US President Donald Trump has labeled NAFTA the “single worst trade deal” and although many disagree on the strength of that statement, many agree an optimization of the deal is needed. The Trump administration is focusing on shrinking the US’ trade deficit with Canada and Mexico and renegotiations may mean a shake-up for a number of industries, including healthcare. There are several areas that could be impacted, most notably pharmaceuticals and medical devices.
Mexico is a medical device manufacturing hub, especially the northern state of Baja California, which is home to 79 medical device companies. The proximity to the US border, NAFTA and qualified talent makes it an ideal location for manufacturing plants. The US imports over US$40 billion of medical devices every year, according to ProMéxico, of which Mexico is a main supplier. “The origin of components is one of the main areas that will be impacted,” says Ignacio García-Téllez, Director of Health of KPMG in Mexico. “We can take the example of the medical devices cluster in Tijuana. They import inputs, manufacture a product, send it as a semi-finished product to the US, where it is packaged, or undergoes a final process and then is sold back to Mexico as a final product.”
In July 2017, the US published its goals for renegotiations. For intellectual property, it seeks to establish terms similar to those negotiated for the TPP, which would impact the pharmaceutical industry. It would require countries to grant patents for anything classed as “new, involves an inventive step, and is capable of industrial application” and to adjust patent terms should there be a five-year delay in the filing process.
In Mexico, some companies have complained of such delays with regulatory authorities, despite their recent efforts to speed up and smooth out the process. The US is seeking to set data exclusivity at a minimum of 10 years for agricultural chemicals, eight for biotechnologicals, five for new chemical entities and three for new indications for existing pharmaceuticals, according to patentdocs.org. In the US and in Canada, biologics and orphan drugs are currently granted 12 years of protection. “In Mexico, there is only an incipient and weak protection for five years, granted through an internal COFEPRIS paper that would have difficulty standing up in a court of law. Data package exclusivity terms remain at five years for biologics and orphan drugs. This is not satisfactory,” says Alejandro Luna, Partner and Life Sciences Co-Chair at Olivares.
Although Trump would have companies move back to the US, many see this as an impossibility, as companies have invested a great deal in building plants. “The companies here have been present for many years and they will not go back. It the treaty collapses, we will not see major issues, unless a tax is imposed on imported products, but we do not think that will happen. Overall, NAFTA has been beneficial for all three countries and I am sure renegotiation will center on optimization and on areas that did not exist when it began, such as e-commerce,” says Cristóbal Thompson, Executive Director of the Mexican Association of Pharmaceutical Research Industries (AMIIF).