Favored by exchange-rate devaluations, which corroborated to improve the commercial balance, the largest countries have achieved economic stability and seem prepared to grow at a sustained pace. Important capital flows to the region also support the idea that on a global scale, good results in the region became more than ever fundamental. Companies and funds are eager to invest in Latin America.
The healthcare sector mirrors the same tendency. What are the opportunities for pharmaceutical companies in this context? Companies are opening new production sites in Brazil and Mexico to transform these countries into an export platform for the whole region. Mergers and acquisitions have also gained importance as an alternative to organic growth strategies to expand portfolios and to enter high-potential markets in the short term.
Other factors, too, have favored the shift of investments toward the region. The emergence of middle classes and government health plans, such as PAC in Brazil, Remedial in Argentina, Saguaro Popular in Mexico and Ague in Chile, among others, have improved access to health services in these countries, especially for lower classes, increasing significantly the potential of healthcare markets in the region.
Furthermore, the aging phenomena in
What's on Pharmaceutical Companies' Agenda?
The healthcare sector in
Big pharmaceutical companies have been moving from a blockbuster drug model to a specialty business model, where companies are coming from a fragmented approach focused on multiple diseases to therapeutic niches. By focusing on specific areas, companies have been able to develop expertise, thus promoting brand recognition and saving money by allowing the consolidation of sales teams and R&D.
Moreover, the combination of expiring patents and a lack of novel drug lines is highlighting the importance of research into cutting-edge therapeutics. Although pipelines are less strong than they used to be, investment in R&D continues to be a fundamental driver of companies' growth. In Latin America, research productivity is developing at a fast pace due to higher levels of public and private investment.
In the wake of blockbuster drugs going off patent, large pharmaceutical companies are turning to biologics and vaccines for a steady revenue stream. Innovation in the vaccines industry is increasing rapidly to target diseases that were previously not considered attractive. Now companies are developing innovative vaccines to treat such lifestyle disorders as nicotine addiction, for example.
Another area of considerable growth potential is oncology. Cancer-related drugs constitute half of the current biotech pipeline, with oral oncology drugs making up 35 percent of the oncology pipeline. Such drugs offer targeted therapy for patients with no treatment options, increasing patients' convenience, while reducing healthcare costs and increasing compliance to therapy and eventually improving the quality of life.
The industry has also been looking towards synergies to lessen overall R&D costs, which are continuing to increase. Clinical research outsourcing is an opportunity to optimize resources, and the region is competing with Asia to receive trials. Latin America is seen as a good environment to carry out clinical trials for many reasons. Lower costs (30 percent of the cost of clinical trials carried out in Europe and the U.S.) and a good supply of qualified professionals are among the most important.
Generics seem to constitute one of the biggest drivers of revenues in the pharmaceutical sector, especially in countries where the segment is not that developed as it is in Brazil, Mexico and Argentina, for example.
Another important trend is the greater incorporation of biotech assets and technology portfolio diversification. New therapeutic areas, such as antibody therapies, are prompting pharma companies to develop partnerships and licensing agreements aimed at maximizing their opportunities. This could allow for synergies such as broader sales force efficiency, larger contracts and increased product presence.
The Dawn of the 'Power Patient'
Last but not least, healthcare companies have been migrating to personalized healthcare solutions, where diagnostics and drug development work provide patients more personalized medicine. Biomolecular tests can identify the phenotype of patients, allowing physicians to prescribe personal, unique dosages to their patients, for example.
The main challenge of the industry is to deal with budget constraints in the region. These increase the need to demonstrate the efficacy of new drugs to governments that may constitute a significant part of their revenues.
Competition is increasing, and companies have to be prepared to innovate not only on the product side, but also by developing sophisticated distribution systems, such as dispensing kiosks and mail order. Mail-order firms have gained high usage among large employers due to cost savings and convenience associated with it. Additionally, the emergence of drug dispensing kiosks, like ScriptCenter in the U.S, is allowing patients to pick up pre-packaged refills by swiping a card for identification and payment purposes.
Patient centricity is fundamental to pharma firms succeeding in the future. Patients have become kings and queens. The power-patient generation is arising. Patient programs and customer services are likely to gain high importance as a competitive advantage. Similarly, price wars due to the entrance of generics in new therapeutic classes will reinforce the need to differentiate to survive in Latin America and worldwide.
Luisa Woge is Senior Consultant in Frost & Sullivan's Latin American Healthcare Practice. She focuses on monitoring and analyzing emerging trends, technologies and market behavior in the pharmaceutical, clinical diagnostics and medical devices markets in Latin America.