ABRAMED PANEL - ENGLISH VERSION

099 An alternative way of accounting for the number of complement services and subclasses: pathological health facilities in Brazil can be done through the and cytological anatomy laboratories, clinical Relação Anual de Informações Sociais (RAIS)33. laboratories, tomography services, among others. RAIS handles the collection of information on the number of employment links of public and private Data show that there were approximately 10,722 >> administration and companies registered in the clinical laboratories in the country in 201734, with an Cadastro Nacional da Pessoa Jurídica (CNPJ) and increase of 80.1% in the last ten years. Noteworthy registered with the Instituto Nacional do Seguro was the increase in the number of diagnostic Social (INSS), providing a set of relevant variables to imaging services units35, which totaled 5,884 understand. the dynamics of the diagnostic medicine units, with growth of 184.5%, on the same basis market, as well as the number of jobs created in the of comparison. On the other hand, the number of sector. pathological anatomy facilities decreased by 2.0%, totaling 1,303 units. Through the information available at RAIS until 2017, it was possible to identify the number of facilities related to the activities of diagnostic Graph 29 Number of facilities related to the activities of diagnostic and therapeutic complementation service36 (2007/2017) Source: RAIS Estabelecimento. Access in 6/25/19. Abramed Elaboration. 10,722 1,303 5,884 453 327 1,040 23 2,315 10,000 8,000 6,000 4,000 2,000 Clinical Pathological Imaging CT services Magnetic Dialysis, Bank of Non-specific laboratories resonance Activities and cytological Diagnostic services chemotherapy, human anatomy Services radiotherapy, cells and laboratories hemotherapy, tissues lithotripsy services 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 33 Established by Decree No. 76,900 of 12/23/75. Ministry of Economy / Special Secretariat for Social Security and Labor. 34 RAIS establishments - latest data. 35 Considers the services: Ionizing Radiation Imaging Diagnostic Services, Except Tomography, Non-Ionizing Radiation Imaging, Except Magnetic Resonance, Graphic Record Diagnostic Services - Ecg, Eeg, and Other Similar Tests, Diagnostic Services by Optical Methods - Endoscopy and Other Similar Tests. Considers only establishments with number of links greater than or equal to 1. 36 Considers the exclusive CNPJ for related activities.

0100 4ABRAMED BRAZILIAN MARKET OF DIAGNOSTIC MEDICINE PANEL “Expansion of the number of facilities towards the countryside, especially in the North, Northeast and Midwest regions Analyzing the growth rate of clinical laboratories, ” pathological anatomy and diagnostic imaging facilities, the North region shows the largest variation in relative terms, with an increase of 124.1%; 54.2% and 345.2%, respectively, between 2007 and 2017. >> Table 16 Number of facilities related to the activities of diagnostic and therapeutic complementation services (2007/2017) Source: RAIS Estabelecimento. Access in 25/6/19. Abramed Elaboration. Clinical ∆ (%) Pathological and ∆ (%) Imaging ∆ (%) laboratories 2007/ cytological 2007/ Diagnosis 2007/ 2017 anatomy 2017 2017 2007 2017 laboratories 2007 2017 2007 2017 North 294 659 124.1 59 91 54.2 73 325 345.2 Northeast 1,181 2,431 105.8 320 333 4.1 279 1,088 290.0 Southeast 2,542 4,250 67.2 603 540 10.4 1,019 2,721 167.0 South 1,383 2,347 69.7 211 232 10 473 1,040 119.9 Midwest 553 1,035 87.2 137 107 21.9 224 710 217.0 Total 5,953 10,722 80.1 1,330 1,303 2 2,068 5,884 184.5

0101 Regarding size, most diagnostic medicine < companies in the country have family structures with up to four employees. Considering the services of clinical laboratories, pathological anatomy and diagnostic imaging, about 90% of establishments have up to 19 employees. Table 17 Number of clinical analysis and diagnostic imaging facilities, considering number of employees (2017) Source: RAIS Estabelecimento. Access in 25/6/19. Abramed Elaboration. Size Clinical Pathological Imaging CT services Magnetic laboratories anatomy and Diagnosis resonance (Employees) cytology labs services 1 to 4 6,095 676 3,385 226 132 5 to 9 10 to 19 2,357 275 1,242 109 69 20 to 49 50 to 99 1,272 213 715 67 61 100 to 249 250 to 499 659 105 400 39 49 500 to 999 1,000 or More 222 23 93 9 12 Total 96 10 40 2 3 12 1 81 - 6- 1 -1 3- --- 10,722 1,303 5,884 453 327

0102 4ABRAMED BRAZILIAN MARKET OF DIAGNOSTIC MEDICINE PANEL Health equipment Imaging equipment and its technological evolution are essential for improving disease >> detection and diagnosis. Contrary to what is spread, new technologies play an essential role in the quality and accuracy of diagnosis, increasing the chances of cure. Another important factor is that new technologies increasingly value patients’ well-being, either through painless examination or rapid diagnosis. According to CNES data, in December 2018, the number of diagnostic imaging equipment presented a total of 133,306 devices in use in Brazil. The equipment of graphic and optical methods, totaled 45,722 and 41,957, respectively. The following chart shows the evolution of the number of equipment as of December 2014, considering all legal spheres (public administration, business entities, non-profit entities and individuals) and only the equipment in use in each period. Graph 30 Number of diagnostic imaging equipment, graphics and optical methods in use in Brazil (2014/2018) Source: Ministry of Health- National Registry of Brazilian Health Establishments – CNES. Abramed Elaboration. 133,306 116,483 Number of equipments 39,336 45,722 41,957 37,620 Imaging Diagnosi Graphical methods Optical methods 2014 2015 2016 2017 2018

“Contrary to what is spread, new 0103 technologies play an essential role in the quality and accuracy of diagnosis, increasing the chances of cure. Regarding the reliability of data collected through ”Considering the number of equipments according to >> CNES, it is important to highlight that they are relevant to health planning, control and evaluation the type, there is a significant increase in computerized actions and should reflect the actual situation of mammography, from 456 in 2014 to 889 in 2018, an available resources. Some studies have shown that increase of 95.0%. In contrast, the number of simple inconsistencies in the database could negatively affect mammography and stereotaxis remained relatively more complex analysis. However, the main criticism stable, with an increase of 3.0% over the same period. is about the gap relating to the amount of equipment In this situation, the development and incorporation in health facilities between the current and previous of a new technology in the health market does not period and criteria for defining what are they and how necessarily correspond to the increase in the number health facilities are configured. of equipment available. Graph 31 Number of equipment in use in Brazil (2014/2018) Source: Ministry of Health - National Registry of Brazilian Health Establishments – CNES. Abramed Elaboration. Ultrasound 39,339 Magnetic 2,511 resonance 4,663 CT scanner X-ray 27,979 Computer 889 mammography Simple mammography 4,834 and stereotaxis - 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 Number of equipment in use 2014 2015 2016 2017 2018 NOTE Does not consider dental X-ray equipment.

