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Rachel Howard is a director at Research Partnership.
As we near the end of the first year of Mexican president Andrés Manuel López Obrador's six-year term, Rachel Howard caught up with local expert Dr Xavier Tello to make sense of the latest changes in the healthcare system and consider what they mean for pharma manufacturers wishing to enter the Mexican market.
Andrés Manuel López Obrador (commonly referred to by his initials AMLO) was elected President of Mexico in a landslide victory of December 2018. As we near the end of the first year of his six-year term, Dr. Xavier Tello makes sense of the latest changes in the healthcare system and what they mean for pharmaceutical manufacturers wishing to enter the Mexican market?
“It has been a wild ride under AMLO,” says local expert Dr. Xavier Tello, CEO of Strategic Consulting. One of the radical changes proposed by AMLO was to create a unified, nationalized health service that is fully run by the government and free to all users, akin to the UK NHS model.
The Mexican system has long been criticized for its complexity, with multiple actors and sources of financing across the multiple institutions responsible for providing healthcare. Seguro Popular, the health administration system set up in 2003 to provide access to healthcare for the uninsured population, came under particular fire for failing to ensure that all uninsured people have adequate access to healthcare services. When running for office, AMLO accused the system of being deeply corrupted.
AMLO’s original plan, therefore, was to dismantle Seguro Popular and integrate it with the Federal social security institutions of IMSS, ISSSTE and PEMEX into a single national health system. However, this proved to be far less straightforward to implement than expected, with challenges from unions and guilds preventing these institutions from being easily disbanded.
By way of compromise, AMLO’s government founded INSABI, the Institute of Health for Welfare, to replace Seguro Popular and absorb the State-run systems, which had a poor track record of misuse of health resources.
While INSABI covers over 60 million citizens, the finances to run this system are severely lacking. AMLO implied the integration of Seguro Popular and the state-run systems would double the healthcare budget. But the budget is actually no greater than the sum of the original budgets of the individual institutions that have been subsumed within it. The system is under huge pressure to contain costs, and the challenge of affordability is far from resolved.
Given the urgency of constraining healthcare expenditure, the government has empowered the “Oficialía Mayor,” a special office of the Secretaría de Hacienda, the Ministry of Finance, to take responsibility for the procurement of pharmaceuticals for all of the state institutions.
Historically, once a drug was approved by COFEPRIS, the national regulatory body, and registered in Mexico, the next step was to apply for inclusion on the Cuadro Básico Interinstitucional, a formulary that allowed each institution to purchase the drug. Each institution had their own local Cuadro Básico formulary, and had some discretion about which drugs from the Cuadro Básico Interinstitucional to include. They would then purchase the drugs via their own tenders, and more recently a consolidated tender organized by IMSS (the biggest customer) with the Secretaría de Hacienda responsible only for the funding.
Under the new plan, INSABI has considerable influence on what is included on the Cuadro Básico Interinstitucional, and the institutions’ local formularies are disappearing, making it challenging for manufacturers to get included as they no longer have opportunity to communicate directly with each institution. Once included on the Cuadro Básico Interinstitucional, the Secretaría de Hacienda has taken over the tendering, consolidated into a single tender for the supply of all institutions. Tender conditions are aggressive and unfavorable to manufacturers, often allowing limited time to prepare the paperwork and deliver supply, with hefty penalties for manufacturers who fail to meet their stringent conditions.
The logistical challenge for manufacturers has been exacerbated by the government’s move to cut out wholesalers, in an attempt to drive down prices (and alleged corruption) by removing one layer of mark up. The country’s four largest wholesalers have been banned from operating in government deals by presidential memo, forcing manufacturers to negotiate directly with payers. However, the intention of this has backfired, as many manufacturers lack the capabilities to manage deliveries themselves, and with the unfavourable tender conditions, some have declined to participate and exited the market. In the latest tender, 62% of the purchases were declared “void”, while the Secretaría de Hacienda focused on publicising the savings within the 38% that were awarded.
In a controversial move, the government has recently bypassed COFEPRIS, and international trade agreements, to purchase unregistered drugs from overseas. COFEPRIS itself is in a state of decline from a once state-of-the-art regulatory agency to a closed body facing increasing questions over the transparency of its decisions. But this latest move to undermine its authority over the Mexican drug supply poses a challenge to its very existence, with some speculating the government is planning to disband the agency.
Altogether, what do these changes mean for the pathway to achieve market access in Mexico? Dr. Tello is unsure: with such major changes still in progress, no one knows what will happen a few months from now. Elections are never won or lost on healthcare, and improving the functioning of the system does not seem to be a government priority, leaving potential for the entire system to be derailed.
With that in mind, what should pharmaceutical companies wishing to enter the Mexican market consider, beyond keeping up to date with the latest developments? “One aspect is political,” comments Dr. Tello. “They will need to do their homework in terms of getting close to the decision makers.” Of course, putting together a solid clinical story in the dossier will always be essential, but he recommends manufacturers also consider Mexico in their clinical development plan where possible as this may help to keep them on side, given the tendency to favor national interests.
Rachel Howard is a director at Research Partnership.