Healthcare sector Nordic Investment in Mexico Healthcare

Healthcare
Nordic Investment
in Mexico
Healthcare sector
The purpose of this document is to be only a general reference on certain areas of interest. The application and effect of the
law may vary depending on the specific data included herein. Omissions or inaccuracies are possible due to the changing
nature of the laws, rules and regulations. This document is distributed based on the understanding that the authors and
editors are not bound to offer legal, accounting and tax advice, nor other professional services. Therefore, this document
cannot replace direct accounting, tax or legal professional advice, or any other type of advice. Before making any decision
or taking any action, we recommend calling upon a professional of PwC Mexico.
Even though we made our best effort to base the contents of this document on reliable sources, PwC Mexico is not
responsible for any mistake or omission resulting from the use of this information. The data included in this document is
provided “as found” in the original source, without guaranteeing its integrity, precision, accuracy or assuming the
responsibility for the results obtained through its application; and without any other kind of guarantee, expressed or implicit,
including but not limited to performance, commercialisation and convenience guarantees to reach an specific goal. PwC
Mexico, its affiliated companies/firms, partners, agents or employees cannot be held accountable for any decision or
measure implemented by you or any other person based on this information, as well as for any resulting damage or harm,
specific or similar, including a notification about the possibility of such damage.
Overview
Epidemiological changes
In Mexico, health is considered citizens’ right and the
government is obliged to preserve it. It actively intervenes via
the legislative function, the development of public policies and
the implementation of social programmes. This responsibility is
entrusted to institutions in a position to simplify the delivery of
affordable, proper, efficient and high-quality healthcare
services to the entire population. Furthermore, it should offer
the entire population equal developmental opportunities and
quality of life, regardless of social status. The Mexican
healthcare system goes back more than 70 years ago with the
creation of the Ministry of Health and Welfare, Mexican Social
Security Institute (IMSS in Spanish) in 1943, in a response to
the need of providing social security to employees and their
families. The Social Security Institute and Services for
Government Employees (ISSSTE in Spanish) was created in
1959. Other similar institutions were created later for the army
(ISSFAM) and Petroleos Mexicanos (PEMEX) personnel, both
financed by the employer (ie the government)1.
In spite of the complicated landscape of the sector, life expectancy
in Mexico has increased by 18 years over the last 50 years, and the
mortality rate has decreased significantly. However, lifestyle has
intensified the prevalence of chronic degenerative diseases, most
of which are preventable and controllable, but not curable, which
means that they have a significant impact on medical care expenses.
Standardised mortality rate by age and cause
per 100,000 inhabitants
1800
1600
1200
800
600
In the 80s and 90s, Mexico’s population pyramid was comprised
mainly of citizens from zero to 20 years old. In the last 50 years,
the fertility rate has decreased considerably, from seven
children per family (in 1970) to 2.1 (in 2008). Since then, the
National Population Council (CONAPO in Spanish) has
estimated a negative population growth with more deaths than
births due to chronic-degenerative diseases; therefore, in 2050,
the largest group of the population pyramid will be made up of
individuals 45 years old, which will trigger one of the greatest
future threats to the Mexican healthcare system.
400
200
Male
1
3.6
2.4
1.2
0
0
1.2
2.4
3.6
ed
as
ic
er
M
ex
ic
o
e
ro
p
Eu
Am
ite
rra
ne
an
W
Pa es
ci ter
fic n
ia
M
Source: OECD Health data (2011).
The diseases with the highest mortality rates in Mexico are
diabetes mellitus, ischemic heart diseases and strokes. Similarly,
risk factors such as overweight and obesity have doubled in the
adult population, totalling 69.3% in 2006 (26% of school-age
children and 31% of teenagers).
Female
100+
95-99
90-94
85-89
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
As
Af
ric
a
0
The Mexican population pyramid - 2030
4.8
Communicable
diseases
1000
Demographic changes
6
Non-communicable
diseases
Trauma
1400
4.8
Source: DBI Mexico by PwC: Convergence and Opportunities in the Healthcare Sector
6
Approximately 68% of the disease burden (measured by the
number of healthy years lost due to premature death and
disability) systems from non-contagious diseases, including
depression, traffic accidents and violence induced injuries,
prenatal problems, diabetes mellitus, and ischemic diseases.
