Whenever the international investor community contemplates doing business in Mexico’s life science sector, the primary appeal usually derives from the sheer size of the marketplace and its underlying growth potential associated with trends in the country’s population demographics. Much attention is thus given over to devising strategies to win public tenders and to securing listing within the ‘Cuadro Básico Interinstitucional,’ Mexico’s standardised list of essential medicines and health supplies used across public healthcare institutions, and placement on local formularies.
Consequently, Mexico’s considerably smaller retail pharmaceuticals and private healthcare segments can sometimes get overlooked. To do so, however, would risk downplaying the critical function that the private market performs: both in terms of sustaining the welfare of the nation, and in providing a much-needed outlet and channel for innovation.
From a patient perspective, the country’s private life science market can sometimes represent the only available pathway for gaining access to latest-generation, advanced therapies. “More often than not, the private sector finds itself compensating for deficiencies in the public healthcare system,” says Miguel Lombera, President of the Mexican National Association of Drug Manufacturers (ANAFAM). “Whenever there are medicine shortages, as is frequently the case these days, or when specific therapies have not made it onto the reimbursement lists of the state schemes, those that can afford it will generally elect to go private, paying out of pocket for medical consultations, medicines, medical devices and even procedures such as surgeries,” he recounts.
Germán Fajardo, Director General of Health Services at the Universidad Nacional Autónoma de México (UNAM) concurs. “Continuous reforms to the Mexican public health system have caused a certain amount of structural damage that has yet to be fully put right. Seguro Popular disappeared, CONAMEX became weakened, and the General Health Council was practically dismantled leaving a certain strata of the population without proper recourse to quality medicines and medical care. Naturally they have been turning to the private sector to fill the gaps wherever possible,” he explains.
Rich Pickings
Meanwhile, originator drugmakers can find the private sector to be valuable source of sales for their innovative portfolios while navigating evaluation of their reimbursement dossiers or awaiting public tender decisions. “For research-driven specialty players, especially midcaps, it has become common practice to introduce products sequentially: first launching within the private market upon receipt of the market authorisation and then working to get them included on public formularies,” observes Julio Conejero, president and managing director for the LAMEX cluster at Organon.
Some innovative drug developers are even eschewing the public sector altogether. “One of our key strategic decisions has been to avoid selling to the government due to the innovative nature of our product portfolio and the fact we felt we did not have the logistic infrastructure to deal with government health institutions,” confides Vicenzo D´Elia, general director at Alfasigma, a Bologna-headquartered specialty player focused primarily on gastroenterology and vascular therapies.
“It quickly became clear that the public institutions were more interested in price than on the end value our innovative products could deliver so we decided to direct our energies and investments instead towards the private distribution channel. With hindsight, this approach has served to insulate us from the uncertainties often associated with government dealings in this market and has allowed us to circumvent many of the bureaucratic hurdles faced by our some of our competitors and peers,” he attests.
Guy Jean Savoir, CEO of local outfit, Carnot Laboratories, which is also strong in Gastroenterology therapies and ranks as the second fastest-growing pharma company in country, recounts very similar experiences. “While our participation in public procurement has been beset with delays in tenders and a lack of clarity in certain processes, our sales to the private sector have been flourishing. Having that outlet available has proven extremely beneficial for companies like ours, not just in contributing to growth and but also in affording business stability and predictability to plan ahead calmly,” he acknowledges.
“Competing in Mexico’s private sector pharma market is, of course, a very different ball game to the world of centralized government sales and federal purchases,” reflects Federico Prince, general manager and CEO of DF and Toluca-based Laboratorios Kener. “Over time, we’ve orientated more and more away from the public sector and nowadays the lion’s share of our revenues is split between retail and hospital business. In retail, we serve all major pharmacy chains and large retailers like Walmart, Comercial Mexicana, and Soriana. Meanwhile, our hospital business has become particularly strong, covering 80 percent of private hospital beds in Mexico, and we are experiencing high double-digit growth in this area,” he reveals.
“Our specialism today is in hard-to-make aseptic products, notably injectables, and we began to realize that the profitability and the complexity involved in developing these products aligned much better with the private market than the cost-sensitive institutional sphere where competition from Indian companies competing on price rather than quality is intense. By contrast our primary customer base nowadays recognizes the superior quality, and the price is very much secondary for them,” says Prince.
High quality legacy and mature products can also be highly appreciated in the Mexican out-of-pocket market. “Whereas, in developed markets such as Western Europe and Japan, mature products generally face substantial pricing pressure due to the presence of generics, which compete aggressively once the patents expire, this is certainly not the case in Mexico’s private market,” reflects Organon’s Conjero. “Here, consumers often decide based on the perceived quality of the product and follow their physician’s advice. If a branded product is well-promoted and trusted amongst doctors and clinicians, patients may well choose it despite being placed at a higher-price point than the cheapest generic alternatives,” he notices.
