Brazil as it embarks on regulatory reforms. The government should set up an institutional framework which does not generate conflict of interest. For example, if the Ministry of Health is a major purchaser of drugs, the health agency which regulates drugs should be an autonomous agency, and not under its jurisdiction. Regulations should also control but not damage private sector activities. Other lessons which could be applied to the Brazilian case are: (1) ensuring regulatory institutions are sufficiently autonomous so they are not influenced heavily by political agendas; (2) ensuring that there is enabling legislation in place which will provide institutions with the flexibility they require to set and enforce rules; and, (3) giving institutions adequate resources for the development of information systems and the maintenance of inspectors.36 And, efforts should be made to implement a regulatory system which functions on observable and verifiable quality control mechanisms, monitored on a regular basis. 4.5 Counterfeit and Sub-Standard Drugs 36. Pharmaceuticals are particularly susceptible to counterfeiting because they are a high profit and low bulk product. In Brazil, examples of counterfeit drugs include: 37(i) capsules of the anti-epileptic phenytoin contained barely 25 percent of the labeled amount; (2) fake penicillin and tetracycline products contained only a small portion of the labeled amount of the antibiotic, or none at all; (3) Schering do Brazil produced 2257 kilos of the contraceptive, microvlar, to test a packaging machine, but only controlled for the disposal of 600 kilos; and, (4) Botica ao Veado d 'Ouro , a local producer in Sao Paulo, produced and distributed a counterfeit drug used for patients with prostrate cancer. Estimates about the percentage of counterfeit drugs in the Brazil market are inconsistent. The National Secretariat of Health estimates that about 5 to 7 per cent of all medicines in Brazil are counterfeit. Some private sector representatives estimate that the presence of fake drugs represent only about 0.4 per cent of products sold in Brazil's non-hospital pharmacies. 36 These points are cited from Daniel Whitaker's article on "The Future of Managed Care in Latin America" pp. 143-154 in Clemont Bezold, Julio Frenk and Shaun McCarthy (eds.) 21"' Century Health Care in Latin America and the Caribbean: ProsDects for Achievin2 Health for All. (Mexico City: Institute for Alternative Futures and Fundacion Mexicana para la Salud, 1998). Used with permission from the author. The following examples are from cited in "The Drug Swindlers" OD. cit., p. 154. 38Pharmaceutical research-based industry figures. 18 Public Policies in the Pharmaceutical Sector: A Case Study of Brazil 37. Brazil is classified by UNIDO as a country with pharmaceutical reproductive capabilities; it produces both therapeutic ingredients and finished products.39 Domestic producers produce about 30% of the drugs consumed in the market and multinational companies, account for the remainder. Brazil has 11 public producers registered with the Associacao Nacional dos Laboratorios Oficiais: Fundazao Ezequil Dias (MG), Centro de Medicamentos do Parana, Laboratorio Farmaceutico de Pernambuco, Fundacao Oswaldo Cruz (RJ), Instituto Vital Brasil (RJ), Laboratorio do Rio Grande do Sul, Laboratorio de Santa Catarina, Nucleo de Pesquisas de Alimentos e Medicamentos do Rio Grande do Norte, Laboratorio Farmaceutico de Alagoas, Bahiafarma, Industria Quimica de Goias. There is also Fundacao para o Remedio Popular (SP). 38. Brazil's public manufacturers have been largely responsible for supplying the basic medicines which are distributed throughout the public health system. They are financially assisted by tax exemptions. The govemment's efforts to improve the enforcement of drug quality standards in Brazil may mean that many of these facilities will have to receive investments in order to ensure their quality standards are up to international levels. The role of how the private sector can become more involved in supplying drugs to the poorest members of the population, particularly in under-served areas, should be considered seriously by the government. 39. In the past, manufacturers in the public and private sectors have not been consistently subject to sufficient monitoring for GMP standards, nor rigorous testing of product quality. The same applies to raw materials (about 60%-70% of raw materials for pharmaceuticals are imported in Brazil).40 Previous governments have made intermittent efforts to improve the quality standards in the pharmaceutical sector in these and other areas. For example, the inspection of manufacturing plants improved from 1995-1996, when the number of inspections carried out by the drug inspection team was 740. This compares with only 25 which had taken place from 1993-1994, 340 re-inspections were also executed during the same time period. 