Argentina. Country Scan

Transcription

1 Country Scan Door # /2, 4th & 5th Floors, Astral Heights, Road No 1, Banjara Hills Hyderabad , India Phone: Fax: / info@cygnusindia.com Disclaimer: All information contained in this report has been obtained from sources believed to be accurate by Cygnus Business Consulting & Business Research (Cygnus). While reasonable care has been taken in its preparation, Cygnus makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. The information contained herein may be changed without notice. All information should be considered solely as statements of opinion and Cygnus will not be liable for any loss incurred by users from any use of the publication or contents.

2 Pharmaceutical Industry Insight on LATIN AMERICA: AN OVERVIEW The Latin American Pharmaceutical Industry accounts for 4.12% of the global market with total sales of US$17.4 billion in 2003 according to IMS World Review (Audited) The region is dominated by Brazil till now because of its large Columbia, 6% Chile, 3% Peru, 2% Brazil, 28% Venezuela, 8% Source: IMS 2005 estimates, 15% Mexico, 38% population but Mexico is expected to supersede it soon. The other major markets in the region include Mexico,, Venezuela, and Columbia. Following a period of economic recession, the Latin American market is beginning to show signs of recovery in The availability of medicines in Health-care Spending in Latin America However, its recent economic instability has led to it being overshadowed by Mexico. With large populations, an increased spending on healthcare and double-digit market growth, Latin American markets are proving attractive and rewarding for the global pharmaceutical industry. Furthermore, the introduction of patent protection should encourage more pharmaceutical companies from outside to invest in local facilities and market newer drugs in the region. and Colomboia have very large health care spending of all Latin American nations. ARGENTINA A COUNTRY OVERVIEW is located in Southern South America, bordering Chile on the west, Bolivia and Paraguay on the north, Brazil and Uruguay on the northeast, and the Atlantic Ocean on the east. It s the secondlargest country in South America (after Brazil) Map of % of GDP Brazil Chile Colombia Source: EIU Market Indicators 2003 Mexico Latin America has also improved and this has persuaded many pharmaceutical companies to take another look at investing in the region. Because of its large population, Brazil had always been considered a major market in Latin America. Peru Venezuela Selected Latin American Nations spreading across the total area of 2,766,890 sq km. The climate is mostly temperate; arid in southeast; sub Antarctic in southwest. Buenos Aires is the country s capital and largest city. The population is around 39,144,753 according to 2003 estimation. Economy Overview is rich with natural resources and has an extremely high literacy rate. It s has got export-

3 oriented agricultural sector, and a diversified industrial base. Over the past decade, it has weathered recurring economic problems of inflation, external debt, capital flight, and budget deficits. Growth rate in GDP during 2000 was (-) 0.8%. It was due to lack of confidence of both domestic and foreign investors on the government s ability to clear debts and maintain the peso s fixed exchange rate with the US dollar. The economic situation worsened in 2001 with the widening of spreads on Argentine bonds, massive withdrawals from the banks, and a further decline in consumer and investor confidence. The peso s peg to the dollar was abandoned in January 2002, and the peso was floated in February 2002; the exchange rate plunged and inflation picked up rapidly. However, by mid-2002 the economy had stabilized, although at a lower level. Strong demand for the peso forced the Central Bank to intervene in foreign exchange markets to check its appreciation in Driven by record exports, falling unemployment, and controlled inflation under 4% at year-end the economy gained momentum with output up 8% in The per capita GDP is US$11,200 (2003 est.) with an 8% real GDP growth rate. has managed to turn itself round economically in recent years. Notably, it has succeeded in reducing its inflation rate. This has partly been achieved through s alignment with the US dollar. The major industries in are food processing, motor vehicles, consumer durables, textiles, chemicals & petrochemicals, printing, metallurgy and steel. These industries contribute 28% to the GDP. In agricultural sector major products are Sunflower seeds, lemons, soybeans, grapes, corn, tobacco, peanuts, tea, wheat and livestock, which contribute 5% to the GDP. The service sector contributes 67% of the GDP. The export size of is around US$29.57 billion f.o.b. (2003 estimate). The major export items are edible oils, fuels and energy, cereals, feed and VITAL FACTS Population 39,144,753 Population Growth Rate 1.02%. Birth rate Death rate Net migration rate Languages ARGENTINA per 1,000 population 7.57 per 1,000 population 0.61 per 1,000 population Spanish (official), English, Italian, German, French Literacy rate 97.1% GDP per capita $11,200(2003 est.) Real GDP growth rate 8% Inflation rate Below poverty line Currency 3.7% (2003, yearend) 51.7% of population Argentine peso (ARS) Exchange rates ARS per US$= 3 Source: motor vehicles. Its export partner countries are Brazil, Chile, US, Spain, China and Netherlands. The estimated import size is US$13.27 billion f.o.b. (2003 estimate). It primarily imports machinery and equipment, motor vehicles, chemicals, metal manufactures and plastics from Brazil, US and Germany. PHARMA INDUSTRY The market size of is US$1.4 billion in the year 2003 having around 11% of market share in total Latin America. (Source: EIU Market Indicators and Forecasts). It is the 3rd largest player in Latin America after Mexico and Brazil. And globally it is the 12 th largest pharmaceutical market in value terms. Market growth is volatile. The market has experienced the economic problem during 2000 and 2001 which pushed the sales down. Argentinean citizens have access to different health care services through Social Security schemes, health insurance plans (prepaid medicine) and public hospitals. The health care spending percentage is one of the highest in the region. It spends above 8% of its GDP to health related expenditures according to the chart Healthcare spending in Latin America. The domestic budget expenditure is only 2% of the total GDP. Health expenditures on an average are US $675 per-person

