enero 25

Mexico’s Generics Revolution: Market Drivers and Challenges


The Mexican public health sector is currently facing a significant amount of challenges which require new models to improve the ability to treat patients. First of all the rapid rise of obesity is one of the major causes of diabetes and cardiovascular diseases. With 32.8% the Mexican population now considered obese, the treatment of these diseases is taking a huge toll on the healthcare system. Another problem that Mexico is facing is an increasingly aging population. According to CONAPO, 10.68% of the Mexican population was over 60 years of age in 2010 and this number is expected to rise to 22% by 2050. This segment of the population will need specialized medicine at lower costs. Moreover, the lack of preventative medicine in Mexico is problematic, since patients only seek care for disease at latter stages that require more costly and complicated procedures than either prevention or early intervention.

Stepping in to to fill many of the healthcare gaps is the generics sector. The generics industry in Mexico has evolved remarkably in the last decade. Fifteen years ago, local manufacturers were distrusted by the general public and the medical community due to quality issues and safety concerns. Big pharma companies were acutely aware that a huge wave of patent expirations were approaching, but at the time local manufacturers did not have the necessary resources and capabilities to be competitive. Significant changes have occurred in the last five years. According surveys conducted by Diálogo Ejecutivo, in 2014 up to 80% of Mexicans had a positive view of generics and up to 85% of the population had used them at least once. Rafael Gual, General Director of CANIFARMA, explains that the obvious strength of generics is that their safety and efficacy is now trusted and they can be cheaply provided to a large number of patients.

Among the many drivers for the generics industry in Mexico, the regulatory improvement has played an important role. Today Mexico’s regulatory requirements for approving a generic medicine are strict and in alignment with global guidelines. All generic drugs that are currently available in the market have bioequivalent studies that ensure their safety and quality, which was not the case five years ago. In this way, low quality and counterfeit products have been pushed out of the market. This has ultimately made the industry a more formal one, capable of expanding to other countries and attract foreign investments.

Generics have quickly overtaken the market with important economic benefits. According to Funsalud, 84.1% of the medicines sold in Mexico in 2012 were generics, while 14.4% were branded medicines with expired patents, and only 1.5% were patented medicines. Mikel Arriola, commissioner of COFEPRIS, stated that in the last four years the number of generic medicines grew 15,000%, from 153 in 2010 to 23,500 in 2014. For Mexicans, this means a reduction in the annual medicine expenditure from MX$2,100 to MX$750 (US$137 to US$49) since generics can be up to 90% less expensive than their reference products. Moreover, Cristobal Thompson, Executive Director of AMIIF states that generics represented annual savings of MXN$3 billion (US$196 million) in 2014 to the health sector which are expected to increase to MXN$5 billion (US$327 million) in 2015. These savings are extremely beneficial as they permit possible investments into innovative medications and an increase in the amount of services provided for patients. Between 2010 and 2014 IMSS increased its coverage to 1.1 million more patients. This is very attractive to generic manufacturers since they stand to make huge profits from the Mexican health industry, which is valued at almost US$10.5 billion.

Drug distribution has also faced relevant transformations in recent years. The business of large distributors is decreasing and local pharmacies are closing due to the rapid expansion of big pharmacy chains in Mexico. Interestingly, big pharma companies have the highest profits in the supply chain for innovative drugs, while pharmacies and distributors are the biggest winners in the generic drugs’ value chain. This translates into more sales of generics at a cost for innovative companies. In this regard, Eli Lilly faced a loss of 58% of its profits due to patent expiration. Forbes estimates that between 2009 and 2012 about US$100 billion were lost due to patent expiration worldwide. Innovative companies have therefore implemented diverse strategies to face this megatrend, ranging from a complete focus on innovation to acquiring local generics manufacturers.

Not all is this good news though. The public health sector is also facing large budget cuts brought about by the steep drop in oil prices, which has brought about a large deficit. Recently the budget for the public health sector was been reduced by MX$10 billion (US$653 million), which represents a risk for prevention and health promotion programs. In addition, public institutions need to find the balance between the number of generics and innovative drugs that are included on the National Formulary and that are available for prescriptions. Pharmacoeconomic studies are key to evaluate the economic feasibility of all medicines prior to their provision by public institutions, so this process should be further supported in order to ensure the best allocation of resources.

The future for generics in Mexico seems promising. Adrián Gabriel Ruíz Parra, General Manager for Hetlabs Mexico, claims that quality is increasing and there is a certainty among consumers and physicians that generics are as effective as innovators, which opens the opportunity for competing with big pharma. But not everything is positive. Hector Valle, former General Director of IMS Health, paints a more complicated future for generics taking into account that the general economy is decelerating and GDP has not grown as expected. Since the pharmaceutical market is driven by out-of-pocket spending, and as the middle class is impacted by the tax reform, reduction of disposable income affects the market. This has had an impact on innovative products as well as generics, which are now seeing a growth deceleration. Moreover, the entrance of Indian companies to the Mexican market also represents a threat for local companies that have seen nothing but growth. Finally, local companies must design new strategies for adapting to the upcoming internal and external challenges in order to keep on providing patients with high quality alternatives at lower costs.


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