Transactional. The years 2022 and 2023 presented significant challenges for the industry, with a post-pandemic market correction and macroeconomic pressures resulting in one of the worst performances in decades. Depreciation made capital raising difficult for both private and publicly traded companies, reflecting in the transactional landscape of 2023.
As we enter 2024, the pharmaceutical industry faces unprecedented challenges. Market volatility remains high, driven by changes in capital dynamics and geopolitical issues, global inflation, and economic uncertainties. Sector-specific issues such as talent competition, politicization of drug pricing, health-related litigation, diversification in clinical trials, and the growing pressure to demonstrate commitment to environmental, social, and governance (ESG) issues may make the horizon difficult to perceive with the necessary clarity. Nevertheless, the new year yet begins with the prospect of being a busy year, characterized by a high volume of transactions – notable are the transactions already announced by industry giants such as Sanofi, Johnson & Johnson and Biogen, etc. – although lower valuations reflect economic factors and ongoing trends observed in recent years towards smaller and more manageable transactions.
Innovative therapies such as cell and gene therapy, as well as medtechs, are expected to continue generating exciting developments in this field, while venture capital remains crucial for sector financing. Partnerships and licensing agreements between companies are seen as promising investment strategies. Furthermore, with a growing focus on core assets, divestments are also expected to create value and allow large groups to redirect their efforts. Notable recent spin-offs include the consumer health divisions of GSK/Pfizer (creating Haleon) and J&J (creating Kenvue), as well as the separation of GE HealthCare from GE. Sanofi is the latest to join this trend, seeking to spin off its consumer health division in the fourth quarter of 2024.
In the context of the overall economy, the biopharmaceutical and medtech industries stand out as predominant components of the healthcare sector, which, in turn, maintains a strong position compared to other leading economic sectors on the stock exchange.
From a competition standpoint in the life sciences and healthcare sectors, we can expect rigorous scrutiny from regulators, especially regarding excessive drug pricing and obstructing market entry by generics or biosimilars in an anticompetitive manner. In the first case, with health budgets under pressure, the government is interested in keeping pharmaceutical prices low. If a competition authority believes that prices are excessively high and not aligned with costs or prices of similar products, enforcement measures may be taken. In the second case, competition and health authorities continue to critically examine any measures implemented by "originators" to continue benefiting from patent protection after patent expiration. Strategies for dealing with loss of exclusivity or so-called life cycle management are not an issue per se, but companies must be careful not to employ practices that may be seen as obstructing market entry by generics or biosimilars in an anticompetitive manner.
In straightforward business relationships, it is relevant to mention the high attention given to contracts that make up the supply networks in the life sciences and healthcare sectors. This is because recent years have been marked by disruptions in the supply chain, with global shortages of essential products, unprecedented raw material prices, and more, highlighting the importance of having contractual mechanisms to deal with these eventualities and facilitate business continuity. At a time when supply shortages are highly possible, contractual flexibility is likely to be much better than companies having to rely on the more radical button of dispute or termination.
Truth is that, despite these hurdles, the new year holds promise with a flurry of transactions, exciting developments in innovative therapies and medtechs, and a strategic landscape gaining prominence through partnerships, licensing agreements, and divestments. Furthermore, the heightened attention to contractual mechanisms in supply networks underscores the industry's commitment to ensuring resilience. Successfully maintaining a robust position amid evolving challenges will necessitate adept navigation of the intricate and dynamic landscape in the coming year.
Technology, Artificial Intelligence, and Digital Transformation. In the scene of life sciences and healthcare, the noteworthy themes of Technology, Artificial Intelligence, and Digital Transformation took center stage in 2023 and are poised to remain prominent in 2024. The recurrent usage of these headlines reflects the industry's trajectory and anticipates a continuation of these trends into the coming year. Indeed, as we project ahead to 2024 and beyond, it is apparent that significant investments in these industry sectors are likely to be channeled towards innovative technologies, building on the momentum observed in recent years.
From 2020 onwards, we have witnessed the ascent and proliferation of diverse transformative technologies that are actively shaping and gaining prominence in the healthcare landscape, marking significant progress. Noteworthy examples include personalized medicine, health virtual assistants or BOTs, digital twins, virtual and augmented reality, and the impact of the Internet of Things (IoT) on wearable devices, telemedicine, and the advent of virtual hospitals. Additionally, the utilization of 3D printing technology for medical tools and even organs exemplify the array of technological and digital innovations unfolding.
