Summary
Per-capita spending on pharmaceuticals in Mexico was US$103 in 2005, the highest level in Latin America. But even though public spending is rising at about 6% per year, the country continues to underspend on healthcare. Against an OECD average for healthcare spending of 8.9% of GDP, the country allocated an estimated 6.7% of its national wealth to the sector in 2005. The systemic lack of resources is variously attributed to underfunding of the two dominant state-run reimbursement schemes, known as IMSS and ISSSTE, which together account for more than half of annual expenditure on pharmaceuticals. The private insurance sector accounts for only 5-6% of annual health spending. In this context, the retail pharmaceutical market remains dominant, accounting for around 75% of total sales, while out-of-pocket disbursements by consumers account for some 88% of all drug spending.
However, the government is attempting to resolve the historic inadequacies of healthcare provision in Mexico. A new scheme aiming to cover treat 'catastrophic' treatment costs, known as Seguro Popular, has been introduced. The programme's pharmaceutical purchases were budgeted at about MXN4.2bn (US$375mn) in 2005, but provision is expected to rapidly increase in the near term. By contrast, BMI believes that without radical reform, retirement contributions and budgeted spending rises will begin to place unsustainable pressures on ISSSTE and IMSS from 2007 onwards.
The structure of the pharmaceutical market is heavily weighted to the branded prescription sector, which accounts for more than 80% of sales, although it is estimated that 40% of all prescription drugs are dispensed without a script. This has held back the development of a self-medication culture (although self-prescription is commonplace), and further pressured government reimbursement agencies and consumers. Moreover, the generic sector is underdeveloped due to the proliferation of low-quality copies and counterfeits, with illegal products valued at some US$700mn per year. Despite this hostile environment, however, the outlook for legitimate, bioequivalent generics is strong in Mexico - largely due to new government programmes that are focusing on the procurement of generics. The leading international players in off-patent medicines are active in the sector, which is expected to be worth US$650mn in 2010.
Mexico is a significant regional producer, with drug exports valued at some US$981mn in 2005, although the pharmaceutical trade deficit continues to deteriorate due to strong demand for hi-tech branded, imported medicines. Nevertheless, the market offers a natural harbour for multinationals in Latin America, offering low costs and the most advanced market regulation and intellectual property legislation in the region. Moreover, the country is emerging as a significant location for clinical trials, thanks to its established tradition of basic research and comparatively heterogeneous population. This status is reflected in BMI's Business Environment Ranking for Latin America, which place the country first in Latin America in terms of its appeal as an investment proposition.
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