The OTC pharmaceutical market in Mexico
Summary
- The OTC pharmaceutical market in Mexico reached around $2.4bn in 2009, witnessing a Y-o-Y growth of around 6%. In 2009, the cough, cold and allergy category was the leading category in the OTC pharmaceutical market with over 25% market share, followed by analgesics at 15% and vitamins and minerals with a 13% market share.
- The OTC market in Mexico has grown due to the increasing accessibility of OTC medicines which were previously available as prescription only. Neighboring cities in the US, also contributes to OTC sales in Mexico, as some OTC medicines in Mexico are prescription only in the US, and the prices of OTC products is lower in Mexico than in the US.
- The OTC market in Mexico is also characterized by large proportion under-the-counter (UTC) sales of prescription products. The UTC sales of antibiotics has resulted in a drug-resistant population, however the government is taking serious steps to eradicate the practice of selling antibiotics without a doctor's prescription. It is believed that the inappropriate consumption of antibiotics has led to the spread of spread of antibiotic resistant bacteria which resulted in increased H1N1 cases.
- The Federal Commission for Protection against Health Risks (COFEPRIS), the regulatory body operating under the Ministry of Health, is responsible for the control and monitoring of health facilities, drug registration, and framing the legal framework for drugs, food, pesticides, plant nutrients and medical devices.
- The key drivers of the OTC market in Mexico are intensified competition between companies as well as pharmacies. The economic recession has also resulted in driving the OTC market as consumers are reluctant to spend on physician visits for minor ailments.
Mexico
Overview
The
population of Mexico reached 111.1 million in 2009, an increase of 5% since
2005. In 2009, the population aged 65 years or above was only 6% of the total
population, although it is expected that the older population will increase in
the coming years as the fertility rate continues to decline. The fertility rate
is estimated to be 2.3 children per woman in 2010, down from around 6.5 in
1970. By 2013, those aged 40 years and over are expected to account for 46% of
the total population, up from around 40% in 2009 and 36% in 2005. That said,
Mexico has a large working population due to a low median age of around 26.5
years.
The
country's trade with the US and Canada has quadrupled to over $200bn annually
after the implementation of the North American Free Trade Agreement (NAFTA) in
1994. Presently, Mexico has free trade agreements with over 50 countries including
Guatemala, Honduras, El Salvador, the European Free Trade Area and Japan,
accounting for over 90% of the trade under free trade agreements. In 2009,
Mexico's GDP fell by over 6%, as a result of the global economic slowdown which
resulted in a decline in exports. Nevertheless, Mexico's GDP is expected to
show positive growth by the end of 2010.
The
Mexican government is facing numerous economic challenges, including improving
the public education system, upgrading infrastructure, increasing healthcare
expenditure, modernizing labor laws and fostering private investment in the
energy sector. The economy is heavily dependent on international trade, about
80% of which comes from the US. As a leading oil producing country, Mexico is
heavily dependent on oil exports, although it accounts for only 5% of the
country's GDP. The biggest challenge now facing the Mexican government is to
reduce the country's dependency on oil exports, and also its high level of
dependency on the US economy.
Over
three quarters (77%) of Mexico's population resided in urban areas in 2008. The
majority of the urban population is found in the northern cities including
Ciudad Juarez, Tijuana and Monterrey and also Mexico City each of which has
over one million inhabitants. However, healthcare facilities in Mexico are
still far behind the standard common across the OECD countries. In 2009, total
healthcare expenditure as a percentage of GDP stood at around 7.4%. However,
there is a huge gap between the availability of healthcare services in various
parts of the country. Over 50% of the population in Mexico is uninsured and
over half of the country’s annual health spending is out of pocket.
Mexico's OTC pharmaceutical market
The
OTC pharmaceutical market in Mexico reached $2.4bn in 2009, witnessing
year-on-year growth of 6%. In 2009, the cough, cold and allergy category led
the OTC pharmaceutical market with a share of over 25%, followed by analgesics
at 15% and vitamins and minerals at 13%. The Mexican OTC market has grown due
to the increasing accessibility of OTC medicines which were previously only
available through prescription. The rise of private label OTC brands is
expected to drive the market in Mexico, as these brands are usually priced
lower than other branded OTC products. Some neighboring US cities also
contribute to the Mexico's OTC product sales, as a number of drugs available
over the counter in Mexico are prescription medications in the US. This results
in an influx of consumers coming to Mexico expressly to purchase OTC products,
compounded by the fact that the prices in Mexico are lower than in the US. The
OTC market in Mexico is also characterized by a large proportion of
'under-the-counter' sales, to the extent where these kinds of sales have
resulted in a drug-resistant population. Indeed, it is believed that the
inappropriate consumption of antibiotics has led to the spread of spread of
antibiotic resistant bacteria which resulted in increased H1N1 cases. However,
the government is taking serious steps to eradicate the practice of selling
antibiotics without a prescription.
