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2 0 2 1 THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL YEARBOOK 4th editionwww.abraidi.com.br TH E S U P P LY C Y C LE O F H E A LT H C A R E P R O D U C TS IN B R A ZI L 2 0 2 1 THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL YEARBOOK ABRAIDI Associação Brasileira de Importadores e Distribuidores de Produtos para Saúde 4th edition 2 0 2 1 THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL YEARBOOK ABRAIDI Associação Brasileira de Importadores e Distribuidores de Produtos para Saúde 4th edition THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL004 AUDIT COMMITTEE Eduardo S. Facci (holder) ORTHOMAXX HOSPITALAR EIRELI/SP Fernando Reatto (holder) CIENLABOR INDÚSTRIA E COMÉRCIO LTDA./ PB Hugo Feijó F. Freire (holder) JOTEC DO BRASIL IMP. E COM. EQUIPAMENTOS HOSPITALARES/SP José Luis Pollesi (alternate) MULTIVISION COMÉRCIO DE MATERIAL HOSPITALAR EIRELI/ES ETHICS AND PROCESSING COMMITTEE President Volnei Luiz Ortigara CANADÁ CENTRAL DE NEGÓCIOS DO BRASIL LTDA./RS Vice-President Henrique César Martins HMS IMPORTAÇÃO E COMÉRCIO DE PRODUTOS MÉDICOS EIRELI/SP Members José Luis Pollesi (holder MULTIVISION COMÉRCIO DE MATERIAL HOSPITALAR EIRELI/ES Aline Moura (1st alternate) ATRIAL SAÚDE/SP Roberley Carlos Polycarpo (2nd alternate) UL QUÍMICA E CIENTÍFICA LTDA./ES BOARD OF DIRECTORS President AT. CIRÚRGICOS LTDA./RS Vice-President Ronaldo Sampaio Carneiro MARIN MEDICAL LTDA./BA Director Cândida de Fátima Bollis SP INTERVENTION LTDA./SP Counselors Cassius Maggioni CORTICAL COMÉRCIO DE PRODUTOS CIRÚRGICOS LTDA./SP Eduardo Ferreira Simões IMPLAMED IMPLANTES ESP. COM. IMPOR. EXP. LTDA./SP Fábio Zanini LIVANOVA BRASIL COM. E DIST. DE EQUIP. MÉD. HOSP. LTDA./SP Gláucio Pegurin Libório ORTHOHEAD INSTRUMENTOS E IMPLANTES CIRÚRGICOS LTDA./SP Henrique César Martins HMS IMPORTAÇÃO E COMÉRCIO DE PRODUTOS MÉDICOS EIRELI/SP Luzia de Almeida Assis Silva PORTO SURGICAL COMÉRCIO DE MATERIAL HOSPITALAR LTDA./RJ Marcos Sylvestre MEDARTIS IMPORTAÇÃO E EXPORTAÇÃO LTDA./SP Maria Cecilia Patrícia Braga Braile Verdi BRAILE BIOMÉDICA IND. COM. E REPRESENTAÇÕES LTDA./SP Murilo P. Rocha CICLOMED DO BRASIL LTDA./SP Roberley Carlos Polycarpo UL QUÍMICA E CIENTÍFICA LTDA./ES LTDA./SP GOVERNANCE MANAGEMENT 2020-2023 THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 005 EXECUTIVE AND TECHNICAL STAFF Executive Board Bruno Boldrin Bezerra Technical Board Sérgio Alcântara Madeira Administrative Staff Daise de Oliveira Domingues ADMINISTRATIVE/FINANCIAL Deborah Ramos SECRETARIAT Lucas Macedo GOVERNMENT AND INSTITUTIONAL RELATIONS Tatiane Munhoz COMMUNICATION/EVENTS Tayane Araújo RELATIONSHIP/SERVICE TO THE MEMBER ABRAIDI YEARBOOK 2021 IMPLEMENTATION Associação Brasileira de Importadores e Distribuidores de Produtos para Saúde – ABRAIDI Websetorial Consultoria Econômica Duplo Z Inteligência de Comunicação COOPERATION (In alphabetic order) Bruno Boldrin Bezerra ABRAIDI Fanny Rosa Zygband DUPLO Z INTELIGÊNCIA DE COMUNICAÇÃO Lucas Flávio de Macedo ABRAIDI Patrícia Véras Marrone WEBSETORIAL Sérgio Alcântara Madeira ABRAIDI Sérgio Dilamar Bitencourt da Rocha ABRAIDI SPECIAL COOPERATION – ARTICLES Celso Ienaga (Dextron Consulting) – Sustainability of the health system Jefferson Fernandes (Associação Brasileira de Telemedicina e Telessaúde) – Digital Health: Opportunities at the Front Door Leonardo Giusti e Sheila Mittelstaedt (KPMG) – Changes in health in post-covid-19 Proofreading and translation: Vero Verbo Serviços Editoriais Graphic design: Laika Design Print: Centrográfica Table of Content LETTER TO THE READER MISSION, OVERVIEW AND VALUES INTRODUCTION 10. 12. 14. 16. ABRAIDI’S ACTIONS AND NUMBERS 24. THEMES AND ACTIONS 2020/2021 37. COMPLIANCE CHAPTER 1 46. INDUSTRY AND INTERNAL MARKET NUMBERS 42. HEALTHCARE PRODUCTS SECTOR CHAPTER 2 53. FOREIGN TRADE IN HEALTHCARE PRODUCTS 74. CHANGES IN HEALTH POST-COVID-19 (KPMG) 62. COVID-19: POST- -PANDEMIC IMPACTS AND CHANGES CHAPTER 3 92. DIGITAL HEALTH: OPPORTUNITIES AT THE FRONT DOOR (ABTMS) 98. HEALTH DISTORTIONS AND THE SUSTAINABILITY OF THE SECTOR 101. SUSTAINABILITY OF THE HEALTH SYSTEM (DEXTRON) CHAPTER 4 124. CONCLUSION 126. ABRAIDI MEMBER COMPANIES 108. PAYMENT MODELS AND HEALTHCARE PRODUCTS SUPPLIERS 110. DISTORTIONS IN HEALTH 110. REVENUE RETENTION 118. FINANCIAL DISCOUNT 121. PROVISION OF ADDED SERVICES 122. COST OF DISTORTIONS 114. DISALLOWANCES 116. DEFAULT THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL008 LIST OF CHARTS Chart 1: Segmentation of Abraidi Members by Type of Activity. Page 18 Chart 2: Distribution of Abraidi Members by Size (Annual Revenue). Page 19 Chart 3: Distribution of Abraidi Members by Region. Page 20 Chart 4: Distribution of Abraidi Members by Federation Unit. Page 21 Chart 5: Segmentation of Abraidi Members by Specialty. Page 22 Chart 6: Impacts of the 18% Tax Rate on Medical Devices in Abraidi Members in the State of São Paulo. Page 27 Chart 7: Status of Abraidi Members in Relation to Compliance Programs. Page 41 Chart 8: Contractualization of Abraidi Members. Page 46 Chart 9: Participation of Players in Contractualization with Abraidi Members. Page 46 Chart 10: Consumption of Healthcare Products by SUS. Page 48 Chart 11: Top 10 Main Products – OPSM Consumed by SUS. Page 49 Chart 12: Distribution of Abraidi Members’ Revenue by Paying Source. Page 51 Chart 13: Income Distribution by Type of Customer. Page 52 Chart 14: Apparent Consumption of Implantable Medical Devices, Materials and Support Equipment and Percentage Share of Imports in this Market. Page 54 Chart 15: Brazilian Production of Implantable Medical Devices, Materials and Support Equipment. Page 55 Chart 16: Trade Balance of Implantable Medical Devices, Materials and Support Equipment. Page 56 Chart 17: Main Countries of Origin of Imports of Implantable Medical Devices, Materials and Support Equipment. Page 57 Chart 18: Main Destination Countries for Implantable Medical Devices, Materials and Support Equipment Exports. Page 60 Chart 19: Measures Taken to Reduce Costs During the Pandemic Period. Page 67 Chart 20: Increased Revenue Retention, Disallowances and/or Defaults During the Pandemic. Page 69 Chart 21: Perspective of Recovery by Abraidi Members. Page 70 Chart 22: Permanent Changes that have Been or will Be Adopted After the Pandemic. Page 72 Chart 23: Revenue of Abraidi Members Retained by Paying Source. Page 110 Chart 24: Average Number of Days Until the Invoice Is Issued by Abraidi Members by Paying Source. Page 111 Chart 25: Average Number of Days Between Invoice Issuance and Payment – Abraidi Members By Paying Source. Page 112 Chart 26: Disallowance Practice by Health Insurance Plans. Page 114 Chart 27: Total Volume of Disallowances from Abraidi Members. Page 115 Chart 28: Losses with Default by Hospitals, Health Insurance Companies and Public Agencies. Page 116. Chart 29: Default Volume – Resources Receivable for More than 180 Days or Lost – Abraidi Members. Page 117 Chart 30: Hospital Discounting Practice/Financial. Page 118 Chart 31: Retaliation by Denying the Granting of a Hospital Discount. Page 119 Chart 32: Percentage of Suppliers’ Operating Costs Arising from Distortions in the Healthcare Products Industry. Page 122 THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 009 LIST OF FIGURES Figure 1: Open letter to the government of São Paulo, published on January 15, 2021. Page 25 Figure 2: Folha de S.Paulo Seminar sponsored by Abraidi. Page 26 Figure 3: International Compliance Seminar and launch of the 4th edition of the Abraidi Code of Ethics and Conduct, with the participation of Nancy Travis, vice-president of Compliance of AdvaMed. Page 37 Figure 4: International Compliance Seminar and launch of the 4th edition of the Abraidi Code of Ethics and Conduct, with theparticipation of representatives from Latin America and Europe associations. Page 39 Figure 5: Average percentage drop in revenue and surgical volume during the most acute phase of the pandemic in 2020 – Abraidi members. Page 66 Figure 6: Average increase in revenue retention, disallowances and default – Abraidi members. Page 70 Figure 7: Possible resumption pattern for healthcare product suppliers. Page 85 Figure 8: Possible resumption patterns for health and life sciences. Pages 86-87 Figure 9: The crisis and the different effects on the sectors. Pages 88-89 Figure 10: The organizational impacts of the crisis. Page 90 Figure 11: VBHC Implementation Matrix (EIT Health). Page 105 Figure 12: Average time between invoice issuance and receipt from Abraidi members – 2020. Page 113 Table 1: Main Countries of Origin of Implantable Medical Device Imports, by Product – 2020. Page 59 Table 2: Main Destination Countries for Implantable Medical Device Exports, by Product – 2020. Page 61 Table 3: Payment Models Used by Hospitals and Health Insurance Companies that Are Clients of Abraidi Members. Page 109 LIST OF TABLES THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL010 Letter to the Reader THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 011 The year 2020 went down history because of the covid-19 pandemic, which hit the entire planet and challenged the health system around the world. For medical device suppliers, it was a difficult year of overcoming, resilience and caution. In order to capture the impact of the pandemic on manufacturers, importers and distributors of healthcare products, Abraidi promoted a change in the production schedule of the Yearbook, conducting the survey with its members between January 18 and February 22, 2021. Thus, the data contained in this 4th edition reflects consolidated information for the entire year of 2020, unlike the methodology used in previous editions, which enabled a more accurate analysis of the facts. During the most acute phase of the first wave of the pandemic, between March and May 2020, a significant portion of the members practically paralyzed their activities, due to the suspension, cancellation or postponement of elective surgeries. This situation has led many companies to review their operations and make changes to stay alive. In order to bring to the authorities the challenging scenario and the difficulties faced by their members and the supply sector as a whole, Abraidi has participated intensely and actively in several fronts of sectorial and governmental dialogue. Besides the suspension of elective surgeries, companies were severely affected by the problems of international and national transport of products, especially to more distant regions, and by the shortage of essential products, such as personal protective equipment (PPE) and respirators, to mention some. We also contributed to the development of health safety protocols for supplier’ operations, emphasizing the most acute stages of risk, such as presence in the hospital environment, and we requested the federal government to prioritize industry professionals and distribution of healthcare products in the vaccination campaign against covid-19. In short, it was a year of great difficulties and hard work. Despite a tentative recovery in the third and fourth quarters of 2020, we are currently living with a new wave of the pandemic, which has overcrowded hospitals and threatened the health system. We are again facing the closure and suspension of several activities and operations, which represents another testing period for the entire society and also for our industry. We hope that vaccination can take great steps, as this is the only way we will be able to take care of patients awaiting treatment and those whose health is already aggravated. In this way, we will be able to fully resume our activities and reassume the economic importance that the sector represents, contributing to the country’s recovery and to overcome the crisis in which we live. Good reading! Sérgio Dilamar B. da Rocha President the Board of Directors 012 MISSION, OVERVIEW AND VALUES THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 013 Ensure that member companies represent the cutting edge in healthcare solutions. Mission To be an association that represents distributors and importers of healthcare products, supported by ethics and transparency, promoting actions that make our members references in the health market. Overview Good citizenship, which include: > Ethics > Social responsibility > Quality management systems > Continuous focus on the weakened being, the patient Values THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL014 Introduction The data in this 4th edition of the Yearbook refers to the period between January and December 2020. From this year on, Abraidi will adopt the closed fiscal year as a reference for collecting information. Until last edition, the calculation was based on the months of September to August of the following year. The association believes that the new criteria will make it possible to draw a more accurate radiography of the sector, in addition to making the respondents’ work easier. The paradigm change may help explain any differences in results between this edition and the previous one, such as the numbers related to sales, even discounting the effects of the pandemic. Another variable that may have influenced some results was the increase in companies associated with Abraidi in the last year: there are 297 in total, 17 more than in 2019. According to the methodology adopted by Websetorial, responsible for the technical preparation of the report, after extracting the data from respondents, an extrapolation of the results is made for the set of members. THE 2021 ABRAIDI YEARBOOK – THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL IS PUBLISHED IN A PARTICULARLY DIFFICULT MOMENT NATIONALLY AND GLOBALLY. ITS CONTENT STRONGLY REFLECT THE IMPACT THAT THE COVID-19 PANDEMIC HAD ON IMPORTERS, DISTRIBUTORS AND MANUFACTURERS OF HEALTHCARE PRODUCTS ASSOCIATED WITH THE ENTITY AND WHO PARTICIPATED IN THE PREPARATION OF THE DOCUMENT. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 015 The information in the 2021 Yearbook was obtained from a 49-question questionnaire, available on an online platform. 103 companies responded to the survey, although the number of participants varied among the questions. In compliance with the General Data Protection Law (LGPD), both in the questionnaire and in the extraction of information, no personal or participating company data was identified. For the yearbooks to provide an increasingly reliable portrait of the body of members and the industry, with their specificities in terms of size, revenue, number of employees and types of activity, Abraidi created, in 2019, a control group of companies, trying to maintain the existing proportionality in the set. The idea is to build, over time, a representative and relevant database of the sector and a historical series that contribute to the entity’s interaction with its stakeholders, and the internal public’s interaction (the members themselves) with the government. Abraidi considers it essential to give visibility to this sector that supplies hospitals and other healthcare service providers with equipment, materials and medical devices and whose performance is decisive to ensure the quality of life in the population, in addition to contributing to socioeconomic development of the country. We are talking about companies that were responsible, last year, for more than 15,000 direct jobs, which had revenues of around R$ 7.1 billion in 2020 and which, although concentrated in São Paulo and in the Southeast region, operate nationwide, due to a surprising capillaritythat reaches all regions and states in the country. In order to describe faithfully this universe, its contributions, difficulties and efforts to overcome problems, as in the covid-19 pandemic, is the purpose of this Yearbook and the next ones to come. We hope that they provide a comprehensive view of the sector’s commitment to the Brazilian health. DATA IN THIS YEARBOOK – 4TH EDITION – RELATE TO THE PERIOD BETWEEN JANUARY AND DECEMBER 2020. 1 1 ABRAIDI’S Actions and Numbers NUMBERS 297 MEMBERS1 MORE THAN 15 thousand R$ 7.1 billion3 DIRECT JOBS2 IN REVENUE IN 2020 Source: ABRAIDI. IMPORTER ONLY 10 - 3.4% DISTRIBUTOR AND MANUFACTURER 3 - 1.0% IMPORTER AND MANUFACTURER 2 - 0.7% IMPORTER, DISTRIBUTOR AND MANUFACTURER 12 - 4% 1February 2021 2 Estimate based on a survey with a sample of 100 member companies and extrapolated for the entire group of members. 3Calculation based on a survey with a sample of 77 member companies and extrapolated for the entire group of members. ABRAIDI’S ACTIONS AND NUMBERS Segmentation of Abraidi Members by Type of Activity In % and number of members – February 2021 CHART 01 MANUFACTURER ONLY 1 - 0.4% DISTRIBUTOR ONLY 137 - 46.1% DISTRIBUTOR AND IMPORTER 132 - 44.4% THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 019 MICRO: over R$ 2 million; LOW: over R$ 2 million; AVERAGE: over R$ 6 million; HIGH II: over R$ 20 million; HIGH I: over R$ 50 million. Source: ABRAIDI Distribution of Abraidi Members by Size (Annual Revenue) In % of members – February 2021 CHART 02 41% AVERAGE 11% MICRO 20% LOW 9% HIGH I 19% HIGH II ABRAIDI size rating (in annual revenue): 1. ABRAIDI’S ACTIONS AND NUMBERS020 Distribution of Abraidi Members by Region In % of members – February 2021 CHART 03 Source: ABRAIDI 14% NORTHEAST 3% NORTH 63% SOUTHEAST 7% MIDWEST 13% SOUTH THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 021 SÃO PAULO 133 - 45% 31 - 10%RIO DE JANEIRO MINAS GERAIS 14 - 5% PERNAMBUCO 14 - 5% DISTRITO FEDERAL ESPÍRITO SANTO 11 - 4% 9 - 3% BAHIA 9 - 3% PARÁ 6 - 2% GOIÁS 5 - 2% PARAÍBA RIO GRANDE DO NORTE CEARÁ 4 - 1.3% 3 - 1% 3 - 1% MARANHÃO MATO GROSSO DO SUL 1 - 0.2% 1 - 0.2% SANTA CATARINA 4 - 1.3% MATO GROSSO 3 - 1% 3 - 1% 3 - 1% PIAUÍ SERGIPE AMAZONAS 2 - 0.4% 1 - 0.2% 1 - 0.2% 1 - 0.2% ALAGOAS AMAPÁ ACRE 18 - 6%PARANÁ RIO GRANDE DO SUL 17 - 6 % Distribution of Abraidi Members by Federation Unit In % and absolute number of members – February 2021 GRÁFICO 04 Source: ABRAIDI 1. ABRAIDI’S ACTIONS AND NUMBERS022 5% 1 It is common for importers and distributors to work in several specializations at the same time. 2 Orthopedics also includes spine. 3 Cardiovascular surgery comprises cardiology, vascular surgery and interventional cardiology. 