Latin America is becoming an increasingly popular destination for the offshoring of clinical trials. Advantages include cost savings, availability of large concentrated pools of suitable clinical trial patients, high quality urban healthcare facilities, maturing drug development capabilities and significant commercial opportunities. However, it can also present various challenges, the most noticeable being the uncertainty around intellectual property protection. These issues are rarely insurmountable but, at the same time, companies considering conducting R&D activities in Latin America need as much information on the landscape as possible, especially at a time when the R&D environment in these countries is changing rapidly.

Latin America generally refers to territories in the Americas where Spanish or Portuguese are predominantly spoken: Mexico, most of Central and South America, plus Cuba, Puerto Rico and the Dominican Republic in the Caribbean. The region's population (563 million) is almost double that of North America and it is ethnically very diverse. A high proportion (78 per cent) of the population is urbanised, and the adult literacy rate is relatively high (91per cent).

In the past many Latin American countries have experienced frequent political change and economic turmoil. In recent years, however, the major economies of the region have demonstrated political stability and exceptional growth. This growth has included strong sales growth in the pharmaceutical markets.

In response to low interest rates and exceptional growth, investment in the region has been on the rise. In May 2008 Brazil's Standard & Poor's investment rating was raised to investment grade (based specifically on its economic expansion and declining foreign debt) - thus aligning Brazil with the other BRIC countries. There also appears to be a pragmatic and gradualist approach to economic policy with many countries pursuing trade agreements with Western economies; this trend is exemplified in countries such as Chile, Brazil and Mexico.

From a pharma investment point of view, more centrally aligned governments, strong social policies and increased healthcare spending are all good signs. The political and economic stability also bodes well for high employment rates and increased confidence in the implementation of regulatory and legal frameworks, which both contribute to a more secure IP environment.

Current R&D activity
Most big pharma companies already have a degree of ongoing clinical development in Latin America, with the bulk of the activity taking place in Argentina, Brazil, Chile and Mexico. The most common model is a local operating company supplemented by CROs, the region being well served by many multinational as well as local CROs. As is typical of most non-traditional regions, the vast majority of trials conducted are Phase 3 trials.

Why Latin America?
Conducting clinical trials in traditional regions such as North America, Western Europe and Australia is becoming increasingly challenging and costly, primarily due to the difficulties in recruiting suitable patients within reasonable timeframes. Four to six million Americans participate in clinical trials, and a large number of these move on from one trial to the next.

Like many other developing regions, Latin America provides a large population of suitable potential subjects who are often keen to participate in clinical trials in order to avail themselves of free medical diagnosis and treatment which they may not otherwise be able to afford - the enrolment rate per site is on average three to five times that in the USA5. Furthermore, once recruitment starts, the large patient pool at specific sites generally enables much faster recruitment than would be possible in many traditional Western locations. Investigators are also readily available, often keen to access new technology and become part of a global R&D community.

Latin America also has several other key features which might make it a more attractive destination than the comparable non-traditional options.

Unique advantages
High population densities around world class medical establishments. Cities such as Buenos Aires, Rio de Janeiro and Mexico City can provide access to populations of five to 10 million people within a 20 mile radius, which greatly aids the logistics of running a trial. However, the problem often cited with non-traditional countries is that patients may be not be able to afford travel to multiple sessions at clinics, and this impacts the suitability of sites for long term studies requiring frequent visits.

A highly urbanised population with a disease profile closely aligned to that of populations in the major markets of North America, Western Europe and Australia

A medical system with a strong Western heritage. Many medical professionals have at some time studied at prestigious European and American institutions. There is also good implementation of ICH guidelines and GCP standards6,7

A common official language across most of the region. Brazil is the notable exception where Portuguese is spoken rather than Spanish.

Enthusiastic investigators with excellent patient retention. At 10 per cent, the discontinuation rate is approximately a third of that in the USA for studies lasting beyond a year. Latin American investigators also claim that once a study commences, patient recruitment is faster than in traditional countries, and with an adult literacy rate of over 90 per cent, there are few issues around informed consent or protocol compliance.

Relatively low investigator and site fees. On a linear scale, principal investigator/ site fee costs in Latin America and South Africa are approximately 70% of those in the USA. However, the comparable costs in India are estimated to be lower at approximately 55% of the USA costs.