104 4ABRAMED BRAZILIAN MARKET OF DIAGNOSTIC MEDICINE PANEL Considering the availability of equipment in use, >> both public and private, there is a void in the clearer areas of the map. According to CNES data, there is no equipment available in these municipalities. Of the 5,570 Brazilian municipalities, 1,104 (19.8%) have at least one mammogram equipment. Among these, the average number of mammographers is 4.38. Of the 4,834 mammograms distributed in the country in 2018, 10.6% were concentrated in the cities of São Paulo and Rio de Janeiro, with a total of 512 units. Map 05 Mammography equipment by municipality Source: Ministry of Health - National Registry of Brazilian Health Establishments – CNES. Abramed Elaboration. December 2018 0 >=1

105 It is noted that the geographic distribution of < magnetic resonance and CT Scan equipment is not homogeneous throughout the national territory. While some regions concentrate an important part of the offer, others are far from any imaging center. Map 06 Map 07 CT Scanner Equipment MRI Equipment by municipality by municipality Source: Ministry of Health - National Registry of Brazilian Health Establishments – CNES. Abramed Elaboration. December 2018 December 2018 0 >=1

106 4ABRAMED BRAZILIAN MARKET OF DIAGNOSTIC MEDICINE PANEL Doctors with expertise in diagnostic medicine In the diagnostic medicine market, it is essential to have professionals with specialist title and >> reference training to provide excellence to the attending physician. Anatomical pathologists, clinical pathologists, geneticists, radiologists, imaging diagnostics specialists, and other practitioners in the industry have played an important advisory role in line with the advancement of technology in both the outpatient and hospital settings. Table 18 General characteristics of medical professionals working in the diagnostic medicine segment (2017) Source: CFM - Demografia Médica no Brasil 2018. Abramed Elaboration. Radiology Pathology Endoscopy Clinical Nuclear Medical and pathology / medicine genetics diagnostic 3,210 laboratory imaging 1.55 medicine 305 0.8% 0.15 Number of Experts 12,233 3,184 1,450 915 0.1% Expert ratio per 100 thousand inhabitants 5.89 3.1% 1.53 0.70 0.44 Percentage of total specialties 3.2% 19.8% 0.8% 0.4% 0.2% 1.3% 54.0% 11.5% Distribution by region 3.4% 13.9% 4.1% 3.7% 3.1% 58.7% North 17.8% 17.1% 25.4% 14.3% 19.3% Northeast 52.9% 9.1% 48.5% 55.5% 56.4% Southeast 16.9% 21.9% 15.6% 9.2% South 43.1% 8.1% 10.6% Midwest 9.1% 56.9% 8.4% 7.4% 35.4% 64.6% Gender distribution 63.9% 2.2% 71.4% 48.5% 63.8% Male 36.1% 9.7% 28.6% 51.5% 36.2% 3.3% Female 13.5% 17.7% 13.7% 22.3% Age distribution 3.9% 10.5% 0.6% 0.0% 2.1% 10.2% ≤ 29 years 17.5% 10.2% 8.7% 1.9% 14.4% 10.2% 30 - 34 years 18.1% 9.8% 17.3% 4.3% 17.2% 12.5% 35 - 39 years 14.6% 12.6% 13.8% 6.5% 18.0% 40 - 44 years 12.3% 10.5% 13.7% 9.2% 14.6% 7.5% 45 - 49 years 10.5% 7.2% 14.7% 11.8% 7.9% 50 - 54 years 11.8% 13.6% 8.5% 4.3% 55 - 59 years 7.8% 9.5% 20.6% 5.1% 4.3% 60 - 64 years 6.9% 7.2% 20.3% 6.1% 65 - 69 years 5.7% 2.6% 11.9% 8.4% 70 - 75 years 2.7% 5.5%

107 It is noteworthy that medical specialties related to the < care of the elderly population and chronic diseases will be positively impacted by demographic change and the epidemiological profile of the population. In this sense, there will be pressure on the supply of these specialties in both the public and private sectors. Regarding distribution, there is an offer of these professionals mainly in the Southeast, Northeast and South. As mentioned earlier, the supply of doctors in these regions is associated with better employment conditions, income and the possibility of specialization. Graph 32 Proportion of doctors working in the diagnostic medicine segment by region (2017) Source: CFM - Demografia Médica no Brasil 2018. Abramed Elaboration. 75% 50% 25% 0% Northeast Southeast South Midwest North Radiology Pathology Endoscopy Clinical Nuclear Medical and diagnostic pathology/ medicine genetics imaging laboratory medicine

108 4ABRAMED BRAZILIAN MARKET OF DIAGNOSTIC MEDICINE PANEL Labor market in the diagnostic medicine sector The diagnostic medicine market constitutes an The deterioration of the labor market observed >> essential part of the social welfare system, besides especially in 2015 and 2016, did not impact generating jobs and services with significant the dynamics of the diagnostic medicine sector, participation in the constitution of the country’s which even in the face of the economic crisis was wealth. Thus, analyzing job retention is essential to responsible for job creation, with an annual growth understanding the dynamics of the sector from the rate of 2.9%39, compared to a negative labor market point of view of job creation. rate of 1.7%. Pathological anatomy and clinical analysis laboratories account for 49.4% of diagnostic In 2018, the diagnostic medicine market was medicine jobs, and imaging services accounted for responsible for maintaining 253,537 thousand 24.8% in 2018, according to CAGED data. Other jobs, expanding 3.7% compared to 2017. In therapy services represent 25.8% of the bonds. the same period, activities related to the health market38 employed more than 2,2 million people. Together they account for 6% of formal contracts in Brazil. 37 Data compiled based on the employment stock of the sector in the year of 2017 and the sum of the transactions in the year 2018. 38 Hospital care activities, Mobile emergency care services, Patient removal services, except mobile emergency care services, Outpatient care activi- ties performed by physicians and dentists, Activities of diagnostic and therapeutic complementation services, Health care professionals activities, ex- cept physicians and dentists, Health management support activities, Human health care activities not previously specified, Elderly, physically disabled, immunosuppressed and convalescents assistance activities provided in collective and private homes, Activities to provide infrastructure support and assistance on homecare, Psychosocial assistance and health care activities for people with mental disorders, mental deficiency and drug addiction. 39 CAGR – 2014/2018

