From Price Pawn to Pharma Power: Mexico’s Reinvention Playbook

On May 12, 2025, President Donald Trump signed Executive Order 14297, "Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients," triggering a seismic shift in global pharmaceutical pricing. Under the MFN rule, US Medicare must reimburse prescription drugs at the lowest price paid in any OECD country with a GDP per capita exceeding 60% of the US level. In effect, Mexico-historically one of the OECD’s lowest-price reference countries-has now become a benchmark for US drug pricing.

This policy is expected to set off a cascade of consequences. Pharmaceutical manufacturers facing sudden margin erosion in the US market will seek to compensate by raising prices elsewhere, delaying launches, or deprioritizing low-margin countries. Mexico, already struggling with chronic underfunding, severe procurement dysfunction, and a fragmented public-private delivery model, may seem like the most fragile domino-ready to fall first.

Yet, Mexico’s current fragility is not new. Over the past seven years, the country’s healthcare system has undergone a dizzying series of disruptive reforms —- each aimed at transformation, yet, each plagued by implementation failures, political swings, or poor execution.

The dismantling of Seguro Popular in 2019 by the López Obrador administration marked the first major shift, eliminating a program that provided partial universal coverage for millions. It was replaced by INSABI (Instituto de Salud para el Bienestar), a hastily launched, underfunded model that lacked clarity, governance structure, and integration with state-level systems. That initiative, too, was eventually scrapped. In a bid to reform procurement, Mexico outsourced medicine purchasing to the United Nations Office for Project Services (UNOPS), a bold move that resulted in serious delays, insufficient coverage, and widespread stockouts. In response, the government created the so-called Mega Farmacia, a centralized warehouse intended to streamline last-mile delivery-but as of mid-2025, it remains largely non-functional, lacking both inventory and distribution capabilities.

This continuous overhaul-marked by swings between centralization and decentralization, foreign outsourcing and domestic experimentation-has produced confusion, institutional fatigue, and erosion of trust among both patients and providers. The Mexican healthcare system has not merely stagnated; it has been destabilized by back-to-back reforms that failed to deliver results.

In short, the system has been battered, not just by resource constraints, but by reform overload. And now, against this backdrop of exhaustion and underperformance, Mexico is suddenly thrust into the international spotlight by MFN pricing-not as a passive observer, but as a reference country whose pricing policies may shape US drug costs and global pharma margins.

But what if MFN is not Mexico’s doom, but its catalyst?

What if, instead of succumbing to this new pressure, Mexico embraces the disruption to radically modernize its healthcare infrastructure and regulatory ecosystem-simultaneously strengthening domestic access and positioning itself as the pharmaceutical manufacturing and innovation hub of the Americas?

Mexico now stands at a critical crossroads. The choice is stark: remain a vulnerable cost-containment pawn, or become a strategic player with resilient, modernized institutions and competitive industrial capacity. This article lays out a pragmatic, actionable roadmap for the latter — one that turns adversity into advantage, institutional inertia into innovation, and failed reforms into a foundation for reinvention.

1. Procurement Inefficiencies: The Cracked Foundation

Mexico’s public healthcare network-led by IMSS, IMSS-Bienestar, and ISSSTE-relies on a biannual, consolidated procurement process overseen by BIRMEX (Laboratorios de Biológicos y Reactivos de México). Intended to deliver scale, efficiency, and transparency, the system has instead devolved into a model of dysfunction-marked by bottlenecks, legal disputes, delays, and supply chain failures.

The most glaring recent example? The 2025–2026 national drug tender was declared null by the Ministry for Anti-Corruption due to procedural violations and suspected overpricing of over MXN 13 billion. As a result, more than 70% of the drug lots intended to supply Mexico’s major public institutions were left unawarded. We are now in June, and the system remains in limbo. This decision halted contracts covering 73% of nearly 500 essential drug codes, triggering acute shortages for insulin, oncology agents, and antihypertensives nationwide.

