Analyst Insight by Monica Feldman
Governmental policies and competitive forces are shaping the creation of affordable consumer health products for Latin American consumers. Euromonitor International reviews important trends providing value to companies and people across the region.
The influence of governmental policies in pricing
The Argentinean government has tried to limit the inflation rate, as it is deemed a serious threat to the success of its economic policy. The government has attempted to control the inflation of medicines by means of informal agreements with leading players. In this scenario, informal price agreements have taken place between the government and leading OTC players, such as Laboratorio Elea SACIF y A and Bayer AG to limit price increases close to the inflation rate reported by INDEC (National Institute of Statistics and Census). The informal price agreements have positively influenced the market, as essential Over-The-Counter (OTC) drugs are being priced lower than the inflation rate, making them more affordable for the population.
Building a good image in a difficult political environment
Social responsibility is a common corporate strategy in Venezuela due to the unfriendly attitude of the current government toward private firms. Consequently, a growing number of pharmaceutical firms have introduced social responsibility programmes given the prevailing socialist ideology as well as the serious threat of expropriation. Firms try to maintain a proper image before government officials since current government ideology considers corporate private profitability as self-centred and contrary to its political purposes. Social programmes have been more visible among multinationals, while domestic players tend to be one step behind. Pfizer Inc, for example, introduced the “Healthier Community” (Comunidad + Saludable) programme that includes telemedicine, access to discounted medicines at pharmacies, and an educational workshop of “Learn with Pfizer” (Aprende con Pfizer) based on sexual education for teenagers.
Affluent consumers in Venezuela tend to be better informed regarding nutritional and preventative issues. They obtain information from their social environment and from abroad, via the Internet and as a result of travelling. Self-medication took stronger roots in 2010 through promotions done by manufacturers and the expansion of modern parapharmacy/drugstore networks which facilitate purchasing decisions and offer recognised products and brands.
Generic pharmaceuticals and private label trends
The expansion of generic products in Mexico has provided significant savings to consumers. Some manufacturers such as Apotex Inc, Productos Medix SA de CV, Laboratorios Pisa SA de CV, Rimsa SA de CV, and Teva Pharmaceutical Industries Ltd have made their name out of manufacturing perhaps a small portfolio of branded products but devoting a good portion of manufacturing capabilities to the production of private label for some of the largest retailers in the country. Quimica y Farmacia SA (Quifa), a subsidiary of Perrigo Co since 1997, has successfully engaged in the manufacturing of OTC generic options for a number of large retailers, as it now serves Wal-Mart Stores Inc, Controladora Comercial Mexicana SAB de CV, Costco Wholesale Corp, and Organización Soriana SA de CV.
In Chile pharmacy chains Farmacias Cruz Verde SA, SalcoBrand SA, and Farmacias Ahumada SA are increasing sales by offering good-quality private label products to consumers looking for inexpensive and effective alternatives to branded products. Moreover, the Ministry of Health's public health campaigns are fuelling demand for generic products. The bargaining power of pharmacy chains has increased the competitive challenge to manufacturers, with leading drugstore chains gradually introducing their own brands. In 2010, the retail value share of private label brands represented 7% of all consumer health – a development that highlights the rising penetration of pharmacy chains in 2010 when sales of branded analgesics products fell by more than 10%.
As in other developing countries, in Colombia, the production of generics is mainly in the hands of domestic laboratories such as Tecnoquímicas SA, Lafrancol SA and Laboratorios Genéricos Farmacéuticos SA. These companies have a competitive advantage based on larger sales forces that cater to remote, rural and low-income populations that foreign companies do not serve as well. This is one of the reasons why more often than not, Colombian doctors prescribe or recommend generic equivalents to lower-income Colombians.
Generic brands are playing an important role in the expansion of the consumer health market in Guatemala since a high percentage of the population lives in poverty. These brands have been able to increase their availability through economy pharmacy chains, which are rapidly expanding in the country. Consumers who need to take medicines but have limited budgets are opting first to purchase generic products or seek phone consultations with a health specialist to treat minor ailments.
The herbal/traditional medicine approach
Brazilian biodiversity is one of the largest in the world where more than 1,400 medicinal plants are native to Brazil. Yet, very few plants were originally registered with the regulatory agency, ANVISA, as herbal/traditional products. Only three are Brazilian plants – guaraná, guaco and espeinheira santa. The pharmaceutical industry makes few investments in phytotherapy products as the registration procedure at ANVISA is very bureaucratic and the fees required proving the efficacy and safety of the product are costly. ABIFISA (Brazilian Association of Phytotherapy and Dietary Supplements Manufacturers), pharmaceutical industry representatives and some politicians have joined forces to develop measures to increase investment and promotion of herbal/traditional remedies.
After the introduction of the Política Nacional de Plantas Medicinais e Fitoterápicas in 2007, improvements were made in the regulation of herbal/traditional products. Portaria 2982 was approved on 26 November 2009 and included the herbal/traditional products of artichoke, cascara sagrada (Rhammus purshiana), garra do diabo (Harpagophytumbens) and soy isoflavone (Glycine max) on the list of essential medicines to supply the public system.
In 2010, registration requirements of herbal/traditional products were updated in a bid to guarantee the quality and safety of the products available to consumers. Moreover, a list of 66 plant species attributed with standard medical claims was introduced and made available to the pharmaceutical industry to better inform patients about trusted herbal/traditional options. According to Euromonitor International's estimates, herbal/traditional products (not including prescription medicines) increased by 8% in value terms to reach R$1.1 billion in 2010.
Euromonitor International invites you to join us at the World Self-Medication Industry 17th General Assembly – Achieving the Self-Care Future taking place 27-28 October 2011 in Puerto Vallarta, Mexico, where Monica Feldman, Head of Consumer Health Industry, will discuss relevant trends on the Creation of Value – World Drivers for Economic Change in Self-Care influencing Latin America