Drugmakers Wary Brazil Price Index for Medicine to Crimp Revenue

Brazil’s government for the first time in nine years has delayed publishing the calculation it uses to set price changes for medicine, raising concern in the pharmaceutical industry this year’s prices will be too low.

“The government may try to raise prices artificially” in a way that may hurt the industry, said Nelson Mussolini, president of the pharmaceutical industry association of Sao Paulo known as Sindusfarma. “The industry does not know how the calculation is done. It is very subjective.”

The government didn’t publish the formula used to calculate price changes for drugs in September as it normally does, making it difficult for companies to set strategies for 2014, Mussolini said. Medicine affected by the government calculation last year represented 0.16 percentage point of the annual inflation rate.

Consumer price increases exceeded the central bank’s official target in 2013 for the fourth straight year, damping consumer and business confidence. The government lifted regulated prices at the slowest pace since 1992 as President Dilma Rousseff said she was working to slow inflation.

The Finance Ministry’s press office declined to comment when contacted by phone about this year’s formula for drug prices.

The government last year pressured power utilities to lower rates in exchange for license renewals and Rousseff caps gasoline prices charged by state-run oil company Petroleo Brasileiro SA. (PETR4)

Thwarting Pledges

Annual inflation in 2013 accelerated to 5.91 percent from 5.84 percent the year prior, thwarting pledges from central bank President Alexandre Tombini that consumer price increases would ease. Policy makers target 4.5 percent inflation, plus or minus two percentage points.

“We are making a big effort to make inflation converge to the midpoint of the target,” Rousseff said today during an interview with radio stations in Minas Gerais state. “This is a important issue. The closer Brazil is to the center of the target, the more stable the country becomes.”

Sindusfarma members include drug companies such as GlaxoSmithKline Brasil Ltda. and Bristol-Myers Squibb Farmaceutica SA.

To contact the reporters on this story: Rachel Gamarski in Brasilia at rgamarski@bloomberg.net; Carla Simoes in Brasilia Newsroom at csimoes1@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net

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