However, other diseases prevail, mainly those related to poverty,
to which 13% of overall deaths are attributed. Nevertheless, highly
disadvantaged municipalities contribute to 21% of all deaths,
which arise mainly from diarrhoea, acute respiratory diseases,
tuberculosis, malaria, and dengue fever.
PwC Mexico
1
Chronic diseases are predominant in Mexico
Drown
Bipolar
Diabetes
COPD
CKD
Fire
Scables
Chronic 48%
Infectious 38%
Alzh
Injuries 14%
A Fib
Atrial Fibrillation
IHD
Heart Ischemic Disease or Acute
Myocardial Infarction
CKD
Chronic Renal Insufficiency
CMP
Cardiomiopathy
COPD
Chronic Obstructive Pulmonary
Disease
HTN
Hypertension
LRI
Lower Respiratory Tract Infection
MDD
Major Depression
PUD
Peptic or Gastro duodenal Ulcer
PEM
Protein Calorie Malnutrition
Nordic investment in Mexico
Preterm
URI
Cirrhosis
Otitis
Epilepsy
PCO
Asthma
Migraine
PUD
Oth Vision
Oth Endo
Sickle
Edent
Hearing
Acne
Eczema
Congenital
Oth Resp
Osteo
R. Arthritis
2
Diarrhea
LRI
Neck Pain
Violence
N Enceph
Oth
Musculo
Alcohol
Schizo
Lymphoma
Low Back
Pain
Drugs
Road Inj
HIV
N Sepsis
TB Iron
PEM
Chagas
Oth Neo
HTN Heart
Kidney
Pancreas
CMP AFib Brain
Ovary
Cervix
Oth Circ
Anxiety
Leukemia
Breast
Fall
Self-harm
MDD
Liver
Lung
Stomach
Stroke
Autism
IHD
Oth Unintent
Distribution of the burden of disease - Mexico 1990 and 2010*
Mexico’s national health system,
de jure and de facto
The Health Sector in Mexico is
moving towards greater
convergence and collaboration
amongst the players.
Actual coverage
Artículo 123 A
Informal private
sector workers,
self-employed
Fee
reversion
None 25%
Artículo 5º
ISSSTE
Private formal
sector workers
SP 48%
SP 37%
Artículo 123 B
IMSS
Ministry of Health
Households,
government,
private sector
Military
Formal public
sector workers
Free
choice
49%
11%
1%
10%
129%
31%
5.6%
0.3%
0.4%
100%
Source: DBI Mexico by PwC: Megashifts. Impulso a Sector Salud 2013.
Expenditure on health by type of financing, 2009
% of total expenditure on health
100
3
2
90
80
5
6
2
5
17 16
13
1
14
10
15 12
14
17
70
13
7
1
20
22
9
13
0
20
5
11
20 12
2
5
19 20
12
13
1
27
28
13
15
22
3
24 16
9
5
8
26
27
7
5
29
32 48
19
40
30
60
50
78
78 77
75
75 75
75 74
73
73
72 72
71
71 68
66
65
60
60
58
Israel
80 78
Switzerland
81 81
Portugal
82
Greece2
84
Slovak Republic
84 84
Turkey2
84
Slovenia
84
Iceland
40 85
Czech Republic
40
30
33
34
12
58 48
48 47
20
10
Out-of-pocket
Private insurance
Chile
Mexico
United States
Korea
Hungary
Australia
OECD
Canada
Poland
Spain
Ireland
Private sector
Finland
Estonia
Belgium1
Germany
Italy
Austria2
France
Japan
General government
New Zealand
Sweden
0
Norway
Unfortunately, Mexico is still
below the Latin American
average of 6.9%. On average,
spending per capita in an OECD
country is 3,233 USD PPP5,
while in Mexico, spending is less
than a third of that. These
factors contribute to the growth
of the healthcare sector in
Mexico.