4 Special materials: any materials or devices for individual use that help in diagnostic or therapeutic procedures and that do not fit the specifications of orthotics or prostheses, implantable or not, and may or may not reprocessed, according to rules determined by Anvisa. ORTHOPEDICS2 73% 70%CARDIOVASCULAR SURGERY3 GENERAL SUR- GERY 21 % OTHERS 20% UROLOGY 15% BUCOMAXILLARY 13% CONSUMPTION 11% PLASTIC SURGERY 9 % NEPHROLOGY 6% RADIOLOGY ODONTOLOGY 5% 4%OPHTALMOLOGY 53%NEUROSURGERY SPECIAL MATERIALS4 23 % Segmentation of Abraidi Members by Specialty1 In % of members – February 2021 GRÁFICO 05 Source: ABRAIDI THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 023 The covid-19 pandemic, which led public and private hospitals to cancel, suspend or postpone elective surgeries to meet the growing number of patients with the disease, had a significant impact on the surgical volume performed by Abraidi members in 2020. Compared to the previous year, there was a drop of 8.3% in relation to SUS surgeries and 40.4% in procedures performed by supplementary health. Surgical volume THE DROP IN SURGICAL VOLUME REPORTED BY MEMBERS IN 2020 WAS 8.3% IN SUS AND 40.4% IN SUPPLEMENTARY HEALTH. TEMAS E AÇÕES 2020/2021 The decision of the government of the state of São Paulo to restrict the application, as of January 2021, of the ICMS Agreement No. 01/99, which exempted 197 products which are important to the public and private health systems, led Abraidi to adopt a set of initiatives to try to reverse the measure and reduce the negative impact it will have on companies in the area and, therefore, on patients. The new rule increases from 0% to 18% the ICMS rate on the sale of healthcare products to clinics, laboratories, hospitals and private health insurance plans. Even though the tax acts on the private sector, the measure will affect the entire health chain, as the exemption maintained in sales to public hospitals and Santas Casas finds a tax credit problem that falls on the distributor, who buys from the industry and subsequently sells to SUS. Besides that, the state will “export” ICMS to other states. Because all operations with healthcare products that have their origin or destination in São Paulo will suffer impacts. It is important to remember that the state of São Paulo is a national and international hub, where most of the imported products that supply Brazil pass through, in addition to having the largest concentration of manufacturers. The restriction imposed by São Paulo may trigger a fiscal war with other states and compromise the renewals of ICMS Agreement No. 01/99 nationwide. If this eventually occurs, the application of an 18% rate on the products can result in an increase in costs of R$ 2.54 billion/year for public health and R$ 2.73 billion/year for supplementary health, according to estimates by Aliança Brasileira da Indústria Inovadora em Saúde (ABIIS). Besides the abrupt increase in the tax, Abraidi questions the moment when the decision was taken, when companies are financially weakened as a result of the drop in economic activity caused by covid-19. The health sector was the only one to have the full increase in taxation, at a level far above the 20% cut in tax benefits announced by the government when it presented Bill of Law No. 529/2020 in the Legislative Assembly of the State of São Paulo (Alesp). Among the initiatives to reverse the decision, Abraidi forwarded, together with other entities in the health area, several proposals to the state government and state deputies, including helping to claim the exemption for the public sector, which was contemplated in the Law No. 17,293/2020. ABRAIDI PROMOTES SEVERAL INITIATIVES AGAINST THE 18% RATE AND PARTICIPATES IN THE UNITED FOR HEALTH MOVE- MENT #AGORANÃOÉHORASP* *NOWISNOTTHETIMESP. ICMS Agreement No. 01/99: Renewal and Changes in São Paulo THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 025 See below other actions taken by Abraidi to defend the industry and its members and try to reverse the decision of the government of São Paulo: Negotiation: a proposal was presented to the state government to reduce the 18% rate to 2%; with the government resistance, the industry then presented a proposal to reduce it to 4.14%, both without response; Public letters: three open letters to the government of São Paulo were published in the Folha de S.Paulo asking for the maintenance of the ICMS exemption for healthcare products and alerting to the risks to the system and to the patients; In December 2020, the association filed legal measures against the decision and, in February 2021, together with a group of entities in the sector, became part of the United for Health Movement, with the motto #AgoraNãoÉHoraSP. As part of this broad mobilization strategy, in February the entities held a motorcade to the Assembly, on the same day that Bill of Law No. 82/2021 was presented, which aims to revoke article 22 of the law that promoted the ICMS increase. The plea has the support of a group of more than 30 deputies willing to revoke theICMS increase. Other initiatives Figure 1. Open letter to the government of São Paulo, published on January 15, 2021. 1. ABRAIDI’S ACTIONS AND NUMBERS026 Webinar: in January 2021, ABRAIDI held a webinar with more than 220 participants to discuss the impacts of the new ICMS-related rules in the state of São Paulo. In a survey with 117 responses carried out during the event, 65% of entrepreneurs stated they will no longer serve the Brazilian Health System (SUS) in the state and 72% answered that they will lay off employees due to the increase in costs that the new taxation will bring. Seminar “The impact of theICMS increase in the health sector”: ABRAIDI was one of the sponsors of the event, held by Folha de S.Paulo in January 2021, which discussed the serious effects of the tax increase; Recommendations and announcements: since the government of São Paulo revoked the ICMS exemption, Abraidi has sent several announcements and recommendations to its members, presenting the new tax scenario in the state and other factors that also impact the cost of products and suppliers’ operations, such as the increase in the exchange rate and freight values, among others; Judicial: ABRAIDI filed two Writs of Mandamus with requests for preliminary injunctions to guarantee the exemption of the products. Both were dismissed, even after appeals by the association; STF: ABRAIDI also pleaded with the Federal Supreme Court (STF) to appear as an interested party (amicus curiae) in one of the direct actions of unconstitutionality that try to invalidate the ICMS increase; Figure 2. Folha de S.Paulo Seminar sponsored by ABRAIDI. 65% OF ENTREPRENEURS STATED THAT THEY WILL STOP SERVING SUS IN THE STATE, AND 72% WILL LAY OFF EMPLOYEES. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 027 Impacts of the 18% Tax Rate on Medical Devices in Abraidi Members in the State of São Paulo1 In % – January 2021 GRÁFICO 06 THEY WILL STOP SERVING SUS THEY WILL LAY OFF EMPLOYEES 1 In the survey, there were companies that selected both response options. Source: Survey conducted by ABRAIDI with 117 member companies, during a webinar in January 2021. The renewal of the ICMS Agreement No. 01/99 Only in 2020, the Agreement had its validity extended twice: initially until December 31, 2020, and then until March 31, 2021. This year, the National Council of Finance Policy (Confaz) met in March and renewed the Agreement until March 31, 2022. Before the renewal, Abraidi, together with several health entities, participated in meetings at Confaz and the Ministry of Economy to defend the renewal, emphasizing the serious health situation in the country and the negative impact of São Paulo’s measure for the whole country. 65%72% Since the approval of the ICMS Agreement No. 01/99 for over 20 years by Confaz, Abraidi has been working for its maintenance due to the importance that the ICMS exemption represents for the health sector and, above all, for the patient. A survey carried out by Abraidi nationwide in 2019 identified that 80% of member companies sell products exempted from ICMS under this Agreement. If it was not renewed by Confaz, 43.5% could close their doors, 38.7% would no longer serve SUS and 47% would lay off employees. 1. ABRAIDI’S ACTIONS AND NUMBERS028 SECTOR DISCUSSED WITH THE STF AND CNJ THE PROBLEM OF “CONFISCATION” OF EQUIPMENT AND MATERIALS TO COMBAT COVID-19. Abraidi participated in a virtual hearing, in April 2020, with the then president of the STF, Minister José Dias Toffoli, to ask for action regarding the “confiscation” of respirators, ventilators, masks, gloves and other PPE by the federal government, states and municipalities. The shortage of this equipment and materials, essential for the prevention and treatment of serious cases of covid-19 and for the protection of health professionals, generated a dispute among federation entities, which began to Hearing with Minister Dias Toffoli on the “confiscation” of equipment and PPE “confiscate” them through judicial measures and administrative requisitions. The lack of criteria for these actions led Abraidi and nine other health organizations to appeal to the STF and the National Council of Justice (CNJ) in search of a nationwide resolution that would guide judges across the country and delimit the circumstances in which this type of confiscation could occur. Besides the legal uncertainty for companies, the concern is that random confiscations would harm the supply chain and, above all, patients. On May 12, 2020, the CNJ issued a technical note addressed to the federal government, states, municipalities and the Attorney General’s Office, proposing the adoption of management measures to minimize the effects of the covid-19 crisis and prevent judicialization. Among the recommendations is the adoption of hospital contingency strategies based on service capacity levels. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 029 Abraidi apresented to the Minister of Infrastructure and Anac the logistical problems faced by medical device suppliers Representing the health sector, Abraidi had virtual meetings with the Minister of Infrastructure, Tarcísio Gomes de Freitas, and the deputy director- president of the National Civil Aviation Agency (Anac), Juliano Noman, to present the difficulties with air transportation faced by supply and distribution companies of healthcare products, which directly impacted the supply of hospitals, clinics and laboratories and, consequently, the patients. As a result of the coronavirus pandemic, there was a drastic reduction in the frequency of national and international flights, as well as last-minute cancellations, causing a great impact on product delivery and lack of storage space for cargo that cannot be shipped. In addition, the reduction in the supply of cargo transportation caused the price of national and international freight to soar, reaching levels considered abusive. In the meetings, Abraidi explained that, with the decrease in air transportation, some locations in Brazil now have only one flight a week, delaying the shipment and arrival of essential medical and hospital products and equipment, including for the fight against covid-19, especially in the North and Northeast regions. AS A SPOKEPERSON FOR THE SECTOR’S ENTITIES, THE ASSOCIATION REPORTED THE IMPACTS ON PATIENTS, SUPPLIERS AND SERVICE PROVIDERS, AMONG THEM DELAYS IN THE DELIVERY OF ESSENTIAL MEDICAL-HOSPITAL EQUIPMENT AND PRODUCTS After the meeting, Anac, which had already established an “essential air network” and temporarily qualified air taxi companies to transport cargo, adopted three other measures: Suggestion for companies with essential products to also use state government and military aircraft as an alternative for transportation. Reinforcement of protocols so that transportation companies prioritize the transport of products and equipment to deal with covid-19. Commitment to strengthen the dialogue with the Ministry of Health’s crisis group, along with health sector entities. Minister Tarcísio de Freitas said that he acted to ensure that the land circulation of vehicles with healthcare products was not impeded by state or municipal governments and that ports remained open and operating with a large volume of imported healthcare products. He also informed that a Council was created with state Transportation secretaries to coordinate actions during the pandemic. 1. ABRAIDI’S ACTIONS AND NUMBERS030 Virtual Regional Meetings Abraidi adopted the online format for its regional meetings due to covid-19 and, since May, it has promoted 11 virtual meetings with representatives of member companies from all regions and states of the country. The objective was to make a deeper survey of the impacts caused to members of the pandemic and to better understand the peculiaritiesand needs of each state before the situation. Although Brazil is a country with continental dimensions and different realities, some problems were common to all regions. The reduction in elective and emergency surgeries, the increase in logistics costs, especially freight, payment delays and disallowances were recurrent themes in the meetings. Due to its national character and the presence of members in 23 states, Abraidi has held, since 2013, annual in-person meetings in all regions of the country to report on its actions, collect demands and monitor the situation of members– a pioneering work in the medical device industry. As of 2018, in response to the request of companies headquartered outside São Paulo, Abraidi started to hold courses, lectures and webinars with online transmission to all members in Brazil – another innovative initiative in the industry. With the pandemic, this format has intensified, and the contents has also become available on the Abraidi channel on YouTube, which has made it possible to further expand the access of members to the association’s contents and materials. ABRAIDI INTENSIFIES VIRTUAL REGIONAL MEETINGS AND CONSOLIDATES ANOTHER INNOVATION IN RELATIONSHIP WITH MEMBERS ABRAID HAS PROMOTED 11 VIRTUAL MEETINGS WITH MEMBERS FROM ALL REGIONS AND STATES OF THE COUNTRY. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 031 Abraidi and UPS close a partnership to offer better logistical conditions to members Abraidi signed a collective agreement with UPS to help member companies solve one of the main problems generated by covid-19 in the in- dustry: the transportation barriers caused by qua- rantine around the world, which has caused flight cancellations and an increased in the price of air cargo transportation. The partnership provided the members with special rates for domestic and international ex- press shipments of healthcare products, in an ef- fort by Abraidi to help them balance delivery speed and operating costs. SPECIAL RATES HELP THE INDUSTRY TO FACE BARRIERS REGARDING THE SHIPMENT OF PRODUCTS IN THE COUNTRY AND ABROAD The agreement was detailed in a webinar at- tended by Abraidi and UPS directors. They highli- ghted the need to make changes in operational processes and look for new logistical solutions to reduce costs and maintain efficiency in situations such as customs clearance, storage, distribution, tracking and product insurance, among other me- asures. UPS highlighted that the health sector is one of the main pillars of the company’s opera- tions. For Abraidi, it was an opportunity to contri- bute with its members, through the agreement, to reduce costs and damages in such an essential sector as the supply of medical devices to hospi- tals and other healthcare service providers. Proposals for updating nomenclatures in Appendix I of the ICMS Agreement No. 01/99 In March 2020, Abraidi sent Confaz a proposal for updating the terminology of five medical devices, whose outdated definitions generate tax litigation for companies, often preventing certain products from being covered by the tax exemption provided in ICMS Agreement No. 01/99. The list and description of the products eligible for the benefit are contained in Appendix I of the ICMS Agreement No. 01/99 which, since it was created more than two decades ago, has undergone few changes and has not kept up with the evolution and modernization of a wide range of products. The fact that the nomenclatures are outdated often creates problems of interpretation regarding the exemption provided by the Agreement, according to each tax inspector or state treasury, which has led to tax litigation, in addition to hindering free competition among companies, precisely the problems that Abraidi hopes to help solve. OUTDATED TERMINOLOGY OF THE LEGISLATION GENERATES TAX LITIGATION AND DAMAGES TO FREE COMPETITION TEMAS E AÇÕES NO RADAR Based on the proposal delivered to Confaz, the Ministry of Health started a broader review of the list, consisting of 197 products, with the participation of Anvisa and other entities in the medical device sector, who met in January 2021 to define the suggestions that were sent to the Ministry. The matter is expected to be referred by the Ministry to Confaz by May 2021. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 033 Collective lawsuits against alteration of NCMs by Camex In order to maintain the ICMS exemption for several medical devices, threatened by Resolution No. 52, of June 17, 2020, of the Executive Secretariat of the Foreign Trade Chamber (Camex), ABRAIDI filed collective lawsuits in 13 states. The list and description of the products eligible for the benefit are contained in Appendix I of the ICMS Agreement No. 01/99 which, since it was created more than two decades ago, has undergone few changes and has not kept up with the evolution and modernization of a wide range of products. The fact that the nomenclatures are outdated often creates problems of interpretation regarding the exemption provided by the Agreement, according to each tax inspector or state treasury, which has led to tax litigation, in addition to hindering free competition among companies, precisely the problems that Abraidi hopes to help solve. Based on the proposal delivered to Confaz, the Ministry of Health started a broader review of the list, consisting of 197 products, with the participation of Anvisa and other entities in the medical device sector, who met in January 2021 to define the suggestions that were sent to the Ministry. The matter is expected to be referred by the Ministry to Confaz by May 2021. CAMEX’S DECISION AMENDING NCMS PUTAT RISK THE ICMS EXEMPTION ON HEALTHCRE PRODUCTS 1. ABRAIDI’S ACTIONS AND NUMBERS034 Economic monitoring of medical devices After participating directly and recommending the participation of its members in three Public Consultations on economic monitoring of medical devices held by Anvisa in August 2020, the agency published in March the RDC No. 478/2021, establishing the monitoring, in addition to Normative Instructions (INs) No. 84/2021, with the list of medical devices selected by Anvisa for monitoring, and IN No. 85/2021, with the technical attributes of the selected devices. ABRAIDI believes that economic monitoring is an important measure, as long as it does not hinder the incorporation of new technologies in the country and free market competition, and has actively encouraged its member companies to respond individually to public consultations. Besides, it prepared a contribution on behalf of its members, with the participation of the Regulatory Affairs Working Group (RAQA). Public Consultations No. 876, 877 and 878, all from 2020, referred, respectively, to the economic monitoring of medical devices, the list of products that will be the object of the measure and their technical attributes. Since 2018, Anvisa has been evaluating the Economic Monitoring of Health Products in Brazil as an alternative to price controls. In 2019, the agency released the Preliminary Regulatory Impact Analysis Report and a monitoring panel with the results of a pilot project that used stents as a model. ABRAIDI AND MEMBERS PARTICIPATED IN PUBLIC CONSULTATION AND SENT CONTRIBUTIONS TO ANVISA ANVISA PUBLISHED IN MARCH RDC NO. 478/2021, ESTABLISHING ECONOMIC MONITORING. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 035 Public Consultations No. 584, 585 and 586 are on Anvisa’s agenda, but remain without deliberation In 2020, the discussion on the use and reuse of healthcare products was on the agenda of Anvisa’s Collegiate Board meeting, but there was no decision, as the CEO of the Agency, Antônio Barra Torres, asked for more time to study the process. Abraidi is not in favor of reuse for patient safety reasons. The association understands that it will hinder product traceability and recallin case of problems in any batch. Abraidi has been following the topic, which is relevant to the sector, since discussions began in 2018. Decision on alteration in RDC No.185/2001 reaches GGTPS ABRAIDI is following the developments of Public Consultation No. 730/2019, promoted by Anvisa to improve RDC No. 185/2001, which regulates the risk classification of medical devices, the registration system and the requirements for labeling and instructions for use. The deadline for submitting suggestions ended on January 29, 2020. Besides encouraging its members to participate in the consultation, Abraidi sent its own contribution with recommendations on the standardization of definitions and nomenclatures, using Anvisa’s materials. In 2021, Anvisa’s General Management of Healthcare Products Technology must analyze the proposed changes and send the consolidated document to the rapporteur of the process, the director-president Antônio Barra Torres. The agency must also hold a public meeting before the conclusion of the process and publication of the new text. 1. ABRAIDI’S ACTIONS AND NUMBERS036 Abraidi supports members in the implementation of the General Data Protection Law (LGPD) In order to help its members adapt to the requirements of the LGPD, which provides for the processing of personal data and the right to privacy, Abraidi adopted a set of initiatives based on a consultation with Anvisa in early 2020. The main point in the dialogue with the agency was to obtain some information on how suppliers should behave, considering the new law, in relation to the requirements of traceability of healthcare products. Thereafter, the association issued a series of recommendations to companies about refraining, for example, from receiving information about surgeries, patient data and any documents related to medical procedures that are personal and sensitive data, especially for revenue and internal control purposes. Abraidi complemented it with a series of webinars and lectures on the subject. In addition, it presented to Instituto Coalizão Saúde (ICOS) the proposal for the creation of an industry working group aimed at mitigating problems and facilitating dialogue among players in the health sector in the compliance with the LGPD. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 037 Figure 3. International Compliance Seminar and launch of the 4th edition of the Abraidi Code of Ethics and Conduct, with the participation of Nancy Travis, vice-president of Compliance of AdvaMed. COMPLIANCE Abraidi promotes an international event on compliance and launches the 4th edition of the Code of Ethics and Conduct In December 2020, Abraidi held an international seminar on ethics and compliance in the health area, broadcast live by YouTube for the entire world. During the event, the entity launched the 4th edition of its Code of Ethics and Conduct, which includes several advances, including the inclusion of the “Bogotá Principles”, which guide the Inter-American Coalition of Ethics in the Medical Devices Sector and orient the adoption of ethical practices in the sector. The Code also provides updates on general compliance standards, addresses the LGPD, which entered into force in 2020, and creates the Reporting Channel on the Abraidi website, so that any violations of the Code can be reported. INTERNATIONAL SEMINAR IN PARTNERSHIP WITH ADVAMED HAD THE PARTICIPATION OF MEDICAL DEVICE ASSOCIATIONS FROM LATIN AMERICA AND EUROPE, IN ADDITION TO A WORKSHOP WITH PRACTICAL CASES In addition, it includes as an appendix the Internal Rules of the Ethics and Processing Committee of Abraidi. The vice-president of Compliance of AdvaMed (Advanced Medical Technology Association) in the United States, Nancy Travis, participated in the opening of the event and mentioned the update of the American association’s Code of Ethics in 2020, and detailed the cooperation agreements that AdvaMed is signing. The vice-president of Government Relations of AdvaMed, Steven Bipes, closed the event together with the Executive Director of Abraidi, Bruno Boldrin Bezerra. 038 THE 4TH EDITION OF THE ABRAIDI CODE OF ETHICS AND CONDUCT BRINGS UPDATES ON GENERAL COMPLIANCE STANDARDS AND INCLUDES PROVISIONS ON THE LGPD AND THE BOGOTÁ PRINCIPLES. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 039 Inter-American Coalition on Ethics in the Medical Device Sector The association also announced some actions that the Coalition must prioritize between 2020 and 2023, such as the group’s integration with other players in the health sector and the launch, by AdvaMed, of a kit of integrity and compliance materials for distributors, which can be used by any company in the world. A MEMBER OF THE EXECUTIVE COMMITTEE OF THE INTER-AMERICAN COALITION OF ETHICS IN THE MEDICAL DEVICES SECTOR, ABRAIDI PRESENTED THE RESULTS OF THE LAST TRIENNIUM AND PLANNED ACTIONS UNTIL 2023. Among the various panels and roundtables discussions at the international seminar, one of them discussed the actions of the Brazilian health sector in the field of ethics and integrity, with the participation of the president of Abraidi, Sérgio Rocha, and the president of Instituto Ética Saúde, Eduardo Winston. The event also included a panel on international compliance efforts and experiences in the medical devices industry, which was attended by Andrew Blasi, technical secretary of the Inter-American Figure 4. International Compliance Seminar and launch of the 4th edition of the Abraidi Code of Ethics and Conduct, with the participation of representatives from Latin America and Europe associations. Coalition of Ethics in the Medical Devices Sector, as well as representatives of medical devices associations from Argentina, Chile, Mexico, Colombia and Portugal, who discussed and presented international compliance efforts and experiences in their respective countries. In the second part of the seminar, members had an exclusive workshop with discussions and practical cases on compliance and the LGPD. The global vice-president of Governance and Compliance of AdvaMed in the United States, Nancy Travis, explained details of the entity’s Code of Ethics, which came into effect in 2020, and presented general data from a survey conducted by the Coalition on adherence to the “Bogotá Principles”, which guides the adoption of ethical practices in the medical devices sector. 1. ABRAIDI’S ACTIONS AND NUMBERS040 Compliance in Action Program Through the Compliance in Action Program, developed and launched by Abraidi in 2018, the association has promoted a series of actions for its members aimed at training and qualifying companies in matters of integrity, ethics, compliance and the LGPD. There are lectures, webinars, workshops, courses and several materials available annually that aim to help members develop and improve their integrity and compliance programs. With this qualified support work and thanks to the effort, dedication and commitment on the part of Abraidi members, we have achieved increasingly positive results in terms of the adoption of integrity and compliance ABRAIDI MEMBERS HAVE THE INTEGRITY PROGRAM FULLY IMPLEMENTED OR IN AN ADVANCED DEVELOPMENT STAGE. Abraidi also participated in the second virtual meeting of the Coalition held in December last year, in which the group’s objectives for 2021, the impact of covid-19 and the priorities of the action plan that will be taken to the next Coalition meeting were discussed. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 041 Status of Abraidi Members in Relation to Compliance Programs In % of members – 2017-2020 CHART 07 14 9.3 15.1 49.2 25.9 14 33.3 28.3 51.8 46 26 13 3.8 17.5 52.8 IT DOES NOT HAVE A COMPLIANCE PROGRAM IT HAS ONLY CODE OF ETHICS AND CONDUCT IT HAS CODE OF CONDUCT AND IS DEVELOPING A COMPLIANCE PROGRAM IT HAS A COMPLIANCEPROGRAM FULLY IMPLEMENTED 2017 20192018 2020 Source: ABRAIDI based on a sample survey with member companies. programs by the healthcare product supplier companies associated with Abraidi. In 2020, we reached 82.5% of survey participants with their integrity program fully implemented or in an advanced development stage. This demonstrates the pioneering spirit and responsibility that these companies have with society in general, with their employees and, above all, patients. 0 2 2 Healthcare Products Sector HEALTHCARE PRODUCTS SECTOR The fact that was crucial to the retreat of the national healthcare products sector was mainly the cancellation of surgeries and elective procedures by health insurance companies and some state governments and, by extension, the drop in demand for equipment, implants, materials and supplies for medical and hospital use. In order to get an idea of the extent of this fact, hospitalizations for surgery in SUS had a reduction of 25.5% last year. To make beds available for covid-19 patients, the public system stopped performing 1.3 million elective surgeries in 2020 according to Datasus. ANS has not made available the data regarding the suspension of non-urgent surgeries in the private health system. However, it is to be assumed that there has also been a significant drop in this sphere, considering that health insurance companies serve approximately a quarter of the population and that ANS recommended the cancellation of surgeries, procedures and elective exams as soon as the pandemic began to spread across the country. The drop in demand for healthcare products also affected the national production of medical devices, which fell 22.2% from January to December 2020. The retraction in the sector was about five times greater than in the Brazilian manufacturing industry, which shrank 4.6% last year. From the standpoint of international trade, the disorganization of global markets caused by covid-19, mainly due to blockages and impediments to the movement of people and goods imposed by governments around the world, affected the import of medical devices in Brazil. TALKING ABOUT THE PERFORMANCE OF THE HEAL- THCARE PRODUCTS SECTOR IN 2020 WITHOUT MEN- TIONING THE COVID-19 PANDEMIC AND THE ENTIRE ARSENAL OF TRANSFORMATIONS AND IMPACTS THAT IT PRODUCED WOULD BE, AT LEAST, UNREALISTIC. LAST YEAR, THIS MARKET INVOICED US$ 11.1 BILLION IN BRA- ZIL AND SUFFERED A 1.5% DOWNSIDE COMPARED TO 2019, AFTER THREE CONSECUTIVE YEARS OF GROWTH. EVEN SO, THE DROP WAS LESS THAN THAT OBSERVED IN THE GLOBAL MEDICAL DEVICES MARKET, WHICH SHRANK 3.2%, ACCORDING TO THE ECONOMIC BULLE- TIN OF ABIIS. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 045 Despite the barriers, in the medical devices sector, there was a 12.9% increase in the volume of foreign purchases, which totaled US$ 6.2 billion. This was mainly due to the import of products to fight against covid-19, such as reagents and analyzers used in tests and kits for tracking the spread of coronavirus. However, if we analyze separately the three segments that make up the healthcare products market, we will see that the pandemic penalized each of them in different ways. The in vitro diagnostics segment, mentioned above, registered a 20.5% growth in imports. On the other hand, the segment of import and supply companies of health products, especially equipment, raw materials, orthotics, prostheses and other devices – represented by Abraidi – experienced a 29.5% drop in the indicator. The area of manufacturing medical and hospital materials and equipment, in turn, shrank 12.4%. Besides the cancellation of elective surgeries in the country and the international barriers, import and distribution companies suffered from the exchange rate variation, which increased the price of raw materials, inputs and imported products. The internal restrictions on air and road SUS STOPPED PERFORMING 1.3 MILLION ELECTIVE SURGERIES IN 2020. transportation, which affected the availability of some products, delivery time and prices impacted by the increase in freight costs, also was crucial to the drop in performance. At Anvisa, besides the covid-19 pandemic, the changes in the board of directors that took place throughout 2020 ended up affecting the progress of the discussion of some relevant topics for the sector. Among them are the monitoring of healthcare products, measures to improve risk classification, registration and labeling of products, and definitions of reuse. Throughout this publication, we will look in more detail at other indicators and factors that influenced the performance of the import and distribution of healthcare product in 2020. NÚMEROS DO SETOR E MERCADO INTERNO Source: ABRAIDI – Websetorial Survey. NOYES Source: ABRAIDI- Websetorial Survey Contractualization of ABRAIDI Members In % – 2020 CHART 08 Participation of Players in Contractualization with ABRAIDI Members In % – 2020 GRÁFICO 09 Contracts 8%92% 98% 51% 49% WITH SUPPLIERS WITH HOSPITALS HEALTH INSURANCE COMPANIERS THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 047 The survey of the theme of contractualization4 in the import and supply of healthcare products sector has been systematically addressed in Abraidi’s publications since the 2nd edition of “The supply cycle of healthcare products in Brazil”, in 2019, base year 2018. The need to better understand the business relationships of members arose from the perception of the existence of informal practices in the sector, as traditionally occurs in the Brazilian health system. An analysis of the historical series of Abraidi’s publications shows that the percentage of companies working under contracts has remained practically stable in recent years, with some improvement in 2020, which recorded 92% of positive responses. In 2019, the practice was adopted by 88% of companies and 90% in 2018. The greatest advance in the formalization of business ties took place between importers and distributors with health insurance companies: in this field, there was a 12% growth between 2018 and 2020 from 37% to 49%. The positive result stems from the actions developed by Abraidi with its members companies to encourage the formalization of legal instruments that provide greater security and possibility of judicial questioning in case of abusive practices. In addition, this procedure is in line with the best integrity and compliance practices recommended by Abraidi in its Code of Ethics and Conduct. Despite advances, there is still a long way to be covered. Looking at the issue from the opposite side, the survey reveals that almost 50% of members maintain informal ties with customers, which in practice puts them in a situation of vulnerability and subject to possible abusive or unethical business practices. To reduce this risk, Abraidi has worked on the development of guidelines with recommendations and has promoted webinars, workshops and lectures to make members aware of the need to formalize supply contracts, providing more transparency to the conditions negotiated by mutual agreement and respecting the law and codes of conduct of the sectors involved. FORMALIZATION OF BUSINESS RELATIONSHIPS BETWEEN IMPORTERS AND DISTRIBUTORS WITH HEALTH INSURANCE COMPANIESADVANCED 12% FROM 2018 TO 2020. 4 Contractualization – the act or effect of inserting into a contract, formally and legally establishing what was verbally agreed upon. 2. HEALTHCARE PRODUCTS SECTOR048 Consumption of Healthcare Products by SUS5 In R$ million6 CHART 10 5 ERRATA: This chart in previous editions mentioned the data as “Volume of material sales from ABRAIDI members to SUS”, and the correct one is the total volume of healthcare products consumed by SUS, and not only by ABRAIDI members. 6 Annual data at the time of extraction may vary due to the delay in some statesand municipalities in passing on the information to the Ministry of Health. 2015 2017 20192016 2018 2020 1.522 1.3331.316 1.353 1.409 1.313 Source: Datasus/Info ABRAIDI. After a gradual and consistent growth that started climbing with a 0.3% increase between 2015 and 2016 and reached 8% in 2019, the consumption of healthcare products by the public system suffered a 12.4% drop in 2020 compared to the previous year. The retraction of the indicator is probably related to the cancellation of elective surgeries to make way for the care of patients with covid-19, one of the consequences of the atypical year that the pandemic produced in all markets, especially in health sector. Sales and Invoicing THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 049 CORONARY ARTERY STENT MULTI-PROGRAMMABLE CARDIAC PACEMAKER EXTRACORPOREAL CIRCULATION SET ANGIOPLASTY BALLOON CATHETER IMPLANTABLE CARDIOVERTER DEFIBRILLATOR LINEAR CUTTING STAPLER CARDIOVERTER DEFIBRILLATOR WITH MULTISITE PACEMAKER PEDICULAR DEVICE FOR SCREW FIXATION DEFINITIVE ENDOCARDIAL ELECTRODE CORONARY ARTERY DRUG-ELUTING STENT TOTAL R$ 1,333 MILLION Top 10 Main Products – OPSM Consumed by o SUS In % of total value1 sold - 2020 CHART 11 The portfolio of products purchased by the SUS is quite varied, but among the most representative items in terms of values are surgical devices and materials for the field of cardiology. For the third consecutive year, the most purchased product by the public sector was the coronary artery stent, which represented 9.3% of sales, equivalent to R$ 123,9 million 1 The total amount encompasses all materials in addition to the Top 10. Source: Datasus/InfoABRAIDI. 9.3% 9.2% 6.5% 3.7% 3.5% 3.4% 2.9% 2.7% 2.3% 2.2% THE SUS REFERENCE TABLE OF VALUES HAS REMAINED PRACTICALLY UNADJUSTED FOR MORE THAN 20 YEARS. 2. HEALTHCARE PRODUCTS SECTOR050 THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 051 Distribution of Abraidi Members’ Revenue by Paying Source In % of revenue – 2019-2020 CHART 12 Private health is historically responsible for the main portion of Abraidi member’s revenue, representing more than 80% of revenue in 2020. Moreover, its share has been increasing in recent years, going from 73% in 2018 to 78% in the following year and growing by another 3% in 2020. The growth of the private client was probably an alternative found by the sector to overcome recurrent problems in the business relationship with SUS. One of the main problems is the lag in the table of amounts paid, which has remained practically unadjusted for more than 20 years, compromising the economic and financial capacity of suppliers to serve the public sector. Although SUS is a market with the capacity to move large volumes of resources and materials as it serves about 170 million Brazilians, supplementary health – which has 47 million users – offers better prices, even though it moves a smaller volume. PRIVATE PAYING SOURCES IN REVENUE (%) PUBLIC PAYING SOURCES IN REVENUE (%) 2019 20192020 2020 19% 81% 22% 78% Source: ABRAIDI – Websetorial Survey. 2. HEALTHCARE PRODUCTS SECTOR052 Income Distribution by Type of Customer In % of income – 2020 CHART 13 A more detailed analysis of the customers of Abraidi members reveals that health insurance companies – with hospitals or not – are the largest customers of 63% of responding companies. For 21%, public hospitals are the largest customers, while private hospitals are the main source of income for 16%. When asked about the representativeness of the largest customer in the company’s revenue, the participants answered as follows: For 56% of companies, the largest customer represents up to 20% of revenue. For 27%, the largest customer represents between 21% and 40% of revenue. For 13%, the largest customer represents between 41% and 60% of revenue. For 4%, the largest customer represents between 61% and 80% of revenue. For 0%, the largest customer represents more than 81% of revenue. In addition, 66% stated that their largest customer is a market leader in their region of operation. In 2019, the indicator was 62.9% and totaled 76.1% in 2018. This reduction may signal a diversification of customers by suppliers, in order to reduce risks and, eventually, negotiate better business conditions. Source: ABRAIDI – Websetorial Survey. 21% PUBLIC HOSPITAL 26% HEALTH INSURANCE COMPANY NOT INTEGRATED TO HOSPITALS (NON-VERTICALIZED) 37% HEALTH INSURANCE COMPANY INTEGRATED TO HOSPITALS (VERTICALIZED) 16% PRIVATE HOSPITAL THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 053 7 Até o momento não há estimativas para 2020. Imarc Group. Available at: https://www.imarcgroup.com/implantable-medical- devices -market#:~:text=The%20global%20implantable%20medical%2n0devices%20market%20was,US%24%20103.3%20 Billion%20in%202019. Access on: March 20, 2021. Foreign trade in healthcare products The global implantable medical devices (IMD) market turned over US$ 103.3 billion7 in 2019, according to the American research company IMARC. Brazil had a 2.7% share of the total that year. In 2020, the spread of covid-19 to all continents and lockdowns imposed by several countries disrupted the operations of many companies and affected the supply chain around the world. As a result of the impact of this situation, IMARC predicts a slow industry recovery and moderate growth over the next five years. However, the consultancy believes that an aging population and increasing prevalence of chronic diseases should drive some expansion, causing the global implantable medical devices market to reach an estimated value of US$ 160 billion by 2026. The Brazilian IMD market was also greatly affected by the pandemic in 2020, mainly due to the cancellation, suspension or postponement THE SPREAD OF COVID-19 AND LOCKDOWNS IMPOSED BY SEVERAL COUNTRIES HAVE AFFECTED THE SUPPLY CHAIN AROUND THE WORLD. of elective surgeries by SUS and ANS, and by interruptions and problems in the global supply chain such as flight restrictions, border closures, product confiscations, production stoppage of raw materials and final products, exports restrictions and bans etc. 2. HEALTHCARE PRODUCTS SECTOR054 Apparent Consumption1 of Implantable Medical Devices, Materials and Support Equipment and Percentage Share of Imports in this Market Import share in %: apparent consumption in US$ million CHART 14 ¹Apparent consumption: sum of national production and imports, minus exports. (P): Projected – IBGE updates of the value of national production occur every two years. Source: Comex Stat; IBGE/PIA Produto 2018. Published in 2020. 2012 20162014 20182013 20172015 2019 (P) 2020 (P) 47% 2,338 2,631 2,872 2,418 2,603 2,813 2,882 2,118 2,554 47% 36% 36% 36% 35% 39% 37% 46% Import share in apparent consumption – % Apparent consumption in US$ million The cancellation, suspension or postponement of elective surgeries in 2020 for fear of covid-19 contamination caused a “shrinkage” of the market for implantable medical devices, materials and support equipment in Brazil, which went from US$ 2.8 billion in 2019 to US$ 2.1 billion in 2020. The result represented a 26% contraction in the sector, resulting from a 22.2% drop in national production and a 29.5% drop in imports In recent years, there has been a decline in the import share in the apparent consumption of the sector’s products. From 47% in 2012, imports now represent 35% in 2020, indicating an increase in the participation of national production in the period THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 055 Brazilian Production of Implantable Medical Devices, Materials and Support Equipment In R$ million and in US$ million CHART 15 8 R$/US$ = 2,33 on December 2020. Source: IBGE/PIA Produto 2018. Published in 2020. (P): Projected – IBGE updates occur every two years. 