Global Insight Perspective | |
Significance | Mexico's Health Secretariat and the pharmaceutical association Canifarma have agreed that patent drugs will be sold to public sector institutions for the same price as in comparable economies, while making an adjustment for the volume of sales. |
Implications | The Health Secretariat's newly-created Co-ordinating Commission for the Negotiation of Medicine Prices and other Health Supplies (CCNPMIS) had been pushing for discounts of 10%, while drug manufacturers had previously offered maximum discounts of just 2-3%. |
Outlook | A total of 17 companies will participate individually in the final phase of negotiations, which is due to begin tomorrow. The Health Secretariat is confident that its agreement with Canifarma will allow it to achieve average savings of between 2-10%. |
The Health Secretariat's negotiations were carried out via the so-called Co-ordinating Commission for the Negotiation of Medicine Prices and other Health Supplies (CCNPMIS), which was established in April to negotiate the price of patent drugs for the public sector (see Mexico: 10 April 2008: New Price Negotiation Commission Finally Established in Mexico).
According to El Financiero, the two parties agreed that, if Mexico's Health Secretariat discovers that a particular patent medicine is being sold more cheaply in another comparably-sized economy, the manufacturer will be obliged to reduce its prices to match that cheaper level. The pharmaceutical industry considers comparable economies to include Brazil, Argentina, Colombia and Turkey. However, the agreement applies only to medicines whose patents are still being enforced in those countries.
It will now be up to each of the 17 individual patent drug companies involved to demonstrate in its negotiations that the prices that it is offering are the best possible, taking into account the country's economic situation (i.e. per capita income) and the volume of sales.
Commenting on the agreement, the president of Canifarma, Carlos Abelleyra, stated: "We in the industry are fed up with the discounts; however, I understand that the government has to fight to secure the best possible price, but that also companies want a price that allows them to receive a reasonable return on their investment."
The next stage of negotiations is due to begin tomorrow, and the entire process must be concluded within three weeks, in order to prevent a medicine shortage from January next year. All purchases will be made in Mexican pesos.
Outlook and Implications
The deal that was finally reached came about following three arduous rounds of negotiations between Canifarma and the CCNPMIS. According to Córdova Villalobos, the public sector needs to maintain a strict control on prices in light of the fact that expenditure on patent medicines has shot up as a result of an upsurge in chronic degenerative illnesses such as cancer, HIV, sclerosis and hepatitis. Córdova Villalobos noted that as much as 7 billion pesos (US$546 million) has been allocated to just 100 patent medicines, and that this is a sizeable proportion of the Health Secretariat's overall budget of 45 billion pesos.
Previous negotiations between Canifarma and the CCNPMIS had yielded maximum discounts of just 2-3%, which fell far short of the CCNPMIS's targeted discounts of 10%. For its part, Canifarma had insisted that, in the current economic situation, additional discounts were not possible (see Mexico: 13 November 2008: Mexican Price-Negotiation Committee Rejects Drug Industry's Offer). Given that negotiations between individual companies have yet to be concluded, the average size of the discounts has yet to be determined. However, the Health Secretariat is confident that the system that has now been put into place will allow it to achieve reductions of between 2-10%.
Looking longer term, Mexico's Health Secretariat is keen to promote a healthy interchangeable generics industry, although more widespread use of generics is currently hampered by quality control issues—and the fact that the ongoing drug re-registration process is not due to be completed until 24 February 2010.