The Mexican pharmaceutical market’s capacity to change dramatically in a short period of time means that both innovators and generics companies must think strategically and “play their cards right” in order to succeed.
From 2014 to 2015, the total Mexican pharmaceutical market displayed a strong 5.3 percent growth to reach 209.5 billion Mexican pesos [USD 11.14 billion], placing the country’s pharma market on the brink of the global Top 10. As more than 300 companies already account for the vast majority of Mexico’s pharmaceutical sales, new players are continuously tempted to grab a piece of the pie, such as Celgene and Recordati Rare Diseases which both set up their Mexican affiliates over the last 18 months.
“Over recent years, Mexico has been displaying a remarkable consistency in terms of market growth, and we expect this growth to continue in the upcoming years. As a result, Mexico is considered the only Latin American country whose market value growth will be higher than what we had in the past,” explains Xavier Valdez, General Manager Mexico and Central America at IMS Health. Nevertheless, if the bigger picture indeed seems particularly appealing, the complexity of the very dynamic Mexican market also incites international innovators to endlessly reevaluate and adapt their commercial strategy if they want to truly reap the benefits of the second largest pharma market in Latin America.
Mexico’s pharma market can indeed change radically in a six-month period. As a matter of fact, according to IMS Health, the private retail market grew 7.1 percent in 2015, whereas it had dropped 0.2 percent in 2014. On the other hand, the budget pressure currently faced by the federal government tremendously impacted the institutional sector, which saw growth slump to 2 percent last year, whereas it reported a 9 percent growth in 2014. As a result, the private sector, which still represents 74 percent of total Mexican sales, is now propelling the overall market’s growth.
This new market dynamic leaves some innovators with no choice but to adapt their commercial strategy if they want to display similar (double-digit) growth rates as in the past. Ferring Mexico, for example, decided in 2014 to expand and strengthen its sales force related to the institutional market, covering an all-time high number of Mexican hospitals – a strategy that clearly paid off. Nevertheless, recent government budget cuts in health spending and their dramatic impact on both sales and innovation access in the public sector notably forced the Swiss company to change track. “Although we will continue to look at consolidating our market share in the institutional sector, we will allocate more resources to the private sector in the upcoming years,” explains Rafael Suarez, Ferring’s general manager in Mexico.
In the private sector however, generics drive by far the largest share of the growth, whereas innovative treatments’ growth did not exceed 1.5 percent in 2015. As a result, we also see companies like Bayer, whose pharma division is led in Mexico by Alvaro Angel, that decide to intensify their efforts in the public sector, despite its current sluggish growth. The Mexican affiliate, which makes up to 26 percent of the sales of Bayer in Latin America, hopes to bypass the important deadlocks in innovation access affecting the institutional market by massively developing and strengthening its market access capacity and adopting a more creative approach to the Mexican market. In this endeavor, the German champion will however have to cope with the unique fragmentation of the Mexican public health system, the 120 million beneficiaries of which are enrolled in a variety of independent social security institutes displaying strong differences in terms of product reimbursement processes and coverage. In the meantime, these companies betting on the public sector expect public budget cuts will not continue forever, while they could enjoy a very interesting and privileged market position in the institutional sector when public heath investment will pick up again.
2016 indisputably stands as a very exciting year for pharma observers and stakeholders committed to the Mexican market. While many international companies are shifting their strategic focus accordingly to the strengths of their local portfolio and the market opportunities they identify, no one can predict which companies are making the right bet. All eyes are now turned to the concrete implementation of their respective strategies, and we will soon know the names of the Mexican players that are truly earning the fruits of their new positioning…until the Mexican market radically changes once again and reshuffles the cards.
Writer: Laurent Pichotzki-Libano