2012 20162014 20182013 201720151,515 2,596 1,702 3,057 2,117 4,334 1,695 3,747 1,925 4,275 2,023 4,531 2,089 4,762 1,588 3,705 1,639 3,072 In R$ million In US$ million of PPP The national production of medical devices, materials and support equipment in Brazil showed a 22.2% decline in 2020 compared to 2019, reaching the value of R$ 3.7 billion or US$ 1.6 billion at the exchange rate of Purchasing Power Parity (PPP).8 It is important to note that, for the conversion of health sector data, it is agreed to use the PPP exchange rate. Using this conversion rate facilitates international comparisons by minimizing distortions caused by different exchange rates, living costs and incomes of a country’s population. 2019 (P) 2020 (P) 2. HEALTHCARE PRODUCTS SECTOR056 Trade Balance of Implantable Medical Devices, Materials and Support Equipment In US$ million CHART 16 Source: Comex Stat. The import value of medical devices, materials and support equi- pment in Brazil has been much higher than exports since the beginning of the series in 2012. In 2020, imports (US$ 738 million) were equivalent to 3.5 times exports (US$ 208 million). Import in US$ (–29%) Export in US$ (–17%) 2012 1,107 284 272 267 258 251 284 223 237 208 2016 945 2014 1,199 2018 1,027 2013 1,202 2017 936 2015 1,021 2019 1,047 2020 738 THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 057 Main Countries of Origin of Imports of Implantable Medical Devices, Materials and Support Equipment In US$ million – 2019-2020 CHART 17 In 2020, US$ 738 million in implantable medical devices, materials and support equipment were imported, equivalent to 15,609,979 tons. The United States remained as the main country of origin of imports, representing 29% of total in 2020. Together with Germany and China, these countries were responsible for 51% of Brazilian imports in the sector. The top ten countries of origin of Brazilian imports of implantable medical devices accounted 81% of purchases made abroad. Fonte: Comex Stat. UNITED STATES 347 214 OTHER COUNTRIES 182 141 GERMANY 86 106 CHINA 73 76 MEXICO 51 58 SWITZERLAND 31 62 PUERTO RICO 29 35 INDIA 29 30 FRANCE 27 45 JAPAN 23 34 IRELAND 33 72 2019 2020 THE UNITED STATES, GERMANY AND CHINA WERE THE THREE MAIN COUNTRIES OF ORIGIN OF IMPORTS OF IMPLANTABLE MEDICAL DEVICES IN BRAZIL. 2. HEALTHCARE PRODUCTS SECTOR058 2. O SETOR DE PRODUTOS PARA SAÚDE THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 059 90211010 48Orthopedic devices Mexico 22 46% 90211020 45Fracture apparatus United States 18 40% 2490183219 Other tubular metal needles China 10 42% 90213190 23Other joint prosthesis United States 11 50% 90219081 31Expandable implants (stents) Ireland 11 35% Main Countries of Origin of Implantable Medical Device Imports9 by Product – 2020 TABLE 01 Source: Comex Stat. 90183929 211Other probes, catheters and cannulas United States 74 35% 2490213930 Coated vascular prosthesis Germany 3 15% 90189095 46 Clamps and clips, their applicators and extractors Puerto Rico 17 38% 90183119 36Other syringes, whether or not with a needle, of plastics Portugal 13 37% 90213980 25Other prosthetic devices Netherlands (Holland) 6 26% 9 It does not include materials and support equipment. NCM CODE TOTAL IMPORTED (IN US$ MILLION) NCM DESCRIPTION MAIN COUNTRY OF ORIGIN COUNTRY IMPORTS (IN US$ MILLION) COUNTRY SHARE OF TOTAL ITEM (%) 2. HEALTHCARE PRODUCTS SECTOR060 Main Destination Countries for Implantable Medical Devices, Materials and Support Equipment Exports In US$ million – 2019-2020 CHART 18 In 2020, US$ 208 million in implantable medical devices, materials and support equipment were exported, equivalent to 1,601,599 tons. The United States was the main destination country for exports, representing 28% of total in 2019. Together with Belgium and Switzerland, they represented 56% of exports. The top ten export destinations together accounted for 84% of Brazilian exports. Source: Comex Stat. UNITES STATES 79.2 57.7 ECUADOR 3.1 2.4 CHILE 8.7 8.2 ARGENTINA 8.1 10.9 SPAIN 8.5 7.4 MEXICO 14.7 12.7 BELGIUM 25.9 39.5 SWITZERLAND 33.9 29.5 OTHER COUNTRIES 34.1 42 .7 COLOMBIA 14.3 13.5 2019 2020 THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 061 30061090 46Other sterilized catguts etc. for surgical sutures Bélgica 13 29% 90183220 19Needles for sutures United States 17 91% 690183929 Other probes, catheters and cannulas Argentina 1 24% 90183119 4Other syringes, whether or not with a needle, of plastics Chile 2 51% 90183924 8 Peripheral intravenous catheters, polyurethane or ethylenetetrafluoroethylene copolymer (ETFE) Mexico 1 18% Main Destination Countries for Implantable Medical Device Exports10 by Product – 2020 TABLE 02 Source: Comex Stat. 90213919 49Other cardiac valves Switzerland 20 40% 530061010 Materials for surgical sutures (Polydioxanone) Luxembourg 1 26% 90211010 32Orthopedic devices Switzerland 13 42% 90183219 14Other tubular metal needles Spain 8 55% 90213980 12Other prosthetic devices Colombia 7 59% NCM CODE TOTAL EXPORTED (IN US$ MILLION) NCM DESCRIPTION MAIN DESTINATION COUNTRY COUNTRY EXPORTS (IN US$ MILLION) COUNTRY SHARE OF TOTAL (%) 10 It does not include materials and support equipment. 3 3 Covid-19: Post-pandemic impacts and changes In order to have a more precise dimension of the effects that the pandemic produced in 2020, nine specific quantitative questions on the subject were included in the survey for this Yearbook. Besides, to the participants were given a space for the inclusion of qualitative responses, which enabled them to obtain a more comprehensive diagnosis of how this unique event was experienced in the companies and the entrepreneurs’ vision of the future for when the pandemic ends or recedes. The survey was answered by 61 companies, varying by the question. The radiograph that emerges from the results points to a market whose general conditions have worsened for members. In addition to the drop in revenues and sales – resulting from the postponement of elective surgeries – and the increase in air and sea freight rates, historical COVID-19: POST-PANDEMIC IMPACTS AND CHANGES THE OBJECTIVE OF THIS CHAPTER IS TO TAKE A DEEPER AND MORE CAREFUL LOOK AT THE IMPACT THAT THE COVID-19 PANDEMIC HAS HAD ON THE IMPORTATION, DISTRIBUTION AND MANUFACTURING COMPANIES ASSOCIATED WITH ABRAIDI. IN ADDITION TO MEASURING AND ANALYZING THESE REPERCUSSIONS, WE ALSO LOOK TO THE FUTURE. THUS, TWO ARTICLES ARE PRESENTED THAT DETAIL THE PRESENT SITUATION AND PROVIDE RECOMMENDATIONS, POINTS OF ATTENTION AND TRENDS OF CHANGE FOR SUPPLIERS AND HEALTH IN GENERAL. distortions in the sector were accentuated due to the pandemic, such as revenue retention, disallowances and defaults, which will be discussed in detail in chapter 4. All these factors coexisted – and were amplified – due to structural issues, such as the rise in the exchange rate and the increase in the ICMS rate in the state of São Paulo, where most companies are headquartered and where most products pass through. All this inevitably imposes higher costs on the sector, as well as the need to review operations and contracts. To survive this intricate equation, companies have made different types of negotiations, diversified their product basket – including items to combat covid-19 –, downsized their physical structure and reduced working hours and the number of employees. Regarding the future, the survey participants believe that specific issues directly related to covid-19, such as the cancellation of elective surgeries, will be resumed when most of the population is vaccinated. They understand that some changes are positive and should remain after the pandemic, such as the adoption of more innovative management and new business models that contribute to the growthof companies. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 065 But they also envision a slow recovery, which could be aggravated by the explosion of cases and deaths recorded in March this year and by the consequent restrictions imposed by governments to contain the worst moment of the pandemic so far, whose term is uncertain. In addition, they see some gray clouds on the horizon, formed mainly by the high tax burden, exchange problems, difficulties in negotiating with the public and private health systems and the instability of the country’s political, social and economic scenario. THE RADIOGRAPHY THAT EMERGES FROM THE RESULTS POINTS TO A MARKET WHOSE GENERAL CONDITIONS HAVE WORSENED FOR MEMBERS. 3. COVID-19: POST-PANDEMIC IMPACTS AND CHANGES066 Average percentage drop in revenue and surgical volume during the most acute phase of the pandemic in 2020 – ABRAIDI members FIGURE 05 The healthcare products supply market was strongly impacted by the covid-19 pandemic and by the obstacles it generated, producing an average drop of around 50% in the member companies’ revenues. In some regions of the country and in certain specialties served, the drop in both revenue and surgical volume reached 90%. Factors such as the reduction in elective surgeries and the consumption of medical and hospital materials, in addition to national and international logistical problems, contributed to this result. Restrictions on the circulation of products imposed by some countries and the high prices of air and sea freight also influenced on the sector’s performance. More than 1 million surgeries were suspended in the public health system alone, according to the ABIIS bulletin. Supplementary health data was not available, but it is important to remember that sales to health insurance companies represent about 80% of Abraidi members’ revenues. REVENUE 50.8% SURGICAL VOLUME 59.8% THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 067 Measures Taken to Reduce Costs During the Pandemic Period In % – 2020 CHART 19 To reduce costs and try to cushion the drop in activity and revenue, the companies in the sector adopted a set of measures that mainly involved the business relationship with customers and suppliers and the staff. Debt renegotiation and reduction of working hours and salaries were the strategies indicated by 59% of survey participants. 8% 26% 48% 8% 31% 54% 59% 59%REDUCTION OF EMPLOYEES’ WORKING HOURS AND SALARIES DEBT RENEGOTIATION COLLECTION/ REVENUEOF RECEIVABLES RENEGOTIATION/ CANCELLATION OF CONTRACTS WITH SUPPLIERS SUSPENSION OF EMPLOYEES’ CONTRACTS DISMISSALS REDUCTION IN PHYSICAL STRUCTURE NONE OF THE PREVIOUS 3. COVID-19: POST-PANDEMIC IMPACTS AND CHANGES068 Fifty-four percent of the companies chose to collect receivables from customers, that is, revenue that were retained by health insurance companies or hospitals. This occurred because of the need to maintain the companies’ cash flow, impacted by the sharp drop in revenues and operations and by the increase in the minimum operating costs to maintain the companies. This decision may also have been driven by the 18% increase in the ICMS rate on healthcare products under ICMS Agreement No. 01/99. The tax, which is levied on sales operations to hospitals, private clinics and laboratories and health insurance companies, would take effect as of January 2021 in the state of São Paulo. Thus, surgeries performed with ICMS-exempt products would have the additional cost of taxation if billed after the beginning of 2021. Another resource used by 48% of participants was the renegotiation or cancellation of contracts with suppliers. The pandemic also caused the suspension of employee contracts in 31% of companies participating in the survey and layoffs in 26%. In other words, a quarter of the members laid off, the highest rate among the segments that make up the medical device sector (considering the areas of OPSM, equipment and in vitro diagnostics). THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 069 Eight percent of the participants reported a reduction in physical structure and another 8%, the adoption of other initiatives such as the following: Product diversification. Reduction of purchases/stock. Financial loans. Inclusion of products for covid-19 in the portfolio. Home office work. Compensatory time off/time bank. More than half of the companies (56%) pointed to the growth during the pandemic of practices considered “market distortions” by the sector and that negatively affect economic performance. Revenue retention occurs when health insurance companies and hospitals prevent, under penalty of retaliation, the invoice of pro- ducts used in previously authorized surgeries. Disallowance is the refusal of health insurance companies to pay for surgical materials or equipment used and, in some cases, previously authorized. Default occurs when payment to the supplier is not made 180 days after billing. Increased Revenue Retention, Disallowances and/or Defaults During the Pandemic In % – ABRAIDI members CHART 20 NO 44% YES 56% 3. COVID-19: POST-PANDEMIC IMPACTS AND CHANGES070 DEFAULT 42.7% DISALLOWANCE 24.7% REVENUE RETENTION 39.9% Average increase in revenue retention, disallowances and default - ABRAIDI members In % – 2020 FIGURE 06 Perspective of Recovery by ABRAIDI Members11 In % – 2020 CHART 21 11 Perspective as of January 2021. 10% 1ST SEMESTER 2021 44% 2ND SEMESTER 2021 42% 2022 2% 2023 2% THE MARKET WILL CHANGE AND WILL NOT BE AS IT WAS BEFORE THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 071 Despite the variety and intensity of challenges faced during the pandemic, the companies are optimistic about the timeline for economic recovery to pre-pandemic levels. Fifty-four percent believe that recovery will occur as early as 2021. About half of respondents (42%) predict improvement by 2022. A small portion (2%) indicates recovery in two years and 2% believe that the market will not return to its previous level. 072 Permanent Changes that have Been or will Be Adopted After the Pandemic In % – 2020 CHART 22 14% 23% 21% 33% 49% 49%OPENING NEW CUSTOMERS IN THE PRIVATE SECTOR ACTIVITY AND/ OR PORTFOLIO EXTENSION PHYSICAL AND PERSONNEL STRUCTURES REDUCTION OPENING NEW CUSTOMERS IN THE PUBLIC SECTOR PERMANENT HOME OFFICE FOR SOME AREAS OF THE COMPANY PRODUCT PORTFOLIO REDUCTION 3. COVID-19: POST-PANDEMIC IMPACTS AND CHANGES THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 073 49% OF MEMBERSLOOKED FOROPENING NEW CLIENTS IN THE PRIVATE SECTOR OR EXPANDING THEIR PORTFOLIO. To cope with the challenges brought by covid-19, the companies adopted practices that will become perennial after the pandemic, including the diversification of customers and challenges. Some points highlighted by survey participants: “The biggest problem for the implantable device sector was not the pandemic, but the fiscal adjustment package adopted in São Paulo, which affects the entire country.” “The market is moving towards a greater concentration between hospitals and health insurance companies, which may change the form of negotiations between suppliers and these customers.” “The industry is being directed to new business models, not only due to the pandemic, but also due to the political, social and economic scenario in Brazil and the world.” “Problems such as tax increase and the difficulty of negotiating with the government will persist.” “The reduction in surgical procedures has greatly affected the sector, but the survival of some companies is threatened by the increase in the ICMS rate on the sale of healthcare products in São Paulo.” “One of the post-pandemic impacts will be the reduction in surgical volume compared to the previous period, as many people were laid off and lost their right to health insurance plan and, consequently,to use the private sector.” O CICLO DE FORNECIMENTO DE PRODUTOS PARA SAÚDE NO BRASIL THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL074 Strong pressure on the supply chain – logistical restrictions and relevant exchange rate increase. Decrease in demand – reduction in the sale of medicines and devices (implantable and materials), focusing “only” on combating covid-19, and postponement of elective treatments. Operational-financial sustainability – primarily of national capital and smaller suppliers. Greater protagonism in the client-patient relationship, which now has even greater power of decision/choice over what will be used in its procedures, debating and actively looking for this knowledge now that health is increasingly on the agenda. Regulatory challenges – here the dysfunctionality related to prices and product similarities and the challenges related to the economic monitoring of these healthcare products stand out. This leads to increased health expenditures, hinders access and reduces the quality of healthcare provided in the country. CHANGES IN HEALTH POST-COVID-19 The global economy is expected to grow 5.5% in 2021 and 4.2% in 2022. Effective mul- tilateral cooperation is needed to control the pandemic everywhere. These efforts include in- creased funding for Covax12 deployment to ac- celerate access to vaccines across all countries, ensuring universal distribution of vaccines and facilitating access to affordable therapy for all. While recent vaccine approvals have raised hopes of a turnaround in the pandemic, new wa- ves and new variants of the virus pose concerns about the global resumption outlook. Even so, it is expected to give rise to increased momentum in the second quarter as vaccines and therapies become more readily available, allowing for the strengthening of direct-to-public contact activity. In this context, the main challenges and trends for suppliers in the healthcare chain are: Leonardo Giusti (KPMG) Sheila Mittelstaedt (KPMG) THE GLOBAL GROWTH CONTRACTION FOR 2020 HAS BEEN ESTIMATED AT -3.5% (0.9% HIGHER THAN PROJECTED IN THE PREVIOUS FORECAST), REFLECTING A STRONGER-THAN-EXPECTED BOOST IN THE SECOND HALF OF 2020. ¹² Covax is part of the Access to COVID-19 Tools (ACT) Accelerator, a mechanism that WHO created in response to the pandemic, a coalition of 165 countries to guarantee a vaccine against the coronavirus for the poorest nations. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 075 Use of technologies and artificial intelligenceto identify significant health outbreaks, as well as to accelerate the development of medical devices and medicaments. Potential reduction in private participants of the value chain due to financial consequences resulting from the pandemic, the isolation situation, the sudden drop in revenue and the difficulties of recovery. Here are some of the important issues to be addressed in this article in different ways: THE GLOBAL ECONOMY IS EXPECTED TO GROW 5.5% IN 2021 AND 4.2% IN 2022. Acceleration of digital transformation in the value – multiple channels for contact with the medical class and in the client-patient relationship. New business models, industry with greater customer-patient proximity. How will the new restrictions needed to contain transmission affect activity in the short term before vaccines begin to provide effective protection for the entire society? A How will vaccine expectations and public policy support affect the economic activity of the healthcare industry? B How will financial conditions and commodity prices evolve? C 3. COVID-19: POST-PANDEMIC IMPACTS AND CHANGES076 Restriction of suppliers’ productive capacity, causing supply disruption. Map and understand the production capacity of the main suppliers and assess stock availability for short term. Lack of supply chain visibility, making traceability and physically location of materials difficult. Evaluate inventory levels of raw material, in-process and finished product, prioritizing customers and placed orders Logistics operators/third parties being impacted by operational constraints related to customer service capacity. Establish a short-term plan with current logistics operators/third parties, evaluating operational constraints and possible impacts on the business. Lack of visibility in the purchasing area regarding the criticality of some materials. Establish partnerships to operationalize sales through digital platforms, expand sales channels and enable last mile delivery. Logistic routes facing operational difficulties to ensure the physical flow of goods. Map the entire logistics network and establish new routes and alternative modes of transportation. Drop in sales volume due to the lack of online sales channels; logistical operation difficulties to operate the last mile efficiently. Establish a logistical committee and map the physical location of materials in transit to report status to the customer Legal disputes and contractual fines caused by non-compliance with contractual requirements with suppliers. Map existing contracts, assess responsibilities and financial risks. Bring the legal area closer to the parties in order to minimize legal disputes. Evidence of Brazil’s dependence on other countries and the lack of integration in global health value chains. Structure the Strategic Purchasing Matrix and define a supply chain risk mitigation plan. Stock-out of inputs and finished products, directly impacting customer service. Supply Chain & Operations (Healthcare Providers) – Impacts and Crisis Response The crisis impacts... Responses to the crisis... 