4 per-annum, mostly financed by private parties and insurance companies. Insurers cover 43% of total pharmaceutical expenses, with private parties covering 38% and public expenditure covering 19%. Prescription drugs account for 93% of the market and OTCs for the remainder. Per Capita pharmaceuticals Sales in have seen a positive growth rate with a CAGR of 4.5% from 1998 to The per capita sales have gone from US$114 to US$140 in the same period. In between it was affected due to economic crisis but latter it recovered. The major drivers for the industry in are: 1. Per capita pharmaceutical consumption The per capita pharmaceutical consumption in is higher.compared to around US$ 3 these figures in Latin American countries such as are at US$ 115, Brazil at US$ 50 and Chile at US$ 53, which are highly attractive. 2. Private Insurance System The private insurance system in is reasonably well established, with about 25% of the population having some form of private cover, although the current government does not appear to see much of a role for the private sector in a reformed healthcare system. The well established private insurance is one of the driving factors for the pharmaceutical business. 3. Developed healthcare system & Trained staff In Comparison to other countries in Latin America, has got a relatively highly developed healthcare system. The healthcare reform process that was introduced in the early 1990s remains uncompleted due to the economic crisis and this is set to progress in the near future. In the 1990s, had access to quality healthcare and highly trained doctors and technicians who were familiar with the latest technology. But the prolonged recession spoiled that combination. Now with the economy in recovery phase, doctors and patients should lead the demand for the latest medical technology and supplies, which until recently were readily available in the market. This will help the industry grow with the technology and demand of quality healthcare. 4. Low-cost generic drugs Latin American markets are largely price driven, and low-cost generic drugs are an appealing option. Many governments encourage generics. In, the government purchases only generics for public health facilities. Apart from that the government of approved a law making compulsory for doctors to prescribe pharmaceuticals by the generic names instead of traditional practices of specifying branded label. This is the driving factor of the generic business in this region and there is a sign of growth in generic segment. Pharmaceutical market size The market had seen a growth phase in the first half of 90 s and a negative growth in the end of 90 s during the recession and the market weathered the sales (US$ million) Pharma sales in e 2005f 2006f 2007f 2008f Pharma sales in Source: e=estimate f=forecast. Source: EIU Market Indicators and Forecasts economic crisis. But from 2004 onwards it is estimated to grow further and total sales of US$1.40 billion in 2003 would grow at 2% to US$1.55 billion till 2008.

