26 March 2006
Growth in pharmaceuticals markets of Latin America
Diverse region offers excellent opportunities
Successful launches point to bright future
The opportunities for the pharmaceutical industry are a natural extension of the trend whereby Latin America has opened up for global trade. Many Latin American countries have taken bold steps to fundamentally restructure their governments, modernise their economies, attract foreign investment and improve living conditions for their citizens. Despite these steps progress has often been uncertain and there still remain many problems in raising the status of those on low incomes in these countries.
Latin American governments are paying much greater attention to their healthcare systems than ever before and many have embarked on major reforms over the last decade. The importance being attached to the healthcare systems in Latin American countries has opened up opportunities for commercial organisations operating in the healthcare sector. For example, pharmaceuticals are an important part of healthcare and the demand for modern medicines has attracted all the major pharmaceutical companies to base themselves in the region. Latin America now accounts for around 6% of global pharmaceutical sales, with countries such as Mexico, Brazil, Argentina and Venezuela making up a major part of sales in this region.
Although Latin America is an extremely promising region for the international pharmaceutical industry, it is not a straightforward region to operate in and the economic and political forces that exist in different countries can still dent commercial objectives. As with any other region of the world, Latin America is made up of a number of different areas with diverse political, economic and social conditions. A feature of many countries in Latin America is the tremendous wealth gap between the rich and the poor. Unfortunately, when countries try to address this imbalance, their policies can often inadvertently lead to economic and social crises.
Healthcare costs pressure drug prices
As with many other countries, the healthcare situation in Latin America is affected by national and international politics. The population will look to the government to finance the healthcare system, but as the costs to maintain a high quality healthcare system rise, there can be reluctance on the part of governments to fund such increases. No government around the world has found the ideal system to fund and organise its healthcare system and the Latin American region is no exception. When countries seek to suddenly reduce healthcare expenditure, pharmaceuticals often feature as a primary target. It has not been unusual for Latin American countries to introduce similar cost containment measures to those in other regions of the world. For example, in 2003, despite protests from the pharmaceutical industry, the Venezuelan government passed legislation that effectively fixed the prices of nearly 600 products. As part of its cost containment measures during 2002, Argentina's Congress brought in a new law making it compulsory for doctors to prescribe pharmaceuticals by their generic name. In Brazil, access to essential medicines has become a major political issue and the government has taken a tough line with the pharmaceutical industry over its prices.
There remains considerable financial risk involved in investing in Latin America and companies need to be fully aware of past economic crises when becoming involved. In 2002, the Latin America suffered its worst economic performance for nearly twenty years, with real gross domestic product (GDP) for the region projected to drop by 2%. Certain countries such as Argentina, which represents one of the most promising national pharmaceutical markets, suffered economic collapse. Between 2002 and 2003, Argentina's real GDP was predicted to fall by 15%. The Argentinean government froze bank accounts, ended the conversion of the local currency into dollars and introduced a policy which required companies to convert dollar obligations to local currency obligations. These moves caused social unrest and angered investors, whose assets were now worth very little. The regional economic problems also led to a shortage of medicines in various countries and an inability to pay for them. As a result, pharmaceutical company predictions for the regional market during this period became totally unrealistic.
"Latin America has seen ongoing investment by the international pharmaceutical industry and most major companies are well represented in the region"
It is clear that steps to deal with potential negative forces that can result from the current events taking place in each country should be factored into the business strategies of companies investing in Latin America. If note is taken of the political and economic environment and potential risks from the start of an investment there is no reason why a company cannot succeed in Latin America. It may even be the case that a company can continue to operate in a troubled region, as the developments occurring in the country do not impact on its industrial sector.
Latin America has seen ongoing investment by the international pharmaceutical industry and most major companies are well represented in the region. They have managed to deal with the economic crises in the region, but there remain other areas of concern. In particular, the pharmaceutical industry has frequently expressed strong concerns about the environment for intellectual property protection in Latin America and has indicated that it is a factor that is affecting their investment in the region.
Although in principle there should only be markets for branded medicines and their generic competitors, the Latin American market is actually more complex with there being a range of products that fall into legally ambiguous classes. These manufacturers position their products in such a manner that they appear almost the same as branded products and thus confuse the consumer. In the absence of better information, consumers then believe that branded products are over expensive and avoid buying them.
A more advanced market than expected
Generalisations about trends in Latin America are inevitable, but must always be balanced by knowledge of the situations that exist in each of the individual countries and of specific areas within those countries. Within many of the Latin American countries there are zones of considerable promise, which could be missed for potential if a generalised analysis of the country in question were made. An example of the heterogeneity of the healthcare aspects in the region can be seen by examining life expectancy in the region. For example, statistics for infant mortality in Chile show it to be at 10 per 1000 live births while the number in Mexico is about 26 and in Bolivia is closer to 50. For regions where the most basic healthcare is lacking, perhaps sophisticated novel pharmaceuticals could even be seen as luxury items of little relevance.Companies must remember that in Latin America there is a tremendous wealth gap between the rich and the poor. In the affluent areas, purchasing power is high and so this section of society often looks to mirror Western industrialised societies in terms of what it wishes to buy. In terms of healthcare, they expect to gain access to the latest developments and if they cannot do so within the country they are able to travel abroad for their healthcare needs. Companies in the healthcare sector selling their services and products in Latin American countries wish to gain access to this level of consumers because they have the required purchasing power, but need to ensure that the numbers of such customers are sufficiently high enough to make an investment in the region commercially beneficial.
There are an increasing number of examples of major companies having benefited from committing to Latin America when launching new products, particularly Pfizer, GSK, Novartis and Sanofi-Aventis. Following its international launch in 1998, Pfizer's Viagra achieved strong sales success in Latin America. According to IMS Health Viagra was the fastest selling product in Latin America during 2000, and it helped propel Pfizer from 10th place to become the fifth largest pharmaceutical company in the region. Latin American sales of Viagra, grew by close to 60% in 2000 to make it the third-highest selling drug in the region. In Brazil, Viagra accounted for nearly a quarter of the company's total sales. The other most popular markets for the drug were Mexico and Colombia.
In a similar fashion, Celebrex proved highly successful when it was launched in Mexico in 1999. In fact, Celebrex became the most successful drug launch in Mexican history after Viagra. After Mexico, the drug achieved a similarly promising debut in Brazil, Argentina and Chile. Celebrex has sometimes been described in the regional media as a 'super aspirin' and this has contributed to product recognition of the product, if not a full understanding of its mechanism of action. The establishment of offices in different Latin American countries contributed to Pfizer's success in the region, but the marketing team also had to devise an innovative campaign as consumers were not always taking their lead from doctors in choosing their medication. A survey at this time, conducted by Gallup, indicated that 69% of those surveyed stated that they tried new medications when prescribed by their doctor. However, 16% stated that they made the decision when choosing a medicine and that this was based on recommendations from friends and family or that they consulted a pharmacist. As many prescription drugs are sold over the counter, this made these types of consumers even harder to reach and educate. Pfizer developed a novel campaign to reach these other patients and this is now an approach used by many pharmaceutical companies.
In Mexico it is estimated that around 60% of the 10 million estimated sufferers of arthritis go untreated. Therefore, in order to disseminate information as widely as possible, Pfizer began to liase with patient advocacy groups. In Mexico, Pfizer has provided support to the patient group Manos Libres by not only supplying information, but by also bringing in US specialists to educate patients about their condition and treatments. In Brazil, pharmaceutical companies have launched an arthritis awareness campaign, in conjunction with the national Arthritis Foundation, using both television and print media.