Bayer,
Johnson & Johnson (J&J) and Boehringer Ingelheim are the leading
international OTC pharmaceutical players in Mexico, while the leading local
player was Liomont. Mexico is estimated to be among the leading countries in
the world in terms of the number of officially available active ingredients in
OTC drugs.
In
2006, the emergency contraceptive pill levonorgestrel became available as an
OTC drug, leading to an influx of women consumers from the US (where the
contraceptive is a prescription medicine).
Market segmentation
The
cough, cold and allergy category led the OTC pharmaceutical market in 2009,
accounting for over 25% of the market by value. Other leading categories were
analgesics, with a share of around 15%, and vitamins and minerals, with a share
of around 13%. The spread of H1N1 was a contributing factor to the increase in
the sales of these categories, despite the economic crisis. However, declining
disposable income has restricted growth of lifestyle products including
vitamins and minerals. OTC drug retailing is also becoming very competitive in
Mexico due to intensified competition. Most of the pharmacies, supermarkets and
grocery retailers provide discounts and are even moving into internet retailing
to drive sales.
Regulatory framework
The
Federal Commission for Protection against Health Risks (Comisión Federal
para la Protección contra Riesgos Sanitarios; COFEPRIS) is a regulatory
body operating under the Ministry of Health. COFEPRIS is responsible for
controlling and monitoring health facilities and drug registration, and for
maintaining the legal framework for all classes of drugs, food, pesticides,
plant nutrients and medical devices. Chapter IV of the General Health Law deals
with the regulation of medicines, Article 224 of which classifies drugs on the
basis of their form of preparation and nature.
Form of preparation
Article
224 classifies a drug as either master, officinal or proprietary based on its
form of preparation.
- Master – the drug is prepared according to the formula prescribed by the physician.
- Officinal – the drug is prepared according to the rules of the Pharmacopoeia of the United Mexican States.
- Proprietary – the drug formulas are discovered by any company in the pharmaceutical industry and approved by the Ministry of Health.
Nature of the drug
A
drug can be classified as allopathic, homeopathic or herbal on the basis of its
nature.
- Allopathic – a product made from a substance or combination of different substances which has therapeutic, preventative or rehabilitative properties and is prepared according to the procedures detailed in the Pharmacopoeia of the United Mexican States for allopathic medicines.
- Homeopathic – a product made from a substance or combination of different substances which has therapeutic, preventive or rehabilitative properties and is prepared according to the procedures detailed in the Homeopathic Pharmacopoeia of the United Mexican States.
- Herbal – a product made from plant material or any plant derivatives with therapeutic efficacy and safety scientifically confirmed in national or international literature.
Article
226 of Chapter IV details the sales of drugs to the general public and divides
the drugs into six groups. While group I, II and III relates to the sales of
the prescription drugs, group IV, V, and VI pertains to the classification of
OTC drugs. Group IV medicines are drugs that require a prescription for the
first time but can be bought again as often as directed by the physician
without a prescription. Group V medicines are available as OTC but are sold
only through pharmacies. Group VI medicines are also available as OTC but can
also be sold through channels other than pharmacies, such as supermarkets,
hypermarkets and grocery stores.
Growth drivers
Intensified competition from private label brands
The
increasing competition from private label brands is expected to drive the OTC
pharmaceutical market in Mexico. The growth potential of the OTC market has led
many supermarket/hypermarket owners to introduce their own private label OTC
brands. Private label brands are not able to compete with those of
multinational players in terms of brand awareness and loyalty due to
differences in advertising and marketing budgets, so these brands primarily
compete on the basis of price.
Retail competition
In
Mexico, the retail sector for OTC products is very competitive with the presence
of numerous pharmacies and supermarkets/hypermarkets and grocery stores selling
OTC products. This competition has led to price wars and enhanced customer
service including some fringe benefits such as discounts, offers and free home
delivery. Companies are also contemplating their distribution strategy to
ensure appropriate distribution and pricing across all the channels. Indeed,
some major pharmacy chains have moved into online retailing in order to drive
sales.
Unwillingness to spend
The
global economic crisis has resulted in a decline in the disposable income of
consumers, thus making them reluctant to spend. The Mexican population is
becoming more price-conscious; this attitude is resulting in a reduced
willingness to consult a medical practitioner for common ailments such as
colds, coughs, fevers and pains. Moreover, in Mexico, even prescription drugs
are available under-the-counter from most pharmacies. However, the government
has now increased its surveillance on the dispensing of drugs from all channels
to ensure proper distribution. The uncontrolled availability of antibiotics
without prescription has raised several problems in the past and the government
is very strict to regulate this in a view to improve people's health and
prevent antibiotic resistance from developing.
