Chile's medicine prices are likely to rise due to the high cost placed on the producer in the process of obtaining bioequivalence certificates and as a result of the growth in vertical integration.
IHS Life Sciences perspective | |
Significance | Vertical integration and obtaining bioequivalence certificates have increased medicines prices in Chile. |
Implications | The pharma industry has invested more than CLP18 million (USD28 million) during the last year in obtaining bioequivalence certificates for 500 pharmaceutical products. Additionally, the pharmacy chains control almost 90% of the market nationally and their influence on pharmaceutical prices has been questioned. |
Outlook | The process of obtaining bioequivalence certificates is scheduled to be completed by the end of 2015. Senator Guido Girardi is leading the campaign against what has been termed called incestuous vertical integration. |
Chile's medicine prices are likely to rise due to the high cost burden on the producer in the process of obtaining bioequivalence certificates, reports Cooperativa. According to the source, the pharma industry has invested more than CLP18 million (USD28 million) during the last year in obtaining bioequivalence certificates of 500 pharmaceutical products. Additionally, the clinical studies in laboratories and humans represent an extra cost of between CLP10 million–75 million. According to Tatiana Tobar, head of the department of pharmaceutical policy of the Ministry of Health, when an industry is required to provide more controls, technical studies, and certifications, the final prices are likely to increase as a result of the extra cost assumed by the producers. Meanwhile, Jean Jacques Duhart, vice-president of the Chamber of Pharmaceutical Innovation, has stated that "bioequivalence has never aimed to lower the price of remedies in Chile, this regulation aims to standardise the quality, safety and therapeutic efficacy of the drugs".
Chile's health ministry has increased the number of regulated bioequivalent generics in Chile with the implementation of the Medicines Law, which envisages stricter regulations on generics and bioequivalent drugs (see Chile: 16 August 2013: Medicines Law is approved in Chile). The process of obtaining bioequivalence certificates is scheduled to be completed by the end of 2015.
Vertical integration trend
Another trend in the Chilean pharmaceutical market that may increase prices is the proliferation of vertical integration in the distribution market. Chile's three big pharmacy chains – Ahumada, Salcobrand, and Cruz Verde – boast their own pharmaceutical production laboratories and as such have high levels of control over the market. Cruz Verde and Medical International Laboratories Corporation (Mintlab) are affiliates of the same company; Sofocar SA Salcobrand is integrated with Productos Farmaceuticos Medipharm Ltda and Farmaceutica Medcell Ltda, both affiliates of Empresas Yarur SAC; and Farmacias Ahumada SA owns 100% of Laboratorios FASA and Compania de Nutricion General (GNC). The pharmacy chains control almost 90% of the market nationally and prices of average medicines rose from USD4.73 in 2009 to USD6.27 in 2013, reports business newspaper Estrategia.
Outlook and implications
Although vertical integration is not necessarily a negative trend, overuse of this business strategy could negatively affect healthcare sector competition. Specifically in Chile, the reported issues is that the pharmacy maintains monopolistic control over prices in generic and brand medicines and delays the entrance of generics into the Chilean market, according to Estrategia. However, the establishment of the new pharmaceuticals law ignored vertical integration. Senator Guido Girardi is leading the campaign against what has been termed incestuous vertical integration, suggesting that the incentive to sell own brands instead of other firms' generic products has increased considerably in Chile (see Chile: 13 January 2015: Vertical integration increases in Chilean pharma distribution market).
Chile's Medicines Law, which was approved by the Chamber of Deputies in January 2013, attempts to increase access to medicines and pave the way for greater use of bioequivalent generics, introducing new requirements such as ensuring the availability of bioequivalent medicines and displaying the price of drugs on the packaging. However, it has been difficult with the implementation of this regulation at the Chilean retail level. According to the National Federation of Pharmaceutical Workers (Fenatrafar), some of the pharmacies have not made available to the public the list of bioequivalent medicines that have been approved by the Ministry of Health and they do not have a list of prices available, as the recent Medicines Law stipulates (see Chile: 6 June 2014: Pharmacies criticised for lack of compliance to Medicines Law in Chile). Additionally, unbranded generics are a minority among the products to have undergone bioequivalence certification and pharma companies have been criticised for prioritising higher-priced branded generics for bioequivalence certification (see Chile: 2 January 2015: Pharma companies criticised for prioritising higher-priced branded generics for bioequivalence certification in Chile).
Higher numbers of branded generics arriving on the market as a result of the process of obtaining bioequivalence certificates and high concentration of power at the retail level may raise prices in the Chilean market. A preference for bioequivalent products may provide a business niche for the international pharmaceutical companies but could damage the government's aim of supporting generics entrance to the market and reducing medicines prices while boosting the domestic pharma industry.