It is also imperative to underscore the central role that AI is poised to play in shaping these upcoming healthcare trends, particularly with the advent of generative AI, anticipated to wield a substantial influence in the next 12 months. This form of AI is expected to democratize access to various applications, streamline implementation processes, facilitate result interpretation, and generate personalized recommendations. Moreover, generative AI is anticipated to play a pivotal role in creating synthetic data for training medical algorithms without compromising patient privacy, thereby paving the way for the development of chatbots and virtual assistants that can aid across all stages of the patient journey.
The global emergence of artificial intelligence, particularly generative AI, signifies one of the most significant opportunities and challenges confronting professionals, consumers, and regulators across various industries. Notably, it is within the life sciences and healthcare sectors that this transformative wave assumes an exceptionally pivotal role. Advocates argue that, given their dedication to enhancing quality of life and promoting public health, these sectors possess not only the greatest potential for reaping benefits from AI utilization but also confront the most substantial risks, particularly concerning ethical and regulatory considerations.
Precisely because it emerges as a tool with numerous potential benefits for the sector, artificial intelligence has already sparked considerable interest and attracted substantial investments – as highlighted by Stanford University, the health sector led in private AI investment in 2022, raising a total of $6.1 billion.
Recent developments involving the use of AI in life sciences and healthcare have the power to revolutionize how data is analyzed, how doctors interact with patients, and how diseases are diagnosed and managed. AI-driven data analysis can provide faster and more accurate insights, facilitating clinical decision-making and contributing to more efficient diagnoses. The interaction between doctors and patients can also be enhanced, promoting a more personalized and patient-centered approach. Moreover, disease management can significantly benefit from AI algorithms, which can predict patterns and identify preventive interventions. This technological revolution has the potential to enhance the efficiency of healthcare systems, providing faster, more accurate, and personalized care.
The prospect of substantial improvements in public health instills optimism, yet it is imperative to approach the ethical and regulatory challenges associated with the use of AI and other technologies and digital innovations in healthcare pragmatically.
From an ethical standpoint, safeguarding the confidentiality of sensitive patient data, ensuring privacy, and bolstering security in terms of processing and sharing emerge as critical global concerns. Furthermore, the issue of equitable access to technological advancements takes center stage – ensuring that all segments of society can equally benefit from the digital transformation in healthcare is pivotal to prevent disparities in medical care and access to innovative treatments.
In Europe, an expanding landscape of new laws addressing privacy and data regulation is evident. The United States continuously introduces new elements into the intricate mosaic of state privacy laws. Across the globe, data privacy laws inspired by the General Data Protection Regulation continue to evolve, with Saudi Arabia and India representing the latest instances where companies will need to augment their compliance and privacy programs in 2024. In Brazil, the significance of LGPD (General Data Protection Law) stands out as part of this global movement towards more stringent data privacy regulation.
Where specific legislation is lacking and the utilization of artificial intelligence in business is on the rise, it becomes paramount for participants in the service chain to possess a clear, transparent, and real-time understanding of both opportunities and risks. Vigilantly tracking legislative debates, adhering to ethical principles, and meticulously formulating rules and contracts emerge as indispensable measures in this environment.
In the regulatory domain, the swift evolution of technology poses a challenge for regulatory bodies to keep pace. It is crucial to establish clear guidelines for the implementation of AI and other technologies in healthcare to ensure safety, efficacy, and compliance with ethical standards. The absence of adequate regulation can lead to gaps that compromise the integrity of the digital healthcare system.
Turning to the regulation of AI in Brazil, a key focus is on its application in medical devices and software. In 2022, Anvisa introduced specific requirements for the regularization of software as medical devices, known as SaMD (Software as a Medical Device), through Resolutions of the Collegiate Board No. 657/2022 and 751/2022. Although the regulation does not explicitly mention AI systems, the definition of SaMD, covering software that uses AI systems and tools for medical purposes, necessitates adherence to rules applicable to medical devices. This includes risk classification, notification and registration, labeling, usage instructions, and providing detailed information on the databases used for AI training, learning, and verification at the time of regularization, under the risk of non-approval of the request.
