Mexico: Climbing To The Top Of The Pyramid (Sep 2008)
Release Date: 2008-09-17 00:00:00
3 years after our first Mexico report, we revisit Mexico's pharmaceutical industry. The Mexican government has been putting in place innovative regulatory changes that aim to enhance the quality of both its pharmaceutical industry and its healthcare system. The best is still to come.
Chapter 1
Mexico: Climbing To The Top Of The Pyramid
“In Sanofi-Aventis we do not talk about BRIC, but about BRICMEX. This country is key in terms of sales potential, industrial investments and clinical research” explains Nicolas Cartier, General Manager of Sanofi-Aventis Mexico, the leading company in this market in terms of sales. With the developing world being the main driver for growth in drug sales, pharmaceutical companies are focusing much of their attention on large emerging markets and Mexico, one of the largest pharmaceutical markets in the world, is at the top of the agenda for most of the industry players.
Already being ranked as one of the largest markets in the world (between the 10th and the 13th position depending on the measurement method) Mexico’s true size might actually be underestimated. Audit firms “are not able to correctly measure the government market which is huge and is one of the main growth drivers” explains Carlos Abelleyra, President of CANIFARMA, the largest pharmaceutical association in Mexico, and Managing Director for Mexico & Central America of Wyeth.
Mexico’s attractiveness relies not only in its current size, but also in its significant potential for growth. With healthcare spending representing 6.6% of GDP in 2007, Mexico still has a long way to catch up, not only with fellow OECD countries (where the average is 8.9%), but also with most other large Latin American countries (7.6% in Colombia and Brazil, and 8.9% in Argentina). Furthermore, the continuous growth of the Mexican population’s purchasing power, together with the ongoing changes in its demographic pyramid, paint a promising picture for the almost 300 pharmaceutical companies present in the country. In addition, the industry is experiencing a boost in its exports thanks to Mexico’s robust network of free-trade agreements.
Probably the most promising aspect of all is that the Mexican government seems to have finally realized the importance and potential of the country’s pharmaceutical industry. Since the year 2000, the Mexican government has been putting in place innovative regulatory changes that aim to enhance the quality of both its pharmaceutical industry and its healthcare system. If these policies achieve their intended results, expect the global pharmaceutical industry to keep its eye on this market for many years to come, as clearly in Mexico, the best is still to come.
Mind the waves
According to Abelleyra, for many years the Mexican pharmaceutical industry could have been compared to a very calm lake. Multi-national companies (MNCs) were fully devoted to the private sector, while local players fought between themselves for a share in the government market. “Nothing really happened. Nobody cared about IP protection or patents. Today, everything has changed and the lake is now full of large waves!”
The most significant of the recent transformational changes is probably the government’s plan to universalize healthcare. Currently, only around 50% of Mexicans have access to a healthcare system which is directly linked to formal employment. Nevertheless, since 2004 the government has been expanding its flagship program called Seguro Popular (People’s Insurance), which offers free basic healthcare to the uninsured population. Today, the Seguro Popular counts with more than 20 million affiliates and according to Secretary José Ángel Córdova Villalobos it should cover all uninsured Mexicans by 2012.
The Mexican government has also been paying close attention to how it spends every peso, through a commission in charge of centralizing all institutional purchases of innovative drugs. Although some companies initially perceived it as a move towards price regulation, there is a now a consensus that the government’s real intention is to maximize the efficiency of its spending. As Abelleyra explains, “today, the government agencies which are part of the healthcare sector pay different prices for the same medicines. Just as I want to get the best possible price from my suppliers, so does the government”.
Cost efficiency will also be applied in the purchase of generics. The Mexican Secretariat of Health is currently considering using a system of reverse auction for its purchases. Many local players that have long subsisted on sales to the government - and an increasing number of international companies that have started to tap into this lucrative market - consider this a negative step towards a system that would only take into consideration price, leaving aside other key variables such as quality.
