pharmaceuticals: carving out a medical ... 2013 healthcare life sciences & review 2013...

MEXICO 2013

HEALTHCARELIFE SCIENCES

REVIEW&

2013

PHARMACEUTICALS:

SHAKING UP THE SYSTEM

PAGE 21

CARVING OUT A MEDICAL

DEVICE MARKET

PAGE 56

CASE STUDY: SILANES

PAGE 70

CONVERGENCE IN ACTION:

FOCUS ON DIABETES

PAGE 82

published in association with

COFEPRIS Revamped

Mikel Arriola, the man who changed an institution and an industry PAGE 18

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Mexico: Healthcare & Life Sciences Review 2013

1ACKNOWLEDGEMENTS

Healthcare & Life Sciences Review – Mexico 2013 is brought to you by


2 ACKNOWLEDGEMENTS

Focus Reports would like to thank all individuals, institutions and companies

involved in producing this report.

Special thanks go to

Rafael Gual (CANIFARMA),

Mikel Arriola (COFEPRIS),

Milton Rosario (OD Consulting Group)

Hector Valle (IMS), and

Fabiola Trigueros (Smart Scale)

who showed us their strong support and interest throughout our project.


3CONTENTS

THE MEXICAN HEALTHCARE SYSTEM 7

The Current Situation Through the Eyes of a Patient 8

Fragmented Institutions, universal coverage? 10

Interview with Eduardo Gonzalez Pier – former finance director of IMSS 14

Medical Tourism 16

Interview with Mikel Arriola, COFEPRIS 18

PHARMACEUTICALS 21

Introduction by Rafael Gual, CANIFARMA 22

Shaking up the system 23

An outstanding example 24

Shifting landscapes shift strategies 26

Home turf 29

Unreached Potential 32

Pharma’s affair with Private labels 33

Stengthening guidelines for biosimilars 35

Interview with Fabiola Trigueros, Smart Scale 36

The legal perspective on…by Alejandro Luna, Olivares 38

Expert eye… The Mexican Public System, by José Carlos Ferreyra. President, Pharmaceutical Institute, A.C. 40

Expert eye… The Healthcare System and Regulatory Framework in Mexico

By Sandra Sánchez, President of the Mexican Association of Pharmaceutical Research Industries (AMIIF) 42

Interview with José Alberto Peña, VP & General Manager of GSK Mexico 44

Focus on orphan drugs

Interview with Markus Krenzlin, Country Manager, Shire Mexico 46

Expert eye: Optimizing pharmaceutical distribution channels

By Dominik Bacher and Reto Zoppi, director general and commercial director, BacherZoppi 48

MEDICAL DEVICES 50

Mexico’s potential for medical devices 51

A Challenging Regulatory Landscape 53

Carving Out A Medical Device Market 56

Seguro Popular Needs To Extend Its Reach 58

Made in Mexico 60

Doing Business With “Integrators” 62

Distributing health 64

INNOVATION: Creado en Mexico? 66

Case Study: Silanes 70

REINVENTING HEALTHCARE 73

Expert eye… Public Private Partnerships, by Jose Alarcon, PWC 74

Interview with Jaime Cervantes, Vitalmex 76

Looking for leaders 80

Convergence in action, a focus on diabetes 82


4 INTRODUCTION

The publication of this first edition of a Healthcare & Life Sciences Review on Mexico

in 2013 couldn’t be timelier. Mexico has blossomed in the healthcare arena and has

become an important partner for the US. I’m pleased that the Mexican healthcare

sector is having a turn in the spotlight.

Over the last decade, the Mexican government has made unprecedented efforts

to ensure universal healthcare coverage to all its citizens through Seguro Popular

– and today, the program serves as a role model for health policies around the

world. Beyond Seguro Popular, a growing middle class, and aging population have

increased healthcare expenditures and the demand for an efficient distribution

system throughout the diverse geography of the country.

In addition, Mexico has consolidated its position as a major manufacturing hub for both

pharmaceuticals and medical devices. The trade flows between Mexico and the US to

the North; and Mexico to the south with Central and South America have also grown.

All of this means opportunities and challenges for logistics in the region. DHL

Supply Chain has a keen focus on the development of the Latin American healthcare

industry, which has shown steady growth for almost a decade now. This growth is

credited to the exponential growth of the world’s emerging markets – primarily

Brazil and Mexico, where governments and manufacturers have committed to

increase market penetration and expand coverage, at a lower cost for the end

consumer. The region’s overall economic conditions and rapid recovery from global

economic crisis ensures solid opportunities for industry players in the region.

DHL Supply Chain has a strong presence in the key Latin American markets, pioneering

sophisticated and customized logistics solutions for customers with highly complex

supply chains. We develop strategic partnerships with our customers to: help them

identify opportunities for efficiencies; to help them achieve their business goals; and

to simplify their logistics through our end-to-end solutions such as hospital logistics

and secondary packaging, both recently launched and already providing great benefits

to our customers. We are pleased to share the knowledge, infrastructure and expertise

that support the impressive industry growth in Mexico and throughout Latin America.

We are delighted to support Focus Reports in the compilation of this invaluable

report on the current Healthcare and Life Science industry in Mexico. The publication

encapsulates the views of key figures across the healthcare and life sciences industry,

and provides essential opinion and analysis for those wanting to understand this quickly

evolving market. I hope it proves to be a valuable asset for your business, as well.

Sincerely,

José F. Nava, President, DHL Supply Chain Latin America

Introduction from DHL

José F. Nava, President, DHL Supply Chain Latin America

“DHL Supply Chain

has a keen focus on

the development of

the Latin American

healthcare industry,

which has shown steady

growth for almost a

decade now.”


5INTRODUCTION

“As Mexicans we must be prepared for a new stage of our country’s development”.

These have been the inspiring words of newly-elect President Peña Nieto, who

has promised to transform Mexico into a competitive global power. As the world’s

thirteenth largest economy, there is no question that Mexico has outgrown its status

as a low-income developing nation. Nevertheless, the country has disappointed in

the rate of its development considering that more than 40% of its citizens are still

defined as poor. With such indicators, it comes as no surprise that the country’s

provision of healthcare is still a work in progress.

For the last decade Mexico has made healthcare a priority and a right of all its

citizens. With the introduction of universal coverage in 2004, known as the Seguro

Popular, the country has been moving to increase healthcare access and improve

the quality of service. To do this, the government has vowed to augment health

expenditures from 6.4% of GDP to 10%. This is certainly a welcome move given

that currently Seguro Popular only budgets around USD$200 per patient per year.

Money alone, however, will not fix the fragmented nature of the Mexico’s current

healthcare system, which varies widely in terms of quality from state to state.

Indeed, the greatest challenge at the moment is defining an effective structure that

will efficiently incorporate all of the actors relevant to the healthcare sector. Only

once this has been achieved will true efficiencies emerge and access be enhanced.

This will be reflected in a reduction of waiting times, a decrease in overall costs

and an increase in the quality of service. Currently, there are constant reports

of mismanaged funds and insufficient resources. Greater transparency must be

created so that states and healthcare institutions become accountable for the

money they are granted by the federal government.

A predominating opinion amongst experts is that Mexico’s healthcare must be

rearranged under the scope of convergence. The idea is that the patient should

become the focal point of all actors, who must understand their role in the

healthcare ecosystem in a holistic manner. Rather than simply playing an individual

part, it is essential for all actors to understand how their contributions affect the

wider system and how they can better interact with other players to improve their

services. This includes coordinating the activities of the public, private and not-for-

profit sectors with the final aim of creating an integrated system.

Undoubtedly, convergence of wills should happen before convergence of actions.

This is why raising awareness and rallying all actors around a core objective – the

patient – is crucial. We hope this publication serves to further this effort.

A Call for Convergence

Note from the Focus Reports team

Publisher: Julie Avena

[email protected]

Digital Publisher: Iain Plummer

[email protected]

Senior Editor: Leonardo Barquero

[email protected]

Art Director: Ines Nandin

[email protected]

Associate Editor: Nala Nouraoui

Kirsty Avril Jane Walker

Rachel Marusak

Contribution: Teddy Lamazere

Focus Reports

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Copyright Focus Reports 2013All rights reserved. No part of this publication maybe reproduced in any form or by any means, whether electronic, mechanical or otherwise including photocopying, recording or any information storage or retrieval system without prior written consent of Focus Reports.While every attempt is made to ensure the accuracy of the information contained in this report, neither Focus Reports nor the authors accept any liabilities for errors and omissions. Opinions expressed in this report are not necessarily those of the authors.


7THE MEXICAN HEALTHCARE SYSTEM

The MexicanHealthcare system


8 THE MEXICAN HEALTHCARE SYSTEM

• Most Mexicans (44%) are dissatisfied with the performance

of the Mexican healthcare system.

• Primary reasons for criticizing the healthcare system’s

performance are waiting times (74%), the availability of

medications (52%), lack of patient-/consumer-orientation

(47%), limited access to services and convenience (45%),

and wellness-orientation (38%)

• 65% of consumers believe that 50% or more of healthcare

spending is wasted.

• Consumers are optimistic (69% agree) about the possibility

to simultaneously improve quality and reduce costs in the

current system of care.

• However, Mexicans are satisfied with the level of care

offered by primary care centers (83%) and hospitals (72%)

• Dimensions of the Mexican healthcare system that

consumers feel positively about include up-to-date

technology (39%), modern buildings and equipment (33%),

and medical innovation (31%)

The Current Situation Through the Eyes of a Patient

Whether it is cost, efficiency, quality or technology, what do Mexicans think of their healthcare system today?

Copyright © 2011 Deloitte Development LLC. All rights reserved.

60%40%20%0%

10%

19%

52%

47%

19%

19%

22%

38%

33%

31%

30%

33%

24%

39%

45%

74%

Favorable grade (”A” or “B”)

Unfavorable grade (”D” or “F”)

Up-to-date technology

Up-to-date buildingsand equipment

Medical innovation(new treatments

or services)

Focus on wellnessrather than illness

Access to services(availability and

convenience)

Patient- andconsumer-centered

Availability ofmedication products

Wait times for service

Using a typical report card scale of A, B, C, D and F, how would you grade the health system in Mexico on the following dimensions?

Statistics from Deloitte 2011 Survey of Healthcare Consumers in Mexico - Key Findings, Strategic Implications


9THE MEXICAN HEALTHCARE SYSTEM

Note: Bars may not sum precisely to the totals

above due to rounding.

Source: Deloitte 2011

100%

80%

60%

40%

20%

0%A

1%

14%

41%

24%20%

44%15%

FAVORABLE GRADE

2011 Mexico

UNFAVORABLE GRADE

B C D F

Using a typical report card scale with grades A, B, C, D and F,

how would you grade the overall performance of Mexico’s

healthcare system?

Source: Deloitte 2011

100%

80%

60%

40%

20%

0%

3% /6% 83% / 72%

NOT SATISFIED

Primary care provider Hospital care

SATISFIED

1

1 3 1 1 1 2 14 3 4

910

2221 2526

36

25

2 3

2 3 4 5 6 7 8 9 10

Overall, how satisfied are you with the quality of care you

receive from your primary care provider/received from

the hospital you used most recently?


10 FRAGMENTED INSTITUTIONS

Exactly 10 years ago Mexico realized that its public healthcare provision was

inadequate as it was based on a system of employment benefits. This left over 50

million Mexicans without healthcare coverage because they were largely employed

by the country’s widespread informal economy. The implementation of the Seguro

Popular transformed access to healthcare into a right rather than a privilege,

and today it has succeeded in registering all those who were excluded under the

original national healthcare plan, the Mexican Institute of Social Security (IMSS)

created in 1943.

More than just the social aspect of covering the whole country without leaving

anyone behind, Seguro Popular is also interesting for the pharmaceutical and

medical device industry as a whole, by massively bringing new consumers into

the market – despite the low prices. Even more interesting for the government,

if Seguro Popular currently represents huge spending to cover the most citizens

under its umbrella, it should in the long term allow savings through preventive

medicine rather than expensive treatment.

Unfortunately, the more Seguro Popular grows, the more it exaggerates the

fragmentation of the healthcare system, as it is the states that are responsible for

the implementation of the program and the management of the infrastructure.

Each state manages its network of general hospitals and a smaller group of high-

specialty hospitals. To meet the huge demand of such an attracting new coverage

system, both the federal and state governments had to build their own primary care

and hospital facilities in a short amount of time but it has not been accompanied by

a similar growth in terms of human resources, making it very difficult to deliver a

quality and efficient care. This is a direct consequence of the lack of strict national

requirements and standards expectations that would encourage most hospitals to

homogenize the care provided, whether it is through IMSS, ISSSTE, PEMEX or the

National Institutes.

This disparate mosaic of so many different institutions is the main source for

varying services and quality offered at health clinics. If the GDP spending for

healthcare is still below Latin American average and far behind OECD countries,

Fragmented Institutions, universal coverage?Mexico’s move to offer universal healthcare coverage to its population is unprecedented and has been hailed as

an example for other countries to follow.

“There is clearly

enough money for

healthcare in the

country. However the

issue is infrastructure

and the articulation

of the fragmented

elements of the system:

it is too complex and

not efficient.”

Jaime Cervantes, President of

Vitalmex,


11FRAGMENTED INSTITUTIONS

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IN THE SPOTLIGHT:

Dra. Mercedes Juan López -

Health Secretary”

Born in Mexico City, Dr. Mercedes Juan Lopez is a surgeon

specialized in Rehabilitation Medicine.

Dr. Juan López has garnered over 35 years experience

in federal, state, and academic pursuits of public health

policy and research. In her distinguished career, she has

served as Deputy Chief of Education at the Ministry of

Health General Directorate of Rehabilitation; Technical

Secretary, Health Cabinet, Republic of México Presidency;

Secretary of Health Regulation and Promotion, Ministry

of Health; Federal Deputy, LVII Legislature; Secretary,

Health Commission and the Commission on Population

and Development; Vice-coordinator, Parliamentary Faction,

PRI; Coordinator, Liaison Unit, Ministry of Health Congress;

Secretary, General Health Council; Commissioner of Health,

COFEPRIS; Member, Governing Board, National Women’s

Institute; Executive President, Board of the Mexican Health

Foundation.

As the first woman to head the Ministry of Health, she

has offered to work with care and dedication to guarantee

efficient and quality public health services, with a particular

focus on prevention.

The industry’s reactions to her nomination in December

2012 were very positive. She is perceived as competent and

committed, and her nomination was seen as “ a great news

for the industry but also for the country”.


12 FRAGMENTED INSTITUTIONS

“Secretarias de Salud”. Each of these different segments act

with their own mechanisms, their particular processes, using

different technologies for treatments. That is why the Mexican

market is not very clear and difficult to classify as developed or

not, given the fact that it has so many different layers.”

Roman Rosales, general manager of medical services and ER

for Mexico City, Health Department, adds that “as long as our

health institutions remain financially independent, it will be

difficult to obtain a performing healthcare system. Universal

coverage is the best solution to homogenize medical practices

in the country, provide equal services to the patients, display

high technology equipment, and insure equal professional

medical attendance to all patients.”

Indeed, the notion of a cohesive healthcare system was one

of the propositions of incoming President Peña Nieto who

included healthcare as one of his main pillars for reform.

The idea was a central part of his Pacto Por Mexico reform

proposal that rallied all political parties together under

some state that Mexico has the resources to create a

better healthcare system, if only it was more united. Jaime

Cervantes, President of Vitalmex, a company providing

integrated healthcare services, explains that “there is

clearly enough money for healthcare in the country.

However the issue is infrastructure and the articulation of

the fragmented elements of the system: it is too complex

and not efficient.”

Echoing the views of many general managers of the industry,

Carlos Jimenez, Director General of B. Braun Aesculap

de México contends that “it is difficult to view the Mexican

healthcare market as one single entity. Indeed, the healthcare

market is Mexico is composed of 4 to 5 different segments.

There is the highest standards segment, that would be the

private sector and the “5 star hospitals”, followed by the

National Institutes at the government level, which are every

much focusing on quality. I would then classify IMSS and ISSSTE

as the third segment and finally the decentralized parts with the

1. Mexican Institute of Social Security

2. Institute for State Workers Insurance and Social Services

3. Secretariat of National Defense

4. Secretariat of the Navy

5. Mexican Petroleum

Source: IMSS

SERVICE PROVIDER

Secretariat of Health

State Health Services

IMSS-Oportunidades

IMSS

ISSSTE , SEDENA ,

SEMAR , PEMEX

Private hospitals

and clinics

POPULATION SERVED FINANCING

Institutions that provide services to an open/uninsured population

Institutions that provide services to a population with social security

Institutions of the private sector

Self-employed, unemployed,

workers in the informal economy

Federal Government

and user fees

Federal Government, State

Government and user fees

Federal Government

Federal Government,

employers and workers fees

Federal Government

and workers

Employees and employers

Vulnerable and marginalized

population

Workers from the private sector

of the formal economy and

IMSS workers

Workers from the public sector

of the formal economy

Individuals with or without

social insurance and with a larger

ability to pay for health services

1.

2.

4. 5.

3.

The National Health System


13FRAGMENTED INSTITUTIONS

a single cause. That cause is the assurance to transform

Mexico into a country with enviable living standards and

robust economy that is recognized globally.

Gonzalez Pier, former Finance Director of IMSS, and current

President of Fundación Mexicana para la Salud (Funsalud)

concludes that “the healthcare system in Mexico is at a crossroads.

We are working on turning a system that is very fragmented

and inefficient into something that is more appropriate to the

needs of the population. There is a lot of consensus regarding

universalizing health care coverage, but we need to be more

precise on what exactly universal health care entails.”

“There are two hot topics on the core agenda: what will be

the benefits and the population groups covered. We need

to include those who are not covered yet, and provide more

interventions currently not being delivered. It will be a tough

challenge because it is difficult to deliver the same level of

care throughout the whole healthcare sector. We also need

to define and work on the new tools required to deliver this

brand new health system. Beyond defining a common view of

health care, the real challenge will lie in implementing the

system in an efficient and sustainable manner.”

The sum of insurees may be larger than the total Mexican population

(113,122, 894 citizens) due to the overlap in insurance agencies. For instance,

individuals covered by both IMSS-Oportunidades and Seguro Popular.

Sources: Individual estimates are based on IMSS, Monthly Report to the

IMSS user population and AcceDer, December 2010; The State Workers

Institute for Insurance and Social Security (ISSSTE), Annual Statistics 2010;

System of Social Protection in Health, Report of Results 2010; Mexican

Petroleum (PEMEX); Secretariat of National Defense (SEDENA),

Secretariat of the Navy (SEMAR); and the National Institute of Statistics

and Geography (INEGI), Population and Housing Census 2010.

PEMEX,SEDENA, SEMAR,

1,091,321(0.96%)

Private,2,006,687(1.77%)

Other publicorganizations,900,884 (0.8%)

IMSS,55,705,875(49.24%)

ISSSTE,11,993, 354

(10.6%)

SeguroPopular,

43,518,719(38.47%)

Population by insurance status


14 INTERVIEW: EDUARDO GONZALEZ PIER

IMSS is a central pillar of Mexico’s healthcare system and the largest social

security institution in Latin America. How do you assess the level of healthcare

provided by IMSS?

To evaluate the efficiency of our services, it is key to look at the amount of resources

we are granted per person. When you divide the available budget per person covered,

it comes down to about USD$ 350 per person per year, which is only slightly higher

than Seguro Popular.

Taking into account the amount of money allocated per person each year, we

provide an excellent service. We offer all levels of care, with very few restrictions.

