Global Opportunities

Brazil: Medtech Opportunities for Swiss SMEs

Verticalization and consolidation trends in the Brazilian health sector support double-digit growth in imports of medical devices

The imports of medical devices grew by 26% from January to June 2018 (in comparison to the same period in 2017), showing that there are many opportunities to be explored by Swiss medtech companies in this sector.

Woman examining samples under the microscope

The Brazilian Health Sector in Numbers

The Brazilian medtech market has superlative numbers. With a population of 207 million inhabitants, the country counts with more than 6’700 hospitals, 417’000 physicians, 219’000 dentists (10% of the world total), 438’000 hospitals beds and a medtech market worth USD 4.86 billion in 2017, according to EMIS and BMI reports.

In order to supply the demand for health services in the public and private sectors, Brazil imports around 45% of all the material and equipment used, from which 4% comes from Switzerland, being the 5th main supplier in 2017. From all imported medtech products, diagnostic imaging is the largest product area, accounting for 23% in 2017, closely followed by other medical devices and consumables such as patient aids and orthopaedics & prosthetics, each with 10-15% of the total amount.  Dental products, in turn, with 5% of the imports, was the best performing product area in 2017, recording a double-digit increase in both local currency and US dollar terms. 

For the first semester of 2018, the medtech numbers are also encouraging: while the general market for health devices grew 14.7% from January to June 2018, imports grew by 26%, totaling USD 3.3 billion, according to the Brazilian Alliance of Innovative Health Companies, ABIIS. These results are even more impressive given that the country is starting to recover from a deep recession, while waiting for decisive elections to take place in October 2018.

Amongst the reasons behind the sector’s positive indicators are the trends towards the consolidation and verticalization of this industry, posing different opportunities for Swiss companies to develop new businesses, as indicated in the next sections.

Verticalization of the health insurance companies

According to ABIIS, most of the sector’s growth is due to the verticalization of the health insurance plans, which have been investing in their own hospitals and clinics in order to reduce costs.  A 2014 study by the National Agency for Supplementary Health, ANS, showed that around 40% of the insurance health plans in Brazil already count with their own health units for attending their clients. 

In the past years, with the decline of private health beneficiaries and the scaling costs in the health sector, the verticalization has become one of the main strategies of the private insurance health plans to remain competitive. The verticalization also brings more control over the chain and reduces their dependence of third-parties. As an example, some insurance companies are importing medical devices directly from the foreign manufacturers, without the intermediation of a distributor. This option reduces the importation costs and allows the insurance plans to avoid frauds that could burden the system. For Swiss companies interested in the Brazilian market, this means a new opportunity to sell directly to the health insurance plans and be more competitive in terms of prices.

Investment funds and consolidation in healthcare services

In the last two years, the resources of the healthcare service providers financed most of the Brazilian health sector’s expansion (new hospitals, clinics and laboratories), while the banking credit lines accounted for only one third of the investments. In 2017, there were 40 M&A transactions in the sector, with 80% of them involving foreign capital shareholders. It is important to note that, since the enactment of Law 13,097/2015 in January 2015, foreign capital was allowed to invest in enterprises related to healthcare services in Brazil, including controlling and holding direct and indirect equity interests in hospitals and clinics. This change in the legislation led to the acquisition of participation shares in hospitals and clinics by foreign investment funds, allowing the consolidation of the sector by the acquisition of smaller health units. With more capital and less dependency from credit lines, these groups have been investing in new units or in expanding their existing structures, as demonstrated below.

Technology investments by leading private hospitals

Another trend that may interest Swiss medtech exporters is the search for more efficiency and the adoption of new technologies by the leading private hospitals in the country. Hospital Oswaldo Cruz in São Paulo, for example, has invested BRL 550 million in new technologies in the past 6 years, including investments in its robotic surgical center and the creation of a new clinical protocols system. Between 2018 and 2022, the hospital aims to invest additional BRL 185 million in innovation and research, according to a special edition of the business magazine Valor Econômico from June 2018. 
Hospital Albert Einstein, also in São Paulo, has been investing since 2017 in a modern Patient Electronic Record system based on big data, and plans to invest further BRL 800 million in an expansion plan that includes a new building of high complexity with surgical centers and an ICU. 
In turn, Hospital Sírio-Libanês is investing BRL 170 million in the construction of a new hospital with 144 beds and 6 surgical rooms in Brasília, the country’s capital. In São Paulo, the group will invest BRL 130 million in the expansion of its technological park and the hospital’s main area, in order to accommodate a larger educational unit and research lab. 
Owner of a complex with 5 hospitals in São Paulo, Hospital Beneficência Portuguesa plans to start the construction of a new hospital with 200 clinics and capacity for 3.5 thousand physicians in 2018, with investments worth BRL 200 million. 
Finally, Rede D’Or Group, known for its strategy based on M&As, has invested BRL 500 million in acquisitions from 2015-2017, and will invest additional BRL 2.5 billion in 2018 for the expansion of its network, with expectations to grow 20% this year.
The expansion of the leading private health hospitals shows that there are many opportunities for Swiss companies to explore in this market, given the Switzerland’s unique medtech landscape, highly focused in innovation.

Advice for Swiss Medtech Companies

Swiss medtech companies willing to take advantage of the above-mentioned opportunities may participate at the next Country Consulting Week Brazil in Switzerland, from November 19th to 23rd. At the occasion, the S-GE Senior Consultant for South America, Fabio Speciale, and the Swiss Business Hub Brazil Deputy Head Tatiana Campos, will provide first-hand advice to Swiss companies interested in the Brazilian market (such as market information, regulatory and tax aspects, leading trade shows, etc). Interested companies may register for a Country Consulting Session here: Register now!

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