As the region has become more popular as an R&D destination, many countries have proven capabilities. Besides the mandatory criteria for clinical trial execution, Argentina, Brazil, Chile and Mexico also have medical centres with cutting edge technology and expertise - a significant number of these being linked to US based institutions. However, a notable feature of these countries is the imbalance in capability between the urban metropolitan areas and the more dispersed areas. Cities such as Santiago and Mexico City have an abundance of highly qualified medical professionals whilst rural regions may be short of medical capacity (especially personnel).

Regulatory environment
In most countries in the region the time taken to register a drug is officially less than six months. The two exceptions are Brazil, where the time taken to register an original drug is estimated to be 12-14 months; and Uruguay where the process can take over three years. The time taken to register a new drug in Argentina, Chile or Mexico is officially less than a year. Whilst these timelines seem reasonable, they are rarely met. This is often a consequence of a relative lack of resources resulting from the rapidly expanding industry, and sequential bureaucratic processes.

The regulatory processes in the three main markets are subtly different: on paper Argentina is probably the simplest country in which to register a drug, relying heavily on FDA or EMEA reviews. In Brazil, the process can take up to two years in reality, and if the submission is rejected it cannot be resubmitted for a further two years. Mexico has recently extended its timelines as a result of the increased volume of submissions. The recent appointment of the Mexican Federal Commissioner (who has a background in finance rather than healthcare) is a clear message that the main objective in Mexico is to reduce the price of medicines by promoting cheaper generic drugs - submissions also need to include evidence of local manufacturing capability or a suitable partnership.

From big pharma's perspective, the key question is to what extent timelines can be reduced through collaboration with regulatory authorities i.e. discussions around planned trials and data requirements. In many emerging markets, strong relationships and genuine collaboration based on a shared commitment to local R&D may enable local operating companies to circumvent standard sequential approaches e.g. waiting to use dossiers prepared for the FDA or EMEA. Currently this does not appear to be easy in Latin America, and it can easily be mistaken as attempted corruption. However, a major commitment may facilitate an opportunity to develop these relationships, and ultimately contribute to the improvement of the regulatory processes in the country in question.

Commercial environment
Whilst patient recruitment, capability and the regulatory environment are all fundamental building blocks, R&D leaders should ideally also seek to optimise opportunities to align R&D activities with commercial priorities.

Over 2006, Latin American pharmaceutical sales grew almost 13 per cent compared to an eight per cent increase for North America. While Brazil and Mexico are the two largest markets by sales, between 2002 and 2006, growth of the Brazilian market was almost three times that of Mexico . Argentina was the second fastest growing market over the same period with almost 20 per cent growth in sales11.

Whilst these growth rates are attractive, it is worth looking at the breakdown of sales. Sales growth in many countries can often be driven by public healthcare spending with a disproportionate bias towards generics at the expense of proprietary drugs, but there has been strong sales growth in original brands in all of the selected countries. Furthermore, the distribution of sales across therapeutic areas in the major Latina markets is comparable to that of the US, UK and Japan.

All in all, Latin America appears to present enormous opportunity. Not only are the patients and capabilities available to conduct clinical trials quickly and effectively, but there are also significant commercial opportunities for novel, patented drugs. Furthermore, the relevant therapeutic areas are well aligned with those in the larger pharma markets. However, the region is not without its challenges.

Challenges in Latin America
The pharma industry has long held concerns over the IP situation in many Latin American countries. Argentina, Brazil, Chile and Mexico are all WTO members and are officially TRIPS compliant, but they have all been criticised for their "flimsy" IP protection record - Argentina and Brazil are still on the US Trade Representative's Special 301 Report Priority Watch List.

The main issue with Argentina, Chile and Mexico seems to be a lack of coordination between the patent granting bodies and the authorities granting sanitary registration of products, resulting in illicit marketing of patent infringing drugs. Furthermore, the US cites moves in Mexico (where it is in effect law) and Brazil, to allow local companies to manufacture generic versions of patent protected drugs in certain instances where the patent owner has not started local production of the drug - this latter point appears to illustrate the necessity of demonstrating genuine commitment to invest locally.

Whilst the governments concerned have made various concessions and amendments to the laws, the acid test is how they handle situations where patent infringements appear to have occurred. They need to build the confidence of multinational pharma companies by demonstrating that they are monitoring and enforcing the laws appropriately, but the evidence to date is not convincing. For example:

Brazil bypassed patent protection on Merck's Efavirenz and issued a compulsory license. Although the definition of a 'medical emergency', which would allow the issue of such a license, is debatable, the clear outcome from this situation was a renewed sense of discomfort amongst pharma companies operating in Brazil.