Nevertheless, Secretary Córdova Villalobos considers this should not be an issue as “…by 2010, quality will not be variable in the Mexican market anymore”. The Secretary is referring to what will certainly be a historic turning point for Mexico’s pharmaceutical industry. Today, the Mexican market is composed of innovative products, generics (both branded and interchangeable generics) and similares, which are drugs that have not demonstrated bioequivalence. From 2010, all drugs will have to be re-registered every five years. As part of the new registry process, drugs will have to meet bioequivalence standards in order to be allowed for commercialization. This means that by February 25TH 2010, all similares will have to either become generics or leave the market.
The Mexican regulatory agency, COFEPRIS, expects about 10,000 drugs registers to be renewed before this date, but many companies are concerned this agency will not be able to meet the deadline. However, the recently appointed COFEPRIS Federal Commissioner, Miguel Angel Toscano, considers that the agency is up to the task and assures that the date of February 2010 is plainly “non-negotiable”.
Most players in the industry agree that this will be a historic benchmark that will have the Mexican consumer as its main beneficiary. Nevertheless, there is some debate on the form in which the change is being implemented, particularly regarding Toscano’s lack of flexibility. The root of the issue is that, while the regulatory change was approved in 2005, only last February were industry players informed on how exactly to proceed with the renewal. According to Roberto Rosas Puente, General Manager of Streger “this means that companies now have less than 15 months to finance a cost that should have been absorbed in a period of 60 months. On top of this, today we face a scenario in which the 15 companies that conduct bioequivalence tests in Mexico face a demand for 10,000 products which has resulted in the prices for these tests skyrocketing”. Rosas Puente argues that given the financial burden of these tests a large number of companies manufacturing high quality low-cost products will have to sell, close their operations or choose a limited number of their products to continue in business. According to him, unless the deadline is extended, the main beneficiaries of this process will be the large pharmaceutical companies and the process will finally result in less competition in the market.
Dagoberto Cortés Cervantes, general director of Hormona and President of AMEGI, the association that groups the main manufacturers of interchangeable generics, does not necessarily see the reduction in the number of players as a negative thing in itself. “The market is undergoing a process of natural cleaning and the main beneficiary of this process is the consumer. Only those companies with quality products will be left in the market, making Mexico a more competitive country,” he claims.
This debate will certainly continue up to the Februrary 2010 deadline. What is not being contended anymore is that Mexico is today seriously pursuing an upgrade of its quality standards with the intention of taking a more important role in the pharmaceutical world. Certainly, the players that will benefit from these changes will be those better prepared to ride the new waves in the lake.
Biotechnology: The Waiting game
As in most other emerging countries, biotech companies working in Mexico have to overcome big challenges. One of the main reasons for this is that it usually takes longer time for these countries’ legislation to catch up with the latest trends and technologies. Alejandra Mendoza General Manager of Genzyme Mexico claims that regulation has been the main challenge that this leading biotech firm has had to face when launching operations in Mexico. “We were pioneers in the area of biotech in Mexico, so we had to approach the health authorities with a group of therapeutic solutions that did not fit in Mexico’s regulatory framework! It took us 3 years, from 2002 to 2005, to finally be allowed to bring the drugs into Mexico under the category of orphan drug, a category which did not previously exist here”.
Since then, Mendoza explains, there has not been one year in which the company has not introduced a new product into the Mexican market. “Different to other pharma companies, what really keeps us busy is keeping up with the launching of our new products” she claims proudly. For Mendoza, despite the many challenges, launching operations in Mexico was the right decision. “Genzyme is here to stay and to continue bringing the best therapies. We have a long-term commitment to the country and to our Mexican patients.”
The Mexican government is making efforts to adapt the regulatory framework to biotech products. In this sense the country’s Congress is currently discussing legislation on biosimilars. This draft legislation can be seen as a step in the right direction, but some are skeptical about how long it will take the authorities to act on it, as for the last few months the legislative agenda has been monopolised by a controversial energy reform.
According to Esther Lucero Zarate Villa, Regulatory Affairs & Safety Director for Amgen in Latin America, the main challenge biotech firms find in emerging markets such as Mexico, is the fact that, unlike developed markets, these countries have no reimbursement schemes. Thus, in Mexico, only a very small part of the population can afford this kind of treatments. “We will sell to the private market, but we will not succeed in these markets if we are not able to work closely with the government” she argues.
