Productive Development Partnerships: Rationale

How this complex procurement instrument utilized by the public sector helps foster the growth and local production of health products in Brazil

Tulio Chiarini[1]

Vitor Paiva Pimentel[2]

Julia Paranhos[3]

What are the Brazilian PDPs?

The so-called PDP is an acronym standing for Parcerias para o Desenvolvimento Produtivo (Productive Development Partnerships), which consists in a technology transfer from a product already on the market in order to be locally produced in Brazil. Although sharing a similar name and a common acronym, there is no relation with “Product Development Partnerships”, a frequent model for vaccines and neglected diseases development under the World Health Organization (WHO) guidance.

To comprehend the Brazilian PDPs, we need to revisit a Presidential Decree issued in 2008, which established the Health Industrial Complex Executive Group (Grupo Executivo do Complexo Industrial da Saúde). Gecis, as it was called, was an inter-ministerial body entrusted to create the federal government's strategy for the health industry development.

Gecis proposed to introduce "national sustainable development" as one of the objectives of government procurement, alongside low prices and competition issues. In 2010, the Legislative Authority processed and adapted the draft, incorporating several aspects into the law. These amendments included provisions for direct contracting to encourage the establishment of technological cooperation projects, introducing a new modality for utilizing the State's public procurement: technology transfer processes. It is within this context that the Ministry of Health (MoH) subsequently issued several ordinances that gradually established the regulatory framework for PDPs.

It was not until 2012 that the MoH stablished a formal definition of PDPs (Ordinance No. 837), stating that they "are partnerships between public institutions and private entities aimed at accessing priority technologies, reducing the vulnerability of the Unified Health System (SUS) in the long term, and rationalizing and reducing the price of strategic health products, with a commitment to internalizing and developing new strategic and high-value-added technologies".

A new ordinance issued two year latter outlined the PDPs’ objectives:

  • Expand the population's access to strategic products and reduce vulnerability of the SUS;
  • Reduce dependence on foreign productivity and technology to fulfill the short, medium, and long-term health needs of the Brazilian population, while upholding the constitutional principles of universal and equitable access to health actions and services;
  • Rationalize the State's purchasing power by selectively centralizing expenditures in the healthcare sector, aiming to ensure the sustainability of the SUS and the expansion of domestic production of strategic products;
  • Safeguard the interests of the Public Administration and society by pursuing economy and advantages, taking into consideration factors such as prices, quality, technology, and social benefits;
  • Foster technological development and knowledge exchange for innovation within both public institutions and private entities, contributing to the growth of the health-industrial-economy complex and enhancing their competitiveness and capabilities;
  • Promote the development and manufacturing of strategic products for the SUS within the national territory;
  • Strive for the technological and economic sustainability of the SUS in the short, medium, and long term by creating structural conditions that enhance the country's productive and innovative capacity, contribute to reducing the trade deficit of the health-industrial-economy complex, and ensure access to healthcare;
  • Stimulate the growth of the public production network in the country and acknowledge its strategic role in the context of the SUS.


Which are the entities involved in a PDP?

A PDP agreement typically involves three parties: the MoH, a public laboratory, and a private company. The MoH commits to purchasing a product (such as drugs, vaccines, blood products, equipment, medical-hospital items) for a specific period of time, while the private companies are obligated to transfer the production technology of the product to a public laboratory within the same term. By the end of the agreement, the public laboratory is expected to be fully capable of supplying the product to the MoH, as outlined in the Figure bellow.

Simplified flow of acquisitions via PDP

Source: CGU (2019, p. 11) Authors’ elaboration.

Source: Controladoria Geral da União (2019). Relatório de avaliação: Secretaria de Ciência, Tecnologia e Insumos Estratégicos. Brasília: CGU. Authors' elaboration.

The simplified scheme in the above figure illustrates the relationships between the primary actors involved in PDPs. It is important to note that, in addition to the private technology supplier (private entity), there is a requirement for the critical technological component (the master cell bank for biologicals or the active pharmaceutical ingredient for chemicals) to be produced within the national territory. This responsibility can be undertaken by the technology supplier, the public institution, or a third party designated by the parties, as long as it is proven that local production is feasible.

The simplified model depicted previously can be configured to accommodate a variety of institutional arrangements. These arrangements include: i) the coexistence of a domestic and a multinational pharmaceutical company, being the API manufacturer a Brazilian enterprise (model 1); ii) solely a Brazilian pharmaceutical company vertically integrated (with API production) (model 2); iii) the coexistence of a Brazilian pharmaceutical company and another domestic API manufacturer (model 3); iv) a Brazilian pharmaceutical company operating in tandem with a consortium of two or more domestic API manufacturers (model 4); v) a consortium of two or more national pharmaceutical companies operating with a domestic API manufacturer (model 5); vi) a multinational pharmaceutical company, being the local API manufacturer the subsidiary (model 6); vii) a multinational pharmaceutical company, being the local API manufacturer another domestic company (model 7); and viii) solely a Brazilian API manufacturer (model 8).

