Summary
Argentina's pharmaceutical market surged in Q107, according to data released by the country's INDEC official statistics agency. This data show combined domestic sales coupled with exported pharmaceuticals produced in Argentina surged 39.5% year-on-year in local currency terms and was worth ARS1.769bn (US$574mn). Domestic sales jumped 33.4% while export sales rose 98%. A weaker peso has helped local producers increase exports and government spending is up. In view of this data, as well as strong economic growth and pre-election largesse, BMI has upgraded its full-year forecast for total pharmaceutical market value growth to 7.8%in US dollar terms (8.1% in peso terms), with market value reaching US$2.58mn by the end of 2007. The average five-year annual growth rate for 2006 to 2011 is now 5.8%
At first glance, BMI's forecast still appears overly cautious, given Q107 data. But the data are not complete. Exports in particular are running high - the peso reached a four-year low against the dollar in mid-July on the back of disappointing economic data. We see this factor hitting imports while the government maintains very stringent pricing controls on medicines in its continuing war on inflation. GDP growth is still forecast at a robust 7.0% y-o-y. Troublingly, the inflation data itself is suspect, as the government of President Nstor Kirchner has been accused of tampering with INDEC data. It is a charge that has not been proven but at the same time will not go away. Health cost data in particular looks suspiciously low, given what health insurers are saying about rate raises and the government's own data on drug spending.
As the country gears up for October elections - with Christina Fernandez Kirchner, the president's wife and a powerful political figure in her own right, the candidate of the current government - the squeeze on prices is unlikely to ease. The government negotiated with (some say brow-beat) health insurers to reduce health insurance plan costs at the beginning of this year by introducing more basic insurance packages at a lower price. But in the event, few opted for these plans, which sit better in the statistics - less than 3% of the population at last count. Now insurers want to up premiums again to reflect reality. Meanwhile, a freeze on medicines remains, if it is on occasion ignored, with government threats to 'name and shame' a key and, arguably very successful, enforcement method.
Pricing is the reason Argentina continues to score last in BMI's Business Environment Rankings in Latin America, along with poor intellectual property rules that fail to protect and promote bio-equivalent generics. One frustration is that the rules are populist and often don't look at consumer behaviour. As recent data from the Observatory for Health, Medicines and Society and the Argentine Pharmaceutical Confederation (Cofra) show, Argentines opt for branded (often patented or name-brand non-equivalent generics) medicines 80% over generics. Clearer rules would see clearer generic substitution with attendant cost benefits. Such moves look unlikely for now, as the election season reaches full swing.
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