During the last years, Amgen has analyzed the potential of Asia Pacific, the Middle East and Latin America, evaluating the complexity of these regions from different points of view such as regulation and pricing, so as to put in place a tailor-made business plan for each market. “In the case of Latin America, at present we are focusing in the biggest countries, Brazil and Mexico, because together they make up 80% of sales in this region. These are countries with good regulatory frameworks; well defined markets; and governments that aim to promote companies with high levels of research in the country. Amgen conducts R&D activities in those countries. We have around 3,500 patients participating in clinical trials in Latin America”, says Zarate Villa.
Amgen has huge expectations for Latin America. “We have great hopes because Amgen has excellent products, a uniquely robust pipeline and is very well structured and organized. Now the challenge is to extend this corporate structure to these markets” Zarate Villa explains.
Thanks to their size and fast economic development rates, large emerging markets are resulting more and more attractive for biotechnology firms. Nevertheless, these companies will have to be highly innovative in their strategies to engage patients, doctors and governments; as their main strength, their strong pipelines, will not be enough on its own to guarantee them success.
A question of flexibility
As any other large emerging country, the Mexican market poses unique challenges and responds to a particular logic. Despite their very different strategies, most MNCs agree that any recipe for success here must have as its main ingredient a flexible organization that allows talented managers to maneuver according to each market’s idiosyncrasies.
Astra Zeneca Mexico went back to the fundamentals to jump in the sales ranking from the 18th to the 4th position. “We basically built our growth on the basis of increased loyalty from physicians towards our brands,” President Ricardo Alvarez-Tostado explains. He considers that given the increasing importance of E7 countries (Brazil, Russia, India, China, Mexico, Turkey and Indonesia) one of the biggest challenges for the industry in the coming years will be to reconcile the need for funding innovation with the access limitations of emerging markets. “We need to break the taboo that if we have differential pricing across the world it will have consequences on the developed markets. That is simply not true. There is not one wealthy individual who will criticize a company for giving the poor access to the same quality drugs they themselves have access to”.
Wyeth Mexico has also been out-growing the local market (26% vs 8% in 2007) and it was the first country office from a developing market to succeed in having a vaccine (Prevenar) included in a national program. As the company’s headquarters intended to maintain international prices, the Mexico office designed a donation program to make sure the vaccines could reach the poorest sectors of society.
Cartier from Sanofi-Aventis, the market leader, sums up the general feeling: “Basically, if you try to manage Mexico the way you manage the US or France you will forget about a large chunk of the market.”
CNS: breaking taboos and teaming up.
“Our product for Alzheimer is a blockbuster worldwide, with sales over US$ 1 billion. However, it is obviously not a product of great volume for Latin American countries” explains Nicolas Freudenberger, General Manager of Merz Mexico. The difficulties that pharmaceutical companies face in large emerging markets are also related to their therapeutic area of specialization. When it comes to Central Nervous System (CNS) pharmaceuticals, Mexico’s young population can prove challenging for companies working in this area. “In order to succeed we need to be flexible in choosing which products of our portfolio in Germany are more promising or which products we can get through strategic alliances and licensing agreements that can be a perfect fit for our business in each market. For example, in Brazil we have products that are very successful in that country, but are not significantly important for our European operations” argues Freudenberger.
Furthermore, as Herman Santoni Ramos, Managing Director of Lundbeck Mexico explains, the social perception on CNS disorders can also prove to be a challenge. “Some conditions such as Schizophrenia or Obsessive Compulsive Disorder continue to be a taboo. However, we have come a long way and people today are more comfortable talking about Depression or Anxiety. We also see a significant amount of general practitioners, treating the less complex cases of depressed patients themselves. Since Depression is such a common disease we need to continue to create awareness of this illness and make sure that patients have access to the right treatment and medication”.
