Mexico has a healthcare system in need of reform but with plenty of potential ahead of it.
The Mexican healthcare ecosystem is currently fragmented and access to medicine, although improving, remains a key issue. During 2016, 77% of the population received the medications prescribed to treat their illness, up from 65% in 2012. This is due to medical insurers becoming more integrated and having a wider coverage across the population. Market access is a challenge that can act as a barrier to entry for many innovators looking to launch products into the marketplace, along with generics players and the raft of ancillary service providers they both bring with them.
However, Mexico is undergoing a significant reform with the USMCA (United States-Mexico-Canada Agreement) being a landmark agreement which, amongst other areas, will impact drug patent life and likely extend it for innovators. In conceptual terms, the extension will give pharmaceutical companies a longer runway to generate the returns they need and will likely promote activity in the country.
The drug approval process also has headroom for streamlining as it is currently considered more complex to receive approvals and then to get the right drug to the right place, than in other countries. The government is the primary buyer of medication and therefore reducing complexity and expediting the process will also enhance Mexico’s reputation for pharmaceuticals.
This reputation comes in contrast to a lower than average national healthcare spending. In 2017, Mexico spent 5.4% of its GDP on Healthcare, below the OECD 35 average of 9.0%. This is expected to rise, and many commentators have noted that the President-elect Mr López Obrador will address the issue over his term, along with other key priorities such as anti-corruption and poverty.
On the manufacturing side, in 2008 the Health Supply reforms saw the removal of the requirement to pass all pharma products through a Mexican based manufacturing plant – another area which may be reconsidered in the coming years. A change to this reform would have significant impact on the Mexican manufacturing market and the attractiveness to manufacture in the Mexican market for export. Global supply chains are big business and the current expectation is that Mexico has the capacity to manufacture more Drug Substance and Drug Product through the country, although it has lacked investment in the past for more complex procedures such as injectables of biologics. One view point recently discussed with a Mexican lawyer was that Mr López Obrador’s focus on reducing the population who are not working and not in education, may see a rise in apprentice-style roles to educate and drive the pharmaceutical sector towards more complex manufacturing over time.
With significant change often brings significant opportunity and this can be achieved through M&A. With the potential for a country with lower corruption, higher levels of transparency and more robust patent protection, Mexico is likely to become a more attractive pharma destination over the coming years. This will likely result in a larger volume of M&A and licensing deals to capitalize on these opportunities with a focus on the manufacturing market.
 Fiscal sustainability of health systems-why is it an issue, what cane be done?, OECD 2015
 OECD (2018), Health spending (indicator). doi: 10.1787/8643de7e-en (Accessed on 04 October 2018)