What makes a millionaire businessman from São Paulo from the pharmaceutical industry to spend 1.5 million BRL (US$ 404,000) in the last electoral campaign and guarantee an alternate seat in the Senate for Tocantins? No longer needing “intermediaries”, explains Ogari Pacheco, founder of one of the largest Brazilian laboratories, Cristália.

At age 80, the doctor makes his debut in politics speaking his mind. He makes it clear that he will influence Congress in discussions that interest pharmaceutical companies. “We always criticize that we have to use an intermediary. But nothing better than someone from the industry”, says the businessman to Repórter Brasil.

An agreement with the head of the ticket, Senator Eduardo Gomes (MDB-TO), guarantees Pacheco an informal sub-office, which will be responsible for health projects during the term. “He [Gomes] is going to take office, but I’m going to start working now,” he says. The senator confirms the alternate’s “unrestricted participation” in the term.

With a personal fortune of 407 million BRL (US$ 110 million), Pacheco is not alone. Executives linked to 462 drug labs, distributors and pharmacies donated 13.7 million BRL (US$ 3,7 million) to 356 candidates in the last election, according to a survey by Repórter Brasil. Among them there are governor-elect João Doria (PSDB-SP), federal deputy Arlindo Chinaglia (PT-SP) and former deputies Rogério Rosso (PSD-DF) and Marcus Pestana (PSDB-MG), who were not elected. 

The survey listed the partners and managers of active companies registered with the Federal Revenue Service who manufacture, distribute or sell medicines, active pharmaceutical ingredients and pharmaceutical products. The names were cross-checked with the donors of the 2018 elections, according to the Superior Electoral Court (TSE).

The donation of individuals is permitted by law, but it can reveal influences of a sector that acts in Congress in favor of its interests. “The lobby works with campaign support and consultancy contracts, as it is everywhere in the world,” says Reinaldo Guimarães, a researcher at UFRJ and former secretary of Science, Technology and Strategic Inputs at the Ministry of Health (2007 to 2010). “The pharmaceutical market in the world is over US$ 1 trillion. The influence capacity of a market of this magnitude is enormous”.

In 2010 and 2014, when private campaign financing was still allowed, the pharmaceutical sector donated 26 million BRL (US$ 7 million) and 57 million BRL (US$ 15.3 million), respectively, to 1,404 candidates in total, according to the donations declared to the TSE. However, suspicions of unrecorded funds and payment of bribes put the leading donor company, Hypera Pharma (formerly Hypermarcas), in the Lava-Jato Investigation.

“The strength of money moves the lobby. And the elements linked to public health are very diluted in this chain of pressures”, says Reinaldo Guimarães

A former Hypera director admitted in a plea bargain that he transferred 30 million BRL (US$ 8 million), between 2011 and 2015, to politicians at the top of the MDB party, such as former federal deputy Eduardo Cunha. In return, parliamentarians would approve measures favorable to the company, such as the release for sale of non-prescription drugs in supermarkets – which was in fact approved by the Chamber in 2012, but vetoed by former President Dilma Rousseff (PT).

Away from the crisis, close to the politicians

Even in the face of the Brazilian economic crisis, the medicines market stood out for its continuous strong growth in the past years. In 2016, when the national GDP fell 3.6%, the sector advanced 18%, with 63 billion BRL (US$ 17 billion) in sales. Today Brazil is the seventh largest market in the world and is heading to be in the fifth position in two years.

Government spending and incentives play an important role in this market, which also explains the interest of the pharmaceutical sector in the political scene. On the one hand, the Unified Health System (Sistema Único de Saúde/SUS) accounts for about 19 billion BRL (US$ 5.1 billion) of medicine purchases in Brazil. On the other hand, the pharmaceutical sector receives generous tax exemptions annually, estimated today at 9.5 billion BRL (US$ 2.5 billion) according to the Federal Revenue Service.

Based in small town of Itapira (SP), Cristália has tripled sales in the last decade, reaching 2 billion BRL (US$ 540 million) in 2018. Its biggest client is SUS, which accounts for half of the revenue earned from hospitals.

In addition to investing heavily in expanding its industrial capacity, and also with the support of the public authorities, Cristália made millionaire donations in the last three elections. In 2014, they invested 4.3 million BRL (US$ 1.1 million) in candidates from different political backgrounds, such as then-president Dilma Rousseff, the PSDB’s national directory and parties such as MDB, DEM, PSC and PCdoB. The same happened in 2010, when donations reached 900,000 BRL (US$ 243,000).

“The laboratory has never individually been politically involved,” says Pacheco. He says that the donations were stimulated by FarmaBrasil, a group that represents national pharmaceutical companies and supports the Parliamentary Chemistry Front, created in 2012. “They asked: ‘The front is made up of A, B, C, D parliamentarians. You could contribute as follows: so-and-so donates to A, another to B, C…”. It was like that ”, he says. Read the interview with Ogari Pacheco here.

With leverage in the political scene, the laboratory welcomed President Dilma Rousseff and the then governor of São Paulo, Geraldo Alckmin (PSDB), in 2013, during the inauguration of a factory in the interior of São Paulo. The plant cost 208 million BRL (US$ 56 million) – of which 58 million BRL (US$ 15.6 million) came from federal funds, according to information from the Federal Government.

The governor of São Paulo, member of the Brazilian Social-Democratic Party (PSDB), returned to the region in 2017 to inaugurate the group’s new distribution center, a 400 million BRL (US$ 108 million) mega-investment built on a piece of land provided by the local city hall. In addition to the factory, the region also gained two marginal roads and a ring road on the SP-147 highway – built by the state government in front of Cristália’s new building, at a cost of 26 million BRL (US$ 7 million).

