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€‹The pharmaceuticals industry in Mexico

In recent years, an increasing number of American pharmaceutical giants have ventured into Mexico for a simple reason: it is a neighboring country with a highly skilled workforce where the […]

In recent years, an increasing number of American pharmaceutical giants have ventured into Mexico for a simple reason: it is a neighboring country with a highly skilled workforce where the costs of research and production are considerably lower than the US.

As a result of a series of reforms between 2009 and 2011, Mexico has removed many regulatory bottlenecks to facilitate the manufacturing of pharmaceutical products by foreign investors in the country, accelerating the flocking of Western generic makers and brand drug developers to Mexico.

Familiar multinational names such as Sanofi, Bayer, and Novartis have had a long presence in Mexico. Johnson & Johnson and Pfizer, two pharma giants whose names are often heard in the news these days in relation to COVID-19 vaccines, also have a strong presence in Mexico. All in all, some 770 economic units of various sizes and description are currently active in Mexico, according to the National Institute of Statistics and Geography (INEGI).

Although pharma giants sometimes use Mexico as a production hub for international markets, the nation’s domestic market is their primary focus. In parallel with economic developments in Mexico, life expectancy is increasing. And, as the nation’s population approaches 150 million by 2050, the country’s elderly will be more in need of medications than ever.
In addition to therapeutic pharmaceutical products, which are mostly in demand by the elderly, the demand for vitamins, minerals, and other nutritional supplements is also increasing as the size of Mexico’s middle class continues to grow. Indeed, the percentage of health expenditure in the GDP has been growing at a steady rate toward the end of 2010s, reaching 6.3% of the GDP in 2020.

Mexican citizens spent over USD26 billion on pharmaceuticals in 2020, showing a 100% increase since a decade ago. As the fight against COVID-19 continues in 2021 and national vaccination programs are launched everywhere, Mexicans will likely spend even more on pharma products this year.

Mexico is also an ideal gateway for many anglophone companies to enter the markets of Latin America. Being a neighbor and regional business partner of the US, and a major Spanish-speaking country with a huge cultural influence over the rest of Latin America, Mexico has long acted as a buffer between businesses from the English-speaking world and Latin America.
Mexico continues to serve as a hub for international pharmaceutical companies, while its own citizens, too, benefit into the bargain. First, it is estimated that the access of general population to their required medication will increase rapidly, growing from 65% in 2012 to 77% in 2016. What is more, it is estimated that the pharma industry has directly created around 65,000 jobs in the country—mostly for the nation’s highly skilled workforce specializing in pharmacology, organic chemistry, and process engineering.

In addition to American companies, Mexico’s pharmaceutical sector is learning from the experiences of pharma manufacturers in India, who have made a name for themselves across the world as highly affordable generic makers. Two Indian major pharma companies, namely Ranbaxy Laboratories and Wockhardt Limited, have invested in the manufacturing of generic drugs in Mexico for domestic use as well as exports to the Latam region.
With the localization of the pharmaceutical industry in Mexico, the country will soon earmark a larger percentage of its pharma output for exports. Aside from transnational companies that are manufacturing drugs under license, many native companies are also operational in the country.

Senosiain and Sanfer, for example, are 100% Mexican companies whose market share has been on the rise in recent years. Once the pharmaceutical industry is fully localized in Mexico, the country can become a regional manufacturer of generic drugs in the Latam region, much in the same way that India is supplying most of Asia with pharmaceuticals.
Mexico’s proximity to the US is certainly a good thing for the industry, but the Mexican pharma industry can form partnerships with companies from other countries, too, as it was noted earlier.

“For us, it helps that we are next to a country like the US that has a large pharmaceutical industry. But it still has molecules that we do not have access to. Usually, the development of new molecules takes place in the US, the EU, China, and India,“ Melissa Rosales, Director General of RM Pharma, told TBY in 2019.

In the early 2020, and with the COVID-19 pandemic getting out of control, Mexico further focused on the robustness of the local pharmaceutical sector. Industry players in Mexico have started teaming up with pharmaceutical companies outside the US.
A number of new partnerships were formed in 2019 and 2020 between Mexican companies and Indian generic drug developers, including a major deal between the state of Hidalgo in Mexico and six Indian generic makers. The deal will open the Mexican market to Indian companies such as Zydus Cadila and Glenmark, among others, while strengthening the local pharmaceutical supply chain.