109 Table 19 Inventory of diagnostic and therapeutic medicine jobs (2014/2018) Source: CAGED - Cadastro Geral de Empregados e Desempregados. Abramed Elaboration. Pathological anatomy and cytology labs 2014 2015 2016 2017 2018 Clinical laboratories CT services 13,712 13,441 12,773 12,734 13,171 95,125 95,756 103,588 107,776 113,111 Diagnostic imaging services using ionizing radiation, except tomography 3,308 3,733 4,339 4,521 4,476 Magnetic resonance services 35,886 36,420 39,258 39,301 40,232 3,129 3,156 3,666 5,173 5,271 Diagnostic imaging services without the use of ionizing radiation, except for MRI 5,223 5,764 5,961 7,561 7,683 Graphic Record Diagnostic Service - 1,565 1,739 1,797 1,992 2,329 ECG, EEG, and other similar exams 2,377 2,663 3,009 3,303 3,470 Diagnostic services by optical methods - 14,297 15,202 15,270 16,228 16,469 endoscopy and other similar exams Dialysis and Nephrology Services 3,979 4,557 4,832 5,054 5,329 Chemotherapy Services 1,190 1,312 1,194 1,264 1,299 Radiotherapy Services 7,453 7,931 7,886 7,968 8,184 Hemotherapy Services Lithotripsy Services 51 73 70 80 80 Human Cell and Tissue Bank Services 259 196 222 180 186 Activities of complementary diagnostic and 38,456 39,228 32,324 31,267 32,257 therapeutic services not otherwise specified 228,024 233,186 238,205 246,419 253,547 Total activity of diagnostic and therapeutic 1,959,703 2,028,038 2,066,002 2,121,573 2,202,673 complementation service 41,109,693 39,484,142 38,112,779 37,989,350 38,410,428 Total Health Market Total Labor Market

110 4ABRAMED BRAZILIAN MARKET OF DIAGNOSTIC MEDICINE PANEL About the distribution of the employment balance by >> region, Southeast accounted for more than half of employment in the diagnostic medicine sector representing about 53.2% of the total, while the Northeast represents 18.4%; South 13.7%; Midwest 9.6% and North 5.1% in 2018. Table 20 Jobs in diagnostic and therapeutic medicine sector by region (2018) Source: CAGED - Cadastro Geral de Empregados e Desempregados. Abramed Elaboration. North Northeast Southeast South Midwest Pathological anatomy and cytology labs 983 2,767 6,277 2,020 1,124 Clinical laboratories 6,503 22,746 56,039 17,087 10,736 CT services 211 1,050 1,602 835 778 Diagnostic imaging services using ionizing radiation, except tomography 1,541 6,169 22,045 5,710 4,767 110 1,292 2,741 671 457 Magnetic resonance services Diagnostic imaging services without the use 422 1,673 3,755 923 910 of ionizing radiation, except for MRI Graphic Record Diagnostic Service - 217 474 993 251 394 ECG, EEG, and other similar exams 188 497 2,000 353 432 Diagnostic services by optical methods - 901 1,777 endoscopy and other similar exams 194 4,188 7,443 2,160 721 3,402 673 339 Dialysis and Nephrology Services 50 113 414 152 Chemotherapy Services 1,025 570 568 458 Radiotherapy Services 1,016 5,117 19 Hemotherapy Services 10 5 1 Lithotripsy Services 0 45 17 3 5 Human Cell and Tissue 161 Bank Services Atividades de serviços de complementação 664 3.919 22,684 2,944 2,046 diagnóstica e terapêutica não especificadas antertiormente 13,019 46,635 134,874 34,645 24,374 Activities of complementary diagnostic and 83,833 375,459 1,210,802 348,451 184,128 therapeutic services not otherwise specified Total Health Market1

111 Map 08 Total employment in diagnostic and therapeutic medicine sector and percentage share by region (2018) Source: CAGED - Cadastro Geral de Empregados e Desempregados. Abramed Elaboration. North Northeast 13,019 46,635 5.1% 18.4% Midwest Southeast 24,374 134,874 9.6% 53.2% South 34,645 13.7%

112 4ABRAMED BRAZILIAN MARKET OF DIAGNOSTIC MEDICINE PANEL Table 21 Diagnostic and therapeutic medicine sector jobs, by age group (2018) Source: CAGED - Cadastro Geral de Empregados e Desempregados. Abramed Elaboration. up to 17 18 to 24 25 to 29 30 to 39 40 to 49 50 to 64 65+ Pathological anatomy and cytology labs 102 2,516 2,415 4,270 2,572 1,218 78 Clinical laboratories 9,116 481 CT services 753 22.,197 21,782 38,358 20,424 282 11 Diagnostic imaging services using ionizing 36 840 845 1,614 848 radiation, except tomography 2,941 172 Magnetic resonance services 352 7,614 7,673 14,355 7,125 316 21 Diagnostic imaging services without the 41 1,142 1,050 1,851 850 use of ionizing radiation, except for MRI 690 40 Graphic Record Diagnostic Service - 65 1,459 1,424 2,551 1,454 ECG, EEG, and other similar exams 190 12 14 458 462 814 379 Diagnostic services by optical methods - 12 endoscopy and other similar exams 20 551 619 1,280 719 269 88 Dialysis and Nephrology Services 66 1,.733 2,460 6,414 3,958 1,750 21 Chemotherapy Services 22 66 961 2,165 1,063 431 11 Radiotherapy Services 15 162 256 135 165 Hemotherapy Services 18 673 982 494 226 Lithotripsy Services 6 2,741 1,960 1,645 - - 11 14 - Human Cell and Tissue 38 25 24 Bank Services 3 16 21 67 41 Activities of complementary diagnostic and therapeutic services not otherwise specified 302 5,901 5,628 11,394 5,970 2,904 158 Total activity of diagnostic and 1,809 45,939 46,601 88,393 47,613 21,922 1,270 therapeutic complementation service Total Health Market1 9,653 270,938 333,709 79,383 49,885 282,454 22,649

