Competition lacking in the Mexican drug market

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A report by the Mexican antitrust commission COFECE – Comisión Federal de Competencia Económica finds that off-patent drugs are not generating sufficient competition against the major pharmaceutical companies, which continue to dominate the market.

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The cost of medicines in Mexico, a developing economy, has been described as onerous. It is therefore important to improve competition in the Mexican drug market, which in 2016 was valued at Pesos 200 billion (over US$11 billion).

Although for years Mexico has lacked specific regulation on generic drugs, it has a growing generics market. Drug patents in Mexico are granted by the Mexican Institute of Industrial Property (IMPI). Once they have expired, generics makers can produce cheaper, non-branded equivalents.

To market these drugs, they must demonstrate bioequivalence and be registered by the Federal Commission for the Protection against Sanitary Risks (COFEPRIS), the regulatory body for approval of medicines in Mexico. However, evidence suggests the system may not be operating as planned. 

Now, COFECE – which works to protect competition and free market access in the country – have published a study on competition in the off-patent drug market in Mexico.

The report found a number of problems which are limiting the number of pharmaceutical companies that can enter the market. It says there is a lack of incentives to ensure drugs are available at competitive prices, which is essential to improve access for Mexican citizens. 

Among the problems identified, they found that patent expiry for expensive brand-name drugs is not being translated into sufficient competitive pressure, meaning that generics makers cannot compete against the major drug manufacturers.

The report found 22 blockbuster drugs whose patents have expired which currently have no generics competition. Pharmaceutical companies with products facing no competition include Pfizer, GlaxoSmithKline, Sanofi, AstraZeneca, Merck & Co, Novartis AG, Janssen-Cilag, Abbott Laboratories, Roche and Eli Lilly.

The report also describes delays in market entry for generic drugs. It takes an average of two years after patent expiry for the price of a drug to fall. This is significantly longer than other countries in the European Union (EU) and the US. And even when prices have dropped, they are on average just 28% lower than the brand-name drug product, compared to 40% lower for generics in the EU. Some generic drugs failed to be produced altogether, even after receiving approval from COFEPRIS.

The report says this is largely due to industry regulation, which makes it difficult to swap brand-name drugs for generics unless the prescriber specifically indicates this in the prescription, and a lack of public information on generic drugs.

Overall, the lack of competition is costing Mexico Pesos 2.5 billion (equivalent to US$140 million) each year, which could be used to build four hospitals with 180 beds each.

Although the companies are not acting illegally, COFECE said some used ‘unspecified legal strategies’ to extend drug exclusivity after patent expiry and employed uncompetitive practices such as pay-for-delay, whereby patent holders pay generics makers not to challenge the branded drug.

To resolve these issues, the commission says the legal framework and criteria for public policy must be changed, including tightening the rules on issuing secondary patents and promoting generic drugs by building trust among doctors and patients. The report also suggests making it obligatory for doctors to prescribe generic drugs.

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Source: COFECE (Comisión Federal de Competencia Económica/Federal Economic Competition Commission)

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