39Robert Balance, Janos Pogany and Helmut Forstner, 1992. "The World's Pharmaceutical Industries: An Intemational Perspective on Innovation, Competition and Policy." UNIDO 40 SCRIP, February 10, 1999, Issue No. 1410. 19 Public Policies in the Pharnaceutical Sector: A Case Study of Brazil Table 5. Medicines that Escape Regulation P' _ '';T'' ': PIRATED Pirated drugs are those drugs which are produced in breach of intellectual property law. They are copies of new drugs which are protected by patents and are not available yet for legitrimate generic production They contain the components of the authentic product but many governments do not require bioequivalence and bioavailability data based on human clinical tials. Pirated drugs are subject to legal remedies under commercial law. COUNTERFEIT Counterfeit drugs are packaged and labeled to mnimic an original product. Often, they do not contain any or a sufficient amount of the active ingredients of the original product. They are sold under the false pretense of having phanmacological properties. Management of this problem requires a sound regulatory fiamework and inspection systemn. SUB-STANDARD Sub-standard drugs do not meet interational standards (such as in adherence to Current Good Manufacturing Properties). There is no guarantee tha these drugs contain the appropnate amoLmts of active materials, that they are bioequivalent and bioavailable. that they are packaged properly, and that they will remain intact, physically and phannacologicaly, prior to their expiration date. Management of this problem requires a sound regulatory framework and inspection systenL 4.6 Pharmacovigilance 40. Pharmacovigilance4' is an essential component of a quality assurance system and is an area where Brazil could benefit from making investments, particularly to set up a national network of laboratories. Equally important, is a good information system which can detect, notify, and analyse the effects of adverse drug reactions. A good information system can then permit the government to make sound decisions conceming the restriction of certain drugs in the market. There have been a number of initiatives in the past to implement a national pharmacovigilance system, but because of the high turnover of leadership in the then Sanitaria Vigilancia de Saude (SVS), as well as within the Ministry of Health, no system has been fully set up. Still, a few institutes in Brazil have developed excellent pharnacovigilance systems which cover small areas. The Grupo de Prevenca ao Uso Indevido de Medicamentos (GPIUM), based at the Federal University of Ceara Forteleza, is an example. GPIUM executes "Programa de Notificacao Voluntaria de Reacoes Adversas a Medicamentos" (Programme of Voluntary Notification of Adverse Reaction to Medicines) in agreement with the Secretary of Health of the State of Ceara. Good communication between the government and the private sector is also critical in pharmacovigilance. 41 Pharmacovigilance is the monitoring of adverse drug reactions on a regular basis. 20 Public Policies in the Pharmaceutical Sector: A Case Study of Brazil 4.7 The National Health Surveillance Agency (Agencia Nacional de Vigilancia de Sanitaria (ANVS)) 41.Legislation for the creation of a new health agency (ANVS) was passed by the Brazilian Congress in early 1999. The ANVS began its operations in Brasilia, following a presidential decree establishing the agency and the naming of five directors in May 1999. The new agency oversees pharmaceuticals, as well as medical equipment, cosmetics, and hospital services. It also has responsibility for authorizing products on the market (registro sanitario), as well as the licensing of manufacturers (licenca da funcionamento). The agency is responsible for overseeing an estimated US$ 120 billion worth of services and products, or about 15% of the GDP. A recent report by the US Departmnent of Commerce notes the law which created the ANVS also instituted a new user fee structure, together with new certification rules. The last date the old user fees could be charged was May 10, 1999. From this date on, the local market started paying new user fees for new drug registrations, which increased by 90 (ninety) times over the old values. The govemment's increase of user fees, coupled with delays in registration, resulted in a number of legal actions against the government of Brazil by local trade associations, which are under review.42 42. It is important to note that the core functions43of a regulatory agency are: post- marketing surveillance, GMP inspection, distribution inspection, regulation of promotion, and the authorization of clinical trials. All of these areas need sufficient capacity. An effective agency also requires trained staff with appropriate career incentives, who can ensure that regulations are implemented and enforced. 