Pharmaceutical Distribution in Northeast Brazil

Interview with Jorge Batista da Silva Filho, Director of Jorge Batista Group

Let us talk about a general question surrounding the Northeast region. How do you perceive the extraordinary economic growth in the last few years in this region?

I was talking during my trips to Sao Paulo with directors from the pharmaceutical industry and telling them that the Northeast is the Brazilian China. While the Northeast can be growing at 10, 12% per year, Brazil will be growing at a rate of 5, 6% per year. So this is a huge business opportunity. Therefore we have been making an effort in trying to convey this message to the directors and CEOs of the multinational pharmaceutical companies to increasingly invest in the Northeast region. We have been able to be successful in this approach. The medical publicity has increased in this region as well as the amount of people working here and this has given very good revenue. It is consensual whilst speaking to the directors of pharmaceutical companies that this is undoubtedly the region that has been growing more. It is a great opportunity.

The number of medical representatives is also growing. What is their role exactly?

The medical representatives are the people that advertise next to several doctors. The media attention on TV is helping the biggest companies visualize the potential of the Northeast region market. And this is why I compare it with China. Because there are millions of people here that are out of the consumer market. But when those people join the market there will be a boom in growth, which is what is happening in China. In the pharmaceutical area this is already taking place, the northeast is growing faster than in the rest of the country.

There is a potential in agriculture, gas energy, nickel and all these natural resources. What about industry?

I would say that the pharmaceutical industry would never settle in Piaui with the conditions we have today. The industry is concentrated in Sao Paulo and has a tendency to relocate its axis in Goiás, due to fiscal incentives. But besides this, all our production is in Sao Paulo and a very little amount in Rio de Janeiro. So, for the pharmaceutical industry I don’t see it as a pole in Piaui. What we see in Piaui is one of the last agricultural borders in the production of grain, cotton, soya, corn and this is a market that holds a huge potential for outside investors to come here and invest in our region, which is happening at this moment. There are a lot of entrepreneurs that are investing here in the Piaui.

What are the advantages and difficulties for doing business in Piaui?

I would say that the advantage would be that Piaui is well located geographically speaking, so you can spread your product, especially in the industrial field. Here you are in a very different situation from Ceára, Paraíba. I mean, it could be a distribution centre. It is so much so that the distribution companies for pharmaceutical or consumer goods are very well reputed in companies in Piaui. These companies are expanding, such as ours, expanding first to Maranhão, then to Ceára and then approaching the entire northeast and a part of the north. The main difficulty would be the lack of public investment in our infrastructure. Roads, railway transport and communication are still an issue and we are working towards fighting these difficulties. This is not only the reality in Piaui but also in other states of the Northeast. But I would say that the biggest challenge lies in the road infrastructure.

How confident are you about the outlook for the region, whether it is a real sustainable growth that will continue or whether it will fade?

The expectation I would say is excellent. Even despite the crisis, Brazil is managing to grow, maybe not as we expected but the Northeast doesn’t depend as much from the foreign market regarding import and export. In this way, the Northeast will avoid this crisis. The opportunities are excellent, we do need to input a lot of work to make our companies grow, which is what is happening with our group. We have been positively growing at a rate of 20% per year, in the last 5 years, independently from crisis. The years we grew more were in 2009/10, amidst the international crisis. In 2010 we grew 43%. So you can see that crisis can mean opportunity to some. Being in the Northeast you would be in a good position to seize the opportunities.

How do you see the development of the relationship between the consumer and sectors such as education, services, IT?

My understanding is that the Northeast has been developing itself as a whole, both the state and also the population. If we speak about people’s economy, people are living better, studying more. Actually, education wise we are experiencing a wide increase in highly educated students. Fifteen years ago, you could only attend the public university or not graduate at all. Today we have many private universities which broaden the options. We had a huge quantitative leap. We now need to do the same qualitatively. If you came to Piaui 10 years ago this looked like a small town, compared to today. Today it offers amazing investment and development opportunities, in sectors such as real estate, industry, services.

Now, what is your personal concern regarding the future of Piaui? What do you feel needs to be addressed now, otherwise it will bring all sort of problems in the future?

Our work is grounded on the development of our entrepreneurial group. We are growing at a 20% rate per year and we currently employ 3100 people. We have differentiated salaries, medical benefits, so our main focus today is on the growth of the company and the people working on it. And we also involve other companies, stakeholders and personnel.

In some small cities we are the last available distributor of medicines. The national distributors prefer to go to the biggest cities in the Northeast. So, if it weren’t for our company, some cities in Piaui and Maranhão would be out of medicines. So we also have this social component of taking the medicines to the population that needs it, even to the most distant regions of the state, as this is a basic necessity good and its inexistence could make people die.

This “land of opportunity” is luring multinational companies to come and compete with national and local ones. Is this a cause for concern for you in the near future?

We think competition is healthy. If you have no competitors you tend to accommodate and not evolve. At this moment our competitors are the 3 biggest companies in Brazil and we have different goals. Theirs is to dominate in the big city market whereas we intend to distribute in more remote locations where we can be the only force to be reckoned with. We deliver, let’s say 10 boxes of medicines within a distance of 800 km from the headquarters, the very next day. So the orders we receive in one day are delivered in the next day, until noon. We consider this as providing a service, as our service delivery means saving lives.

Our last question, about pharmaceutical regulations. What is your personal experience? How rigid are they compared with other states and countries?

I would say that the Sanitary Vigilance which is the regulating Health organism in Brazil exists for 10, 12 years now and it is still being developed but there is manpower missing in order to be able to handle all the files that arrive at the Sanitary Vigilance service. This is actually a general complaint nowadays and it involves both the industry and distribution. In some cases, regarding the industry files can take up to 1 year and a half to get approved and consequent release of the product. Foreign products are sometimes approved by the FDA (USA) and even so it can take them one year and a half to get the product to be released for consumption. So it is clear that the government here needs to invest more in the Sanitary Vigilance so that they can manage all the requests that are received in a more efficient manner in our country.