It was through the expansion of Cristália to Tocantins that the São Paulo businessman met Eduardo Gomes and went into politics for the state. “Through local political leaders, he [Gomes] sought to offer some advantages, such as tax incentives and land donations. This did not persuade me”, he says. The politician then invited him to join the Senate ticket. “Then things changed.”

Now in Congress, one of his goals will be to speed up the process of evaluating and approving drug patents, which today takes an average of 13 years for a final answer from the National Institute of Industrial Property (Inpi). The issue is of special interest to Cristália, the national record holder in number of patents, with 106 in total, 89 abroad. 

Its other front of action will be debates on the disposal of medicines, the subject of at least 15 bills in Congress. Currently there is no regulation on the issue, and the drugs end up being disposed of in the common garbage, causing damage to health and the environment.

Pacheco is against manufacturers to assume the costs for disposal alone and argues that the responsibility should be shared with pharmacies, health units and distributors. 

The governor and the pharmaceutical companies

Tax incentives for pharmaceutical companies and the disposal of medicines were the subject of an investigation by the São Paulo’s Public Prosecutor’s Office in 2017, after a report by CBN radio revealed that the São Paulo City Hall, at the time led by João Doria (PSDB-SP), had received donated medicines close to the expiration date and without paying taxes. 

Doria, current governor of São Paulo, was the tenth most supported candidate in the pharmaceutical sector in 2018. He received 270,000 BRL (US$ 73,000) from four executives, two of them connected to pharmacies and two other owners of medicines distributors – who provide services to laboratories and drugstores.

When he was in charge of the city hall, Doria devised a program that, in addition to donations, provided for the privatization of pharmaceutical assistance in the municipality, which would directly benefit pharmacies. The Quick Remedy program, presented at a press conference in February 2017, intended to transfer the distribution of medicines from the public network – made through Basic Health Units (UBS) and AMAs (Ambulatory Medical Assistance) – to private pharmacies. The idea, however, would hinder the distribution of medicines in peripheral and poorer areas of the city, where the presence of large pharmaceutical chains is lower. The proposal did not take off.

Doria announced, at the same press conference, that the municipality would receive 120 million BRL (US$ 32,5 million) in medicines donated from 12 pharmaceutical laboratories. The member of the PSDB Party convinced the then governor Geraldo Alckmin to exempt the ICMS (Tax on Circulation of Goods and Services) on donations, in favor of partner laboratories and carriers.

If the municipality had received the announced 120 million BRL, it would have failed to collect almost 66 million BRL (US$ 18 million) in taxes, but donations did not reach 10% of what was promised. In the end, 10 laboratories donated 8.8 million BRL (US$ 2.4 million) in products, with a tax waiver of 1.2 million BRL (US$ 324,000). The investigation by the São Paulo’s Public Prosecutor’s Office was shelved for failing to identify loss in municipal coffers.

The governor informed, through his press office, that the donations of medicines were part of an “innovative policy” in his administration. With regard to electoral donations, the staff said that “they were all made strictly within the terms of the Electoral Law” and that “they do not represent even 1% of the total collected by the campaign”. Strictly speaking, the amount represents 1.44%.

Rich industry, but dependent on the foreign

Of the three richest candidates last year, two are businessmen in the pharmaceutical sector. In addition to Ogari, in third position, there is Fernando de Castro Marques (SD-DF), main shareholder of União Química laboratory, a giant in the production of medicines for human and animal use, declared assets for 668 million BRL (US$ 180.5 million) to the TSE and led the ranking.

Defeated in the election for the Senate, the businessman donated 7.1 million BRL (US$ 1.9 million) to 14 politicians in 2018 – including 2.7 million BRL (US$ 729,000) for the campaign – and was the industry executive with more donations. Marques says he does not expect any particular retribution from the parliamentarians he supported. “They are people I admire and who are going to work for the development of the Federal District. This is my only interest, there is no other interest,” he said in an interview with Repórter Brasil.

Senator Eduardo Gomes said he invited Pacheco to the ticket as a representative of Democrats Party and for his business activities in Tocantins. “His participation in the mandate is unrestricted, as he and the first alternate are eventual substitutes in the vacancy of the elected Senator, as provided for in the electoral legislation,” he said in a statement, which highlights that the donations were made within the criteria established by law.

Deputy Arlindo Chinaglia said that “all donations from campaigns, not only these, never conditioned my actions”. Marcus Pestana, who was not re-elected, stated that the donations received are in accordance with Brazilian law. “There is absolutely no relation between my parliamentary role on the topic and donations”. Rogério Rosso did not answer. 

“The industry puts pressure on deputies, commissions [in Congress] and also on medical associations,” says Fiocruz researcher Jorge Bermudez. “Often the interest of the industry has nothing to do with health. The industry wants the most profitable product,” he says. 

Despite its size and public support, the pharmaceutical industry causes losses to the Brazilian trade balance year after year. In 2017, there was a deficit of at least US$ 5.3 billion, according to data from the then Ministry of Industry and Foreign Trade.

The weak point is the almost nonexistent production of raw materials, the so-called active pharmaceutical ingredients, ingredients used in the manufacture of medicines. The deficit leads the country to import 90% of all the raw material it needs. The exception is Cristália, who imports 47% and produces most of it in Brazil.

In his “sub-office” in the Senate, Pacheco promises to reverse this scenario. He says he is already preparing a bill to incentive the national production of inputs. “And without asking a penny for public money”, he assures.

(Illustration: Angelo Abu)

This story was originally published on 19th February 2019