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Scaling the healthcare wall: is Mexico an attractive market for high cost drug makers?

By Jack Rawson, Analyst

Email: jrawson@partners4access.com

At first glance Mexico presents a significant opportunity for drug manufacturers, with a large population of over 126 million, a developing economy and universal access to reimbursed healthcare. The aging population is also placing an increased need for healthcare services and statistics on the demand for drugs are favourable. Prescription medicine use is increasing rapidly given 77% of the population received prescribed medications in 2016, compared to 65% in 2012 (According to the 2016 National Halfway Health and Nutrition Survey-ENSN). These trends point to Mexico being an increasingly attractive market for drug manufacturers looking to expand into emerging markets.

However, first impressions can be misleading, and upon closer inspection it becomes apparent that the healthcare market in Mexico is more difficult to crack than it may initially seem. There are numerous ‘barriers’ drug manufacturers are likely to face in trying to gain access through public insurance providers. This is particularly the case for manufacturers of high cost drugs. This article will outline these barriers and provide recommendations to drive patient access to high cost drugs, such as orphan drugs.

The barriers to success in Mexico

  1. Fragmented and inefficient healthcare system
  2. Stringent reimbursed price control
  3. Inconsistent access across healthcare providers
  4. Relatively long timeframes to reimbursed access
  5. IP protection not enforced

1. Fragmented and inefficient healthcare system

The Mexican healthcare system is highly fragmented, and the public sector broadly involves two sets of insurers: The Social Health Insurances (SHIs) and Ministry of Health (MoH) managed plans. There are multiple insurance providers within these two sets of public payers (Figure 1).

Figure 1: Healthcare providers in Mexico

The fragmented healthcare system has led to inefficiencies, which are further compounded by the fact that the different insurer providers in Mexico act independently. Each provider manages its own formulary and its own network of hospitals and retail pharmacies. The implication of this is what you would expect- inequitable healthcare coverage across public insurance providers.

2. Stringent reimbursed price control

Price potential for new patented medicines in Mexico is low for such a fragmented market. The Committee for the Negotiation of Drug Prices (CCPNM) was created in 2008 as a reaction to the country’s disjointed public procurement system and heterogenous pricing.  It aims to support public acquisitions through transparent negotiations between public insurers and pharmaceutical companies, negotiating prices on a yearly basis. Overall, the CCPNM has succeeded in lowering drug prices across the public sector, to the extent that formal reimbursed drug prices are much lower than in the EU or US. While the CCPNM has lowered prices, the inefficiencies caused by the fragmented system still exert their pressure on budgets leading to lower spending power in the system overall.

3. Inconsistent access across healthcare providers

Another notable characteristic of the Mexican healthcare system is that, even considering the private market, healthcare expenditure is relatively low at 5.47% of GDP when compared to the OECD average of 8.8% of GDP. Moreover, a large proportion of this spend is via patient out-of-pocket (OOP) spending, which constitutes 45% of the total healthcare spend. This is partly due to poor and/or inequitable healthcare coverage, especially in the public sector. Overall, healthcare spending from public sources is only around 51% of the total healthcare spend.

Low public expenditure on healthcare results in smaller budgets to fund new medicines and creates a more challenging environment for high cost drug manufacturers. Willingness to reimburse treatments across public insurance providers varies with greater access generally being seen in the SHI providers (e.g. the IMSS) compared to the MoH providers (e.g. Seguro Popular). Therefore, drugs which should be reimbursed across the healthcare system are often not in practice by some public insurance providers. This ultimately results in inequalities in patient access to new medicines across healthcare providers.

4. Relatively long timeframes to reimbursed access

The route for a drug to be reimbursed on the public healthcare system is relatively slow compared to other OECD countries. The time from marketing approval granted by the Federation Commission for Protection Against Sanitary Risk (COFEPRIS) to the drug being dispensed in hospital and retail pharmacies is on average 4.2 years. This is driven by the multi-step process that includes national-level coverage and pricing decisions, followed by engagements with each public insurance provider to include the drug in their formulary.

5. IP protection not enforced

Although IP protection laws are fairly standard in Mexico, there is a lack of enforcement with delays in prosecution and ineffective injunctions. However, the current situation is expected to evolve. The US-Mexico Canada Agreement (USMCA), as well as the Patent Prosecution Highway (PPH) agreement the Mexican Institute of IP (IMPI) has initiated with the US Patent and Trademark Office (USPTO) may stimulate change. As Mexico seeks to transition its economy away from low cost manufactured goods, one of the new government’s goals is to increase manufacturer access to the public drug price tender process, which requires IP enforcement to be improved.

However, efforts to curb IP infringement seem to pale in significance compared to the serious issues Mexico is facing with counterfeit medicines. According to the Mexican association of Pharmaceutical Research Industries (AMIF), 60% of medication sold in the country is either stolen, expired, falsified, or produced without meeting minimum quality requirements. This is partly driven by the high cost of legal medicine, but the result is black market groups selling stolen or counterfeit medicines at lower prices though the public providers.

Attempts to tackle this have included seizures from groups selling drugs online. Although this has not been effective in solving the problem as the medicine black market was estimated to double in value from 2017 to 2018. It now represents 9% of the total value of the countries pharmaceutical market.

Will these barriers change?

While these barriers are very much entrenched characteristics of Mexico’s healthcare system, this doesn’t mean things won’t change in the future. The country is seeking to change its system for the better, and there are signs of positive steps being made.

Mexico’s new president, Andres Manual Lopez Obrador assumed office on the 1st of December 2018. The new leadership’s healthcare strategy goals were announced, and included:

  1. Federalising the Mexican Healthcare System
  2. Decreasing confidential discounts and other arrangements between public institutions and manufacturers
  3. Increasing local drug manufacturer access to the public tender processes

Are there any current opportunities?

While there are certainly other considerations to be made when evaluating Mexico’s market attractiveness for high cost drugs, the problems outlined here are mainly concerning public policy. It is likely steps will be made to decrease fragmentation in terms of access, and in doing so hopefully decrease its associated inefficiencies. With that said, high cost drug manufacturers looking at the Mexican market would be wise to explore case-by-case reimbursement routes, as well as the private insurance market for the time-being. Such routes would sacrifice volume for better prices and faster market access.

Partners4Access is an expert global consultancy specializing in access for orphan drugs, cell and gene therapy. If you would like support in your product candidate commercialization journey, please contact the team on contact@partners4access.com.

References:

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  36. https://iclg.com/practice-areas/pharmaceutical-advertising-laws-and-regulations/Mexico

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