Even when tenders are awarded, logistics challenges remain endemic. Last-mile failures, supplier non-compliance, inadequate warehousing, and distribution delays mean that medicines often do not reach clinics and hospitals. A 2024 audit revealed that over 60% of IMSS clinics in rural areas had stockouts of basic drugs, while 80% lacked critical oncology and nephrology treatments.

Supplier confidence has eroded significantly. Multinational and domestic pharmaceutical companies frequently abstain from bidding, citing regulatory unpredictability, payment delays, and inconsistent quality requirements. This breakdown creates a self-reinforcing crisis of access, credibility, and continuity.

Actionable Solutions:

• Digitize procurement (Transparent e-Procurement Platform) through real-time dashboards, AI-enabled risk alerts, and automated compliance tracking. A public dashboard updated daily-with tender status, awarded suppliers, delivery milestones, and penalty triggers.

• Mandate performance-based contracts, with financial incentives for reliability and penalties for non-compliance. Introduce bonus payments for on-time, full-quantity deliveries and impose swift penalties for non-compliance, backed by automated compliance checks.

• Establish five decentralized regional logistics hubs, each equipped with modern warehousing, cold-chain capacity, and last-mile delivery oversight. At least five high-capacity logistics centers tied by real-time inventory management, ensuring reserves of 60 days for tier-1 medicines.

Fixing procurement inefficiencies is not just a technical fix-it is the cornerstone of systemic reform. It stabilizes domestic access, rebuilds trust with manufacturers, and sets the stage for pharmaceutical industrialization.

2. Regulatory Bottlenecks: Choking Innovation

The Federal Commission for the Protection Against Sanitary Risks (COFEPRIS) remains a significant bottleneck in Mexico's drug approval process and overall market access. As of early 2025, over 1,500 marketing authorization applications are pending, with some delayed for more than 18 months. Even fast-track pathways, such as those utilizing international reliance mechanisms — leveraging approvals from agencies like the FDA, EMA, or Health Canada — face substantial delays due to staff shortages, unclear criteria, and bureaucratic inertia.

While COFEPRIS has recently committed to processing certain clinical trial approvals through a new reliance pathway within 45 calendar days, this initiative is still in its early stages and has yet to demonstrate consistent results. In contrast, Brazil's regulatory agency, ANVISA, has established a more efficient reliance pathway, routinely clearing foreign-authorized trials within 45 days, highlighting COFEPRIS's lag behind its global peers. 

This sluggishness not only hampers timely access to innovative therapies for Mexican patients but also diminishes Mexico's attractiveness as a destination for pharmaceutical investment and clinical research. These delays have a chilling effect: pharmaceutical companies delay or cancel product launches, shift clinical trial investments elsewhere, and divert R&D pipelines to more agile regulatory environments. Patients suffer the most, denied timely access to next-generation therapies.

Strategic Reforms:

• Institutionalize reliance pathways and harmonization by mandating legally binding 30-day approvals for drugs and devices already cleared by FDA/EMA/Health Canada, slashing review times. Participate actively in PAHO/PANDRH convergence workstreams to share guidelines and inspection reports.

• Expand and upgrade COFEPRIS’s digital platform (DIGIPRIS) for dossier submissions, integrating AI triage tools that flag incomplete applications, rank high-impact submissions, and automatically allocate them to specialized reviewers. Consider AI-assisted document validation, real-time status trackers, and e-labeling functionalities.

• Create a Regulatory Innovation Fellowship, placing private-sector experts on temporary secondments inside COFEPRIS for six to 12 months to drive process reengineering, mentorship, and capacity-building and fostering knowledge transfer of ICH and GMP best practices.

A modern, agile regulatory authority is a strategic asset-one that boosts Mexico’s competitiveness in global trials, attracts biopharma investment, and delivers innovation at speed.