113 “The proportion of The analysis of the number of employed persons in < 2018, by age group, showed that in the diagnostic jobs in the sector is activities, young people from 18 to 24 years old higher in the 25-39 represented about 18.1% of the employed persons; age group: 34.7% in the age group of 25 to 39 years represented of the total. approximately 34.7%; and in the age group of 40 to 59 were about 18.7% of the employed persons. ”Graph 33 Proportion of jobs in the diagnostic and therapeutic medicine sector, by age group in% (2018) Source: CAGED - Cadastro Geral de Empregados e Desempregados. Abramed Elaboration. 34.7 35.8 30.3 18.1 18.3 22.3 21.9 15.0 18.7 12.3 15.114.1 15.7 12.8 8.6 0.7 0.4 1.0 0.5 1.0 1.2 up to 17 18 to 24 25 to 29 30 to 39 40 to 49 50 to 64 65+ Diagnostic and therapeutic Health market Job Market complementation service activities

114 4ABRAMED BRAZILIAN MARKET OF DIAGNOSTIC MEDICINE PANEL Tests needed for fast, accurate diagnosis - Chronic Noncommunicable Diseases Noncommunicable Chronic Diseases (DCNT) are the leading cause of premature mortality and disability in Brazil and worldwide. Ac- cording to the World Health Organization, seven out of ten people die worldwide each year from NCDs. Among the top 10 causes of death in high-income countries, nine were due to NCDs. In absolute terms, 78% of the number of deaths from NCDs occurred in low- and middle-income countries. Studies indicate that the burden of these diseases can be reduced by reducing risk factors, early diag- nosis and appropriate treatment. In this sense, the control of signs by diagnostic tests is an important instrument, capable of promo- ting not only the patient’s well-being, but also reducing the total expenditure on health care.

115 Diabetes mellitus According to the American Diabetes Association, SUS, the variation was less significant, with 39.8 the Sociedade Brasileira de Endocrinologia million tests performed in 2018, compared to e Metabologia, the Sociedade Brasileira de 38.3 million in 2017, an increase of 4.0%. Diabetes and the Sociedade Brasileira de Patologia Clínica/Medicina Laboratorial, glucose From an economic standpoint, the financial < tolerance testing or glycated hemoglobin dosage impact of hospitalizations for diabetes and its may be used to diagnose diabetes and pre- complications is $845 on average per patient. diabetes40. Glycated hemoglobin is a test used The average cost of hospitalization was for screening and diagnosis, and may be ordered significantly higher for men in all age groups, several times a year to monitor patients with type averaging $956.00 compared to $746.00 for 1 and 2 diabetes. The test indicates the average women41. These amounts are even higher when amount of glucose present in the blood over the the indirect financial costs resulting from the loss past 2 to 3 months, and assists the doctor in of production capacity are estimated. In contrast, determining the effectiveness of the treatment. the average glycated hemoglobin42 test value If the initial test result is uncommon, it should be was R$16.00, according to data available from repeated to confirm the diagnosis of diabetes, D-TISS43. In looking at these values, there is no and other tests may be performed to identify doubt that the preventive approach to disease related conditions. treatment tends to considerably reduce health expenditures. In the supplementary healthcare market, the number of glycated hemoglobin tests increased significantly, from 12 million in 2017 to 13.5 million tests performed in 2018, an increase of 12.4%. In 40 https://labtestsonline.org.br/conditions/diabetes 41 Disease and Economic Burden of Hospitalizations Attributable to Diabetes Mellitus and Its Complications: A Nationwide Study in Brazil 42 40302075 – Glycated Hemoglobin A1 Total 43 D-TISS is a panel provided by the National Supplementary Health Agency. (ANS) to consult data received through TISS. Average value of the year 2016.

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117 Cardiovascular diseases Holter is an exam used to evaluate variations in rhythm and heart rate that occur over a given period. It is a small portable device that continuously measures and records heart activity for 24 or 48 hours, depending on the type of monitoring indicated. Generally, the test is indicated for at-risk patients to investigate arrhythmias or dysrhythmia; dizziness symptoms and/or palpitations or when congenital cause is suspected. The results of using a Holter will help your doctor decide if further testing or appropriate treatment is needed. In 2018, 1.3 million Holter-type tests were performed in the < supplementary health market, a 7.0% increase over the previous year, when 1.2 million were performed. In the same period, SUS held 270 thousand tests, an increase of 5.2% compared to 2017. Evidence about the economic impact of cardiovascular disease (CVD) is scarce. Nonetheless, some systematic reviews indicate that expenditures per cardiovascular disease episode range from US$ 50044 to US$ 1,500, however, the variability between estimates was high. 44 The economic burden of cardiovascular disease and hypertension in low- and middle-income countries: a systematic review.

118 4ABRAMED BRAZILIAN MARKET OF DIAGNOSTIC MEDICINE PANEL Care Production of Diagnostic Medicine Supplementary Health “More than 1.6 >> In 2018, more than 1.6 billion health care events were billion health care held in the supplementary health market, including events held in the 861.5 million complementary exams, up 5.5% over supplementary the previous year. The most performed imaging health market in exams in 201845 were: radiography, with 31.8 million 2018. events, followed by magnetic resonance imaging, 7.9 million and CT Scan , 7.4 million. ” 45 It considers the list of exams that must be detailed by the operators.