5 Industry structure The market is fragmented. There are around 70 pharmaceutical companies operating. Out of those majority are domestic players and number of global The major domestic players BAGO BIOSIDUS DESYNTH ROEMMERS TOLBIAC PHOENIX GADOR The major MNCs Lilly Aventis Roche Novo Nordic Novartis players is not more than a dozen. Domestically manufactured products are predominant (71 percent) over imported products (29 percent) - although laboratories use mostly imported drugs. With in, local companies rules 52% of the market and European companies have managed a 27 percent share against 21 percent share of US companies. The market is characterized by the growing market share of generics with the strategies of price reduction and commercial integration. The government is forcing physicians to prescribe basic drugs rather than branded drugs and this has given survival kit to small and generic players. Most of the global players capture the Argentinean market through their Brazilian set up and Indian companies are no exception to that. Indian company Strides Arcolab Limited has got a big market for its HIV drugs in. But it also accesses via Brazil. Import and Exports: There is a trend in decreasing of Pharmaceutical imports to the country and growing exports from the country. With the growing Percaptia drug consumption in the country and the trends in imports & exports indicates that the domestic production of the drugs is on the rise. US $ million Source: intracen.org Import & Export Trend in Pharmaceuticals imports exports Therapeutic Segments The largest therapeutic class, ATC (Alimentary Tract & Metabolism) has declined from 18.4 percent in 1993 to 17.4 percent in It has further declined to 16.7 percent in 2004.This decline is expected to continue and it has lost its leading position in Therapeutic segments US$ bn % % US$ bn share share Alimentary Tract and Metabolism Systemic Anti-Infective Cardiovascular System Central Nervous System Respiratory System GU System and Sex Hormones Musculo-skeletal System CNS (central Nervous System) has shown marginal growth and has gone up to 18.12% in 2004 from 12.8% in 2003 by occupying the leading therapeutic segment slot. CVS (Cardio-vascular System) is showing good sales records over these days. It is holding the 3 rd position. AIDS is a major concern area in. Nearly 1,800 deaths were from AIDS in 2001 (AIDS Epidemic Update December, UNAIDS, 2002). The HIV prevalence rate is 0.7% having 130,000 infected persons. Majority of all AIDS patients were between 20 and 34 years of age. There is an increasing shift of infection towards a younger age group which is attributed to an increase in intravenous transmission associated with drug use. The epidemic s profile

6 has changed not only in terms of the higher number of women infected, but also because of the gradual spread of intravenous drug addiction as a means of transmission. This trend is supported by the fact that there is an increasing trend of drug consumption in urban areas and the country is notoriously known to be used as transshipment for cocaine headed for Europe and US. Other STDs (including syphilis and gonorrhea) have maintained a low or stable rate. A trend can also be observed in this market including Brazil and Mexico that anti infective will be in demand, analyzing the capacity of the healthcare system to manage patients suffering from bacterial hepatitis Virus (HCV) and Lower respiratory tract infection. Hepatitis case reporting has improved since Regulatory Structure The major regulatory bodies for pharmaceutical industry are The ministry of Health and Social Welfare: Registration authority for pharmaceuticals and other health products prior to importation. The secretariat of industry and commerce: It is the principal authority governing imports to. The National Directorate of patents and trademark is responsible for intellectual protection. The National Institute of Industrial Property: The agency responsible for implementing intellectual property protection. ANMAT: The regulatory agency that licenses the import, manufacture and marketing of medicines and medical devices as well as foodstuffs. Patent protection: Pharmaceuticals and items with no industrial application are not patentable, but legislation before the Argentine Congress would provide internationally recognized patent protection for pharmaceutical products. Typical is s patent law, which extends patent protection to drugs that are produced outside. Legal Provisions for Export to As per these provisions in Argentinean law, all drugs exported to that country must be registered with the National Administration of Drugs, Foodstuffs and Medical Technology under its health ministry. The Decree No. 150/92 contains two Annexes. Annex 1 requires that pharmaceutical imports from countries listed therein be manufactured in facilities approved by the relevant governmental bodies in the country of export or by the Argentinean Health Ministry, and meet manufacturing & quality control requirements set out by s National Health Authority. Annex 2 states that manufacturing facilities in listed countries must be inspected and approved by the Ministry of Health before exports from these countries are allowed into. Previously India was not listed in any of the annex but later with representation of the Indian authorities, the Argentinean authorities had assured that India would be included in annex 2. Then India withdrew the complaint. In the recent efforts of government, many former import restrictions and controls have been lifted. However pharmaceuticals items require the approval of the Argentine Ministry of Public Health prior to importation and the concerned government department prior to distribution in the market. If the product comes from a country having higher standards than that exists in, the approval can be perfunctory. Currently Import duty of 11 percent tariff is applied to medicines. Over the period Brazil exports of pharmaceuticals to other MERCOSUR (created by, Brazil, Paraguay and Chile with the signing of the Treaty of Asuncion) countries has increased, mainly to. In 2001, exports to those countries increased 61 per cent, with being the largest recipient. So, the trend supports the point of foreign players capturing market via Brazil

