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Analysis

Medical Devices, Pharmaceutical Production: Pillars for Recovery

By Miriam Bello | Fri, 04/30/2021 - 14:17

As vaccination campaigns move forward, Mexico starts building on recovery strategies to help the economy to get back on track. Many industries will contribute to these efforts but MBN interviewees weigh in on the significant role healthcare – medical devices and pharmaceutical production in particular – will play in pushing the country toward the new normal.

According to AMID, medical devices production in the country exceeds US$15.22 billion in value and generates more than 130,000 jobs. It also represents 0.3 percent of the total GDP and 1.5 percent of the manufacturing GDP. Mexico also has a very consolidated pharmaceutical industry, with a solid production network and strong supply capabilities. According to CANIFARMA, the pharmaceutical industry represents an average of 1.2 percent of the national GDP and 7.2 percent of the manufacturing GDP. Approximately 74.7 percent of the industry focuses on patent drugs, 12.1 percent of generic drugs and 13.2 percent of non-prescription drugs. During Mexico Health Summit 2021, Arturo Morales, Corporate Affairs Director at Landsteiner, said that this industry provides 100,000 direct jobs and more than 300,000 indirect jobs and since 2018, it has become a strategic pillar for the country’s economic sustainability.

Industry Strengths

The relevance of these sectors points to their role in Mexico’s post-COVID-19 economic recovery. Furthermore, the undeniable reinvention of the role of healthcare at an individual and systematic level has made this industry a priority for stakeholders and investors.

According to North American Production Sharing, the country’s position as the third-largest medical devices exporter Mexico’s leadership in FDA, CE & ISO 13485 certified manufacturing processes and the high percentage (70 percent) of plants operating in controlled environments – most having class 10,000 or class 100,000 clean rooms –, are among the country’s main advantages in terms of production.

Globally, even before the COVID-19 pandemic, Ignacio García-Téllez, Director of the Health Sector at KPMG México, estimated a continuous growth for the medical devices industry. The firm forecasted global annual sales growth of over 5 percent year-on-year, reaching nearly US$800 billion by 2030. “These projections reflect increasing demand for innovative new devices (like wearables) and services (like health data), as lifestyle-related diseases become more prevalent and economic development unlocks the huge potential in emerging markets,” states KPMG. According to Oxford Business Group, since the beginning of the COVID-19 pandemic, company members of AMID have experienced a six-fold increase in demand. Ana Riquelme, Executive Director of AMID, told MBN that this demand had been mainly driven by ventilators and personal protection supplies, which experienced a 1,000 percent increase in demand. As vaccination campaigns move forward, Mexico’s public demand for syringes is expected to grow by at least 35 percent, said Riquelme.

The Mexican pharmaceutical industry has also become more specialized as years go by. Learning key lessons about critical processes in manufacturing and supply, while also designing key pharmaco-vigilance standards has been critical in this sector, said Deyanira Chiñas, Commercial Director of T5DC, during Mexico Health Summit 2021. The country is making important advances in personalized treatment and medication for personalized health conditions, she highlighted. “The achievements of the national sector are so significant that international companies have flocked to adopt many of these techniques.”

Chiñas comments align with INEGI´s findings regarding the Mexican pharmaceutical industry. Data shows the industry directly impacts 161 economic activities out of a total of 259. Given their size, companies in the pharma industry are also an important employment and economic development driver. A company in the pharmaceutical industry has an average of 121.4 people employed. Other manufacturing companies report a 10.4 people employment rate, while the national average is 5.1 per economic unit, according to INEGI. Moreover, in the pharmaceutical industry, the participation of women is higher than that observed in manufacturing and general economic activities.

Among the industries most heavily impacted by pharmaceutical activities are:

  • Production of basic chemical and pharmaceutical products
  • Business administration services
  • Employment services
  • Grinding of seeds to obtain oil and fats
  • Imports
  • Production of cardboard and paper products
  • General cargo motor transport
  • Accounting, auditing and related services
  • Corporate activities
  • Advertising and related activities
  • Production of plastic products
  • Production of petroleum and coal products
  • Generation, transmission and distribution of electricity

Just as for the medical devices, growth forecasts for the pharmaceutical industry were significant prior to the COVID-19 pandemic. A KPMG report on the pharma industry states that “to cope with the demographic trends of general population growth and ageing, the increase chronic diseases rate, treatment costs and poverty (which leads to malnutrition and infectious diseases), a solid pharmaceutical industry is necessary to interact with all the elements that move the health sector.”