119 Table 22 Number of complementary exams in supplementary health (values in thousands - 2015/2018) Source: ANS - Care Map for Supplementary Health 2018.Abramed Elaboration. Number of complementary exams 2015 2016 2017 2018 (%) Parti- in supplementary health 18/17 cipation 747.0 796.8 816.9 861.5 2018 Complementary exams (in thousands) 6.5 7.1 7.4 7.9 5.5 Nuclear magnetic resonance 6.6 7.1 7.2 7.4 6.7 100.0% CT Scan 2.7 0.9% Oncotic cervicovaginal cytopathology 6.8 6.6 6.3 6.1 0.% in women 25 to 59 years old -3.4 Bone densitometry 2.2 2.2 2.2 2.2 0.7% Transthoracic echodopplercardiogram 5.0 5.1 5.2 5.2 0.3 Bronchoscopy with or without biopsy 0.1 0.1 0.1 0.1 -0.1 0.3% Endoscopy - upper digestive tract 3.3 3.1 3.2 3.3 4.3 0.6% Colonoscopy 1.1 1.1 1.2 1.2 5.2 0.0% Holter of Hours 1.1 1.2 1.2 1.3 5.5 0.4% Mammography 5.1 5.1 5.0 5.0 7.0 0.1% Mammography in women 50 to 69 years old 2.3 2.3 2.3 2.3 -0.4 0.2% Myocardial scintigraphy 0.6 0.6 0.5 0.5 1.8 0.6% Dynamic renal scintigraphy 0.0 0.0 0.0 0.0 -3.1 46.0% Radiography 34.8 34.4 33.1 31.8 5.7 0.1% Exercise testing 3.5 3.5 3.4 3.4 -3.7 0.0% Abdominal diagnostic ultrasound 6.1 6.4 6.5 6.9 -1.8 3.7% Diagnostic ultrasound of lower abdomen 8.2 7.7 7.0 6.7 5.0 0.4% Upper abdominal diagnostic ultrasound 1.0 1.0 1.0 0.9 -5.1 0.8% Morphological obstetric ultrasound 1.1 1.0 1.0 1.0 -4.2 0.8% Glycated hemoglobin 10.0 11.0 12.0 13.5 -0.6 0.1% Faecal occult blood screening in 50-69 year olds 12.4 0.1% 1.0 1.0 1.1 1.1 1.6% 3.7 0.1% NOTE Participation in Mammography in women aged 50 to 69 years refers to the total number of mammograms. <

120 4ABRAMED BRAZILIAN MARKET OF DIAGNOSTIC MEDICINE PANEL Unified Health System (Sistema Único de Saúde - SUS) Approximately 3.7 billion outpatient events were held at SUS in 2018. Of these events, 934.7 million were performed for diagnostic purposes and grew by 3.6% over the previous year. The available data come from the SUS - SIA/SUS Outpatient Information System, managed by the Ministry of Health, through the Secretariat of Health Care, together with the State Health Secretariats and the Municipal Health Secretariats, being processed by the DATASUS - Departament of Technology from SUS, of the Executive Secretariat of the Ministry of Health. >> Table 23 Outpatient production in the Unified Health System according to procedure group (values in thousands - 2015/2018) Source: Ministry of Health - Outpatient Information System SUS (SIA/SUS). Abramed Elaboration. SUS outpatient production 2015 2016 2017 2018 ∆(%) 18/17 Participation 2018 Total 4,116.1 3,986.1 3,978.4 3,657.7 - 8.1 100 % Health promotion and 626.4 591.4 524.0 307.8 - 41.3 8.4 % prevention actions 897.0 893.8 902.1 934.8 3.6 25.6 % Procedures for - 11.2 37.0 % diagnostic purposes 1,628.6 1,523.1 1,523.3 1,352.0 Clinical Procedures Surgical procedures 91.9 77.1 65.1 45.8 - 29.6 1.3 % 1.7 1.7 1.7 1.7 2.6 0.0 % Organ, tissue and 5.3 26.7 % cell transplants 840.2 865.6 925.9 975.3 6.8 0.2 % 0.9 % Medication 5.7 6.1 6.6 7.0 12.1 5.7 27.2 29.6 33.2 Orthotics, prosthetics and special materials Complementary actions of health care NOTE Approved amount per year of service according to the procedure group.

121 “In 2018, approximately 934.7 million tests were performed for diagnostic purposes at SUS. ”Tabela 24 Outpatient production of SUS according to procedure subgroup (values in million) Source: Ministry of Health - Outpatient Information System SUS (SIA/SUS). Abramed Elaboration. Exams Amount Participation Diagnosis in clinical laboratory 677.2 72.4% Radiology diagnosis 62.6 6.7% Material collection 51.8 5.5% Diagnostic methods in specialties 44.6 4.8% Rapid Test Diagnostics 41.8 4.5% Ultrasound Diagnosis 18.2 1.9% Diagnosis and special procedures in hemotherapy 16.4 1.8% Diagnosis by pathological anatomy and cytopathology 12.1 1.3% CT Diagnosis 5.3 0.6% Endoscopy Diagnosis 2.0 0.2% Magnetic resonance diagnosis 1.2 0.1% Diagnosis in epidemiological and environmental surveillance 1.1 0.1% Diagnosis by nuclear medicine in vivo 0.4 0.0% Interventional radiology diagnosis 0.1 0.0% Total 934.8 100.0% NOTE Approved amount per year of service according to the procedure group. >>

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123 Considering the main imaging exams performed >> at SUS, the number of radiographs was 55.7 million, ultrasound 15.7 million, tomography 5.1 million, and magnetic resonance imaging 1.2 million in 2018. Graph 34 Outpatient production in the Unified Health System selected imaging examinations (million - 2018) Source: Ministry of Health - Outpatient Information System SUS (SIA/SUS). Abramed Elaboration. 15.7 Ultrasound 55.7 5.31 Radiography Cytopathological examination 5.3 1.2 Tomography RReesssoonnaânncce NOTE Approved amount per year of service according to the procedure group.