It is noteworthy that Anvisa, beyond granting registrations to various AI-incorporating products, integrates this technology into its regulatory activities. An example is the use of AI to identify the irregular commercialization of health-harmful products on the internet, showcasing Anvisa's commitment to technological innovations for enhancing the regulatory process and safeguarding public health.
In the Brazilian regulatory landscape, the response to the growing use of AI materialized with the introduction of the Artificial Intelligence Legal Framework Bill (PL 2338/2023) in the first half of 2023. This legislative proposal aims to establish comprehensive nationwide standards for the development, implementation, and responsible deployment of AI systems in Brazil. Termed the AI Legal Framework, this initiative represents a substantial legislative effort by the National Congress to comprehensively regulate AI. Essentially, the project seeks to safeguard the rights of individuals affected by AI-driven systems, address risks associated with these systems, and delineate the interactions of these individuals with AI providers and operators.
In the health sector, the initial high-risk classification of AI use, particularly in aiding diagnoses and medical procedures, was removed in the substitute text for PL 2338/2023 published in November 2023. The current version of the text suggests that various wearables and AI-based SaMDs have the potential to be classified as high-risk AI systems. This underscores the constant need for industry players to monitor (i) the increased cost attributed to the use of AI in health, given greater obligations to its agents and operators, and (ii) to avoid risks associated with the improper development or irregular use of AI technology in their operations. Such risks may include frequent inspections, fines, interruption of commercial activities, among other consequences.
Lastly, it is crucial to mention AI applications in the country's supplementary health sector. Within the framework of the Digital Transformation Plan of the National Supplementary Health Agency (ANS) and the Artificial Intelligence Solutions (AI) for the Public Power project, the agency has signed three contracts with startups for the development of AI projects aimed at facilitating administrative activities. There is also a significant rise in the use of AI by health insurance providers and other entities in the supplementary health sector, particularly for process optimization and automation.
Undoubtedly, this constitutes the primary focus for 2024 in the country. Now the central discussion revolves around which company will adapt, possibly allowing newcomers to surpass them, and which company will take the necessary steps to advance with the right partners, embracing changes for the development of better and safer products in more markets and at a faster pace.
Globalization and International Collaboration. The coronavirus pandemic prompted a rapid mobilization of the global scientific community, directing efforts towards the development of strategies and solutions. The imperative for international collaboration, dedicated to safeguarding and enhancing public health, became more evident than ever. Looking ahead to 2024, there is an anticipation of sustaining and solidifying this environment of international collaboration in health. The emphasis remains on proactively envisioning solutions for potential global public health challenges, particularly in light of emerging threats from new pandemics.
In July 2022, Brazil entered into a Cooperation Strategy with the Pan American Health Organization/World Health Organization (PAHO/WHO) for the period spanning 2022 to 2027. This initiative is designed to outline the strategic priorities that the country will pursue, with a particular focus on enhancing and fortifying health services and priority programs affected by the pandemic, notably the Brazil’s Public Health System (SUS). The strategy also underscores the promotion of research, innovation, and the generation of scientific and technological knowledge in the health sector, encompassing the development and manufacturing of pharmaceuticals, vaccines, herbal medicines, and other related products.
During 2023, the Brazilian Hospital Services Company (EBSERH) and the Pan American Health Organization (PAHO) also formalized a Cooperation Agreement, aiming to bolster the integration between federal university hospitals and Brazil's SUS. Simultaneously, the United Nations and the Brazilian government inked the new Brazil-UN Cooperation Framework for the period 2023-2027, delineating five thematic pillars: Economic Transformation for Sustainable Development; Social Inclusion for Sustainable Development; Environment and Climate Change for Sustainable Development; Governance and Institutional Capacities; and Humanitarian and Sustainable Development Actions.
At the Latin American level, amid the growing prominence of the regulatory reliance movement, discussions are intensifying regarding a potential shift in how Latin American markets collaborate with their respective health regulatory authorities. In April 2023, regulatory bodies in Mexico (Cofepris), Colombia (Invima), and Cuba (Cecmed) formally endorsed the Acapulco Declaration, setting the stage for deliberations on the establishment of a new regional regulatory entity overseeing pharmaceuticals in Latin America and the Caribbean, referred to as the Latin American and Caribbean Medicines Agency, or simply AMLAC. Furthermore, several other nations, including Bolivia, Dominica, Ecuador, El Salvador, Honduras, Jamaica, and the Dominican Republic, have expressed their interest in participating in this initiative.