According to AMID, COFEPRIS has played a strategic role in the growth of these two sectors through the digitalization of procedures for issuing records for both generics and innovative medicines, supporting scientific research in the country, participating in international cooperation agreements and establishing regulations that improve the competitiveness of the sector. This has increased the access to health products for the Mexican population, especially pharmaceutical products that are consumed more frequently and in greater scale than medical devices. Moreover, the KPMG report projected a supply chain and logistics transformation to support the local pharma industry. With the COVID-19 pandemic, these initiatives have accelerated. According to CANIFARMA, the pharmaceutical industry works at full steam and it foresees sales growth of between 6 and 7 percent in 2020 unlike other industries that are still suffering the effects of the health crisis.

Growth Opportunities and Challenges

The medical devices sector has two clear growth axes: increasing local consumption of medical devices and strengthening the country’s already established relationship with the US. “AMID wants to attract more investment to Mexico to continue manufacturing for foreign companies. We want to pour that investment into local medical devices companies,” said Riquelme. She pointed out that Mexico’s manufacturing capacities and good practices are among the most valuable assets in this sector. “Devices like heart valves are handmade with such quality and detail that it is hard to deny the level of production.”

Propelling local consumption of medical devices has been deemed essential to boost medical devices manufacturing in Mexico. Riquelme highlighted that AMID has requested a meeting with the minister of economy to attract more final assembly processes to Mexico. “To achieve this, Mexico would need to increase its medical devices consumption, as the final assembly is commonly done at the product’s point of sale to avoid damaging the device.” One example is ventilators, which are 80 percent manufactured in Mexico. However, the final assembly takes place where the device is sold. “The solution to this is simple,” Riquelme stated. “The government needs to understand the benefits of medical devices and allocate more budget to these solutions.”

Growth in the pharmaceutical industry, on the other hand, is conditioned by the highly uncertain environment the government has created around medicine purchases to supply public institutions. During Mexico Health Summit 2021, Patrick Devlyn, President of the Health Commission at CCE, exposed what the private sector sees as a major setback for growth. The government’s enacted changes to the LAASSP, opening the door to acquiring medicines through UNOPS, which generated much uncertainty among suppliers that could no longer plan their stock, investment or time of production. Authorized third parties have also been limited in their functions, which has led to delays in COFEPRIS’ approval times. Finally, many projects under a public-private partnership scheme have been cancelled.

For multinational innovative companies like Chiesi, the panorama exposed by Devlyn creates complexity and doubt. Marco Ruggiero, General Manager of Chiesi Mexico, told MBN that both multinational and national companies require profits to continue working, which can be compromised if Mexico prevents transparency in this sector. “This can lead multinational companies to reconsider their plans for Mexico and their investment intentions,” said Ruggiero.

In the generics industry, Benjamin Vega, Commercial Director of Allen Laboratorios, explained that the national industry strongly depends on government tenders, so it is important to restructure what has been done. “Clarity and capacity are key in this process, as well as strategies to open to different markets,” he said during an interview with MBN. Vega stressed the industry’s capacity to create a virtuous circle for the local economy, “supplying therapies, providing dignified jobs and creating innovation opportunities.”

A critical area of opportunity for Mexico to strengthen both its pharmaceutical and medical devices industry are local clinical trials. During Mexico Health Summit 2021, Carlos López Patán, Director General of Medix, lauded the achievements of both transnational and national companies in Mexico. However, he stated that Mexico needs to strengthen clinical research and take advantage of the incredible talent that is has developed over the years. “Tech should be enabled, so doctors and laboratories can be part of a virtual chain that uses artificial intelligence to not only develop medicine but also create a more accurate profile of patients,” he stated.

Boosting Mexico’s potential as a research hub has been identified as a key factor to address by experts such as Fernando Cruz, Country President of Novartis. During an interview with MBN, Cruz explained that Mexico has an important number of patients treated by IMSS. In total, the public sector treats more than 70 million patients. This, coupled with the available talent among healthcare professionals and enough infrastructure, makes this investment a smart choice, he said. Cruz also highlighted COFEPRIS’ position as a reference in regulatory processes in the region, which allows clinical studies done in Mexico to gain faster approval in many countries that recognize COFEPRIS’ authority in the matter. Field experts, such as Melissa Rosales, Director General of RM Pharma, recommend to have more research protocols, to encourage patient recruitment and to break bureaucratic hurdles.

Miriam Bello Miriam Bello Journalist and Industry Analyst