Pharma emerging markets: Latin America
Ruben Gennero &, Valentina Jaramillo
IHS Global Insight &, Investigacion Clinica Latam
Latin America is more than a southern continent populated by 577 million people. Indeed, it is more than a group of countries playing good football or enjoying carnivals and colourful traditions. Once called ‘the new world in old times’, there is a group of us who strongly believe our region continues to represent an interesting opportunity for the rest of the world, in particular in terms of healthcare and the pharmaceutical sector. According to figures from IMS Health (2010), Latin America’s pharmaceutical market (Top 4) worth US$ 35 billion and experienced an average growth rate of 24%(sales revenue over last 12 months), compared with 3% in North America and 1% in Europe. As part of this optimistic scenario, clinical research and likely changes in policy regulations are driving the attractiveness of Latin America as a market open for innovation and development for the healthcare and pharmaceutical industry.
An updated picture of Latin America confirms that it is likely that the region is particularly strong at the moment, driven mainly by political stability, an interesting world geo-political influence (driven by countries such as Brazil and Mexico), and finally its ability to quickly overcome the latest economic crisis exhibiting strong growth rates. These facts mean that Latin America in some way has started to leave behind its image of an ungovernable region characterised by dictatorial regimes, poverty and corrupt economies. However, inequality and social exclusion still remain challenges.
“…clinical research and likely changes in policy regulations are driving the attractiveness of Latin America as a market open for innovation and development…”
When we assess the big picture in terms of the Latin American market, it is possible to see that Chile has become the country with the highest income per capita (US$ 14,900 PPP) recently overtaking Argentina. However, in absolute terms Brazil is the biggest and most attractive market, based on its huge population and growth. Venezuela continues to base its economy in oil exports, and Bolivia and Peru, despite the huge growth figures that especially the latter has exhibited, continue to be the most vulnerable countries. Public expenditure in health represents almost 50% of the total health expenditure in the majority of cases, except in poorer countries and Brazil, where out of pocket expenditure is massively important. In terms of healthcare outcome such as infant mortality rate and life expectancy, it is noticeable that South American figures are far better than Africa, and some countries even have pretty similar standards to those in Europe (Chile, Uruguay and Argentina for example), including life expectancy figures which are closer to 80 rather than 70.
Such development has increased the access of healthcare throughout Latin America, and countries there have a well established mixed health system, mainly public but with an important private component. Healthcare expenditure as part of the Gross Domestic Product (GDP) is around 7%, split almost 50/50 between public and private expenditure. The private expenditure is driven basically by public insurance premiums and out of pocket spending. Despite the strong economic growth, development has brought different type of consequences.
Even though access to healthcare has gone up, the change in the patterns of diseases has turn resulted in an increase in the demand for health services and drugs, now fuelled by non communicable diseases such as cardiovascular (CVD) and cancers. In the majority of the countries in the region, CVD and cancer represent half of the mortality rate and prevalence of diabetes and obesity increase every year. An aging population, further access to healthcare, increased diagnoses, the so called “transitional epidemiology” from infectious to non communicable diseases and the presence of a middle class with strong purchasing capacity, have reshaped the healthcare and pharmaceutical sector in Latin America. Thisopens opportunities as well as new challenges to the industry.
“However, in absolute terms Brazil is the biggest and most attractive market, based on its huge population and growth.”
Clinical Research in Latin America
During the last decade, as predicted, the Clinical Trial business has become stronger in Latin America. This is confirmed by the NIH database which says that between 1999 and 2009, 4415 clinical trials were held in Latin America. Even though the number of trials decreased in the past 2 years due to the global crisis plus the complexity of the regulatory process, especially in Brazil and Argentina (the leading countries of the region), Latin America is starting to pick up its growth rhythm again. The region is now more mature and is ready to deal with the new challenges.