It is difficult to find an insurance scheme that is so comprehensive with the budget

constraints we have. Furthermore, the quality of service is good considering the

infrastructure capacity we have.

In Mexico the average rate for beds is 1.5 per thousand people whereas the OECD

standard is more than 4, and at IMSS our rate is 0.8 per thousand. For Seguro

Popular the rate stands slightly below 1 bed per thousand people. This means that

IMSS and Seguro Popular’s rates are below the national average and far from the

OECD level. The reality is that there are not enough beds or hospitals in the system,

despite the government’s efforts to build more hospitals. The problem, however,

is that many times this has meant that we end up with hospitals with insufficient

doctors or trained specialists because the allocated resources are less than what

is required. Mexico has an average of 2 physicians per thousand patients, which is

much lower than the OECD average.

It is also obvious that we have a problem with a very low number of specialty doctors

and their geographical distribution. Most specialty doctors are based in urban areas

Eduardo Gonzalez Pier – former finance director of IMSS

Eduardo Gonzalez Pier, finance director of IMSS at the time of the interview, shares with Focus Reports the

challenges but also the achievements of Latin America’s largest social security institution.


15INTERVIEW: EDUARDO GONZALEZ PIER

and big cities. Also, we need to find the right mix of doctors

with different specialties. For instance in a country like Mexico

with an ageing population, we need less obstetric doctors and

more oncologists, geriatricians and cardiologists. However,

I am not sure that the right motivations and communication

are there for young students to specialize in what is needed.

How does IMSS define the price of medicines it purchases?

There are two different mechanisms for the purchase of drugs

– one for single-source drugs (mainly patented products) and

another for generics.

Prices of single-source drugs are negotiated yearly under a

centralized process where prices are established based on a

combination of criteria, such as cost and efficacy of the drug

compared to therapeutic substitutes. Other variables we

account for include social and financial protection concerns.

For generics or multiple-source drugs, prices are set

competitively through a tender process.

Is IMSS integrating some elements of value based pricing in

Mexico?

There are two types of value-based pricing we take into

consideration:

Ex-ante, when the price will be set according to the health and

cost-saving benefits directly expected from that drug. Then

there is the ex-post pricing, where the final price is adjusted

later on when the actual health outcomes are evaluated and

thus the risks are shared. If gains are not delivered, whether

they are economic or health related, then it is possible to get

some sort of reimbursement and price adjustments.

At IMSS we already use the first scheme, since we purchase

some drugs in accordance to our forecast of the benefits. We

are also starting to design the contracting process for the

“The reality is that there are not

enough beds or hospitals in the

system, despite the government’s

efforts to build more hospitals. ”

second type. These sort of risk-sharing arrangements are new

and complex; we are looking at best practices and experiences

elsewhere, including the UK where there has been more

experience, especially through patient access schemes.

Do you think the tender process is transparent enough? What

has been done to improve it?

It is more transparent than it used to be. IMSS has implemented

several new tendering schemes, with different price setting

criteria, new tendering technologies, and more complete

and readily available information. For the last 3 years, we

have been following a set of recommendations issued by the

OECD, which include best practices for transparency and

accountability. I believe our process has improved and the

cost savings and other results obtained so far have been part

of these new managerial efforts.

The tender process switched from a cost-per-product to a

cost-per-procedure. What has been the impact of this shift?

The net gain comes down to whether you can actually

measure the end-result or not with sufficient reliability.

When looking at the numbers associated to potential

savings from more efficient tendering practices, of course

this becomes very attractive. The challenging part, however,

is that once we move away from buying products in the

traditional way to buying procedures and services – which

are much more difficult to monitor – we might end up in a

worse scenario. It is necessary to be able to have reliable

systems to measure the necessary procedures and the

actual costs and benefits. For many medical activities it is

hard to check the end-result, so there needs to be a careful

selection of what can and cannot be contracted under

different payment schemes.


16 MEDICAL TOURISM

What are the main trends of medical tourism in Mexico today?

First of all I do not think the term medical tourism is appropriate. Tourism is related

to vacation and enjoyment and to me receiving a treatment or having surgery should

not be related to leisure.

Mexico has been a part of this trend for many years, because people with means

in Mexico have been going to the US and sometimes Europe to receive health

treatment. Now, we are experiencing medical tourism from the other side: we see

many American or Canadian patients coming to Mexico to be treated. The motivation

is obviously different, as they come to Mexico to get more cost-effective treatments.

What is your opinion on such a growing phenomenon?

Medical Tourism should not turn care into something mechanical. We are not

an assembly line providing healthcare, and patients are not machines that

need to be repaired and can then go back to normal life. There should always

be continuous treatment when patients go back home. Surgeries and specific

procedures that people seek through medical tourism are most of the time a

small part of the treatment they need, and that is why there is a risk involved

with this phenomenon.

An example would be bariatric surgery: people with obesity problems come to

the Mexican border, get cheap surgery, but afterwards do not receive follow up

treatment. The surgery is only the first step to the bariatric treatment. So a question

remains - how are we going to ensure that the patient will have follow-up care when

he is back in his country and which physician will continue the treatment?

What is ABC Hospital’s involvement with medical tourism?

At ABC, we need to make some additional efforts to ensure that our patients will

continue to receive medical care even after surgery. Otherwise, we are omitting

quality and safety factors, and as a high-end hospital we should not compromise

our main values. That is also why we are affiliated to the Methodist Hospital in

Houston, which allows us to organize a formal follow up process in the US.

The view on medical tourism

Medical tourism in Mexico has been experiencing rapid growth in recent

years, evolving from low cost dental clinics at the US border to high-tech

hospitals with international accreditation spread throughout the country.

Founded in 1886, The American British Cowdray Medical Center is a leading

not-for profit medical center in Mexico with an outstanding reputation for

patient care. Alejandro Alfonso Diaz, its managing director, gives Focus

Reports his insight on the role of medical tourism in Mexico.

“Medical Tourism should not turn care

into something mechanic. We are not

an assembly line providing healthcare,

and patients are not machines that

need to be repaired and can then go

back to normal life.”

Alejandro Alfonso Diaz, managing

director, The American British Cowdray

Medical Center


17MEDICAL TOURISM

Assisteo Mexico S.A. de C.V.Program - Care ContinuumFirst Accredited: 16 March 2012

Christus Muguerza Alta Especialidad Monterrey Program - Hospital First Accredited: 22 July 2007Re-accredited: 27 August 2010Accreditation Withdrawn on 27 August 2011

Clinica Cumbres Chihuahua Chihuahua Program - Ambulatory First Accredited: 23 April 2008Re-accredited: 30 August 2011

Hospital CIMA Chihuahua Chihuahua Program - HospitalFirst Accredited: 31 August 2012

Hospital CIMA Hermosillo Hermosillo, Sonora Program - Hospital First Accredited: 11 December 2008Accreditation Expired: 10 December 2011Voluntarily Withdrew from Accreditation

Hospital CIMA Monterrey Monterrey, Nuevo Leon Program - HospitalFirst Accredited: 19 December 2008

Hospital Galenia Cancun, Quintana Roo Program - HospitalFirst Accredited: 5 October 2012

Hospital Mexico Americano, SC Guadalajara, Jalisco Program - HospitalFirst Accredited: 20 March 2010

Hospital San José Tec de Monterrey Monterrey, Nuevo Leon Program - Hospital First Accredited: 25 December 2007Re-accredited: 18 June 2011Voluntary Withdrawal from AccreditationAccreditation Expiration Date: 17 June 2012

Hospital Y Clinica OCA, S.A. de C.V. Monterrey, Nuevo Leon Program - Hospital First Accredited: 27 September 2008Re-accredited: 22 December 2011

The American British Cowdray Medical Center IAP - Observatorio Campus Mexico City Program - Hospital First Accredited: 6 December 2008Re-accredited: 17 December 2011

The American British Cowdray Medical Center IAP - Santa Fe Campus Mexico City Program - Hospital First Accredited: 12 December 2008Re-accredited: 10 December 2011

Source: www.jointcommissioninternational.org , March 2013.

List of Hospitals in Mexico with Joint Commission International (JCI) accreditation

Table 1: Medical tourism prices (in selected countries)

Procedure US India Thailand Singapore Malaysia Mexico Cuba

Heart Bypass (CABG) 113 000 10 000 13 000 20 000 9 000 3 250

Heart Valve replacement 150 000 9 500 11 000 13 000 9 000 18 000

Angioplasty 47 000 11 000 10 000 13 000 11 000 15 000

Hip replacement 47 000 9 000 12 000 11 000 10 000 17 300

Knee replacement 48 000 8 500 10 000 13 000 8 000 14 650

Gastric bypass 35 000 11 000 15 000 20 000 13 000 8 000

Hip resurfacing 47 000 8 250 10 000 12 000 12 500 12 500

Spinal fusion 43 000 5 550 7 000 9 000 15 000

Masectomy 17 000 7 500 9 000 12 400 7 500

Rhinoplasty 4 500 2 000 2 500 4 375 2 083 3 200 1 535

Tummy Tuck 6 400 2 500 3 500 6 250 3 903 3 000 1 831

Breast reduction 5 200 2 500 3 750 8 000 3 343 3 000 1 668

Breast implants 6 000 2 200 2 600 8 000 3 308 2 500 1 248

Crown 385 180 243 400 250 300

Teeth whitening 289 100 100 400 350

Dental implants 1 188 1 100 1429 1 500 2 636 950

*Cost of surgeries around the world. Costs given in US$. **The price comparisons for surgery take into account hospital and doctor charges, but do not include the cost of flights and hotel bills for the expected length of stay.

Source: Medical Tourism: Treatments, Markets and Health System Implications: A scoping review

Neil Lunt, Richard Smith, Mark Exworthy, Stephen T. Green, Daniel Horsfall and Russell Mannion, OECD, 2011.


18 INTERVIEW: COFEPRIS

You were appointed as Federal Commissioner of COFEPRIS in March 2011. What have

been the biggest challenges you’ve faced within this time?

COFEPRIS regulates every sanitary risk related to any industry- we regulate 10%

of Mexico’s GDP, and 12% of international trade. The most important challenge

I faced when entering COFEPRIS was understanding whom I had to deal with to

make things happen.

On a more material point of view, the major challenge we first experienced was

tackling the massive backlog of sanitary registrations. Mexico had a major legal

reform in 2005 that mandated the renewal of every drug registration in the market to

ensure that we had only 2 types of medicines: generics and innovative medicines. This

reform was crucial, but the government didn’t regulate this reform in administrative

terms until 5 years later. This agency went into an administrative crisis, and when I

arrived from the Ministry of Finance, I had to deal immediately with the backlog.

The other challenge was also to determine what we wanted in terms of

pharmaceutical policy. Our pharmaceutical policy is to provide the patient – our

main object of protection – with the best alternatives in the market. The COFEPRIS

universe was unreadable and lacking priorities; we needed to set them and to reset

communication with the whole industry. One of our strategies, for example, was

to establish access to medicines for all Mexican families – so we started to issue

sanitary registrations for generic drugs.

What steps have you taken to actively change the reputation of COFEPRIS in the minds

of the Mexican public and the pharmaceutical industry?

Our goal is to generate predictability for the market, and send the right messages to

our regulated industries. By doing so, we are going to have a better set of alternatives

for the consumer, hence protecting public health. We have to assume our position as

a sanitary regulator, but also as an economic regulator, and build strong relations

with the sectors that we manage. I invest a lot of my time receiving companies of all

sizes and, I suppose, this is how the image of the institution has changed. We need

to be the best for the health of the consumer and the industry can’t survive without

a market. COFEPRIS cannot meet its objective to protect the consumer if we don’t

regulate firmly but with a commitment to both industry and consumers.

Interview with COFEPRIS: Mikel Arriola

Life has not been easy for Mikel Arriola since he stepped in as head of COFEPRIS. The regulatory authority’s

agenda has been daunting and overwhelming since Arriola’s entrance, but results have been impeccable. Despite

a change in government, Mikel Arriola was reappointed as the head of COFEPRIS in December 2012.

“Our goal is to generate

predictability for the

market, and send the

right messages to our

regulated industries.

By doing so, we are

going to have a better

set of alternatives for

the consumer, hence

protecting public health.”


19

What do you feel have been the most significant achievements

of COFEPRIS since you have managing the organization?

We designed a very specific strategy when we first arrived

in COFEPRIS, and I think we have been quite successful in

complying and enforcing it.

Firstly, we had to reduce the backlog, and we have since then

issued 9000 registrations the first year. Secondly, we had to

improve our regulatory framework and eliminate barriers

to entry into the market, which was done by issuing 109

generic registrations, suppressing the manufacturing plant

requirement and building consensus around our regulations

on biological products and bio-similars. Thirdly, we had to build

international recognition, and we have achieved it through the

PAHO recognition which was achieved in late 2012.

My conclusion is that we have a strategy to reinforce the

Mexican market for the well-being of our patients and we are

on the right path.

INTERVIEW: COFEPRIS

We have heard many times that the Government should start to

see COFEPRIS not just as a quality controller, but as a promoter

for Mexican exports. How do you achieve this?

The Mexican pharmaceutical industry is an industry with

great quality, and is a huge asset for the economy. If we can

work with the industry to expand their opportunities to invest

internally and externally, we are making a change for our

country. We have to be creative, and build the best profile for

the Mexican industry to be able to attract more investment

and provide better opportunities. We have to create a more

flexible market, and the best tool to create this is regulation.

I want to be very aggressive in terms of gaining market share

internationally.

Pharmaceutical Policy – a roadmap Improve access for consumers to Health Supplies as to reduce sanitary risks

Reducing the backlog Legal framework improvement to eliminate barriers to entry

Deregulation and organizational modernization

International harmonization

Issuance of sanitary registrations

Introduction of generics into the market

Removal of the manufacturing plant requirement

Certification by the Panamerican Health Organization

Simplified liberation of vaccines Legal reforms for the introduction of biotechnological drugs

Reclassification of medical devices and creation of low risk classification

Specialized lanes for administrative procedures

Introduction of innovative drugs into the market

Equivalence agreements on medical devices and new molecules

Specialized lanes for pharmaceuticals and medical devices

Recognition of foreign GMP certificates

Authorized Third Parties

Source: COFEPRIS, 2012

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21PHARMACEUTICALS

Pharmaceuticals


22 PHARMACEUTICALS

In the last three years CANIFARMA has been working tirelessly in defining a development

program for the pharmaceutical sector, which is unprecedented in terms of depth and scope.

In brief, the development program involves transforming the pharmaceutical sector into

one of the most important economic engines for Mexico, and a new route of economic

development for the country.

All essential aspects of the country’s health are touched by the pharmaceutical sector, since

we help to improve life expectancy and the quality of life of the population; we generate

knowledge through the intrinsic relationship of our business with research, innovation and

applied science; and we also impact the economy, since we create high quality jobs that

foster a virtuous circle of human capital, productivity, welfare and development.

In recent years there have been significant advances in regulatory matters in which the

concurrence, understanding and cooperation between authorities and industry have

made a notable difference, all working in favor of Mexico.

As for research, Mexico has a great potential yet to be properly exploited. The

infrastructure and human resource available in our country allows us to predict that

under favorable conditions, we can become the most important clinical research

development center for Latin America, which will bring significant technological and

economic spillover for our country.

Besides, our sector is currently the second largest productive sub-branch for

the country, as it shares more than seven percent of gross domestic product for

manufacturing sector, and generates almost four hundred thousand jobs, both direct

and indirect. We maintain our growth dynamics in both the domestic and external

markets, with a significant increase in exports, even in times of crisis.

To support all these facts, CANIFARMA recently completed the first census of the

pharmaceutical industry, which confirms and validates most of the data we already

knew, and also gives us a strong base that allows us to foresee a promising future

in terms of investment in new manufacturing facilities, clinical research, employment

generation and financial development.

With all the input and ideas provided by industry experts, we have finalized the

Development Program for the Pharmaceutical Sector, which contemplates three

progressive stages of development along the first hundred days of the new government

in office, the first four years, and the last two years for project consolidation. These

three stages are referred to three aspects; namely, the improvement of the regulatory

framework, innovation and research, and industrial policy.

Our sector has always been recognized because of its cohesion and unity, and exerted a

positive influence and important representation in the economic and political scene of

our country. We have met innumerable challenges with integrity and consistency. The

challenge now is to persevere in this spirit for the growth and benefit of our industry

and our country.

FOREWORD BY RAFAEL GUAL,

director general of CANIFARMA

Since 1946 The National Chamber for the Pharmaceutical Industry

(CANIFARMA) has been working to represent and further the interests of

the Mexican pharmaceutical sector in relation to governmental authorities.

In this section, Rafael Gual, General Director of CANIFARMA, speaks about

the chambers objectives regarding sanitary regulation, research and

innovation, and economic development.


23PHARMACEUTICALS

Over ten years ago, the economic concept of the ‘BRIC’ countries- Brazil, Russia, India and China, was coined by

Jim O’Neill, chief economist at Goldman Sachs. Earlier this year, the very same man who declared that by 2020

Mexico would be the seventh largest economy in the world, surpassing both India and Russia. Mexico belongs to

one of four recently defined ‘growth markets’ alongside Indonesia, South Korea and Turkey. That certainly shakes

things up a little for both outside observers and active local stakeholders in the economy.

Shaking up the system

But what does this recent categorization as a ‘growth market’ suggest for Mexico’s

pharmaceutical industry?

With an estimated value between 12 and 14 billion USD, the Mexican

pharmaceutical industry has seen some significant changes over the last four

years. The government has significantly increased public health spending and

its coverage in an effort to pull Mexico up from the bottom of the pile. According

to the latest OECD Health Data, Mexico fared 33rd out of 34 OECD countries

for total expenditure on health as a percentage of GDP. The government is also

fighting against rapidly increasing levels of chronic long-term illnesses rife in

the population, such as diabetes.

These wide-reaching changes have affected industry dynamics, and coupled with

the patent cliff, and the worldwide innovation drought, have opened up a bigger

space for generics penetration and created the perfect storm that has pushed

present multinational companies to either diversify, or to focus on niche markets.

Mexico’s solid macroeconomic policies and encouragement of foreign investment

have also increased competition in the market, pushing local companies to take

a side step on their strategies and in some cases to be more resourceful and

aggressive in retaining and increasing their share of the pie.

Last but not least, there has been an undeniable shift of power towards the point of

sale: pharmacies and supermarkets. Pharmacy giants are taking warehousing and

distribution into their own hands and private label (store brand) drugs are becoming

increasingly popular. Some say positioning a general medical service with doctors at

the point of sale has created an even bigger demand for private label medicines at the

expense of other brands. For some players in the market, it is a bitter pill to swallow.

Mexico certainly offers a lot of growth potential. One can debate whether Mexico

is still truly an emerging market, but as Ricardo Alvarez Tostado, president and

general director of AstraZeneca Mexico points out: “it is not how fast you grow, but

how consistent your growth is over time, and I genuinely believe that Mexico is very

well positioned through a rigorous monetary policy and an improving fiscal policy.

It is a democratic, free enterprise emerging market. Mexico is, and will remain, a

strategic market for any industrial interest.”

“It is not how fast

you grow, but how

consistent your growth

is over time.”