4.8 Drug Registration Procedures 43. The registration process of new pharmaceutical products is based on Brazilian Law 6360 (1976), the Administrative Act number 71/96 (1977), as well as other regulations which are issued by the Ministry of Health. There is, in theory, a 90 day review period for a drug application for registration but processing can take anywhere from 8 months to a year. Registration of AIDS drugs are the exception. They comnmonly are registered by the government in less than a month 44. Since 1976, in practice, local industry has marketed its products according to local court orders. These orders guarantee producers the right to sell a product after the 90 day term for a government review has expired. Thus, for the government to effectively mange the registration, it needs the capability to respond in 90 days or less, which is not typically the case (often drug registration can take as long as a year). This "administrative silence" is criticized by some regulatory experts44 because it can potentially mean a lack of control of the kinds of drugs available in the market. Much more needs to be known about how to manage the registration system better and the impact of existing practices. 42 Clovis Lemes, "Brazilian Medical Equipment Sector" August 18, 1999. 43 Julie Milstein, WHO, Geneva, draft, Regulation of Vaccines: Building on Existing Drug Regulatory Authorities. 44 Based on discussions with FDA staff. 21 Public Policies in the Pharmaceutical Sector: A Case Study of Brazil 45. The scale for drug registration fees has recently been modified. They are now determined by firm size and the type of product. Fees for the registration of new medicines range from R$ 8,000 to RS 80,000, similar products R$ 2,100 to R$ 2 1,000, and generic drugs from R$ 600 to R$ 6,000. Beet Pa tic #5 Amp rateiizon of; DrugRgiZao hale PUipine 4ln199 z494 the Ureau ofTd anrugs (ED ntePiipesudrokarjet CrmPterze g-9 istsU Diet ofs ivolved ih the : egi-stat os wer by a were N set up .or ne}"eg rod informain -fuinr pf Ct e 4 -.fftiinS, for ot an clients t injieao theutati hek BfspSpIicains Reports an begeneae esinga epor eeoi - P. -.T JOM'4' f'Sb-"'' paii8Ēv.S^5.t@ t ~la i a* ; 65, Ae a _re infor:itioeotepg oh ;5=S ' B F m .... -.-@ - :-- : - S S: . . .. requirto iranimg elpetfli e cnuez&yti rgie teilnn Pergsrr 4t. werazi had a p.r.......e n system in wace unwtilb1992,when pharl'ceutica prce wertiaedn b -ow to nrealseonly t and insat olationt r srice wd m itncremo estem. Althu teried was par inti oftesiCollor thvermnenyte's itonhas speeddn. tHe chisatioterizess n 46vBaolunhady aprinemcontrlssbtwemen plae uoermnti 1992 when pharmaceutical piceustr.I practice, no price regime is in place, even though the government is formally responsible for approving the prices of new pharmaceutical products. 47. Pharmaceutical companies are responsible for determining wholesale drug prices, but the prices which the consumer pays at the pharmacy also reflects other costs and taxes. Prices for retail drugs also include a pharmacy mark-up (which can be as high as 30%), a federal tax (PIS/COFINS) of 6% and a state tax (ICMS), either 17% or 18% depending on the state (see Box 3 below). The ANVS is undertaking an investigation of pharmaceutical prices at the retail and wholesale level. The work is initially being carried out by two economic research institutes, IPEAD in Minas Gerais and FIPE in Sao Paulo, and will likely be expanded to other states. The Ministry of Health plans to use the information to set up a monthly pharmaceutical retail price index.45 5Scrp "Brazil Compiling Pharma Price Data' August 4, 1999, Issue No. 2460, p. 17. 