Spotlight: The emerging but complex Mexican market

February 1, 2006
Faiz Kermani

Pharmaceutical Technology Europe

Pharmaceutical Technology Europe, Pharmaceutical Technology Europe-02-01-2006, Volume 18, Issue 2

Latin America has become a promising region for the pharmaceutical industry in terms of both R&D and sales. Nowhere has this been more apparent than in Mexico, which has become a top priority market for many of the major multinational pharmaceutical companies. Furthermore, the Mexican government is increasing its investment in healthcare resources and there is a strong, growing demand from the population for access to newer and better medical treatments.

Latin America has become a promising region for the pharmaceutical industry in terms of both R&D and sales. Nowhere has this been more apparent than in Mexico, which has become a top priority market for many of the major multinational pharmaceutical companies. Furthermore, the Mexican government is increasing its investment in healthcare resources and there is a strong, growing demand from the population for access to newer and better medical treatments.

A strong market

Mexico's potential was highlighted during 1999, when the Latin American region was affected by recession. Mexico's oil-based economy and close links to the US helped it survive this period of economic uncertainty, while other countries in the region suffered. At present, it is the ninth largest economy in the world and the leading trading nation in Latin America.1 Having established bilateral accords with 32 countries, Mexico has become ideally placed for international trade and commerce.1 In particular, Mexico's participation in the North American Free Trade Agreement (NAFTA) with the US and Canada puts it in a very powerful trade position with respect to its Latin American neighbours.

Key points

In pharmaceutical terms, Brazil had always been the major Latin American market, but by 2003, continuing economic problems led to it being surpassed by Mexico in terms of sales. In 2004, IMS Health estimated that Mexico accounted for 32.6% of the regional pharmaceutical market, with Brazil accounting for just over 31%.2

Mexico's growing importance as a pharmaceutical market is not surprising given its large population. As their financial situation improves, many in the population are seeking access to new and better medicines. In addition, the government is attempting to reform its healthcare system to provide poorer sections of its society with affordable treatments.3,4 Many Latin American countries, including Mexico, have taken an interest in how the British National Health Service is organized when embarking on such reforms.5

A greater focus on healthcare

Similar to many other Latin American countries, Mexico has been re-examining its approach to healthcare to expand coverage for its citizens.6–8 By law all workers in the mainstream economy must be registered with one of the social security institutions.8 These include the Instituto Mexicano de Seguro Social (IMSS), which provides healthcare to about 34 million Mexicans, mostly in the private sector, and the Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado (ISSSTE), which provides healthcare to about 9 million Mexicans, mostly federal government employees.8 The national oil company, PEMEX, and the military run their own health insurance schemes. The system for the uninsured population includes the Ministry of Health's (SSA) services, which operate throughout the country, and the IMSS Solidarity Program, which covers the population in certain rural areas.6–8

Mexico's public healthcare system provides services to about two-thirds of the population, but the government recognizes that the current service level is far from ideal.6–8 To improve coverage for those that require it most, the government is attempting to persuade employed citizens to use their private medical insurance more effectively. Although the Federal government sets the overall standards and has the major say in regulating the healthcare service, since 1996 there has been a considerable amount of decentralization, with individual states taking on more responsibilities.

Figure 1 Life expectancy in Mexico.

One of the major problems in reforming Mexican healthcare is that despite certain advances in the past, there remain areas where little improvement has been made. In addition, the country has been keen to improve the quality of the healthcare being delivered and make such information available to the public via the established media and the internet.7 The government has encouraged the establishment of codes of practice for health professionals, the use of clinical guidelines in public institutions, and the certification of professionals and healthcare institutions.5

Nevertheless, healthcare in Mexico is improving and the government hopes to make further advances. For example, between 1940 and 2000, life expectancy rose by 30 years for both men (from 40 to just over 70 years) and women (from 42.6 to just over 76 years) (Figure 1).4 Furthermore, between 1970 and 2000 infant mortality more than halved to (from 72 per 1000 births to 26).5

The country has been making ambitious reforms through its National HealthCare Programme (El Programa Nacional de Salud). Through this programme 2001 to 2006, the government hopes to define the type of national healthcare system the country needs to have for the future.7 The aim is to establish a system that will guarantee all citizens free healthcare by 2025, independent of their ability to pay for it. As of 2002, government projects had extended healthcare coverage to over 8 million low-income citizens.5

As well as constructing new hospitals, and improving existing ones, government projects are also focusing on the procurement of pharmaceuticals and other medical supplies.4 At present, although the public health system provides services to a majority of the population, it accounts for somewhere between a tenth to a fifth of the total value of the market for pharmaceuticals (Figure 2). If healthcare reforms are successful, this figure should rise.

Figure 2 Public share of pharmaceutical expenditure (2002 estimate).