Ricardo Alvarez Tostado,

president and general director of

AstraZeneca

MACRO DATA OF THE MEXICAN

PHARMACEUTICAL INDUSTRY

(last available data, INEGI 2009, OECD

2011)

Share in GDP 1.2%

Share in Manufacturing GDP 6.9%

Health expenditures as a share

of GDP6.1%

Health expenditures per capita

(dlls.)934

Value of the Pharmaceutical

Market (billion dlls.)13*

Direct Employment 78,500

Indirect Employment 330,000

SOURCE : COFEPRIS – with data from

INEGI and CANIFARMA

* Note: value estimated for 2011 using

12.42 pesos per dollar, average exhange

rate for 2011


24 PHARMACEUTICALS

First, in terms of ‘cleaning up’ the market, in February 2005 COFEPRIS amended

Article 376 of the country’s General Health Law that mandated the renewal of

every drug registration in the market. All generic pharmaceutical products were

expected to have proven bioequivalence and therapeutic efficacy by February 2010.

A much anticipated move for the industry, opening up the way for innovative and

generics companies alike. It also ensured there were only two types of medicine

available: generic and innovative.

This new registration setup was an important milestone in the organization’s history, and

more so because it helped to phase out the so called similares from the market. Similares

were legally questionable medicines without proof of bioequivalence, and incredibly

popular amongst lower income population groups. Similares caused regulatory and

safety concerns for the government and some people say that due to adverse side effects,

they had fired up suspicion in the general public about generic medicine as a whole.

The elimination of similares hand-in-hand with the increase in public healthcare using

predominantly generic medicines have essentially made generics much more accessible

to the Mexican public, both financially and psychologically.

Hector Valle, general manager for IMS Health in North Latin America, says that as

a company they run 10,000 interviews on a monthly basis with customers leaving

the point of pharmaceutical sale. This is to understand what is happening to the

end consumer.

As a testimony to the increasing levels of public understanding on generics, Valle

explains “80% of the people we interviewed said they understand generics, but

when we ask more questions to qualify their understanding, it is actually 50%.

Around 41% said that if there was a generic version of products they buy normally,

they would buy the generic. That’s a huge change, and part of it has to do with the

government putting a lot of information out, and also giving quick registrations for

generic drugs to speed up access.”

Dagoberto Cortes, general director of Hormona Laboratories, points out that in the

government’s continued push to open access and reduce barriers for cheaper generic

products, they have also significantly reduced time to market. “A couple of years ago,

the average time between patent loss and generic arrival on the market was two

years. Today COFEPRIS is making a great effort to reduce the time needed to issue

a generic registration. In some cases the time to market has reduced to a couple of

months. This is very important for the authorities because it represents a lot of savings.”

An outstanding example

The Mexican pharma market has always had a historically low generics

penetration, but initiatives such as Seguro Popular are pushing firmly

towards a more generics-focused environment.

“COFEPRIS is making a great effort

to reduce the time needed to issue a

generic registration”

Dagoberto Cortes,

General Director, Hormona

“The national companies who used to

sell to the government are now coming

to the private market because of the

price drop in the institutional sector.”

Hector Valle, general manager North

Latin America, IMS Health


25PHARMACEUTICALS

“While we understand Seguro Popular has a limited budget and

is required to look for the lowest possible prices, Apotex cannot

compromise on quality just to get the extra sale.”

Hector Carrillo, director general, APOTEX

Although the generic pharmaceutical industry has expressed

its delight at such efforts, many people in the industry feel

that when price is the only basis on which to win a government

tender, quality is inevitably marginalized.

Hector Carillo, general director of Apotex Mexico, points

out that “the government continues to be a good business

for us because supplying on time is becoming increasingly

important. When it comes to timely and high quality product

delivery, they know we can do it. But we cannot supply at

their requested benchmark prices. They demand the lowest

possible pricing from the market, and while we understand

Seguro Popular has a limited budget and is required to look

for the lowest possible prices, Apotex cannot compromise on

quality just to get the extra sale.”

TOP 5 REGIONS % OF PRESCRIPTIONS WRITTEN IN INN.

Ciudad de México 19,60%

Estado de México 10,06%

Puebla 6,04%

Guadalajara 5,54%

Monterrey 4,90%

SOURCE : Close –UP.

Source: Close – Up

16

14

12

10

8

6

4

2

02008 2009 2010 2011 2012

% INN prescription vs Total Market


26 PHARMACEUTICALS

Alvarez Tostado of AstraZeneca, believes that MNCs need to adjust their activities to

become competitive in both the private and public sector. “Mexico provides a uniquely

generous market structure where you have the institutional sector, the private out-

of-pocket segment of the market, and then you have the new up-and-coming popular

insurance systems that will cater to those who have very little access to medical care,

if they have access at all. So in that regard, I think the industry has to realign itself

to make sure that it is able to provide adequate services to the institutional sector;

provide broadened access to the out-of-pocket consumer, and obviously realign to be

competitive in the Seguro Popular concept.”

Mexico is no exception to the global trend of companies moving towards branded

generics; a successfully growing sector in a very much brand-driven Mexican

society. Bertrand Baron, general director of Sanofi Mexico, is confident that

Sanofi’s global strategy of diversification fits well with the current climate in

Mexico. “I believe that Sanofi in Mexico is a perfect example of what we are as

a diversified healthcare player because here we are playing in all the markets:

human vaccines, consumer healthcare, biotech, rare diseases, innovative

products, generics, and soon we will be in eye care.”

Sanofi acquired Mexican laboratory Kendrick in 2009, and last year bought Medley,

the Brazilian branded generics company that currently sits at #1 in Brazil and #3

in Latin America. The acquisitions are perfect examples of decisions that will allow

Shifting landscapes shift strategies

Marked socio-economic differences are also playing an important role in pushing the uptake of generics, and these

issues are starting to affect multinational corporations (MNCs). MNCs are being forced to open up and diversify,

quite simply to have their fingers in as many pies where they can compete successfully. Alternatively they are

applying a more focused sales strategy to concentrate on niche markets.


27PHARMACEUTICALS

Erlbacher, COO of Aspen Labs, Spanish Latin America. This

turnaround strategy to harness the Mexican market trends

was proven successful as Erlbacher goes on to explain.

“Since then, Aspen Labs has performed incredibly well: we

have delivered significant growth, more than tripling our

turnover in the last three years.”

Other MNCs did not turn around to join in the generic

playground, but fought back by taking it a step further from

a localization point of view. They are making tailor-made

solutions from their current portfolio, or using their innovative

pipelines to target niche biotechnology sectors.

Tim Daveler, vice president and general director of MSD

in Mexico explains that they “have a unique development

laboratory here in Mexico [the Mexican Product Development

Laboratory] that is not commonly seen in other companies,

especially not multinational companies. We use this

development laboratory to expand the lifecycle management

for our products in order to meet the needs of Mexicans.

Many of our products that are on the shelves in Mexico have

come from our development laboratory, in order to meet the

market needs here in Mexico.”

Similarly, Karel Fucikovsky, general director in Mexico & Central

the company to compete in all market segments. “We believe

there is a huge market, and generics were a piece of the

market we were not tackling. Now we are doing it with good

quality brands, guaranteeing quality to both the physician

and the patient.” he continues. The first products under the

Medley brand were launched in the Mexican market just a few

months ago with high expectations. Medley is already rising

fast in the industry ranks.

Aspen Labs, the South African pharmaceutical giant and

relative newcomers to the market, started operations in

Latin America through a 50% acquisition of Strides in 2007.

They found the key to success in Mexico was through turning

an originally hospital-focused and opportunistic market

business, into a business driven primarily by promotion and

branding.

“In 2009, Aspen started to implement a structure that would

enable us to enter into the private ethical market, or the

prescription-based business. That is where we started to

build up our sales and marketing team. At the same time,

we were launching a small portfolio of locally developed

and manufactured branded generics. The combination of

the two would provide a strong platform with greater brand

recognition for future Aspen branded generics.” says Peter

“I believe that Sanofi in Mexico is a perfect example of what

we are as a diversified healthcare player because here we

are playing in all the markets: human vaccines, consumer

healthcare, biotech, rare diseases,

innovative products, generics, and soon we will be in eye care.”

Bertrand Baron, general director of Sanofi Mexico

LOCAL Other Foreign Large Global (15)

Source: IMS HEALTH, MIDAS 2010. Argentina, Venezuela, Brazil,

Mexico & Korea Retail only; China hospital only

US Germany France Russia India Korea China Brazil Mexico Arg.

Source: IMS Health analysis and estimates; CER: 13.45 USD

Institutional

Value(US$ M)

Units(M packs)Growth

vs. PY

2%

5%

1%

3%

7%

-3%

2%

2%

2%

2%

Growthvs. PY

14,040 3.032

Generics

Originalbrands

Originalbrands

Generics

Brandedgenerics

Retail

SHARE OF MARKET BY COMPANY TYPE

TOTAL PHARMACEUTICAL MARKET BY PRODUCT TYPE

(MAT JANUARY 2012)


28 PHARMACEUTICALS

Here to stay

“We are clearly flying onto the radar; Mexico is a priority

market and Pierre Fabre Medicament is here in Mexico

to stay”, remarks Karel Fucikovsky. Despite the range of

necessary strategy shifts deployed by many multinationals to

stay present on the undulating Mexican landscape, it seems

there is so much potential to be realized that it is duly worth

the effort. In some cases, it has catapulted Mexico onto the

priority list for investment and resource assignment- in some

cases assigning Mexico as their Latin American headquarters.

Norbert Oppitz, senior vice president for Nycomed, A Takeda

Company, in Latin America points out, “Today, Brazil is the

most important economy, but in a regional context Mexico will

be the most important player for decades to come. Mexico

today is much more consolidated than many of the other so

called truly emerging markets, it is a more industrialized and

modern society than many people realize. Things are moving

here, and one of the most dangerous things we can do as a

multinational company is not to understand it.”

America for the French company Pierre Fabre Medicament,

believes a specialty focus will bring reward. “The rules of the

market will keep changing. International companies will start

to focus on higher specialty drugs, and a company like Pierre

Fabre Medicament that is very focused on products and medical

specialties, will be able to deliver growth.”

Medical education and awareness has traditionally been

quite challenging in Mexico, leading some companies to put

resources into education in order for the market to open up.

Angel Sosa, general director in Mexico of human protein

specialists Octapharma, explains that “it is not easy to show

the government authorities the savings to be made in giving

patients the treatments that they require, but it is possible,

and it is also the key to further developing immune deficiency

treatment in Mexico.”

Octapharma takes an active role in promoting this, he says.

“We participate in both government and scientific meetings in

which authorities, physicians and patients discuss awareness

issues openly… and in the field of immune deficiencies, we

have been working very closely with a patient organization by

sponsoring a road trip across the country that transmits the

key focal signs of the diseases to local physicians.”

“Many of our products that are on the

shelves in Mexico have come from

our development laboratory, in order

to meet the market needs here in

Mexico.”

Timothy Daveler, VP and general

manager, MSD Mexico

“We have delivered significant growth,

more than tripling our turnover in the

last three years.”

Peter Erlbacher, COO of Aspen Labs,

Spanish Latin America

Maria del Pilar Serrania, director

general, Pharma Data Mexico


29PHARMACEUTICALS

If multinational companies are looking in, then you could say that Mexican

companies have been looking out to send their products elsewhere. IMS figures

show that local companies in Mexico have introduced more products to the market

than multinationals in the last 10 years. In 2011 for example, national companies

launched a total of 657 SKUs (stock-keeping units, or unique products) in Mexico,

compared to 492 SKUs from multinational companies. In the last two years national

companies have either maintained or increased promotional investment in order to

gain market share. They are also finding it more tempting to look across the border

and export their products- both North and South of Mexico- to increase revenue,

despite the challenges faced along the way.

This could possibly be explained by turning back the clock for a second. Guy Jean

Savoir, general director of Carnot Laboratories recalls that “in 2008 you could find a

market that was extremely healthy and a feeling that both price and unit increases

would continue to be prevalent; everything was easy.”

That was the point when things started to change. Savoir points out that Mexico

has three main, large sources of capital: oil, tourism, and remittance (this is the

income from Mexicans working in the United States).When the global economic

crisis hit the world that year, all three income sources dropped significantly.

Remittance dropped due to changes in U.S. migratory policy, the oil price dropped

after being high for so long, and tourism was sent packing after both swine flu, and

the spiraling war on drugs. Purchasing power reduced dramatically at the same

time when COFEPRIS was implementing bioequivalency regulations that suddenly

enabled the public to access cheap, trusted generics. Generics didn’t stop growing,

foreign competition also joined the crowd, and prices dropped even more.

Some companies had foreseen these market changes and preferred to look outwards

and export sooner, rather than later. Guillermo Funes Rodriguez, CEO of innovative

Mexican company Silanes comments that “due to the fact that our major market

was Mexico, we had to make a change ourselves. The only way was to diversify

our products, and go into Latin America, the United States and Europe to build

up strategic alliances. We are now growing in those markets and we are currently

developing new products in our European research and development facilities.”

Silanes as a company puts 10% of sales back into research and development.

Although Mexico is still their principal market, they have also been manufacturing

their own products in Brazil after forming a strategic alliance with Ache Labs, the

Brazilian pharmaceutical company.

Socorro España Lomeli, executive director of ANAFAM believes, “When a company

Home turf On the inside, looking out

“Multinational companies might want

to come and find out what we are doing,

and to take our products into markets

where we are not capable of going by

ourselves.”

Guy Jean Savoir,

General Director, Carnot


30 PHARMACEUTICALS

wants to export, they are often blocked by bureaucratic

red tape and regulations which makes it impossible. It is

mainly the administrative processes that pose a problem,

not the quality. This has been a big hurdle for Mexico in both

entering the United States market, and some Latin American

markets.” Silanes has completed its learning curve, which

leads Funes to conclude: “By the end of 2013 we hope to

have two more products approved by the FDA, and we will

then submit a further three. Now we know the mechanisms

and the processes behind approvals, we can be more

efficient and faster in complying with them. The long term

outlook of Silanes is fantastic: we have patented products in

biotechnology, with a plant that is FDA and soon to be EMA

approved, we are ready to compete globally”

Many other national companies are also exporting home-

grown innovation. Guy Jean Savoir of Carnot Laboratories

realized that their differentiated and innovative pipeline

was essential to export success. “Today Mexico is a tougher

market; you have to be aware of the added benefits of a

differentiated product. When you export generics the only

driving factor is price, which means you have to be very price

conscious if you want to succeed and be competitive. This is

not our business model- we have 130 people in Research and

Development and we have decided that this is the side of the

fence for us to be on. In fact, our differentiated pipeline was

exactly what enabled us to successfully export and launch in

different markets in the first place”, says Savoir. His advice:

“don’t overlook Mexican innovation. Mexico is a place where

multinational companies might want to come and find out

what we are doing, and to take our products into markets

where we are not capable of going by ourselves.”

Building Trust

Other companies decided to stick to their strategy during these

tough times and came out on top, due to the strength of their

brands and the trust built up with the medical community.

Liomont Laboratories, whose portfolio is 75% prescription

medicine, will celebrate 75 years in the industry next year

and is in the top ten rankings for prescription drugs in the

country. Alfredo Rimoch, general director of the company,

explains how they won through on trust and reputation.

“Over recent years we have put particular focus on

branded generics which we promote to doctors through a

very strong sales force. We prepared well for the boom in

pure generics, which took a lot of work, but we succeeded.

Branded generics have existed for a long time in Mexico

and we have worked for many years in promoting our

vision of the company which is based on quality and trust

through our services and our products.”Equally, Stendhal

has based a large part of its business on in-licensing

innovation from multinationals, and building itself up to

be the government’s partner of choice. That is not an easy

task, especially when focused on the anti-retroviral market

involving tricky negotiations with government healthcare

institutions. The company has managed to maintain 25-

30% yearly growth over the last two years and its products

are now offered to 70% of HIV patients in Mexico. Luis

Calderon, managing director of Stendhal, attributes this to

their long-term attitude and quality.

“Stendhal is not a company that looks for opportunistic

business, by participating in a tender one year and

disappearing the following year: we want to increase our

“We have worked for many years in promoting our vision of

the company which is based on quality and trust through our

services and our products.”

Alfredo Rimoch, general director, Liomont


31PHARMACEUTICALS

market share sustainably and be in a place where we can

adapt alongside the changing interests of the healthcare

environment in order to increase patient share.” he explains.

Maquila country

Other companies have turned to contract manufacturing, an easier

revenue generator as long as you have quality standards and long-

term vision. In fact, many companies use contract manufacturing

to provide the revenue needed to develop their own brand.

This is the case with Biofarma Natural CMD, whose general

director Ignacio Luna explains, “creating a brand in Mexico

involves many years of hard work and a lot of investment, and

for us it has been much easier to simply generate revenue

through our manufacturing strengths. We are proud of the

fact that we are one of the only manufacturing plants in

Mexico granted licenses for both medical products and herbal

products. We have all the certificates and Good Manufacturing

Processes (GMPs) that go with it. This attracts companies in

the industry who are searching for high quality.”

“We want to increase our market share sustainably and be in a

place where we can adapt alongside the changing interests of

the healthcare environment.”

Luis Calderon, Managing Director, Stendhal


32 PHARMACEUTICALS

Unreached potential

According to industry data, the pharmaceutical sector represented 7.2% of Mexico’s manufacturing GDP last year.

When compared to other manufacturing industries in Mexico, this is significant, but by no means in stellar. But can

we call Mexico a real ‘hub’ for the pharmaceutical industry?

Rafael Gual of CANIFARMA clearly states that “our goal is to make the Mexican

pharmaceutical industry the biggest manufacturing sector in Mexico over the

next 5 or 6 years. Currently pharmaceutical manufacturing represents 7% of

manufacturing GDP in Mexico, and we want to push it into first place.”

In 2008 COFEPRIS abolished article 168 and 170 of pharmaceutical legislation,

which meant that companies no longer needed a plant in Mexico in order to

distribute their products. Since then five companies entered the market without a

manufacturing plant. This includes Italian company Menarini, Daiichi Sankyo from

Japan, and Swedish Meda Pharma. But it also resulted in several multinationals

re-assessing their Mexican manufacturing strategies as plants were no longer

required to be part of the market.

Miguel Salazar, general director of Boehringer Ingelheim Mexico points out that

“the pharmaceutical real estate market is getting crowded because everyone is

selling their plants.”

However, there are some obvious benefits in setting up a manufacturing hub for

Latin America in Mexico, as compared to Brazil. Labor costs are significantly lower,

it is geographically very strategic bordering the United States, and Mexico also

shares a common language with most of the region.

“In 1995, Boehringer Ingelheim wrote their manufacturing strategy and decided

that Mexico was to be a center of excellence in terms of manufacturing, and the

company invested more than $70 million USD in a new plant which would be

one of the manufacturing hubs for the rest of the world”, boasts Salazar of the

company’s award-winning plant located in the south of Mexico City. “Around 60% of

our products are exported globally and 40% is local. We are focused on high quality

and high delivery.”

Along the same lines, Bertrand Baron of Sanofi comments, “Today we have three

manufacturing sites in total and we strongly believe in increasing our business in

Mexico. 80% of what we sell in terms of volume is coming from our local plant. I

would be shooting myself in the foot if I withdrew our Mexican plant.”

Despite these multinationals here to stay, how can the industry live up to Gual’s tough

target of becoming the number one manufacturing sector for the country? Socorro

España Lomeli of ANAFAM strongly believes that the government should play a bigger

role, especially when it comes to local companies. “I believe fiscal incentives are very

important because they encourage industries to grow”, she concludes.

“In 1995, Boehringer Ingelheim

wrote their manufacturing strategy

and decided that Mexico was to be

a center of excellence in terms of

manufacturing.”

