Country Report: Mexico

Shaking Up the System
Aug 01, 2012
By Pharmaceutical Executive Editors

This sponsored supplement was produced by Focus Reports.

Project Director: Julie Avena
Research and Editorial: Kirsty Avril Jane Walker
Project Publisher: BĂ©atrice Collet
Graphic Assistance: Christine Guiang

Photo credit: Kirsty Avril Jane Walker
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But what does this recent categorization as a 'growth market' suggest for Mexico's pharma industry, recently left red-faced in regional second place after Brazil's bullish and apparently unstoppable growth?

With an estimated value between 12 and 14 billion USD, the Mexican pharmaceutical industry has seen some significant changes over the last four years. The government has significantly increased public health spending and coverage in an effort to pull Mexico up from the bottom of the pile; according to the latest OECD Health Data, Mexico fared 33rd out of 34 OECD countries for total expenditure on public health as a percentage of GDP. The government is also fighting against rapidly increasing levels of chronic long-term illnesses rife in the population, such as diabetes.

Most notably, the Popular Insurance Scheme 'Seguro Popular' increased its coverage from 17 million Mexicans to more than 50 million who were previously not under any kind of health scheme. Now almost every single Mexican in the country is covered under a public health system.

Rafael Gual, General Director, CANIFARMA
The Federal Commission for the Protection against Sanitary Risk (COFEPRIS) oversaw several recent regulatory changes. Suppression of the manufacturing plant law in 2008 enables foreign pharmaceutical companies to distribute and sell their products in Mexico without the presence of a manufacturing plant on Mexican territory. The deadline for new generic drug registrations passed in February 2010 which, after being subjected to stringent bio-equivalency testing, cleaned up an estimated 7000 products from the market. Additionally, the antibiotics law was enacted in August 2011, requiring a prescription to be presented before any antibiotic can be dispensed.

For Rafael Gual, general director of CANIFARMA, the National Chamber of the pharmaceutical industry, there is one goal that COFEPRIS must still achieve, "Full recognition [from PAHO, the Pan American Health Organization], which will provide a strong opportunity for national companies to reach the Latin American market; a win-win situation for both industry and government."

These wide-reaching changes have affected industry dynamics, and coupled with the patent cliff and the worldwide innovation drought, have opened up a bigger space for generics penetration and created the perfect storm that has pushed present multinational companies to either diversify, or to focus on niche markets. Mexico's solid macroeconomic policies and encouragement of foreign investment have also increased competition in the market, pushing local companies to take a side step on their strategies and in some cases to be more resourceful and aggressive in retaining and increasing their share of the pharmaceutical pie.

Last but not least, there has been an undeniable shift of power towards the point of sale: pharmacies and supermarkets. Pharmacy giants are taking warehousing and distribution into their own hands and private label (store brand) drugs are becoming increasingly popular. Some say positioning a general medical service with doctors at the point of sale has created an even bigger demand for private label medicines at the expense of other brands. For many players in the market, it is a bitter pill to swallow.

Mexico certainly offers a lot of growth potential. One can debate whether Mexico is still truly an emerging market, but as Ricardo Alvarez Tostado, president and general director of AstraZeneca Mexico points out, "It is not how fast you grow, but how consistent your growth is over time, and I genuinely believe that Mexico is very well positioned through a rigorous monetary policy and an improving fiscal policy. It is a democratic, free enterprise emerging market. Mexico is, and will remain, a strategic market for any industrial interest."

But to grow, or in some cases survive, pharmaceutical companies must adapt to dynamic market conditions. Those who manage to achieve this flexibility in Mexico will be the ones with smiles on their faces in 2020 as successful players in one of the world's largest economies.

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