Artículo 4º
Luxembourg
Healthcare spending as a
percentage of GDP has increased
from 5.1% in 2000 to 6.4% 2010.
Formal coverage
United Kingdom
The 2010 Population and
Housing Census showed that
public social security
institutions are responsible for
the health of 65% of the
population. You can better
appreciate the magnitude of this
challenge if you consider that
52% of total healthcare
expenditure is private.
Payer
Netherlands1
Denmark1
Unemployed or self-employed
citizens are covered by
government institutions, such as
the Ministry of Health (SS in
Spanish), healthcare services in
the 32 states, the National
Institutes of Health, and the
Institute of Integral Family
Development (DIF in Spanish).
Other
1. Current expenditure.
2. No breakdown of private financing available for latest year.
Source: OECD Health Data (2011).
PwC Mexico
3
Value chain of the healthcare sector
Scenarios
Political
Economical
Social
Technological
Regulatory reforms
Financing changes
New service models
Personalised medicine
and biotechnology
Financial resources flow
Regulators
• Governments
• Patients’
associations
• Academies
Payers
• Insurance companies
- MME
- HSII
- Government (IMSS,
ISSSTE, SPSS)
• Healthcare managers
• Individuals
Providers
Intermediaries
• Hospitals
• Clinics
• Doctors’ offices
• Drugstores
• Clinical test
laboratories
• Ambulances
• Distributors
• Integrated services
Providers
• Infrastructure IT
• Human: Universities
• Material:
Pharmaceuticals,
Devices & Medical
equipment
Healthcare resources flow
Technology/Information
Convergence/Collaboration
Source: PwC Mexico 2012.
Healthcare stakeholders amidst a Convergence Transformation
1.Social: Mexico’s healthcare coverage rate is more than 90%; however, demographic and
epidemiological changes generate challenges that must be addressed, such as the significant
increase in life expectancy, as well as the average age of the population, and the prevalence of
chronic-degenerative diseases.
2.Political: coverage levels have put the healthcare model under strain, and the need to maximise its
service capacity has been acknowledged. Therefore, the Mexican government has developed the
Functional Integration Plan for the 2006-2030 period, which is designed to offer better services to
the population at any public or private unit of the healthcare system.
3.Economic: Mexico understands that the capacity to invest in healthcare infrastructure and services
is higher if public sector capabilities are maximised by making use of the capabilities of the private
sector. This has generated significant changes in the operating model of the country’s health
regulatory authorities, the Federal Commission for Protection against Health Risk (COFEPRIS in
Spanish) as well as the new Federal Act for Public-Private Investments, aside from those already
established by several states in the country.
4.Technological: Mexico approved the Electronic Medical Record Official Standard (NOM-024SSa3-2010) at the end of 2010 for the purpose of merging hospital information systems (HIS) and
subsequently creating a national interoperability platform. Furthermore, the boom generated by
the Mexican National Institute for Genomic Medicine (INMEGEN) in the development of
personalised medicine has given rise to opportunities to innovate and develop new businesses in
Mexico.
4
Nordic investment in Mexico
Transition of Mexico’s national
health system
Before
Federal
Funds
Federal
services
Today
State
services
IMSS
Oportunidades
Federal
Funds
Seguro Popular
Catastrofic
expenses
State
providers
Future vision
in 10 years?
State
providers
Contributory
funds
Out of pocket
payment
IMSS
ISSSTE
Private
services
Contributory
funds
Out of pocket
payment
IMSS
ISSSTE
Private
services
Seguro Popular
Basic coverage
IMSS
Oportunidades
Federal
providers
Unique
Federal Funds
Complementary
Funds
Public articulating
agencies
Private articulating
agencies
IMSS
Oportunidades
Federal
providers
IMSS
ISSSTE
Private
providers
Source: PwC 2013 Megashifts. Impulso a Sector Salud.
PwC Mexico
5
Integration of the sectors involved
in the healthcare process
The introduction of the Seguro Popular in 2002 has reduced the number of people without access to
healthcare services in Mexico, as it covered more than 90% of the target population by the second half
of 2011. It should be noted that in providing medical care, this system makes use of the medical and
hospital infrastructure of both the state and the Federal Ministries of Health.