Miguel Salazar, general director of

Boehringer Ingelheim Mexico


33PHARMACEUTICALS

The truth is that the rise of large pharmacy chains is starting to hit the industry

big time. This is a fast-moving shift of control away from the pharmaceutical

wholesalers, who have been the traditional torch bearers. It does not just change

the dynamics of the industry today; it transforms the future dynamics of the

pharmaceutical landscape.

Pharmacy chains are gradually moving their purchasing ratio in favor of buying

directly from pharmaceutical companies who manufacture, as opposed to the

wholesalers. The manufacturers involved do face opposition from wholesalers, but

they can still see the potential benefits.

Farmacias del Ahorro, one of Mexico’s largest pharmacy chains, is starting to

take warehousing and distribution into its own hands. It recently opened a large

warehouse just outside of Mexico City, and is planning to open two more in the

Pharma’s affair with private labels

When asked to define the three most impactful changes on the Mexican

pharmaceutical industry over the last few years, executives put Seguro

Popular, and COFEPRIS regulation in the lead. The third change is muttered

perhaps a little more reluctantly. “The Point of Sale”.

“Many years ago power in the industry

was in the hands of the pharmaceutical

companies, a few years after that it was

in the hands of the distributors, and

today we have it in the points of sale.”

Gabriel Zavala, Commercial General

Director, Farmacias del Ahorro


34 PHARMACEUTICALS

fairly slow on the uptake of private label products – not only

for pharmaceuticals. Ricardo Ganem, vice president and

general manager of Perrigo Mexico, explains why it took so

long. “For many years, store brands in general were all about

putting a “cheaper” product next to the leader with focus on

low prices, but often at the expense of quality. The stigma

that private labels are low quality stayed in the mind of the

Mexican consumer, but this has changed dramatically over

the last several years.”

Ganem also notes that Mexico is the country with the highest

brand loyalty index. He observes that this can be explained

by studies on the monopolistic advertising structure favoring

high-priced media such as television, for the last 60 years.

The historical attrition to well-known brands is exactly what

is helping to make private labels successful now. Mexicans

feel confident buying own-brands from pharmacy and

supermarket chains that they know and love.

In August 2010, regulations prohibiting the sale of antibiotics in

retail pharmacies were implemented by the health authorities,

with the intention of reducing risk related to inappropriate use of

antibiotics and increasing bacterial resistance. Retailers came

up with a solution in the form of having a qualified doctor on

site to avoid any problems, which also fuelled the intense rise

of private label medicines. A recent study by IMS Health showed

that the majority of Mexicans who use a doctor at the point of

sale had used the service up to ten times previously. This is clear

evidence of its popularity. The most common reasons for using a

doctor present in a pharmacy were found to be convenience and

low price; the perfect combination for a busy, working Mexican

on a budget.

So what next for the private label business at the points of

sale? Ganem is already thinking to the future and working

on innovative ways to develop his customers’ product. “I’ll

give it another three or four years before most retailers

will have upgraded strategies in place with differentiated

brands to satisfy specific consumer needs.” Zavala adds,

“Many years ago power in the industry was in the hands of

the pharmaceutical companies, a few years after that it was

in the hands of the distributors, and today we have it in the

points of sale.”

coming years. “The most recently opened warehouse will

account for 70% of the units that we buy directly; today we

have a ratio of roughly 60/40 favoring direct purchasing

from the pharmaceutical companies”, says Gabriel Zavala

the company’s commercial director. “The distributors will

always be necessary in the future. But at the same time, we

will be prepared for ongoing changes in the market with the

infrastructure to support more laboratories if they wish to

sell directly.”

Not only are pharmacy chains buying directly from

pharmaceutical companies, but a more visual change

is taking place. Private label drugs have had a growth

explosion in Mexico and are affecting the way both national

and international companies operate. Hector Valle of IMS

explains, “The national companies who used to sell to the

government are now coming to the private market because

of the price drop in the institutional sector. Now private labels

give them a very good opportunity to do just that. This enables

national companies to grow but also affects the brands from

the multinational companies as well.”

Companies promoting their own brands to sell in retail stores,

at the same time find themselves increasingly attracted to

manufacturing private label goods for that very same point

of sale. Pharmaceutical companies are ‘having an affair’ with

private labels, but can they have their cake and eat it?

Local company Gelpharma is doing just that. Luis Verduzco,

managing director of the company, realizes just how

important private labels are to his business after producing

primarily for the public sector. “The private market didn’t

have the same level of uncertainty as the government

market, so we changed direction. At the moment, we are

giving higher priority to third party manufacturing for

private labels because the relationships we are forming

with pharmacy chains and supermarkets are extremely

important. If we don’t make those relationships robust now,

maybe in a couple of years there will be another company

offering the same service and we will lose market share.”

The core Mexican business of U.S. company, Perrigo, is

manufacturing private label medicines. When compared to

the United States or Europe, up until now Mexico has been

“The stigma that private labels are low quality stayed in

the mind of the Mexican consumer, but this has changed

dramatically over the last several years.”

Ricardo Ganem, VP & general manager, Perrigo Mexico


35PHARMACEUTICALSStrengthening guidelines for biosimilars

Despite being in the Mexican market for over twenty years, biosimilars

have never been regulated as a separate entity. They have always been

regulated as simply another category of generic medicines.

“This enabled almost unmonitored competition from China, India,

South Korea and other fast-growing countries, which sometimes

caused more damage than good to the patient”, explains Jaime

Uribe, CEO of Mexican biosimilar company, Probiomed. “This is

the reason why biosimilars started to be regulated much more

closely, and after five years of negotiations the law was finalized”,

he continues. The Mexican guidelines for the approval of biotech

and biosimilar drugs became effective in April 2012.

Dr. Ana Cristina Mirassou, director of biotechnology in Jalisco-

based company, Grupo IFACO, tells us how this lack of tight

regulation affected the launch of their first biotechnology

product. “There has been some turmoil around biotech

regulation in Mexico, and for a long time, the authorities

were uncertain as to which requirements to ask for in a new

biotech product. Companies who were able to register their

products before this turmoil were granted the registration in

about six months, whereas we had to wait three years.”

According to BMI figures, Mexico’s biopharmaceutical

sector currently employs almost 25,000 Mexicans in more

o

Recently concluded a joint project

with the UNIDO to prevent damage

to the ozone layer.

3

3

3

3

3

3

3

3

3

3

3

3

3

3

3

3

3

3

3

3

3

3

3

3

3

3

3

3

3

3

3

3

3

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3

than 32 biotechnology

companies. Biotechnology

is also becoming more of a

priority for many States in

Mexico when compared to

traditional pharmaceuticals.

“The governor of Jalisco

declared biotechnology as

one of the key strategic

industries for the state. He

sees biotechnology as the

future,” Mirassou says.

Uribe adds, “Half of new

innovative drug registrations

given here in Mexico are for biotechnology products: the world

is looking to biotechnology and companies are investing more

and more every day.” Indeed, Mirassou sees Grupo Ifaco’s

biotechnology center as the main growth driver for the group,

and concludes: “Mexico is emerging as an important hub for the

production of biotechnology products. Once we have our legislation

in order, we will be extremely competitive, not only inside Mexico,

but internationally.”

“There has been some

turmoil around biotech

regulation in Mexico.”

Ana Cristina Mirassou,

Biotechnology Manager,

Grupo IFACO


36 INTERVIEW: SMART SCALE

Smart Scale was recently certified and recognized for its international quality

standards. What have been the main growth drivers?

Our experience and deep knowledge of the pharmaceutical market has been

rewarded by the ISO 9001:2008 certification which we managed to get when the

company was established. It shows that we are able to meet and fully understand

the needs and requirements of our customers at an international scale.

Smart Scale’s owes its stable growth to quality, which has always been the key

value for us, along with dedication and care, in every single service we provide.

Smart Scale is composed of experts working in the field, providing ad hoc solutions

for pharmaceutical industry sales and marketing departments, such as targeting,

database, deployment, rep. Equiv., CRM, benchmarking, etc…We deliver efficient

and accurate solutions to help companies achieve a better decision making process.

Smart Scale operates under a diversified product portfolio. Could you give us a

breakdown of these products as well as how do you achieve synergies between them?

Our objective is to provide external support to companies to help them being innovative:

First, we have the best database in the Mexican market for the pharmaceutical

industry, doctors, pharmacies, hospitals, etc… (complying with the Data Protection

Act). If companies ask themselves, who should we sell or promote to? Where

should we sell? Why must our products be sold there? The answer is Smart Data.

Second, we are experts in medical, pharmacy, hospitals, and retail outlets visits,

etc. Smart Scale is considered the best option for business strategy and sales force

automation as “Media Soft “ is the most advanced, flexible, fast and user friendly

tool for the Latin American market. The goal of our CRM “Sales Vision” is to analyze

and provide feedback on the effectiveness of our clients’ business strategy.

Our third innovative tool is called Marketimetrics, that provides very precise

information for the sales and marketing teams of pharmaceutical laboratories.

The data is collected from different sources coming from our clients, and it allows

them to get the information directly rather than spending time searching for it

themselves.

All our tools give “state of the art” information through high technology, with the

permanent goal to help pharmaceutical companies improve their sales and profits.

What are the future challenges and opportunities for Smart Scale, and what message

do you want to convey to the readers of our review?

We want to achieve a worldwide recognition as the leaders for the Latin American

pharmaceutical market in technology and information services.

As a Mexican businesswoman with over 27 years of experience in this wonderful industry,

and as a mother, wife, sister, daughter, friend, my message would be: Smart Scale can

be a significant support between information technology and health care science for us

to fulfill our mission; to ensure that everyone has a Better Quality of Life.

Interview with Fabiola Trigueros

President and Owner of Smart Scale

Knowledge, experience, dedication and enthusiasm!

“Smart Scale owes its

stable growth to quality,

which has always been

the key value for us, along

with dedication and care,

in every single service we

provide.”


38 LEGAL PERSPECTIVES

I. Pricing & Reimbursement.

Price control in the private sector is based on a scheme of self-regulated maximum

retail price (MRP) covering patented products, as overseen by the Ministry of

Economy. Pharmaceutical companies’ participation is voluntary. Under the price

control each product’s MRP must not exceed an international reference price,

estimated as the average price in six major markets, plus a market factor. There

are no established sanctions for violations of the MRP.

In 2008, the government created the Committee for the Negotiation of Drug Prices

(CNDP) to:

- Support public acquisitions through a process of negotiation transparency

between public insurers and pharmaceutical companies.

- Determine the cost-benefits ratio of new medicines and therapies in relation to

their prices and those of other products in the market

Public sector purchases are made through public tender processes. The CNDP

analyzes the effectiveness of drugs and relevant therapeutic alternatives, and the

feasibility and implications of an eventual substitution with equivalent medicines.

The CNDP also conducts an economic evaluation of the cost-effectiveness of

patented medicines compared with potential substitutes. Drug payments by the

government (mainly in the IMSS) derive from the obligatory fees paid by both

employees and employers. However, federal government subsidies are necessary

in all segments of the public health system at the federal and state levels.

In the private sector, the majority of payments are made on an out-of-pocket basis.

Private insurers are currently improving the level of pharmaceutical coverage as

the private market in medi¬cines has grown considerably in the last six years.

II. Patents

Conditions and legislation

Patent applications are regulated by the Intellectual Property Law (IPL) and its

regulations. Patentable inventions must (Article 16, IPL):

-Be novel.

-Result from an inventive step.

-Be industrially applicable.

The Mexican Institute of Industrial Property (IMPI) now grants patents protecting

the compounds, formulations, uses and manufacturing processes of medicines.

The legal perspective on…

ALEJANDRO LUNA FANDIÑO, Partner, Olivares & Cia

ALEJANDRO LUNA FANDIÑO

Partner, Olivares & Cia

T +52 55 5322 3080

F +52 55 5322 3001

E [email protected]

W www.olivares.com.mx


39LEGAL PERSPECTIVES

Article 19 of the IPL excludes medical procedures from being

the subject matter of an invention. However, a patent can be

obtained for a therapeutic method by drafting the claims in

the Swiss-style format, that is, claiming the medical use of

the compound for the treatment of a specified illness.

Process and timing

The average time for obtaining a Mexican patent varies

depending on the field of technology. Generally, it takes from

four to six years to obtain a patent.

A patent is obtained by filing a patent application with the IMPI.

Duration and renewal

The term of a Mexican patent is 20 years from the effective

filing date of the patent application. For Paris Convention and

non-Paris Convention applications, the effective filing date is

the filing date in Mexico. For Patent Cooperation Treaty 1970

applications, the effective filing date is the date of filing of the

international patent application.

The patent cannot be renewed.

Data Package Exclusivity

Arguably in conflict with international law (which contains

provisions concerning industrial secrets and the protection of

data package exclusivity rights (DPE)), Mexico does not have

any domestic legislation which expressly establishes and

protects DPE.

Extending protection

There are no provisions for exclusivity term extensions or

supplementary protection certificates in domestic law.

In theory, the life term of a patent could be extended under

certain international treaties (for example, NAFTA) where

the Health Authority has delayed the process to obtain a

marketing authorization for a patented product. However, in

practice no-one has yet attempted to do this.

Patent infringement

The IPL grants patentees the right to the exclusive exploitation

of the patented invention. Therefore, a patent grants the right

to exclude others from making, using, offering for sale or

importing the patented invention. In a patent infringement

action, the claimant must prove the following:

- Ownership or recorded license over a granted, valid

and fully in force patent. Generally, a certified copy of

the “file wrapper” of the patent prosecution is enough to

prove these requirements. Validity of the patent can be

challenged by the defendant.

- That someone is using, making, offering to sell or

importing the patented invention. The IPL establishes

direct infringement over the manufacturer. Infringement

against sellers requires evidence of prior notice of

the alleged infringement. When a claimant claims

infringement of a patented process, the defendant has

the burden of proving the use of a different process other

than the patented process. There are no grounds in the

IPL to apply the contributory infringement doctrine.

- Use of the patented invention. Under the IPL, only literal

infringement is recognized. No doctrine of equivalence

applies.

The burden of proving authorization is on the defendant. The

doctrine of implied license has never been tested before the

Mexican courts.

Proving patent infringement in Mexico is a difficult task, since

the jurisdiction follows a strict civil law system which has

formalistic rules for both evidence and proceedings.

The patent infringement claim must be submitted before the

IMPI. The claim is served on the alleged infringer, who then

has ten working days to respond and, if applicable, bring a

counterclaim. That response is then served on the claimant

for the claimant to refute it. All the evidence is analyzed, and

finally a decision is issued. That decision can be challenged

before the Federal Courts.

The IMPI is an administrative authority. There is no judge or

jury participation in patent infringement actions.


40 EXPERT EYE

In the past 10 years, México has been dramatically changing the market dynamics

of the pharmaceutical market, as well as the health sector, in general.

The private sector has been reducing its values and its strategic weight, while the

public buyers (the public sector) are gaining a more competitive advantage, and are

becoming a must-have line of business due to its unprecedented growth.

Nowadays, the overall view of the public sector:

• Accounts for more than 50% of the total Mexican market in units.

• Is composed by aprox 150 public health providers, or institutions (IMSS, ISSSTE,

PEMEX, the armies, National Institutes and Hospitals, and the States. These

last ones receive every year over $ 5,000 million USD via the Seguro Popular

program).

• Per year, more than 1,000 public tenders or biddings are published with

opportunities for the pharmaceutical products manufacturers and distributors

to sell to these public institutions.

• The public sector manages over 7,000 different hospitals and medical units.

The Mexican population is divided into the following major grouping1,2:

• IMSS: 55 million beneficiaries.

• Seguro Popular: 52 million beneficiaries.

• ISSSTE: 12 million beneficiaries.

• PEMEX: 750,000 beneficiaries.

In order to make a good penetration in the Mexican public sector, the pharmaceutical

manufacturers come every day to our facilities, to search for consultancy, either for

a better understanding of the Mexican public market dynamics, or to analyze the

entry/growth strategies to make public buyers a real business opportunity.

We must consider at first, which market segments offer better business scenarios.

Based on the database information of the public sector we grow every day, we

assess our clients by the following:

Each market must focus on a differential strategy. This means, for the same

pharmaceutical product that we wish to sell to the Government buyers, we must

create a differentiated strategy based on:

The Mexican Public Sector

José Carlos Ferreyra. President, Pharmaceutical Institute, A.C., [email protected]

Footnotes:

1 Population joints may occur, i.e.: multiple

health coverage per beneficiary.

2 Gross numbers.

3 Based on the pharmaceutical products

acquisitions audited information of more

than 100 public institutions in México.

Source: Pharmaceutical Institute, A.C.

4 Group names according to the National

Health Counsel official national

formulary.


41EXPERT EYE

• Differentiated Price. Even though the law establishes

the prices to be observed and followed, in the practice we

can see that each public buyer will set up different prices

for the same product.

• Differentiated Seller/Distributor. The same distributor

that can win the tenders in IMSS or ISSSTE, is not the

same that will make a good market penetration in the

Seguro Popular (states).

• Differentiated Value added. All the 150 public buyers

in México are different, and so as well, their priorities

in terms of value added. Don’t think of a good access

strategy that worked well in an institution to be bullet-

proof anywhere else.

Besides, in order to make public buyers the best bet you can

get, you must observe accurately and develop commercial

and access strategies for a good coverage of the following

market dynamics:

• Service integrator owner (SIO). This model is being

quickly adopted by Mexico’s public sector. Within this

contract scope, the SIO must buy, store and distribute all

the pharmaceutical products (all other medical supplies

as well) under a fixed contract that includes the margin

and benefits for the SIO. So, in order to make your

product available to the institution, you must establish a

good relationship with the SIO.

• Private hospitals. The huge chain hospitals are

becoming a very important provider of the Mexican public

institutions, for an outstanding number of services that

are being now provided to the public beneficiaries in

private hospitals all over the country.

• Patient outsourcing. This model is being offered by

the private industry, on which the provider takes along

all the service required by the public institution. For

example, in the private clinics of hemodialysis and

peritoneal dialysis. This growing model is allowing the

big public institutions to refocus their budget to other

priorities, due to the fact that by outsourcing patients,

the institution no longer has to buy the pharmaceuticals

and supplies needed.

• Local pharmacies. Take into consideration that providing

drugs and medicines to over 100 million Mexicans, is not

an easy job. This is why, the recipe for the beneficiary,

sometimes must be provided by a local pharmacy (which

has the surrogate-recipe contract with the institution),

with no cost to the beneficiary. However, in México,

the pharmacy employee can offer either a generic or a

substitute to the product signed in the recipe.

If you are looking to make your business grow, Mexican public

sector is the answer. Look for a strong market database tool

(market database providers MUST tell you exactly where the

source information is coming from), who also has proven

knowledge in assessing access strategies, and can also train

and certify your KAMs and Government Sales Reps in both

promotion and Contract Management for each client you

want to reach.

In the Pharmaceutical Institute we can help you develop the

best mix of strategies to reach this huge public market.

Contact us for any consultancy you might need.