The Acapulco Declaration acknowledges the challenges faced by the region in health, production, the economy, and society, particularly during emergencies such as the coronavirus pandemic. However, taking into account the regional context and specific needs, it is worth recognizing that the proposal to create a regional pharmaceutical organization for Latin America and the Caribbean is rooted in the necessity to address numerous obstacles encountered by some domestic regulatory frameworks in this domain. These include a lack of workforce and insufficient financial provisions, inconsistencies in regulatory capacities, and the absence of synchronization and harmony in regulatory requirements and procedures. Additionally, the region faces challenges related to obtaining essential drugs, maintaining the quality of pharmaceutical products, and combating the spread of fraudulent or substandard drugs.
Although not yet operational, the concept of creating a regional pharmaceutical agency for this area has been a subject of deliberation and discussion in various conferences over time.
Within the broader context of internationalization, it is noteworthy that, in recent years, Anvisa has championed a comprehensive agenda aimed at fortifying the reputation of the Brazilian regulatory environment in international markets and with global authorities. This initiative entails active engagement in bilateral, regional, and multilateral forums, where processes of harmonization and regulatory convergence unfold, establishing the technical-scientific foundations for the Agency's regulatory framework. By embracing the concept of "regulatory convergence" introduced by Anvisa itself, the Agency has positioned itself as one of the primary global authorities in drug regulation. The noteworthy technical prowess of Anvisa has been instrumental in paving the way for global initiatives, underscoring the Agency's deep involvement in an all-encompassing process of internationalization.
An instance of ongoing regulatory harmonization and convergence in Brazil, with potential implications for 2024, involves the establishment of a regulated framework for electronic cigarettes. Presently, the sole operative regulation is a prohibition. However, recognizing the evolving global landscape, Anvisa initiated a regulatory review process in 2019 to reassess this decision. As part of this initiative, a Public Consultation (CP) was released in December 2023 to solicit public input on the matter.
It is recognized that, across various regions globally, electronic cigarettes are being subjected to regulation as part of harm reduction strategies for individuals already using traditional cigarettes. Approximately 80 countries, including the United States, the United Kingdom, and Canada, have opted to regulate these products. Within the Americas region, eight countries have chosen a complete ban, such as Argentina, Brazil, Mexico, Nicaragua, Panama, Suriname, Uruguay, and Venezuela.
Last but certainly not least, it is imperative to acknowledge the relevance of China. As the transatlantic equilibrium gradually shifts away from Europe towards the United States, China emerges as a new influential power. The local pharmaceutical market has sustained a consistent double-digit growth rate for several years, coupled with robust domestic Research and Development (R&D) endeavors. According to EFPIA estimates, China's R&D growth stands at an impressive 12.9% Compound Annual Growth Rate (CAGR). If the present trajectory is maintained, China is poised to surpass Europe in the next 10 to 15 years, solely in terms of expenditure, though other indicators suggest this turning point may occur even sooner. Furthermore, notwithstanding the challenges posed by the COVID-19 pandemic, China persists in its pursuit of originality, positioning itself to become one of the world's top 10 most innovative countries. In the latest 2023 Global Innovation Index ranking, China secured the 12th position as the most innovative economy worldwide and the leading innovator among 36 upper-middle-income countries.
As an illustration on the fact that China has become a life sciences and healthcare sectors powerhouse, AstraZeneca has recently disclosed an acquisition plan of up to $1.2 billion for a Chinese cell therapy biotech company. Bayer and RTW Investments have recently revealed an equity investment in a clinical-stage Chinese company, aiming to introduce new medicines for Chinese patients dealing with serious cardiovascular and eye diseases.
The sustained growth of major pharmaceutical companies' local presence in China is exceptionally robust, underscoring the importance of the Chinese market. Now is the opportune moment for Brazil to strengthen ties with this nation, with the healthcare sector emerging as one of the most prominent avenues for collaboration.
