Chile Pharmaceuticals and Healthcare Report Q3 2012

BMI View: Chile’s intellectual property (IP) regime continues to be a cause of concern for the manufacturers of innovative pharmaceuticals, with the country listed on the Priority Watch List of the 2012 Special 301 report. While the data protection regime has been improved, concern remains over lengthy delays to patent application decisions, as well as over the lack of effective patent enforcement.

Nevertheless, we expect gradual improvement in Chile’s IP regime over our 10-year forecast period, which should support the development of local drug market values, especially considering the government’s investment in the expansion of the primary healthcare network.

Headline Expenditure Projections

Pharmaceuticals: CLP1,508bn (US$3.12bn) in 2011 to CLP1,590bn (US$3.12bn) in 2012; +5.4% in local currency terms and +0.1% in US dollar terms. Forecast broadly unchanged from Q212.

Healthcare: CLP9,034bn (US$18.67bn) in 2011 to CLP9,940bn (US$19.50bn) in 2012; +10.0% in local currency terms and +4.4% in US dollar terms. Forecast down slightly from Q212, due to use of new historical data.

Medical devices: CLP256.33bn (US$530mn) in 2011 to CLP267.45bn (US$525mn) in 2012; +4.3% in local currency terms and -1.0% in US dollar terms. Forecast unchanged from Q212. Risk/Reward Rating: In Q312’s America’s pharmaceutical risk/reward ratings (RRRs) matrix, Chile ranks in sixth place out of the 17 countries surveyed, an improvement from its eighth place in Q212, despite its unchanged composite score of 55.2 out of 100. We expect Chile, which has a favourable rewards profile, to climb up the regional matrix over the coming years as operational risks become addressed. Globally, Chile is 37th out of the 95 countries surveyed in total, above Bahrain and below South Africa.

Key Trends And Developments

In April 2012, the health commission of the Chamber of Deputies in Chile issued a vote on the bill that would permit OTC sales of non-prescription drugs; however, the majority of parliament members voted against the bill. The bill is also not supported by the two deputies of the commission, even though it aims to increase competition in the sale of medicines, thus lowering prices and improving access to drugs.

The Public Health Institute (ISP) of Chile was quoted by the local press as stating that 54 drug bioequivalence studies had been submitted in 2012, as of February 16 2012. The agency predicts the authorisation of 168 bioequivalent medicines over the entire year. Under resolution 244, bioequivalence studies are focused on products containing active substances used for the treatment of diseases such as cardiovascular, metabolic, central nervous system diseases, infectious diseases, HIV, muscular diseases, cancer and arthritis.

BMI Economic View: The Chilean economy will show strong resilience to global headwinds in 2012, owing to a strong private consumption story and robust, albeit declining, credit growth. While we expect economic growth to moderate slightly in 2012, we believe the Chilean authorities have plenty of ammunition on the monetary and fiscal fronts to shield the domestic economy from negative external shocks. As a result, we maintain our above-consensus real GDP growth forecast of 4.8% for 2012. BMI Political View: The administration of Sebastián Piñera will struggle to reconnect with the electorate for the duration of his tenure, as dissatisfaction with the government's education and energy policies intensifies. While we believe Piñera's reputation has been irreparably tarnished, the opposition coalition remains highly divisive and will fail to fully capitalise on the government's ailing popularity.