Trends for 2018: meet the Brazilian healthcare services industry’s restrained demand

As 2018 just started, we are tempted to look back and once again regret the political and economic turmoil that Brazil has faced last year. In such a crisis scenario, industry and services sectors are naturally brought to reorganize their structure to the changing demands and this is how new opportunities appear.

Let’s take as an example the Brazilian health sector. Brazil is the sole country in the world above the threshold of 100 million inhabitants which has a unified, public and free healthcare system, called Sistema Único de Saúde - SUS. Any individual, regardless if he/she is employed and contributes to the social security or not, has the constitutionally guaranteed right to an equal access to healthcare. Out of the 208 million inhabitants in Brazil, 145 million rely exclusively on the SUS: every year 457.7 million medical consultations and 3.2 billion ambulatory proceedings are ensured by the SUS. Private health insurance companies, which policies are usually sponsored by employers, coexist with the SUS and provide healthcare services by means of a network of conventional medical service providers.

Since the end of 2014, almost three million Brazilians lost, alongside their jobs, their private health policies, thus strongly swelling the number of SUS users. If the SUS was already overburdened, as its users have waited at times months for a consultation and, not infrequently, found makeshift beds in the hospitals’ corridors, the increasing unemployment only worsens this situation.

However, such scenario creates opportunities for affordable health services providers. This market gap was identified by a group of investors led by Thomaz Srougi, who founded in 2011 Dr. Consulta, a private clinics’ network which renders quality medical services in 27 specialties at affordable prices to the lower middle classes C and D. To illustrate the affordability, for example a hemogram test costs about 3 euros and a consultation with a specialist medical doctor or an ultrasound examination costs about 30 euros. This business model convinced foreign investment funds Kaszek Ventures and LGT, the latter led by Maximilian Prinz von und zu Liechtenstein, which injected about 10 million euros this year in Dr. Consulta.

It is worth noting that the Brazilian market of healthcare services was closed to foreign investors until early 2015, when Law 13.097/15, which allows the direct and indirect participation of foreign investors in companies dedicated to the management and exploitation of hospitals and clinics, was enacted. While the door to the healthcare services industry was just opened to foreign investors, the pharma and medical devices sector has already been a huge market for foreign companies for decades. Despite the current crisis, the turnover of pharma companies has grown 12.3% in 2015 and 13.1% in 2016. And needless to say that the Brazilian healthcare services industry has an enormous restrained demand.