Research and Development. Clinical Research took a significant leap in November 2023 when the Chamber of Deputies approved the bill ("PL 7082/17"), ushering in new regulations for clinical research involving human subjects and establishing the National System of Ethics in Clinical Research with Human Subjects to govern such studies in Brazil.
The approved text, championed by federal deputy and rapporteur Pedro Westphalen, meticulously outlines the rights of voluntary research participants. It places special emphasis on ensuring privacy guarantees, proper data treatment, fair compensation, the requirement for explicit and prior authorization for participation, among other provisions. Moreover, it delineates the responsibilities assigned to investigators, study personnel, sponsors, and entities involved in proposing, authorizing, and conducting and concluding research.
The bill also introduces crucial changes to existing regulations, including (i) reducing the deadlines granted to competent entities for analysis and approvals; (ii) transferring the role of registering, accrediting, and overseeing Research Ethics Committees (CEP) to the Executive Branch, shifting from the National Commission for Ethics in Research (CONEP), an entity linked to the CNS; (iii) affiliating the CEP with the institution responsible for the research; and (iv) modifying the rules concerning participants' access to approved methods and diagnostics in clinical research.
A point of intense debate revolves around the participant's right to access post-study medications. While sponsors currently must provide the medication free of charge for as long as the participant needs it, PL 7082/17 allows for the discontinuation of experimental medication in clinical trials for various reasons, such as the participant's decision, disease cure, introduction of a satisfactory alternative, lack of continuous benefit, adverse reactions, or technical and safety impossibility in obtaining or manufacturing. However, the bill mandates that sponsors provide an equivalent or superior alternative. Furthermore, discontinuation may occur after five years of commercial availability in Brazil or when the experimental drug is available in the Brazil’s SUS.
The prospect of positioning Brazil among the top ten countries in the global Clinical Research ranking is particularly intriguing. The bill's approval is seen as a catalyst for establishing a legally sound, ethical, and scientifically robust system in the country. Recognition of the competence of Brazilian researchers, their significant participation in clinical studies during the pandemic, and unique national characteristics, such as ethnic diversity and a robust healthcare ecosystem, will contribute to Brazil's competitiveness globally.
Looking ahead, the bill is expected to undergo Senate consideration in 2024, paving the way for new perspectives in clinical research involving human subjects in Brazil and subsequently opening a myriad of opportunities for business development in this sector in the country.
A final note on the significance of R&D this year is that, during the world's largest healthcare symposium, JPM, held in San Francisco in early January 2024, it became evident that the year's expectations center around accelerating medical innovation and drug development through new deals and partnerships. Additionally, it was observed that investors supporting the sector seem to have fresh capital available for reinvestment in promising companies. These well-funded entities are better positioned to support the research and development necessary to attract major pharmaceutical companies, enabling the transformation of scientific advancements into market-ready new drugs. Anticipated progress in manufacturing, a persistent challenge, and advancements in clinical trials for in vivo cell therapies are expected this year.
Major pharmaceutical companies themselves have also announced an extensive pipeline of R&D, particularly in an effort to counter the loss of market share due to the end of patent periods. Oncology is anticipated to maintain its position as the most active area in initiating clinical trials over the last decade, closely followed by gene therapies and orphan drugs for the treatment of rare diseases, as well as new drugs for the battle against obesity. Unlike traditional approaches involving extracting a patient's cells for external engineering before reinfusion, in vivo therapies aim to provide a more efficient treatment directly within the patient's body. Again, the first indications expected to undergo testing in trials are likely to be for cancer and autoimmune diseases.
Having said all this, research and development represent a significant focus in the life sciences and healthcare industry for both the short-term and medium-term.
Preventive Medicine VS. Precision Medicine. Preventive medicine spans a broad spectrum of subjects, covering areas such as exercise, well-being, mental health, and immunizations, underpinned by the timeless wisdom that “prevention is better than cure.”
In practical terms, preventive medicine establishes daily practices that contribute to well-being, involving regular check-ups, adopting a balanced and healthy diet, and engaging in consistent physical exercise. These holistic approaches reduce the likelihood of individuals developing diseases that may exacerbate over time, such as hypertension and diabetes.
Vaccines play a crucial role in this context, administered to prevent the manifestation of specific viruses or bacteria. By averting contact with these pathogens, vaccines impede the development of more severe diseases, including hepatitis A, influenza, tetanus, tuberculosis, and even COVID-19.