3. Out-of-Pocket Crisis: The Quiet Collapse

Out-of-pocket (OOP) health expenditures in Mexico now account for over 40% of total health spending-the highest in the OECD. Of this, pharmaceuticals make up more than 52.7%, meaning stockouts and delays in the public sector directly push patients into catastrophic financial exposure.

A 2024 CONEVAL (National Council for the Evaluation of Social Development Policy) survey revealed that over 12 million Mexicans spent more than 30% of their annual income on healthcare, mostly on medicines, diagnostics, and private consultations. The proliferation of private pharmacies and retail clinics is often portrayed as innovation-but it is more a desperate workaround by families left behind by an underperforming public system.

Policy Proposals:

• Implement income-adjusted co-pay caps for outpatient pharmaceutical purchases. Mirror Spain’s tiered system, charging low-income households 0–10% of drug costs while higher-earning patients pay up to 40%, redistributing financial risk fairly.

• Distribute e-vouchers to low-income households, redeemable at accredited pharmacies and clinics.

• Enforce a national formulary with mandatory coverage and stock availability across both public and licensed private providers.

• Set procedure-specific price caps for chronic therapies, such as dialysis (~MX$3,800 per session) or standard chemo cycles (MX$4,500 per infusion), to establish absolute caps on patient co-payments when treatments occur in accredited private facilities.

• Integrate public and private providers (Unified Referral Networks) via a National Health Access Card, enabling patients to use nearest accredited clinics under a fixed voucher amount, thereby reducing commute times and improving adherence.

Addressing OOP costs is not just a question of economic relief, it is essential to restoring institutional trust, enabling social mobility, and generating political bandwidth for deeper reforms.

4. Private Sector: An Untapped Force Multiplier

Mexico’s private healthcare sector, valued at over US$48 billion, remains largely disconnected from national health strategies, leading to underutilization in achieving public health objectives. This separation results in significant duplication, fragmentation, inefficient capital deployment, and constrained access-particularly affecting middle-income patients.

At a time when the public sector is underperforming, leveraging private capacity is not just strategic, it is urgent.

Immediate Integration Levers:

• Contract private imaging and diagnostics networks to alleviate backlogs and enhance early disease detection. Outsource large imaging and laboratory networks for urgent tests, guaranteeing 24-hour turnaround times for CT scans, MRIs, and oncology panels.

• Implement therapeutic bundled payment models for high-prevalence chronic diseases such as diabetes and renal failure. For example, partner with dialysis and oncology clinics under bundled-payment models where providers assume volume risk in exchange for stable reimbursement per treatment cycle.

• Scale telehealth services through public-private partnerships, establishing unified platforms, shared infrastructure, and comprehensive quality oversight.

• Integrate private pharmacies into a national e-prescription clearinghouse, issuing reimbursements directly and capturing anonymized dispensing data to monitor usage patterns and identify supply gaps.
  A key challenge to address is the separation of public versus private pricing and dispensing channels within the same pharmacy. Without clear logging and traceability mechanisms, there is a risk of data misreporting or cross-subsidization. A robust dual-channel tracking system must be implemented to ensure transparency and compliance.

Key Enabler:

• Develop a federated digital backbone built on secure Application Programming Interfaces (APIs) that connect institutions, track patient entitlements, and flag anomalies (for example, duplicate prescriptions), thereby fostering accountability and enabling data-driven supply planning.

Additional Strategic Actions:

• Incentivize domestic pharmaceutical manufacturing firms, particularly small and midsized enterprises (SMEs), to invest in the production of sterile injectables, biologics, and specialty generics - products that are underproduced locally yet in high regional demand.

By activating the private sector as a force multiplier, Mexico can drive cost efficiency, expand access, and enhance supply chain resilience. Public-private integration not only strengthens systemic resilience and enables risk-sharing but also sets the foundation for a competitive, integrated pharmaceutical ecosystem.

