Colombia Pharmaceuticals and Healthcare Report Q3 2012

BMI View: The Colombian pharmaceutical market is the fifth-largest in Latin America, a position that is expected to continue to solidify over the forecast period. The country benefits from an improving regulatory position and has made itself as a distribution centre for multinational firms operating in the Andean region, placing the country in a good position to compete in the pharmaceutical exports sector regionally.

Headline Expenditure Projections

Pharmaceuticals: COP7,076bn (US$3.83bn) in 2011 to COP7,505bn (US$4.17bn) in 2012; +6.1% growth in local currency terms and +8.9% in US dollar terms. Forecast up slightly since Q212 due to macroeconomic factors.

Healthcare: COP29,953bn (US$16.2bn) in 2011 to COP30,634bn (US$17.0bn) in 2012; +2.3% growth in local currency terms and +5.0% in US dollar terms. Forecast up slightly since Q212 due to macroeconomic factors.

Medical devices: COP1,901bn (US$1.03bn) in 2011 to COP2,096bn (US$1.17bn) in 2012; +10.3% growth in local currency terms and +13.2% in US dollar terms. Forecast up slightly since Q212 due to macroeconomic factors.

Risk/Reward Rating: Colombia remains in seventh place in the Americas Pharmaceutical Risk/Reward Ratings (RRRs), scoring 53.9 out of 100. Colombia scores above the regional average in all subcategories. The country’s main advantages include its large population size and the immaturity of its pharmaceutical market. Furthermore, the removal of Colombia from the watch list in Pharmaceutical Research and Manufacturers of America (PhRMA)’s Special 301 submission for 2012 suggests the country’s regulatory risk profile is improving.

Key Trends And Developments

In April 2012, Eurofarma, Brazil’s third-largest drugmaker, acquired a manufacturing plant from Schering Plough (a subsidiary of Merck & Co) in Colombia. Over the medium term, Eurofarma intends to market and sell its own drugs in Colombia. The acquisition is in line with the company’s aims of establishing itself as a pan-Latin American drugmaker and covering 90% of Latin America by 2015.

In a measure likely to support sales in Colombia’s largest pharmaceutical export market, the Venezuelan government introduced new measures to assist exports from Colombia’s healthcare sector in February 2012. The move is part of an effort by the Venezuelan government to encourage bilateral trade between the countries. The Venezuelan government has been exempt from paying VAT and other tariffs and tax rates on importing goods and materials from Colombia for five years. The exemption is applicable on all products from Colombia, including pharmaceutical, surgical and medical supplies and equipment, as well as on staff to be obtained by that portfolio.

BMI Economic View: We remain positive about Colombia’s growth story in 2012 due to strong outlooks for the infrastructure and oil and gas sectors, as well as private consumption. Still, we anticipate a slight moderation in real GDP growth following a very strong 2011, in line with our 4.7% growth forecast. That said, we are neutral across asset classes for Colombia as exceptionally strong performances in the year to date have led us to question how much further the country’s assets can go over the next six months.

BMI Political View: Despite strong approval ratings (62% in February according to a Gallup Colombia poll) and robust economic growth, President Juan Manuel Santos recognises that major policy objectives, including strong economic growth and social development, depend on the government’s ability to stem rising violence and shore up the country’s security situation. Substantial deterioration in the security situation would pose a threat to the country’s robust growth and investment outlooks, while also jeopardising Santos’s ability to follow through on major policy goals. These factors inform our view that the administration will take a hardline approach to national security and defence again in 2012.