124 4ABRAMED BRAZILIAN MARKET OF DIAGNOSTIC MEDICINE PANEL Rational use of diagnostic procedures: balancing benefit and risk for the patient The benefits of modern medicine have greatly increased the health of the population in many countries. However, as health care has improved and life expectancy has been extended, overall health expenditure has grown at a rapid pace in recent decades. In this scenario, despite several advances, overuse, underuse and misuse of health resources coexist. Excessive use of medical services is characterized by repetitive outpatient

125 procedures, surgeries, and above- the total. average hospitalizations, in addition to prescription and overuse of However, it is essential to emphasize that performing medication, especially regarding use preventive tests and monitoring symptoms that have of antibiotics. This is a worldwide normal results should never be considered wasteful. phenomenon that considerably raises Clinical patient information is currently not available to health care expenditure and needs to enable the physician to accurately associate the out- establish the real benefit to the patient come with the history of monitored pathologies. In this without harming their quality of life sense, it is essential to improve health practices and and impacting the sustainability of to establish a set of recommendations regarding the the health system. Some systematic performance of cost-effective diagnostic tests. Initiati- analysis also demonstrate use beyond ves such as the program: Choosing Wisely Brazil se- the real necessity of diagnostic tests in eks to promote communication between physicians several countries. In the US, estimates and patients in order to improve decision making by of treatment expenditures vary avoiding potential risks and unnecessary use. considerably. Some projections indicate that it represents 6% to 8% of total health Another problem related to rising health expenditures, expenditure46. In Switzerland, about but little addressed in the literature, is underutilization, 14% of colonoscopy and 49% digestive i.e. the failure to provide effective and affordable me- endoscopy tests showed evidence of dical interventions to the population. Underuse cau- overuse47. In other European countries, ses suffering to millions of people48 around the world excessive endoscopy examinations through physical, psychological and social harm to accounted for between 13% and 33% of patients and generates waste of resource to society. According to the book, “Overtreated - Why too much medicine is making us sick and poorer,” patients re- ceive proper care in just under 55% of the time. Also according to the book, this fact stems, in part, from the lack of coordination and absence of primary care. In addition, there is a prevalence of underutilization due to barriers to access when care is denied or not >> 46 Evidence for overuse of medical services around the world. Lancet 2017; 390: 156–68 47 Overuse and underuse of colonoscopy in a European primary care setting. 48 Addressing overuse and underuse around the world.

126 4ABRAMED BRAZILIAN MARKET OF DIAGNOSTIC MEDICINE PANEL reimbursed by health plans and insurance. Careful statements not to generate movements that The balance for these issues consists, among impact in the reduction of exams and diagnostic pro- other measures, in patient empowerment and full cedures alone require reasoning focused on the out- knowledge and autonomy to practice medicine. In come of the patient’s health, otherwise it may cause this way, patients and doctors will be able to increase irreversible damage. their ability to dialogue and decide on the best treatment possibilities, minimizing risks with better According to the Federal Court of Auditors operational health results without disregarding the financial limits audit report49, one of the main causes for the unpre- of each sector agent. dictability of cancer care is the lack of primary care to track cancer cases, reflecting on the advanced diag- Diagnostic medicine and the correlation analysis with nosis of the disease. The report shows that 53.9% sustainable management of the system and popula- of breast cancer patients in Brazil were diagnosed at tion health cannot be analyzed considering only the advanced stages, stages 3 and 4. For comparison, absolute numbers observed in the short term. Pre- in the United States, one study found only 7.3% at vention has already been proven to be a fundamen- advanced stages. In addition to lifestyle changes, the tal pillar of the search for sustainability in the sector. Therefore, it is not only the variation in the number of reduction in this rate is influenced especially by con- < tests performed that demonstrates the waste. ducting preventive exams. Graph 35 Staging at the time of diagnosis - (Brazil 2010/USA 2004) Source: TCU. Elaboração Abramed. 45.6% 39.5% 41.4% 25.7% 15.2% 12.5% 2.2% 5.2% 7.6% 5.1% 4 0 12 3 Detection Stage – Staging 49 National Cancer Care Policy Brazil USA



128 5ABRAMED DIAGNOSTIC MEDICINE MARKET: TRENDS PANEL

129 5Diagnostic Medicine Market: Trends

130 5ABRAMED DIAGNOSTIC MEDICINE MARKET: TRENDS PANEL “Healthcare companies continually seek quality assurance through increased efficiency and innovation. ”

131 Diagnostic Medicine Market: Trends The diagnostic medicine market is one of the fastest >> evolving and innovating markets each year. Advances in technology enable diagnostic exams - clinical and imaging - to be performed on a larger scale, in a shorter time, with better quality and accuracy. Several factors have driven the expansion of this market, among which stand out: the modernization of equipment, new management tools and techniques, the demand for new market exams, the provision of high quality services, process automation, integration of the information technology systems and genetics innovations, among others. Notwithstanding these advances, several trends are pointing to the diagnostic medicine industry in the coming years, including: Healthtech - with wide use of wearables and

132 5ABRAMED DIAGNOSTIC MEDICINE MARKET: TRENDS PANEL artificial intelligence; new laboratory technologies; < and the use of telemedicine. All these trends point to a scenario of strengthening and development of the sector in the coming years, with the emergence of several health startups focused on solutions in the various segments that permeate patient care. Healthcare companies continually seek quality assurance through increased efficiency and innovation with high investments compared to other sectors of economic activity. Startups in health Virtual Research Clinical reality manage- ment Homecare Imaging Wearables Robotics Diagnosis Genomic Mental Patient data Artificial Digital health and risk therapy analysis intelligence Internet of 3D Women’s Telemedicine medicine impression Health Disease Nutrition Relationship management with patients

133 Healthtech: Transforming healthcare access The healthcare market is changing through In the recently published article, “The Revolution in < technological innovations and solutions that can Health Care is Coming,” The Economist magazine streamline processes and deliver more value pointed out that smartphone technologies allow to patients. The Healthtech theme describes a people to monitor their own health and gain access specific set of technology applications for solving to their own medical records. This enables you to general efficiency issues and cost constraints in minimize inefficiencies in medical treatment and healthcare delivery and is associated with a number also provide data to help train medical algorithms. of innovations, including wearable technology, AI, According to UBS estimates there were over and analytics, promoting a set of opportunities. 150,000 health-related applications in 2018 and Using digital tools, artificial intelligence and other more than $30 billion50 have been invested in funding technologies, Healthtechs aim to enhance the Healthtech activities. Forbes magazine estimates patient experience. Common examples of this that the healthcare AI application market will reach evolution include the incorporation of new benefits to about $1.7 billion by the end of 2019. patients; increase business productivity; use artificial intelligence to analyze imaging; generate real-time information for more efficient decision making and nutritional tracking through apps, among others. Graph 36 Number of smartphone operating system apps Source: UBS Switzerland AG and UBS AG – june 2018. Abramed Elaboration. 100,000 Google Play 80,000 60,000 Apple app store 40,000 20,000 0 50 https://www.cbinsights.com/

