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The Outlook for
Emerging Central American
Pharmaceutical Markets

Often overlooked, the US$18.1 billion Central American pharmaceutical markets present sizeable opportunities for branded and generic drug companies

While Mexico is the largest pharmaceutical market in Central America, companies should not ignore the potential of Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama. Combined, they represent a pharmaceutical market greater than Colombia, Chile or Peru. The region’s manufacturing capabilities are strong and proven, particularly in Mexico. Pharmaceutical research has been limited but opportunities exist.

All Central American countries offer attractive fiscal incentives. The North American Free Trade Agreement (NAFTA) and the Dominican Republic – Central American Free Trade Agreement (DR – CAFTA) also provide advantages, including stronger IPR enforcement. As foreign manufacturers move into Mexico, they are also considering other Central American markets.

This new management report, The Outlook for Emerging Central American Pharmaceutical Markets, has been written by Espicom’s Latin American healthcare analyst Ricardo Vicente. Incorporating much original information, the study shines a critical light on the markets in the region, assessing their status and potential in the current economic and market conditions.

For each market, the report provides analysis of:

• Healthcare expenditure, infrastructure and provision
• Pharmaceutical regulation, IPR, pricing and reimbursement
• Pharmaceutical wholesaling and retailing
• Pharmaceutical markets, with forecast values to 2013

OVER 50 LOCAL MANUFACTURERS REVIEWED

The report provides insight into the local pharmaceutical industry, with a review of leading players:

HIGHLIGHTS FROM THE REPORT

Costa Rica

Costa Rica has a relatively small but open pharmaceutical market dominated by foreign branded drugs in the private pharmacy sector and generics in the public sector. After Mexico, Costa Rica has been the most popular country for foreign producers in the region. Roche, MSD and Pfizer are the leading exporters of pharmaceuticals. Local and foreign producers have developed the export market in neighbouring Central American countries, the Caribbean and Venezuela.

El Salvador

El Salvador is the third largest Central American pharmaceutical market. In the private pharmacy sector, there is no drug price regulation system in place, but taxes and customs duties are applicable. In the public hospital sector, MSPAS and ISSS are co-operating but they have not yet centralised drug purchases. Pharmaceutical production mainly comprises generic medicines. El Salvador is close to Guatemala, and local producers have increased their manufacturing capabilities in order to capture the sizeable Central American market. Bayer is one of the leading international producers established in the country.

Guatemala

Guatemala is the second largest Central American pharmaceutical market. In the private pharmacy sector, there is no drug price regulation system in place, but taxes are applicable. Under Decree No. 16/2003, however, generic drugs and natural products are exempted from VAT and customs duties. In the public hospital sector, MSPAS, IGSS and the Ministry of Defence centralise pharmaceutical purchases via an open contract system with local producers and importers. There are 92 producers, most of whom produce generics. Bayer is the only leading international producer.

Honduras

Honduras is a small economy, with a strong dependence on remittances from Hondurans living abroad. Local producers are small or medium sized, therefore production is limited and only represents about 20% of the market. Honduras has failed to implement the five-year test data protection and patent linkage, under the Dominican Republic – Central America Free Trade Agreement. Prices of locally produced medicines are liberalised. However, prices of imported medicines are regulated, with established wholesalers’ and pharmacy margins.

Mexico

The private pharmacy sector accounts for 72.9% of the pharmaceutical market at retail prices, while the public sector represents the remaining 27.1%. Due to the economic downturn, out-of-pocket pharmaceutical expenditure in the private pharmacy sector is slowing down. The pharmaceutical regulatory environment is fragmented but is showing signs of consolidation. Local manufacturing plant requirements are being phased out over two years. The reform of the Health Supplies Regulation has improved the renewal and registration processes of pharmaceuticals, and there will only be patented drugs and bioequivalent generics in the market from February 2010.

Nicaragua

Nicaragua is the smallest pharmaceutical market in Central America. The market is mainly supplied by imports, as local production represents between 15% and 20% of the market. Pharmaceutical prices are regulated by the Ministry of Development, Industry & Trade (MIFIC); no taxes are applicable to medicines. Pharmaceutical distributors and importers can increase prices in local currency values due to devaluation or inflation. In July 2008, new measures were agreed, mainly increasing the prices of branded medicines until March 2009.

Panama

Rapid economic growth, increasing pharmaceutical imports, a lack of pharmaceutical price regulation, the rising retail pharmacy sector and the consolidation of the public sector have made Panama the sixth largest Central American pharmaceutical market. Panama is expected to show exceptional growth over the next five years and will reach the same size as El Salvador by 2013. Panama is one of the pioneering countries in terms of pharmaceutical regulation in the region; one of the latest measures is the regulation of biologic products.