Lundbeck focuses large parts of its efforts in raising awareness on these diseases across the markets in which it is present, through organizing events with psychiatric hospitals, universities and specialists. “We also offer support to patients and family members. For example, here in Mexico we have implemented workshops for family members and caregivers of patients suffering from Alzheimer. It is very fulfilling to know that you can make a difference in the quality of life of those who suffer of these diseases. Every time that I receive a letter from a patient or family member sharing how their lives have changed for the better; I know that I am in the right industry” claims Santoni Ramos.
Both Merz and Lundbeck have launched operations in Mexico in the last decade and in a short period of time have rapidly positioned themselves as leaders in the CNS field. Furthermore, as Santoni Ramos explains, the CNS segment is growing in a healthy manner in this market as more and more, the physicians as well as the general population are getting familiarized with these diseases. In this sense he sees a very positive horizon for the company in the country. Freudenberger agrees, and he has strong reasons to do so as in the last 5 years Merz has shown average annual growth of between 25-30% in this market.
Looking into the future, both firms consider that in order to sustain their success they need to continue finding new compounds that meet the patients’ needs, not only through their own R&D structures, but also by accurately identifying opportunities for partnering with other companies which might not have the core capability in CNS and are looking for a partner to maximize the potential of their products in Mexico. At present, both companies have local agreements for their Mexican operations, as well as global agreements, such as the one Lundbeck and Merz actually maintain at the global level.
Big Ambitions: Mexico’s generic players want to change history.
These days it is not difficult to come up with the names of several Indian, Chinese or Brazilian pharmaceutical companies that have leveraged on their success in their local markets to become global players. However, the same can not be said about Mexican players.
One of the reasons for this is that Mexican generic companies have traditionally invested scarcely in R&D. The roots of this phenomenon can be found in Mexico’s unstable track record in terms of patent legislation. In 1976 the law on Invenciones y Marcas identified three areas as strategic for the country’s development: national security, food and healthcare. According to this legislation, patents could not be obtained in any of these areas. Thus, drugs and Active Pharmaceutical Ingredients (API) could not be patented. In 1987, with the objective of developing strong local industries, the government published a decree by which patents could be obtained in the three aforementioned areas, but only after January 1st 1997. “Many companies increased their expenditures in R&D, and at PROBIOMED we started investing significantly on biotechnology” explains Jaime Uribe, President of ANAFAM, the association that groups the largest generic players in Mexico, and general manager of PROBIOMED.
Nevertheless, in 1991, in order to join NAFTA, Mexico passed a new patent law which had a retroactive article, allowing for products that were of public knowledge to be patented. According to Uribe “this had a significantly negative impact on the development of the local industry. Just as an example, we were ready to launch our first biotech product, IFN alfa 2a to the market in 1995. We had developed this product under the protection of the 1987 decree that said that this product could not be patented. However, when we wanted to commercialize it, we found out that Roche had been given a patent! We were not able to launch the product in the Mexican market until the year 2000”.
A second explanation why we still do not see a Mexican Ranbaxy, Dr Reddy’s or EMS is the low penetration of generics in the Mexican market. According to Rodrigo Iturralde, General Manager of Randall Laboratories, the main reason for this is that the generic concept is still very young in the country. This concept was introduced less than a decade ago under the name of Interchangeable Generics to differentiate it from the other generics that existed at that time which had not passed bioequivalence tests.
Hector Carrillo, President of Apotex Mexico adds that in the late 1990s, just when it looked like a generic culture was starting to grow in Mexico, Farmacias Similares appeared generating great confusion in patients and even in doctors. “People started thinking that Farmacias Similares were selling generics, when they are actually a marketing concept. The idea behind this firm is to sell drugs at the lowest possible price. This is quite different from our idea of selling quality products at accessible prices. We cannot even think of selling low quality products without hurting the whole concept of generics” he argues.
Finally, Dagoberto Cortés Cervantes, general director of Hormona, argues that scarce governmental support to the generic culture contributed to low penetration rates in Mexico’s private market.