134 5ABRAMED DIAGNOSTIC MEDICINE MARKET: TRENDS PANEL Wearables Advances in sensor development and data analysis effectiveness of tests or therapies to be assessed; techniques have created new possibilities in the use Early detection: by combining body sensors and of wearables in health. These are mobile devices activity monitors, the technology can be used to with microcontroller functions and wireless data detect symptoms and various changes in health. transmission. Wearables can improve the quality and lifestyle of its users, as well as provide a wealth of According to a recent study, the number of connected < information that can help the practice of medicine51. wearables around the world will jump from 325 million These devices can be integrated with various (2016) to over 830 million by 2020. More than any accessories such as multi-sensor wristwatches and other wearable category, wrist devices will be the are usually integrated into a system that transmits most common, with over 170 million units sold in data collected by multiple body or environmental 2020 alone. This year, the sale of “smart watches” will sensors in a single device. Currently, most wearables account for nearly half of all wearables distributed. can be classified into five categories: Health and Wellness Monitoring: sensors that examine physiological data. Safety supervision: devices capable of detecting falls; Home rehabilitation: combined with interactive features to facilitate home rehabilitation in physiotherapy; Efficacy assessment: sensors that enable the precise development and 51 https://usemobile.com.br/wearables-setor-da-saude/

135 Artificial Intelligence and Analytics The ability to store, retrieve and analyze health data discoveries in medicine. < electronically is at the heart of the Healthtech theme. The generation of information considering qualitative Artificial intelligence (AI) diagnostics can consider and quantitative aspects requires the efficient use of a all available medical evidence, accurately identify data set. This will make it possible to make evidence- pathologies, and provide personalized care, improving based decisions for planning, management, treatment outcomes in the light of untapped health measurement and learning purposes. The use data. Thus, the use of AI should increase the accuracy, of analytics has assisted health professionals in considering all data and information available from predicting, diagnosing and treating various diseases, similar exams, instead of considering the results reducing costs and improving the quality of service in isolation and not comparatively. In this sense, provided. Some estimates suggest that applying data artificial intelligence software is able to incorporate mining techniques could save $450 billion a year on family history, risk factors and results of various the US health care system52. tests to assist in the diagnosis of various diseases. The term analytics refers to the possibility of building systematic reasoning from the available data. Thus, data analysis techniques will enable improvements in the documentation process and access to scientific evidence, as well as the development of models for forecasting and anticipating hospital events. Finally, it will allow the sharing of knowledge and new 52 A Systematic Review on Healthcare Analytics: Application and Theoretical Perspective of Data Mining.

136 5ABRAMED DIAGNOSTIC MEDICINE MARKET: TRENDS PANEL Interoperability A challenge related to information technology in diagnostic exam needs complementation or further < the diagnostic medicine industry is the lack of detail. Finally, the use of interoperability in health interoperability or the inability of different information technology systems can be an effective strategy technology systems and software applications to to achieve improvements in integrated care communicate, exchange data and use information management and care and will certainly reduce that has been stored and transmitted in the past. healthcare expenditure. Lack of interoperability can stop the flow of the diagnostic process as it tends to limit or delay access to data available for clinical decision making. When health systems do not share data, clinical and diagnostic information may be inadequate if unavailable, requiring further testing and procedures to ensure appropriate management. Inconsistent and slow adoption of standards, particularly among organizations that are not subject to Electronic Health Record (EHR) certification programs, make it difficult and can make interoperability unfeasible. Another issue concerning the interface between the EHR and laboratory and radiology information systems (HIS, LIS, RIS, etc.) that generally have insufficient clinical information to establish a clinical picture to allow the clinical pathologist or radiologist pathologist to interpret results or indicate if the

137 Telemedicine According to the World Health Organization (WHO) is reported as cost-effective in 73.3% of the cases telemedicine is defined as a constantly evolving covered by the literature55, while negative effects science that incorporates technological advances are responsible. only 5.6% of the selected studies. and adapts to the health and care needs of The remaining 21.3% of the studies analyzed had a modern society53. Telemedicine has great potential neutral effect regarding the use of telemedicine as a to overcome regional barriers in access to health health cost reducer. Assumptions that have a strong services and budget constraints faced mainly impact on the cost-effectiveness of telemedicine by developing countries. The advancement of solutions reported by the studies include: the information technology is constantly revolutionizing distance between patient and nearest healthcare the way people communicate. Therefore, they professional; time required for consultation and cost constitute an important instrument capable of of a doctor visit. minimizing the problems of access, equity, quality and cost-effectiveness faced by several countries The use of telemedicine is a reality in many < and their health systems. The provision of health developed countries despite the barriers and services in regions with limited infrastructure can difficulties associated with implementation. Overall, be made available through telemedicine, providing online procedures are expected to be cheaper access between patient, doctors and other health than face-to-face procedures, which can result in professionals (2nd medical opinion). reduced healthcare costs and avoid waste. In this sense, Teleradiology has been regulated since 2009, In the United States, the number of appointments and updated in 2014 through CFM Resolution No. made through telemedicine has increased from 206 2,107/2014. It is a set of standards intended to in 2005 to 202,374 appointments in 201754. Most ensure ethical and legal use - which is the practice of this increase has occurred in recent years, with of transmitting radiological images of patients an average annual growth rate of 261% from 2015 between different sites for the production of a to 2017 and 52% between 2005 and 2017. The medical report, a second expert opinion or a clinical- average age of the patients treated is 38.3 years, of radiological review. Its use is based on distance as a which 63.0% were female and 83% lived in urban critical factor for sending radiological images for the areas. The conclusion of the study is that regulation purpose of reporting to support medical activities in about coverage and reimbursement policies has isolated locations. positively influenced the demand for telemedicine consultations. Another study aimed at analyzing the telemedicine market in Europe and understanding the factors that determine its development, found that telemedicine 53 WHO - World Health Organization. 54 Trends in Telemedicine Use in a Large Commercially Insured Population, 2005-2017. 55 Market study on telemedecine.

