Global Insight Perspective | |
Significance | The Mexican government's newly-established Co-ordinating Commission for the Negotiation of Medicine Prices and other Health Supplies (CCNPMIS) is unlikely to meet its targeted savings of 10% on the purchase price of patent drugs to be used by public sector institutions. |
Implications | Drug companies in Mexico have adopted a hard negotiating stance, offering discounts of just 2-3%. Their intransigence stems from the difficult economic conditions, which have led to a sharp decline in sales and profits. |
Outlook | Time is running out for the CCNPMIS to win further concessions, given that the deadline for negotiations is 15 November. For its part, the drug industry is hopeful that the decline in the private sector market will be counterbalanced by increased sales through the public sector. |
Dubbed the Co-ordinating Commission for the Negotiation of Medicine Prices and other Health Supplies (CCNPMIS), the negotiation commission was established in April with a mandate to purchase patent drugs on behalf of public sector institutions (see Mexico: 10 April 2008: New Price Negotiation Commission Finally Established in Mexico). In the past, public sector institutions such as the IMSS, ISSSTE and the Seguro Popular used to purchase drugs on an individual basis, but the aim of the new commission was to leverage its dominant market position in order to negotiate price savings of around 10%.
However, according to the Financiero newspaper, the pharmaceutical industry has been unable to offer discounts of more than 3%. The newspaper quoted Carlos Abelleyra, president of Mexico's pharmaceutical industry association Canifarma, who explained the industry's position: "Companies have had problems in reaching their sales targets. In terms of units, they have suffered a serious downturn in comparison with previous years." The decline in sales began last year, but has become particularly acute since August. Companies have also been hit by the devaluation of the peso relative to the U.S. dollar.
Patent Drugs to Account for 80% of Medicines Budget
According to Mexico's Health Secretary, José Angel Córdova Villalobos, the public sector will this year invest 45 billion pesos (US$3.46 billion) in the purchase of medicines. Some 80% of the budget will be allocated to patent drugs, while the remaining 20% will be spent on so-called "interchangeable" generics. In volume terms, the percentages are reversed, with patent medicines accounting for 20% of the public sector's purchases and interchangeable generics accounting for the remainder.
Outlook and Implications
The CCNPMIS formally began negotiations in September, and this week has seen the start of the second session of negotiations. Although Córdova Villalobos has acknowledged the tough conditions faced by the industry, he has also referred to their negotiating position as "extremely hard" and has signalled his determination to secure additional discounts before the 15 November deadline (see Mexico: 3 November 2008: Health Secretary Warns that Financial Crisis will Put Pressure on Mexico's Drug Reimbursement Prices).
Meanwhile, Carlos Abelleyra noted that, in times of economic crisis, the population generally relies more heavily on social security or other health schemes. The hope therefore is that the decline of the private-sector market will be counterbalanced by increased sales in the public sector.