1. 1. 6. 5. 3. 3. 8. 7. 2. 2. 7. 6. 4. 4. 9. 8. 5. 077 Review the business strategy considering alternative suppliers in order to ensure the continuity of the operation. Review raw material and finished product safety stock policies in order to mitigate supply risks. Establish a contingency plan with new operators/third parties in order to meet the demand in case of unscheduled downtime. Develop Omni Channel platform for online service, establish contracts and define service levels with logistics partners to operate last mile. Structure logistical network scenarios and contingency plan, evaluating new transportation routes/modalities, mitigating risks in the process of moving materials and products. Implement raw material and finished product tracking solutions in order to promote supply chain visibility Structure a contract review plan evaluating contract clauses and coverage related to force majeure events. Define specific strategies for critical and strategic materials groups, develop new suppliers and perform Make or Buy analysis to verticalize operations. Coming out of the crisis... 1. 5. 3. 7. 2. 6. 4. 8. O CICLO DE FORNECIMENTO DE PRODUTOS PARA SAÚDE NO BRASIL 078 Finance and Liquidity The crisis impacts... Increased in accounts receivable defaults. Retraction of the banks regarding the availability of credit lines.1. 3. Reduction in demand for products and services. Impact on liquidity and accelerated cash burn.2. 4. 3. COVID-19: IMPACTOS E MUDANÇAS NO PÓS-PANDEMIA THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 079 Review the projected cash flow, pay attention to accounts receivable performance, review non-essential expenses. Identify with banks and credit funds the availability of new lines of credit. Define the degree of intensity and urgency of stabilization actions. Assess government measures that make tax payments more flexible and reduce personnel expenses. Continuously perform cash stress tests. Look for flexibility regarding short-term maturities. Optimize working capital through: actions with customers to secure receivables and measure changes in future demand; reassessing credit policies regarding limits and payment terms; monitoringthe supply chain, identifying flexibility in terms and conditions of payment and capacity for continuity of supply. Identify and implement operational and non-operational cost reduction. Organize a narrative consistent with the company’s strategic vision, the actions being taken to minimize the crisis impacts and a medium- and long-term vision. Responses to the crisis... 1. 5. 3. 7. 2. 6. 4. 8. 9. Reassess financial planning and cash flow. Strive to lengthen the average terms of existing indebtedness. Plan the resumption of activities in sync with the supply chain, involving the supply chain, and pay attention to any vulnerabilities of suppliers/partners that need support. Sell non-strategic assets. Strengthen the company’s liquidity position by negotiating new lines with the banks. Diversify funding sources, including access to capital markets. Reassess the required capital structure. Adjust operational and financial strategy and develop a robust narrative regarding its strategy and vision for the future, to interact with its various stakeholders. Assess the company’s need for capitalization. Coming out of the crisis... 1. 6. 3. 8. 2. 7. 4. 9. 5. Fraud and non-compliance Effects of covid-19 on suppliers’ financial statements and disclosure EMERGING RISKS BRAZIL 2021 – NEW POINTS OF ATTENTION On March 20, 2020, due to the pandemic, the federal government decreed a state of public calamity in the country. Among other measures, this decree exempts the government from adhering to the precepts of the Bidding Law (Law No. 8,666/93), which establishes the principles that govern bids and other administrative contracts for the entire federal, state and municipality government. The flexibilization of this law makes room for countless types of fraud arising from government procurement processes, including embezzlement of funds and assets. The “Covid-19: Compliance Survey”, carried out by KPMG in Brazil, identified the adaptation to emerging risks as one of the main impacts reported by the Chief Compliance Officers (CCOs), with respect to the role of compliance in companies. Among these emerging risks, the most concerning are those related to fraud, corruption and misconduct, motivated by factors such as donations, the need to hire new third parties and new regulations and procedures. A careful assessment must be made of the necessary and useful information to users of the financial statements (investors, partners, directors and other managers) about the effects of covid-19, which will be disclosed in the notes. Check on the next page a list of some items that should be considered in the context of the covid-19 pandemic: THE BEST TOOL THAT THE COMPANIES CAN HAVE TO PROTECT THEMSELVES FROM THIS TYPE OF SITUATION ARE ACTIVE AND EFFECTIVE INTERNAL CONTROLS, WHICH PROVIDE TRANSPARENCY TO THE PROCESSES AND ENSURE THAT NEW INTERACTIONS ARE NOT MISINTERPRETED, WHICH CAN GENERATE ACTS OF CORRUPTION AND CAUSE IRREVERSIBLE DAMAGE TO THE COMPANY’S REPUTATION. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 081 FOCUS ON CONTINGENCIES, ESPECIALLY ON LEGAL AND LABOR ASPECTS. Focus on contingencies, especially in legal and labor aspects, which may generate lawsuits due to the several situations triggered by the pandemic, and possible disputes with suppliers, lessors, customers and financial institutions. Analyze the possible circumstances that may cause the need for reduction to the recoverable value of assets. Also focus on disclosures that must fully comply with the rules, so that they are clear and objective. Covenants: in general, companies have focused their attention on complying with restrictive clauses (covenants) in loan and financing agreements at the balance sheet date. This is because, in case of non-compliance with these clauses, there may be some significant consequences for the equity position of the companies Operational continuity: making projections in the current scenario can be a complex and challenging exercise. The point of attention is that previously considered items may no longer be reasonable in a stressful situation. The ability to renew credit lines or access the capital market may have undergone a significant change as a result of the current scenario imposed by the pandemic. After the LGPD officially went into effect, companies are moving to an increasingly data-driven business model. Personal information accumulates value, which can be translated into strategic assets for the economy. Companies need to be able to customize their products/ services and anticipate their consumers’ expectations and needs. In Brazil, this regulation is very new, but it is essential to understand that this adaptation is not a requirement of the regulator itself, but a matter of competitiveness. Therefore, the company must be able to efficiently choose investments to establish a coherent cybersecurity strategy. Data-driven Market 3. COVID-19: POST-PANDEMIC IMPACTS AND CHANGES082 Covid-19 has disrupted business as we know it and started digital transformation strategies. Extending financial losses, reducing workforce, supply chain delays, increasing security risks, adapting quickly to a new way of doing business, discovering new secure ways to serve customers and rebalancing priorities while moving to a very remote workforce. Sixty-three percent of organizations have increased Digital Transformation (DT) budgets. Companies are transitioning their processes to a digital future of work. The main digital priorities include adding new digital capabilities and creating new digital pro- ducts and services, building digital platforms, creating digital business models, and automa- ting business processes. Eight out of ten orga- nizations are using collaboration and cloud com- puting tools to enable their digital transformation strategy; about six in ten are adopting systems integration technologies: IoT13 and ITSM14. Some key points that will address changes throughout the current pandemic scenario and should be part of the priority strategies to be developed by Abraidi members: 13 IoT – Internet of Things. The Internet of Things (IoT) describes the network of physical objects – “things” – that are embedded with sensors, software and other technologies in order to connect and exchange data with other devices and systems over the internet. These devices range from common household objects to sophisticated industrial tools. With more than 7 billion IoT devices connected today, experts expect this number to rise to 10 billion by 2020 and 22 billion by 2025 14 ITSM – Information Technology Service Management, which stands for IT service management. We are talking about a set of strategies, tools and software that track and manage the entire lifecycle of IT services. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 083 The pandemic is driving customer centricity even higher on the priority list. Improving the customer experience (82%) and creating a customer-centric digital business system (70%) are the main drivers of DT leaders’ digital transformation strategy. In addition, more than half say that they are accelerating initiatives on connecting the front, middle and back offi- ce, creating an employee experience to deliver better value and aligning with partners to meet commitments together. The “critical” business processes on site span front, middle and back office Front office: 61% are automating or will au- tomate claims, followed by customer service (52%). While 38% plan to automate any front office business process and 35% will focus on product design and program development/deli- very, sales (30%) and clinical (30%). Middle office: automation is a slightly more common practice among middle office proces- ses: 72% are automating or will automate inven- tory management and distribution, while 65% are automating/willautomate operations or su- pply chain (60%). Back office: automation is also being levera- ged for back office processes: 72% are automa- ting or will automate procurement, while about six in ten are automating IT processes (65%), transparency and traceability (63%), human re- sources (60%), finance (59%) or security (59%). Between 20% and 42% are exploring automa- tion of back office processes; most notably, bu- siness partner/reseller/distributor support (42%), risk and compliance (35%), and security (32%). 3. COVID-19: POST-PANDEMIC IMPACTS AND CHANGES084 In this immense turbulence derived from covid-19, a crisis is spreading among individuals, companies and countries globally. A crisis with repercussions not only in health, but also in economic, social, financial, structural, political and security aspects. In a survey we recently launched in Brazil, 75% of respondents reported that their company had gone through at least one crisis in recent Implement/update the Crisis Management and Business Continuity plan. Develop/update the Risk Management plan. Perform continuous monitoring of third- -party risks and readjustment of the contracting process and contract management, including contractual reviews (suppliers, partners and customers). Monitor business practices adopted with third parties and analyze the correct approval chain for discounts, bonuses or agreed terms. Crisis management – impacts and recommendations The crisis impacts... Coming out of the crisis... FINALLY, SOME GENERAL RECOMMENDATIONS WILL SERVE FOR MOST COMPANIES OTHER HEALTHCARE: Structure LGPD Analytics. Perform investigative monitoring on critical and/or emergency transactions. Customer retention: mapping customer profiles and contracts, understanding contractual clauses (for example: health fine) and defining and implementing the retention plan. Monitor post-crisis financial risks. Activate the whistleblower channel to capture new potential incidents of deviations and/or crises. years, but only 45% had a corporate crisis management policy. At this moment when instability is real and growing, it is of utmost importance to manage it. When everything returns to normal, it should be considered whether the lessons learned at this moment should not be incorporated or adapted to the company’s routine. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 085 Establish and activate the crisis management and response plan. Manage the impacts of risks in the different areas of the company and its ecosystem.. Establish a central risk response team. Establish a continuous emergency support structure (PMO). Develop an internal and external communication plan. Develop a rapid deployment plan for business continuity. Structure Compliance Analytics. Review contracts and disputes. Responses to the crisis... Nature Consideration Medical devices Drop in sales and pressure on the supply chain – imports Suppliers Drop in demand and logistical difficulties Health Products Suppliers POSSIBLE RESUMPTION PATTERN FIGURE 7 3. COVID-19: POST-PANDEMIC IMPACTS AND CHANGES086 Health NATURE Providers Drop in demand – focus “only” on covid-19 Increase in loss ratio High financial and operational/assistance pressure Insurance companies SUS RESUMPTION PATTERN Back to Normal See graphic below. CONSIDERATION Impacts Challenges Tendencies Predominance of physical access throughout the value chain; “digital health” strongly resisted by trade entities, industry professionals and regulatory bodies. Public-private relationship in the fight against covid-19. Operational-financial sustainability in check both in public and in private sector. Scarcity of various types of resources to fight the pandemic. Withholding and postponement of treatment and elective surgeries – potential for post-covid-19 bottlenecks. Acceleration of digital transformation in the value chain – technologies that allow the entry of digital channels (telemedicine/ teleconsultation/electronic prescription) and medium/long- -term strategy based on multiple channels. Potential reduction in supplementary health beneficiaries as a result of the worsening economic crisis, with the consequent migration of users to the public sector. Potential reduction in private value chain participants due to financial consequences resulting from the situation of isolation and sudden drop in revenue. Acceleration of new business models. Need for optimization of the installed health facilities, as well as search for greater operational- -financial efficiency. Possible resumption patterns for health and life sciences FIGURE 08 THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 087 NATURE Medicaments Drop in sales and pressure on the supply chain – imports Drop in sales and pressure on the supply chain – imports Drop in demand and logistical difficulties Devices Distribution Back to normal RESUMPTION PATTERN CONSIDERATION Life Sciences Strong pressure on the supply chain – logistical restrictions and relevant exchange rate increase. Drop in demand – reduction in the sale of medicines and devices (implantable and materials) given “only” the focus on combating covid-19 and postponement of elective treatments (with a strong retraction in the dispensing of hospital and pharmaceutical retail drugs). Operational-financial sustainability mainly of national capital and smaller participants. Greater prominence in the client-patient relationship– regulatory challenges. Acceleration of the digital transformation in the value chain – multiple channels for contact with the medical class and in the client-patient relationship. Use of technologies and artificial intelligence to identify significant health outbreaks, as well as to accelerate medi- cament development. New business models, industry with greater customer-patient proximity. Potential reduction in private participants in value chain due to financial consequences resulting from the isolation situation and sudden drop in revenue. 3. COVID-19: POST-PANDEMIC IMPACTS AND CHANGES088 The crisis and the different effects on the sectors FIGURE 09 1. Growth Industry/companies that scale post-covid with consumer behavior favorably changed during the crisis. Investors realize their potential to lead and provide capital to scale aggressively during the recovery. 2. Back to normal Industries/companies seen as essential will suffer from the recession’s effect of social distancing but will recover more quickly as consumer demand picks up at similar volumes. Resumption Pattern TURNING POINT (SPEED) BEGINNING OF CRISIS END OF CRISIS Online retail and pharmacy Food delivery Chemicals and petrochemicals Media streaming Telemedicine and preventive medicine Digital education Food and beverages Financial services Consumer goods (cyclic) Private equity e and asset management Road and urban transportation Telemedicine and telecommunications Public utilities Agriculture Health and life sciences TURNING POINT (SPEED) BEGINNING OF CRISIS END OF CRISIS THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 089 3. Transform to Re-Emerge Industries/companies that will recover, but along an extended path, requiring capital reserves to resist and transform operating and business models to emerge stronger and more aligned with changing consumer priorities and behavioral patterns. 4. Restart Industries/companies struggling to recover from covid-19 due to “permanently” reduced de- mand for offerings, insufficient capital to avoid prolonged recession and/or poor execution of digital transformation. TURNING POINT (SPEED BEGINNING OF CRISIS END OF CRISIS Tourism Miningand Metals Oil, gas and ethanol Real state/E&C real estate and construction companies AutomotiveConsumer goods (non-cyclical) Hotels Sports and media Government Industrial marketsAirportsRetail(other segments) TURNING POINT (SPEED)? BEGINNING OF CRISIS END OF CRISIS 3. COVID-19: POST-PANDEMIC IMPACTS AND CHANGES090 The organizational impacts of the crisis FIGURE 10 PERSONS SUPPLY CHAIN & OPERATIONS FINANCE AND LIQUIDITY OPERATION SUPPORT TECHNOLOGY TAX AND LABOR ASPECTS Source: KPMG THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 091 Some KPMG publications that complement this article and that may be of interest to the reader. Scan the QR Code to access KPMG’s covid-19 content. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL092 DIGITAL HEALTH: OPPORTUNITIES AT THE FRONT DOOR Dr. Jefferson Fernandes (Associação Brasileira de Telemedicina e Telessaúde) Digital health (DS) can be defined as connected, continuous healthcare using digital and communication technologies. SD is a broad term in which telemedicine and telehealth are also included. Telemedicine is the practice of medicine in different locations through the responsible use of information and communication technologies. Although the terms “telemedicine” and “telehealth” are often used interchangeably, it is appropriate to understand telehealth as the provision of health services in different locations by all health professionals, mediated by information and communication technologies, for healthcare, education, research and management purposes. Telehealth is also a generic term and the practice of healthcare in various professions, such as tele-nursing, tele-physiotherapy and occupational therapy, telenutrition, telepsychology, telephonoaudiology, among others. DIGITAL HEALTH IS GROWING EXPONENTIALLY ANDENCOMPASSING THE ENTIRE SPECTRUM OF HEALTHCARE. THE DIGITAL SOLUTIONS OFFERINGS INCLUDE THE QUALITY OF LIFE AND HEALTH PROMOTION, PREVENTION, DIAGNOSIS, TREATMENT, INCLUDING REHABILITATION, AND HOME CARE. THIS ACCELERATED EXPANSION, WHICH HAS BEEN OCCURRING IN SEVERAL COUNTRIES, WAS DETERMINED BY THE COVID-19 PANDEMIC AND IS EXPECTED TO CONTINUE GROWING EVEN AFTER THE PANDEMIC ENDS. The evolution and expansion of the various modalities, applications and use of digital health in the real world have generated several other names that, little by little, in several countries, are replacing the terms “telemedicine” and “telehealth”. Among them are virtual care, connected care and connected health. The modalities of performance in telemedicine can be classified as follows: Telemetry/orientation: evaluation of symptoms, at a distance, to define and refer the patient to the appropriate type of care he need. Teleconsultation: direct doctor-patient consultation (for diagnosis and treatment). Teleinterconsultation/Teleconsultation: interaction among physicians to clarify aspects of diagnosis, treatment and other issues related to patient care. Two types: synchronous and asynchronous. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 093 Telediagnosis: support for reports of various types of complementary exams (usually asynchronous), such as: teleradiology, tele- -electrocardiogram, tele-electroencephalogram, telepathology. Telemonitoring: remote monitoring, through electronic systems, of body parameters (includes transmission, recording, processing and clinical management). Telemonitoring includes the use of wireless devices, wearable and implantable sensors. It enables continuous support and management of chronic diseases and can be synchronous (real time) or asynchronous (storage and forwarding), depending on the patient’s need. The application of artificial intelligence (AI) and machine learning can enable better disease surveillance and early detection, improved diagnostics, clinical decision support, and support for personalized medicine. THE FUNDAMENTAL ASPECT WAS THE PERMISSION FOR THE USE OF TELECONSULTATION, WHICH WAS THE GREAT OBSTACLE TO THE DEVELOPMENT OF TELEMEDICINE IN THE COUNTRY. In Brazil, the advance of telemedicine, after decades of restrictions, was initially determined by the publication by the Ministry of Health of Decree No. 467, of March 20, 2020, which authorized the use of telemedicine in all its modalities during the covid-19 pandemic. This decree was followed by the publication of Law No. 13,989, on April 15, 2020, originating from a bill prepared and approved by the National Congress and sanctioned by the Presidency of the Republic. The fundamental aspect of the decree and the law was the permission for the use of teleconsultation, which was the major obstacle to the development of telemedicine in the country. The Federal Council of Medicine (CFM) resolution on telemedicine still in force is Law No. 1,643, of August 2002, which excluded teleconsultation. Physicians who have started using teleconsultation are satisfied with the benefits and results of this modality of patient care. Of course, we should not expect all physicians to be 3. COVID-19: POST-PANDEMIC IMPACTS AND CHANGES094 interested in its use, either in primary care or in medical specialties. This method of care should be used by those who want it, both physicians and patients. However, the benefits of telemedicine are already clear. We can safely say that telemedicine in its various modalities is here to stay. Everyone involved needs to know its benefits as well as its limitations. There are several scientific and real-world evidence that demonstrate the benefits of responsible use of telemedicine and telehealth. Among them are: A survey carried out by Press Ganey with 1.3 million patients in the United States in 2020 noted that patients appreciate the convenience and, surprisingly, the intimacy of virtual visits. However, this survey also showed that there is an enormous room for improvement in telemedicine/telehealth and teleconsultation processes. But how to improve the use of telemedicine and its processes? An efficient way is through the training of physicians and health professionals to practice responsible connected health, that is, safety, ethics and quality. The communication and operational processes of the virtual consultation are also important for delivering a consistently satisfactory patient experience. Expanding access to health services. Continuous and articulated follow-up in the different levels of care.1. 4. Strengthening care coordination. Cost reduction in healthcare.3. 6. Increasing resolutivity and effectiveness of healthcare. Contribution to the organization of health systems, bringing greater effectiveness and efficiency. 2. 5. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 095 THERE IS AN ENORMOUS ROOM FOR IMPROVEMENT IN TELEMEDICINE/ TELEHEALTH AND TELECONSULTATION PROCESSES. 096 3. COVID-19: POST-PANDEMIC IMPACTS AND CHANGES Based on the experience we are having during this pandemic period, we will be able to accelerate the strategic use, operational efficiency and quality of connected care to benefit patients, physicians and healthcare services and systems. It is important to emphasize that telemedicine and telehealth are patient care methods, not tools. These are the technologies used for its execution (hardware, software, internet etc.). Participants in the health ecosystem are increasing their focus on digital health. This includes regulators reducing the burden to encourage digital innovation and ease time-to- -market for needed diagnostic, therapeutic and monitoring solutions; paying sources showing a greater appetite to expand coverage; healthcare providers increasing their use of connected care; patients adopting the use of more sophisticated digital healthcare technologies; and product developers investing in the development of new digital technologies. In Germany, for example, the new Digital Health Law made it possible for some health apps to be prescribed by physicians with the costs covered by health insurance companies, which was considered a world innovation. However, companiesor startups must demonstrate within a year that the digital solution is accurate, when it THE DIGITAL HEALTH MARKET WAS ESTIMATED AT OVER US$ 106 BILLION IN 2019. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 097 comes to diagnosis, or effective, when it comes to directing to therapeutic alternatives that are necessary for approval and continuity. Under this law, Germany wants more teleconsultations for patients, including electronic prescriptions and improvements in IT systems for physicians and dentists. In Brazil, the Ministry of Health, through Datasus, recently published the so-called “Digital Health Strategy 2020-28”. It emphasizes the importance of working in harmony among the various organizations and institutions from all sectors of health, as “the public sector cannot, alone, respond to all the needs for scientific discovery, industrial production, innovation and human resources training for health and even less for digital health”. One of the axes of this strategy “aims to implement a conceptual, normative, educational and technological environment that favors effective collaboration”. The size of the digital health market has been estimated at more than US$106 billion in 2019, and the industry will have a compound annual growth rate (CAGR) of 28.5% by 2026, that is, to around US$ 640 billion. The increasing number of covid-19 cases around the world has increased the adoption of digital health technologies and will drive the growth of the digital health industry. It is estimated that the health apps segment will have a CAGR of 38.9% in this period and 26.2% for the telemedicine/ telehealth segment. The increasing number of smartphone users around the world and the entry of 5G will drive a market growth. The rapidly progressing health IT infrastructure in both developed and developing countries will also contribute to this market growth. In Brazil, the demographic transition, which has shown a significant growth in the elderly population, is accompanied by an epidemiological transition, that is, a significant increase in chronic diseases. These transitions will lead to the adoption of new solutions to manage people’s health, stimulating demand for digital solutions, for example, remote monitoring, increasing the market size and driving the expansion of the regional industry. From telemedicine to remote patient monitoring and management, new services will be adopted quickly, generating countless opportunities. Investors will see it. O CICLO DE FORNECIMENTO DE PRODUTOS PARA SAÚDE NO BRASIL 4 4 Health distortions and the sustainability of the sector IN RECENT YEARS, ABRAIDI HAS BEEN CONTRIBUTING TO THE DEBATE ABOUT THE SUSTAINABILITY OF BRAZILIAN HEALTH, A TOPIC THAT HAS BECOME CENTRAL TO PUBLIC AND PRIVATE MANAGERS AND OTHER REPRESENTATIVES OF THE SECTOR NOT ONLY IN THE COUNTRY BUT ALSO AROUND THE WORLD DUE TO SEVERAL FACTORS SUCH AS PEOPLE LONGEVITY, NEW MEDICAL DISCOVERIES, THE DEVELOPMENT OF NEW TECHNOLOGIES, INCREASED HEALTH COSTS, AMONG OTHERS. In this chapter, we present two different approaches that add value to this discussion: an article that deepens the debate around health sustainability based on the concept of Value-Based HealthCare (VBHC), which implies a paradigm shift from disease- -oriented care to health-driven care, with a central focus on the patient; and the results of the Abraidi members survey on how the historical distortions of the business relationship between suppliers and customers behaved in 2020 and how much this increases costs, burdens the health system as a whole and does not represent any benefit to the patient. HEALTH DISTORTIONS AND THE SUSTAINABILITY OF THE SECTOR THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 101 SUSTAINABILITY OF THE HEALTH SYSTEM I believe we can say that the world will no longer be the same after the announcement of the pandemic created by the coronavirus. Regardless of the possibility of returning to the pre-pandemic condition, our view of the world and, particularly, the value of healthcare have been indelibly impacted. In recent years, the need to shift the focus from the cost of illness to the value of health had become evident. After all, the so-called health system, as we know it today and depend on it, is a disease system, in which the generation and capture of value begins and ends with treating “someone sick”. However, covid-19 has certainly accelerated the transformation from a disease system to a health system in months, which would possibly take years and eventually another decade. In order to clearly understand the depth and magnitude of such a change, it is important to go back in time to the first practical evidence associated with curing diseases and extending life as applied by Eastern medicine – Indian, Chinese and Tibetan – more than 5,000 years ago. The concern with the treatment of disease probably appears in medieval medicine, but it is still associated with divine causes. The history of modern medicine begins in the Renaissance, a little more than 500 years ago, with the efforts to separate divine causes from scientific and rational aspects. IN BRAZIL, THE AVERAGE LIFE EXPECTANCYWENT FROM 53 YEARS IN 1950 TO 76 YEARS IN 2018. Celso Ienaga Managing Partner at Dextron Consulting 102 4. HEALTH DISTORTIONS AND THE SUSTAINABILITY OF THE SECTOR However, in the last 100 years, advances in medicine, which added to the population’s increasing access to education, basic sanitation, housing and food, have provided a considerable increase in the world population’s longevity. In the United States, the average life expectancy in 1915 was 54 years; today it is possible to see a considerable part of the American population over 100 years old.15 In Brazil, in the last 70 years, the average life expectancy of the population, which was 53 years old in 1950, jumped to over 76 years old in 2018, an increase of approximately 50% in life expectancy.16 The direct consequence of this change in the population profile is the need to rethink the focus of the current disease-based system to a health- -oriented system. It is a transformation that we could say that it is almost a general reset and reboot of the health operating system. However, what is the main reason for such a change? The sustainability of the health system. Rising medical costs (above inflation) and constant investments in technological upgrading for the treatment of different diseases (new and old) added to the need to serve an increasingly larger population, more demanding of care and more longevous, show the inability to maintain and finance the current health model. It is in this context of strong pressure for a change that the Value-Based HealthCare (VBHC) emerges, which proposes that the care and treatments offered by the health system, public or private, should be value-based and patient- -centered. Introduced in 2006 by Michael Porter and Elizabeth Olmsted Teisberg, professors at Harvard Business School, in the book Redefining Healthcare,17 the model aims to present a response to the rising costs associated with healthcare, the structural inefficiency of healthcare and the low generation of patient benefits. In short, the concept of VBHC is based on a simple account: the value of health to the patient is related to the results (outcomes) achieved in his treatment and/or consultation (functional recovery and quality of care), divided by the total cost of the care cycle to generate these results.18 Despite the simple definition, the implementation of VBHC is highly complex, starting with the choice of the metric/indicator to be used to measure the outcomes (benefits), that is, the quality of the result of care, not the quantity of medical services provided. This choice is a key success factor, since the assessment of the value in health can generatelarge variations depending on the patient or health insurance company or hospital’s point of view, for example.19 15 SCHNEIDER, Tobias van. All of this happened in less than 100 years. Jan. 10, 2016. Available at: https://vanschneider. medium.com/100-years-ago-12ca8935f25f#.eq9on7c1q. Access on: Mar. 21, 2021. 16 O MATERIAL jornalístico produzido pelo Estadão é protegido por lei. O Estado de S. Paulo, São Paulo, Dec.11, 2020. Available at: https://economia.estadao.com.br/noticias/geral,aumento-da-expectativa-de-vida-demanda-planejamentofinancei ro,70003547391. Access on: Mar. 21, 2021. 17 PORTER, Michael; TEISBERG, Elisabeth O. Redefining health care: creating value-based competition on results. Boston: Harvard BusinessReview Press, 2006. 18 COVID-19 é catalisadora para expandir o Value-Based Healthcare (VBHC)? In Club, Oct. 14, 2020. Available at: http://www.inclublicita.com.br/ covid-19-e-catalisadora-para-expandir-o-value-based-healthcare-vbhc/. Access on: Mar. 21, 2021 19 SAÚDE baseada em valor foi tema de discussão entre especialistas, em congresso realizado em SP, pelo IBRAV’S. Capital Econômico, Jul. 1, 2020. Available at: https://revistacapitaleconomico.com.br/saude-baseada-em-valor-foi-tema-de-discussao-entre-especialistas- emcongresso-realizado-em-sp-pelo-ibravs/. Access on: Mar. 21, 2021. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 103 The change of the current fee-for-service model – in which payment is made according to the number of procedures performed, regardless of the quality of results and/or costs associated with these treatments – becomes even more necessary in the Brazilian context21, since: healthcare inflation is persistently much higher than general price indexes. According to the Institutode Estudo de Saúde Suplementar, on average, the variation in medical and hospital costs is 3.4 times greater than the average of the Extended National Consumer Price Index (IPCA); the cost of supplementary health care doubles in the 54 to 58 age group, that is, the older the population, the greater the expenses in the health sector; Another major challenge for implementing VBHC is the remuneration model. Unlike other initiatives to modify the system, such as evidence-based medicine, new medical procedures and protocols, quality health programs, co-participation and co-management models etc., the VBHC proposes to implement a new remuneration system, in which the priority is the constant search for improving the quality of patient care, simultaneously with an optimization of the costs for providing this service20. In other words, the adoption of a remuneration model based on the value of health. the waste of the current remuneration model, quantified through unnecessary exams and hospitalizations, use of extra material, adoption of more costly treatments, which could be avoided, is estimated at around R$ 32 billion. According to Instituto Coalizão Saúde, there are five value-based payment models: Fee-for- Service (FFS), Fee-for-Service with performance bonus (FFS+P4P), Bundle, Capitation and Global Budget. Although the Fee-for-Service model is the most adopted by most hospitals and health insurance companies in the country, it is already possible to observe an accelerated growth of the Bundle and Global Budget models, as Abraidi showed in the 3rd edition of the Yearbook22. In terms of results, experiences in the United States and Europe, in adopting remuneration models based on the VBHC, have managed to save amounts exceeding billions of dollars or euros. Obviously, the challenge lies in implementing this new remuneration model. When analyzing best practices, it is possible to observe that some practices and priorities are key factors for success, such as transparency of information, prioritization of primary care, management of treatments risks and costs, integration with information systems, review of processes and the organizational model and especially the definition of metrics for outcome assessment. 20 MAKDISSE, Marcia. A transformação do cuidado baseada em valor. Medicina S/A, São Paulo, Marc. 3, 2020. Available at: https://medicinasa. com.br/marciamakdisse-valor/. Access on: Mar. 21, 2021. 21 LINS, Julia. Mudança nos modelos de remuneração médica: qual o impacto? DOC, Oct. 27, 2020. Available at: https://www.universodoc. com.br/2020/10/27/mudancas-nos-modelos-de-remuneracao-medica-qual-o-impacto/. Access on: Mar. 21, 2021. 22 ABRAIDI. O ciclo de fornecimento de produtos para saúde no Brasil. 3. ed. São Paulo, 2019. Available at: https://www.abraidi.com.br/files/pub/ Anuario_ABRAIDI_2020_PT.pdf. Access on: Mar. 21, 2021. 104 4. HEALTH DISTORTIONS AND THE SUSTAINABILITY OF THE SECTOR In the specific case of metrics for evaluating outcomes, in 2017 the Organization for Economic Cooperation and Development (OECD) launched at the request of the ministries of health member countries a benchmarking study of the outcomes that matter most to patients in the different health systems in force in their countries. The result of the study “Implementing value-based health care in Europe – Handbook for pioneers”, conducted by the European Institute of Innovation and Technology (EIT) Health, was published at the end of 2020. Obviously, given the diversity of health reality associated with the cultural and social aspects of the various countries participating in the study, it was not possible to identify a “one- -size-fits-all solution” to measure the outcomes. On the other hand, the study showed that health service providers, when implementing the VBHC, by taking similar steps and facing similar challenges, converge on similar solutions. These standardized steps in the VBHC implementation resulted in a matrix composed of five critical dimensions (Figure 11), a saber: REGISTRATION: measuring processes and outcomes through a scorecard and data platform. COMPARISON: comparison of internal and external reports from benchmarking teams. REMUNERATION: investment and creation of incentives based on outcomes. IMPROVEMENT: organization of improvements in the care cycle through collective learning. PARTNERSHIP: aligning internal efforts and establishing collaboration with external partners. THE CHALLENGE LIES IN THE IMPLEMENTATION OF THESE NEW REMUNERATION MODELS. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 105 The final summary of the study, especially taking as reference the different real and practical cases mapped out, was that the Patient-Reported Outcome Measures (PROMs), that is, the patient-reported outcomes, are clearly the basis of the migration, the transformation to the VBHC, as they align teams of professionals with what patients consider to be important and mobilize internal forces to implement the necessary changes. According to the study, patient-reported outcomes have the potential to introduce a universal language in which stakeholders, interested parties, can share and evaluate success in healthcare. PROMs are powerful because they use risk-adjusted instruments and turn qualitative symptoms (e.g., “how I feel”) into a numerical score (e.g., “how much you feel”), thus allowing health-oriented initiatives to be evaluated and improved. VBHC Implementation Matrix (EIT Health)23 FIGURE 11 23 EIT HEALTH launches guidance on Value-Based Health Care. May 26, 2020. Available at: https://eithealth.eu/news-article/eit- healthlaunches-guidance-on-value-based-health-care/. Access on: Mar. 21, 2020. Identifies a patient group CONDITION1. Enables data capture, interface interactions, data analytics and access to data DATA PLATAFORM4. Defines processes, costs and outcome indicators while applying case-mix adjustment SCORECARD3. Consists of mobilizing a core team, involving patients and making board support visible INTERNAL FORCES2. Refers to partnering with insurers and heath authorities EXTERNAL COLLABORATIONS9. Relies on improvementcycles, training programmes and research projects LEARNING COMMUNUITY8. Create outcome-based payments and behavioural encouragements INCENTIVES7. Involve human and financial resources mobilized for implementation INVESTMENTS6. Provide transparent outcome comparisons across providers BENCHMARKS5. 106 4. HEALTH DISTORTIONS AND THE SUSTAINABILITY OF THE SECTOR On the other hand, it is interesting to note throughout the study that the VBHC is not per se the solution to all health-related problems of the population, nor the guarantee of greater longevity, improvement in quality of life and maintenance of individual’s ability to contribute economically to the sustainability of the health system. For this, it is essential that, in the medium and long term, the main players and agents of the health ecosystem can realign their interests, roles and positionings of the different stakeholders, interested parties (that is, government, private initiative, regulatory agents, entities of class, academia etc.). Analyzing the main lessons learned and the best practices when adopting the VBHC model, either in the context of a hospital or a national health system (as in the case of the Netherlands, in Europe), it is possible to observe that VBHC- -oriented transformation becomes a reality and a part of the medical routine, especially when four basic principles are adopted by everyone involved in the implementation process, namely: Equity, Transparency, Accountability and Social Responsibility. Interestingly, these basic principles are the same four Principles of Corporate Governance24, adopted by several public and private organizations and entities as they look for sustainability and longevity of their organizations. Obviously, the search for sustainability of the health system is a great challenge, given 24 h'ttps://www.ibgc.org.br/blog/principios-de-governanca-corporativa. 25 https://www.anahp.com.br/noticias/noticias-anahp/grupos-de-trabalho-da-anahp-convidam-advisory-board-para-discutir-os-caminhosda- saude-baseada-em-valor/ the number and diversity of agents and players involved, as well as the high complexity of the relationships among the parties. However, the adoption of the basic governance principles and the best practices proposed by the VBHC by each of the main health stakeholders, interested parties, can be the first step towards solving structural problems such as dysfunctional incentives25 (such as: bonuses based on a greater consumption of unnecessary tests etc.), which limit and make access to quality healthcare for the population more and more expensive. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 107 THE SEARCH FOR SUSTAINABILITY OF THE HEALTH SYSTEM IS A GREAT CHALLENGE, GIVEN THE NUMBER AND DIVERSITY OF AGENTS AND PLAYERS INVOLVED, AS WELL AS THE HIGH COMPLEXITY OF THE RELATIONS AMONG THE PARTIES. O CICLO DE FORNECIMENTO DE PRODUTOS PARA SAÚDE NO BRASIL 108 4. HEALTH DISTORTIONS AND THE SUSTAINABILITY OF THE SECTOR In this edition, with data from 2020, the “open account”, which is based on the remuneration of the paying agent on the product provided or on the service rendered, that is, fee-for-service model is used by 67% of members’ customer who responded the survey. In this format, payment privileges the number of procedures performed and products used, regardless of the quality of the results for the patient. The “surgery-restricted package”, also known as a bundle – which adopts the expected cost per episode as the payment basis –, or the package that includes products and services related only to surgery is used by 44.9% of members’ customers, which maintains the market concentration trend in these two models.26 Payment Models and Healthcare Product Suppliers A SURVEY CONDUCTED AMONG THE HEALTH PRODUCT SUPPLY COMPANIES ASSOCIATED WITH ABRAIDIREVEALS THAT TRADITIONAL PAYMENT MODELS STILL PREDOMINATE IN THE MEDICAL DEVICES SECTOR. IN THE 3RD EDITION OF THE YEARBOOK, LAUNCHED IN 2020 WITH DATA FROM 2019, THE RESPONSES POINTED OUT THAT 51.4% OF MEMBERS’ CUSTOMERS USED FEE-FOR-SERVICE MODEL, WHILE 44.1% WORKED WITH BUNDLE OR CLOSED PACKAGE MODEL. 26 The sum of the amounts exceeds 100% because a hospital or a health insurance company can work with more than one payment model. 67% OF MEMBERS HOSPITALS AND HEALTH INSURANCE COMPANIES CUSTOMERS USE FEE- -FOR-SERVICE MODEL. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 109 Payment Models Used by Hospitals and Health Insurance Companies that Are Clients of ABRAIDI Members1 In % – 2020 TABELA 03 Source: ABRAIDI Survey. 8.3Open account with performance bonus 39.1Treatment package (Surgery + Post) Open account 67 44.9Surgery-restricted package 32.6Other forms of remuneration %MODEL 1 For this question, a sample of 41 members was used. 110 4. HEALTH DISTORTIONS AND THE SUSTAINABILITY OF THE SECTOR The practice known as “revenue retention” by health insurance companies, health plans and hospitals occur when, after performing a previously authorized surgical procedure and the use of products and materials necessary for the procedure, both the health insurance company and the hospital do not authorize the revenue, under penalty of retaliation, postponing payment of materials. Revenue Retention Revenue of Abraidi Members Retained by Paying Source1 In R$ million – 2017-2020 CHART 23 HEALTH PLANS AND INSURANCE COMPANIES PUBLIC HOSPITALS (SUS) PRIVATE HOSPITALS 331 94.8 113.8 177 162.6 148.9 204 42.4 237.7 392 111 290.4 2017 20192018 2020 Source: ABRAIDI Members Survey. 1 Estimated calculation based on the ABRAIDI Members Survey sample. TOTAL (2020): R$ 793,4 MILLION The covid-19 pandemic had major and profound repercussions on the operation and revenues of medical devices suppliers. In addition to the logistical, foreign exchange and tax problems already addressed throughout this Yearbook, which raised costs and left little margin for transfers, the industry’s historical Distortions in Health distortions have accentuated the business relationship with the main customers, the health insurance companies and public and private hospitals. Revenue retention by payers exploded in 2020 and payment terms became longer, impacting the companies’ cash flow, as we will see below. In 2020, Abraidi members pointed out that the estimated total value of retained or blocked revenue reached R$ 793.4 million – an increase of 63.8% compared to 2019. The significant increase in this percentage occurred after two years (2018 and 2019), in which the impact of the practice had remained stable, around R$ 485 million. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 111 One hypothesis is that the suspension and postponement of elective surgeries in public and private hospitals, added to the uncertainty regarding the evolution and development of covid-19, have led health plans to take precautions and protect their cash flow, retaining the revenue of suppliers. In the case of public hospitals – a segment in which the index has also risen, even though they have received a significant contribution of resources from the federal and state governments– it is possible that the resources were directed primarily to the care of patients with covid-19. In 2020, suppliers also had to cope with the extension of the deadline for issuing the invoice. In this regard, the average time identified in the sector for issuing the invoice after the surgery was 45 days, ranging from 35 to 52 days. In 2019, the indicator was 36 days. Average Number of Days1 Until the Invoice Is Issued by ABRAIDI Members by Paying Source Comparison in days – 2017-2020 CHART 24 HEALTH PLANS AND INSURANCE COMPANIES PUBLIC HOSPITALS (SUS) PRIVATE HOSPITALS 68 62 5453 29 45 40 52 35 34 35 48 2017 20192018 2020 Source: Abraidi Members Survey. 1 Estimated calculation based onthe Abraidi Members Survey sample. 112 4. HEALTH DISTORTIONS AND THE SUSTAINABILITY OF THE SECTOR On the other hand, the average time for effecting payment after issuing the invoice decreased to 73 days, ranging from 67 to 77 days. In 2019, the average was 85 days. The most significant reduction in payment terms occurred in public hospitals. Although they worked with significant revenue retention, they were more agile in making payment after the invoice was issued. A possible explanation for this may have been the need to make purchases for quick and permanent replacement of supplies and materials, due to the explosion ofcovid-19 cases and the need to maintain care for other diseases. Average Number of Days1 Between Invoice Issuance and Payment – Abraidi Members by Paying Source Comparison in days – 2017-2020 CHART 25 HEALTH PLANS AND INSURANCE COMPANIES PUBLIC HOSPITALS (SUS) PRIVATE HOSPITALS 92 91 83 62 67 81 65 67 107 82 77 75 2017 20192018 2020 Source: ABRAIDI Members Survey. 1 Calendar days. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 113 Figure 12 depicts the average time that elapsed in 2020 between the supplier issuing the invoice after the surgery and the actual payment, in most cases, previously authorized. The average time was 118 days, or 3 months and 28 days. There was little variation compared to 2019 (average of 121 days), but a significant growth compared to 2018 (112 days). The delay of almost four months to receive payment leaves the supplier in a situation of great vulnerability, as this period compromises his financial capacity and cash flow, in addition to raising the financial cost of the operation, which burdens the health system. Source: ABRAIDI Members Survey. 1 Average number of calendar days among paying sources (estimate by the Abraidi Members Survey). 2 Average number of calendar days among paying sources (estimate by the Abraidi Members Survey). Average time between invoice issuance and receipt from ABRAIDI members – 2020 FIGURE 12 DAYS2 DAYS118 DAYS28MONTHS3= + 73 INCOME AUTHORIZATIONSURGERY PAYMENT DAYS1 45 APPROVAL FOR THE PROCEDURE 114 4. HEALTH DISTORTIONS AND THE SUSTAINABILITY OF THE SECTOR Disallowances occur when the health insurance company or plan refuses to pay for some products, materials or equipment used in surgery previously authorized by them (in some cases, the entire hospital bill may be disallowed). This may happen due to bureaucratic, third-party or unjustifiable issues. Unjustified disallowances have been an important and frequent distortion, causing great losses to suppliers. In 2020, 89% of members reported suffering from disallowances, which amounted to R$118.6 million. Although the number of members claiming to suffer from disallowances has increased by 3%, the total amount disallowed was approximately 26% lower than in 2019 (R$ 160.6 million). Disallowances Disallowance Practice by Health Insurance Plans In % of members – 2020 CHART 26 NOYES 11%89% Source: Abraidi Members Survey. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 115 The reduction in disallowances is a factor that is related to the covid-19 pandemic and to one of its striking effects: cancellation, suspension or postponement of surgeries and elective procedures. The data also reflects the reduction in the number of emergency surgeries – such as trauma surgeries, caused by traffic accidents, for example –, one of the effects of quarantine and people staying at home. The fear of contracting the virus has also kept patients away from hospitals, even in the most acute cases of illness. Regarding the volume of disallowances to be received by suppliers 64% are attributed to health insurance plans, while 36% are related to hospitals. Total Volume of Disallowances from Abraidi Members In R$ million – Comparison 2017-2020 CHART 27 2017 2018 2019 2020 100.8 127.2 160.6 118.6 Source: ABRAIDI Members Survey. 116 4. HEALTH DISTORTIONS AND THE SUSTAINABILITY OF THE SECTOR Another distortion that affects suppliers is default. It occurs when the supplier is not remunerated after 180 days from the surgical procedure. Default should also be considered the amounts “lost” due to the bankruptcy of the service provider or the paying source and even intentional default. According to the Abraidi survey, 94% of members recorded losses with default or deadbeat by hospitals, health insurance companies or public agencies in 2020, totaling an amount of R$ 714 million in funds to be received or lost. Defaults Losses with Default by Hospitals, Health Insurance Companies and Public Agencies In % of members CHART 28 NOYES 6%94% Source: ABRAIDI Members Survey. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 117 The default recorded in 2020 was about 10% lower than in 2019 (R$ 789 million). Nevertheless, the high amount contributed to leave the supplier in a vulnerable situation and without a cash flow. It is another factor that adds to the fact that elective surgeries have been suspended in both the public and private sectors, forcing the supplier to collect amounts not yet received to maintain liquidity and, consequently, the company’s operation. Default Volume – Resources Receivable for More than 180 Days or Lost – ABRAIDI Members In R$ million – Comparison 2017-2020 CHART 29 2017 2018 2019 2020 692,2 554,8 789 714 Source: ABRAIDI Member Survey. 118 4. HEALTH DISTORTIONS AND THE SUSTAINABILITY OF THE SECTOR The financial discount is characterized as the unilateral practice of hospitals to demand or impose on suppliers the granting of discounts as an essential condition for the supply of products, materials and equipment. Although the financial discount is a legal and valid practice, it becomes abusive when there is a requirement that the discount is applied by the supplier only in the bank payment slip, and not in the invoice, which formalizes and monitors the sales transaction, characterizing an illegal operation. When this happens, hospitals tend to charge health insurance Financial Discount Hospital Discounting Practice/Financial In % of members – 2020 CHART 30 NOYES 36%64% Source: ABRAIDI Members Survey. companies for the full amount of the invoice, profiting “on both ends”, that is, in relation to the supplier and the health insurance company. Abraidi has reinforced the guidance given to members regarding the financial discount, recommending them to observe the guidelines contained in the Abraidi Code of Ethics and Conduct, as well as the Normative Instructions of Instituto Ética Saúde. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 119 In 2020, 64% of members who respond the survey pointed out the occurrence of the practice of hospital discounts in their region of operation. There was a significant drop in the rate compared to 2019, when 83% of participants reported the problem. The result can be attributed to a greater awareness of suppliers about the illegality of this practice by hospitals, the risks for companies, as well as the importance of formalizing business relationships through contracts, for example. At these points, Abraidi has been actively working to bring information and awareness to its members. The fact that 75% of suppliers report retaliation for denying the financial discount is a clear record that this abusive practice remains at extremely high levels in the device market. In 2019, the percentage was 73%, revealing that little has changed on this topic. Retaliation by Denying the Granting of a Hospital Discount In % of members - 2020 CHART 31 NOYES 25%75% Source: ABRAIDI Members Survey. 120 4. HEALTH DISTORTIONS AND THE SUSTAINABILITY OF THE SECTOR ADDITIONAL SERVICES INCLUDE EVERYTHING FROM THE SUPPLY OF INSTRUMENTAL KITS, EQUIPMENT AND EVEN PROFESSIONAL PROVISION. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 121 One of thebiggest distortions in the medical devices market is the provision of a series of added services by suppliers that are not related to the logistics of importing and distributing healthcare products and for which they are not remunerated. Additional services include everything from the supply of essential items for performing surgeries – such as instrument kits – to providing professionals who work as assistants in these procedures, such as surgical technician and perfusionists. It is an atypical situation that has no parallel with the performance of suppliers in any other country, in which these items, services and professionals are, in general, part of the hospitals’ assets. See below some examples of additional materials and services under the responsibility of the suppliers: • Supply of surgical tables and patient monitoring equipment, on a loan basis. Supply of equipment such as orthopedic saws and drills, cardiopulmonary bypass, electric scalpels, towers for video surgeries, on a loan or non-release basis. Provision of Added Services Programming of valves and other equipment, as well as technical support and maintenance in certain cases. Making this equipment and materials available implies high investments by suppliers, with long amortization periods and without the counterpart of incorporating these costs into the prices of products and procedures. In addition to configuring a major distortion of the Brazilian health system, this situation is another problem that adds to those already mentioned above, such as the revenue retention and long payment periods, directly affecting the performance of companies. 122 4. HEALTH DISTORTIONS AND THE SUSTAINABILITY OF THE SECTOR The distortions that occur in the medical devices sector and the proportions with which they occur, as measured by the survey, impose a series of additional costs on the suppliers’ operation that end up reverberating throughout the entire health chain. Cost of Distortions Percentage of Suppliers’ Operating Costs Arising from Distortions in the Healthcare Products Industry In % of average annual operating cost - 2020 CHART 32 DEFAULT VALIDITY LOSSES REVENUE RETENTION LOSSES DUE TO PRODUCT WASTE OR DAMAGE TO EQUIPMENT AND INSTRUMENTS UNPAID SERVICES – SURGICAL TECHNICIANS, EQUIPMENT, INSTRUMENTS AND OTHERS FINANCIAL DISCOUNT OR OTHER UNDUE FEES DISALLOWANCES These are abusive practices that drain resources from the health system and directly harm patients. In addition, they create an unethical, unfair and unequal remuneration mechanism among the parties in business relations. 12 12 8 8 9 7 8 Source: ABRAIDI Members Survey. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 123 The survey reveals that distortions are responsible for 64% of healthcare products suppliers’ operating costs. In the period between 2019 and 2020, the percentage increased by 14%. The services provided by suppliers to hospitals, but not paid – such as hiring surgical technician and other health professionals, or even the lending of equipment and instruments, which should also be under the responsibility of these establishments– weighed in calculation. This irregularity accounted for 12% of operating costs. The same impact, also at the 12% level, can be credited to the revenue retention suffered by the companies. These are parameters that increased compared to 2019 and that are added to the increase in costs generated by default, disallowances and financial discounts, producing a perverse and harmful account for the health system and patients. DISTORTIONS ARE RESPONSIBLE FOR 64% OF SUPPLIERS’ OPERATING COSTS. