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Analysis

Generics Present Both Opportunities and Challenges

Fri, 09/20/2019 - 17:35

That is the case in Mexico, which has become an attractive market for generics manufacturers thanks to government efforts to increase access to medications. During President Peña Nieto’s administration, COFEPRIS approved 590 generic registries to address 71 percent of the most common mortality causes in the country. In mid-2018, former Commissioner of COFEPRIS Julio Sanchez y Tepoz stated that this strategy saved public institutions MX$26.1 billion (US$1.37 billion) and allowed them to increase the number of acquired medications from 4.4 million units to 24.9 million units per month.
The impact of generic medications extends beyond the public sector. “Previous administrations have invested in generics, which amount to 86 percent of prescriptions in the public sector. This has resulted in significant changes to the entire market, including public and private institutions and pharmacy chains,” says Rafael Maciel, President of the Mexican Association of Generics (AMEGI).
Generics have also left their mark on the private sector, creating competition and opportunities. “The generics market has grown exponentially in Mexico and Latin America due to low prices and a boost from pharmacies. There are solid opportunities, particularly in the branded generics segment,” says Esteban Abad, Vice President and Head of Upper Latin America at Glenmark. Now, nine out of every 10 medications sold in the country are generics, according to IQVIA. While their sales volume has quickly surpassed that of patented medications, generics represent only 53 percent of the medicines market by value because of their lower cost. Higher investment in generics could bring even further savings. The Federal Commission of Economic Competition (COFECE) states that Mexicans would save MX$2.55 billion (US$133 million) per year if penetration of generics doubled.
BIG OPPORTUNITIES, BIGGER CHALLENGES
Another type of products that have significant potential in the market are biosimilars. “Biosimilars are expected to change the industry and they have brought significant advantages to those countries in Europe and the Americas that have adopted them,” says Américo García, Managing Director Latin America of Apotex. Unlike small molecules that can be fully replicated, making the patented medication and the generic equal in every way, biological molecules are much larger, complex and cannot be fully replicated because they are produced by living organisms. For that reason, regulators have established a different set of requirements for biosimilars: while a biosimilar cannot be exactly the same as the biotechnological drug, it must be highly similar in purity, molecular structure, bioactivity, safety and potency.
Due to their nature, biosimilars are harder to research and manufacture than generics. Moreover, there are complex patent processes stopping the commercialization of biosimilars even after the patent has expired. For instance, AbbVie’s Humira, which was the world’s best-selling medication in 2018 and earned its manufacturer US$19.9 billion that year, had three FDA-approved biosimilars by early 2019. However, none are commercially available in the US or Mexico and the situation is not expected to change soon. In fact, according to the Initiative for Medicines, Access & Knowledge, AbbVie has filed 274 patents in the US for Humira, 49 percent of them after Humira’s first patent expired in 2014. These patents can increase Humira’s market exclusivity until 2037, much longer than the original patent’s protected 20 years counting from 1994.
A similar situation has occurred with several other biosimilars. “[Biosimilars] have failed to enter many regions, such as the US, which has extremely high barriers for their introduction. The story is similar in Mexico,” says García. Not all markets are the same. After Humira’s patent in Europe expired in October 2018, four manufacturers were quick to introduce their generic version in the region. But in Mexico, their approval might be more complex thanks to recent changes introduced to the yet-to-be-ratified USMCA that extend the protections for the clinical data of biotechnological products. This move was greatly frowned upon by the local pharmaceutical industry. “We have been working alongside generics associations from the US and Canada to fight against these extra 10 years of data protection. This extension will lead to longer wait periods for patients to access biosimilars and will maintain higher prices in the market,” says Maciel.
Despite the challenges that have complicated the entrance of biosimilars to Mexico, many see opportunities ahead. National and international pharmaceuticals, including Neolpharma, Liomont, Probiomed, Sandoz, Amgen, Pisa Farmacéutica and Silanes, are investing in the development of biosimilars for the local market. The development and introduction of biosimilars to the local healthcare system can bring savings to patients who pay out of pocket and to the public healthcare system.
local strength
Mexico is the second-largest pharmaceutical market in Latin America and the 12th in the world. The Mexican public sector, which includes IMSS, ISSSTE, PEMEX, SEDENA, SEMAR and others, is the country’s largest buyer of medications. In 2019 the Federal Administration budgeted MX$79.42 billion (US$4.16 billion) for the acquisition of medications, according to SHCP. Public institutions are heavily reliant on generics to provide care to the millions of people they care for. As Maciel says, generics and biosimilars “amount to 86 percent of prescriptions in the public sector.” Moreover, Mexico has the lowest expenditure in healthcare out of all 35 OECD countries at a total of only US$1,080 annually per person. A significant percentage of that expenditure is made out of pocket by patients without access to social security. The country has the second-highest out-of-pocket costs out of all OECD countries, which is 41 percent of the country’s health expenditure.
These conditions have created a fructiferous environment for generic, less-expensive medications. Many of these are available at the growing number of pharmacy chains, such as Farmacias del Ahorro, Farmacias Similares, Farmacias Benavides, Farmacias Guadalajara and Farmacias San Pablo, among many others. “Farmacy chains offer generics at very competitive prices. Moreover, they offer free doctor’s visits,” says Maciel. Pharmacies at the point of sale now surpass IMSS, Mexico’s largest public healthcare service provider, in the number of daily doctor’s consultations. “These doctors are writing over 400,000 prescriptions per day and the number will continue growing,” says Marcos Pascual, Commercial Director of ANAFARMEX. For comparison, IMSS provided between 180,000 and 185,000 daily consultations, said Patrick Devlyn, President of the Health Commission at the Business Coordinating Council, to El Universal in mid-2019.  
Generics are expected to continue growing and penetrating the Mexican market. “The country’s economic conditions do not allow people access to patented products but for those with enough purchasing power, branded generics represent significant savings in out-of-pocket spending,” says Abad.
MADE IN MEXICO
Mexico is gradually becoming a generics manufacturing powerhouse. The country now ranks as the 25th-largest manufacturer in the world with a production valued at US$4.74 billion in 2017, according to ProMéxico. The country now has 795 pharmaceutical companies, according to INEGI, most of them clustered in three states: Mexico City, Jalisco and State of Mexico. The sector now represents 1.4 percent of the country’s manufacturing GDP. Moreover, Mexican production of generics is expected to increase and reach a value of US$9.48 billion by 2025, according to ANAFAM.
There are bumps on the road, however. First, “the linkage process for patents is extremely unclear and inefficient,” explains Maciel. The second is the USMCA’s additional 10-year protection for data on biotechnological products, which may delay the introduction of biosimilars. Finally, the latest medication tender held in June 2019 which reduced prices by 8 percent and separated distribution from manufacturing. The tender was heavily criticized for accepting bids from Asian countries, as local manufacturers claim that those products are less expensive but follow unethical manufacturing practices.
While there are challenges, there are also opportunities for generics. For instance, during this tender “62 percent of the product keys were deserted, which will create a shortage of medications at public institutions that will force patients to head to the private sector,” says Maciel. Mexico’s growing population will need a large number of medicines, especially as people get older and waistlines keep increasing.