Austerity policies will hit the public healthcare system

With a potential standoff brewing between Brazil’s government and its pharmaceutical industry, millions of Brazilians could find their health at risk. Conditions including diabetes have risen sharply in recent years, but a federal initiative to make medicine more affordable has so far helped an estimated 9.87 million Brazilians. The program, ‘Farmácia Popular’ or ‘the people’s pharmacy’, offers large discounts for medications to treat the population’s most common health conditions – mainly diabetes, hypertension, and asthma.

However, when now-president Michel Temer assumed office in May 2016, he announced sweeping changes to the program. Temer’s government reportedly cut 400 pharmacies from the Farmácia Popular network upon his arrival, and is now attempting to renegotiate the prices they pay companies for medications included in the scheme.

While Brazil’s Health Minister Ricardo Barros says that the changes should save the government an upwards of 600 million BRL per year, . Disputes remain, however, over the real cost of the medications, as well as over what the financial costs might be to other parts of the healthcare system become inaccessible for some Brazilians.

Disputed calculations

With the program, Brazilians pay a minimal amount towards the medications. The minimum discount is 90 percent, while some are entirely free. But a Ministry of Health study found that on average, the government paid pharmaceutical companies around 30 percent above average market prices.

“The cost of NPH insulin, for example, with the transfer of technology, taxes, and logistics, ends up at 10 BRL,” a spokesperson for the Ministry of Health told The Brazilian Report. “In the program, the disbursement is 27.50 BRL, a sufficient resource for more than double the supply of insulin.”

The government believes that through readjustments, it will bring the total cost of medications down from 2.6 billion to 1.85 billion BRL, while still serving the same number of people. But pharmaceutical representatives argue that they already supply medications to the program at the lowest possible cost. Antônio Britto, president of Brazil’s Industrial Association for Pharmaceutical Research (Interfarma), says that the government has miscalculated, forgetting to include tax costs on the circulation of goods and services.

Britto warns that these miscalculations could have grave consequences for the Brazilian population. “This type of modification, if implemented, will make the Farmácia Popular program unfeasible,” he said, explaining that inflation and electricity costs are some of the factors that have contributed to increased production costs over the last twelve years. “Since 2005, when benchmarks were first defined for diabetes and hypertension drugs, the industry has made a substantial contribution – without which the program would not be viable.”

Brazil’s Minister of Health, Ricardo Barros, defends the austerity agenda. Photo: Antonio Cruz/ABr

More unnecessary hospitalizations

Created in 2004, the program aimed to ensure that Brazilians could access the medications necessary for the most common chronic conditions. By 2016, popular uptake of the program had grown by more than 20 percent; that year alone, the program delivered 12.2 billion prescriptions to Brazilians.

And far from being an unnecessary cost, the expansion of Farmácia Popular proved to be a fiscally savvy move for the government. Ministry of Health studies in recent years show that hospitalizations related to hypertension, diabetes, and asthma have decreased by 20 percent, mostly because of this increased accessibility to medications.

Humberto Costa, a senator for the Worker’s Party at the time and the person responsible for the program’s creation, warns that the change will have the opposite effect of its desire to cut back on costs, as more will come to rely on hospital visits.

“Denying these medicines to people is practically issuing a death sentence to millions of Brazilians who don’t have the means to pay for treatments,” Costa told the local press. “Without access to daily medication, people will end up demanding far more from emergency health outposts. What we see is a complete neglect of the population and a game that panders to specific private interests.”

Edson Paulo Domingues, an economist at Minas Gerais’s Federal University who has studied the social costs and effects of Farmácia Popular, shares Costa’s fears about an increased burden on the public healthcare system.

“Without access to medication, these families will get sick more frequently,” Domingues told The Brazilian Report. “The health care system – which already operates on an extremely tight scale, with many already having to wait in long lines – will see an even greater number of people. When you take away these preventative medicines, you add to the pressure on the public health system.”

System under strain

Brazil’s public healthcare system is struggling, as it tries to provide comprehensive universal healthcare in the face of severe federal debts. Austerity measures passed in December 2016 were nicknamed ‘the Death Amendment’ by public healthcare workers because of the effects that the 20-year spending cap is expected to have on the population – particularly when it comes to austerity measures restricting access to essential healthcare supplements and medications.

Domingues points out that the main beneficiaries of the Farmácia Popular program are Brazil’s working-class families, who wouldn’t be able to purchase some of the medication without the discounts offered. “The program has an important effect, especially for lower-income families,” he said. “The cost of these medications can be a huge weight on families. Take away this subsidy, and you will make the costs far higher, and these families will not have the money to buy the medicine they need.”

But it’s not just the sheer size of Brazil’s population that puts the burden on its healthcare system. As a part of the universal healthcare principle, Brazil’s federal courts can oblige the national health system to pay for medication that patients can’t afford themselves. Many of these are expensive: studies show it costs the public healthcare system over 1 billion BRL a year.

“The Farmácia Popular program should be understood as an investment which effectively contributes to spending reductions for the public health system,” said Britto, Interfarma’s president. However, the government argues that its current negotiations with the industry remain the only solution to keep the program publicly available.

Meanwhile, the federal administration is ready to accept 14 billion BRL in extra expenses in an effort to pass the pension system reform. This is one of a series of widely unpopular austerity reforms to pass through Congress in the last year – leading many to question where government priorities lie as cuts to federal programs hit Brazil’s working classes.