Although for a long time generic players have taken a secondary role in Mexico’s pharmaceutical market, there have been many positive signs of change in the last years: patent legislation has been pretty stable for more than a decade; the generics penetration in the private market has been growing at annual rates of over 30%; and the February 2010 regulatory change is expected to significantly increase the awareness of Mexico’s population about the benefits of generic products. As Cortés Cervantes explains, “...fortunately the country’s current Secretary of Health, is a firm believer in the role that generics should play in a country like Mexico in which 50% of the population has no health coverage and pays for drugs through out-of-pocket expenses”.
This positive scenario for generic manufacturers has given place to significant investments in R&D and manufacturing capabilities, together with ambitious plans of internationalization. Today, there is a strong feeling amongst Mexican generic players that they are facing a historic chance to become truly global players.
Chapter 2
Overcoming the R&D bottleneck
Not only has Mexico shown an unstable track record on patent legislation but the country also suffers from a serious lack of integration between academia and industry, believes Alfonso Álvarez Páramo, General Manager of PiSA. This situation is actually exacerbated by a research system biased towards publications instead of patents. Consequently, argues Álvarez Páramo, Mexican companies should focus their efforts “in developing other capabilities in which we have competitive advantages. We need to concentrate in creating the right alliances. We need to cooperate with the best in each area”. PiSA is currently establishing a research center in India together with Biocon which will be mostly dedicated to biosimilars. “Cooperating with such companies which are world-class in R&D allows us to overcome the research bottleneck that we find in Mexico”.
According to Guy-Jean Savoir, CEO of TechSphere Group, the way to master this challenge is to invest on developing in-house talent. For a long time TechSphere’s policy was to hire top scientists from Mexican higher education institutions and make it mandatory for them to get their masters degree while working. “You can put in place high-end R&D infrastructure in Mexico but you need to be willing to invest in the long-term. Today, we count with a group of 130 highly trained researchers working for us who are capable of making innovation happen, but this is the result of 20 years of hard work!”
Its strong R&D capabilities have allowed TechSphere to enjoy a unique position in Mexico as the company has products that are avant-garde even for developed markets. “On one hand, we have the capabilities to come up with between 3 and 5 super generics per year. These products do not have the potential to really be successful in first world markets, so they are mostly geared towards our operations in Mexico and the rest of the Latin America region. We leverage on these products to form a critical mass of capital so as to penetrate the first world markets. On the other hand, we have the potential to come up with what would be a better-than-super-generic per year for the next 6 years. These are truly innovative products, but they are not based on new chemical entities. We have already successfully registered one of these products in Mexico and are currently negotiating a license for Canada, US and Europe with an MNC” Savoir explains proudly. This will probably be the first investigational Mexican product to reach developed markets since the early 1960s, when Syntex (now Roche) was able to synthesize Norethindrone. Furthermore, Savoir expects the second product of this type to be registered in Mexico at the end of this year and start clinical trials in the US by early 2009.
Liomont, one of the largest pharmaceutical companies in Mexico, has bet on developing its R&D capabilities mostly in the area of clinical trials and bioavailability tests. “Although we know we are just giving the first steps for what we will be doing in the future, we are very proud of our broad spectrum of R&D activities” claims Alfredo Rimoch, General Manager of Liomont. For the past five years Liomont has maintained an alliance with a research based US company for which it has carried out several Phase I studies, and is currently in the process of teaming up with three other similar foreign research firms. “In the next years we expect to see much more of this kind of cooperation agreements as there is a large number of companies that need firms like Liomont to carry out their formulations, clinical trials, etc” explains Rimoch.
Apotex, the Canadian generics giant, has also developed drugs in Mexico, but as Carrillo explains this was more the result of need rather than of a broad R&D global strategy. In order to tailor its portfolio for the Mexican market, Carrillo realized Apotex Mexico needed to develop some products that were not a priority for Canada. “Since we counted with a lab and trained people here, our options were either to wait for some years until Canada got to our request or to do it ourselves. In this sense we started with very simple drugs. As we were building our strengths in product development we saw opportunities in the government market so we started developing more complex products such as antiretroviral drugs. We have even developed some drugs faster than our colleagues in Canada! We will now establish an R&D center with an investment of around US$ 6 million. We have earned the support of our headquarters by means of being creative and proactive. Our headquarters did not identify Mexico as a hotspot for R&D; we just showed them what we could do” he explains.
