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New Calls to Permit Foreign Drug Distributors in Mexico20 Mar 08Julio Portales, Novartis's (Switzerland) vice-president of corporate affairs, has proposed a series of new measures to reduce the price of drugs in Mexico, including allowing foreign drug distributors to operate there.
According to Julio Portales, who was quoted in the Reforma newspaper, if Mexico is serious about lowering medicine prices it has to permit the entry of international distributors; increase the volume of purchases in the public sector in order to offer larger discounts in the private sector; and expand medical directories to include drugs that have shown themselves to have a good cost-to-benefit ratio. Drug Distributors Enjoy Healthy Margins A drug manufacturer bases the retail price displayed on a product's packaging on its average price in six reference countries (see Mexico: 28 September 2007: Mexican Finance Ministry Proposes New Pricing Model for Patented Medicines). However, drug companies then have to increase their prices by 23% in order for pharmacists to operate with a margin of 15% and distributors with a margin of 8%. Many manufacturers believe that the high margins for these two sectors have been inflating the price of medicines in Mexico. Manufacturers' concerns have been amplified by the imminent creation of the so-called Co-ordinating Commission for the Negotiation of Medicine Prices and Other Health Supplies, which will negotiate the price of drugs on behalf of all the public sector health institutions (see Mexico: 14 February 2008: Creation of Mexican Price Commission Imminent). The concern here is that the new commission will only affect manufacturers, and will not decentralise distribution or lower prices in the private market. According to Portales, if prices in the private market are to be lowered it needs to go hand-in-hand with increased purchases in the public sector. Outlook and Implications In the past, the relatively high price of drugs in Mexico has been variously attributed to the local manufacturing requirement, the 20-year patent protection period and to import costs. Although opening the market up to foreign distributors could indeed lead to lower prices, current legislation does not permit it. According to the North American Free Trade Agreement (NAFTA), only national companies can obtain permission to offer transport services between two points on Mexican territory. Currently, around 30 drug distributors exist in Mexico, although two of these, Casa Saba and Nadro, together account for 70% of the private market. Meanwhile, it has been estimated that the new price negotiation commission will create savings of approximately 5 billion pesos (US$464 million) on public sector purchases, which would leave a massive hole in the finances of Mexico's drug industry (see Mexico: 25 February 2008: Mexico's New Price Commission Predicted to Make Savings of US$464 mil.). In order to offset this, the association of research-based pharmaceutical companies, AMIIF, has been campaigning for the savings to be channelled towards additional purchases. |
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