Brazil Considers Reduction of Maximum Medicine Prices to Combat Inflation

Brazil is set to discuss lowering the maximum price of medicines regulated by CMED, aiming to align ceiling prices with actual market pricing. Pharmaceutical manufacturers express concerns about potential harm to small pharmacies and market competition. Discussions are driven by inflation control priorities and the need to address pricing discrepancies. The impact on business sustainability, especially for small pharmacies serving low-income populations, is of significant concern.

The Brazilian federal government is preparing to discuss a proposal aimed at lowering the maximum price of medications, which is currently regulated by the Drug Market Regulation Chamber (CMED) and the national health agency, ANVISA. This initiative seeks to reduce the pricing gap, as pharmacies generally discount government-set prices by approximately 30%.

Retailers and pharmaceutical manufacturers express concerns that lowering the price ceiling may discourage competition and negatively impact small and regional pharmacies, which constitute 80% of the market. Independently-owned and smaller chains typically maintain full pricing to optimize revenue, and a price reduction could unfairly disadvantage them.

Pharmaceutical companies further caution that a reduced price ceiling could lead to the withdrawal of lower-cost medications from the market, as current profit margins are already tight for numerous drugs. While CMED considers adjustments to align the price ceiling more closely with retail prices, officials indicate that any modifications will likely remain moderate to support existing discount structures.

This ongoing discussion is not without precedent; Senator Fabiano Contarato introduced a bill in 2020 addressing the pricing discrepancy after consumers expressed concerns over unexpected price increases during supply shortages. The current government, prioritizing inflation control, has revisited this matter as part of the broader regulatory framework for medicines, which was designated as a key initiative for the Finance Ministry this January.

During a recent forum organized by the National Association of Private Hospitals (ANAHP), CMED Executive Secretary Daniela Marreco affirmed that the issue is actively under discussion. She remarked, “We have debated this extensively, and there is even a bill from 2020 suggesting that CMED should bring the actual market price closer to the ceiling due to the discounts commonly observed.”

However, Nelson Mussolini, president of Sindusfarma, the pharmaceutical industry association, criticized the proposal, noting that the sector has not been consulted and warned against potential disruptions to market competition. He stated, “In my view, if the price drops, profit margins shrink in absolute terms. There will be pressure to maintain profitability.”

Additionally, Mr. Mussolini raised concerns about the viability of manufacturing certain low-cost medicines if reduced prices hinder production costs. He rejected the notion that the proposal is a tactic to combat inflation, asserting that pharmaceutical inflation is low and does not significantly impact overall inflation.

Ms. Marreco conceded that such a policy shift could introduce market risks. “One concern we need to consider is that in countries that have adopted similar measures—aligning the price ceiling with actual market prices—over time, we’ve seen a reduction in the discounts offered by manufacturers and retailers,” she observed.

The impending public consultation on the regulatory overhaul is anticipated mid-year, with any resultant changes to be established through interministerial decrees involving several governmental ministries and ANVISA. It is important to note that ongoing discussions regarding price adjustments do not affect the annual price-setting process governed by existing laws.

Interfarma, representing the pharmaceutical industry, indicated a lack of awareness regarding formal government discussions about altering the price ceiling, emphasizing that poorly structured pricing policies could lead to market disruptions. Small, independent pharmacies, especially those serving remote areas, are most at risk if the price ceiling is lowered; these enterprises often face higher operational costs and rely on flexible pricing.

The reliance of many small pharmacies on full list pricing for sustainability highlights their critical role in providing essential medications, particularly to low-income populations. One industry representative remarked, “The market is not uniform, and companies are not all the same,” stressing the varied business models within this sector.

With Brazil housing around 90,000 pharmacies—80% of which are categorized as micro or small businesses—many operate based on full pricing with limited volumes. Two major pharmacy chains expressed confidence that they would not be adversely affected due to their existing competitive pricing strategies.

The debate on price ceilings follows the government’s recent modifications to the Farmácia Popular program, which aims to broaden the list of subsidized products. However, independent pharmacies have reported ongoing frustrations due to delayed government reimbursements, which complicates cash flow, particularly in low-income areas reliant on such subsidies for sustained business operations.

Despite attempts to reach CMED for comments concerning the concerns raised by both retail and pharmaceutical sectors, no response was received prior to publication. Similarly, the Brazilian Pharmacy Retail Association (ABRAFARMA) also declined to provide comments on the matter.

The Brazilian government is contemplating a reduction in the maximum price of medications, with potential implications for small pharmacies and overall market dynamics. While intended to close the gap between ceiling prices and actual retail prices, concerns raised by industry representatives highlight the risks posed to market competition and the viability of low-cost medicines. As discussions continue, the consequences of such regulatory changes remain to be fully evaluated within the broader economic landscape.

Original Source: valorinternational.globo.com