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Chile Pharmaceuticals and Healthcare Report Q2 2008
Business Monitor International, May 2008, Pages: 51
The Chile Pharmaceuticals and Healthcare Report provides independent forecasts and competitive intelligence on Chiles pharmaceuticals and healthcare industry.
BMI has increased its dollar valuation for the total Chilean pharmaceutical market in 2007 to US$1.11bn as well as somewhat upgrading its five-year growth target to US$1.47bn, an annual 6.0% growth rate for the 2007-2012 period. Growth in 2007 amounted to 10.7% year-on-year (y-o-y). BMI has adjusted its numbers based on the latest retail data from industry association ASILFA and government reports on institutional spending. Looking forward, expected strength in the Chilean peso (CLP), driven in part by strong commodity prices, and a weak US dollar will depress peso growth rates, with an average 4.0% growth rate in local currency terms expected for the pharmaceutical market over the forecast period.
Peso strength encouraged imports in 2007. But intellectual property (IP) concerns remain a primary barrier for research-based companies investing in production in Chile. In January 2008, Congress approved a bill to create a new Institute of Intellectual Property (IPI) as part of a broader IP reform under debate. Still, foreign producers note a retreat from original plans backed by the government containing stiffer penalties for copyright infringement. Many see a continuing contradiction in Chile’s free trade agreement (FTA) and the country’s continued status as one of the worst operating environments for research-based pharmaceutical producers among the large markets in Latin America. For Chilean drug makers, ‘liberalism’ in IP is precisely the point and they appeared to welcome the latest measures.
For local producers, ASILFA forecasts that exports will reach US$125mn in 2008, from an estimated US$100mn in 2007 - and this will consist primarily of Chilean owned companies targeting fast-growing and less regulated markets, such as Colombia, Peru and Central America. Still, in February 2008, leading drug maker Andrómaco pulled out of a deal for three mid-sized Colombian producers - citing due diligence concerns. Modest growth rates at home and perceptions of market saturation in some lower value categories are pushing Chile’s mid-sized drug industry to seek new markets. Diversification could make things easier to toughen rules at home, although few believe major changes can be made without consolidation and exit of some smaller players.
In contrast, Chile’s pharmacy retailers are the region’s largest and most competitive. One of the three, Farmacias Ahumada (Fasa) increased its store numbers by nearly a third in 2007 and now has more than 1,000 in Chile, Mexico and Peru. Still, within Chile the stranglehold of Fasa, Cruz Verde and Salcobrand and some links between suppliers and shareholders among the chains are facing an ongoing investigation by regulators. Longer term, the market could see the biggest shake-up if reports of US retail giant Wal-Mart seeking to buy one of Chile’s largest retailers, D&S, are borne out. Pharmacies run by Wal-Mart and Carrefour in markets such as Mexico, Brazil and Argentina have shaken up less concentrated markets there. Such developments could see a return to the pharmacy price wars of recent years and dismiss worries about any emerging cosiness or collusion in Chile’s pharmacy sector.
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