The capacity of the healthcare infrastructure must be increased so as to provide medical care to the
low-income population, usually composed of people living far from urban centres. Therefore, over the
past five years, the Mexican government has invested more than 5 million USD in the construction,
rehabilitation and outfitting of medical units, as well as in hiring and training medical staff, although
this has been insufficient and more investment may be required.
An international alternative for increasing healthcare coverage and improving quality lies in
establishing Public Private Partnerships (PPP), where service outsourcing is used to generate more
efficient services for the public sector, more profits for the private sector, and higher quality and
performance standards for the population receiving medical care, thus eliminating the idea that
private healthcare services are for affluent people only, while public services are for the rest of the
population.
The private and public sectors need to understand the specific features of PPPs and commit to them in
order to establish a successful relationship. Every PPP model should emerge from a clear and well
identified need, which is characterised as the gap between the current situation and the optimum
situation. Firstly, as the difference between the current services provided and the optimum level;
secondly, it is essential to work together in a real partnership; thirdly, it is indispensable to have the
proper incentives for all the participants and fourthly, there must be the capacity of every stakeholder
to comply with the standard required. These issues are based on the need to have flexible schemes.
Recently in Mexico, the federal government issued the Public Private Partnerships Act, which is
intended to promote the development of economic and social infrastructure in our country through
the private sector investment in service-rendering projects, by:
•Ensuring more security for the private sector in PPP projects
•Establishing clear and balanced risk distribution schemes between the parties involved
•Expediting the real estate, goods and rights valuation and acquisition processes needed to provide
the services
•Expediting studies commissioned to support the viability of the project
•Promoting the financing of PPP projects
In the same way, local governments have been modifying regulatory frameworks since 2005. Today,
almost 95% of the Mexican states have a PPP law approved or about to be approved, while the
remaining ones are in the process of creating one.
6
Nordic investment in Mexico
Healthcare Sector Megashift. Areas that will drive and accelerate change in Mexico
Emerging paradigm line
Universalization
of health services
Health professionals as entrepreneurs
Medical tourism
Integrated services
Specialised logistics
Innovation in access to health providers
Innovation in health infrastructure
Integration of the pharma industry
Personalised medicine
Accelerators
Healthcare information systems
Multichannel platform
Tele medicine
Clusters
New models to finance health
Change
Emerg. Paradigm Pilot State
Convergence & Portability
Continuous Improvement
Transformation
• Gradual approach
to a 100% coverage
• Steps towards
functional integration
Continuous Improvement
Transformation
Continuous Improvement
Decentralisation
Article 4 and gradual
Reforms in the world
1980
1990
• Seguro Popular
• Citizenship access to
health services
• Protection against
sanitary and financial
risks; quality
assurance
2000
EPN 2012-2018
• Pacto for Mexico
• Effective universal coverage
• Public-Private Associations Law
• Health innovation
• Strengthening infrastructure
(26 hospitals)
2010
2020
Source: PwC México 2013.
PwC Mexico
7
The pharmaceutical market
In the last decade, the Mexican government acknowledged the
importance of investing in scientific and technological know-how
and establishing science and technology development as a state
policy for the federal government’s National Development Plan for
the 2007-2012 period. Some of the salient points are the support of
scientific, technological and innovation activities designed to
improve the competitiveness of the country. This has been a
relevant factor in order for Mexico to emerge as one of the main
pharmaceutical and medical equipment markets in Latin America.
from breast cancer, osteoporosis, bone cancer and degenerative
diseases such as Paget’s bone disease, and herpes zoster and
simple herpes. The agency also cleared eight licences for the
development of generics that will be used to treat diseases causing
13% of deaths among Mexicans. The head of the COFEPRIS, Mikel
Arriola, said the list of drugs is the fourth set of generic products
that have cleared quality, safety and efficacy tests. He also
confirmed the expiration of the patents3.
