Growing demand for generics, but more expensive input reduces billing

The sale of generics has been growing above the average for the pharmaceutical sector, driven by demand from consumers looking to save money. But the high sharp of the dollar in recent weeks could upset the performance of manufacturers this year.
With the skyrocketing Exchange, the cost of pharmaceuticals with raw material, mostly imported, has pressed profit margins. "Generic demand tends to increase in the crisis, but with more expensive, part of the input gain is lost," said the Executive Director of the Brazilian Association of logistics and Distribution of pharmaceutical products (Abradilan), Geraldo Monteiro.
Despite being cheaper, the class already registers a deceleration in the pace of expansion, according to the President of the Brazilian Association of generic drugs (generics), Telma Salles. "Even though it's a market that still grows, we realize that the consumption of medicines in general are lower this year," he says. Given this, the Pro already revised the Generic high projection of 15% in sales volume for the year. "The expectation now is to keep the 12.3 percent growth in the first half," he adds.
Another factor that may impact the advancement of generics is the possible withdrawal of government contributions to the subsidy program for the purchase of medicines Here Has Pharmacy Popular.
The proposal submitted to the National Congress for the 2016 budget provides for transfer to the people's Pharmacy, which this year should receive $ 578 million. The program, in operation since 2006, enables the purchase of discounted remedies in accredited pharmacies. "If the proposal passes, this cut affects the manufacturers and we hope that the Government will reconsider", declares the President of Pro. She clarifies that it is not yet possible to estimate the impact of the measure on the sector, but points out that generics account for about 80% of the products sold through the program Pharmacy Popular.
Strategy
Meanwhile, companies in search of alternatives to reduce the foreign exchange impact and maintain competitiveness. The EMS adopted some practices to reduce costs. Today, 95% of its raw material is imported. "We are in the process of reducing costs to try and recover [the high-dollar], including seeking to increase the volume of production to gain economies of scale", reveals the commercial Director of generic unit of EMS, Aramis Domont.
Exports, yet little total marketed by pharmaceutical representative, is pointed to by the Executive as one of the alternatives to maintain profitability. "How to export, the high dollar favors. But today only 2% of revenues come from such sales. The idea is that this percentage will grow in the coming years, "he says. Of the total sold to other countries, 90% is composed of generics.
"We believe that the dollar tends to devalue a little and not remain at this current level. But, if that doesn't occur, we need to review our grid costs and discuss the situation with the Government, which regulates the prices in the sector ".
With the reduction of costs and the expansion of the production of generics, EMS hopes to close the year with 20% higher sales volume before 2014.
Already the paranaense Prati-Donaduzzi also sees exports as an alternative to keep the expansion over the medium and long term. According to the Vice President of Prati, Eder Maffissoni, the company has been looking for new potential markets in other countries.
"We want to export to the United States, being the first company to commercialize there drugs produced in Brazil," he says. The forecast is that the generic manufacturer will be exported in the middle of 2016.
Maffissoni believes that the operation can help balance the effect of the exchange rate in the billing of Prati. He recognizes, however, that will still take time for the volume of sales to the foreign market have relevance in business to compensate for the increase in inputs.
Competition
"In addition, there is still much demand retracted on the domestic market, so the Brazil follows as our focus," comments. In the first eight months of the year, the Prati 25% advanced billing, with the volume growing a bit above that percentage. According to the Executive, that difference is a reflection of the increasing competition in the generic category, which has led to a reduction in average prices.
"We realized, from the beginning of the year, a slight drop in prices. This has a direct relationship with the greater competition this year, "he says.
In his review, the dispute over price is more aggressive among the domestic manufacturers, since multinationals competitors have more conservative pricing policies.
"Our primary strategy to deal with this dispute has been investing in a mesh efficient logistics, to deliver the fastest possible orders and have the least disruption of the market", he quotes.
In Brazil Torrent, the impact of the high dollar has been greater than on local manufacturers. The company imports 100 percent of generics sold in this country.
"We have a direct impact on the cost of the product, however, despite the tight margin, we keep the prices," says the ceo, Thaddeus Strongolli company. Sales revenue through September was 15% above the forecast. The expected close year Torrent with high of 10% in sales.