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL0124 It was a year of difficulties, of factors that impacted companies’ cash flow and that penalized especially small and medium- -sized companies. The cancellation, suspension or postponement of elective surgeries was, without a doubt, a key factor in this scenario. More than 1 million surgeries were no longer performed in SUS alone – a reduction of more than 25%. Other factors are the rising dollar and the decision of the government of the state of São Paulo to raise from 0% to 18%, in the middle of the pandemic, the ICMS tax on sales to private hospitals and health insurance companies of about 200 healthcare products, many of them essentials. The blockades and lockdowns decreed by the governments of several countries made imports more difficult and expensive and reduced exports. In the national market, the increase in freight costs was another factor to pressure companies’ operations. The need for all players to guarantee revenue and preserve cash amidst uncertainties has reinforced historical distortions and abusive business practices in the sector. The revenue retention rate grew 64% in the year and the average payment term for services rendered remained at the high level of four months. All these factors were added to an outdated SUS payment schedule, which has not been readjusted for more than 20 years. In a moment like the present and with the market conjuncture factors mentioned above, SUS runs a serious risk of collapsing in healthcare and lack of supply of healthcare products in the medium term. Unfortunately, as in all sectors of the economy, these factors have also forced medical devices suppliers to reduce labor contracts and dismiss. CONCLUSION THE PANDEMIC AND THE SET OF CHALLENGES AND UNCERTAINTIES THAT CAME IN ITS MATTER AND DOMINATED ALMOST THE ENTIRE YEAR OF 2020 BROUGHT OUT THE BEST AND WORST IN HEALTHCARE, ESPECIALLY IN THE MEDICAL DEVICES, THE FOCUS OF THIS YEARBOOK. THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 125 On the other hand, given the need to reduce costs, members also looked for other solutions, as the covid-19 survey pointed out. The participants reported that the pandemic forced them to look for innovative and more effective ways of management. It was also necessary to adopt other business models, review contracts, look for new customers and diversify the portfolio of products sold – changes that are here to stay. Abraidi, in turn, continued defending the sustainability of the sector and taking its claims to all levels of government and powers. The webinars and the regional meetings, that were necessarily virtual, have increased the capillarity of information and the permanent service also to members from distant regions. Materials and training courses were also made available on the network, benefiting a MOST PEOPLE BET THAT BY 2022 MORE POSITIVE WINDS WILL BLOW. greater number of companies. About compliance, in addition to important participation in the meetings of the Inter-American Coalition for Ethics in the Medical Devices Sector, Abraidi promoted a virtual International Seminar and held the launch of the 4th edition of the entity’s Code of Ethics and Conduct with several advances. The future is still uncertain, as well as the course of the economy, even after the immunization of a large portion of the population, which should occur more rapidly in the second half of 2021. However, the entrepreneurs who participated in the survey are optimistic. Many of them believe that changes will occur later this year and most of them bet that by 2022 more positive winds will blow. ABRAIDI MEMBER COMPANIES126 ACRE PSC DE HOLANDA ALAGOAS ALL MEDIC COMÉRCIO DE MATERIAIS MÉDICOS EIRELI FIX BRASIL LTDA. IMPLAMEDICAL ALAGOAS COM. DE PRODUTOS MÉDICOS LTDA. AMAPÁ MEDICON IMPORTAÇÃO AMAZONAS HW COMÉRCIO DE PRODUTOS HOSPITALARES LTDA. LIDERA COMÉRCIO DE ARTIGOS MÉDICOS LTDA. – EPP SAGA MEDICAL BAHIA CORAMED COMÉRCIO DE ARTIGOS MÉDICOS LTDA. IMPLANTES MÉDICOS BAHIA COM. DE PRODS. MÉD. HOSP. LTDA. JDR COMÉRCIO PRODUTOS CIRÚRGICOS LTDA. JOINTMED COM. DE MAT. CIR. HOSP. E ORT. LTDA. MARIN MEDICAL MEDICICOR COMERCIAL EIRELI ORTHEK COMÉRCIO E IMPORTAÇÃO DE PRODUTOS HOSPITALARESLTDA. SAFEMEDIC PRODUTOS MÉDICOS HOSPITALARES LTDA. SYNTECH COMÉRCIO IMPORTAÇÃO EXPORTAÇÃO LTDA. CEARÁ AGF MEDICAL LTDA. MEDTRAUMA COMÉRCIO E IMPORTAÇÃO DE ORTOPEDIA LTDA. – ME NEW CARDIO MEDICAL COMÉRCIO PRODUTOS MÉDICOS LTDA. – ME ORTOGÊNESE COM. IMP. MAT. MÉD. CIRÚRGICOS LTDA. DISTRITO FEDERAL BRASMÉDICA HOSPITALAR E ORTOPÉDICA LTDA. CARDIOMED IMPORTAÇÃO E DIST. DE PROD. PARA SAÚDE EIRELI – ME FOUR MED IMPORTAÇÃO DE PROD. MÉDICOS HOSPITALARES EIRELI FUSÃO SOLUÇÕES PARA MEDICINA LTDA. INOMEDI COMÉRCIO DE MATERIAL HOSPITALAR LTDA. LEADS MEDICAL COMÉRCIO DE MATERIAIS HOSPITALARES LTDA. MEDICATO PRODUTOS PARA SAÚDE LTDA. TRAUMA SURGICAL PRODUTOS MÉDICOS HOSP. LTDA. UNIÃO MÉDICA COM. PRODS. HOSPITALARES LTDA. UNIMEK COM. DE MAT. MÉD. HOSP. LTDA. VIVA COMÉRCIO E IMPORTAÇÃO LTDA. Rio Branco Maceió Maceió Maceió Macapá Manaus Manaus Manaus Salvador Salvador Salvador Salvador Salvador Salvador Salvador Salvador Salvador Fortaleza Fortaleza Fortaleza Fortaleza Brasília Brasília Brasília Brasília Brasília Brasília Brasília Brasília Brasília Brasília Brasília ABRAIDI MEMBER COMPANIES THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 127 ESPÍRITO SANTO BONE SURGERY COM. DIST. LTDA. COMERCIAL COSTA GOMES LTDA. EMILCARDIO PRODUTOS HOSPITALARES EIRELI MEDICAL SUTURE COM. LTDA. MULTIVISION COMÉRCIO DE MATERIAL HOSP. EIRELI ORTHOHEAD INSTR. E IMPL. CIRÚRGICOS LTDA. PH COMÉRCIO DE PRODUTOS HOSPITALARES LTDA. UL QUÍMICA E CIENTÍFICA LTDA. VITÓRIA HOSPITALAR LTDA. GOIÁS CMS PRODUTOS MÉDICOS LTDA. GYNMED DIST. IMP. E EXP. DE PRODUTOS HOSPITALARES LTDA CENTRAL HOSPITALAR SCITECH PRODUTOS MÉDICOS S.A. SÍNTESE COMERCIAL HOSPITALAR LTDA. MARANHÃO LIMINE PRODUTOS MÉDICOS LTDA MEDFIX ORTOPÉDICA LTDA. TG COMÉRCIO E IMPORTAÇÕES DE MATERIAL MÉDICO LTDA. – ME MATO GROSSO FAST MEDICAL COMÉRCIO HOSPITALAR LTDA. – EPP QUALITY COMERCIAL DE PROD. MÉD. HOSP. LTDA. TITANIUN COMÉRCIO DE MAT. MÉD. HOSPITALARES LTDA. MATO GROSSO DO SUL NOREM PRODUTOS MÉDICOS E HOSPITALARES LTDA. – ME MINAS GERAIS AMGS – COMÉRCIO E REPRESENTAÇÕES LTDA. BIOMEDICAL PROD. CIENT. MÉD. E HOSPITALARES LTDA. COMÉRCIO E DISTRIBUIÇÃO ALLBORG MED. LTDA. ENDOLATINA COMÉRCIO E REPRESENTAÇÕES LTDA. EVOLUTION BRASIL LTDA. GJO COMÉRCIO E REPRESENTAÇÕES LTDA. H MEDICAL IMPORTAÇÃO E COMÉRCIO LTDA. IMPLANTEC – COMÉRCIO E ASSISTÊNCIA TÉCNICA LTDA. – ME JYAS COMÉRCIO MATERIAIS CIRÚRG. HOSPITALARES LTDA. MARJA COM. REP. IMP. DE PROD. P/ SAÚDE LTDA. MEDIODONTOMINAS COMÉRCIO LTDA. MKS COMÉRCIO E REPRESENTAÇÃO DE PRODUTOS MÉDICOS, HOSPITALAR ORTONEURO PRODUTOS CIRÚRGICOS E HOSPITALARES LTDA. – EPP ORTONEURO PRODUTOS CIRURGICOS E HOSPITALARES LTDA. – EPP TRAUMINAS DIST. MAT. CIRÚRGICOS HOSPITALARES S.A. Vitória Cariacica Vitória Vitória Vitória Serra Serra Vitória Vitória Aparecida de Goiânia Aparecida de Goiânia Rialma Aparecida de Goiânia Goiânia São Luís São Luís São Luís Cuiabá Cuiabá Cuiabá Campo Grande Belo Horizonte Belo Horizonte Barbacena Belo Horizonte Belo Horizonte Belo Horizonte Belo Horizonte Belo Horizonte Belo Horizonte Ubá Montes Claros Belo Horizonte Governador Valadares Governador Valadares Belo Horizonte ABRAIDI MEMBER COMPANIES128 PARÁ ART MED COMÉRCIO LTDA. – ME BIOSAÚDE PRODUTOS HOSPITALARES LTDA. CTA CLÍNICA TRAUMA ARLES EIRELI – EPP IMPLANTUS COMÉRCIO E REPRES. DE PRODUTOS HOSPITALARES LTDA. LIDERA SURGICAL COMÉRCIO DE ARTIGOS MÉDICOS LTDA. NORDICA DISTRIBUIDORA HOSPITALAR LTDA. PARAÍBA POTENGY COMÉRCIO E REPRESENTAÇÃO DE PRODUTOS HOSPITALARES LTDA. PROMED MATERIAIS CIRÚRGICOS LTDA. TOP IMPLANTES MATERIAIS CIRÚRGICOS LTDA. PARANÁ ANGIOMEDIC COM. DE MATERIAL MÉDICO HOSPITALAR EIRELI ARTROFIX COMÉRCIO DE MATERIAIS CIRÚRGICOS LTDA. FORMATHOS FORNECEDORA DE MATERIAL HOSPITALAR LTDA. HYPERDINÂMICA REPRESENTAÇÕES COMERCIAIS LTDA. INTERMEDICAL COMÉRCIO DE PRODUTOS MÉDICOS LTDA INVASIVE IMP. E COM. DE PROD. MÉDICOS LTDA. L&G MATERIAIS CIRÚRGICOS LTDA. LUMINAL PRODUTOS MÉDICOS EIRELI ORTHOFACE IMPLANTES ESPECIAIS LTDA. ORTOESTE COM. PROD. MÉD. HOSPITALARES LTDA. POLYMEDICAL IMP. E COM. DE PRODUTOS MÉDICOS LTDA. PRÓ VASCULAR REPRESENTAÇÕES COMERCIAIS LTDA. PROSPINE COMÉRCIO DE MATERIAIS CIRÚRGICOS LTDA. PROSURG PRODUTOS MÉDICOS LTDA. PROTECNO COMÉRCIO DE MATERIAIS HOSPITALARES LTDA. TC TÉCNICA CIRÚRGICA COM. MAT. HOSP. ODONT. LTDA. TECMEDIC COMÉRCIO DE PRODUTOS MÉDICOS LTDA. TECNOMEDICAL PRODUTOS MÉDICOS LTDA. VITTA MEDI PRODUTOS MÉDICOS LTDA PERNAMBUCO ADN SAÚDE COMÉRCIO DE PRODUTOS HOSPITALARES LTDA. BRASIL ORTOPEDIA COM. IMP. PROD. CIRÚRG. HOSP. LTDA. CROMUS MATERIAIS MEDICOS HOSPITALARES EIRELI – ME GOLDMEDIC PRODUTOS MÉDICOS HOSPITALARES LTDA. JL MATERIAL CIRÚRGICO LTDA. NEUROFIX COM. DE MATERIAIS HOSPITALARES LTDA. – EPP ORTHOMAX MEDICAL COM. IMPL. ORTOP. LTDA. – EPP ORTHOSERV COMÉRCIO E SERVIÇOS LTDA. – ME ORTOPLAN COMÉRCIO DE IMPLANTES ORTOPÉDICOS LTDA. PE IMPLANTES COM. IMPL. ORTOPÉDICOS LTDA. PROMEPE COMÉRCIO DE PRODUTOS MÉDICOS DE PERNAMBUCO LTDA. CARDIO PRODUTOS MÉDICOS REPRESENTA MATERIAIS CIRÚRGICOS MÉDICOS E HOSPITALARES LTDA. SAFEMEDIC PRODUTOS MÉDICOS HOSPITALARES LTDA. Ananindeua Belém Parauapebas Belém Belém Belém João Pessoa João Pessoa Campina Grande Londrina Londrina Curitiba Curitiba Curitiba Curitiba Curitiba Curitiba Curitiba Curitiba Curitiba Curitiba Curitiba Curitiba Cascavel Curitiba Curitiba Curitiba Londrina Recife Recife Camaragibe Recife Recife Recife Recife Recife Recife Recife Recife Recife Recife Recife THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 129 PIAUÍ BIOSÍNTESE COM. IMP. MAT. MÉD. HOSP. IMPL. LTDA. RIO DE JANEIRO AXISTE COMÉRCIO DE PRODUTOS MÉDICOS HOSPITALARES LTDA. BIOCARDIO COMÉRCIO E REPRESENTAÇÕES LTDA. CLASSY MED COMÉRCIO DE MATERIAL HOSPITALAR LTDA. – ME CORTEX MED COM. DE PRODUTOS HOSP. LTDA CROMO LIFE DIST. DE MATERIAIS HOSPITALARES LTDA. DMO DISTRIBUIDORA MATERIAIS ORTOPÉDICOS LTDA E. TAMUSSINO & CIA LTDA. ECMAX COMÉRCIO DE MATERIAL HOSPITALAR LTDA. – ME ENDO SUTURE COMÉRCIO E REPRESENTAÇÕES LTDA FLEX LAB COMÉRCIO DE MATERIAIS CIRÚRGICOS E HOSP. EIRELI – EPP GLOBUS MEDICAL BRASIL LTDA. LABORATÓRIOS B. BRAUN S.A. MAXCARE INSTRUMENTAL HOSPITALAR EIRELI MEDICAL HEALTH COMÉRCIO, SERVIÇOS E IMPORTAÇÃO EIRELI NUVASIVE BRASIL COMERCIAL LTDA OPERANDI COMÉRCIO DE MATERIAL HOSPITALAR LTDA. ORTONENSE EQUIPAMENTOS HOSPITALARES LTDA. – RJ ORTONEURO COMÉRCIO E IMPORT. MATERIAIS HOSPITALAR PER PRIMA COMÉRCIO E REPRESENTAÇÕES LTDA. PORTO SURGICAL COMÉRCIO DE MATERIAL HOSPITALAR LTDA. REALCARE COM. E REPR. DE MAT. MÉDICO HOSP. LTDA. RIO SURGICAL COMÉRCIO DE MATERIAL HOSPITALAR LTDA. RPM COMÉRCIO DE MATERIAL HOSPITALAR LTDA. SINTEX MEDICAL IMPLANTES BIOMÉDICA COMERCIAL LTDA. SÓLIDA HOSPITALAR TECHNICARE INSTRUMENTAL CIRÚRGICO LTDA. TECNEURO PRODUTOS CIENTÍFICOS E HOSPITALARES LTDA. TELLUS RIO COMÉRCIO IMP. EXP. LTDA. VERTICAL RIO WM WORLD MEDICAL IMPORTAÇÃO E EXPORTAÇÃO LTDA. ZEIKI MEDICAL PRODUTOS MÉDICOS LTDA. RIO GRANDE DO NORTE KOMPAZO SAÚDE DIST. DE PROD. E SERV. HOSPITALARES LTDA. RIO GRANDE DO SUL BOYNTON IMPORTAÇÃO E EXPORTAÇÃO LTDA. CANADÁ CENTRAL DE NEGÓCIOS DO BRASIL LTDA. DISCOMED COMÉRCIO PRODUTOS HOSPITALARES LTDA. ENDOSUL COM. E REP. DE MAT. CIRÚRGICO LTDA. GF MEDICAL IMPLANTES CIRÚRGICOS LTDA. GF MEDIKA IMPORTAÇÃO E EXPORTAÇÃO LTDA. IMPROTEC COMÉRCIO DE MATERIAL CIRÚRGICO LTDA. INMED COMÉRCIO DE MATERIAIS HOSPITALARES LTDA. INTELIMED COMÉRCIO E REPRESENTAÇÕES LTDA. Teresina Rio de Janeiro Rio de Janeiro Rio de Janeiro Rio de Janeiro Rio de Janeiro Rio de Janeiro Rio de Janeiro Rio de Janeiro Itaperuna Rio de Janeiro Niterói São Gonçalo Rio de Janeiro Rio de Janeiro Rio de Janeiro Niterói Volta Redonda Rio de Janeiro Rio de Janeiro Rio de Janeiro Rio de Janeiro Rio das Ostras Rio de Janeiro Rio de Janeiro Rio de Janeiro Rio de Janeiro Três Rios Rio de Janeiro Rio de Janeiro Rio de Janeiro Rio de Janeiro Natal Porto Alegre Porto Alegre Porto Alegre Porto Alegre Porto Alegre Porto Alegre Porto Alegre Porto Alegre Porto Alegre ABRAIDI MEMBER COMPANIES130 Porto Alegre Caxias do Sul Porto Alegre Porto Alegre Porto Alegre Porto Alegre Caxias do SulPorto Alegre Florianópolis São José Florianópolis Garuva São Paulo Mogi Guaçu São Paulo Ribeirão Preto São Paulo São Paulo Campinas São Paulo Rio Claro São Paulo São Paulo São Bernardo do Campo São Paulo São Caetano do Sul São Paulo São Paulo Itu São José do Rio Preto São José do Rio Preto São Paulo São Paulo São Paulo São Paulo São Paulo Ribeirão Preto Fernandópolis São Paulo São Paulo Santo André São Paulo São José dos Campos OSTHEON COMÉRCIO IMP. E EXP. DE PRODS. HOSPITALARES LTDA. PORTOMED CAXIAS COMÉRCIO DE PRODUTOS ORTOPÉDICOS LTDA. PORTOMED COMÉRCIO E REP. DE MATERIAIS ORTOPÉDICOS LTDA. PROGER COMÉRCIO, IMPORTAÇÃO E EXPORTAÇÃO LTDA. PROSUL COM. E IMP. DE MATERIAIS MÉDICO CIRÚRGICOS LTDA. PROTIL – PRÓTESE E INSTRUMENTAL LTDA. SERRA NORTE IMPLANTES ORTOPÉDICOS LTDA. ZAREK DISTRIBUIDORA DE MAT. CIRÚRG. E MEDICAMENTOS SANTA CATARINA BR MEDICAL LTDA. CMO COMÉRCIO DE MATERIAIS ORTOPÉDICOS LTDA. FENERGY COM. PROD. MÉD. HOSP. LTDA. SELECTA MED DISTRIBUIDORA PRODUTOS MÉDICOS HOSPITALARES LTDA. SÃO PAULO 3D MEDICAL IMPORTAÇÃO E COMÉRCIO DE PRODUTOS MÉDICOS E HOSPI. A2 MEDICAL SUPLLY COMÉRCIO E REPRESENTAÇÃO LTDA. – ME ACERTTA DISTRIBUIDORA HOSPITALAR LTDA. ALFA COMÉRCIO DE PRODUTOS CIRÚRGICOS LTDA. – EPP ALLENT COM. IMP. DIST. MAT. MÉD. LTDA ALLERGAN PRODUTOS FARMACÊUTICOS LTDA. – EPP ANGIOMEDICAL COMÉRCIO DE PRODUTOS MÉDICOS LTDA. ARTHREX DO BRASIL IMP. COM. EQUIP. LTDA. ARTROMED DISTRIBUIDORA DE PRODUTOS HOSPITALARES EIRELI – ME BALT BRASIL PRODUTOS MÉDICOS LTDA. BIOCATH COMÉRCIO DE PRODUTOS HOSPITALARES LTDA. BIOIMPORTS COMÉRCIO IMPORTAÇÃO EXPORTAÇÃO DE PRODUTOS MÉDICOS BIOMAX MEDICAL COMÉRCIO E REPRESENTAÇÕES LTDA. BM9 COMÉRCIO DE MATERIAIS CIRÚRGICOS EIRELI BONE SURGICAL EQUIPAMENTOS MEDICOS EIRELI BOSTON SCIENTIFIC DO BRASIL LTDA. BR HOMMED COM MAT. MÉDICOS LTDA. BRAILE BIOMÉDICA INDÚSTRIA COMÉRCIO E REPRESENTAÇÕES LTDA. BRUNO GARISTO JUNIOR – BRUMED IMPLANTES CARL ZEISS DO BRASIL LTDA. CICLO MED DO BRASIL LTDA. CIENLABOR INDÚSTRIA E COMÉRCIO LTDA. COMÉRCIO E IMPORTAÇÃO ERECTA LTDA. CORTEXMEDICAL COMERCIAL DE PRODUTOS MÉDICOS LTDA. CORTICAL COMÉRCIO DE PRODUTOS CIRÚRGICOS LTDA. CRUZ ALTA PRÓ HOSPITALAR EIRELI DABASONS IMPORTAÇÃO EXPORTAÇÃO E COMÉRCIO LTDA. DENUO MEDIC IMPORT. E EXP. LTDA. DMF MEDICAL MAT. MÉDICOS EIRELI – ME DPA DISTR PAULISTA ARTIGOS MÉDICOS DPM VALE COM. DE PRODS. CIRÚRGICOS LTDA. – EPP THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 131 EDWARDS LIFESCIENCES COM. PROD. MÉD. CIRÚRGICOS LTDA. ENDOLOG LOGÍSTICA E ARMAZÉNS LTDA. ENDOTEC PRODUTOS MÉDICOS LTDA. FIXEN MED COMERCIAL E DISTRIBUIDORA DE PRODUTOS MÉDICOS LTDA. FOCCUS MEDICAL EQUIPAMENTOS MÉDICOS EIRELI GADALI MEDICAL COM. DE PRODUTOS MÉDICOS HOSPITALAR LTDA. GADE IMP. E EXP. MAT. EQUIPS. HOSPS. LTDA. GC DISTR. PROD. ORTOPÉDICOS LTDA. GETMED – DISTRIBUIDORA MÉDICO HOSPITALAR LTDA. GM DOS REIS INDÚSTRIA E COMÉRCIO LTDA. GUSSON – EQUIPAMENTOS MÉDICOS HOSPITALARES LTDA. HANDLE COMÉRCIO DE EQUIPAMENTOS MÉDICOS S.A. HELCA IMP. EXP. COM. DE MAT. CIR. LTDA. HEXAGON IND. COM. DE IMPLANTES ORTOPÉDICOS LTDA. HMA PRODUTOS MÉDICOS LTDA. – ME HMS IMP. E COM. DE PROD. MÉDICOS EIRELI IMPLAMED IMPLANTES ESP. COM. IMP. EXP. LTDA. INOMEDICAL COM. PROD. HOSPITALARES LTDA. INOVASC DISTRIBUIDORA DE MATERIAL MÉDICO HOSPITALAR LTDA. – ME INTEGRIT COM. DIST. IMP. E EXP. DE PROD. MÉD. HOSP. LTDA. INTERMEDIC TECHNOLOGY IMPORTAÇÃO EXPORTAÇÃO LTDA. INVASIVE SP MEDICAL DEVICES COM. DE PRODS. MÉDICOS LTDA. IOL IMPLANTES LTDA. IOMED ORTOPEDIA ESPECIALIZADA LTDA. – EPP JOHNSON & JOHNSON DO BRASIL IND. E COM. PROD. SAÚDE LTDA. JOTEC DO BRASIL IMP. E COM. EQUIPS. HOSP. KAGIMED COMÉRCIO IMPORTAÇÃO E EXPORTAÇÃO LTDA. LAS – LATIM AMERICAN SOLUTIONS IMP. E EXP. LTDA. LDR BRASIL COM. IMP. EXP. PROD. MÉD. LTDA. LG COMERCIAL LTDA. LIFE SPINE IMPLANTES LTDA. LIMA DO BRASIL LTDA. LINK DISTRIBUIÇÃO DE PRODUTOS ORTOPÉDICOS DO BRASIL LTDA. LIVANOVA BRASIL COM. E DIST. DE EQUIP. MÉD. HOSP. LTDA. LIVE COM. DE PROD. CIRÚRGICOS MÉD. HOSP.LTDA. M&LIMA COM. MAT. MÉD. LTDA. – ME M.A.S IMPORTAÇÃO E DISTRIBUIÇÃO DE PRODUTOS MÉDICOS LTDA. MAX CARE IMPORT. E DIST. DE PRODS. MÉDICOS HOSP. LTDA. – EPP MAX SURGICAL COMÉRCIO DE IMPLANTES ORTOPÉDICOS LTDA. MAXI MÉDICA ARTIGOS CIRÚRGICOS E HOSPITALARES LTDA. MB OSTEOS – COM. IMP. MATERIAL MÉDICO LTDA. MEDARTIS IMPORTAÇÃO E EXPORTAÇÃO LTDA. MEDCORP HOSPITALAR LTDA. MEDIC CALL COM. DE PROD. MÉDICOS E HOSPITALARES EIRELI MEDIC SOLUTION PROD. MÉD. HOSPITALARES LTDA. MEDICAL ORTOPEDIA COM. IMP. EXP. MAT. CIRÚR. LTDA. MEDICAL PROVIDER COM. ATACADISTA DE MATS. MÉD. E HOSP. LTDA. São Paulo Diadema São Paulo Barueri São Paulo Campinas São Bernardo do Campo Santo André Bauru Campinas Fernandópolis Ribeirão Preto São Paulo Itapira São Caetano do Sul São Bernardo do Campo São Paulo São Paulo São José dos Campos São Paulo São Paulo São Paulo Diadema São Paulo Guarulhos Valinhos Valinhos São Paulo Santo André Bonfim Paulista São Paulo São Paulo São Paulo São Paulo São Paulo São Paulo São Bernardo do Campo São Paulo Rio Claro São Paulo São Paulo São Paulo São Paulo São Bernardo do Campo São Paulo Valinhos Campinas ABRAIDI MEMBER COMPANIES132 MEDICAL SUPPORT MATERIAIS MÉDICOS E HOSPITALARES LTDA. MEDTRONIC COMERCIAL LTDA. MF MEDICAL COM. DE PRODTS. MÉDICOS E HOSPITALARES LTDA. – EPP MICROMEDICAL IMPLANTES DO BRASIL LTDA. MM MEDICAL PRODUTOS MÉDICOS E HOSPITALARES LTDA. MP COMÉRCIO DE PRODUTOS MÉDICOS LTDA. MR BIOMEDICA RIO PRETO LTDA. MR ORTHOS COM. E IMP. DE PROD. HOSP. LTDA. – EPP NACIONAL COML HOSPITALAR S.A. NIVAA PRODUTOS MÉDICOS E HOSPITALARES LTDA. NOVELTY COM. IMP. PROD. CIRÚRG. ORTOP. LTDA – EPP OP ASSIS – ME ORTHO STEEL DISTRIBUIDORA DE MATERIAL HOSP. LTDA. ORTHO SYSTEM – COM. IMPORT. E EXPORT. DE IMPLANT. ORTOP. LTDA. ORTHOFIX DO BRASIL LTDA. ORTHOMAXX HOSPITALAR EIRELI ORTHONEURO COM. IMP. EXP. PRODS. MÉDICOS LTDA. ORTO’S COM. PROD. MED. HOSP. LTDA. ORTOCIR ORTOPEDIA CIRURGIA LTDA. ORTOMEDIC DISTRIBUIDORA DE PRODUTOS MÉDICOS LTDA. ORTOSPINE COM. IMP. E EXP. DE MAT. HOSP. LTDA. ORTOSYS COMÉRCIO DE MATERIAIS CIRÚRGICOS LTDA. OSTEO COMPANY COMÉRCIO E DISTRIBUIÇÃO DE PRODUTOS CIRÚRGICOS OSTEOLINK PRODUTOS MÉDICOS LTDA. OSTEUM PRODUTOS MÉDICOS E HOSPITALARES LTDA. – ME PAOLA PORTALEONI EIRELI – EPP PRIME CIR IMP. EXP. COM. DE PROD. ORT. LTDA. – EPP PRISMA MEDICAL LTDA. PRONEC EQUIPAMENTOS CIRÚRGICOS LTDA. – ME QUALIMEDIC MATERIAIS CIRÚRGICOS LTDA. RCL IMP. COM. LOC. MAT. MÉD. HOSPITALARES LTDA. RIAADE SUPRIMENTOS MÉDICOS LTDA. ROVER DISTRIBUIDORA DE PRODUTOS PARA SAÚDE EIRELI SAO PAULO SURGICAL COMÉRCIO DE MATERIAL HOSPITALAR LTDA. SINNERGY IMPORTAÇÃO E EXPORTAÇÃO LTDA. SLIM PRODUTOS MÉDICOS LTDA. – ME SMITH & NEPHEW COM. DE PRODS. MÉDICOS LTDA. SOMMA PRODUTOS HOSPITALARES LTDA. SP INTERVENTION LTDA. SP OSTEO DISTRIB. PROD. SAÚDE LTDA. SPINE LEVEL – COM. IMPORT. E LOCAÇÃO DE PRODS. MÉDICOS LTDA. SPM COMERCIO DE PRODUTOS MÉDICOS EIRELI STRYKER DO BRASIL LTDA. SUPPORT SURGICAL COM. DE PROD. HOSP. E ODONT. EIRELI – EPP SURGICARE COM. PROD. CIRÚRGICOS LTDA. SYNCROFILM DISTRIBUIDORA LTDA. TECNIMED COM. IMP. DE PROD. MÉD. HOSP. LTDA. Ribeirão Preto São Paulo São Paulo São Paulo São Paulo São Paulo São José do Rio Preto Campinas Ribeirão Preto São Bernardo do Campo São Caetano do Sul Santa Cruz do Rio Pardo Valinhos Rio Claro São Paulo São José do Rio Preto São Paulo São Paulo São Paulo São Bernardo do Campo Barueri Campinas Ribeirão Preto São Bernardo do Campo São Caetano do Sul Praia Grande Campinas Ribeirão Preto Ribeirão Preto São Bernardo do Campo São Caetano do Sul Ribeirão Preto São Bernardo do Campo São Paulo São Paulo São Vicente São Paulo Ribeirão Preto São Paulo São Caetano do Sul São Bernardo do Campo São Bernardo do Campo São Paulo Campinas Paulínia São Paulo São Caetano do Sul THE SUPPLY CYCLE OF HEALTHCARE PRODUCTS IN BRAZIL 133 TOTAL MEDIC COMÉRCIO DE PRODUTOS MÉDICOS E ODONTOLÓGICOS LTDA. TRÍADE IMPLANTES COM. IMP. EXP. IMPL. ORT. LTDA. ULTTRA MEDICAL BRASIL COMÉRCIO, IMPORTAÇÃO E EXPORTAÇÃO LTDA. VENTURA BIOMÉDICA LTDA. WL GORE & ASSOCIATES DO BRASIL LTDA. WORLD MEDICA COMERCIO DE PRODUTOS MÉDICOSLTDA. WRIGHT MEDICAL LTDA. X-SAFE COM. PROD. MÉD. HOSP. LTDA. SERGIPE IMPLAMEDICAL SERGIPE COMÉRCIO DE PRODUTOS MÉDICOS LTDA. MEDPLACE DISTR. MÉDICO HOSPITALAR LTDA. – ME ORTOPLAN SERGIPE LTDA. São Paulo São José dos Campos São Caetano do Sul São José do Rio Preto São Paulo São Paulo São Paulo São Caetano do Sul Aracaju Aracaju Aracaju 2 0 2 1 O CICLO DE FORNECIMENTO DE PRODUTOS PARA SAÚDE NO BRASIL ANUÁRIO ABRAIDI Associação Brasileira de Importadores e Distribuidores de Produtos para Saúde 4ª edição ABRAIDI Associação Brasileira de Importadores e Distribuidores de Produtos para Saúde Rua General Jardim, 770 - 1º andar - conjunto 1A Vila Buarque - São Paulo - SP 2 0 2 1 O CICLO DE FORNECIMENTO DE PRODUTOS PARA SAÚDE NO BRASIL ANUÁRIO ABRAIDI Associação Brasileira de Importadores e Distribuidores de Produtos para Saúde 4ª edição 2 0 2 1 O CICLO DE FORNECIMENTO DE PRODUTOS PARA SAÚDE NO BRASIL ANUÁRIO 4ª ediçãoçwww.abraidi.com.br O C IC LO D E FO RN EC IM EN TO D E PR O DU TO S PA RA S AÚ DE N O B RA SI L