New legislation encouraging generic drug use is an important step in bringing high quality medicines to the Chilean market and eventually improving access to medicines in the country. The tightened bioequivalent regulations will boost genuine medicine sales and force similares out of the market. However, we believe the current lack of vigilance in bioequivalence regulations in Chile has allowed the proliferation of low quality medicines in the market. Despite the ongoing capacity issues reported by domestic manufacturers, we believe local generic drugmakers need to adopt production processes that guarantee the quality of their drugs and improve their global competitiveness. We expect stronger political and legal intervention to address the monopoly issue in the country's pharmacy sector and improve drug access. The bulk purchasing of medicines by CENABAST will further reduce medicine prices in Chile's public health sector due to the increasing competitiveness of the international pharmaceutical markets.
Headline Expenditure Projections
- Pharmaceuticals: CLP1,724bn (US$3.5bn) in 2013 to CLP1,851bn (US$3.4bn) in 2014; +7.4% in local currency terms and -1.3% in US dollar terms.
- Healthcare: CLP10,663bn (US$21.5bn) in 2013 to CLP11,932bn (US$22.1bn) in 2014; +11.9% in local currency terms and +2.9% in US dollar terms.
Chile's RRR score for Q214 stands at 55.5 out of 100, with the company ranked seventh out of the 18 markets in the Americas matrix. The country has improved from Q114, due to its more promising pharmaceutical market growth outlook in US dollar terms when we calculated the RRR scores .
Key Trends And Developments
- The Congress of Chile passed a new Drug Act on January 7 2014 to promote the use of generic medicines. Health Minister Jaime Manalich said that the new law 'aims solely to benefit the citizens with medications that have certified quality. Patients who have fewer resources but have to manage chronic diseases will benefit the most.' The new law requests the compliance of bioequivalent regulation on medicines in Chile. It also demands that pharmacies supply generic drugs with bioequivalent certifications issued by the Ministry of Health and sell medicines with a single united dose form if necessary; over-the-counter (OTC) medicines should be sold at pharmacies without pharmacists' intervention. Further, doctors in Chile must prescribe medicines with generic names as an alternative to branded medicines, and the Central Purchasing Agency (CENABAST), which centralises public expenditure on pharmaceuticals and medical products, is authorised to import directly in case of drug shortage or emergencies.
- In Feburary 2013, Chilean drugmaker CFR Pharmaceuticals' efforts to acquire South Africabased Adcock Ingram collapsed after a rival bidding consortium, led by Bidvest and Community Investment Holdings, announced it had gained 34.5% of the total issued ordinary shares in Adcock.
- In November 2013, a study by Health Panorama Organisation for Economic Co-operation and Development (OECD) 2013 reported that households in Chile spend around 4.6% of their budget on healthcare.
BMI Economic View: We believe that weaker fixed investment amidst mounting external headwinds - namely, cooling external demand from China for copper - will negatively affect real GDP growth in Chile in 2014. That said, we expect that expansionary fiscal and monetary policies by the Chilean government will provide some support for the economy, underpinning our forecast for headline growth of 4.2% in 2014, only slightly down from estimated growth of 4.3% in 2013. However, we note that the risks to our forecast lie primarily to the downside.
BMI Political View: Michelle Bachelet's return to the Chilean presidency in 2014 will pave the way for a highly ambitious reform agenda, which seeks to raise taxes and introduce higher quality free education in the country. However, due to an insufficient parliamentary majority, we believe that the centre-left coalition will need to compromise on reforms, ensuring that Chilean politics do not veer too far to the left over the coming years.