Since 2001, through the National Council for Science and
Technology (CONACYT in Spanish), the Federal Government has
been supporting scientific and technological research through tax,
financial, foreign-trade and training incentives, as well as
administrative simplification, among others.
Historically, the rules for medicines to enter the Mexican
healthcare sector have been stricter than in other industries. The
explanation given by the authorities is, in general terms, that they
have the right and the obligation to protect the health of the
Mexican population, regardless of the provisions of foreign
legislation.
CONACYT provides financial support to individuals and companies
with technological development and innovation projects;
furthermore, it gives priority to projects linked to universities and
research centres.
Pharmacogenomics - personalised medicine
Personalised medicine is just one facet of the development of the
bio-economy in the 21st century, as part of the life sciences sector.
Genomic medicine dates from March 14th, 2000, when the US and
UK governments jointly declared that the human genome had been
read and mapped and contains some 23,000 genes.
The genome discovery has moved on from an academic science to
big business. According to the OECD, it is calculated that for every
dollar invested in genomic research, there is a profit of 141 USD.
Considering that annual global investment is close to 10 billion
USD, the potential for economic gain is huge.
Mexico was an early starter in genomic research, having already
mapped the genome of diseases that plague the country. It was one
of the few countries to set up its own National Institute of Genomic
Medicine (INMEGEN) in 2004. By 2009, it had already completed
work on a Haplotype Map of the Mexican genome. Mexico´s
research on genomic medicine has received international
recognition. More recently, the Mexican Society of Genomic
Medicine was founded to support the government’s efforts at
INMEGEN2.
Generic drugs
With the growth of consumer spending slowing, Mexicans will be
more receptive to generic substitution, thus offering new
opportunities to generic drug makers now looking for a Central
American entry point. In February 2012, Mexico’s Federal
Commission for Protection Against Health Risks (COFEPRIS)
released three active substances, anastrozole, zoledronic and
valaciclovir, following the expiration of patents. The active
substances are indicated for the treatment of patients suffering
Market Access for Medicines
Since Mexico started its foreign trade regime, any healthcare
regulations that might reflect a certain level of protectionism is
submitted to great scrutiny.
COFEPRIS is also the body that authorises clinical trials in the
country. Most patients who take part in clinical trials are recruited
through public healthcare institutions. Mexico has the opportunity
to increase its participation in the clinical trial process, based on
the fact that diabetes mellitus, high blood pressure, obesity and
cancer are the main causes of death in the country. Since 2012,
COFEPRIS has speeded up the marketing authorisation process for
generic medicines, as a result of which, the country is expected to
increase its access to affordable medicines and save MXN14bn
(US$1.1bn) from 2012 to 20154.
Distributors
The complex Mexican market interconnects more than 6,000
products from more than 300 companies with more than 30,000
points of sale. Regardless of the alternative market, 80-90% of
sales are made through wholesalers. In Mexico, approximately
80% of medicine distribution is handled by four large companies,
i.e., Nacional de Drogas (NADRO), Casa Saba, Casa Marzam and
Fármacos Nacionales. The Pharmaceutical Product Supply and
Distribution Federation (FADIF in Spanish) was created as an
additional link in this subsector of distributors, which also includes
other sector associations.
There are two medicine and injury- care distribution and supply
systems:
1.Public: under this system, orders are based on consumption.
There are warehouse planning, purchasing, distribution and
investing processes in place, as well as inventory control,
management and financing.
Source: Doing Business in Mexico by PwC; Convergence and Opportunities
in the Healthcare Sector.
3
Source: BMI Mexico Pharmaceutical and healthcare report2013
4
Source: DBI by PwC; Convergence and Opportunities in the Healthcare Sector.
5
Source: BMI 2013 Mexico Pharmaceutical and healthcare report.
6
Source: BMI Mexico Pharmaceutical and healthcare report.
2
8
Nordic investment in Mexico
Medicines sales in Mexico (US$bn)
2.Private: orders are based on current market demand. The
drug store or retailer has effective inventory management,
proper negotiations with its sales representatives, daily
supply and maintenance of strategic and safety inventories
and a logistics and special products handling infrastructure9.