Whilst Chile's favourable patent ruling over Sanofi- Aventis' Plavix (clopidogrel) in 2006 was encouraging, the fine of $25,000 did not constitute a major deterrent. Furthermore, Eli Lilly's failed legal battle in Chile over a competing insulin formulation imported from India that won a large government order does not inspire confidence.

The intellectual property issues mentioned tend to present themselves downstream i.e. patent infringing competitor compounds, but the situation does not arise upstream in discovery and early development. Could Latin America therefore not provide an option for earlier phase work, and if so what are the limitations? No doubt local capabilities, appropriate technologies and previous experience all need to be explored in more detail.

Investment beyond allocation of clinical trials
It seems clear that Latin America provides valuable opportunities to conduct high quality clinical trials within attractive timeframes, and many of the multinationals have been capitalising on this despite the potential challenges associated with IP protection. However, as with many emerging markets, opportunistic outsourcing without a commitment to build local capability is unlikely to be sustainable. This is primarily due to the inevitable rising costs in emerging markets and the need to build strong local relationships in order to understand and navigate the evolving legal and regulatory landscapes.

At what point does a company go beyond the clinical development service model? What criteria need to be met in selecting a country as an option for an R&D hub? - i.e. a regional base with a degree of autonomy, through which local country level operations can be supported, and through which they can feed into the main R&D centre. From Kinapse experience the following points need to be considered early on:

● Local scientific talent - FTEs and investigators
● Current R&D activity
● Match of pipeline to areas of specialisation in the country (recognising that whilst a country might not be of interest in general R&D terms, it might possess leading edge sites in a particular TA)
● Relative commercial attractiveness
● Business environment -support for foreign companies, corruption etc
● Infrastructure e.g. e-readiness, networks and airports
● Tax incentives
● Cost
● Other company locations
● Current level of activity in clinical development
● Language
● Readiness to demonstrate commitment to invest in country R&D capability and innovation

In many non-traditional countries the advantages of being "on the ground" cannot be overestimated, especially where the local regulatory authorities are constantly evolving and thus require skilled and knowledgeable input from in-house regulatory specialists. In moving from a clinical development offshoring model to an R&D hub, an organisation not only builds local capability, but also cements relationships with local government and regulatory agencies. It also strategically positions the organisation to take advantage of the skills and knowledge of the regional scientific community. The latter is often underestimated in these regions, particularly with regard to the potential discovery of early stage assets.

The decision to develop a more established presence is subject to a number of factors, not least the economic and political outlook, which currently looks very positive in Latin America, particularly in Brazil and Mexico. It is also contingent on being able to recruit suitably trained people, and this can sometimes be a challenge in emerging markets. Latin America is not short of medics, and whilst the general availability of skills is not as high as it is in India and China; Brazil and Mexico do appear adequate in this regard.

Conclusion
Latin America provides enormous opportunity for big pharma companies as a destination to conduct clinical R&D. However, decisions should not be driven by cost alone; a more sustainable model for the region should be built on patient availability and data quality, and it must be matched to the emerging pipeline.

With large, diverse populations of treatment and trial naïve subjects clustered around world class medical establishments, the logistics of running clinical trials in Argentina, Brazil, Chile and Mexico are favourable. Furthermore, motivated investigators and willing participants provide definite advantages over conducting clinical trials in Europe or North America.

The major threat to Latin America attracting further foreign investment in pharma R&D is the lack of confidence in the protection of scientific data. Although there do appear to be progressive steps to improve IP protection in many countries in the region, the IP laws are still not always clearly enforced. Whilst this can cause uncertainty, it can be managed to an extent by developing a better understanding and communication with local authorities (through strong local relationships); and by demonstrating a genuine commitment to the local pharma industry (through local manufacturing and commitment to developing capability within the country). The high costs implied in adopting this approach mean the pharma companies should arguably consider investing greater sums in a smaller numbers of markets rather than the scattergun approach that many have adopted to date. Given the growth and opportunities in the region, the question is not whether to invest in Latin America, but where, and at what level. The key to success will be the willingness to invest time and energy on actually building capabilities and relationships in the region for sustainable growth and success.

Courtesy: Kinapse Consulting