5. Mexico as a Regional Manufacturing and Innovation Hub

Mexico’s strategic assets are undeniable: proximity to the United States, competitive labor costs, a highly skilled health-sciences workforce, and robust logistics infrastructure. Yet, its global pharmaceutical export share remains below 1%, mainly limited to generics and packaging. The potential for growth is massive not only for drugs but for APIs.

Key Levers for Growth:

• Develop life sciences clusters in hubs in strategic locations like Guadalajara, Monterrey, and Bajío, with tax incentives, expedited permitting, and R&D subsidies.

• Build biomanufacturing parks tied to research universities and export corridors, with streamlined regulatory pipelines.

• Utilize existing manufacturing capacity, which remains underutilized by large national producers and global firms, by offering productivity-based incentives. Investment in Good Manufacturing Practice (GMP) certification is critical.

• Attract and provide anchor incentives for global CDMOs (Contract Development and Manufacturing Organizations) to set up Latin America headquarters in Mexico, leveraging the country as a bridge between US demand and Latin American markets.

Mexico can also become a clinical trial powerhouse by reducing bureaucracy in ethics review boards, accelerating site certification, establishing trial registry norms aligned with international standards (FDA/EMA protocols), and investing in real-time data infrastructure.

A functional domestic healthcare system-built on reliability, data integrity, demand predictability and stable reimbursement-is the platform from which Mexico’s global competitiveness is launched.

6. United States-Mexico Collaboration: MFN as a Bilateral Imperative

MFN policy, by tethering US prices to Mexico’s, creates a paradox: the United States now has a vested interest in Mexico's pricing stability, regulatory reliability, and supply continuity. Disruptions in Mexico can backfire by triggering price shocks in the United States This interdependence presents a strategic opportunity to embed Mexico into the US pharmaceutical security framework.

Joint Initiatives to Explore:

• FDA-COFEPRIS convergence programs, including joint inspections, shared batch-release protocols, and harmonized labeling.

• Develop binational API (Active Pharmaceutical Ingredient) and KSM (Key Starting Materials) corridors in northern Mexico, backed by BARDA (Biomedical Advanced Research and Development Authority) and DFC (US International Development Finance Corporation) capital, reducing US dependency on Asia.

• Establish binational centers of excellence in Monterrey or Tijuana for cross-border research in drug manufacturing, digital health, and rare diseases.

The United States-Mexico relationship must evolve from transactional to strategic. By framing Mexico not just as a cost-saving node, but as a resilient, quality-driven pharma partner, the region gains shared resilience, innovation, and supply chain security. This approach positions Mexico not just as a low-cost provider-but as a strategic partner in North American pharmaceutical sovereignty. Together, the United States and Mexico can displace China and India’s dominance in APIs and critical ingredients, bolstering regional health security.

The Future Is Intertwined

The MFN policy was designed to slash US drug prices, but it has inadvertently thrust Mexico into a starring role in the global pharmaceutical value chain. Today, Mexico stands at a pivotal crossroads: allow its fragile health system to buckle under the weight of global pressures, or seize this moment for bold, systemic reinvention.

Improving Mexico’s healthcare system is no longer just a matter of access, reliability, or innovation. It is no longer a domestic issue. It is now a geopolitical and economic imperative. Healthcare reform is the linchpin for Mexico to become a competitive, resilient, and innovative pharmaceutical hub – not just for itself, but for the entire hemisphere.

By digitizing procurement, modernizing regulatory processes, reducing household financial burdens, integrating the private sector, and forging a binational alliance within the US life sciences value chain, Mexico can define its next decade not as a price pawn, but as a pharma power.

Incremental change is no longer enough. This is Mexico’s MFN moment-its inflection point. If it plays its cards right, Mexico can transcend its historic limitations and rise as the pharmaceutical anchor of the Americas, challenging Asia’s dominance in global pharma supply.

The question is no longer if Mexico must change, but how swiftly it can orchestrate this transformation. The stakes-health, equity, and economic prosperity-could not be higher.

Let this be Mexico’s moment to thrive, not merely to endure.