Creation of Mexican Price Commission Imminent

According to the Financiero newspaper, patent drug manufacturers and distributors are currently in talks with Mexico's Health Secretariat to iron out the regulatory details of the so-called "Co-ordinating Commission for the Negotiation of Medicine Prices and other Health Supplies". As reported previously by Global Insight, the role of the new commission will be to negotiate the price of all patent medicines purchased by the country's various public health institutions (see Mexico: 8 February 2008: Mexican Government Looks to Harmonise Drug Prices for Public Health Institutions).

As part of the negotiations, the 34 member companies of the association of research-based pharmaceutical companies, AMIIF, have made a request to the innovation sub-secretary, Maqui Ortiz, that savings made as a result of the new commission should be invested in purchasing additional drugs, which could then be used to provide increased public sector coverage.

AMIIF has also requested that public health institutions make an annual plan for their drug purchases, which would allow manufacturers to rationalise the production and import of medicines. According to the AMIIF's executive director, Rafael Gual Cosío, public sector health institutions are accustomed to agreeing their purchases by volume but then subsequently reducing their order, which results in an increase in the originally agreed price.

Drug Purchases and Distribution Services May Be Negotiated Separately

One initiative being considered is establishing two different tiers for price negotiations. The first tier would apply to medicines themselves, and so only drug companies would be invited to participate in them. The second tier would apply to the distribution process, and so would involve wholesalers and specialist distribution and logistic companies—including multinational firms such as UPS and Fedex.

This would represent a significant change from the current system, whereby the public sector purchases its drugs from wholesalers, albeit with the involvement of drug companies. However, a spokesman for the leading drug distribution firm Maypo has indicated that such a move would carry dangers for his company, given that it not only distributes drugs but also provides a wide range of value-added services.

Outlook and Implications

Although the new commission will nominally be headed by the Health Secretariat, it will in practice be dominated by the IMSS. This is a worry for the drug industry because the IMSS's high volume of purchases, its entitlement to set reference prices and its enormous experience in negotiating with drug companies and other healthcare suppliers enabled it to make savings of 2.5 billion pesos (US$233 million) last year. One of the biggest factors contributing to the savings was a 25% price cut imposed on its suppliers, and a similar cut has been imposed this year (see Mexico: 12 December 2007: Mexican Health Service Asks for Drug Price Cut). Given the scale of the cutbacks, the research-based drug industry was disappointed that the huge savings were channelled towards labour and operational costs instead of being used to increase drug coverage for IMSS members.

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