Indeed, the shift from a reactive care model to preventive care is a trend that has gained momentum since the coronavirus pandemic and remains a strategic priority for healthcare providers in the coming years. Technological advancements, such as artificial intelligence and wearable devices, will play a pivotal role in enabling early alerts and rapid interventions.
This is underscored by research highlighting the myriad and substantial long-term benefits of preventive medicine, contributing to the reduction of costs associated with treating avoidable conditions. The importance of this approach is heightened amid the accelerated global aging trend, aiming to mitigate the challenges posed by the rapidly aging world population to healthcare systems worldwide.
In this context, the current ascent of precision medicine and/or personalized medicine merits attention, aiming to enhance the prevention, diagnosis, and treatment of diseases with a particular emphasis on the individual. Precision medicine, instead of solely focusing on symptoms and medical history, integrates data conventionally used for diagnosis and treatment, such as signs, symptoms, family history, and complementary tests, with specific genetic profile information for each individual.
This approach seeks to achieve a more comprehensive and personalized understanding of each individual's health. By considering the genetic uniqueness of each person, healthcare professionals can adopt more precise preventive and therapeutic strategies tailored to individual needs.
We also foresee that, in the upcoming years, the utilization of artificial intelligence to tailor therapies will escalate. This technological integration not only holds the promise of more effective treatments with fewer side effects but also presents a more economically viable option for healthcare systems grappling with budgetary constraints. This scenario gains particular relevance amid the global financial strain on healthcare services, and it falls upon scientists to conclusively demonstrate the benefits of pharmacogenetic tests for a specific drug to patients.
Yet, despite the potential efficacy of personalized therapies based on genetic profiles, their implementation often proves unpredictable and costly. In certain instances, simpler solutions can achieve comparable results. Furthermore, the acceptance of this approach necessitates significant trust from individuals in governmental entities and companies responsible for managing their genomic data. One more critical concern highlighted is the lack of regulatory preparedness to handle therapies tailored for individual patients. Obtaining the requisite data for regulatory approval frequently relies on clinical trials with hundreds or thousands of participants, presenting substantial challenges for personalized therapies.
In light of these considerations, although the potential of personalized medicine is thrilling, it is imperative to tackle practical, ethical, and regulatory challenges to guarantee that this approach can genuinely and safely deliver affordable benefits to patients.
ESG. The ESG approach has gained prominence in recent years, fueled by the growing awareness of socio-environmental issues and the increasing demand from investors for enhanced transparency and sustainability. Consequently, compliance practices have become integral components of corporate agendas across various industries.
The life sciences and healthcare sectors, entrusted with a continuum of institutions committed to enhancing people's quality of life, are no exception. Playing a pivotal role in tackling global challenges like pandemics and ensuring widespread, unhindered access to healthcare, these sectors have progressively adopted stringent compliance measures in these domains, recognizing them as pivotal.
Companies in the sector are taking significant steps to mitigate environmental, social, and governance risks, aiming for broader compliance and excellence. They are adopting effective strategies across all their operational processes, driven not only by the inherent competitive advantage and profitability associated with compliance but also to distinguish themselves in the eyes of consumers who seek ESG-compliant companies.
In this industry, companies recognize the importance of demonstrating the integrity of their supply chains. This includes a commitment to patient access, transparency in clinical trials, ethical use of data, accessibility, and technological advancements.
It is worth noting that ESG issues are expected to become more relevant in mergers and acquisitions transactions in Brazil in 2024. Following COVID-19, many sector companies have adjusted their corporate and M&A strategies to use stronger balance sheets to address imminent ESG issues, focusing on the safety and resilience of supply chains. This trend is expected to accelerate, with life sciences and healthcare companies increasingly using M&A as a tool to enhance overall ESG performance while adding environmental expertise and capabilities. Besides impacting M&A strategy, ESG will also become more critical in business execution. This primarily concerns identifying the ESG impact of a transaction on the buyer, considering corporate strategy and capital structure, as well as mitigating risks during due diligence, especially regarding crucial ESG issues like waste reduction, energy efficiency, and carbon emission reduction.