22 Public Policies in the Pharmaceutical Sector: A Case Study of Brazil Box 3. Example of Drug Pricing Structure 48. Pbarmacoeco-nomics may be a tool the government could apply to help it make more cost-effective drug purchasing decisions. Pharmacoeconomics is a methodology for purchasing drugs, based on data that link the net costs of drug use to meaningful changes in health status, compared with data on alternative therapeutic or preventive approaches. Governments like Australia, the United Kingdom, and even private purchasers (e.g. HMOs) in the United States are applying this methodology to make better purcbasing decisions. The use of pharmacoeconomics allows decision makers to determnine what is the "added value" of a drug and so they can determnine whether the "added value" warrants the drug price. In short, drug resources can be spent more strategically and effectively with the use of this methodology. 4.10 TRIPS and Generic Drugs 49. Brazil is a member of the World Trade Oreanisation and is transforhing its intellectual property system because of commitments it made under the TRIPS (Trade- Related Aspects of Intellectual PToperty) Agreement. The TRIPS Agreement allows developing countries a general transition period of up to five years to amend their patent legislation so it is in accordance with international standards. Ten years is allowed for developing countries which have not provided anduee p vatent protection for phasnaceuticals. Least developing countries are given I m years with the possibility of extending that period to hadronize their regulations with interational standards. Brazil's new patent law, which took full effect in May 1997, achieved early compliance with most of the TRIPS requirements, including the provision of patent protection for pbarrnaceutical products. 50. In November 1998, the House of Representatives passed a generic drug law, which was spearbeaded by Deputy Eduardo Jorge. Senate approval for the legislation was passed in January 1999, and regulations are being developed. The le-islation, aimed at promotinu the use of generics, took eight years for approval, and requires that generic names be printed on product packs, and used on puescriptions and for purchases under SUS.46 Sound bioequivalence and bioavailability testind is essential for cownsumers to have confidence in the quality of generic drugs. 5 l. The Ministry of Health announced that the legislation would potentially allow for a 40-45% reduction of pharmaceutical prices and Minister Serra has promised to provide incentives for manufacturers of generic drugse.lp The legislation, amed 46 Scrip No. 2452 p. 20, July 07, 1999. 46 Correio Braziliense, NoveJber 19, 1998, p. 12. 23 Public Policies in the Pharmaceutical Sector: A Case Study of Brazil mandatory for the generic name to be included on all product packs (at least half the size of the brand name) and requires that under SUS, all prescriptions be written by their generic name, and that generic drugs be used in all purchasing proposals and at . 49 contracts4 . Bioequivalence and bioavailability, as well as in vitro testing, are essential to guarantee the quality of generic drugs in the market. The private sector has technical expertise in these areas which it could share with the government to help ensure the quality of the drugs in the market. Table 6. Per Capita Drug and Health Expenditures (US$) in Select Developing Countries (1990) Country Drucrs Health Bangladesh 2 6 Chile 30 100 China 7 11 Costa Rica 37 132 Ghana 10 21 India 3 21 Indonesia 5 12 Kenya 4 16 Mexico 28 89 Morocco 17 26 Mozambique 2 5 Pakistan 7 12 Philippines I I16 Turkey 21 76 Sources: MDS 1997: Drug expenditures from Ballance et al. 1992: health expenditures from Murray anid Lopez 1994 5. 4.11 Priority Setting 52. Improvements in the pharmaceutical sectoT will require the government to focus strategically in a number of core areas. The following are recommended areas for government intervention: 1. Better enforce drug regulations. 2. Improve supplies of cost-effective, good quality publicly funded drugs. 3. Strengthen public procurement capacity and/or better use of private agents. 4. Improve drug use. 5. Build stronger public and private sector partnerships. 4S SCRIP, World Pharmaceutical News, February 5, 1999, Issue No. 2409, p.17. 