A different story can be found at the local laboratory Streger, which has focused its investments on developing new manufacturing technologies. While four years ago Streger had 200 employees working in its manufacturing facility, today it has only 25. “This is the result of our success in developing unique technologies that have dramatically increased the company’s efficiency” claims Roberto Rosas Puente, General Manager of Streger.
For example, Streger has succeeded in developing a drier that works through magnetic fields and is able of doing the same job than a common dry air oven in 1/16 of the time. Streger has sold the patent of the prototype to Kolpi, a Dutch company that will start commercializing it in from 2010 onwards. Streger has also generated technologies that have increased efficiency during mixing and homogenizing liquids, and packing.
This company is currently completing a system which will allow sterilization directly in the production line. “This process is quite unique since it is not only designed to sterilize glass, but also plastic. It used to be more time consuming and expensive to use plastic rather than glass, but this technology actually makes it faster and more affordable. Our vision is to leverage on our new capacities to become an extremely efficient manufacturer of injectable drugs in plastic ampoules,” he explains.
Through different approaches to innovation, pharmaceutical companies in Mexico are taking important steps in R&D. The reasons for this are that they know research is the path, not only to sustainable growth, but also to global competitiveness.
Spicing up the Mexican OTC market
In the late 1990s, Rodrigo Herrera Aspra wanted to commercialize a new anti-acne formulation and was advised by a friend who was involved in the pharmaceutical industry to hire a group of medical reps. “After thinking on this issue I concluded there was something wrong with a business model in which we would pay a medical rep 8 hours of work for him to spend 7:30 hours waiting at the lobby. It is not the medical reps’ fault, the model is just flawed! Therefore we prepared the first infomercial in Spanish in the world and it was a great hit” recalls Herrera Aspra, President of Genomma Lab.
During the last decade Genomma Lab has become a leader in the OTC and personal care markets in Mexico thanks to a very innovative business model. Firstly, in terms of R&D, the firm is constantly looking for the safest and most effective active ingredient that exists for every indication that can be treated with an OTC product. “We do not get married with an active ingredient; if a new and better one comes up in the market we just adopt it for our product. This process is quite straight forward as, even though we have our own labs and manufacturing facilities, we contract manufacture most of our products” explains Herrera Aspra. Secondly, Genomma Lab advertises heavily. “But usually what we do is to limit our communication only to the illness and to the particular effect of a specific medicine. We want to inform and educate the consumer and it works” he stresses.
Thanks to its creative approach today Genomma Lab, not only exports to over 30 countries, but has also recently successfully launched an IPO at the Mexican stock market. According to Herrera Aspra “we are looking into the long-term. We wanted to raise money to reach some targets in the coming years. We are currently analyzing targets in Mexico, although our international business is growing at a faster rate than the local business”.
Having started with just a garage-made anti-acne formulation and an infomercial, and being today in his early 40s, Herrera Aspra represents a new breed of entrepreneurial young Mexicans and is set to continue spicing up the Mexican pharmaceutical market with his original ideas.
Looking to the world
With generics on the up and the country’s economic clout growing, today many local companies are preparing very ambitious internationalization plans. “Exports represent the future for TechSphere. We do not want to remain a Mexican company, we want to become a truly multinational player and we have all the elements necessary to take this jump: we have the right products, the right people and a plant that is FDA approved” explains Savoir, replicating the vision of many of his colleagues.
Hormona shares the same goals. Although this firm has long based a large part of its growth in establishing licensing agreements for the Mexican market with MNCs (Pfizer, Takeda, BMS , Daichi, Recordati and GSK amongst others), in the late 1990s it drafted a new strategic plan that also included aggressive international objectives that would make it an even more attractive partner. As part of this scheme, four years ago this company inaugurated a state-of-the-art manufacturing plant, Grimann. “This facility was designed so that it can satisfy our demand for the next 20 years. Thus, today we are using only 60% of its manufacturing capability and we have 40% capacity available for contract manufacturing. We are currently awaiting visits from FDA and EMEA as our idea is to look into export possibilities as we know we have the necessary capability and quality” explains Cortés Cervantes.