The private company's interest in the PDP arrangement is the SUS market and for the public lab is the benefit of the technological transfer based on a “reverse transfer model”, which transfers the lower value-added productive steps, such as quality control and packaging, first. In the initial years of the partnership, the private entity performs a substantial portion of the product's productive stages and is compensated accordingly. The private company benefits from a long-term planning horizon for its investments and long-term supply of the product. As emphasized by the Federal Court of Accounts (Tribunal de Contas da União – TCU), the state benefits from the PDP arrangement by acquiring the technology, which can be used or disseminated, and by obtaining the drug ready for distribution in the SUS throughout the technology transfer process and after that with the availability of local production of strategic products. The domestic private partner benefits from the arrangement by becoming economically stronger through the large-scale and long-term supply of the product.

Other entities are directly involved in the PDP approval process. According to Ordinance No. 2,531 issued in 2014, PDP proposals are submitted to two governance committees: the Deliberative Committee (CD) and Technical Evaluation Committee (CTA in the Brazilian Portuguese acronym). The CD is composed of four members: the MoH, Anvisa (Brazilian Health Regulatory Agency) MDIC (Ministry of Development, Industry, Trade and Services), and MCTI (Ministry of Science, Technology and Innovation). However, Anvisa was later included as a member of this committee.

The CTA includes four members from the MoH and five members from other federal government entities: Anvisa, the Financier of Studies and Projects (Financiadora de Estudos e Projetos - Finep), the Brazilian Development Bank (Banco Nacional de Desenvolvimento Econômico e Social - BNDES), the Ministry of Development, Industry and Commerce (Ministério do Desenvolvimento, Indústria e Comércio - MDIC), and the MCTI.

PDP phases

There are four phases that encompass the process of analysis, execution, and finalization of a PDP:

a) Phase I: proposal submission, analysis, and deliberation

The MoH published a list of strategic products, and public laboratories submit PDP proposals within a specific timeframe. The Governance Committees evaluates the feasibility and merit of each proposal based on multiple criteria and scoring methodology, considering factors such as product quality, pricing, technology transfer, investments, and impact on innovation and local production. The evaluation process aims to ensure economic viability and advantageousness while considering prices, quality, technology, and social benefits.

b) Phase II: contractual and product development

Once approved by the Deliberative Committee, the PDP project enters the contractual and product development phase (phase II). An agreement is signed involving the MoH, the public laboratory, and the private partner entities. During this phase, the public institution must fulfill conditions set by the governance committees, including submitting a revised executive project. The MoH does not supervise the contractual relationship between the public laboratory and the consortium companies. The technology transfer agreement and intellectual property rights are negotiated between the parties involved. There is also the possibility of co-development of the product. Changes to the project require evaluation by the governance committees. The technological risk in co-development agreements can result in PDPs remaining in phase II for an extended period or being suspended or terminated. If one partner already holds product registration with the regulatory agency, the registration dossier is transferred to the public institution during this stage.

c) Phase III: technology transfer and procurement phase

The PDP project begins with the MoH first purchase of the product from the public institution. Depending on the agreement conditions, the private entity may manufacture the product for the first purchase. After that, the public laboratory has one year term to obtain the product's sanitary registry. Monitoring of the project activities, pricing during the technology transfer period, volume of purchases, and mechanisms for course correction and adjustments are crucial aspects throughout the technology transfer process. The sale price proposed in the executive project serves as a reference and will be subject to negotiation based on market prices and purchases from other government entities.

d) Phase IV: technology internalization

The phase called "internalization of technology" or "phase IV" in the PDP process refers to the endpoint of the entire process rather than a distinct phase. It means that MoH purchases will no longer be subject to the PDP mechanism, and the public institution must demonstrate manufacture the product.

Final comments

As demonstrated in this short article, PDPs involve multiple entities such as public laboratories, national and international private companies, as well as institutions like BNDES, FINEP, Anvisa, and ministerial secretariats participating in evaluation committees and commissions. It is a complex procurement instrument utilized by the public sector to foster the growth and local production of innovative health products in Brazil. Positioned within the diffusion phase of the innovation process, PDPs are aimed at promoting the dissemination and absorption of emerging or existing products technologies, with the potential to lead to incremental innovations.

[1]. Science and Tecnology Analyst at Ipea. E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

[2]. Economist at BNDES. E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

[3]. Researcher at UFRJ. E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

This work was funded by the Brazilian Ministry of Health (TED No. 06/2022)