49 Bioavailabilitv " refers to the rate and extent to which the active substance is absorbed from a pharmaceutical dosage form, and becomes available at the site of action. Two products are deemed to be bioequivalent if their bioavailabilities after administration in the same molar does are similar to such a degree that their effects, with respect to safety and efficacy will be essentially the same."49 50 Balance R., J. Pogany, and H. Forstner 1992, The World's Pharmaceutical Industries: An international perspective on innovation, competition, and policy, UNIDO, and C. Murray and D. Lopez (eds.) 1994. Global comparative assessments in the health sector: Disease burden, expenditures, and intervention packages, Geneva, WHO. 24 Public Policies in the Pharmaceutical Sector: A Case Study of Brazil 53. This paper has been exploratory in nature, identifying areas in which policy changes, investments, or changes in practices could improve the organization and functioning of the Brazilian pharmaceutical sector. Without assuming that strong conclusions are possible at this point, the table below lists actions that could help the govermment reach the above objectives: 5. Action Plan Action Area Recomiend:dation Better enforce drug Brazil's creation of the ANVS presents an opportunity to take stock of the regulatory regime, regulations and to ensure that the ANVS has the capacity to enforce drug regulations effectively. International experiences and standards should be evaluated, and appropriate best practices applied to the Brazilian context. The govemment is encouraged to meet with international experts to learn from country cases, and to form an action plan, with measurable outcomes, for making improvements in the regulatory system. This process could be initiated with partners, like PAHO, private and public industry, and international experts. The government could also participate in international drug harmonisation initiatives to ensure that Brazil is sufficiently in line with international standards. Improve supplies of Current approaches and mechanisms for the supply of basic medicines should be studied, cost-effective, good particularly in view of decentralisation, to answer the question of why there is not sufficient quality publicly pharmaceutical coverage. Particular focus should be placed at the municipal level. This study funded drugs should include an economic analysis of the individual pharmaceutical products. Mechanisms ought to be developed to ensure the creation of incentives for improving supplies of drugs in underserved areas. A pilot study could be launched in one state, such as Bahia, and then extended to others. Strengthen public Different models of procurement should be evaluated (e.g. open tender versus restricted, bulk drug procurement procurement, electronic procurement (Chile)) and implemented in different states/municipalities. capacity and/or better The models should then be evaluated with particular emphasis on how well they guarantee drug use private agents supplies for the poorest. Training in tender management and other core areas of procurement should accompany this pilot study at the central, state, and local levels. Improve Drug Use Patterns of drug use should be assessed from a regional and economic perspective. The government could cost-effective targeted investments to promote rational drug use among patients and health providers. Build stronger public There is a need for a new paradigm for private-public collaboration in the Brazil pharmaceutical and private sector sector. The government and the private pharmnaceutical industry should meet regularly on partnerships neutral grounds to have open discussions about pharmaceutical policies. Industry can provide technical support to the government on specific areas, such as drug regulations and good manufacturing practices. 25 Public Policies in the Pharmaceutical Sector: A Case Study of Brazil 5.1 Recommendation for Future World Bank Activities Undertake formal economic sector work to develop detailed evidence, to characterize the tradeoffs, and to understand the costs and benefits of action in the five action areas outlined above. Such a study would provide an opportunity for collaboration among one or two state and municipal governments, the federal government, and their international partners (WHO/PAHO, IDB, World Bank). 26 LCSHD Paper Series No. I Van der Gaag & Winkler, Children of the Poor in Latin America and the Caribbean No. 2 Schneidman, Targeting At-Risk Youth: Rationales, Approaches to Service Delivery and Monitoring and Evaluation Issues No. 3 Harrell, Evaluacidn de los Programas para Nifnos y Jovenes Vulnerables No. 4 Potashnik, Computers in the Schools: Chile's Learning Network No. 5 Barker & Fontes, Review and Analysis of International Experience with Programs Targeted on At-Risk Youth No. 6 Lewis, Measuring Public Hospital Costs: Empirical Evidence from the Dominican Republic No. 7 Edwards, Bruce, & Parandekar, Primary Education Efficiency in Honduras: What Remains to be Done? No. 8 Winkler, Descentralizaci6n de laEducaci6n: Participaci6n en elMfanejo de las Escuelas alNivelLocal No. 9 Meza, Descentralizaci6n Educativa, Organizacion y Manejo de las Escuelas al Nivel Local: El Caso de El