The growth in pharmaceutical sales was forecasted at just 3% in the developed world for 2017: North America, Europe, and Japan. Emerging markets were far more promising in driving robust pharmaceutical sales. In general, growth was robust in Latin America and Asia. They have witnessed a growth of 14% on an average from the period extending from 2008–2012. For emerging markets, research analysts believe that the growth in pharmaceutical sales would be sustained at 12% in 2017.
Latin America: A major emerging market with sustainable growth in sales for the pharmaceutical industry
People in Latin America today consider healthcare beyond the basic essentials. This is because income levels have increased proportionately due to the following reasons: rapid urbanization, improved education levels, and higher women workforce in the organized sector.
Latin America is far more promising than Asia given the growth of middle class from 2002 to 2009. During this period, the middle class population increased by 60 million and 49 million in Latin America and Asia, respectively.
Factors that will ensure robust pharmaceutical sales in Latin America
1) Generics: Given the rapid urbanization and increased income growth of middle class, consumption patterns is something to watch out for: the demand for generics has increased consistently in this region. This is because Latin American governments have made concerted efforts to provide healthcare medications with economical pricing. Consequently, the access to healthcare facilities has increased.
Regardless of the penetration of multinational companies, the popularity of generic drugs produced by local manufacturing companies is increasing with each passing day. This is perhaps the biggest factor driving robust sales of pharmaceutical industry in Latin America. These local companies produce both branded and private labels, which are then dispersed through pharmacy outlets. In terms of pricing, generics are sold at 70% lesser costs as compared to patented medications. Therefore, local manufacturing units are witnessing a stupendous growth of 28% annually.
2) Pharmacy distribution pattern: There has been an overhaul in the distribution of drugs through pharmacies. Quite a few pharmacies have consolidated into groups, and medications are also available today in retail/supermarkets throughout Latin America. Independent pharmacies have become less in number.
Thanks to consolidation, there are fewer distributors today in the retail segment of pharmaceuticals. Nevertheless, they are making whopping gross revenue, at least by dispending prescribed drugs and over-the-counter medications. For the local manufacturing industry, the sales process has now been smoother and dependency for growth has now been restricted to fewer retailers. Consequences of these trends are as follows:
- Product suppliers seemed to have lost their longstanding practices of monopolization. Erstwhile, the marketplace contained many individual pharmacies and so the price-cap was soared artificially due to middle-men trading. Today, the negotiations occur directly between retailers and manufacturers; therefore, the prospect of suppliers is declining continuously following consolidation trends.
- Wholesale market of drugs is shrinking thanks to the proliferation of pharmacy chains throughout Latin America. Given the clout of pharmacy retailers, the price-cap has reduced and the wholesale to retail market transition has almost vanished.
3) Private healthcare: With higher purchasing power, Latin America is poised to show promising growth in private healthcare system. Not only has the number of private health insurance providers boomed but also the number of private hospitals and clinics.
The growing middle class prefers these facilities over government ones. Consequently, the demand for medical devices and surgical equipment has been increasing continuously. In other words, sales growth for medical device manufacturers has witnessed an upward trend.
Market summary of Latin American countries
Although the growth of pharmaceuticals is promising throughout the Latin American region, robustness differs: Brazil is the country that spends maximum in the healthcare sector. In fact, almost 43% of sales in the Latin American market hail from Brazil for the period ranging from 2013 to 2017.
Most market analysts believed that Brazil was the fifth largest market for pharmaceutical sales in 2016. Mexico is another country with robust pharmaceutical growth following Brazil. Although Colombia and Peru have witnessed high growth in pharmaceutical industry, small base in this country limits the total revenue when compared to Brazil. In totality, Chile is the country whose pharmaceutical sector is more organized and well-established than Peru and Colombia.
Chile has also witnessed a stable growth over the past few years. On the other hand, Argentina and Venezuela are countries facing economic instability and soaring inflation. This has impacted the growth of pharmaceutical sales in these countries and the picture is grimmer in these countries.
Conclusion: In the Latin American market, Brazil and Mexico are the key players with strong pharmaceutical growth and development. Results are also promising from Colombia and Peru, where pharmaceutical expansion is driving growth.