There are several reasons for the pharmaceutical industry to choose Latin America to perform clinical trials. These reasons include highly experienced investigators, access to a large number of patients, and an excellent quality of data. The cost of performing a trial in the region is also very appealing compared with what is paid in the United States and Europe.
Other reasons why the pharmaceutical industry should think about Latin America are that (as mentioned early previously) the disease patterns are similar to those seen in Europe and the USA, , but with a season compatibility (when is winter in the north it is summer in the south), which can be useful for season related diseases. The doctor-patient relationships are very tight, which helps with the patient retention rate making this an excellent characteristic regarding compliance.
The seriousness of people working with clinical trials and their knowledge of Good Clinical Practice, the implementation of Documento de las Americas (the GCP applied to Latin America) and all country specific regulations regarding clinical trials need to be highlighted as an advantage of working in the region.
Policy Regulation and access to drugs in Latin America
In regard to regulatory aspects, a large variability can be found across Latin America, where medium-high economies such as Chile co-exist with low income countries such as Bolivia, big emerging markets such as Brazil and small ones like Uruguay. A common approach in terms of regulation within Latin America has proven to be difficult. You might imagine that the diversity across health systems, especially in terms of policies,pricing and reimbursement and some protectionism with local companies, might create a complicated scenario in terms of market access.
“…the presence of a middle class with strong purchasing capacity, have reshaped the healthcare and pharmaceutical sector in Latin America.”
However, as part of the development in the region, many countries are setting up new policies in terms of access to drugs for their respective population. Indeed, health reforms in Chile such as AUGE (Universal Access of Established Guaranties), the 150% increase in the public health budget of Brazil during the last few years, the extension of reimbursement list of the public health system in countries such as Paraguay and Bolivia, plus inclusion of new vaccines in national vaccination schedule, might suggest that there is a big opportunity in terms of reaching bigger markets.
One important example is what Mexico is doing through the implementation of Seguro Popular. Seguro Popular is a popular Insurance, which is likely to turn out to be the main source of public health financing, covering 49 million Mexicans at the end of 2011. These reasons all suggest that a good understanding of the complexity of the regulatory aspects in Latin America can open the door to an intense market offering plenty of opportunities.
It sounds great, are there any challenges?
Latin America is an interesting region for expanding healthcare and pharmaceutical business, however there are some challenges to face in order to get the most of it. One important challenge is the delay in terms of the national regulatory processes. The pharmaceutical industries and Clinical Research Organizations (CROs) need to be aware of this issue. To overcome it they need to adjust their own internal processes so as not to have their own timeframes influenced by the respective country´s approval times.
Another challenge for the industry is that Latin America consists of 22 different countries with different cultures, ethnicities, governments and different regulations. Getting to know each country and preparing in advance for what each country will request becomes very important. Having local partners for outsourcing is also a way to overcome this issue. Even though most countries speak Spanish (except Brazil which speaks Portuguese) there are local variations in language that cannot be dismissed. Doing so could cause further problems with site communications and informed consent.
However, these are no motives to get discouraged. On the contrary, knowing these challenges will allow Pharmaceutical companies and CROs to take appropriate measurements to overcome them and turn them into opportunities. Latin America is still in its teenage years regarding pharmaceutical development, and it would be necessary to see these difficulties as an invitation to develop new strategies that will enable companies to obtain all the potential that the region has to offer.
“The cost of performing a trial in the region is also very appealing compared with what is paid in the United States and Europe.”
We need to consider Latin America a key emergent market as a whole, rather than just considering Brazil or Mexico, for example. This is true especially when it comes to research and business development. If pharma took a more active role in integrating upstream and downstream research, whilst taking into consideration the local epidemiology, they could boost the development of science and drugs. The resultant could be a benefit to the Latin American population and the pharma industry as a whole.
About the author:
Ruben Gennero MD, MBA, MPH is a Healthcare &, Pharma Analyst – Latin American Markets at IHS Global Insight. He can be contacted at firstname.lastname@example.org.
Is it time we considered Latin America a key emergent market?