Country Report: Mexico - Pharmaceutical Executive


Country Report: Mexico
Shaking Up the System

Pharmaceutical Executive

Here to Stay

"We are clearly flying on the radar; Mexico is a priority market... and Pierre Fabre Medicament is here in Mexico to stay", remarks Karel Fucikovsky. Despite the range of necessary strategy shifts deployed by many multinationals to stay present on the undulating Mexican landscape, it seems there is so much potential to be realized that it is duly worth the effort. In some cases, it has catapulted Mexico onto the priority list for investment and resource assignment—in some cases placing Mexico as their Latin American headquarters.

Norbert Oppitz, senior vice president for Nycomed, a Takeda Company, in Latin America points out, "Today, Brazil is the most important economy, but in a regional context Mexico will be the most important player for decades to come... Mexico today is much more consolidated than many of the other so called truly emerging markets, it is a more industrialized and modern society than many people realize. Things are moving here, and one of the most dangerous things we can do as a multinational company is not to understand it."


On the inside, looking out

If multinational companies are looking in, then you could say that Mexican companies have been looking out to send their products elsewhere. IMS Health figures show that local companies in Mexico have introduced more products to the market than multinationals in the last 10 years. In 2011 for example, national companies launched a total of 657 SKUs (stock-keeping units, or unique products) in Mexico, compared to 492 SKUs from multinational companies. In the last two years national companies have either maintained or increased promotional investment in order to gain market share. They are also finding it more tempting to look across the border and export their products—both North and South of Mexico—to increase revenue, despite the challenges faced along the way.

This could possibly be explained by turning back the clock for a second. Guy Jean Savoir, general director of national company Carnot Laboratories recalls: "In 2008 you could find a market that was extremely healthy and a feeling that both price and unit increases would continue to be prevalent; everything was easy."

In 2008, things started to change. Savoir points out that Mexico has three main sources of capital: oil, tourism, and remittance (this is the income from Mexicans working in the United States). When the global economic crisis hit the world that year, all three income sources dropped significantly. Remittance dropped, the oil price dropped after being high for so long, and tourism was sent packing after both swine flu and the spiraling war on drugs. Acquisition power reduced dramatically, at the same time COFEPRIS implemented bioequivalence regulations that suddenly enabled the public to access cheap, trusted generics. Generics didn't stop growing, foreign competition also joined the crowd, and prices dropped even more. For the majority of companies, faces dropped too.

Some companies had foreseen these market changes and preferred to look outwards and export sooner, rather than later.

Guillermo Funes Rodriguez, CEO of innovative Mexican company Silanes comments, "Due to the fact that our major market was Mexico, we had to make a change ourselves. The only way was to diversify our products and go into Latin America, the United States and Europe to build up strategic alliances. We are now growing in those markets and we are currently developing new products in our European research and development facilities." Silanes as a company puts 10% of sales back into research and development. Although Mexico is still their principal market, they have also been manufacturing their own products in Brazil after forming a strategic alliance with Ache Labs, the Brazilian pharmaceutical company.

Guy Jean Savoir, General Director, Carnot
Silanes is the first and only Mexican company to have an innovative drug developed on home turf and approved by the FDA. The company is exporting their snake, scorpion and spider bite anti-venom to the United States and soon to parts of Africa. He notes, "if we had decided to go into the North American market with just generics, as other companies have done, we would have failed because Asian countries are selling their generics to the Americans much more cheaply than Mexicans ever could. So we had to conquer the North American market with quality and innovation in the field of biotechnology."

For most Mexican pharmaceutical companies, an FDA approval means open doors, but for Silanes the process took eleven years.

Socorro España Lomeli, executive director of ANAFAM the association of pharmaceutical manufacturers, believes, "When a company wants to export, they are often blocked by bureaucratic red tape and regulations which makes it impossible. It is mainly the administrative processes that pose a problem, not the quality. This has been a big hurdle for Mexico in both entering the United States market, and some Latin American markets."

Silanes has completed its learning curve, which leads Funes to conclude: "By the end of 2013 we hope to have two more products approved by the FDA, and we will then submit a further three. Now we know the mechanisms and the processes behind approvals, we can be more efficient and faster in complying with them. The long term outlook of Silanes is fantastic: we have patented products in biotechnology, with a plant that is FDA and soon to be EMA approved. We are ready to compete globally"

Arístides Torres, CEO, Vanquish
Many other national companies are also exporting home-grown innovation. Guy Jean Savoir of Carnot Laboratories realized that their differentiated and innovative pipeline was essential to export success.

"Today Mexico is a tougher market; you have to be aware of the added benefits of a differentiated product... When you export generics the only driving factor is price, which means you have to be very price conscious if you want to succeed and be competitive. This is not our business model—we have 130 people in Research and Development and we have decided that this is the side of the fence for us to be on. In fact, our differentiated pipeline was exactly what enabled us to successfully export and launch in different markets in the first place." says Savoir.

Luis Calderón, Managing Director, Stendhal
His advice: "Don't overlook Mexican innovation. Mexico is a place where multinational companies might want to come and find out what we are doing, and to take our products into markets where we are not capable of going by ourselves."

Vanquish is another local company not fazed in the least by this "bureaucratic red tape". The company started manufacturing in Brazil through commercial partners in Latin America, and has already started exporting their nutritional supplements to the United States.

"I think it is important to be in the main markets in America...if you want to be global, you need to think big. If we can be successful in the two biggest markets in Latin America, we will be on the radar for other companies who want to have a commercial partner with the muscle to make their products and brands successful." says Arístides Torres, Vanquish CEO.


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