Making the most of the Mexican pharma market
Rajesh Chhabara reports on how Mexicos pharma sector is poised for growth due to regulatory reform and increased government spending on healthcare
By Rajesh Chhabara
Mexico, the second largest pharma market in Latin America after Brazil, is one of the 10 largest drug producers in the world.
According to statistics from healthcare market research firm IMS Health, in 2008 Mexico represented 22.5% of the Latin American region and ranked 11th in the world pharmaceutical market.
Mexicos pharma market grew 0.6% in 2009 to reach $10.4 billion.
According to Ernst & Young, the market is expected to hit $13.6 billion by 2012. By 2014, the market is forecast to reach $14.9 billion.
Research firm Business Monitor International estimates that per capita spending on drugs is expected to rise to $149 in 2014, up from $86 in 2009.
Total spending on medicines is expected to increase from 1.06% of GDP in 2009 to 1.21% in 2014.
All these figures indicate vibrant growth.
The retail opportunity
Mexico is a predominantly patented drug market.
In 2009, patented drugs accounted for $7.9 billion while the value of over-the-counter drugs was $1.49 billion.
However, generics have huge potential for growth as the government implements a public health insurance scheme bringing coverage to larger populations.
The patent expiry of several blockbuster drugs is likely to further boost the generics segment.
David Campbell, senior principal at IMS Health, says the retail sector in Mexico, which accounts for 73% of sales and 42% of volume, offers a key opportunity for multinational companies.
Though a large portion of the Mexican population pays out-of-pocket for medicines, the government is increasing spending on healthcare, which is creating greater overall demand for drugs.
The public healthcare insurance scheme has also significantly improved access to medicines, fuelling sales in the public sector.
Laura Gomez Malagon, senior healthcare consultant for Latin America at research firm Frost & Sullivan, recommends carrying out a portfolio analysis to have a wide range of products to access to all economic levels.
Distribution is also key. Some regions need better distribution, Gomez Malagon says better. Companies with an improved distribution in these markets will have better results.
Regulatory reform
The government has also embarked on revamping the regulatory regime, including a new registration renewal process, guidelines for antibiotics, a draft bill to regulate the sale and production of biologic and bio-similar drugs, and new rules for medical samples.
The new registration process allows only patented and bio-equivalent generics in the market.
New rules require customers to present a prescription to buy antibiotics, and a national register will be created for recording the sale of antibiotics.
Over the past two years, the government has been gradually phasing out the local plant requirement, which has opened up the market for exporters from other countries.
This means local manufacturers face greater competition from imports.
As part of its signing of the North American Free Trade Agreement, Mexico has had to reform its intellectual property protection laws.
Patent protection has helped attract investment from multinational drug companies.
According to Gomez Malagon, the Mexican regulatory regime is quite robust.
For any company, and even more so for a multinational company, it is very important to be in touch with the regulatory regime and to be one step ahead of them, he says.
It is very important for multinational companies to be part of different associations to better understand the regulatory changes.
He adds that regulators are willing to listen to pharmaceutical companiesif there is good lobbying.
Mexico is already a leading exporter of drugs in Latin America.
Local giants, such as Probiomed, Silanes, Senosiain, and Sophia, are increasing investment in research and development to grow exports.
Despite recent improvements in access to healthcare in Mexico, a number of threats remain.
The government continues to pressure companies regarding pricing, says Campbell of IMS Health.
In relation to competition, patent enforcement has some cases under review and the elimination of plant requirements in order to gain registration will put extra pressure on actual competitors.
Companies should also be aware of Mexicos toughening anti-trust enforcement.
A number of pharma companies, including Eli Lilly, Baxter, and Fresenius, have been fined for colluding to inflate prices in government tenders for drugs.
A reformed anti-trust law would allow fines of up to 10% of the companys revenue in Mexico.
For more on Mexico, join the industrys other key players at Market Access & Government Opportunities Mexico on April 12 and 13 in Mexico City.
Check out other articles in eyeforpharmas emerging markets series:
For more on South Korea, see Strategies for growth in South Koreas pharma market.
For more on Turkey, see Transforming the Turkish pharma market.
For more on the Middle East, see The Middle East: A pharma market in the making.
For more on Russia, see Reassessing Russia's pharma market.
For more on Brazil, see Breaking into the Brazilian pharma market.
For more on China, see Cracking the Chinese pharma market.
For more on India, see Getting into the Indian pharma market.
For more on the pharmerging markets as a whole, see How to get ahead in 'pharmerging' markets.