IHS Global Insight Perspective | |
Significance | Following a positive performance during 2009 (with estimated sales at US$1 billion), Peru's pharmaceutical market is expected to continue on the same path of development in 2010, benefitting from a 10% minimum growth in sales (US$1.1 billion) and encouraging regulatory improvements, as stated by executive director of the National Association of Laboratories (ALAFARPE), Augusto Rey de la Cuba. |
Implications | In detail, leading factors shaping Peru's pharmaceutical market during 2010 include the regulation of the New Law for Medications, Sanitary Products and Medical Devices, the incorporation of a universal healthcare system, and new governmental drugs purchasing strategies. |
Outlook | While the process of transformation is still under way, 2010 is expected to be a year of consolidation. Major transformations are expected to become evident within market competition activities, which will produce rising opportunities to boost sales growth. Possible setbacks may include the lack of human capital to lead structural transformation. |
Despite the economic crisis in 2009, Peru's pharmaceutical market remained one of the most promising in Latin America, with total sales (including public and private sectors) reaching US$1 billion. Looking to 2010, sales' growth is expected to reach a minimum of 10% (US$1.1 billion), as stated by the Executive Director of the National Association of Laboratories (ALAFARPE), Augusto Rey de la Cuba in an interview with IHS Global Insight.
According to Rey de la Cuba, leading factors shaping Peru's pharmaceutical market during 2010 include:
- The regulation of the New Law for Medications, Sanitary Products, and Medical Devices;
- The ongoing implementation of the universal healthcare system and changing governmental purchasing strategies of medications.
New Law for Medications, Sanitary Products and Medical Devices
Following several years of discussion and negotiations, the law for medications, sanitary products, and medical devices was finally approved in November 2009, and is currently undergoing a six-month period of regulation implementation (see Peru: 9 November 2009: Peruvian Congress Approves New Law Affecting Medications, Sanitary Products and Medical Devices). According to Rey de la Cuba, this law provides important modifications and significant improvements to Peru's regulatory environment, providing a new foundation for the future development of the pharmaceutical industry in the country and the delivery of quality medical services for patients.
The most important characteristics of the law include:
- The reinforcement of the Office of Medications, Raw Material, and Drugs (DIGEMID)—which will enjoy a more significant role in the process of quality control of medications in the country;
- The introduction of tougher requirements for the registration of drugs—which will include good manufacturing practice (GMP) certifications and generics bioequivalence tests. These changes will drastically transform current features of the national market, including the quantity of suppliers, the variety of products, and the significant role of the informal market (through a stricter penal code for counterfeit drug businesses). In this regard, the reduction of counterfeit products is expected to increase competition among players with long-term plans to stay in the country;
- The implementation of a new timeframe and costs for the registration and approval of products—current timelines are expected to be extended. Previously it took one week, whereas now the process is expected to involve about six months of evaluation. Prices are also expected to rise—previously, application prices were US$100, and they will now reach around US$1,000. These changes will restrict the quality of products entering the market.
Government Purchase Strategies and Universal Insurance Coverage
Governmental purchase strategies are expected to continue to emphasise the recent approach introduced by the government, which includes corporate purchases (inter-institutional purchases) and reverse auctions (see Peru: 23 October 2009: Inter-Institutional Purchase of Drugs Saves US$20.9 mil. for Peruvian Government). These strategies provide an opportunity for a more harmonious process of drugs acquisition, and a break to achieve better price deals for pharmaceutical products. Despite recent statements on the government's intentions to introduce tougher measures reducing prices, Peru's constitution bans price-control measures and protects free-market competition, according to Rey de la Cuba. As such, these new purchase strategies will remain as a top priority for the government to achieve possible reductions in expenditure.
Meanwhile, the ongoing implementation of the universal healthcare system is expected to remain as a top concern for the government. This scheme is expected to bring an important opportunity to boost demand within this country and help to reduce consumption of low-cost illegal products on the streets.
Space to Grow and Leading Players
Peru's pharmaceutical market enjoys significant potential to grow during 2010, as there is much market space to develop businesses and sell products, according to Rey de la Cuba. National firms will remain as the rising stars within the market, where their participation has soared in the past few years. Foreign firms are expected to continue showing interest to boost their participation and possibly buy local players. However, local firms are not expected to sell anytime soon, as they currently enjoy significant opportunities for profit making. As a result, the market is expected to remain fragmented with no major consolidations.
As in many Latin American countries, the tendency of growth will remain in the generics' sector, states Rey de la Cuba.
Outlook and Implications
As in 2009, Peru continues to represent one of the most attractive markets in Latin America. The country's steady economic growth, overall stable political environment, the consolidation of the U.S. free-trade agreement (FTA), and the government's growing investment in the health sector have influenced the introduction of important regulatory changes and strategies of development which will benefit patients, pharmaceutical firms, and the government itself. While the process of transformation is still ongoing, 2010 is expected to be a year of consolidation..
Major changes are expected to become evident in market competition activities, which will benefit from a stronger regulatory foundation and transparent processes. This is particularly true when looking at government efforts to reduce the availability of counterfeit drugs in the market (which represent 20% of total sales) and introduce a clear definition and differentiation between generic drugs and similares. Meanwhile the expansion of the universal healthcare scheme is expected to reduce the opportunities for counterfeit drugs to penetrate the market and reinforce competition between well-established pharmaceuticals firms with prospects of long-term business in the country. In addition to providing clearer registration guidelines and expectations, new prices for drug approvals and registration fees may encourage a more thoughtful process in terms of product inclusion in the market, and help reduce the number of low-quality products,
Considering possible setbacks for the coming year, difficulties with resources, particularly human capital, could affect the process of transformation in Peru's pharmaceutical sector. As such, the government is expected to pay special attention to introduce training and education programmes for institutions like DIGEMID, in order to ensure the successful implementation of new projects and schemes.
Regulatory changes for 2010 may include the incorporation of guidelines for biotech and biosimilar products, which will clarify the current legal vacuum to regulate these products. The implementation of this type of guideline is currently supported by ALAFARPE and undergoing a public-consultation process.