Healthcare spending in Mexico is expected to rise from MXN687bn (US$61.4bn) in 2008 to MXN1,052bn (US$101bn) by 2014, representing a compound annual growth rate (CAGR) of 7.3% in local currency terms and 13.1% in US dollar terms. Furthermore, public sector healthcare spending is forecast to rise from US$22.9bn in 2009 to US$40.7bn by 2014, accounting for 40% of total spending in the healthcare sector.
The rise in public healthcare expenditure is largely attributed to the ongoing promotion and uptake of the Seguro Popular health insurance scheme and thereafter, a continued rise in the utilisation of medical services. The full impact of the recession in Mexico will push forward urgent generic substitution legislation as patients' more prudent approach bolsters the switch away from patented medicines. Despite general assumptions that patients will maintain brand loyalty to patented prescription drugs, it is our view that consumers will be more likely to use both the 2011 patent cliff and the wider availability of healthcare to save money where possible.
A key determinant of growth within the Mexican healthcare market across all types of drug spending is that higher volumes of generic drugs will be sold, though in terms of value this only contributes 7.5% to the total drug market. While the generic pricing policy in Mexico may be susceptible to various fluctuations, the main health and regulatory bodies such as the Institute of Health and Social Services (ISSSTE) are under pressure to save on costs where possible. Restructuring their budgets will undoubtedly presage a more pro-generic drug policy.
Another area of improvement is the ongoing phasing-out of similares. These may only comprise a small proportion of the total market value - as low as 5% - but this continues to pose problems for patented and generic drugmakers in Mexico. While it can be argued that in terms of value, similares feature heavily in the preferences of low-income groups and is therefore not a sizeable determinant of overall healthcare market growth, their presence in the market poses regulatory concerns.
Similares are not bioequivalent and are legally questionable. Branding and advertising of the largest similare drugmaker in Mexico abounds, with pharmacies attached to surgeries in economically deprived areas stocked full of similares. Accessing similares can be easier than a getting hold of generic drugs in some parts of Mexico - rural or isolated areas remain attractive targets for similares manufacturers. Cheaper prices and marketing has created a loyal consumer base.
The presence and perceived acceptance of similares within Mexico questions the regulatory authorities' ability to assure the safety of all medicines available in the country, and could later undermine genuine generic drugs from gaining a larger market share by value. On the political front, wiping out similares could alienate low-income groups - which can be considered an undesirable outcome by the current government given the impending general elections in 2012.