Central America Pharmaceuticals and Healthcare Report Q1 2013

BMI View: The political instability and underdeveloped economies in many Central American countriesmake the region less attractive to multinationals, compared with most neighbouring countries. However,the heavy reliance on imported medicine in the region provides revenue-generating opportunities forgeneric drugmakers from neighbouring Latin American countries and India. We highlight that Costa Ricaand Panama can be the premier countries in the region for foreign drugmakers to expand their presence.

Headline Expenditure Projections

Pharmaceuticals: US$3.3bn in 2011 to US$3.5bn in 2012; +5.5% in US dollar terms. Our forecast has been revised slightly upwards since Q412 due to improved historical data.

Healthcare: US$13.51bn in 2011 to US$14.68bn in 2012; +8.6% in US dollar terms. Ourforecast has been revised upwards since Q412 due to improved macroeconomic factors.

Risk/Reward Ratings: In BMI's Q113 Pharmaceutical Risk/Reward Ratings (RRRs), based on ouranalysis and assessment of the market's appeal to pharmaceutical companies, the Americas regioncontinues to rank second lowest globally with a score of 49.4 out of 100; behind Western Europe (66),Asia Pacific (53) and Central and Eastern Europe (51), but ahead of the Middle East and Africa (44). Ofthe seven Central American countries surveyed, Costa Rica's RRR score has changed in Q113, up from39.2 in Q412 to 40.7 this quarter, reflecting the country's increasing attractiveness to multinationaldrugmakers. Meanwhile Honduras' RRR score has reduced from 31.5 in Q412 to 28.5 in Q113.

Key Trends And Developments

In October 2012, a proposal to amend biomedical research regulations in Costa Rica wassubmitted to the legislative assembly by the University of Costa Rica (UCR) and private sectorrepresentatives. The assembly is likely to approve changes to Draft Law No. 17,777 when itvotes on the issue. The new text covers several areas, including the status of research participantsand improving the management and control bodies of biomedical research. The main goal of thelegislation is to monitor the fundamental rights of people involved in scientific research, UCRpresident Henning Jensen Pennington said.

In October 2012, German multinational drugmaker Bayer warned that a batch of Claribac(clarithromycin) antibiotics that did not meet quality standards has been leaked to El Salvador'sunregulated pharmacies. The director of the National Drug Agency, Vicente Coto, said themedicines with lower active ingredient concentration than required should be destroyedaccording to the country's good manufacturing practice standards. Bayer said 47,320 units ofmedicine were stolen from its production plant in El Salvador and they were very unlikely toenter the country's authorised pharmacies.

In October 2012, the National Drug Directorate planned to set maximum retail prices for morethan 200 essential medicines and eventually to regulate prices for the 11,000 drugs registered inthe country. Although drug price regulation could potentially reduce pharmaceutical companies'profit margins, it will improve volume sales by pushing counterfeit drugs out of the market, asmore patients will be able to afford regulated products

In October 2012, The Social Security Society for Comprehensive Cancer Care in Costa Rica hasreported that there are at least 9,000 patients diagnosed with cancer each year, and 4,244 peopledied as a result of stomach, lung, breast, cervical and prostate cancer in 2011 (the totalpopulation of Costa Rica is 4.7mn). Dr Bernardo Luis Saenz, the director of the society, toldnews agency EFE there was a growing trend in cancer mortality and the number of deaths hasincreased by 24% since 2000.

BMI Economic/Political/Social View: Central America will remain heavily dependent on theperformance of developed-state economies, particularly the US, which remains a major source ofremittance flows and demand for exports. Drug-related violence and rising levels of insecurity willremain the major concern for most of the region's electorate, particularly elevated among the 'northerntriangle' states of Guatemala, El Salvador and Honduras. The region's economic trajectory remains highlydivergent, with Panama set to experience one of the fastest real GDP growth rates in the world over thenext few years, whereas El Salvador and Honduras will struggle.