The increasing difficulties that pharmaceutical companies face in maintaining strong sales growth in their most established markets has seen them begin to rely more on the emerging markets of the world. Latin America is one such region, presently accounting for around 6% of global sales, but with the potential to represent a bigger slice of the international market. It is the growing populations in the countries of the region combined with the commitment of their national governments to expand healthcare coverage that has attracted a host of players from the international pharmaceutical industry. Mexico, Brazil and Argentina have traditionally been the major national markets of interest, but most companies are now well represented across the region.

Yet Latin America has proved to be a mixed blessing for the pharmaceutical industry, as it is not just branded products that are now in demand. The high proportion of the population living below the national poverty line means that the governments are constantly under pressure to fund the purchase of new medicines, but they do not always have the funds to do so. In recent times there have been a number of financial crises in Latin America that have disrupted government plans and have prompted a rethinking of the healthcare strategy required.

For example, in 2001 the Argentinian economy slumped, with severe consequences for the financing of the healthcare system. Yet at the same time, the demands on the healthcare system grew as many people were pushed into poverty and were unable to maintain their standard of living. Similarly, Venezuela ran into economic difficulties due to political disputes, which disrupted the country's vital oil industry. One consequence was a shortage of medicines across the country. At one point, during May 2003, the Venezuelan Pharmaceutical Federation speculated that a collapse of the distribution system might leave the country with only 15 day's worth of medical supplies. Brazil has also suffered disruptions in the provision of healthcare during its economic crises.

The generic generation
The attempts by Latin American countries to recover from their troubles has seen a new approach to healthcare, one which has a high degree of emphasis on cost containment. Many countries have examined the cost containment systems being used in other countries in the world and have supplemented these with additional measures. For example, Brazil tends to take a strong line with pharmaceutical companies that it believes to be intransigent with regard to their pricing. This came about from the need to tackle the growing AIDS crisis in the country. In some cases, the government has threatened to break the patents of particular drugs, if the company concerned with the exclusive manufacture refused to lower the prices. In most Latin American countries, the public view affordability as a major healthcare issue and the pharmaceutical industry faces difficulties in defending its pricing strategies.

It therefore comes as little surprise that Latin American governments have begun to strongly favour the use of generics. A number of Latin American countries have passed laws that make it compulsory for doctors to prescribe pharmaceutical products by their generic name (International Non-proprietary Name (INN)) instead of by brand name. Although it is not mandatory, generic substitution is possible.

Whilst manufacturers of branded pharmaceuticals have viewed the rush towards generics in Latin America with some dismay, international generics companies have been delighted to find new markets. In particular, Indian generics companies have made considerable inroads into the major Latin American markets, on the back of general increased Indian trade with the region. In 2005, Mexico sent an 11-member trade mission to India to explore ways in which to work with Indian pharmaceutical companies. As part of the visit, meetings were held with Ranbaxy Laboratories, Cipla Ltd, Biocon and Wockhardt. Interestingly, as far back as 2001, Ranbaxy identified Mexico as one of its key foreign market targets. Similarly, it set itself up in Brazil and by 2003 was the fifth largest generics company in the country.

Ups and downs
The overt manner in which some of the Latin American governments are promoting the use of generics opens new avenues for companies in this sector. For example, the Brazilian regulatory body Agencia Nacional de Vigilancia Sanitaria (ANVISA) has visibly increased the number of generic applications that it has approved. In March 2001, there were 21 new generic registrations, but for the same period the following year there were 32 (9). Reports in the Brazilian media suggest that generics represented 6.4% of all products sold in the country during 2002 but this increased to 8.7% of all products sold in 2003.

Although the Brazilian government has run a public campaign to educate patients about generics and has claimed success, other reports suggest a degree of confusion amongst some consumers and physicians. For example, one report suggested that over a third of doctors surveyed still expressed doubts about different quality aspects of generic products. Furthermore, consumer respondents reported that 67% of the time their doctor did not prescribe by generic name. Amongst doctors, only 9% stated that they prescribed by generic name, but 75% indicated that if more information were made available to them it might influence their prescribing habits. This suggests that the Brazilian government will need to make greater efforts before it can call its generic strategy a success.

A continuing problem in the Latin American markets is the ambiguity of certain legislation concerning generics and so companies operating in these countries must stay aware of political and legal developments.

For example, a particular feature of the Mexican pharmaceutical market is the existence of a class of generic-like drugs known as similares. Although these products have the same active ingredients as original products they do not go through the same bioavailability procedure as do formal generics. Unfortunately, Mexican law contains ambiguous terminology and this puts similares in the position of being neither legal nor illegal, much to the annoyance of other pharmaceutical manufacturers. Other Latin American countries also have similares, but there may be differences in how they are identifiable. An added complication is that the term bioequivalence is interpreted differently across countries and therefore the procedure required to classify a product as a generic is not the same.

Outlook
As Latin American countries attempt to redress social inequality and reform their healthcare systems in order to expand coverage, generics will find themselves in favour. As such products are cheaper than branded medicines, they allow governments to better allocate their limited funding for healthcare. The shift to generics creates opportunities for a variety of international companies, but also presents them with challenges as the legislation concerning generics in Latin America remains ill-defined and the market is fiercely competitive. However, international generics companies have proved successful in other countries of the world, often in difficult conditions. In order to improve global trade, it is likely that there will be further tightening of the legislation in Latin American countries and so generics companies should be able to reproduce their success in this global region.
- (The author is with Chiltern International, a Clinical Research Organisation based in Slough)