Global Insight Perspective | |
Significance | The devaluation of Argentina’s currency, the peso, in 2002 drastically changed the course of its pharmaceutical industry. The economic crisis, alongside the entry of generic medicines, has notably modified the industry’s shape. New compounds and an increase in generic and over-the-counter (OTC) medicines have led the change in direction. |
Implications | The country’s excessive red tape, patent laws and general regulatory environment remain difficult for major international pharmaceutical companies, which have subsequently downgraded investments in the country in the last couple of years. |
Outlook | The domestic pharmaceutical market is slowly recovering, and is expected to maintain an upward trend in the years to come, driven by the economic recovery and the greater purchasing power of the population. Local drug-makers are predicted to continue receiving the support of the government, whereas foreign pharma companies could be affected by these initiatives to protect the domestic drug industry. |
During the 1990’s, Argentina deregulated its pharmaceutical market by liberating medicine prices and reducing market barriers, particularly distribution barriers, and by strengthening drug quality controls and drug patents. As a result, many multinational pharmaceutical companies entered the market by setting up local subsidiaries, and/or acquiring local drug-makers and by constructing manufacturing plants in the country. However, the economic crisis of 2001 drastically changed the industry, with access to drugs becoming a social problem after the crisis. With the population’s purchasing power decreasing drug expenditure slowed down. Drug coverage was also reduced among health providers, which contracted the country’s health insurance system. In order to remedy the situation, the Ministry of Health introduced a new national drug policy in 2002, establishing reference pricing for basic medicines covered by the country’s social security system and making generic prescription compulsory (see Argentina: 30 August 2002: Prescription of Generic Drugs Mandated Under New Law). It also created the Remediar programme, under which basic drugs were supplied in primary care centres. All of these measures helped increase public access to pharmaceuticals.
As a result of the crisis, many international pharmaceutical companies were forced to sell their local assets, the majority of which were acquired by domestic drug-makers. Most recently, U.S. pharma firm Bristol-Myers Squibb (BMS) sold its manufacturing facility and associated assets to local drug manufacturer Laboratorios Roemmers, while local company Richmond has recently purchased German-based Altana Pharma’s plant in the country (see Argentina: 20 January 2006: BMS Confirms Sale of Argentine Production Facility and Argentina: 15 June 2006: Laboratorios Richmond Acquires Altana Pharma s Plant in Argentina). According to the local association of research-based multinational pharmaceutical companies, CAEME, there are currently 109 pharmaceutical manufacturing facilities in the country, with 90 operated by local companies and 19 by foreign firms. A pharmaceutical industrial site in Buenos Aires will also be constructed by several local drug-makers. The initiative will bolstered by the national association of drug-makers, Cooperala, and the Buenos Aires business association, Corporación Buenos Aires Sur. The project includes an investment of 138.2 million pesos (US$44.8 million) and comprises 11 local companies, including Laboratorios Pablo Cassará, Laboratorios Mar, Therabel Pharma and Química Montepellier.
Meanwhile, the local clinical research market has been also booming in recent years, boosted by the large number of highly qualified professionals, well-established regulations governing clinical trials and the large number of potential trial volunteers (see Latin America: 13 January 2006: The Rapid Expansion of the Latin American Research and Clinical Trial Market). Many research-based multinational companies operating in the country have been forced to invest in quality control laboratories to meet local standards. For example, the country’s pharmaceutical regulatory body, ANMAT, requires foreign drug manufacturers to carry out fresh tests on all batches of imported products, as it refuses to recognise certification from the United States or the European Union (EU).
The country has significantly improved its overall medicine exports, with local companies in particular seeking to increase their presence in foreign markets. This improved performance is mainly due to reforms of the bureaucratic tax systems in Argentina and the Mercosur South American trade bloc. However, the local industry claims that the export sector could perform better still if the pharmaceutical industry was included in the so-called “royalties” framework, under which local firms entering new markets are rewarded with a 5% costs refund. Foreign companies continue to be responsible for the lion’s share of the country’s drug exports.
Generics and OTC Drugs Gaining Ground
Following its boom in 2002, the market for generic medicines in Argentina steadily slowed down. Nonetheless, although branded products have been gradually recovering their position, generic drugs have maintained an important position and currently account for 15% of the overall domestic pharmaceutical market (see Argentina: 10 January 2006: Generics Market Growing Steadily in Argentina). Meanwhile, the market for OTC medicines has been expanding. In 2001, OTC drugs only accounted for 15.85% of the local drug market in terms of volume. This increased to 24% in 2005, taking up a large share of the market for branded drugs. This positive performance has been mostly due to the low prices of these products compared to ethical drugs, and the fact that OTC medicines are playing an increasingly important role in preventative and curative treatment for the population.
Outlook and Implications
The Argentine pharmaceutical market has been slowly recovering since 2002. It is currently the third-largest pharmaceutical market in the Latin American region, after market leaders Mexico and Brazil, with overall sales of approximately US$2.9 billion. The outlook for the domestic drug market remains positive as the Argentine economy recovers. However, large investments were mostly carried out before the economic crisis by foreign pharmaceutical companies, and they are expected to remain scarce in the future as long as the country’s patent laws and regulatory framework remains hostile. Several companies such as Roche (Switzerland) and Eli Lilly (United States) have reduced investment in the country to small clinical testing projects, as these tests are not particularly expensive in comparison with the United States and India. Meanwhile, there are rumours that the government is considering implementing a “minimum local manufacturing requirement” on pharmaceutical firms, to encourage those without manufacturing facilities to license drug production to local firms. This initiative is consistent with the government’s commitment to protect the domestic drug industry and develop it as an alternative to importing expensive foreign medicines. Such a move would certainly hit foreign companies, and it would penalise those that sold local manufacturing plants after the economic crisis. Nonetheless, it remains to be seen whether this requirement, which is already in force in Brazil and Mexico, will be implemented in Argentina.