Cornerstone Believes There Are Changes Ahead for the 2016 Pharmaceutical Industry in Mexico

The global pharmaceutical industry has been transformed. Companies have developed different strategies as their products face patent expirations and access to new products (most of them high specialty) is increasingly difficult. Some companies have broadened their product portfolio to include generics such as Novartis and Sanofi, while others focus their efforts in specific therapeutic areas (Roche and Astra Zeneca). Countless high specialty organizations are betting on this high income niche market. Around the globe, low interest rates and high taxes have triggered mergers and acquisitions deals. In the first 9 months of 2015 there were 152 deals with an estimated value of above 221B usd.

Mexico is the eleventh global market for pharma with a net worth of 13.2B usd. The country has a population of 120 million and a stable economic situation, with an expected growth in GDP of 2.5 for 2016.The country has extensive Healthcare needs, particularly those related to chronic diseases such as cardiovascular, diabetes and cancer. Mexico is still considered an “emerging market” by many global companies. It is perceived as having enormous potential and companies hold high expectations for their local subsidiaries.

All this sounds very promising, but there are many challenges. According to the Corruption Perception Index, Mexico holds the 103rd place of 175 countries (iv). There are security problems in the country attributed to drug cartels. Mexico has 55.3 million inhabitants living in poverty. In addition to this, government spending in healthcare as a GDP percentage is only 6.2% while the average of other OCDE countries is of 9.3%. Generic products have quickly increased their market penetration and in 2013 represented 84% of total market value.

Finally, the public sector, which represents 51.7% of total spending in Healthcare, is currently going through reforms and budget cuts.

There is no magic formula or unique strategy to face current challenges. Organizations are developing strategic bets to maximize their value and survive in a lower margin market with limited access to innovative products. 2016 will be a year of uncertainty and major industry changes. Industry leaders face more complex challenges than ever before in the past.

To view the full report, visit www.cornerstone-group.com/2016/06/17/pharmaceutical-industry-mexico-2016-perspectives