As a second step, last November Hormona acquired a pharmaceutical company in Colombia with operations in seven Central American markets. According to Cortés Cervantes, they knew they needed “to not only look for new market niches but also seek for new markets. We are now looking into acquisitions in other countries such as Argentina and Brazil”.
Even a company such as Liomont, which has for a long time been extremely successful focusing mainly on the Mexican private market, is now looking outside the country’s borders. Liomont started exporting its products in the early 2000’s to Central America, Mexico’s natural market, and since then has gradually been moving towards South America, with its products currently present in Ecuador, Venezuela, Peru and Colombia. “Liomont has a great potential for tapping into foreign markets and we consider exports to be the next stage in our growth. We are currently in the process of entering Chile and we have been in talks with potential partners in Brazil and Argentina” explains Rimoch. Furthermore, this company has recently started sales of Conazol, a topical antimycotic, in the US. “We see this that as a first step, as we are in the process of developing ANDAs for the European and the US markets. However, we know this is a process that will take time, patience and careful planning and that has to be planned carefully. Furthermore, you need to find the right partner to succeed in this bold move” he claims.
The Mexican pharmaceutical company PiSA, a leader in the hospital business, presents a particular case as it has long had a presence across the Latin American region. This Mexican giant has nine manufacturing sites and will start constructing a new facility in Colombia in the next two years. This has also allowed it to become a very active contract manufacturing player for Mexico and the US, particularly in the area of medical devices. “We have manufactured millions of units for the US market and even developed specific components for diverse products such as infusion pumps” explains Álvarez Páramo, who expects the share of PiSA’s revenues that come from exports to grow from 5% today to 20%, in 5 years time.
International ambitions are not a question of size amongst Mexican players. This is proved by the medium-size company Randall Laboratories which, having successfully launched its products in Ecuador, is now looking towards other international opportunities. “Our next step is to establish close commercial alliances with other distributors from the Americas region and with pharmaceutical companies across the world. We have recently maintained close conversations with companies from countries that go from Colombia all the way to the Netherlands and we are looking at promising opportunities in terms of hosting contracts and manufacturing” claims Iturralde.
GOING GLOBAL: Easier said than done
It is obviously a big challenge for pharmaceutical companies from emerging countries to penetrate developed markets. Such bold move requires complex dealings with highly demanding regulatory agencies such as the Federal Drug Administration (FDA) or the European Medicines Agency (EMEA) and, of course, very attractive and competitive products. However, successfully expanding to the rest of Latin America is not easy to achieve either. Although the region might seem highly homogeneous, because of its common language (with the exception of Brazil), history and religion, these markets actually show big differences amongst themselves.
As Hector Carrillo from Apotex Mexico explains, the first step is to decide whether to establish a direct presence or look for a partner. “It depends on the market. In various Central American countries we chose to purchase a number of companies that were family owned companies, so it took a big effort to professionalize them. On the other hand, in Guatemala we decided to go with distributors. When it comes to Colombia we are currently evaluating which would be the best approach to what is actually quite a large market. It takes a long analysis on how much you are willing to invest and what will be the expected ROI (Return on Investment). Furthermore, we need to analyze where we will supply the market from, if Canada or Mexico” he explains.
According to Carrillo the differences amongst these markets require companies to be highly flexible. “Latin America as a whole traditionally loves the blister presentation, while Canada only produces bottles. That is why when the product arrives here we change it into blisters. Moreover, some Central American markets even require for the blisters to allow the product to be sold by unit, so we have adapted our packaging machines to serve this need. We are lucky that we are very flexible at Apotex” he explains.