TABLE 1: TOP GROWING MARKET SEGMENTS3,4:

Top 10 markets growing in units

(2012 vs 2011)

Top 10 markets growing in values

(2012 vs 2011)

Top 10 markets growing in average price

(2012 vs 2011)

1. Ophthalmology (+36.29%). 1. Endocrinology (+59.45%). 1. Endocrinology (+54.47%)

2. Psychiatry (+26.87%). 2. Ophthalmology (+31.49%). 2. Nephrology and urology (+30.04%).

3. Neumology (+19.10%). 3. Nephrology and urology (+27.59%). 3. Immunoallergic diseases (+27.91%).

4. Oncology (+17.95%). 4. Immunoallergic diseases (+25.69%). 4. Hematology (+21.31%).

5. Gynecology (+16.94%). 5. Neumology (+23.28%). 5. Intoxications (+20.30%).

6. Otolaryngology (+10.18%). 6. Hematology (+19.36%). 6. Analgesics (+12.88%).

7. Dermatology (+6.20%). 7. Gynecology (+18.79%). 7. Plasma substitutes (+12.49%).

8. Endocrinology (+3.22%). 8. Neurology (+10.33%). 8. Neurology (+10.74%).

9. Gastro (+2.62%). 9. Plasma substitutes (+8.38%). 9. Anesthesia (+7.22%).

10. Oncology (+1.55%). 10. Analgesics (+3.12%). 10. Infectious diseases (+4.41%).


42 EXPERT EYE

Despite the considerable progress done towards an effective public health system in

Mexico, all healthcare actors, from government to pharmaceutical companies and

health providers, recognize that much more needs to be done. Too many patients still

suffer from delays and insufficient availability of high quality care. Only by working

together more closely, we will find better solutions for healthcare in Mexico.

“It is a complex task, and, even within the pharmaceutical industry, opinions vary

as to which is the best way to achieve this. Nevertheless, there is a consensus

around the need to expand access and promote innovation. Regarding these two

key issues, in AMIIF we are proud to say that we think Mexico is on the right track,

with a number of positive initiatives underway. There is still, of course, work to

be done – specifically, in offering access to innovation. Out of the three necessary

steps – regulation, inclusion in the National Basic Formulary (NBF) & Institutional

formularies, and supply of innovative drugs for the population– we have made

substantial progress in regulation through COFEPRIS. However, we still need to

focus on moving forward with inclusion into NBF and Institutional formularies,

as well as securing supply of innovative drugs. It is important to ensure that any

improvements in any of these areas, quality, cost and effectiveness can be sustained

in the long-term.

Within AMIIF, we are working on a number of proposals and I would like to share

our top line thoughts with Focus Reports.

The regulatory framework in Mexico: improvements, drawbacks, and future perspectives

In terms of improvements, drawbacks and future perspectives in the regulatory

framework in Mexico, there are three key areas to work on. First of all, the efficiency

and effectiveness of the regulatory authority must be maintained and guaranteed.

To this effect, a series of factors should take place under this new administration.

To begin with, the improvement that started last year by “COFEPRIS” (especially

the PAHO certification), should continue. It should be noted that all improvements

took place under Comissioner Mikel Arriola´s leadership, and as a result of his

performance, he was reappointed in this position. There is still work to be done

The Healthcare System and Regulatory Framework in Mexico

By Sandra Sánchez, President of the Mexican Association of Pharmaceutical Research Industries (AMIIF)

“It should be noted that

all improvements took

place under Comissioner

Mikel Arriola´s

leadership, and as a

result of his performance,

he was reappointed in this

position.”


43EXPERT EYE

to guarantee the adherence to deadlines for regulatory

approvals, but there are also high expectations in regards to

the improvements Mr. Arriola is planning to achieve during

his new tenure.

Biotechnology and biosimilar

COFEPRIS has taken significant steps towards developing

a regulatory and legal framework for “Biocomparables”

(as they are called in Mexico) drugs, potentially creating the

standard for Latin America and being one of the most robust

on an international scale. However, this regulation still needs

continued review and effective implementation as the nature

of each class of drugs is complex and very different between

them. We believe science-based standards offer the best

opportunity for expanding access and protecting patient safety.

Patient safety is a collective effort. Making biologic medicines

- whether innovative or biosimilar - is neither straight forward

nor easy. Biologics have highly complex manufacturing

processes and today require significant investment in order

to deliver high quality and reliable supply – both important

to patient safety. Complex products require high standards.

We believe that sound science-based regulations must start

and finish with rules that protect and preserve patient safety,

including:

• appropriate standards for the approval of biosimilars

/”biocomparables”;

• strict rules about substitution and interchangeability;

• a focus on the need for medical providers and patients to

make individualized decisions; and

• a process that ensures that each biologic product-

whether innovator or biosimilar—enters the marketplace

in a manner that permits its use to be tracked and

traced to assure that any safety issue can be addressed

promptly, and that products are monitored and used

responsibly (pharmaco-vigilance)

The biosimilar approval pathway presents opportunities

and challenges. Stringent guidelines will play a key role in

advancing the safety of biologics and improving the lives and

productivity of Mexican citizens.

Intellectual property,

It encourages the research and development of new

innovative drugs. The most recent improvement in this area

is that the ‘Linkage mechanism’ has taken a step forward

with the inclusion of formulation patents, eliminating court

orders that forced authorities to respect them. However, this

protection still needs to be established in the proper legal

precepts as this mechanism today does not explicitly consider

formulations or secondary use patents when COFEPRIS

validates with the Patent Office (Instituto Mexicano de la

Propiedad Intelectual – IMPI), whether a drug registration

application violates patent rights or not.

Combating the illegal market (counterfeit, adulterated and /

or expired)

There is a need to strengthen interagency collaboration with

industry participation to eliminate it and raise awareness on

the health risks it entails; hence it has not only become a

national priority but a worldwide one in recent year.

The R&D pharmaceutical industry has been very proactive

at taking steps to combat these illegal activities by

maintaining a close collaboration with various government

agencies (COFEPRIS, IMPI, PGR, Internal Revenue Service

“SAT” through its customs offices and the States General

Attorneys). Albeit, both industry and Government have shown

a strong determination to combat and reduce the problem,

and their actions have resulted in benefits to patients, the

medical community, and the industry, mechanisms for

more efficient and continuous collaboration still must be

identified.

Recommendations for the healthcare system in Mexico

One of the biggest hurdles and challenges of the Healthcare

system in Mexico is access, ensuring availability to innovative

drugs to most of the Mexican patients who need it, which

entails securing a lengthy formulary reimbursement process

to get on the “National Basic Formulary” (NBF) and “Basic

Formularies” (BFs) of all government institutions / payers.

Transparency, redundancy and consistency in the evaluation of

dossiers remain a concern and limits patients to have access to

innovative drugs. There are still important changes that could

be made to the review process to eliminate redundancies in the

system and establish a unified set of criteria for determining

cost effectiveness that will have an even greater impact and

increase access to new life saving medicines.

Recommendations for the healthcare system in Mexico

include the need for clear, transparent and streamlining the

inclusion process for NBF and BF, as well as comprehensible

mechanisms for purchasing and supply. The roadmap for

achieving these goals consists of 4 key actions.

1. Standardization of criteria for the development and evaluation

of health economic data (pharmacoeconomics) needed for

the inclusion of new therapeutic options in the NBF.

2. Streamlining evaluation process and reducing duplicative

reviews

3. Transparent bidding and negotiation of drug prices

4. Effective purchasing and efficient supply / distribution /

Rx filling of drugs


44 INTERVIEW: GSK

How would you describe the current Mexican pharmaceutical landscape and what is

GSK’s strategic positioning?

GSK today is the 6th pharmaceutical company in Mexico with a 4% market share,

structured in 4 divisions: the pharmaceutical division, the consumer division, and

2 manufacturing divisions. Within the pharmaceutical department that is under

my responsibility, we have 4 business units: the first one focused on innovative

brands, the second one on classic brands and generics, one on vaccines and the

last one on dermatology. Over the last few years, we have diversified our offer to

follow the market trends, and there have been some important changes in the

market in both private and public sectors.

In the private market there has been a shift towards generic products. The impact of

generics can be positive, the main benefit being more access to these products for a

lot of people, notably because of the lower pricing. The second change is in pharmacy

channels. Nowadays we see doctors at the point of sale, which changed the whole

dynamics of the pharmaceutical industry. The presence of doctors in pharmacies is

becoming more significant and the number of visits to these doctors has dramatically

increased, making it a new channel that we need to consider as a group as big as

IMSS in terms of visits. As a result, we need to adapt our go-to-market strategy.

On the public sector front, there have been some important challenges as well. If we

look at the past few years, the amount of new products that have been included in

Interview with José Alberto Peña,

VP & General Manager of GSK Mexico

Following a previous assignment as general manager for GSK in Hong Kong, José Alberto Peña was appointed in

July 2012 in his current position – bringing a fresh look and new perspectives to the Mexican market.

“We need to get closer

to our consumers; we

need to understand their

needs as well as their

limitations.”

José Alberto Peña, VP & General

Manager of GSK Mexico


45INTERVIEW: GSK

the public sector has been significantly reduced. As a result,

access to new pharmaceutical products has been limited. One

of the challenges is to plan a strategy to work closer with the

government institutions. Our goal would be to find win-win

situations for innovative commercialization approaches with

shared risks and common benefits, in order to satisfy the

existing market. There is no doubt that innovation continues

to be a prime driver of GSK’s business, taking in account

that we are launching 3 to 5 products per year, and we will

continue going forward. Our pipeline is very interesting but it

is becoming more specialized, making it more crucial to work

with government institutions.

What is your opinion on value based pricing and how would you

describe your proposal to the Mexican healthcare system?

We need to get closer to our consumers; we need to

understand their needs as well as their limitations. One

of the limitations we see in IMSS is that they get a lot of

financial pressure. As a result, we need to adapt our style

and our way of going to market by accepting that things have

changed. It is more important to understand their needs and

share responsibility through a real win-win situation rather

than just selling products to users. I believe that we need

to look at alternative models and we need to open up to

different options.

Do you think Mexico has the qualities to become the biggest

manufacturing hub in the region?

GSK has 4 manufacturing sites in Mexico, and there are

very few companies that can compete with that in the

pharmaceutical industry. We have one in Mexico City, two in

Morelos, and one in Queretaro. For us, local manufacturing

is definitely something that is important, for the local market

as well as for exports. We have our footprint here, but now

our objective should be to maximize the installed capacity

and see how we can make the best out of it.

I think Mexico has the basics, and the right support. There

are a lot of positive aspects here, especially if we look at the

macroeconomic environment in Mexico, with 4% growth in

GDP. Also, from a basic perspective, Mexico has the right

framework. Is it sufficient to say that it will become the

leading manufacturing hub? Of course there could be more

incentives to attract more manufacturing, because there

will always be a competition between countries. That is very

difficult to say, but it can definitely be more competitive.

What are your priorities as General Manager of GSK and what

do you think of the Mexican healthcare work environment?

GSK is a great company globally, it has a fantastic image,

and we need to put it back on the map in Mexico where it

deserves to be. We want to be part of the decision making

process in the Mexican healthcare sector: being an influence

rather than a reaction.

As a final message, as an industry leader in the pharmaceutical

industry, what do you think should be improved in the Mexican

healthcare system?

One of the biggest challenges we approach with great

interest is access to innovative medicines and making sure

that people who need these new treatments can have access

to it. We are open to discussion to see how we can make

things change in that sense.


46 ORPHAN DRUGS

Please can you give us a rundown of Shire’s activities in Mexico in the last four years,

and the key achievements and milestones along the way?

Shire started operations in Mexico in 2008 and we have had a compound growth

rate of almost 100 percent per year. We are doing this by focusing on a segment

of the market that has always been there, but only now are people actually

receiving the treatment.

I think that Mexico has a great attitude towards orphan drugs. The Mexican

authorities are very conscious of the various niche problems that exist for

patients across the country and have been very open in making orphan drugs

available to them. This is why Shire has been able to establish itself here and

make treatments available to patients. Over the past two years we have been able

to get four products on the market, three of which are available in the public

health system: one for Hunter’s Disease, another for Fabry Disease, and the third

that was approved last year is for Gaucher´s Disease.

The situation in Mexico seems different from Brazil where some patients have had to

fight in court in order to receive their treatment. Has this ever happened in Mexico?

We know there are patients in Mexico that have legally fought for access to their

drugs, but now there is no need to take legal action. We made access possible for

our orphan drugs simply through dialogue with the authorities.

A great example is Seguro Popular, which provides one of our treatments – for Hunter

Disease – to patients under 10 years of age. These are very poor patients whose families

would never be able to afford a biotechnology drug in order to be treated privately.

There was a change to general health law in Mexico published on February 29th

2012. Article 224 has been amended so that it both recognizes that there are orphan

diseases, and that there are orphan drugs to treat them. In essence it means

that the Ministry of Health has to support the development of the diagnosis and

treatment of these diseases. I think this opens up considerable possibilities, and if

you look at the social issues in Mexico then you can see this is a huge step forward.

We have now cases with people living in very poor and remote areas that are getting

treated with a biotechnology product.

How did you manage to get orphan drugs under the umbrella?

The Seguro Popular covers basic needs but it has also very important programs for

catastrophic diseases such as certain type of cancers. It’s true that our products are

Focus on orphan drugs

Interview with MARCUS KRENZLIN, Country Manager, Shire Mexico

“The Mexican authorities

are very conscious of the

various niche problems

that exist for patients

across the country and

have been very open in

making orphan drugs

available to them.”

Marcus Krenzlin, Country

Manager, Shire Mexico


47

know the families and the patients, which helps them to handle

the problem more effectively. We are also giving continuous

support to physicians for diagnosis, but even though we are

trying to play our part it is very difficult as many of the patients

live in extremely rural areas, and Mexico is a huge country.

Will the growth of healthcare from the government aid this

awareness issue?

Yes I believe so. We are already in discussions with the

authorities on how we can support them and provide training

and information to the parties involved. At the end of the day

Shire is a company that enables patients with difficult and

life-threatening diseases and their families to live much

better lives.

Where can we expect to see Shire in five years’ time?

At the moment we just do Human Genetic Therapies (HGT)

here in Mexico, but there are two more business units one

of which specializes in Attention Deficit and Hyperactivity

Disorder (ADHD) and Gastrointestinal (GI) which are about to

be launched here rather soon, and the third business unit is

regenerative medicine. So we expect establishing full Shire

operations in the country in the mid-term.

ORPHAN DRUGS

not cheap, but they are providing great value to patients and

their family and the society overall by really enabling people

with life threatening diseases to lead better lives. In addition

to the authorities’ awareness of the problem, there are also a

number of very active and well organized patient organizations

who, through dialogue, have been able to open up the doors to

get these approvals.

Do you think there is enough awareness for the diseases you are

treating in Mexico, amongst both the public and the physicians?

Awareness is definitely a problem: if you look at prevalence

or incidence data and how many patients have been either

identified or are on treatments, you will find figures indicating

that only 10-15 percent of the theoretical disease population

have been diagnosed. This means there are a large number of

patients in need of our treatment but not receiving it.

Even though there is not a high level of awareness, it is difficult

to conduct any big campaigns because these diseases are so

rare. There are maybe 250 cases in the whole of Mexico, so we

need to deal with awareness differently. We usually manage

awareness through supporting medical education programs

or through supporting the patient associations because they


48 EXPERT EYE

Mexico’s last decade of political and economic stability has brought about

demographic changes that are shifting the structure and needs of the country’s

healthcare industry. In parallel, the regulatory framework for pharmaceutical

products has been evolving to address a new socio-economic reality of greater

economic polarization, leading the different actors of the industry to test the

new rules through innovation. Whereas innovation has traditionally been known

as the development of new pharmaceutical products, in Mexico innovation

pertains to experimenting with new business models that break away from

traditional paradigms regarding the distribution, pricing and sales methods of

pharmaceuticals.

In the short term, Mexico will face an accelerated aging population, which will

generate significant increase in demand for medical services, particularly in the

detection, prevention and treatment of chronic diseases. Under such market

dynamics, no longer will product characteristics be the differentiating factor

for their sales, but rather there will be an equal onus on secondary services

and benefits that are offered to patients. This combination represents a great

opportunity for both pharmaceutical laboratories and pharmacy chains across

the entire spectrum of products; from prescription drugs to OTC and personal

care. Ultimately, this is a chance for the industry to enhance the added value they

can offer patients through their products.

At BacherZoppi, we are prepared to support, design and execute innovative

marketing strategies across all types of distribution channels and of points of

Optimizing pharmaceutical distribution channels

By Dominik Bacher, CEO, and Reto Zoppi, Commercial Director, BacherZoppi

“At BacherZoppi, we are

prepared to support,

design and execute

innovative marketing

strategies across all types

of distribution channels

and of points of sale.”


49EXPERT EYE

sale. Through the hard work of our talented sales-force in

conjunction with the most current marketing data provided

by our collaborators, we are determined to develop the

best practices in optimizing pharmaceutical distribution

channels.

The Pharmacy Modernizing Mexico’s Healthcare Industry

2011 marked the beginning of a decline in Mexico’s young

population (ages 15-24), decreasing from 20.2 million in

2010 to 14.1 in 2011. This has also initiated a reversal of the

country’s population pyramid. The group of elderly (those

above 64 years old), is currently on a fast-track growth path

that will see its expansion from 5.8 million in 2008 to an

estimated 25.9 million in 2050. As we speak, two-thirds

of healthcare expenditures in the poorest 10th percentile

of the population stem from the purchase of medicines.

With the new trend of people living longer, the demand for

medicines, medical services and personal health products

is bound to by amplified dramatically, further exacerbating

the heavy medical expenses of the Mexican population.

Equally as striking has been the change over the past few years in

the way Mexicans purchase medical products and the structure

of their points of sale. Recent studies have revealed that, while

pharmacy chains and self-service locations only account for

30% of the total points of sale, they are responsible for 80% (in

terms of quantity) of all pharmaceutical products sold.

All market actors are currently readjusting to accommodate

this reality, including the pharmaceutical laboratories,

distributors and pharmacies themselves. Pharmacies of

all kinds, whether independent, chains or wholesalers,

are now looking to determine their competitive advantage

in order to survive under the new market dynamics. For

independent pharmacy owners, this has meant a reduction

in their presence as it becomes increasingly harder for them

to compete with larger chains. They have been relegated

to selling generic medicines that are not favored by the

majority of consumers or medical experts. On the other

hand, pharmacy chains are fostering a market penetration

of private brands that has allowed both national and

international laboratories to become direct providers of

their own brands. This has meant an increase in volume of

such products, counterbalanced by a reduction in their final

sales price.


51MEDICAL DEVICES

Medical Devices


52 MEDICAL DEVICES

Mexico’s strengths as a manufacturer, and the fact that the country has more

free trade agreements in place than any other country in the world, make the

country an excellent hub for multinational companies to base their medical

device manufacturing, particularly given Mexico’s close proximity to the US.

However, it must be noted that at this point, Mexican companies have not taken

full advantage of the possibilities offered by the medical device industry: there

are no domestic companies currently manufacturing medical devices. However,

many multinationals are located in Mexico, and although the market opportunities

available in Mexico are not game changing, the potential for cheap and good quality

manufacturing make the country particularly interesting.

Similar to the challenges faced by pharmaceutical producers, the medical device

industry has been struggling to expand their business in Mexico in the face of

lengthy registration and approval times. Unlike a pharmaceutical product, medical

devices tend to have much shorter life cycles. This means that any delay in the

product’s registration process can seriously reduce its profitability and lifespan.

COFEPRIS has been working to reduce registration bureaucracy, yet there are

still numerous examples of unnecessary delays. Additionally, once registration

has been achieved, medical devices also encounter obstacles in regards to their

coverage under healthcare plans and their sales through public tenders.

As the local market matures to widely accept the use and benefits of medical

devices, manufacturers are taking advantage of the country’s free trade agreements

to export these products to other markets. Given Mexico’s numerous free trade

agreements, strong intellectual property rights protection, and an inexpensive

labor force, medical device manufacturers have discovered that there are several

advantages to producing in Mexico. According to the Global Trade Atlas, medical

device exports from Mexico reached USD$5.79 billion in 2010, with a strong

proportion of the products destined for the US.

