Pharmaceutical Market Forecast Revised Down
BMI View: Revenue recorded by multinational pharmaceutical companies will continue to be constrained in Colombia over the coming years due to the severe drug price cuts. Less stringent bioequivalence regulations will also undermine sale growth posted by branded generic drugmakers.
BMI has revised down Colombia's pharmaceutical market growth due to the strict implementation of drug price controls and the promotion of generic drugs:
Under Resolution No. 01/2012, published in September 2012, the National Price Commission of Pharmaceuticals and Medical Devices (Comisión Nacional de Precios de Medicamentos y Dispositivos Médicos, CNPMDM) reviewed the prices of 189 products in August 2013.
In December 2013, President Juan Manuel Santos announced another list of 334 drugs under price control.
In January 2014, the Colombian Medical Federation released a new list of the 39 most expensive medicines that will be targeted under government price controls in 2014.
In mid-February 2014, the Minister of Health and Social Protection announced that as of February 13 2014, price cuts have been enforced on 523 active pharmaceutical ingredients (APIs) and that 95% of the drugmakers complied with the regulations.
At the end of February 2014, the government published the final list of medicines subject to price controls and announced that it planned to save over CLP90bn (US$160mn) from the scheme.
In March 2014, Colombia's Superintendency of Industry and Commerce (SIC) charged Abbott Colombia a CLP3,080mn (USD5.48mn) fine for selling Kaletra (lopinavir + ritonavir), an AIDS treatment, at a price between 53% and 66% above the price set by the government.
In April 2014, multinationals with significant presence in Colombia's generic drug market, such as Sanofi (which accounts for 30% of total generic sales in the country) noted that although the government tries to promote the use of generic drugs, its bioequivalence regulation is not up to the standards of developed states. Multinationals were worried that price caps and the prevalence of poor-quality, low-value generic drugs will undermine branded generic drug sales.
As BMI's July 2013 forecast for increasing government drug pricing pressure in Colombia has materialised,  we believe drugmaker revenue streams will continue to be constrained in the coming years. On the positive side, we expect volume sales will be boosted, and this will partially offset the negative impacts of further drug price cuts. We calculate that pharmaceutical sales in Colombia reached a value of COP8,126bn (USD4.35bn) in 2013. By 2018, we forecast that the Colombian pharmaceutical market will be worth COP11,316bn (USD6.271bn), increasing at a CAGR of 6.8% in local currency terms (+7.6% in US dollars). Previously, we forecast the CAGRs to be 7.3% and 8.1% respectively. We will continue to closely monitor pharmaceutical market trends in Colombia and highlight the possibility of future forecast revision if the situation worsens.
|Severe Price Cuts Undermine Market Growth|
|Colombia Pharmaceutical Market Outlook|
We have also reduced the market share of patented drug sector from 67% to 63% in 2014, due to the severe medicine price controls launched this year and the increasing promotion of generic drug sector. We note that as the government is working towards improving its universal healthcare system by reducing costs and improving service, generic drugs will become a key element in Colombia's healthcare system overhaul. 'Unfortunately the health ministry is prioritising cost over safety and efficacy. We think this is a mistake,' Francisco De Paula Gomez, the executive president of the R&D Association of Pharmaceutical Industry in Colombia, told to the local media.
|Severe Price Cuts|
|Price Controls On Key Medicines In 2014 (USDmn)|
 Business Monitor Online - Industry Trend Analysis - Medicine Pricing Pressure Likely - July 16, 2013.