Generics Fight Brand BiasWed, 09/06/2017 - 11:54
Q: What is Apotex’s strategy for launching its products in Mexico?
A: Over the past 12 months we have been first to market for mometasone, a nasal spray for rhinitis and allergies; diosmin-hesperidin, for chronic venous insufficiency; leflunomide, on the side of rheumatoid arthritis and we are now launching tramadol-paracetamol, a painkiller for moderate to severe pain. We are reshaping our strategy to be more active and efficient in product launches. The company is targeting different opportunities in the generics segment and launching a broad portfolio in CNS products, which comprises antipsychotics and antidepressants, among others. We will launch over 25 products in three years through a full portfolio with a different strategy targeting physicians, which is unusual for Apotex. The company will also introduce some branded products rather than simply generics to complement our product lines. The use of generics in Latin America is different to North America and Europe. It is still generally a branded market. Bioequivalent products are not available in every Latin American country for example. Patients associate brands with quality so, despite the quality of bioequivalents, there is still a preference for brands. We are catering to the demands of the market.
Q: Why do generics generate this level of resistance?
A: Generics have come a long way. Initially regulation was not so strict, so in those days there were products that did not comply with international quality standards. This bias still exists but regulation is now stricter. COFEPRIS is overwhelmed with the work of auditing all manufacturers and ensuring the stricter requirements are properly covered. This is an issue and some will be left behind because they cannot keep up with rising standards. They would have to invest a lot of money to catch up.
Q: What problems do you see with the bidding process established by the government?
A: It changes constantly. At the moment it is talking about packages, which we are still trying to understand. Packaging is more complex because it is not possible to have every product. There are some requirements that are impossible for us to meet so we need to use distributors. I think the bidding process will make some distributors stronger than they already are and that concerns me. For example, a hospital far away in Hermosillo may request a product within 24 hours. For this, we need to work with a distribution company that has its own center because Mexico is five times the size of France and we cannot deliver any given product anywhere in the country within 24 hours. To become more efficient, healthcare providers are ditching their warehouses and we are becoming their warehouse. We also must have different logistics partners because some prefer to work in certain therapeutic areas or in specific regions. Ahead of a tender, they want a letter of endorsement that says we will supply them with a certain product if they win. We sign with the minimum volume and price and if they win the tender, we sell the product to them. Some tenders are national, international or mixed. It is not that they actually want to bring in someone from the outside but it happens that no local company can meet the requirements. We participate as a national company if the product is manufactured in Mexico and international if it is manufactured in Canada or India. Products made in India are more problematic because the tender process generally does not accept these, perhaps because the government is not confident about the quality.
Q: How is the authorized third-party system working?
A: It works well. It costs money because we have to pay for the service but we get faster approvals. It is beneficial to us and to patients, who get new products sooner, and puts lower-cost generics on the market faster. Some Big Pharma companies are trying to extend IP protection, looking for opportunities in the legal framework. As patients and consumers, we should not allow this. At Apotex Mexico we respect patents, of course, but they should not be extended for reasons that do not represent real invention.
Q: How much R&D is done in Mexico and how important is that to the development of your business?
A: Most of the R&D is performed in Canada but our Mexican research complements our efforts in R&D and is more focused on local needs. Canada focuses on the big markets like itself and the US, while in Mexico we look at Latin American opportunities to complement them. We have developed 55
products in our local facilities and many more in Canada. In Mexico, we invest 6 percent of sales revenue in R&D and 4-6 percent more in renewing equipment to improve our technology. Canada invests a much higher percentage.
Q: What types of drugs are researched in your Mexican facility?
A: I have been working on getting back to basics, reshaping the organization’s main activities, and then working a little on the strategic view of where we are going. Over the past few years we have been focusing on doing things better rather than on specific therapeutic areas, except for the CNS line. What we are doing now is aligned with the opportunities we see to penetrate segments in which we do not yet have a presence.
Q: Has the peso depreciation affected your operations? How do you mitigate currency risk?
A: It has affected us, of course. We try to not transfer the full impact to our customers. The company is absorbing some of it by developing efficiencies. Some we are tackling now, improving efficiencies and productivity. We are also trying to develop the export segment because we export in a hard currency. When reviewing market figures, it is possible to see that Apotex is not raising prices as quickly as inflation or in line with the currency’s depreciation. My view is that we will be depreciated, but with the fundamentals under control it will be strategy more than a consequence. We export a good number of our Mexican manufactured products to South America. We negotiate most of those sales in dollars, which mitigates the effect to a certain extent.
Q: What expansion plans do you have for the coming years?
A: We manage the LATAM region from Mexico. Now we have three affiliates in Panama, Nicaragua and Costa Rica and we already have partners in Guatemala, Dominican
Republic, Chile, Argentina and we are about to close a deal for Colombia. The generics segment will remain one of the main sources of growth for Mexico. We will continue to expand to new therapeutic areas, such as prescription. We will start with CNS over the next three years. It will take us that time to gain the relevance we want to have in that area and then I will jump to another therapeutic area. Apotex has been a leader in Mexico since it entered the country. We are celebrating 20 years here and 41 years in Canada. We are one of the few vertically integrated companies, with two API manufacturing sites in Mexico. For 60 percent of our products manufactured in Canada, the APIs come from our Mexican sites. We are committed to this country like no other company.
Q: How does the legal environment protect generics companies from litigation in Mexico?
A: We still have to work on this. We need to get together and be more visible to the authorities to make sure we are being treated fairly. Being close to the US in general helps because we want to be recognized as a highly regulated country that can manufacture products that can be sold everywhere. As we deliver on that, it becomes easier to build trust.
Q: How has the wave of patent expirations benefited Apotex?
A: The products I mentioned for which we will be first to market have expiring patents and we are using the opportunity as soon as we can. This is happening across therapeutic areas. For the CNS line, it will be branded so we do not need to launch the product as soon as the patent expires. For generics however, it is vital to be first.