Ultimately, though the private sector accounts for less than 20 percent of the overall Mexican life sciences marketplace, in value terms it is comprises considerably higher and handsome returns can be generated from playing it right. “To make a success out of Mexico it’s really about tapping into the best niches for your product. There is a common misconception that Mexico’s market consists of 130 million people. In reality, for our type of innovative medicines, the actual market is closer to 30 million people — namely those in the A, B, and C+ socioeconomic brackets,” explains D’Elia.
Engine of Transformation
Many life science professionals also credit the booming private sector with being at the vanguard of positive trends sweeping the industry. For instance, they see it as a standard bearer for preventative healthcare. “Most state insurance plans do not cover routine check-ups, and Mexico’s public health schemes often lack the capacity to promote preventive care effectively. This creates a cycle where insufficient diagnostic infrastructure results in higher long-term treatment costs meaning even fewer resources available for dedicating towards prevention,” bemoans Enrique Giraud de Haro, president and general manager at Fujifilm.
“However, the private sector has become a key driver of this transformation, particularly diagnostic clinics, which are expanding their presence with extensive nationwide networks. Moreover, these clinics are increasingly catering to a population that is gradually embracing preventive health practices, a shift accelerated by the COVID-19 pandemic with considerable growth being registered in segments like women’s health, especially breast cancer diagnostics,” he continues.
“Private hospital groups, in particular, are expanding beyond the major cities. They are investing in regions like Bajío, Yucatán, the Pacific, and areas in the North like Nuevo León and offering a fresh array of services such as early diagnostics and screenings,” observes Victor Matos, senior commercial director at Johnson and Johnson MedTech. “This represents a real change to the care landscape and opportunities on offer because, for the first time, people in these regions are seeing private hospital groups setting up branches, often with two or even three major players in each,” he adds.
“These trends herald a major step forward because prevention and diagnostics are actually the unsung heroes of healthcare systems,” points out Joao Carapeto, country manager at Roche Diagnostics. “Early detection and preventive care can lead to better health outcomes, reducing the burden of chronic diseases and the associated healthcare costs, yet less than three percent of all public healthcare expenditure in Mexico is presently allocated to prevention, and less than two percent is dedicated to diagnostics. This makes little sense when one considers that diagnostics influence more than two-thirds of all clinical decisions,” he argues.
Epicentre of Experimentation
Others see the private sector as a great living laboratory for testing out new approaches for organizing and financing healthcare. The most obvious example is the embracement of leasing and subscription models.
“Many of Mexico’s private clinics, and hospitals are adopting business models that allow them to acquire cutting-edge technology without needing to pay significant upfront costs. One prominent approach is the subscription model, where integrators offer solutions that reduce the burden of capital investment. Hospitals can opt for arrangements like cost-per-procedure, where they pay a monthly fee over a set period rather than investing heavily in equipment outright,” explains Patricia Nakagawa, managing director for Mexico, Caribbean and Central America at Karl Storz, a German medtech developer specializing in endoscopy. “This model allows healthcare providers to focus on what matters most: serving their patients. With integrated solutions, everything needed for surgeries — including the management of equipment and technical support — is provided, alleviating the hospital’s concerns about equipment functionality and availability,” she elaborates.
Fujifilm Mexico has gone a step further. “We are now employing a multifaceted approach to address the diverse needs of healthcare providers, ranging from small family-operated clinics to large private institutions and hospitals. For smaller clinics, many of which struggle with limited access to credit due to informal business structures, we even established a dedicated leasing company. This initiative provides these clinics with the financial flexibility to acquire advanced diagnostic equipment, enabling them to grow into more formalized operations and contribute meaningfully to the healthcare ecosystem,” details Enrique Giraud de Haro.
“Currently, Mexico’s acquisition law does not allow for innovative funding models like value-based healthcare or subscription models for advanced medical devices. This legal framework needs to be updated to accommodate such approaches,” regrets Hector Valle, CEO of the Mexican Foundation for Health (FUNSALUD), a think tank focused on improving public health through research, advocacy, and promoting public-private partnerships.
He is confident, however, that successful examples within the private sphere will help to hasten progress throughout the entirety of Mexico’s healthcare landscape. “I am a big believer in the private sector’s ability to instigate and elicit positive change,” he affirms, noting that the best results occur when public and private sectors learn from one another and pool efforts for the common good.
“During the pandemic we witnessed some very successful collaborations between public and private care entities in the form of patient transfers, and this is set to continue. Even now there are some excellent examples of positive outcomes stemming from public-private cooperation initiatives such as the subrogation of patients to private dialysis services within the public system. To my mind, this augurs well for the future,” he concludes.
