Although Colombia’s pharma sector has enjoyed growth over the past few years, new price controls could disrupt the sector’s expansion if they are poorly planned, industry representatives claim.
Their concerns focus on the reaction to maximum price controls on medication recently approved by the government. The price controls took effect in early September 2013 following the publication of an initial list of 195 medications in July by a technical working group of the Comisión Nacional de Precios de Medicamentos (National Commission of Medication Prices). In August, the group revealed a revised list of a further 189 medications that would also be subject to direct price controls from September.
Despite being generally supportive of the price caps, Alberto Bravo, President of the Association of Colombian Pharmaceutical Industries (ASINFAR), expressed concern about their impact to Manufacturing Chemist. He said that industry uncertainty about potential government controls on the pharma sector within a now approved statutory health law had halted its growth (in volume and value terms). The new law would also establish a publicly funded body to collect and distribute health services and resources and reduce the number of public and private health insurance providers. The new law would also bring in a benefits plan that aims to increase the access of citizens to medication.
In early June the country’s 20th Pharmaceutical Forum, held in the northern coastal city of Cartagena, was attended by 800 delegates. During the three-day event, hosted by Colombia’s National Business Association (ANDI), these reforms and price controls were discussed at length.
The country is really fired up about discussing the next reform to the health system with all the actors of the sector
Rodrigo Arcila Gomez, Director of the pharmaceuticals chamber of ANDI, told Manufacturing Chemist that participants agreed that the price caps should be fair and not stifle investment: ‘The principal conclusion that came out of the forum is that the country is really fired up about discussing the next reform to the health system with all the actors of the sector. We discussed everything concerning what should be implemented in this price policy, which had in its sights two fundamental points: fair prices and a pricing policy that encourages pharma companies to continue investing in Colombia,’ said Arcila Gomez.
Bravo stressed that he is generally in favour of the caps for products that are monopolistic and do not have competition. But he would not support their imposition on medicines that have competing products in the Colombian market.
Lack of competition
And the government maintains that there is a significant lack of competition in the market. Colombia’s pharmaceuticals industry is dominated by multinational companies. Of the top 10 players within Colombia in terms of sales in 2012, only Colombia-based Genfar is a strong local player – being 10th in the ranking. Genfar, which was bought in March 2013 by France’s Sanofi, did, however, present the greatest growth of the top 10 with 9.72%. Meanwhile, the country’s largest pharmaceuticals laboratory is Lafrancol, a Colombian company, which was taken over in late 2012 by the Chilean company, CFR Recalcine.
One motivator behind the government’s actions was a survey into the price and availability of medication in Colombia carried out in 2009 by IFARMA, a local research and consultancy institute. It showed there was a great difference between prices of medication in the Colombian market compared with the international market. It found that branded medication in Colombia was on average 17.3 times more expensive than international reference generic medication. At the extreme end, Albendazole – an antiparasitic drug of the anthelmintic class – was 135 times more expensive than its generic equivalent on the international market. It also showed that the price of the least expensive generic medication was 3.2 times greater than the international reference price. The diuretic hydrochlorothiazide was 12.4 times more expensive in Colombia than in the global market.
Since there is no competition, the market will not regulate prices
Ramiro Guerrero, Director of the Colombia-based PROESA Research Centre for Social Protection and Health Economics, told Manufacturing Chemist that he doubts national production will be affected by price controls, which from his perspective are absolutely necessary. ‘They [will] affect drugs that have monopolies or quasi-monopolies,’ he said. ‘Most of them are biotechnological drugs.
‘Since there is no competition, the market will not regulate prices. [The] government has to do it. Price caps are set according to average prices in other countries, so if they are able to sell at those prices elsewhere, they should also be able to do so in Colombia.’
The government looked at prices in 17 countries when formulating the price caps: Argentina, Brazil, Britain, Chile, Ecuador, Mexico, Panama, Peru, Uruguay, Spain, the US, Australia, Canada, France, Norway, Germany and Portugal, comparing them with those in Colombia.
