Injecting Resilience into Brazil's Health-care Sector
Lessons learned from the pandemic have spurred Latin America's largest health care market to create regional manufacturing hubs, lower dependence on imports, and create local jobs.
When the COVID-19 pandemic hit Brazil in March of 2020, Maria del Pilar Muñoz Semitiel may not have known yet the toll it would take, but she knew her pharmaceutical company had to act fast.
“Certainly, the COVID-19 pandemic has been one of the greatest challenges humanity has ever faced,” said Muñoz, who is the Vice President of Sustainability and New Business at Brazilian prescription drug manufacturer Eurofarma. “No one knew what the impact on society and the economy would be, and there was also no time [to reflect on] a solution.”
Maria del Pilar Muñoz Semitiel. Photo: Eurofarma.
Maria del Pilar Muñoz Semitiel. Photo: Eurofarma.
As Muñoz shifted as many employees as possible to remote work, hired hundreds of temporary employees, and invested in expanding production lines, Eurofarma adapted quickly to the rapidly growing crisis. Other companies in the health care supply chain in Brazil had to act fast, too, because by March 21, 2020, COVID-19 had spread rapidly to every state within Brazil.
Fitesa also knew it was racing against the clock, according to Mariana Mynarski, the company’s Global Marketing Manager. Fitesa is one of the world’s largest manufacturers of the nonwoven raw materials sold to other companies to eventually become medical personal protection equipment (PPE) such as surgical face masks and surgical gowns. To meet the ever-growing demand for this life-saving equipment, the company immediately increased its production, making enough raw materials for 40 million surgical face masks and 8 million surgical gowns.
Just as COVID-19 tested Eurofarma and Fitesa’s capacity to serve Brazilians at exactly the time citizens needed health care products and services the most, the pandemic tested the resilience of the entire Brazilian health care sector. Though many other countries confronted shortages of PPE, pharmaceuticals, and vaccines, the high demand for these items posed particular challenges in Brazil because of the health care sector’s dependence on imports.
The lessons Brazil has learned include how to “invest ahead” so that the health sector can become more resilient, according to Mynarski. With plans for regional manufacturing hubs to expand the availability of local medicines and create thousands of jobs, the country’s health care industry aims to reduce its dependence on imports and build up its capacity to withstand future crises, she says.
To support Brazilian manufacturers as they scaled up local production of raw materials for PPE, vaccine components, and other vital drugs, IFC initiated financing initiatives and programs that provided technical assistance for Eurofarma, Fitesa, and União Química–established companies in Brazil’s healthcare sector—as well as other companies confronting the challenges of COVID-19.
These partnerships with the private sector were part of IFC’s Global Health Platform (GHP), the $4 billion financing platform to mobilize private investment to close health care supply gaps and support developing countries in their goal to strengthen resilience in the face of future pandemics or other critical health needs.
While reducing Brazil’s dependence on imports, investment in the Brazilian health care sector is also expected to drive economic growth, create jobs, and encourage local manufacturers to become greener by reducing plastic waste and greenhouse gas emissions during production.
“By helping developing countries build their own capacity, we are preparing them to deal with public health crises in the longer term,” says Tomasz Telma, former senior director of IFC’s manufacturing, agribusiness and services industry group. “This will also encourage investment and job creation as these economies recover.”
Reducing imports, reducing vulnerability
As COVID-19 spread across the world, few governments were prepared for the demand for life-saving supplies. It was no different in Latin America. For example, in one study on Brazil, Colombia, and Ecuador, only 20 percent of hospital workers reported having adequate and sufficient PPE in 2020.
According to government statistics released at the time, the country depended on imports from India for 90 percent of medical supplies in 2020. In June 2021, the President of the Brazilian Association of Pharmaceutical Ingredients Industry stated that only 5 percent of any vaccine’s crucial component (active pharmaceutical ingredients, or APIs) was being manufactured domestically.
Relying on imports for raw materials and inputs for pharmaceutical production left Brazil’s health sector vulnerable to supply chain disruptions and inflated prices.
"Recent supply chain disruptions and supply shortfalls have highlighted the importance of increasing local capacity of manufacturing and distributing supplies and medications to improve the resilience of the health sector and provide quality, affordable products and services to the Brazilian population," said Carlos Leiria Pinto, IFC Brazil Country Manager.
The challenges were multifaceted. “In addition to facing the pandemic and its consequences, we encountered other adversities such as the exchange rate impact, difficulties acquiring the raw materials, and the logistics chain,” said Muñoz. “Considering that Brazil is small compared to the total pharmaceutical market, [there is a] challenge of being able to supply large markets to guarantee scale.”
