Peru, while considered among the smaller countries in Latin America, has been a stable market in the region. International pharmaceutical companies doing business in Peru would experience a characteristic trait of the Peruvian market that Latin American countries receive noticeable preferential treatment. Moreover, there is little enforcement by the Peruvian government of the bioequivalence measures that are in place in the country.
That being said, the pharmaceutical market in Peru is increasing, and the outlook for the industry continues to be positive. In the next five years, the pharmaceutical market is expected to grow, with a high one-digit compound annual growth rate (CAGR). Most pharmaceutical production in Peru is done by local manufacturers of branded generics or generic drug products. In fact, domestically manufactured pharmaceuticals account for 70% of the total market in Peru.
While the rest of the world suffered through the global economic crisis in 2009, the Peruvian market remained relatively unscathed. In fact, the market for pharmaceuticals reached $1 billion in total sales (which includes both the public and private sectors). In 2010, sales growth is estimated to be at least 10%, with sales reaching a minimum of $1.1 billion for the year. Such growth suggests that the pharmaceutical industry in Peru will be among the most attractive in the region.
Peru’s pharmaceutical market is in a state of transition, and throughout 2010 a number of changes contributed to the evolution of the industry. Chief among these changes was the introduction of a new regulation of medicines, the New Law for Medications, Sanitary Products and Medical Devices. A number of years in the making, this new law was finally approved in November of last year, followed by a six-month implementation stage. While the lasting impact of the new legislation remains to be seen, certain significant developments in the pharmaceutical industry have already come to light since the passage of this law.
As a result of the new law, the Office of Medications, Raw Material, and Drugs is in a position of greater authority in the quality-control process with respect to pharmaceuticals in Peru. Another important provision in the new legislation introduces more stringent requirements for drug registration.
These stronger measures include requiring GMP certification as well as bioequivalence tests to be undertaken for generics. To the extent that these requirements are enforced, the new law could have a transformative effect on the nature of Peru’s pharmaceutical industry, such as with respect to the number of suppliers and the variety of pharmaceutical products available on the market. Moreover, the introduction of stricter penalties for counterfeit drugs should result in a more competitive legitimate market as the informal market is reduced.
The new legislation will also alter the time frame and costs associated with the registration of drugs in Peru and their approval. Upon the implementation of the new law, pharmaceutical companies can expect that the length of time to register their products in Peru will increase.
While previously the registration process required approximately one week to complete, the new law has extended this time line to about six months of review prior to approval of the drug. Moreover, the new law has also increased registration costs. While registration fees were previously a mere $100, the new legislation has raised the costs to approximately $1,000, potentially changing the nature and quality of the pharmaceutical products that are now being registered in Peru.
As the government in Peru continues its focus of providing universal healthcare in the country, such universal coverage will, no doubt, bring about increased opportunities in the pharmaceutical market, as one implication of such policies is the reduction of the black market for counterfeit drugs and a higher demand in the legitimate market.
Moreover, although the government has suggested that it will take steps to reduce drug prices in Peru, there is a constitutional ban on price-fixing measures. Therefore, pharmaceutical companies intending to enter Peru can rest assured that, at least in this regard, free market competition is protected.
While the new law and universal healthcare are among the factors to suggest that the pharmaceutical market in Peru will continue to grow, foreign drug manufacturers should be aware that domestic companies will likely experience most of this growth in Peru. That being said, participation by international firms is expected to grow.
Consequently, at least in the foreseeable future, Peru’s pharmaceutical market will continue to be fragmented with many companies operating within the growing drug industry. Moreover, much as with other countries in the region, the majority of the growth in the pharmaceutical market in Peru will be in the generics sector.
In 2009, the U.S.-Peru Free Trade Agreement was ratified, which drew more attention to Peru from U.S. companies. Together with Peru’s continuing economic growth and political stability, as well as regulatory reforms, the pharmaceutical market in Peru is emerging as among the more attractive markets in the region, offering a growing number of opportunities for drug manufacturers interested in doing business in Latin America.