138 5ABRAMED DIAGNOSTIC MEDICINE MARKET: TRENDS PANEL “When health systems do not share data, clinical information may be inaccurate or inadequate. ”

139 Competition and industry consolidation The Diagnostic Medicine market moves around groups. In recent years there has been a systematic < R$ 42.0 and R$ 43.7 billion per year and stands reduction in the number of laboratories consisting out in the health segment, making it attractive for of private labels and family structure. In this sense, investments considering the various socioeconomic, there is a movement towards regionalization, through demographic and epidemiological factors that favor mergers and acquisitions with the strengthening the growth and development of the healthcare of local brands that can offer greater condition of sector in Brazil. The sector maintained its pace of sustainability. expansion even as economic activity slowed and the labor market slowed, benefiting to a greater extent from the increase in the number of health care plan beneficiaries between 2003 and 2008. There was significant growth in employment and income, low inflation and abundant credit, favoring domestic demand and the development of various sectors. The market is undergoing profound changes, driven “The diagnostic by the emergence of new technologies and the implementation of techniques and services capable medicine market of processing diagnostic tests more efficiently and moved around R$ with scale, favoring the consolidation of the market. 42.0 and R$ 43.7 In this segment, there are important economies of billion last year. scale, that is, the cost of inputs associated with low demand for tests is significantly higher, in per capita ” terms, than necessary to serve a larger portion of patients. However, some companies find it difficult to access new technologies. In addition, there is a need for accreditations, quality certifications, which have a lot of power in the market and usually have a high cost. Finally, the segment is extremely regulated and some actions required to meet the standards require high financial resources. From a competitive perspective, the diagnostic medicine market is made up of a large number of small family-owned companies and some larger

140 5ABRAMED DIAGNOSTIC MEDICINE MARKET: TRENDS PANEL New technologies for imaging diagnose and laboratory tests From ultrasounds to MRI scans and CT Scan, technologies and data production processes in radiologists need and use medical imaging to diagnose disease properly and accurately. recent years, costs have decreased and productivity Technological advancement introduces new imaging equipment capable of utilizing AI-based has increased. In addition to improving the efficiency data. Together, these devices tend to increase the assertiveness of medical analysis and increase the of testing, large volumes of genomic data have been likelihood of early detection of pathologies. Big data analytics is revolutionizing healthcare in general, gathered over the last two decades as the price of including medical imaging. Continued development of big data and data mining will provide radiology sequencing has dropped dramatically. >> professionals with real-time information during the exam, minimizing errors and providing more “The volume of personalized care. medical imaging The volume of medical imaging data is growing data is growing exponentially and requires storage solutions. exponentially and Estimates indicate that the world’s devices will requires storage produce a total of 35 Zettabyte of image data by solutions. 2020. Many health innovations depend on improving the sharing and security of this information. In this ” sense, Blockchain will enable sharing securely through an integrated solution accessible to patients, providers and physicians. Personalized medicine represents one of the greatest advances in the field of laboratory tests. The following chart summarizes the technological advance in the sector. With the development of DNA sequencing 46 Scanning the Future of Medical Imaging.

141 Graph 37 Cost per Genome (US$) vs. Production (2001-2019) Source: National Human Genome Research Institute (NHGRI). Abramed Elaboration. 95,263,072 743,402,711 100,000,000 10,000,000 1,000,000 100,000 10,000 16,200 1,301 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Cost per Genome (US$) Production (MebiByte - 1 MiB = 220 bytes) Using genetics can improve the accuracy of diagnosing serious and complex diseases < and provide a more assertive prevention plan and individualize the approach with each patient. The personalized medicine allows the medical treatment to be tailored to the patient considering their characteristics and needs during each phase of treatment, including prevention, diagnosis, treatment and follow-up. Among the various indications, exams can be used to: – Identify gene mutations responsible for an already diagnosed disease; – Determine the severity and prognosis of a disease; – Guide the therapeutic conduct; – IIdentify gene mutations that increase the risk of disease development; – Identify gene mutations that can be transmitted between generations; – Map treatable conditions in newborns; – Accurately target family genetic counseling.

142 6ABRAMED ABRAMED PANEL PANEL

143 6 Abramed Panel

144 6ABRAMED ABRAMED PANEL PANEL

145 Abramed Panel The Abramed Panel is an important study that presents organized, accurate < and consistent information about a relevant group of institutions that operate in the diagnostic medicine market in Brazil. The main objective of this publication is to contribute to sectoral transparency and health market development through a retrospective view and pointing to industry trends. “The main purpose of this publication is to contribute to sectoral transparency. ”

146 6ABRAMED ABRAMED PANEL PANEL Institutional profile Abramed’s associates operate in various areas of diagnostic >> medicine - clinical analysis, pathological anatomy, genetics, and clinical imaging. There is a significant participation in diagnostic imaging activities, with 88.2% of the associates in this segment57 in 2018. Gráfico 38 Participation in the segments of diagnostic medicine (2018) Source: Abramed Panel. Abramed Elaboration. . 41.2% 47.1% 64.7% 88.2% Endoscopic Teleradiology APnaathtomlogiaic Imaging anatoómgiyca Diagnosis 58.852.9 % 70.6% % Graphical AaCnlianliycsails Genéettics Gmethods 58.8% Nclear medicine 57 A company can operate in more than one segment. For this reason the sum does not correspond to 100%.

147 Graph 39 Participation in diagnostic medicine segments (2018 descending order) Source: Abramed Panel. Abramed Elaboration. Endoscopic 41.2% Methods 47.1% Teleradiology Genetics 52.9% Nuclear medicine 58.8% Graphical methods 58.8% Pathologic anatomy 64.7% Clinical analysis 70.6% Imaging 88.2% Diagnosis 0% 20% 40% 60% 80% 100%

148 6ABRAMED ABRAMED PANEL PANEL “There is a significant participation in serving the private market, about 88.2% among associated companies. ” Graph 40 Participation by service area (2018) Source: Abramed Panel. Abramed Elaboration. . 88.2% 47.1% 41.2% Private Providing Service to macrketoservice support to public other hospitals laboratories 58.8% 5.9% Service teonto private hospitals Senrviceeto the deental stegment