Key Trends and Developments
COFEPRlS signed an agreement with Chile, Peru and Colombia
as part of the implementation of the Pacific Alliance in June
2013. The same month COFEPRIS reported that in the previous
18 months, it had approved nearly 16,000 health products5.
Mexico’s pharmaceutical market has recently experienced a few
positive developments, as the government has approved more
innovative medications of multinational drug makers and has
facilitated patient access to the most commonly requested
anticancer drugs. Government has also improved the sector’s
regulatory system to require scientific proof of a treatment’s
effectiveness and evidence based descriptions of drugs. Local
and foreign companies have also brought more affordable
medicines into the generic drug market6.
Pharmaceutical Market Forecast
The value of the overall pharmaceutical market in Mexico
reached MXN176.00bn (US$13.38bn) in 2012. This
development is driven by an ageing population and the
increasing incidence of chronic diseases, and thus in coming
years Mexican pharmaceutical sales are expected to grow at a
compound annual growth rate (CAGR) of 8.5% in local currency
terms, or by 10.7% in US dollar terms. The expansion of the
state-run health insurance scheme for the low-income
population will facilitate this growth, but at the same time a
slow growth in consumer spending will hamper this trend along
with drug shortages associated with supply and procurement
chain shortcomings and the increased use of generic drugs, as
the authorities are interested in facilitating medicine imports
from lower-cost manufacturing countries7.
According to Business Monitor International healthcare
spending in Mexico is expected to rise from MXN957.76bn
(US$72.82bn) in 2012 to MXN1, 378.78bn (US$115.86bn) by
2017, representing a CAGR of 7.6% in local currency terms and
9.7% in US dollar terms. The key driver of growth will be
increased access to services. About 88million people in the
country (76% of the population) have some form of health
coverage. Therefore, Seguro Popular, which was implemented
in 2004, has proven successful8.
Source: Business Monitor International 2013; Mexico Pharmaceutical and healthcare report.
Source: BMI report Q4 2013 healthcare report.
Source: Doing Business in Mexico - Convergence and Opportunities in the Healthcare Sector 2013.
10
Source: BMI Mexico Pharmaceutical and healthcare report
25
20
Patented drug sales
Generic drug sales
OTC sales
15
10
5
0
2009
2010
2011
2012 2013f 2014f 2015f 2016f 2017f
Projected market share growth 2010-2017 (CAGR)
9.5%
16%
12%
Source: Datamonitor
Expenditure Projections
•Pharmaceuticals: MXN176.00bn (US$13.38bn) in 2012 to
MXN191.342bn (US$15.56bn) in 2013; +8.7% in local currency
terms and +16.3% in US dollar terms
•Healthcare: MXN957.76bn (US$72.82bn) in 2012 to
MXN1,032.83bn (US$83.97bn) in 2013; +7.8% in local currency
terms and +15.3% in US dollar terms10.
Conclusion
There are still many challenges that require preventive action
where everyone can contribute to reduce maternal mortality; child
malnutrition; teenage pregnancy; domestic violence; drug
dependence; the pandemic of obesity and diabetes mellitus;
hypertension; the lack of a comprehensive care to the elderly and
various groups in situations of vulnerability.
Therefore, public policies require a stronger, renewed national
health system based on the knowledge to design and implement
actions that protect people against the risks to health.
The proper synergy between public and private sector is a tool that
can provide a healthy mobility to the national health system in
Mexico and to facilitate in realising the right to a proper health care.
7
8
9
PwC Mexico
9
© 2014 PricewaterhouseCoopers, S.C. All rights reserved. PwC refers to the Mexico member firm, and may sometimes refer
to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/mx for further details.
MPC: 041404_GM_Healthcare
This content is for general information purposes only, and should not be used as a substitute for consultation with
professional advisors.
PwC Mexico helps organisations and individuals create the value they’re looking for. We’re a member of the PwC network of
firms in 157 countries with close to 184,235 people. We’re committed to delivering quality in assurance, tax and advisory
services. Tell us what matters to you and find out more by visiting us at www.pwc.com/mx