Salvador No. 10 Espinola, Descentralizaci6n Educativa, Organizacion yManejo de las Escuelas al Nivel Local: El Caso de Chile No. 11 Guedes, Lobo, Walker, & Amaral, Gesti6n Descentralizada de la Educacidn en el Estado de Minas Gerais, Brasil No. 12 Cominetti & Ruiz, Evoluci6n del Gasto Putblico Social en America Latina: 1980 - 1995 No. 13 Bedi & Edwards, The Impact of School Quality on the Level and Distribution of Earnings: Evidence from Honduras No. 14 Duthilleul, Do Parents Matter? The Role of Parental Practices on Fourth Graders 'Reading Comprehension Achievement in Montevideo Public Schools No. 15 Villegas-Reimers, The Preparation of Teachers in Latin America: Challenges and Trends No. 16 Edwards & Liang, Mexico's Preschools: Coverage, Equity and Impact No. 17 Soares, The Financing ofEducation in Brazil: With Special Reference to the North, Northeast and Center-West Regions No. 18 Salnii, Equity and Quality in Private Education: The Haitian Paradox No. 19 Waiser. Early Childhood Care and Development Programs in Latin America: How much do they cost? No. 20 Tulic, Algunas Factores del Rendimiento: Las Expectativasy el Genero No. 21 Delarmoy, Reformas en Gesti6n Educacional en los 90s No. 22 Barro, The ProspectsforDeveloping Internationally Comparable Education Finance StatisticsforLatin American Countries: A Preliminary Assessment No. 23 El-Khawas, DePietro-Jurand, & Holm-Nielsen, Quality Assurance in Higher Education: Recent Progress: Challenges Ahead No. 24 Salrnen & Amelga Implementing Beneficiary Assessment in Education: A Guide for practitioners (Jointly published by the Social Development Family and the Department of Human Development, Social Development Paper ,Mo. 25) No. 25 Rojas & Esquivel, Los Sistemas de Medici6n del Logro Academico en Latinoamerica No. 26 Martinic, TiempoyAprendizaje No. 27 Crawford & Holm-Nielsen, Brazilian Higher Education: Characteristic and Challenges No. 28 Schwartzrnan, Higher Education in Brazil: The Stakeholders No. 29 Johnstone, Inst.tutional Diferentiation and the Accommodation of Enrollment Expansion in Brazil No. 30 Hauptrnan, Accommodating the Growing Demandfor Higher Education in Brazil: A Role for the Federal Universities? No. 31 El-Khawas, Developing Internal Supportfor Quality and Relevance No. 32 Thelot, The Organization of Studies in the French University System No. 33 Thompson, Trends in Governance and Management of HigherEducation No. 34 Wagner, From Higher to Tertiary Education: Evolving Responses in OECD Countries to Large Volume Participation No. 35 Salni & Alcala, Opciones para Reformar el Financiamiento de la Ensefianza Superior No. 36 Pifieros & Rodriguez, School Inputs inSecondaryEducation and theirEffects onAcademicAchievement: A Study in Colombia No. 37 Meresman, The Ten Who CGo To School No. 38 Vegas, Pritchett, & Experton, Attracting and Retaining Qualified Teachers in Argentina: Impact of the Level and Structure of Compensation No. 39 Myers & de San Jorgee, Childcare and Early Education Services in Low-Income Communities ofMexico City: Patterns of lise, Availability and Choice No. 40 Arcia & Belli, Rebuilding the Social Contract: SchoolAutonomy in Nlicaragua No. 41 Plomnp & Brunmelhuis, Technology in Teacher Education: The Case of the Netherlands No. 42 Winter, Secondary Education in El Salvador: Education Reform in Progress No. 43 Wu, Maiguashca, and Maiguashca, The Financing of Higher Education in Ecuador No. 44 Salhi, Student Loans in an International Perspective: The World Bank Experience No. 45 Ravela & Cardoso, Factores de Eficacia de la Escuela Primaria en Contextos Sociales Desfovorecidos: La experiencia de Ulruguay No. 46 Experton, Desafios para la Nueva Etapa de la Reforna Educativa en Argentina No. 47 Fiszbein, Institutions, Service Delivery and Social Exclusion: A Case Study of the Education Sector in Buenos Aires No. 48 Gasperini, The Cuban Education System: Lessons and Dilemmas No. 49 Liang, Teacher Pay in 12 Latin American Countries No. 50 Brunner & Martinez, Evaluacion PreliminaryMWetodologia para la Evaluacion de Impacto del FOMEC en Argentina No. 51 Koshimura & Tsang, Financing Strategiesfor Equalization in Basic Education No. 52 Koshimura, High StandardsforAll Students: Excellence or Equity? No. 53 Vakis & Lindert, Poverty in Indigenous Populations in Panama: A Study Using LSAS Data No. 54 Cohen, Public Policies in the Pharmaceutical Sector: A Case Study ofBrazil Latin America and Caribbean Region Department of Human Development (LCSHD) The World Bank 1818 H Street, N.W. Washington, D.C. 20433 Fax: 202-522-0050 Website: http://www.worldbank.org/lachealth