To increase the supply of PPE, IFC provided $37 million in financing to Viveo, the largest distributor of pharmaceuticals and medical consumables in Brazil. The company ensured access of imported medical products for hospitals and created a face mask manufacturing unit in the south of Brazil in just a few months. To make local production of PPE viable, IFC also provided $50 million in financing to Fitesa. This investment helped increase Fitesa’s production of raw materials for medical masks, hospital gowns and other PPE by an estimated 20,000 tons per year.
The financing allows Fitesa to “invest ahead,” according to Mynarski. “We supply the raw materials for everything used to manufacture the face masks, both the filter and the external layers, but also the materials for the surgical gowns and drapes,” says Mynarski. The equipment used to produce the raw materials is “the most modern” in the domestic market, “so we are investing ahead [of the competition and future demand].”
Giving local companies a shot
Vaccine shortages in Brazil were another area of concern during COVID-19. Delayed shipments of APIs from China slowed Brazil’s vaccination rates significantly, but there were other problems with Brazil’s vaccine rollout after it began on January 18, 2021.
As hospital beds in Brazil filled and ICUs overflowed with COVID-19 patients, several state capital cities like Cuiabá and Campo Grande halted vaccination campaigns due to shortages during one of the pandemic’s peaks in February of 2021.
IFC’s investments in vaccine manufacturing in Brazil aim to prevent future shortages like these. IFC's partnership with the Brazilian pharmaceutical company União Química includes a BRL 330 million loan (equivalent to $65 million), enabling União Química to renovate and equip its manufacturing facility in Brasília so the pharmaceutical company can produce bulk vaccines and potentially the active ingredients in COVID-19 vaccines.
The investment also allowed União Química to create a new production line capable of potentially producing 400 million doses of the vaccine per year. “IFC’s investment gave our company more possibilities to expand in the local market,” says Fernando Marques, President of União Química.
In addition to the need for more vaccines, the demand for pharmaceuticals also remains high: a May 2022 study by Brazil’s National Confederation of Municipalities showed that 80 percent of Brazilian cities faced pharmaceutical shortages.
IFC’s $150 million loan will enable Eurofarma to help narrow this gap. The support will help build a 280-thousand-square-meter manufacturing plant in Montes Claros, Minas Gerais, which will expand the production of antibiotics and other drugs. At full operational capacity, annual production should exceed 100 million doses for distribution in Latin America, according to Muñoz.
Eurofarma’s new factory is designed to meet the demands of the organization's future growth, both in Brazil and in international operations. Muñoz believes the company’s operations can produce pharmaceuticals for the largest markets in the world with the Montes Claros plant. She aims for Montes Claros to follow the same path of Eurofarma’s main plant in Itapevi, which in 2022 received certification from the USA’s Food and Drug Administration.
Increased production such as the new Eurofarma plant in Montes Claros will help local manufacturers reach more markets in Brazil. “Our team of more than 4,000 people reaches more than 98 percent of Brazilian municipalities,” said Muñoz.
Economic security, environmental sustainability
Investments in the health care sector have been shown to impact the economies of emerging markets in a positive and long-term way, according to IFC research.
“Efforts like these don’t just advance long-term health security,” as IFC’s Farid Fezoua and the World Bank’s Juan Pablo Uribe have written. “They also advance the economy more generally, attract skilled talent to the region, boost tertiary education to ensure students are employable in these industries, and support more reliable supply chains that in turn contribute to more advanced manufacturing that underpins economic development.”
The expansion of Brazil’s health sector is expected to benefit the local economy as well. Eurofarma expects its new Montes Claros plant will generate 600 direct jobs and 1,500 indirect jobs.
Increased investment in the Brazilian health care sector also advances environmental sustainability. For example, Fitesa is working to reduce its two big environmental impacts in the supply chain: plastic waste from single-use plastic PPE such as face masks and hospital gowns, and greenhouse gas emissions from the machines at its manufacturing plants.
“When we reduce the waste, we are also reducing the [environmental] impact” said Mynarski.
To strengthen sustainability, Fitesa began offering bio-based nonwoven materials in 2013. “For many years we have been working on bio-based polymers in our raw materials, and for the first time our customers are using bio-based materials to produce healthcare products" such as face masks, said Mynarski.
As Brazil’s health care executives look forward, focusing on new solutions and a stronger health care manufacturing system, they have not forgotten the crisis of COVID-19. Despite the scale of the catastrophe, the country's health care sector adapted to defend the lives of its citizens, according to Muñoz.
“The COVID-19 pandemic has highlighted the importance of the health sector,” she says, while noting that “resilience and preparation” are required of all sectors. The biggest lesson of all? “Anticipating scenarios is essential."
Published in September 2023