Miguel Ángel Castro Rincón, general director of Grupo Unipharm in Mexico explains that it is key to match the right product with the right market. Unipharm, a Swiss-Guatemalan company, established its presence in Mexico 14 years ago and since then has showed significant growth, particularly in the area of generics. “Our objective is to excel in the development, manufacturing and distribution of generics in terms of quality and efficiency; the idea is to offer more top quality products at very competitive prices” explains Castro Rincón.
This way Unipharm expects to become a very attractive supplier for highly competitive markets such as those of South America. “We expect our attractive product portfolio to allow us to get numerous distributors in every one of this market so as to have a more aggressive expansion” he adds. Unipharm also expects to tap into more non-traditional markets such as Syria, Pakistan and Egypt. “There are many opportunities in those markets because they are usually not covered properly by most pharmaceutical companies”, pinpoints Castro Rincón.
On the other hand, Unipharm is planning on using its nutraceutic capabilities to expand its presence in North America – it already sells products in these markets through its company NOVUM - and to penetrate the European markets. “We already have very interesting and attractive developments in chelated minerals – chelated iron, calcium, potassium, etc. - and we also developed pre-mixes for fortification of food and beverages. The latter have been developed by us since 2003 under a Business to Business model” he explains.
Just like most other players in the Mexican pharmaceutical industry, Castro Rincón expects to see a turning point in its company’s history in the next years. “Our strategic plans are ambitious, and we are forecasting impressive growth in our revenues for the coming years” he says.
Although conscious of the challenges of internationalizing their operations, most generic players expect their own capabilities, together with the right partnerships and strategic alliances, to allow them to hit the ground running. Mexican generic companies are confident their time has come.
The importance of being responsible
Beyond the bright lights and high-end boutiques of the Mexico City districts of Santa Fe and Polanco, around 50% of the Mexican population has no access to quality healthcare or medicines. This presents a particular challenge for pharmaceutical companies in terms of their corporate social responsibility (CSR). Miguel Múnera, General Manager for Roche Mexico, considers that being a socially responsible company is not only one way to do business, but it is ultimately the only way. “You might be able to do good business in the short term without being socially responsible, but you will fail in the long term” he claims.
Local players are certainly amongst the most committed to giving back to the Mexican society. In this sense Liomont is one of the companies that has traditionally been most active in CSR. Amongst other activities, this company organizes a nation-wide environmental award for high school students; organizes free cleft lip and palate surgeries across Mexico; and participates in the “Escuela Amiga” program together with UNICEF through which provides resources for basic schools in communities of around 50 to 100 people in Mexico’s poorest states. “We believe that in order to be truly effective, CSR is something that should come from the heart” argues Alfredo Rimoch, General Manager of Liomont, who is very much involved in each of the company’s social activities.
Many other local companies are highly involved in CSR activities. Genomma Lab for example has a unit of people dedicated solely to corporate social responsibility. Even a small pharma company such as Suanca is behind the Foundation “Dibujando un mañana” (Drawing Tomorrow) which assists thousands of Mexican kids in distress.
In markets such as Mexico there are innumerable opportunities for large, medium and small pharmaceutical firms to come up with fresh approaches to CSR. Contributing to society in this way also allows them cooperate amongst themselves, with the government and with the community as a whole.
The Best Is Still To Come
As a result of the continuous growth of the Mexican population’s purchasing power, together with the evolution of its demographic pyramid and the expansion of its healthcare system, Mexico is set to continue being a very attractive market for MNCs for years to come. Furthermore, given the upgrade in the country’s regulatory framework, the rise of generics in the Mexican private market, and the new global ambitions of local players, Mexican companies will continue expanding their international footprint well into the future.
It is for these reasons that, Ricardo Álvarez-Tostado, President of Astra Zeneca Mexico and a well-respected veteran of the industry, argues that “…if anyone is sitting in a saturated environment and their next step for growth is territorial expansion, Mexico is clearly one of the best places to consider as it provides with highly predictable returns. With all the challenges that Mexico faces, it is years ahead of other emerging markets, making it one of the most attractive places to invest”. Mexico’s pharmaceutical industry is certainly undergoing a time of unique opportunities.