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Dec 1, 2010 (Vol. 30, No. 21)

Small Latin American Countries Think Big

Policies in Chile, Peru, and Argentina Are Drawing Favorable International Attention

  • Argentina

    No discussion of Argentina can begin without first addressing the near total collapse of the Argentinean market in 2002. That year, the market collapsed by approximately 70%, sending the country reeling. Yet in the last eight years, Argentina has made strides to recover, and it is once again becoming an attractive market for foreign pharmaceutical companies.

    The pharmaceutical market in Argentina has had double-digit growth over the last few years, buoyed primarily by branded products. That being said, with the introduction of a formal price-cutting regulation by the Argentine government in November of last year, this growth rate is likely to slow in the near future. Moreover, in the pharmaceutical sector, Argentina is experiencing a trade deficit, with domestic manufacturers having a surplus while foreign companies are at a substantial deficit.

    Although the government in Argentina has expressed an interest in increasing access to pharmaceuticals, a number of challenges still plague the country. For example, copycat products have had significant dominance in the pharmaceutical industry, and the country offers minimal intellectual property rights protection. Additionally, how much the pharmaceutical market is likely to grow in the future will in part depend on how stable the Argentine economy will remain in general.

    Long before the economic crisis hit Argentina in 2002, the Argentine government had begun to institute measures aimed at the deregulation of the pharmaceutical market, such as reducing distribution barriers, freeing drug prices, and strengthening intellectual property rights.

    These governmental actions had the desired effect, and many foreign pharmaceutical companies entered the Argentine market. However, following the economic crisis, a majority of international pharmaceutical companies had to sell their local assets in Argentina, most of which became acquired by domestic drug companies. This changed the nature and makeup of the Argentine pharmaceutical industry.

    Currently, there are approximately 109 pharmaceutical manufacturers operating in Argentina. Of these, 90 are domestic companies and only 19 are foreign firms. The pharmaceutical market is further characterized by the role of generics in Argentina’s pharmaceutical market. After the economic crisis hit the country, the generics market in Argentina grew substantially.

    In recent years, however, this growth has slowed but has still remained an important sector in the Argentine pharmaceutical industry, even as branded drug products have begun to recover. For instance, in 2001, generic drug products made up 15.85% of the pharmaceutical market in Argentina (in volume). In the years following the economic crisis, this number climbed to 24% in 2005, encroaching on the market share of many branded drug products. Currently, Argentina’s pharmaceutical market is roughly made up of 15% generics.

    Since its recovery in the aftermath of the economic crisis, Argentina’s pharmaceutical market has grown steadily, now positioned as the third-largest pharmaceutical market in Latin America (just behind Mexico and Brazil). Today, overall sales of pharmaceutical products in Argentina stand at approximately $2.8 billion, and the economy in general has been making a comeback. Nevertheless, certain regulatory changes are potentially on the horizon in Argentina. The Argentine government is rumored to be taking under consideration the implementation of a new minimal local manufacturing requirement for pharmaceuticals.

    Such a measure would certainly have significant impact on international pharmaceutical companies operating in Argentina. The possible regulation would serve to protect the domestic drug industry, since foreign firms would have to license drug production to local firms if they did not have their own domestic facilities. That being said this regulation has yet to be implemented in Argentina. Moreover, such a requirement already exists in both Brazil and Mexico, so the perceived effect on foreign drug manufacturers may not, in fact, be so substantial.

  • Conclusion

    Together with Brazil, Mexico, and Columbia, the three countries discussed in this article represent a large and important region for the pharmaceutical sector. The pharmaceutical markets in each of these countries have gone through a series of transitions in recent years, and their regulatory development is still continuing. During these growing pains, there are some challenges that a foreign drug manufacturer must be aware of in order to effectively navigate the shifting regulatory and economic terrain in these countries.

    Although obstacles abound, there are many opportunities in Chile, Peru, and Argentina that international pharmaceutical companies can capitalize on as the markets there mature and evolve. To the extent that new regulations, stronger intellectual property rights enforcement, and other government efforts continue to take place, the attractiveness of the pharmaceutical markets in Latin America in general, and in these countries in particular, will continue to grow. In the current state of the pharmaceutical industry, foreign pharmaceutical companies will continue to be drawn to this region.

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