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Mexican pharmaceutical industry booms

March 1, 2017
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Why this is important to Wisconsin businesses: The 2010 lifting of a restriction opened the market to foreign entrants.

As of 2015, Mexico’s pharmaceutical industry was the second-largest in Latin America and ranked 12th globally. This industry harbors dozens of multinational and domestic companies manufacturing high tech products such as antibiotics, cancer treatment products, a wide variety of over-the-counter medicines, vaccines and many other products.

The industry gained a major economic boost with the repeal of the derecho de planta law—which required all companies selling pharmaceuticals in Mexico to have a manufacturing facility in the country—in early 2010, opening the domestic market to numerous new players (a total of 718 manufacturers as of 2014, 31 percent of these operating in the Mexico City metro area). Currently, 20 of the 25 largest pharmaceutical companies in the world have operations in Mexico; names such as Merck, Schering Plough, Boehringer Ingelheim, Pfizer, Bayer, AztraZeneca, GlaxoSmithKline and Roche have been operating in the country for decades. Large national companies include Liomont, Sanfer, Silanes, Hormona, Rimsa, Arlex, Probiomed and Ophia. This boost has been favored also by improvements in regulation, production practices and certifications.

Many foreign companies have made large investments in Mexico over the years. It is estimated that during the period 2005-2014, foreign companies invested a total of $3.2 billion. The largest investments came from the U.S. (36.4 percent of the total), Luxembourg and Ireland (11.7 percent each), Germany (11.5 percent) and Spain (7.8 percent).

In 2015, the pharmaceutical industry had a total estimated value of 82.8 billion Mexican pesos in 2015, or 2.9 percent of manufacturing GDP and 0.5 percent of total GDP, according to the Secretary of the Economy. The industry employed more than 42,000 people, which represented 1.2 percent of the total manufacturing workforce, signaling high output per worker and a higher than average productivity.

Low production cost is one of the reasons for the recent boost of this industry in Mexico: it is estimated that production costs are 17.1 percent lower than those in the U.S. and the lowest amongst OECD nations, according to consulting firm KPMG. International business of the Mexican pharmaceutical industry totaled $7.5 billion in 2015, representing 1 percent of Mexico’s total international business. This amount comprises exports of $2.1 billion and imports of $5.4 billion, pointing to a heavy dependency on imported products—and an important opportunity for foreign manufacturers. The largest export product groups were alkaloids, antiserums, antibiotics, disinfectants, natural herb-based products and gels, with the main destinations being the U.S. (24 percent of all exports), Switzerland (12.2 percent), Panama (11.2 percent), Venezuela (10.9 percent) and Colombia (5.9 percent). The largest import product groups were reactive products used for diagnosis and vaccinations, with the most imports coming from the U.S. (21.2 percent), Germany (18.2 percent), France (11.3 percent), Puerto Rico (8.6 percent) and Switzerland (6.1 percent). Notably, the pharmaceutical industry is one of the few in Mexico that is not overwhelmingly dominated by international commerce with the U.S., but rather, shows a more balanced situation.

It is estimated that by 2020, Mexico’s total pharmaceutical production will reach a value of $22.4 billion (increasing by a 9 percent compound annualized growth rate during the period), while domestic consumption will reach $26.9 billion, closing the gap between production and consumption, but still requiring imports to meet domestic demand. It is also expected that generic products (non-branded bioequivalents) will keep gaining ground in the domestic market, given the much lower cost and thus appeal for consumers.

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