Many of the world’s biggest names in medical devices have manufacturing facilities

close to the US-Mexican border, benefitting from Mexico’s famous maquiladora

program. Under this scheme, companies can import parts duty free for assembly,

as long as a majority of the production is destined for export. This has proven a great

incentive for international medical device companies that are taking advantage of

this unique production environment.

Mexico’s Potential for Medical Devices

While the medical device industry is perceived as less appealing and alluring than its pharmaceutical counterpart,

the sector has been thriving in recent years. Mexico has taken advantage of its experience and expertise in light

manufacturing in order to capitalize on the growing demand for medical devices around the world.

“Although the market

opportunities available

in Mexico are not game

changing, the potential

for cheap and good

quality manufacturing

make the country

particularly interesting

for multinationals.”


53MEDICAL DEVICES

The situation is without a doubt trying for pharmaceutical companies, but for

the medical device sector the COFEPRIS backlog is particularly burdensome.

Incremental innovation is a way of life, and many medical devices are constantly

improved based on practitioner feedback and rapid technological improvement.

Product lifespans are short, with an estimated expiration date of a mere two years

for most products.

For many medical device companies, this situation in Mexico is dire. According

to Jose Alberto Villazon, executive vice president of Siemens in Mexico, “Product

registration has been the main headache for all the medical devices and

pharmaceutical companies in Mexico. Even if COFEPRIS strives to improve the

situation, many issues are still pending and the process is one of the most complex

and time consuming in the world. Consequently, new innovations and technologies

that would benefit the population and, in many cases, reduce healthcare costs,

are available in the country with a one- to two-year delay compared to the US or

European countries.”

In an effort to alleviate delays, COFEPRIS has implemented several measures,

which have received mixed reactions from medical device companies. On 25

November 2010, “Fast Track Health Accord” came into effect in Mexico, which

recognizes medical devices that have been approved and sold in the USA and

Canada. Today, the accord also includes products authorized in Japan. According

to COFEPRIS, medical devices registered and commercialized in these countries

should be evaluated and authorized within 30 days from when the importer files.

A Challenging Regulatory Landscape

Today in Mexico, the regulatory environment is a point of particular

concern for medical device manufacturers. Although health authorities

are earnestly trying to improve the system, many companies struggle with

long delays when registering new products for production and distribution

in the country.

“Product registration has been the

main headache for all the medical

devices and pharmaceutical companies

in Mexico.”

Jose Alberto Villazon, executive vice

president of Siemens in Mexico

“The main challenge for COFEPRIS has

been the registrations, and today the

fast track health accord has changed

the ballgame tremendously.”

Ramon Soto, managing director at

St Jude Medical Mexico


54 MEDICAL DEVICES

For many companies, the measure is making a difference. Ramon Soto, managing

director at St Jude Medical Mexico, says “the main challenge for COFEPRIS has been

the registrations, and today the fast track health accord has changed the ballgame

tremendously. Just some weeks ago, we had three product approvals granted in

eight days. So the government is listening to us. Meetings with COFEPRIS are very

useful so that they can hear the opinions of the industry and try to act on them.”

Similarly, Mauricio Monjardin, the director of 3M’s Healthcare Division in Mexico,

also reports a positive experience dealing with the authority. “What we decided to

do with COFEPRIS is to really select the priority products that we wanted to be

registered instead of wasting time on trying to get all our products approved,”

Monjardin explained.

And with 80% of their products receiving timely approvals, the strategy seems to be

working for the company. “We allow them to save time, and we get more efficiency

from them, so it is a win-win situation at the end. We can even focus more on training

them so that we are sure they know our products perfectly well,” Monjardin said.

However, the experience has not been as positive for all companies, especially those

based in Europe. Carlos Jimenez, managing director of B Braun, a German medical

device and pharmaceutical company, explains that “in Mexico, the only process that

is working in terms of registration is the fast track—and as a European company,

our portfolio benefits from the EC mark rather than FDA approval, so we do not

fully benefit from it. The certification we receive from the European authorities does

not correspond to what COFEPRIS asks for. The European community in Mexico is

working together to improve this situation.”

Nonetheless, the company sees a bright future in the country. “My expectation

for 2015 is to double sales. The question is whether the purchasing model of the

government will be changed towards more quality and better services…. Today,

Mexico is back on the investment map. We have a growth rate of about 20 to 25%

every year and this is also our expectation for the next years,” Jimenez said.

Another effort to reduce product registration delays, COFEPRIS has recently given

the green light to “Third Authorized Parties” to prepare and pre-screen registration

applications for a fee. Kurt Wicker, general manager of Becton Dickinson, a US-

based manufacturer of medical devices, instruments, and reagents, said, “Although

it is too early to judge the impact of these third authorized parties, I truly believe this

measure is game changing and will give us the certainty we need to prosper. In the

past, our low expectations of lead-time to register our products were weakening us.

Today, we feel good to be benefited by such improvements.”

Similarly, Adriana Ibarra, partner with Baker McKenzie, a global law firm, is

optimistic about the pre-screening services. “I am convinced that the outcome will be

extremely positive. The procedures will be facilitated and accelerated with the help

of personal face-to-face meetings to resolve product queries and general doubts

on the application review. Third authorized parties are extremely necessary since

companies suffer from slow internal regulation processes, heavy competition, and

tight schedules for product launch,” Ibarra concludes.

Critics of the system, however, are concerned that it gives an inside track to multinationals

with the financial wherewithal to take on the additional fees. Nonetheless, given the

current regulatory landscape and persisting authorization delays, most companies are

pleased to have another option. According to Ibarra, third parties will have to first “earn

companies trust” to determine their future place in Mexico’s regulatory process.

“What we decided to do with COFEPRIS

is to really select the priority products

that we wanted to be registered instead

of wasting time on trying to get all our

products approved.”

Mauricio Monjardin, the director of 3M’s

Healthcare Division in Mexico

“Although it is too early to judge

the impact of these third authorized

parties, I truly believe this measure

is game changing and will give us the

certainty we need to prosper.”

Kurt Wicker, general manager of Becton

Dickinson Mexico


56 MEDICAL DEVICES

Luis Nieto, Managing Director of ConvaTec in Mexico, a medical device company that

specializes in wound therapeutics, ostomy, and continence care, is well aware of

these market dynamics. “Mexico is more a ‘quick fix’ country—there is a systematic

preference for pills rather than the use of a therapy or medical device (surgery) that

could solve the problem. Some of the most advanced therapies have only penetrated

the market up to 4 or 5%, leaving great room for opportunity. However, it is complicated

to change people’s perception of treatment and adopt the medical device and the

solution to their condition rather than fixing the problem with a pill,” states Nieto.

For Medtronic, a global leader in medical technologies, proof of this Mexican

mindset can be seen in the numbers. German Garcia, regional director of Mexico

and Central America for the company, pointed to the low level of sales of one of

the company’s key products. “The use of pacemakers is highly underdeveloped in

Mexico. Around 123 pacemakers of all brands are implanted per year per million

inhabitants here versus 400 in Argentina, around 1,000 in the US, and more than

1,000 in Europe,” Garcia said.

“Patients believe implanting a pacemaker will be a complicated procedure, and

refuse to do it. So we are working on providing information to the population,” Garcia

explained and said that raising awareness is a key part of the company’s in Mexico.

“The pharmaceutical companies have done a very good job on this aspect and today

the penetration of drugs in Mexico is comparable to developed countries. However,

in terms of surgeries, we are by no means comparable to developed countries, and

this is something that medical devices companies need to work on together as an

industry,” Garcia said.

According to ConvaTec’s Nieto, to reach its full potential, the industry has to overcome

four challenges—physician awareness, patient awareness, physician capacity

(hospital beds and operating rooms), and healthcare capacity—to have more people

treated and with better outcomes. Nieto said, “Out of these four challenges, physician

awareness is by all means the most important and needs to by systematically

addressed. Of course, all are linked in a virtuous—or vicious—circle, but it all starts

with physician awareness, since they are the first ones to meet patients.”

Along the same lines, for BSN Medical, a global medical device company, education

in Mexico must start with the healthcare practitioners. Jose Manuel Lezama,

general manager of the company in Mexico, explains that “clinical education is

extremely important to us and needs to be consistent. You cannot only have training

programs when you launch a product, because you constantly have new nurses

Carving Out A Medical Device Market

With an epidemiological profile that increasingly resembles that of a developed country, with rates of diabetes,

cancer, and cardiovascular disease on the rise, Mexico offers plenty of market potential to medical device

manufacturers. However, often called a “country of pills,” there is a strong societal resistance to surgery and

invasive therapies. In order to make inroads in Mexico, medical device companies must raise awareness about the

benefits of long-term healthcare solutions to convince patients, healthcare practitioners, and providers.

“Mexico is more a ‘quick fix’ country—

there is a systematic preference for

pills rather than the use of a therapy

or medical device (surgery) that could

solve the problem.”

Luis Nieto, Managing Director of

ConvaTec in Mexico,

“Patients believe implanting a

pacemaker will be a complicated

procedure, and refuse to do it. So we

are working on providing information to

the population.”

German Garcia, regional director of

Medtronic Mexico and Central America


57MEDICAL DEVICES

“Here, the opportunity relies on education, and spreading

information as to increase the importance of dental risk

prevention. For example, we are explaining that orthodontics

is not only a problem of esthetics but also of hygiene. I

have been working with key dental decision makers and

professionals, and one of the issues at hand was to know

how we were going to bring more patients to attend their

dental practitioners. Nonetheless, I am convinced that

education will resolve these issues, and health prevention

will prevail in the middle and long term.”

Francisco Ascencion, Bausch & Lomb, a US-based company

focusing on eye health products and medical technologies,

also notes a pressing need to increase awareness not only

to physician but also to patients. “Mexico’s level of pollution

and altitude cause a phenomenon called dry eye. In Mexico,

only a small part of the population has knowledge of this

eye condition, and Mexicans engage in self-prescription and

medication, which can really worsen their condition.”

Improving awareness of the importance of medical devices in

the healthcare ecosystem was a sentiment expressed by many

medical device stakeholders in Mexico. An emerging voice of

the sector, the Mexican Association for Innovating Industries

in the Medical Devices Industry (AMID) is helping to get out

the message that medical devices can provide solutions that

are more sustainable for patients and healthcare systems.

and new users. If you are seriously committed to clinical

education like we are, you have to do it every day to make a

difference. To date, we have already trained 500 healthcare

specialists all over the country.”

“We don’t only sell medical devices, we are committed to

clinical education. Every week, we are doing training in different

hospitals; we continually train nurses, physicians and wound

care specialists. If you want to make a difference, you have to

be committed to clinical education. Sales will follow after you

have made a positive impact on users,” declares Lezama.

Similarly, Enrique Saldivar, general manager of Nobel

Biocare, world leader in innovative restorative and esthetic

dental solutions, said that physician education is also the

missing link for the dental sector. “Even when there are a

few implantology programs offered by universities, these are

still very limited considering the 80-100 thousands dentist

practicing in the country. Lack of proper training is one of

the main causes why dentists do not consider implants as

their first alternative to treat patients. Only 5% of dentists

do it because it is “risky” and most of them were not taught

this treatment while they were studying, although it is a long-

term solution that will outlast all other options”

Armando Martinez Reyes, general manager of KaVo Sybron

in Mexico, another leading dental company, concurs.

“Clinical education is

extremely important to us

and needs to be consistent.”

Jose Manuel Lezama,

general manager of BSN

Medical in Mexico

“Lack of proper training is

one of the main causes why

dentists do not consider

implants as their first

alternative to treat patients

Enrique Saldivar, general

manager of Nobel Biocare

Mexico

“One of the issues at hand

was to know how we were

going to bring more patients

to attend their dental

practitioner.”

Armando Martinez Reyes,

general manager of KaVo

Sybron in Mexico

“Mexicans engage in

self-prescription and

medication, which can really

worsen their condition.”

Francisco Ascension,

general manager Bausch &

Lomb Mexico


58 MEDICAL DEVICES

“Unless you own very good private insurance, most medical expenses relative to

eye care are not reimbursed,” notes Francisco Ascension of Bausch & Lomb. This is

illustrated by the fact that the contact lenses market in Mexico is one of the lowest in

the world with a market penetration of two to three percent.

Lourdes Mejia, director general of Smith & Nephew in Mexico, a UK-based company

specializing in orthopedics and wound management, hopes to see Seguro Popular’s

coverage extended in the years to come. “We believe that wound management and

orthopedics will play an important role. For example, in Mexico, 60,000 people

are affected by osteoarthritis every year and need replacements. Unfortunately,

Seguro Popular Needs To Extend

Its Reach

Limited in resources, Seguro Popular has so far focused primarily on

prevention and primary care. Therefore, patients who are covered by this

regime are largely unable to benefit from sustainable medical device

interventions. While the medical device sector is pleased that more people

have access to healthcare, many stakeholders are pointing the need for

additional coverage.

“We believe that wound management

and orthopedics will play an important

role.”

Lourdes Mejia, director general of Smith

& Nephew in Mexico


59MEDICAL DEVICES

implementation hasn’t been smooth,” Garcia said.

For Diego Prieto, country manager of Coloplast, an international

company focusing on medical devices and services related to

ostomy, urology, continence, and wound care, said that in general,

the country needs to take on a more holistic approach to health.

“There is a need in Mexico to create public policies for people that

need our medical devices. For instance Seguro Popular, Instituto

Mexicano de Seguridad Socia (IMSS), and Instituto de Seguridad y

Servicios Sociales de los Trabajadores del Estado (ISSSTE), focus

way more on medicines that on medical devices. Usually medical

devices rely on nurses’ decision and this needs to change in a sense

that it should be integrated in the healthcare system together with

medicines”, says Prieto.

only 30% are being treated, and we believe that Seguro

Popular will give the chance to the remaining 70% to receive

treatment,” Mejia said.

However, some question whether the popular insurance scheme

has the financial means to sufficiently cover the country’s

healthcare needs in the future. German Garcia of Medtronic

said, “Mexico does not have enough health infrastructure to

cover this drastic increase in the insured population.”

As for most of the medical device companies in Mexico, he noted that

the initiative has not meant much to his business. “Seguro Popular

hasn’t really started having an impact for us. For example, stents

have just been included in Seguro Popular, but the hospitals doing

the procedure need certifications that most have not acquired. The

Interview with Orison Huerta, managing director of the

company in Mexico.

How would you describe the landscape of the Mexican market

when it comes to Ottobock’s product offerings?

It is difficult to assess the size of our market in Mexico, because

the statistics tend to vary. Government statistics assume that there

are about five million handicapped people, including problems

with ears, eyes, etc. However, these statistics are very low

according to some non-profit organizations, which estimate that

there are about 10 to 20 million in Mexico living with disabilities.

Around 50% of those people have a problem related to mobility.

Some were amputated or injured; others had congenital diseases

that ended with a certain limitation of their abilities.

What is the main challenge that you face in Mexico?

Our main challenge is that the situation of handicapped people

is not properly addressed by the authorities, mainly because of

the way it is seen in the society and among families. We want to

change people’s mind and prove that handicapped people have

the right to be taken into consideration for economic activities.

We want to show our government and institutions how important

it is to rehabilitate disabled people to be productive again. We

are launching a large awareness campaign through a special PR

strategy by showing the problems we have as a country.

Very often, recruiters avoid hiring disabled people, even with

equal skills. How are you addressing this issue in Mexico?

People need to understand that disabled people are normal. That’s

why the backbone of the problem is: awareness, making people

understand that it is not something strange or bad, and that it

could happen to anyone. We want to show them that we are all

equal no matter what physical problem some of us may have. We

need to reinforce and increase laws in favor of handicapped people.

At Ottobock, we are taking this very seriously and we have already

suggested solutions and projects to Mexican politicians to address

these challenges.

Ottobock: Offering Mobility

Solutions and Fighting

Stigmas

As the official technical service provider for the

London 2012 Paralympic Games, the German

prosthetics firm garnered international attention

and showed the world the performance potential of

disabled people. In Mexico, Ottobock is also trying

to help society see people living with disabilities in a

different light.


60 MEDICAL DEVICES

protection. Bio-Rad Laboratories, a US-

based life sciences company, opened a

state-of-the-art manufacturing facility

in Mexico City in 2010 and has been

exporting all over the world. Octavio

Zendejas, regional manager of Latin

America for the company claims that

“our manufacturing facility is perhaps

the only one in the diagnostics segment

fully ISO 13485 certified in Mexico.

Thanks to this certification, we are

exporting, mainly to Europe but also

worldwide.”

“We are producing according to the

highest international standards of

quality, and this is perceived positively

in Mexico. When you invest in such

certification and with all the high tech

production systems, your products may

not be the cheapest on the market, but

they are the best”, boasts Zendejas.

According to BSN’s Lezama, Mexico is

an essential hub of production for the

group, with its largest facility located

It’s the Mexican term for manufacturing operations in a free trade zone where

companies can import materials duty-free for assembly in the country as long

as most of the finished products are shipped back out. The regime has made

Mexico a particularly attractive manufacturing location and the numbers show it.

According to data from Global Trade Atlas, by 2011 Mexico’s medical device exports

surpassed USD$ 6 billion, putting the country in eleventh place for the industry

globally. Additionally, Mexico is the leading exporter in Latin America and is the

main supplier to the US.

Many of the big names in US medical device manufacturing are set up along the

border to benefit from the system. With manufacturing facilities in Tijuana and

Sonora, Medtronic is one such example. Other companies include Becton Dickinson,

Productos Bard de México, BSN medical, among many others (see chart opposite).

US-based company Baxter has manufacturing roots going back to 1948. Victor Pedroza,

managing director for the company in Mexico, said the country has long been attractive

to US companies. “We decided to come to Mexico and very early on, we also chose to

have manufacturing facilities in the country. Mexico has a lot of opportunities to offer,

mainly a very large market, and proximity to the United States”, says Pedroza.

Beyond maquiladora and the strategic location, companies are also attracted to

Mexico for its low labor costs, high quality of work, and strong intellectual property

Made in Mexico

Along the US border, Baja California, Chihuahua, Sonora, and Nuevo Leon have been key destinations for international

medical device manufacturers for decades. Companies there have set up shop to benefit from “maquiladoras.”

Source: ProMexico

Concentration of companies

+ -

Sonora

19 exporting companies

Chihuahua


Coahuila


Nuevo León


Tarnaulipas


Distrito Federal


Estado de México


Jalisco


Baja California


Other exporting

companies 170

“Mexico has a lot of opportunities to

offer, mainly a very large market, and

proximity to the United States.”

Victor Pedroza, managing director for

Baxter in Mexico


61MEDICAL DEVICES

in Reynosa. “We now employ more than 500 people there,

despite the fact most of the facility is automated. We have five

different manufacturing lines. Ten percent of the production

stays in Mexico; the US represents 70% of exports and the

rest goes overseas. We are in the optimizing phase for the

moment, but when we’ll need additional capacity, we do have

additional plans for another facility in Reynosa.

Mexico’s main trade partners for medical devices (2011)

Exports (million) Imports (million)

United States 5639 92.9% United States 1993 65.7%

France 145 2.4% Germany 233 7.7%

Ireland 144 2.4% China 195 6.4%

Germany 19 0.3% Japan 72 2.4%

Netherlands 15 0.2% Switzerland 48 1.6%

Belgium 11 0.2% Netherlands 48 1.6%

Canada 11 0.2% Brazil 42 1.4%

Venezuela 10 0.2% Ireland 41 1.4%

Columbia 8 0.1% France 37 1.2%

UK 8 0.1% Taiwan 34 1.1%

Other 62 0.1% Others 289 9.5%

Total 6072 100% Total 3032 100%

Source: Global Trade Atla

“ Thanks to [our]

certification, we are

exporting, mainly to Europe

but also worldwide.”

