Is Brazil’s healthcare sector facing a paradigm shift?

Brazil’s healthcare system is at an inflection point. After growing by an average of 7.5% (in real local currency terms) between 2003 and 2014, FSG forecasts that Brazil’s healthcare spending contracted on average by -2.5% between 2015 and 2016. This abrupt contraction has been driven by reduced spending in both the public and private sectors (average contractions of 2.4% and 2.6% respectively), and has led to increased pressures on multinational companies operating in the market.

Nonetheless, the future of Brazil’s healthcare system remains one of growing demand and increased spending, with FSG forecasting that the market will return to its pre-recession level by 2019, while averaging real growth of 4.1% through 2026. However, while the market is set to rebound, the strategies necessary to win in this market will likely be starkly different, with multinationals operating in the healthcare space facing a growing need to shift focus away from pushing volume to demonstrating value to increasingly powerful payers and providers.

While multinational healthcare companies operating in Brazil have long faced expiring patents and increased competition, FSG believes that the new budgetary pressures on payers and providers (in both the public and private sector) are driving emergent trends that are only set to accelerate over the medium-term. Such movements include more onerous regulatory approval processes, tougher price negotiations in the public sector, vertical integration of the private supplementary system, and the emergence of new reimbursement processes in the major urban centers of São Paulo and Rio de Janeiro. Without maintaining flexible and evolving value propositions, while continuously mapping rapidly shifting customer needs and competitor strategies, multinationals will struggle to maintain current levels of revenue and profitability in Brazil. However, those companies better able to understand the shifting dynamics will be well-positioned to gain market share and attend the growing demand in the market that is expected over the next decade.

This blog post represents the first of a series of blog posts that will analyze the current moment in Brazil’s healthcare system, and the drivers of medium- and long-term growth prospects.  In post two and three, we will look at the unique forces across the public and private systems that are driving the budgetary squeeze and the resultant paradigm shift, and in our concluding post, we will analyze why Brazil is only set to require more healthcare provision and not less over the medium- and long-term. To better understand what strategies are likely to separate winners from losers during this shift, FSG clients should contact their Client Relationship Director, or arrange to attend our client exclusive Executive Healthcare Breakfast in São Paulo, scheduled for May 10th.

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