At the pharmaceutical forum, Nancy Huertas, Director of Medication at the ministry of health and social protection explained that under the new system, the maximum sale price would not set one price, but rather a ‘limit of negotiating space’, with the principal objective being the freedom of competition. The hope is that a fair price will be reached between those limits, depending on the negotiations between manufacturers, wholesalers and pharmacies.
Huertas also stated that the new pricing policy aimed to address the problems of unequal access to medication and poor quality of healthcare in Colombia.
Bravo, whose association represents Colombia-based and other Latin American companies, agreed that the caps were necessary: ‘There has been an unfriendly monopoly, which impedes the national and Latin American companies’ wanting to develop generic versions of certain medicines. The high prices seem to have fuelled a robust black market for medicine, he said. ‘Fundamentally contraband [exists] because at the borders, a lot of products enter that end up in the cycle of commerce … [they] can be obtained three or four times cheaper than the [Colombian] systems offers.’
When asked about the percentage of smuggled pharmaceuticals in the market, Bravo said: ‘The figures are worrying but have never reached more than 6% in Colombia.’
Guerrero also had anecdotal evidence of this medication trafficking taking place. ‘I have heard of pharmaceutical products, for example oncology drugs, being bought by the government of Venezuela and then smuggled into Colombia on the black market,’ he said, although he added that he only had ‘hearsay’ evidence, with no hard proof.
Colombia was among the top 10 countries where fraudulent drugs are falsified and sold
Francisco de Paula Gomez, President of the Association of Pharmaceutical Research and Development Laboratories (AFIDRO), which represents multinational pharmaceutical houses, insisted, however, that the situation is grave. In a recent blog, he argued that 'Colombia was among the top 10 countries where fraudulent drugs are falsified and sold. He added that police busting trafficking networks had found falsified products that contained ‘flour, colouring, sugar, or toxic substances such as ground brick, cement, battery fluid, ethylene and pesticides’.
The problem is not new and is so serious that the Convention for the Legality of Medication (CAVEME) was set up in 2007. It is an agreement between national authorities, regulators, police, customs, trade unions, industry associations and pharmaceutical companies committed to ‘combatting the counterfeiting, tampering, theft and smuggling of medication’, according to CAVEME’s mission statement.
As a result of this, and the other issues facing the Colombian pharma sector, Arcila Gomez argues it is imperative that the price caps be set as objectively as possible, in a way that favours neither the interests of the consumers nor the interests of the companies.
It is imperative that the price caps be set as objectively as possible
He added that the objectives were two-fold: ‘to take patients and consumers into account with fair prices ... but also incentivise the arrival of more products onto the Colombian market’. When asked if Colombian-owned pharmaceutical companies would be in a better position than multinationals after the price controls take effect, Arcila Gomez said: ‘There is no reason for one to do better than the other.’
If this is right and the dust settles on these reforms, the Colombia pharma sector could have a rosy future. Information released this year by US-based IMS Health Intelligence shows that Colombia pharmaceutical sales are expected to grow 5.1% between this year and next, and by 4.9% between 2014 and 2015. Total sales are expected to be $2.45bn in 2013, $2.58bn in 2014, and $2.7bn in 2015. This follows steady growth from 2003 to 2011, with only a dip in 2009 – data is not yet available on whether the current debates actually have halted that growth.
According to IMS, growth in the size of the Colombian middle class has been an important factor behind this increase in consumption. In a presentation given at the forum, the General Manager of Colombia’s central bank, the Banco de la Republica, stressed that Colombia is the fourth largest economy in Latin America and between 2005 and 2008 became an upper middle income country with a GDP per capita of $11,000 in 2012, according to the World Bank.
Colombian pharmaceutical exports were worth $433m in 2012, according to Dirección de Impuestos y Aduanas Nacionales de Colombia (DIAN), Colombia’s tax and customs agency, largely going to other countries in South and Central America. For the same year, imports of pharmaceuticals were valued at $2bn, according to DIAN data processed by ANDI, with key sources being the US, Germany, Switzerland, and increasingly India and China. In 2010, the pharmaceuticals sector was the sixth biggest contributor to Colombia’s manufacturing industry, after petrol refining, iron and steel, soaps and detergents, dairy products, and beer and malt production, said an ANDI report.