Octavio Zendejas, regional

manager of Latin America

for Bio-Rad Laboratories

Think in SafetyThink in B. Braun

B. Braun Mexico | Tehuantepec 118 | Roma Sur |Del. Cuauhtémoc | ZIP 06760 | Mexico CityLada 01 800 522 7286 | Tel +52 (55) 5089 7800 | www.bbraun.com.mx

However, some critics of the current situation caution that

Mexico’s reliance on the US for exports is far too great. The

difficult economic situation in the US and President Obama’s

move to strengthen economic ties in Asia could threaten

the status quo in the future. For increased stability, Mexico

should make a move to expand export destinations beyond its

northern border.


62 MEDICAL DEVICES

From the anesthesia and the surgery instruments, to Class III medical device,

companies are called to provide the integral package. This is a tough task given that

companies rarely have such a broad portfolio. Therefore, new firms called “integrators”

are putting all of the pieces together and taking on increasingly important role in

Mexico’s distribution system.

For Siemens Healthcare, the company has come to rely on integrators for the sale of

clinical products and diagnostics. Siemens’ Villazon estimated that “around 80% of the

public business and also some of the private hospitals use integrators and do not invest

directly in clinical laboratory equipment.”

This is clearly an advantage for public institutions. “They do not need to invest in assets,

and avoid warehousing expenses and product losses or damages. The integrator

is responsible for overall operation of the laboratory taking that weight from the

healthcare institution. This concept is gaining power, and it has already expanded into

areas like laparoscopy, anesthesia, short term surgery and other healthcare services,

with a tendency to keep growing into services like diagnostic imaging and oncology”,

concludes Villazon.

Philips healthcare division develops a wide range of medical devices including large

size equipment, such as MR and CT scanners. Alejandro Paolini, general manager of

Philips healthcare in Mexico, believes that integrators play a key role in the country’s

distribution system today. “I believe the government used the integrators as a means

to face the infrastructure gap. Appropriate infrastructure and standard quality service

in health are the real issues.”

“In order to close this gap, the government offered two different options – Integral

services and public-private partnerships. Philips for example has sold its equipment

to different integrators, and as a provider of equipment we remain transparent with all

our clients. In the end, selling our equipment to integrators is the same as selling to

any other client from the private sector,“ Paolini said.

It’s a good outlook to have because these integral service providers are gaining

ground in Mexico’s healthcare system. According to Mejia of Smith & Nephew, “These

integrators have completely changed the market dynamics and we believe they will

stay in the market for a very long time.”

Doing Business With “Integrators”:

A Unique Distribution System

In Mexico, health institutions are increasingly issuing tenders based on the cost of procedure, rather than individual

devices or products.

“I believe the government used the

integrators as a means to face the

infrastructure gap. Appropriate

infrastructure and standard quality

service in health are the real issues.”

Alejandro Paolini, general manager of

Philips healthcare in Mexico


64 DISTRIBUTION

The Mexican distribution market has traditionally been dominated by a handful of

very powerful wholesalers: Nacional de Drogas (NADRO), Casa Saba, Casa Marzam,

and Fármacos Nacionales. However, as market dynamics change, one niche is

emerging as the trusted partner to the industry: Third Party Logistics companies

(3PLs).

Mario Sicilia, CEO of 3rd party logistics company BOMI Mexico tells us, “The

suppression of the manufacturing plant requirement has helped the third party

logistics industry, because we have had more customers from outside of Mexico.

Our solution is usually their best option to comply with regulation and create value.

These kinds of customers can operate using our sanitary license after signing

a contract with BOMI. This saves a lot of time with COFEPRIS, and of course

guarantees a better and more efficient logistics operations.”

Moreover, as pharmaceutical companies start selling directly to pharmacy chains

and supermarkets, another market opportunity was created for 3PL companies.

Indeed, if this distribution channel is new for the healthcare industry, it is not

unknown to some of these companies. DHL, for example, already handles a large

part of the distribution volume to these outlets - around 20 to 25% of their loads

every day - creating economies of scale and allowing them to deliver multiple

orders in a single truck.

Luis Felipe Martinez, Senior Director of Operations Retail, Life Sciences, Strategic

Development of DHL Supply Chain Mexico continues on a third market change

which benefitted the 3PL industry: the rise of integrators. “Our perception is that

integrators are traders that add real value because of their commercial skills,

but show no real desire on developing expertise or participating and investing in

distribution. This creates opportunities for companies such as DHL Supply Chain

to combine our logistics know-how with the commercial ability of the integrators”,

he explains.

Distributing Health

3PLs: the new prescription for distribution

“Our perception is that integrators are

traders that add real value because of

their commercial skills, but show no

real desire on developing expertise

or participating and investing in

distribution.”

Luis Felipe Martinez, Senior Director

of Operations Retail, Life Sciences,

Strategic Development of DHL Supply

Chain Mexico

So

urc

e:

BO

MI

de

Me

xic

o


65DISTRIBUTION

The company also managed to take advantage of the

geographic context as many medical devices are assembled

in Northern Mexico along the maquila model, and the cross

border flows represent an important strategic opportunity.

Outsourcing logistics is also increasingly seen as a real win-

win partnership by healthcare companies. “Outsourcing

logistics allows companies to focus on their core business

through a less expensive and more transparent operation;

you get one invoice for the cost of logistics, rather than having

a ‘black box’ in your P&L. Logistic Operators also take care of

all compliance with warehousing and distribution regulations

for their customer”, BOMI’s Mario Sicilia explains. “Moreover,

companies who choose to outsource eliminate the need for

CAPEX, and have the flexibility to grow because they don’t

need to invest in a warehouse. If operations increase or

decrease, we can adapt to that as well. We ultimately receive

a customer’s product, linking their manufacturing processes

to their final customers. We act as commercial partners to

our clients, keeping in mind that their success is ours.”

However, managing logistics in Mexico is not a walk in the

park. Whether it is insecurity, theft and robbery, the climate

or the geographic disparity of the country, the challenges are

real and have to be overcome.

“Our vehicles and facilities have GPS active monitoring and

are protected 24/7 by strong dissuasive processes and active

protection forces. In addition, when a customer requests an

escort or a guard inside to protect the merchandise of the

truck, we provide this service. DHL Supply Chain stays on

the cutting edge of security advancement and options. We

have developed some of the technology in house, with the

goal of protecting our customers’ products. Our state of the

art boxes can only be opened by a GPRS satellite device. Our

GPRS technology even allows DHL to track the merchandise

even in the case of theft”, Martinez explains.

“Similar to our investments in facilities and controls, we invest

in full monitoring systems which help us control and maintain

our operating conditions. Our GPRS system has multiple

purposes: monitor the temperature in real time, analyze the

vibrations inside the truck, and assess the driver’s behavior.

We go even further by voluntarily monitoring humidity even

though it is not yet a requirement.” he continues.

But beyond the challenges, distributing health is no common

business. According to Mario Sicilia, BOMI’s success comes

directly from the company’s philosophy that he has spread

among the employees: “When I came into the company, we

changed the historical mission and vision to a mantra that

says: “We save and improve lives”. We always try to make

our employees aware that they are not just pulling a cart

or pushing a box in the warehouse, but they are saving or

improving someone’s life. This has also allowed us to link

ourselves much more closely with our customers, especially

those who are focused on high quality and high service level”.

Source: PwC Mexico 2012

DISTRIBUTION

PRODUCTS MARKET

Own

Through third parties

Biotechnologicalproducts handling

Benefits, (financial,

tax, logistic, medical care)

InformationTechnologies &

Communications(EMR, m-Health,

e-Health)

Socially Responsible

Business

• Temperature• Traceability• Expiration

• Negotiation• Pharmacy chains• Supermarkets

• Reduction of regional warehouses• Increase number of direct shipments• Increase minimum delivery size• Computerise orders processing• Computer-designed distribution routes• Environmental protection

Regulatoryharmonisation

Challenges

The new distribution paradigm

“We always try to make our employees aware that they are not

just pulling a cart or pushing a box in the warehouse: they are

saving or improving someone’s life.”

Mario Sicilia, CEO, BOMI de Mexico


66 INNOVATION

The rise of healthcare costs around the world is transforming the way life sciences

are evolving. Governments are increasingly being forced to streamline and review

their provision of healthcare services while private industry faces greater pressure

to develop new business models, molecules and products while lowering expenses.

At the heart of this evolution lie the clinical trials that provide the basis for all new

drugs released into the market. With a heightened focus on maintaining costs as

low as possible, pharmaceutical companies are more frequently conducting their

trials in countries that offer a price advantage. From Eastern Europe to Asia and

Latin America, R&D of new pharmaceutical products has become a truly globalized

endeavor, forcing countries to compete against each other in order to attract R&D

investment. India and China have been leading the trend, attracting the largest

number of trials outside of the US and Europe.

In Latin America, Brazil and Argentina have traditionally been the favored

destinations for clinical research, with Mexico trailing behind. This scenario,

however, has been shifting over the last few years as Mexico leverages its

advantages to become a likely contender as a preferred clinical trial destination.

“The main advantage of developing clinical studies here in Mexico, aside from the

significantly lower costs, is the type of population that we have – from children

and adolescents, to adults and seniors, and from a variety of different climates

that enables us to re-create different situations and setups for the clinical trials”,

explains Arturo Rodriguez, President of the Association of CROs in Mexico (ACRO).

Mexico’s ethnic diversity is undoubtedly a boon for the pharmaceutical industry,

Creado en México?

Forgetting the maquila – and looking at Mexico’s innovation capabilities

67


INNOVATION

as it allows companies to test their drugs on a wide variety

of gene pools at the same research location. Furthermore,

as Mexico’s economic development has progressed, the

disease profile of the country is comparable to that of the US

and Europe, where pharmaceutical companies make most of

their profits.

“Currently Mexico is working on harmonizing guidelines for

clinical trials with those of the international community”,

adds Rodriguez. This will inevitably make the country more

competitive once universal protocols become standard

practice. In July 2012 The Mexican Federal Commission for

the Protection of Sanitary Risks (COFEPRIS) was certified by

the Pan American Health Organization (PAHO) as a national

regulatory agency of regional reference, alongside those of

Brazil, Argentina, Colombia and Cuba.

After this event “the government has promised to reduce

regulatory process timeframes, and to also increase the

number of reviewers, at the same time implementing a

specialized section in COFEPRIS made up of experts who

will work on setting up a faster approval structure depending

on the type of submissions”, states Rodriguez. The agency

was set up in 2001 as the country’s independent regulatory

body that oversees all activities related to the healthcare

industry, from research and pharmacovigilance to the control

of pharmaceutical marketing. Since its creation, attracting

clinical research has become a priority for the country.

The country has fantastic world class

institutions for generating scientific

and engineering talent but it is critically

important to provide strength to Mexican

small and medium sized organizations

that create and innovate. [...] Alandra

Medical’s successes are meant to reflect

well on Mexico as a research location, to

stimulate other Mexicans to participate

in a value chain, and to be a global

testimony of Mexico’s high quality level of

research, innovation and creativity.”

David Hite, CEO, Alandra Medical

Time is of critical essence for clinical trials, and is often cited

by companies to be more important than cost concerns.

Some pharmaceutical companies still complain that Mexican

approvals are slower than they need to be, averaging 14-16

weeks. However, this is still quite speedy when compared

to Brazil and Argentina that hold average approval times of

8-11 months and 6 months respectively. Mexico is becoming

particularly attractive to small and medium-sized biotech

companies based in the US who collaborate with Big Pharma

to create new molecules for them. Since these smaller biotech

companies do not have the deep pockets that Big Pharma

does, the cost savings of clinical research in Mexico and the

acceptable timeframes have become rather attract.

The bottom line is that there are still many improvements that

can be made for Mexico to become a major clinical trials hub.

This includes increasing the number of beds available for

clinical research given that overall the country has a shortage

of beds to meet the needs of its population. Additional sites

are also needed considering that most of them are now public

institutions with stretched resources.

Furthermore, one of the main challenges to clinical research

in the country is quite specific to the Mexico’s diverse cultural

and linguistic heritage. The informed consent of patients in

Mexico can prove to be burdensome due to language barriers

and illiteracy in the country. UNESCO estimates that 10% of the


68 INNOVATION

has even led companies to develop drugs in Mexico and to

question whether the country can in the future create its own

molecules for the rest of the world.

Some local academics are strong believers that the country

has the capacity for pure innovation and are betting on local

scientists to come up with new products. They have gone

as far as creating a Biocluster that is entirely dedicated to

research in developing life science products.

Dr. Gregorio Cuevas, president of the Biocluster explains that

“eight years ago I developed ‘Biocluster’ which is a not-for-profit

group made up of the State Council for Science and Technology,

various Universities in the state, different Chambers, the State

of Jalisco, and the pharmaceutical companies dedicated

to research and promotion in the biotechnology sector. I set

up this group to get everyone involved in putting the state of

Jalisco on the map in terms of biotechnology. We are looking at

the companies here that are investing in new technology that

can be applied in the sector. At the moment we are working on

tissue clusters in order to develop vaccines with re-combinant

proteins and synthesized peptides. Before we start any new

research project, we always ask the government which are

country’s population is illiterate, while other statistics place this

number closer to 50% of people being functionally illiterate.

Similarly, with over 50 indigenous languages spoken across the

country, getting patients to sign a consent form can be tricky

when they don’t speak Spanish or even less English. This has

caused some questionable ethical practices in the past where

patients were simply coaxed to participate in clinical studies

without truly understanding the risks. Arturo Rodriguez of

Infinite Clinical Research explains how his CRO has dealt with

this issue. “The main step taken was the audits, both from those

inside the same clinical research companies, and externally. Our

business culture does not allow a mistake to happen more than

once, and this can be attributed to the amount of feedback with

which we work. For example if a doctor did not register a piece

of information or did not safe-keep paperwork for the patient

the solution we find to prevent it from happening a second time

is almost always through better training for those involved, and

for those who were not, but who can learn from the situation.”

Examples such as this are proof of Mexico’s improving

clinical research landscape and of a general cultural shift

to increase life sciences R&D in the country. This notion


69INNOVATION

being provided in the country – simply because they train the

health professionals and are a key player in research. For

instance, Tec de Monterrey or Panamericana, as well as public

universities such as the University of Nuevo Leon, should

have the entrepreneurial spirit to join forces and create APPP

(Academic Public- Private Partnerships) such as bioclusters.

That would be a key driver that would create some change

rapidly. The concept of bioclusters is still a challenge for the

industry but is slowly emerging – and one example is the

Campus BioMetropolis in the south of Mexico City.”

However, some question how successful or productive

these initiatives will be. Guillermo Abdel Musik, director of

competitiveness at the Autonomous Technological Institute of

Mexico (ITAM) recommends that before spending resources, the

government should establish very specific investment priorities

in order to reach critical mass and the cluster emulation

necessary to innovation. Altogether, rather than spending these

resources on research that might eventually not be marketable,

he suggests that Mexico should concentrate on what they know

to do best: creating innovative business models that directly

address the inefficiencies of the national healthcare system.

the strongest demands at the moment in the healthcare

sector, and as a result we are working predominantly on novel

treatments for diabetes, obesity, and cancer.

We have also made it clear to COFEPRIS that we are not

working on generics, or bio-similars; we are innovating to

provide treatments for currently unmet needs in biotechnology.

Because of this we have received special pre-approvals for our

laboratory phase developments from them. If we can show them

that we comply with the entire federal requirement for bio-tech

research and development then we can move to the second step.

Biocluster is the first group of its kind in Mexico, and

initiatives such as this in Jalisco really help the company to

push research forward and to soon become the leader in its

field on a national level- we are breaking a lot of paradigms.”

Certainly this initiative is commendable, although some experts

lament the limited “cluster effect” found in Mexico’s healthcare

and life sciences sector today.

Jose Alarcon, partner at PWC Mexico, claims that “Mexican

academic institutions, both public & private, should be

playing a bigger role in transforming the way healthcare is


70 CASE STUDY: SILANES

GLOBALIZATION

We are an innovative Mexican company that invests more than 10% of our sales

back into R&D. Mexico is still our principal market, and we have five manufacturing

plants in the country, including a 52,000 square meters plant in Toluca for solid

pharmaceuticals.

In 2007 we formed an alliance with the Brazilian company Ache Labs, after which

we started exporting to Brazil. We also have another international strategic

alliance with Sanofi, in order to distribute anti-diabetic products in other Latin

American countries, and we also have an alliance with Procaps, a Colombian

company, to distribute our products in Colombia. With these strategic alliances

we can cover South America, while still operating our own forces in Mexico and

Central America.

On the research side, our investment program is three-fold. The first area is

traditional pharmaceuticals with a very strong emphasis on cardiovascular, diabetes

Developed in Mexico: Silanes as a case study Silanes is the first and only Mexican company to have an innovative drug developed on home turf and approved by

the FDA. Guillermo Funes Rodriguez develops on his winning strategy.

“We are ready to compete globally.

The approval of Anascorp was just our

first step”


71CASE STUDY: SILANES

venom, which we subsequently submitted to the FDA for

analysis and approval. It took them 11 years- but we finally

got the approval.

Anascorp is a completely new patented and innovative drug

that is selling fantastically in the United States, and now we

also have sanitary registers for the drug in Africa and we will

be launching Anascorp there in less than a year: specifically

in South Africa, Kenya and Senegal amongst others.

Receiving FDA approval means open doors everywhere you

go because it is the agency of reference. By the end of 2013

we hope to have two more products approved by the FDA,

and we will then submit a further three. Now we know the

mechanisms and the processes behind approvals, we can be

more efficient and faster in complying with them.

The long term outlook of Silanes is fantastic: we have

patented products in biotechnology, and with a plant that is

FDA and soon to be EMA approved, we are ready to compete

globally. The approval of Anascorp was just our first step.

AND INNOVATIONProviding the world with health solutions

Headquarters:Amores 1304, Col. Del ValleMéxico D. F., C. P. 03100 Tel. (52-55) 5488 3700 Manufacturing plant :Prolongación 6 Norte No. 200 Parque Industrial Toluca 2000Toluca, Edo. de México.Tel. (722) 548 0770

www.silanes.com.mx

and metabolic disorders which include obesity. In this area

we have patents, alongside twenty two academic liaisons in

Mexico, the United States, and Europe.

The second area of our investment is in biotechnology,

which has three main focuses. The first focus is on our anti-

venom treatments which we use as a platform, and might

also be used to treat pain. The second focus is on molecular

biology and genomic techniques, in partnership with UNAM

and a research institute in the United States. Our third focus

is on molecular diagnostics, where we are investing in both

pharmacogenomics and proteomics.

If we had decided to go into the North American market with

just generics, as other companies have done, we would have

failed because Asian countries are selling their generics

to the Americans much more cheaply than Mexicans ever

could. So we had to conquer the North American market

with quality and innovation in the field of biotechnology. The

biotechnology branch of the company, Bioclon, developed

Anascorp which is a snake, scorpion and spider bite anti-


73REINVENTING HEALTHCARE

Reinventing healthcare


What are the challenges and opportunities of having a PPP implemented today?

Where there are not enough resources, PPPs come in line as an innovation

in financial models. Thanks to PPPs, the government has an enhanced cash

flow management to provide the services they want, and the patients get better

efficiency. It also brings better infrastructure that is built faster.