The pharmaceutical market

There is a heavy demand for medical therapies in Mexico. A survey found that Mexican society had become the largest consumers of pharmaceuticals in Latin America and the ninth largest consumers worldwide.9 Not surprisingly, the Mexican pharmaceutical market is now the major regional market, but despite its size and potential it has several characteristics that set it apart from other global markets. For example, although in principle there should only be markets for branded and generic products in Mexico, the market is actually more complex, with there being up to five main types of product (Table 1).

There are about 7000 different drugs in 19000 different presentations in Mexico.10 In 2002, $6.83 billion worth of pharmaceutical products were sold through Mexican pharmacies.3 The major drug classes are cardiovascular, respiratory, gastrointestinal and analgesics.3

The private health sector in Mexico accounts for at least 80% of the value of the pharmaceutical market, but in terms of volume it is the public sector that dispenses more medicines to the population.3 The generics component of the private sector is expected to grow as the government attempts to bring down expenditure on healthcare and as consumers seek out cheaper treatments.

Table 1 Types of pharmaceutical products in Mexico. 3

Despite high demand, there has been a problem with the distribution of pharmaceuticals in Mexico and the government is currently trying to address this problem so that pharmacies around the country have adequate supplies.11 In March 2004, many pharmacies across the country were described as having only between 80–90% of needed supplies. An inefficient and poorly managed centralized distribution strategy has been blamed for this. The government believes it has now identified the factors that have been limiting supplies to the estimated 20000 independent pharmacies in Mexico and will seek their support in establishing a new distribution system.11

The issue of generics

Although the government wishes to improve public access to medicines, it is keenly aware of the cost implications in. One option for cost containment is to promote the usage of generics, but this is not straightforward because the generics market is split between formal generic products and other products that utilize the same active ingredients but do not undergo a similar testing level. The mainstream pharmaceutical industry has lobbied the government to prevent 'copycat' producers operating in the national market.

Generic usage has been increasing steadily since 1998, when a law was introduced that allowed companies to introduce products with same ingredients as branded drugs and sell them at a lower price. The pharmaceutical industry in Mexico was previously not in favour of generics because many of the products being sold did not have the same strength and bioavailability profiles as branded drugs. For this reason they have lobbied to have drugs that do not fall into the categories of branded product or generic product removed from the market. Despite the lobbying there are a number of drugs on the market that feature ingredient and dosage variations to branded products. It has been suggested that the future of the Mexican generics market will depend on doctors and their desire to prescribe them.

A particular feature of the Mexican pharmaceutical market is the existence of a class of generic-like drugs known as similares.3 Although these products have the same active ingredients as original products they do not go through the same bioavailability procedure as do formal generics. Unfortunately, Mexican law contains ambiguous terminology and this puts similares in the position of being neither legal nor illegal,3 much to the annoyance of other pharmaceutical manufacturers. Companies that produce similares are able to sell their products at much cheaper prices than their mainstream competitors. Major companies would like to see the manufacturers of similares banned from the market, but weak legislation has enabled them to continue their activities. As yet it is unclear whether the government will tighten the regulations concerning generics.

Outlook

The Mexican pharmaceutical market is poised to become a major global market as well as consolidating its regional leadership in Latin America. There is a continuing demand for better healthcare from the rising population and as coverage is extended through government reforms, the public will seek access to effective newer medicines. However, cost containment issues are growing in prominence throughout Latin America and companies will have to demonstrate the benefits of their products if they wish to justify their prices to the government and society.

Mexico may be considered an emerging market that exhibits considerable growth potential, but it will not be straightforward for the pharmaceutical industry to succeed here. The nature of the Mexican market is complex and much will depend on the pace of government healthcare reforms and revisions of intellectual property legislation. Companies will also need to be aware of the changes occurring in Mexican society if they are to develop products that will be well received by consumers.

Faiz Kermani is European marketing manager, business development, at Chiltern International, UK.

References

1. www.fdimagazine.com

2. www.ims-global.com/insight/news_story/0010/news_story_001011.htm

3. http://strategis.gc.ca/epic/internet/inimr-ri.nsf/en/gr111434e.html

4. www.oecdobserver.org/news/fullstory.php/aid/555/hat_OECD_ministers_are_doing_for_healthcare__.html

5. www.medilink.co.uk/pdf/lanewsletter1201.pdf

6. www.trade.uktradeinvest.gov.uk/healthcare/mexico/opportunities/opportunities.shtml

7. www.salud.gob.mx

8. Anon (2002). Profile of the health services system in Mexico. Program On Organization And Management Of Health Systems And Services Division Of Health Systems And Services Development Pan American Health Organization.

9. www.boletinfarmacos.org

10. www.kpmg.com.mx/publicaciones

11. www.boletinfarmacos.org