Good time for pharmaceutical retail. In 2021, the 26 largest companies in the segment that are part of the Brazilian Association of Pharmacies and Drugstores (Abrafarma) recorded revenues of BRL 67.5 billion, 16% more than in the previous year. And this year, from January to September, revenue was R$ 58.8 billion, 17.4% higher than in the same period last year. These are two of the biggest advances since 2011, when growth was 19.4%. The volume of medicines and products sold by Abrafarma associates corresponds to 50% of the entire market, even with only 10% of the 90,000 pharmacies in the country. Why does this occur? With the word Sergio Mena Barreto, CEO of Abrafarma, who also talks about the challenges of the segment, which according to him “is lagging behind”.
DINHEIRO – What is the reason for the good moment of pharmaceutical retail?
SERGIO MENA BARRETO – We are reaping the fruits of what we sowed in recent years. We went through many stages. The last major investment was in digital transformation, improving all logistics and delivery processes. There are around 90,000 pharmacies in Brazil. Abrafarma has 9,300, but dispenses more than half of all pharmaceutical, hygiene and beauty products for health.
Why does it happen?
We have great logistical inefficiency in Brazil. It is a complex sector. It depends on the input that comes from outside, on a well-done production planning. The American and European markets have a third party payer for the medicine. The patient does not pay for the medicine, health insurance or the government pays. The US operates by PBMs [Pharmacy Benefit Management]🇧🇷 Companies manage medicines for health plans and pay pharmacies for this. The logic is: keeping the patient treated costs less for health insurance. It’s better than a hospital stay. The system has all the data, it is an integrated process.
Are we far from that yet?
Very far away. The PBM knows how many lives are under its umbrella, how many of those are diabetic, heart disease… So they have predictability of the amount of medication, how much it will cost. This gives predictability for industrial production and for sale. In Brazil we do not have this third party payer. The government has the highly complex programs, HIV, Popular Pharmacy, which represents R$ 3 billion in a market of R$ 180 billion. It’s 1.6% of the market, almost nothing. The other 98.4% depend on the buyer’s pocket.
Is there no predictability here?
Exists. But data is not integrated as in other countries. We have logistical inefficiency. In independent pharmacies, out of every ten items, five are missing. It is the inefficiency of the market. Abrafarma’s associates lack 12%, because we invest in our own logistics system. the DR [RaiaDrogasil], which is the largest pharmacy chain in Brazil, alone has 11 distribution centers. The objective is to minimize inefficiency.
With regard to data, how can we compensate for this deficiency?
Identifying the customer every time he goes to the store. That’s why the CPF request at the time of purchase. And then there is a great urban legend, that pharmacies provide data and information about purchases to health plans. This data is gold and we don’t give it to anyone. It’s to improve predictability, stockpiling and assertiveness. To reduce that lack of products.
How has this integration process been worked out?
The health sector in Brazil is fragmented. We do not have a single medical record, as in England. That’s why we have our own data, with our own expertise. Our relationship with manufacturers and the healthcare system is disconnected.
And isn’t there a movement to connect it all?
Not. In this sense, Brazil is far behind. Popular Pharmacy was created in the first Lula government [2003 a 2006], when Humberto Costa was the Minister of Health and I was on the National Health Council. I said that we already had 500 popular pharmacies and it was bad, because they were managed by the municipalities. It never had anything and it was expensive to manage. I said that it would only work when we copied Europe, with the government saying what the pharmacy had to sell, with a reference price, and the government paying the pharmacy at the end of the month. This program was to have advanced. It had the proposal to create the SUS Universal card, which would be the embryo of this integration. But it never advanced. Today we have a CNS number [Cartão Nacional de Saúde]but until this is integrated into the whole system, there will still be ground.
Are you still on the board? Are you close to the current government?
Not. In the elected government we intend to propose a revision of the Popular Pharmacy. We contracted a study at Insper that points to some improvements to be more assertive, be smarter, curb fraud, provide more access. The program froze in 2017. No pharmacy entered the program anymore. And the TCU pointed out some frauds. I have been told, for example, to add biometrics to provide more security.
Lack of political will?
Lack. It is the only program that gives access to medicines to the poorest people. But it lacks progress.
Is the outlook better with the next government?
We have already requested a meeting with the transition team. We can advance on several other points as well. Now, in the pandemic, the digital prescription has started, which is important. Platforms have emerged, telehealth, telemedicine… There is a law going through Congress that is good, but it has to provide minimum guarantees. Today, with the system we have, as there is no regulation, crazy things started to appear.
Like which ones?
The digital platform on which the doctor prescribes began to open a cart inside the doctor’s office. What is it? The doctor prescribed five drugs and the person already receives an SMS with an offer to sell the drugs. The doctor is becoming a medicine salesman. And these platforms are going to pharmacies saying they have prescriptions and are charging for them.
Has a revenue intermediary been created?
And the citizen is at the mercy. The recipe is his. He is free. He is becoming lawless land. It is necessary to regulate. Unfortunately we are in the season of ‘pass the cattle’. The consumer’s right to choose must be respected.
How are online sales?
Impressively tall. It started in the pandemic and continues. In some networks borders 18% of sales. It was trait.
Will the performance of the sector, in general, continue in the coming years?
To be continued. The country is aging. And another thing: if you take five ago, all the growth came from hygiene and beauty products. Now the biggest growth is in over-the-counter drugs, which grew 20% from January to September. Non-medicines — tinctures, sunscreen, deodorant —, 13%. There is also growth in continuous-use medicine for the heart, high blood pressure, cholesterol, arthrosis. We come from a culture where 54% of patients drop out of treatment after six months. With the pandemic, people are more aware.
Has the pharmacy become a point of primary care?
Increasingly, the pharmacy will follow the patient’s journey and offer additional products. We are investing a lot in vaccine. We started investing in 2017. We are still not investing the necessary amount, but it is a business that will grow. Test too. It started with Covid-19. Before, the pharmacy was authorized to apply a single blood glucose test. It was only possible to carry out almost 20 million Covid tests in the pharmacy because there was an exceptional authorization from the Ministry of Health.
We are now in talks with Anvisa to regulate another 40 tests, for dengue, chikungunha, cholesterol… Once that is approved, we change the epidemiological profile in Brazil.
Recently there has been a lack of inputs. How are you now?
It was very serious a few months ago. The inputs for 95% of what we sell come from abroad. When China closed, it had nowhere to supply. When we set up our own system, we started to do better analysis of suppliers. We had products supplied by three manufacturers and we went to get them from three others, so as not to run out. This expansion was a big key for us.
But isn’t there lobbying by the clinics to prevent this from happening?
We’re in the fray. There are only 1,000 clinics in the country that can apply the vaccine. At Abrafarma we have 7,000 pharmaceutical service rooms. When used, if you have a dengue outbreak, we act much faster. We’ll know where it is and how it’s spreading.
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