In turn, emissions, particularly in light of the growing carbon market, are becoming a central concern for life sciences companies. Achieving sustainability is no longer a choice but a business imperative. Companies aspiring to lead the fight against climate change are addressing not only their direct emissions (Scope 1 and 2) but also focusing on indirect emissions (Scope 3) within their value chains. These Scope 3 emissions, though challenging to control, can constitute a substantial portion of a company's total emissions.
In the pursuit of sustainability and ethics, the life sciences industry is leading by example. The B3 stock exchange in Brazil introduced the Efficient Carbon Index ("ICO2 B3") to recognize and promote companies and financial institutions committed to emission transparency and a low-carbon economy. Even sectors like agriculture and livestock are taking steps to reduce their carbon footprint.
While the path toward ESG compliance, particularly in terms of sustainability, holds promise, it is imperative to distinguish authentic sustainability efforts from greenwashing. Some companies may overstate their sustainable initiatives without substantial actions, risking harm to their reputation and undermining trust. This underscores the motivation behind companies adopting stringent supply chain management procedures, refining partner selection criteria, enhancing compliance verification processes, and fostering collaborative efforts within their network to improve supply chain management.
From a social perspective, companies undergo evaluation for workplace equity, diversity, and inclusion, adherence to human rights, employee health and safety, and corporate social responsibility. Investors and, more importantly, consumers closely scrutinize this commitment.
Finally, well-defined and effectively managed corporate governance enhances positive visibility for companies, serving as a reflection of their integrity. Although the current scenario among companies in the sector already demonstrates commitment and adherence to ESG practices, the topic holds great promise and is anticipated to garner increased momentum in 2024. This expectation is particularly heightened due to the pressing legislative and regulatory agenda surrounding the theme in the country this year.
Economic-Industrial Health Complex – CEIS (In Portuguese, “Complexo Econômico-Industrial Da Saúde – CEIS).In September 2023, the Federal Government signed Decree No. 11,715/2023, instituting the National Strategy for the Development of the Economic-Industrial Health Complex (CEIS), aiming to promote the country's reindustrialization with inclusion and sustainability, focusing on one of the most important sectors for Brazilian industrial policy – life sciences and healthcare.
By spearheading this initiative, the State plays a crucial role, establishing policies that regulate and promote actions considering primary objectives such as reducing vulnerability in the Brazil’s SUS, adhering to SUS principles, and expanding public access to products and services.
The project comprises six structural programs focused on expanding the national production of items prioritized for the SUS, aiming to decrease the country's dependence on foreign inputs, medications, vaccines, and health products, as well as providing broad access to healthcare for all.
Eleven ministries actively participate in this initiative, under the coordination of the Ministries of Health and Development, Industry, Trade, and Services, alongside various public agencies, and institutions.
The strategy is structured around three key industrial sectors: (i) a foundation in chemical and biotechnological advancements, (ii) a comprehensive sector covering mechanical, economic, and material aspects, including medical devices, and (iii) health services, fostering institutional, economic, and political collaborations with a specific focus on innovation and health production.
The initiative is set to redefine Brazil's industrial development globally, advocating for official laboratories to shoulder the responsibility of providing medications across the entire public network. This undertaking is marked by the integration of development projects with income generation, fostering national self-sufficiency. As a result, a promising outlook emerges, particularly for domestic production, including active pharmaceutical ingredients, orphan drugs for treating rare diseases, and enhancements in the structure of direct healthcare provision. Inevitably, there is considerable anticipation for an upswing in solutions and products subjected to CONITEC scrutiny.
This is intricately connected to the thorough analysis conducted by various experts and government authorities on Brazil's supply chain and the essential investment needed in domestic alternatives to address product shortages.
Regarding investments, the total is projected to reach 42 billion reais by 2026. With this, the government seeks to equip the SUS with local production and technology, while also mitigating the growth of the healthcare trade deficit, currently at 80% over the past 10 years.
Medicinal Cannabis. The year 2023 proved to be tumultuous for Brazil's medicinal cannabis sector. Despite heated discussions, from the prohibition of importing plant flowers under RDC 660/2022 to the decriminalization of drug possession and Anvisa's stringent regulatory measures against advertising, the overall result is positive.
