Country Report: Mexico - Pharmaceutical Executive

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Country Report: Mexico
Shaking Up the System

Pharmaceutical Executive


PHARMA'S AFFAIR WITH PRIVATE LABELS

When asked to define the three most impactful changes on the Mexican pharmaceutical industry over the last few years, executives put Seguro Popular and COFEPRIS regulation in the lead. The third change is muttered perhaps a little more reluctantly. "The Point of Sale".


Roll Up your Sleeves!
The truth is that the rise of large pharmacy chains is starting to hit the industry in big way. This is a fast-moving shift of control away from the pharmaceutical wholesalers, who have been the traditional torch bearers. It does not just change the dynamics of the industry today; it transforms the future dynamics of the pharmaceutical landscape.

Pharmacy chains are gradually moving their purchasing ratio in favor of buying directly from pharmaceutical manufacturers as opposed to wholesalers. The manufacturers involved face opposition from wholesalers, but they can still see the potential benefits, and act on them.

Farmacias del Ahorro, one of Mexico's largest pharmacy chains, is starting to take warehousing and distribution into its own hands. It recently opened a large warehouse just outside of Mexico City and is planning to open two more in the coming years.

"The most recently opened warehouse will account for 70% of the units that we buy directly; today we have a ratio of roughly 60/40 favoring direct purchasing from the pharmaceutical companies," says Gabriel Zavala, the company's commercial director.

"The distributors will always be necessary in the future. But at the same time, we will be prepared for ongoing changes in the market with the infrastructure to support more laboratories if they wish to sell directly."


Gabriel Zavala, Commercial General Director, Farmacias del Ahorro
With more pharmaceutical companies selling directly to pharmacy chains and chain supermarkets, the niche of 3rd party pharmaceutical logistics has opened a little more. For companies that specialize in this area, the need to offer differentiated services is a key factor in the ever more competitive environment.

Mario Sicilia, CEO of 3rd party logistics company BOMI Mexico tells us, "Our main competitive advantages are specialization and personalized relationships. The flexibility in the procedures that we offer is another relevant competitive advantage. We can adjust our accounts receivable, warehousing and shipping accordingly."

On the other side of the coin, opportunities are not just opening up in the private market, but in the public sector too. The number of Mexicans who benefit from public healthcare has doubled in the last decade causing a number of infrastructural problems within the system.


Ricardo Ganem, VP and General Manager, Perrigo Mexico
Jorge Escalona, general director of MAYPO, a pharmaceutical wholesaler that works exclusively with large government institutions explains, "In the past, all [government] institutions had their own infrastructure and were operating their own warehouses. Distributors merely had to deliver the products to the government warehouse and then the health institution would be in charge of delivering the products to the hospitals."

But since the growth of Seguro Popular, which has no physical infrastructure, the situation has changed. Government distributors have to provide a much more comprehensive service.


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