The financial model is a trust in which the government allocates ticketed resources.

There is in most cases a 20 to 25 years contract in which the private sector commits

to build and then operate the infrastructure for this period of time, providing the

management while the government provides the supervision and the clinical services.

The real challenge is to educate and raise awareness among the local governments

on how the PPPs work.

How do you incentivize local governments to engage in PPPs ?

The advantages of a PPP are very clear. First, they reduce risk for the government, as

responsibilities and costs are shared with the private sector. Another very important

factor is that cash flow pressure on the government side is reduced, allowing for

bigger scale projects in the short term. In turn, this means that the population is

provided with better services. PPPs also reduce administrative complexity for local

governments, as the daily management of logistical services such as cleaning or

laundry can be managed by the private partner. Finally, PPPs leave a lasting legacy

for the government administration that created them.

3 questions about Public Private Partnerships (PPP)

to Jose Alarcon, Partner Healthcare at PWC Mexico

Mexico’s PPP law is expected to transform the healthcare landscape, with procurement for infrastructure projects

but also high tech services. Lessons to be learnt from Mexico.

74 EXPERT EYE


75EXPERT EYE

The main obstacle and challenge of PPPs is that they require

strong and agile leadership from the government side.

Strong leadership is the key, since the political cycle is ill-

adapted to PPPs. The local governments have to think through

a long-term vision if they want to make the right choices, but

on the other hand they are only in place for 6 years, which

makes the task much more challenging. The issue is making

sure that they leave the right projects in place for the future

government without causing problems to the population,

especially if there is a change of political party. Also, you need

to sell the idea to the local congress and unions and convince

them you are not giving away public property. That is a matter

of education and awareness, and I am confident this will soon

be an issue of the past.

Then, agile leadership, as PPPs are complex to implement

politically. For example, the only players that have the

financial leverage to build the infrastructure and get

payments only after initiating operations are medium to large

size companies. Often, the state governments tend to like

more to provide investment opportunities to local or national

companies that are often too small to support the financial

challenges of integrating a PPP. A way around this challenge

would be that the large companies often hire the smaller local

companies to benefit from their market knowledge. Another

political challenge that requires agility is being able to find

a constructive agreement between federal & local levels for

effective patient referral.

How do you get a PPP right for all parties in the healthcare

industry?

In the planning stages, it is crucial that the government gets

the best advice possible as it is a long term and highly complex

project. The first step is to get a strong market study in order

to forecast the size of the hospitals. It is absolutely critical

to identify the minimum demand level to justify the project

and guarantee to private investors the minimum return on

investment they could receive – and this has been a major

problem in Mexico so far. Then, the government should get a

detailed business plan that would serve as a grid to evaluate

the quality of proposals in the bid phase.

“The real challenge is to educate and

raise awareness among the local governments on how the PPPs work.“

José Alarcon, Partner at PWC Mexico

On the private side, companies should identify the right level

of definition of the architectural design to ensure harmony

while allowing reasonable flexibility of design and amenities.

The rest of the factors are linked to typical successful project

management: adequate governance structure, a quality

supervisor, monitoring key performance indicators (KPIs),

independent assessors, appropriate penalties, and a strong

Project Management Office (PMO) for aligning work streams

and oversee risk management.

It is also very important to look at what has been done in

Mexico PPPs project up to today, to extract best practices

and capitalize on lessons learnt to better plan the next PPPs.

One of the lessons learnt in Mexico is that the market study

period is critical. Two of the PPPs conducted in Mexico – in

Nuevo Leon and Ciudad Victoria –faced a big challenge there

because there was an apparent mismatch between the

infrastructure built and the actual demand.

Second, there is a need to gather the most precise details in

the bidding process phase to increase transparency and avoid

legal complications at a later stage.

Third, the medical devices companies can’t bid for a 25 year

contract when they don’t know what tomorrow’s technology

will be. Therefore, the timeframe for medical device has to

be divided into several layers, depending on expectations for

the technology’s future obsolescence. We could also think of

different models such as opening to full service outsourcing

for certain areas of the hospital, and leasing the equipment

with a service level agreement.

Fourth lesson is how to deal the IT infrastructure in the

hospital, and whether to keep it in the frame of the PPP or

leave it outside. There is no rule here, but this is something

that needs to be considered.

Another question that was raised is how to include the clinical

personnel in the PPP – and correctly evaluating how much

staff will be necessary to correctly run the hospital is crucial.

Last, Big Pharma still has to find their place in PPPs, possibly by

offering clinical trials that could take place in those hospitals. If

pharma companies get smart enough, they can win with PPPs.


76 INTERVIEW: VITALMEX

Can you give us a historical overview of the company and tell us about the vision

behind its creation?

Vitalmex is a very humanistic company that puts the patient at the center of its

activities. We focus on a very specific strategy based on 3 goals: accessibility,

availability, and opportunity.

There is clearly enough money for healthcare in the country. However the issue is

infrastructure and the articulation of the fragmented elements of the system: it is

too complex and not efficient.

Vitalmex saw this issue 20 years ago. We were pioneers as we were the first

integrator in the country, creating the comodato system (when the government

buys equipment, they have to buy all the accessories from the same provider) and

the first offering an integrated services model. It means that innovation, medicines,

information, technology, financing, are articulated around the patient’s needs.

Mexico is a very challenging country when it comes to healthcare, and there are

a lot of barriers that do not allow us to work as we wish. At Vitalmex, we are used

to changing paradigms and we happened to modify the way the government was

purchasing products, just by our strong will to improve the system.

We realized that we had invented a very specific business model that could even

become an example for other countries. We convert the investment in equipment to

current expenses, which helps the hospitals and the government a lot. We believe

that if private companies get a bigger role in the healthcare system, by offering

better management systems and integral solutions, the level of care will increase

and the country will be able to offer better service to its population.

How would you describe your growth strategy for the near future?

There are 3 different Mexicos that need to be taken in account, and therefore 3

different ways to do business.

Interview with Jaime Cervantes, President of Vitalmex

Discussion on how integrated services are reshaping the Mexican healthcare system… and beyond.


77INTERVIEW: VITALMEX

The first Mexico is extremely rich, with 23 million Mexicans

that can receive world-class and expensive care. They are the

target of the 5-star hospitals that Mexico as such as Hospital

Angeles, ABC etc.

The second Mexico is based on the social security system,

where the employees prepay for their care through their

federal taxes. However people are not using this system fully

because the quality is not always reliable.

The third Mexico accounts for 40 million people, which are

considered as poor. They are supposed to rely on Seguro

Popular, which is a fantasy. The level of training of the staff

working in these institutions is very low, funds are misused,

the infrastructure is in bad condition, the equipment is

obsolete, abandoned, 80% of the budget goes to payroll,

so the institution is only running with 20% of the budget

dedicated to the patient.

We decided to focus on this bottom of the pyramid target

because the challenges are huge and it is in our values and

philosophy to try our best to increase the level of healthcare

for this part of the population. To work with the poorest, we

need to change the way we behave: that is why we are not only

distributors, we are not only manufacturers, or integrators,

but we are developers of healthcare systems. We want to give

them accessibility, availability and opportunity.

How can developers create value for Mexico?

As developers we want to create 4 different criteria for value.

First, we want to create what we call flexible standardization,

with a system that could be individualized, universal and

functional. Second, we can bring economic benefits to the

government from our solutions. We have engineers looking at

the best technology, even to reuse equipment that is obsolete

in Europe or in the USA but that could be refurbished and

used in Mexico at a low cost. Our third criterion is simplicity,

in order to create an affordable solution. We provide exact

numbers and statistics to the government and we align our

offer to these realistic needs, which creates economical

advantage. The fourth is the guarantee of service, because

we are committed to provide high quality.

“To work with the poorest, we need to change the way we behave: that is why

we are not only distributors, we are not only manufacturers, or integrators, but

we are developers of healthcare systems. We want to give them accessibility,

availability and opportunity.”

Jaime Cervantes, President of Vitalmex

Our offer is completely unique: it is not focused on the

hospital, not on the surgeon, nor technology. Our one and

only focus is the patient – and we have strategic partnerships

with companies such as SAP, Philips, Johnson&Johnson,

Boston Scientific…

Today in Seguro Popular, everything is purchased and organized

separately: transportation, technology, telecommunications,

medical equipment, infrastructure, staff training, logistics, etc.

What Vitalmex offers is putting everything together.

Our offer is an integral solution based on a yearly fee with a cost

per patient. We make sure to avoid any kind of shortage, lack

of staff or technical problem as the service is global and takes

every variable into account. In some cases the government

might even ask us to build new hospitals or refurbish some

clinics. We also train and provide physicians. We are not

selling products but opportunity of health. We operate all the

equipment and are in charge of the maintenance. We basically

provide everything to run a hospital so that the patients can

get the best care out of the available infrastructure.

Our first project where we were able to show that we were

pioneers was at a public hospital in Veracruz for which we have

a 12-year contract. Based on the PPP law, our hospital runs

15,500 procedures per month in Veracruz, and we created 150

jobs there. We installed surgery rooms, high specialty surgeries,

imaging, hemo-dialysis clinics. We raised the capacity and

productivity and the perception of quality of the service we

provide is up to 96%.

We developed not only a new business model, but also a new

healthcare system. Our knowledge of integrated services can allow

us to be developers and spread our program with universities,

social funds, non-profit organizations, private hospitals, etc.

The system is so fragmented in Mexico that we could be the

solution to unify all the different segments that compose the

system, if the government would contract us, state by state.

We have a strategic planning of 20 years and we want to

contribute to a better future for Mexico. Vitalmex is also opening

in Spain, Peru and Colombia because we believe our model

could help other countries solve their healthcare issues.


80 LEADERS

In the face of globalization and convergence, leadership skills within life sciences

are becoming increasingly crucial for the success of the sector. Whereas in the

past most industry leaders had a purely medical and technical background,

the leaders of today must have a solid grasp of business concepts, as well

understand different legal, financial and cultural frameworks. Often functioning

ambassadors of a global group in their country, they must not only adapt best

practices to the local needs, but also develop the company’s operations, while

being flexible towards the rapid changes of the industry.

To address these challenges, those industry leaders need to be strongly trained

and talented. Recruitment firms such as Hays Mexico or Korn Ferry help

companies find the best match to take the reins of their operations.

According to Carlos Apellaniz, Sector Leader, Life Sciences for Korn Ferry, the

main asset for a candidate in leading positions of the healthcare industry should

be its “Learning Agility”. Korn Ferry has coined the concept and assures it has

the highest correlation to success and return on investment that can be observed.

Apellaniz explains that “some practices support the idea that high potential

individuals are individuals who will be able to grow certain number of levels in

management positions in a defined timeframe. The truth is quite different, since

high potential individuals are individuals who are capable of switching from a

completely new role and yet be successful in either parallel or higher positions

in their organizations. The key is to always locate an individual who has a strong

learning agility. Being able to anticipate in order to better understand the changes

of the market is key to survive in a very competitive landscape.

“You need to separate two different angles in the profiles: the expert and the

creative individuals. The experts are capable of grasping the market by analyzing

past factors and defining the stakeholders – yet that is not necessarily enough

in the current changing dynamics. On the other side, the creative ones are

highly innovative, but do not necessarily understand the new trends in time in a

pragmatic way. The ideal individual must be balanced between the expert person

and the creative mind, in order to have the ability to learn and deliver results in

both a short and long term, while adapting to the new circumstances.”

Hays Mexico, another recruiting firm with a specialized life science subsidiary,

takes a long-term view of future structural changes by identifying 4 trends that

will change the work landscape: the emergence of structural growth markets; the

macroeconomic cycle; skills shortages; and the globalisation of the flow of labour.

This is why Hays Mexico “helps clients simultaneously deal with talent shortages

in certain markets, while having to reshape workforces in others”, says Gerardo

Kanahuati, managing director of Hays Mexico. “Industry leaders need to be more

proactive and take strategic long term commitments”, he concludes. “The right job

can transform a person’s life. The right person can transform a business.”

Looking for leaders

“The right job can transform a person’s life. The right person can transform a business.“

Gerardo Kanahuati, partner Healthcare, Hays Mexico

“Some practices support

the idea that high potential

individuals are individuals

who will be able to grow

certain number of levels in

management positions in

a defined timeframe. The

truth is quite different.”

Carlos Apellaniz, Sector Leader,

Life Sciences, Korn Ferry


82 DIABETES

According to the Mexican Ministry of Health , there are currently 11 million people

living with diabetes in Mexico, and data published suggests that there will be more

than 16 million sufferers by the year 2030. Not only is the disease incurable, but

diabetic patients are sometimes referred to as “ticking bombs” given the variety of

medical complications associated with the disease – retinopathy, heart diseases,

kidney failure, diabetic foot just to name a few. As it stands, it is estimated that

diabetes represents about 35% of all Mexico’s public health spending, and as

the prevalence increases, so do concerns for the sustainability of the healthcare

system as a whole.

Joel Duran Chavez, director of marketing for Mexico at Novo Nordisk, suggests

that due to the sheer size of the problem, a solution backed by all stakeholders in

the market has to be found. “Given the speed at which diabetes is rising we need

stronger collaborations and partnerships in order to change the mentality of the

Mexican people. We should beat diabetes before it beats us.”

From treatment to patient care

Not many people can disagree with that stance, but it may be easier said than done.

Even today, there is still social stigma surrounding diabetes. This would probably

explain the high percentage of undiagnosed sufferers – around 35% of Mexican

diabetics haven’t been diagnosed yet according to statistics.

In the meantime, Mexico continues to be top in the world for child obesity, and

number two in adult obesity. Carlos Lopez Patan, general director of Medix, the

Mexican healthcare company specialized on obesity, explains that “diet, nutrition and

exercise are extremely important but there are also several psychological, social and

environmental factors to consider when looking at treatment for a patient. We can’t

just offer a product, but you need a holistic solution that addresses many factors in

the equation.”

Novo Nordisk’s Duran believes there is a strong emotional connection with food in

Mexico because of the high proportion of family events that involve eating. “This

Convergence in action: a focus on diabetes

Type 2 diabetes is Mexico’s leading cause of death – but could be prevented through education, risk screening and

early treatment.

“You need a holistic solution that

addresses many factors in the

equation.”

Carlos Lopez Patan, general director, Medix

83


DIABETES

emotional connection is preventing a lot of patients from

making small but crucial changes in diet and lifestyle habits

that would enable better treatment compliance”, he explains.

“It´s very hard to change the cultural habits, and as a country

it is key not to lose our cultural identity. Family and social

events are common in our culture, and that will not change.

Therefore, education is a main prevention factor for diabetes

and obesity”, shares Claudia Duran, President of the Mexican

Federation of Diabetes.

If mentality is the underlying cause of both under-diagnosis and

non-compliance with treatment, it becomes even more important

to break down barriers and start to tackle this mammoth. Carlos

Baños, president and general director of Eli Lilly in Mexico

believes, along with the majority of the industry, that education is

the only answer to address treatment compliance. This not only

involves telling people about the disease and what they need to

do, but tailor-making real educational solutions for society.

“In Mexico the average person reads fewer than two books a

year. This is a big challenge because we can produce the most

beautiful material about how to manage diabetes, but achieve

nothing because the materials have not been read.” One of Eli

Lilly’s solutions to the problem is an educational tool called

Diabetes Conversations Maps.

“This tool was developed globally and adapted locally to adjust

to the culture of Mexico. It is a game, similar to Monopoly, which

helps teach people living with diabetes and their family all they

need to know on the disease and how to care for themselves”,

he explains.

Education can often be seen in Mexico in the form of a trained

nurse who spends more time with the patient than the doctor

in the patients’ own homes, to show them how to use the

treatment equipment, how to clean it and store it properly. A

big investment on the part of the healthcare companies, but

brand loyalty for chronic illnesses is surely worth it.

Dominik Bacher and Reto Zoppi, director general and

commercial director respectively of BacherZoppi, the leading

contract sales organization in the Mexican healthcare market,

remember their first contract promoting a diabetes related

product. “We had to set up a pool of psychological talent to

support the patients throughout the therapy. The support

teams also trained the patients’ relatives on technical and

nutritional aspects, and kept the patient motivated through

the initial adaptation phase. Compliance is also a driving

force with the physician: if a patient drops out of the therapy,

doctors become more cautious in recommending the

therapy to the patient. This has been an incredible learning

experience for us - to be closer to the patients, understanding

them, considering their context, their family. The industry is

just starting to see the tip of the iceberg when it comes to

patient care. “

“The most important health problems must be attended by

everyone: government, private enterprises, patients, families,

doctors, and society at large”

Claudia Duran, President, Mexican Federation of Diabetes

“Given the speed at which diabetes is rising we need stronger

collaborations and partnerships in order to change the

mentality of the Mexican people. We should beat diabetes

before it beats us.”

Joel Duran Chavez, director of marketing for Mexico at Novo Nordisk


84 DIABETES

From mobile health units to leading the mobile health revolution

Mexican health authorities clearly feel the urge to shift from

a curative health scheme to a preventive approach, and

this is materialized through a series of prevention policies

encouraged by both companies and institutions. Companies

started to commit themselves to this new goal of teaching

better nutrition habits, by implementing wellness programs at

the work place such as encouraging the use of stairs and the

consumption of fruits.

The second main channel of prevention improvement is

encouraged by the government through the use of “Health

Caravans”, medical mobile units created by the Ministry Of

Health, that can diagnose and alert people on certain health

habits rather than just provide curative care.

These mobile units are an opportunity for the country to solve

part of its diabetes problem, by implementing more mobile

facilities able to raise awareness on nutritious habits and

weight in the country. This is an issue directly linked to the very

uneven distribution of infrastructures and human resources

throughout the country, since some rural areas do not get to see

the opportunity to see a specialist physician or receive proper

care on time given the scarcity and fragmented quality of care

in remote regions.

Some innovative companies have decided to tackle the

prevention challenge. Created in 2004 by two brothers,

Morgan & Christian Guerra, Previta provides preventive

healthcare services, including diagnostic tests, clinical

laboratory exams, vaccinations, and affordable and

convenient health-monitoring programs. Previta’s mobile

health centers treat communities and corporate employees

through preventive campaigns, while its retail clinics venture

Morgan Guerra, Founder, Previta

“In Mexico the average person reads fewer than two books a

year. This is a big challenge because we can produce the most

beautiful material about how to manage diabetes, but achieve

nothing because the materials have not been read.”

Carlos Baños, president and general director of Eli Lilly

to neighborhood grocery stores and pharmacies to provide

health management opportunities for casual shoppers.

Today, Previta has also entered the mobile health (mhealth)

segment with their trademark e-healthtracker.

Falcon is another company investing in mhealth. The company

recently launched a program called HDO designed to work with

the clinical history of the patient. “We want to use algorithms

to cross reference the patient’s medical information, which

will allow the program to automatically provide medical

recommendations to the patient. The idea is to create a

dynamic interface between our system and the patient”,

explains Alejandro Bolin, Falcon’s general manager and head

of HDO. By using accurate indicators and business rules, the

program would update the patient’s statistics without having

to send him to the clinic.

One of the pioneers in mhealth in Mexico is the The Carlos

Slim Health Institute. Today their groundbreaking diabetes

monitoring program DiabeDiario is in evaluation phase of

600 patients in the city of Xalapa, Veracruz. If successful,

DiabeDiario could have a tremendous impact not only on the

Mexican healthcare landscape – but also worldwide.

What is certain is that, in a country that has more mobile

phones than people, mhealth is set to reinvent the way

Mexicans deal with diabetes – and the way they perceive their

healthcare system.

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