The utilization of medicinal cannabis products is increasing, propelled by enhanced medical education and progress in clinical research. In Brazil, access to these products, when prescribed, can be acquired either through direct importation by the patient, regulated by Anvisa's Collegiate Board Resolution RDC No. 660/2022, or through the purchase of approved products from pharmacies, as stipulated in Resolution RDC No. 327/2019, currently undergoing review and update.
According to the Brazilian Association of Cannabinoid Industries (BRCANN), commercial flow of medicinal cannabis products more than doubled in 2021 compared to the previous year. In 2022, requests exceeded the previous year by over 100%, and in 2023, an increase of nearly 150% is expected compared to the previous year.
It is anticipated that in 2024, with the update of RDC No. 327/2019, pharmacy sales will surpass direct patient importation. Clear regulation of the sector not only expands access to these products, reducing the financial impacts of litigation but also ensures patient safety by requiring therapeutic protocols approved by health authorities. Furthermore, such regulatory measures stimulate the market, enhance the patient journey, and offer increased security for healthcare professionals engaged in the process.
Concurrently, scientific studies and clinical research in this field have surged by 650% in the last 12 years. Research conducted by Prohibition Partner indicates that in 2022, 60 scientific studies with characteristics of randomized and controlled clinical trials were published worldwide. By August 2023, 49 clinical trials involving cannabinoid-based medications had already commenced. Presently, the United States leads in clinical trial production, followed by the United Kingdom, Canada, Israel, and, finally, Germany and Italy, closely competing. While many studies aimed to understand how cannabinoids could alleviate bodily pain, there is a significant increase in research investigating potential benefits in treating mental disorders such as anxiety, depression, and degenerative diseases.
Despite Brazil's considerable potential for advancing scientific studies on the subject, the country's involvement remains restricted, primarily due to challenges in conducting clinical research. The approval of PL 7082/2017 has the potential to alter this landscape.
Moreover, despite evidence of the efficacy of medicinal cannabis products, the absence of federal regulation hinders their supply through the SUS, prompting many patients to seek legal remedies. Although some states, such as São Paulo (Law No. 17,618/2023), have already enacted laws and regulations for the free distribution of these products through SUS, practical implementation is still underway.
All-in-one, 2024 will undoubtedly witness substantial regulatory and legislative advancements in the country, offering clearer guidelines for this sector, including product commercialization, service intermediation, and even plant cultivation. Once accomplished, the country will finally take its inaugural steps toward the forefront of this global market.
Agribusiness. At the end of the year 2023, the approval of Bill No. 1,459/2022, which establishes a new legal framework for the production, registration, commercialization, and use of agricultural pesticides, their components, and related products, represented a significant development for the sector.
The bill will now move on to the presidential sanction phase, and once sanctioned, it will introduce substantial changes aimed at improving the speed and efficiency of new product registration procedures. This will bring tangible benefits to companies, fostering innovation, expanding the variety of available products, and creating a more attractive business environment for investments.
Still within this overarching theme, noteworthy is the current regulatory effort regarding the regulation of sanitary requirements for plant-based foods by the Ministry of Agriculture and Livestock (MAPA), especially concerning minimum identity and quality requirements, visual identity, and labeling rules for plant-based analog products.
After the conclusion of the Public Consultation (CP) in September 2023, we are now entering the phase of analyzing the received contributions and subsequently crafting the final instrument intended for publication. Thus, the imminent arrival of a new regulatory framework for the topic is anticipated, with a future regulation also expected from Anvisa as part of its Regulatory Agenda 2024 – 2025.
So, in 2024, we can once again expect significant strides in regulatory and legislative developments in the agribusiness sector.
HOW CAN WE ASSIST YOU TODAY?
As seen, the landscape of the life sciences and healthcare sectors in Brazil in 2024 is filled with opportunities and significant challenges. In this dynamic context, we are committed to providing strategic support to our clients, guiding them through the complexities and emerging opportunities. Whether in implementing efficient tax solutions for transactional businesses in the health field, monitoring constantly evolving regulations to ensure compliance, or maximizing the benefits offered, we are here to be the partner that helps our clients navigate this challenging landscape.
Our commitment goes beyond providing services; we indeed seek to empower the growth and innovation of our clients, making the most of the opportunities that 2024 holds for these ever-evolving industry sectors.