Reinventing Mexico’s Supply Chain Model

The COVID-19 pandemic broke down global and domestic health supply chains, leading to shortages and bottlenecks in medicines that undercut accessibility, inflated out-of-pocket costs and amplified hospitalization rates. While the most acute phase of the pandemic has seemingly passed, new challenges have arisen, rendering Mexico’s supply chain model obsolete. In light of this reality, industry leaders look towards the public sector to build a balanced, certified and sustainable purchase and distribution models for the short, medium and long-term. 

“This is a conversation that is happening across all global economies. Domestic companies are already discussing it and we congruently agree that it should begin with a state of the sector diagnosis with special attention to logistical discrepancies and essential medicines,” said Rodrigo Fernández, Director General and LATAM Head, TEVA. 

Initially, inconsistent drug deliveries were followed by changes to the Acquisition Law for medicines and medical supplies. This unleashed irregularities among local medicine manufacturers and distributors as they struggled to navigate the new consolidated purchasing model that centralized operations through the Institute of Health for Wellbeing (INSABI). By intentionally cutting out distribution companies, public institutions and state entities were left to compute their own orders. The federal government anticipated that the new acquisition system would generate savings and help combat corruption, but a year after going into effect it had failed demonstrably: by October 2021, INSABI had only delivered 9.5 percent of all drugs requested by states, according to an investigation by Animal Politico. During this time, shareholders including laboratories, logistics and distributors were forced to work hand in hand to ensure the best distribution practices for drugs and medical equipment. 

However, as evidenced by the rollout of this regulatory amendment, “this is not a problem that can be solved unilaterally, from either the private, public or civil sector; it requires interaction on behalf of all three to generate ideas free of as many blind spots as possible,” said Miguel Lombera, President, CANIFARMA.

Considerations

Before even attempting to formulate a new supply chain model, industry experts agree that they need more data to identify pitfalls, risks and opportunities. Furthermore, they recognize the central role Mexican public health institutions and possibly even international agencies like the World Health Organization (WHO) and Inter-American Development Bank (IADB) will play during this reformation process. Overall, this process should ideally involve as many stakeholders as possible in order to build a global and local supply chain that is capable of guaranteed growth and generating added value, said Lombera.

During this process immediate concerns include how to augment domestic production, how to balance global and local supply chains and the need to differentiate medications through standards or certifications. Moreover, it is imperative that the public sector is willing to reconsider the current overregulation of the sector that has generated unintended impacts along the supply chain over the last year and a half, say industry experts. 

“Other considerations involve the expected wave of nearshoring and the start of a new political cycle, all of which point to the rapidly evolving nature of this macro challenge,” says Juan De Villafranca, President, Asociación Mexicana de Laboratorios Farmacéuticos (AMELAF). In light of this, he recommends that the challenge be approached in multiple stages so that the constructed system, regulatory standards and stakeholders can adapt to the evolving reality produced by changing domestic and global conditions. Furthermore, given the urgency of this challenge and implied investment costs, the process should be followed by transparency and accountability. 

“Regulators also play a key role in ensuring access to medications. In the case of generics, authorities need to work faster so generic drugs can reach the population on time,” says Américo García, Vice President and General Manager for Latin America, Apotex. By accelerating this process, regulators will further promote a framework that will propel quick access to new medications and supplies, he says.