7 Documentation & Procedure Documents required for export to generally include a commercial invoice (which must be legalized by an Argentine consulate) a bill of lading or air waybill, and a packing list. A pro forma invoice and certificate of origin may be requested by the importer. Foodstuffs and pharmaceutical products must be registered with the Argentine Ministry of Public Health prior to importation. Imports require a submission of a statistical import registration to the Trade Secretariat 48 hours before taking delivery of merchandise from customs. Import authorization is now approved through a special statistical import system (Regiumen Estadistico de Importacion - REDI) which automatically approves proper imports. Imports: Only licensed importers are authorized to register products. Separate applications need to be filed for each presentation and applications generally take 6 to 8 months to be processed. This may take longer depending on the importer s skills and experience. There are many additional costs related to notary certifications which many importers will be hard pressed to pay, such as translation into Spanish of service manuals. Incentives In 2002, passed Law to exempt a list of new medical equipment, supplies, and medicines from import duties, tax levies, and customs fees. These products are considered critical for the diagnosis and treatment of human health. This exemption is temporary and will apply until the national sanitary emergency situation remains in. permits 100 percent foreign ownership. Investing in by foreigners is allowed without prior approval of government and investment is registered only for investment purpose. Domestic and foreign players are treated equally and there is no restriction on joint ventures with local partners. No approvals or paperwork of any kind are required to materialize foreign investments - there is absolutely no red tape. Foreign investors face the same tax liabilities as local firms. OUTLOOK The Pharmaceutical industry demand is influenced by the level of income and increases with an individual s wealth than with the price reduction to a larger extent. High-income patients are not as price sensitive and are able to pay more out-of-pocket for pharmaceuticals than are low- income patients. This is why with picking up market can have more demand. Living standards, income levels, consumer preferences, disease patterns, drug consumption patterns, exchange rates, product liability, regulatory requirements, and the degree of competition in markets for health care and pharmaceuticals all contribute to this variance. The increasing living standard is expected to drive the demand after the recovery in the economy. And the increasing percentage of health care spending in is a good sign for the revival of the sector. Major Opportunities for Indian Players are 1. People in Latin America including have accepted Ayurvedic medicines. Doctors are preferring to go to India to study Ayurvedic medicine. So, Ayurvedic medicine is generating interest. Companies such as Dabur and Himalayas have already made entry. 2. Catering to a niche market or segment like AIDS will be fruitful for Indian companies. Majority of all AIDS patients were between 20 and 34 years of age and statistics infers the increase in the ratio. 3. Because of the government incentives for promoting generic drugs the market of generic medicines is increasing steadily with encouragement from the government. Generics account only for 3% of the market currently. So here is a huge potential for growth. It s expected to increase more in near term and India being a low cost producer with generic products can cater there properly. 4. Typical is s patent law, which extends patent protection to drugs that are produced outside and local producers know the patent law could change the entire game. As a

8 result, local firms are coming to form alliances with multinational laboratories for co-production and co-marketing of the multinationals products. Indian biggies can look it as an option. 5. Companies in and Brazil are looking for a manufacturing tie up with Indian companies for intermediates and raw materials for pharmaceuticals that is essentially life saving. This is a welcome call for Indian bulk drug companies to look at, especially those companies who have yet to prove their presence in this region. 6. Brazil exports pharmaceuticals to other MERCOSUR countries, mainly to. In 2001, exports to those countries increased 61%, with being the largest recipient. Here the import from Brazil is too big for Indian companies to ignore. 7. The prices of medicine in Latin American countries were three to twenty times the prices of medicine in India. The cost of production has gone up due to the high interest rates and the tight money supply in this region including. In order to cut the cost of production, the manufacturers have started importing more inputs for their industries from countries such as India. In case of, its comparatively high production costs, particularly its electricity and labour costs push the cost very high. Indian being low cost producer has got a big advantage over here. Indian players can also evaluate outsourcing option. 8. As the market is highly fragmented with too many small and medium players coupled with the after shock of the economic crisis, they will be prone to acquisition. Indian companies can look out for those companies. 9. Most of the foreign players including Indian companies are accessing market via Brazil because it s a bigger market and it s strategic location to cater the entire region. But being in the southern part of the region can become a hub for Chile as well as market. Venezuela Peru Mexico Columbia Chile Brazil Source: IMS The Flip side Market growth rate ( ) In the region, Venezuela and Mexico hold highest growth rate in the period 1999 to The graph depicts the growth rate in CAGR terms. Venezuela seems to be more promising than. 2. There is no trade treaty with India whereas many others countries have signed treaties including china and US. 3. Registration takes time for companies in compared to Venezuela and Mexico. Companies having FDA approval it s very easy and takes too less cost for registration. In Venezuela the cost of registration is low compared to. 4. Free-Trade Zones: There is a lack of promotion on free trade zone from government and this might be because of currency problem they had suffered. Many laws were developed but most of the free trade zones are not functioning properly. 5. The aftermath of the devaluation of currency in 1999 lead to a period of hyper- inflation and economic uncertainty. The scarcity of U.S. dollars in for trade purposes has created a difficult environment for global companies, including the pharmaceutical industry, to trade. The scenario started to stabilize from the last year. Cygnus Business Consulting & Research CAGR in % ( )