Mexico is the largest pharmaceutical market in Latin America, representing 37% of sales in the region and with a recent growth rate of 12% a year. Moreover, drugmakers in Mexico now account for 1% of the country’s total Gross Domestic Product (GDP), and their exports topped $1 billion last year.

Spurring these developments has been the fast growth in foreign direct investment (FDI) into Mexico’s pharmaceutical sector, which increased more than 200% during 1999-2006. Pharma FDI currently represents 1.3% of the total in Mexican industry as a whole and accounts for 11.4% of FDI in the domestic chemical sector, growing 30% in the last eight years, according to Silvia Chavez, a consultant at business intelligence specialist InfoAmericas.

Similar growth rates in Mexican pharma FDI are expected up to 2010, boosted by government policies aimed at widening access to health care and protecting intellectual property, plus the many Free Trade Agreements (FTAs) to which Mexico is a signatory.

The USA accounts for 31% of pharmaceutical FDI in Mexico, followed by the Netherlands (10%), Germany (9%), Switzerland (8%) and Spain (6%), Ms Chavez writes, adding that international drug majors invested more than $200 million last year in conducting clinical trials and modernising their production facilities in Mexico. Among the country’s attractions for multinationals are its comparatively low production costs, the anticipated fast growth of its domestic market and its position as an entry point and stronghold for the remainder of Central and South American markets, particularly those with small local drug manufacturing industries such as Colombia, Costa Rica, Panama and Venezuela. So far, however, R&D has not been a reason for multinationals to invest in the country.

Mexican drug exports are growing 25% a year but so are the country’s medicine imports, and the sector’s trade deficit stood at $1.3 billion last year, notes Ms Chavez.

The country’s intellectual property protection legislation, which dates from 1991, gives multinationals exclusive rights to manufacture their products in Mexico, even if they were not developed in the country. However, the 78% of Mexico’s population who cannot afford these branded medicines, or over-the-counter products, rely on generics and copy products, and the increased access to health care provided under the National Health Program means that demand for these products is expected to show fast growth, she notes.

Meantime, a report published earlier this year by the Organisation for Economic Cooperation and Development commented that Mexican drug price levels remain “higher than would be expected,” compared to similar markets and other Latin American countries, and suggests that one possible reason for this could be the geographic proximity of the USA, “to the extent that manufacturers take the threat of cross-border trade into account when establishing Mexican prices.” By Lynne Taylor

– Market research company Espicom forecasts that the Mexican pharmaceutical market will be worth $14.1 billion this year, making it the world’s 10th-largest.