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Argentina
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Pharmaceutical Industry Insight on Argentina
LATIN AMERICA: AN OVERVIEW
The Latin American Pharmaceutical Industry
accounts for 4.12% of the global market with total
sales of US$17.4 billion in 2003 according to IMS
World Review (Audited) 2003. The region is
dominated by Brazil till now because of its large
Venezuela, 8%
Argentina, 15%
Columbia, 6%
Chile, 3%
Peru, 2%
Brazil, 28%
population but Mexico is expected to supersede it
soon. The other major markets in the region include
Mexico, Argentina, Venezuela, and Columbia.
Following a period of economic recession, the Latin
American market is beginning to show signs of
recovery in 2003.. The availability of medicines in
Map of Argentina
9.5
6.2
4.1
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Ve
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Co
lom
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5.3
Me
xico
5.3
Ch
ile
6.7
Br
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% of GDP
Ar
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a
ARGENTINA – A COUNTRY OVERVIEW
Argentina is located in Southern South America,
bordering Chile on the west, Bolivia and Paraguay
on the north, Brazil and Uruguay on the northeast,
and the Atlantic Ocean on the east. It’s the secondlargest country in South America (after Brazil)
Argentina
Health-care Spending in Latin America
8.5
With large populations, an increased spending on
healthcare and double-digit market growth, Latin
American markets are proving attractive and
rewarding for the global pharmaceutical industry.
Furthermore, the introduction of patent protection
should encourage more pharmaceutical companies
from outside to invest in local facilities and market
newer drugs in the region. Argentina and Colomboia
have very large health care spending of all Latin
American nations.
Mexico, 38%
Source: IMS 2005 estimates
10
8
6
4
2
0
However, its recent economic instability has led to
it being overshadowed by Mexico.
Selected Latin American Nations
Source: EIU Market Indicators 2003
Latin America has also improved and this has
persuaded many pharmaceutical companies to take
another look at investing in the region. Because of
its large population, Brazil had always been
considered a major market in Latin America.
spreading across the total area of 2,766,890 sq km.
The climate is mostly temperate; arid in southeast;
sub Antarctic in southwest. Buenos Aires is the
country’s capital and largest city. The population is
around 39,144,753 according to 2003 estimation.
Economy – Overview
Argentina is rich with natural resources and has an
extremely high literacy rate. It’s has got export-
oriented agricultural sector, and a diversified
industrial base. Over the past decade, it has
weathered recurring economic problems of inflation,
external debt, capital flight, and budget deficits.
Growth rate in GDP during 2000 was (-) 0.8%. It
was due to lack of confidence of both domestic and
foreign investors on the government’s ability to clear
debts and maintain the peso’s fixed exchange rate
with the US dollar. The economic situation worsened
in 2001 with the widening of spreads on Argentine
bonds, massive withdrawals from the banks, and a
further decline in consumer and investor confidence.
The peso’s peg to the dollar was abandoned in
January 2002, and the peso was floated in February
2002; the exchange rate plunged and inflation picked
up rapidly.
However, by mid-2002 the economy had stabilized,
although at a lower level. Strong demand for the peso
forced the Central Bank to intervene in foreign
exchange markets to check its appreciation in 2003.
Driven by record exports, falling unemployment, and
controlled inflation under 4% at year-end the
economy gained momentum with output up 8% in
2003. The per capita GDP is US$11,200 (2003 est.)
with an 8% real GDP growth rate. Argentina has
managed to turn itself round economically in recent
years. Notably, it has succeeded in reducing its
inflation rate. This has partly been achieved through
Argentina’s alignment with the US dollar.
The major industries in Argentina are food
processing, motor vehicles, consumer durables,
textiles, chemicals & petrochemicals, printing,
metallurgy and steel. These industries contribute
28% to the GDP. In agricultural sector major products
are Sunflower seeds, lemons, soybeans, grapes,
corn, tobacco, peanuts, tea, wheat and livestock,
which contribute 5% to the GDP. The service sector
contributes 67% of the GDP.
The export size of Argentina is around US$29.57
billion f.o.b. (2003 estimate). The major export items
are edible oils, fuels and energy, cereals, feed and
VITAL FACTS
Population
Population Growth Rate
Birth rate
Death rate
Net migration rate
Languages
Literacy rate
GDP per capita
Real GDP growth rate
Inflation rate
Below poverty line
Currency
Exchange rates
Source: www.CIA.gov
ARGENTINA
39,144,753
1.02%.
17.19 per 1,000 population
7.57 per 1,000 population
0.61 per 1,000 population
Spanish (official), English,
Italian, German, French
97.1%
$11,200(2003 est.)
8%
3.7% (2003, yearend)
51.7% of population
Argentine peso (ARS)
ARS per US$= 3
motor vehicles. Its export partner countries are
Brazil, Chile, US, Spain, China and Netherlands. The
estimated import size is US$13.27 billion f.o.b. (2003
estimate). It primarily imports machinery and
equipment, motor vehicles, chemicals, metal
manufactures and plastics from Brazil, US and
Germany.
PHARMA INDUSTRY
The market size of Argentina is US$1.4 billion in the
year 2003 having around 11% of market share in
total Latin America. (Source: EIU Market Indicators
and Forecasts). It is the 3rd largest player in Latin
America after Mexico and Brazil. And globally it is
the 12th largest pharmaceutical market in value
terms. Market growth is volatile. The market has
experienced the economic problem during 2000 and
2001 which pushed the sales down.
Argentinean citizens have access to different health
care services through Social Security schemes,
health insurance plans (prepaid medicine) and
public hospitals. The health care spending
percentage is one of the highest in the region. It
spends above 8% of its GDP to health related
expenditures according to the chart “Healthcare
spending in Latin America”. The domestic budget
expenditure is only 2% of the total GDP. Health
expenditures on an average are US $675 per-person
Prescription drugs account for 93% of the market
and OTCs for the remainder. Per Capita
pharmaceuticals Sales in Argentina have seen a
positive growth rate with a CAGR of 4.5% from 1998
to 2003. The per capita sales have gone from
US$114 to US$140 in the same period. In between
it was affected due to economic crisis but latter it
recovered.
The major drivers for the industry in Argentina are:
1. Per capita pharmaceutical consumption
The per capita pharmaceutical consumption in
Argentina is higher. Compared to around US$ 3
these figures in Latin American countries such
as Argentina are at US$ 115, Brazil at
US$
50 and Chile at US$ 53, which are highly
attractive.
2. Private Insurance System
The private insurance system in Argentina is
reasonably well established, with about 25% of
the population having some form of private cover,
although the current government does not
appear to see much of a role for the private sector
in a reformed healthcare system. The well
established private insurance is one of the driving
factors for the pharmaceutical business.
3. Developed healthcare system & Trained
staff
In Comparison to other countries in Latin
America, Argentina has got a relatively highly
developed healthcare system. The healthcare
reform process that was introduced in the early
1990s remains uncompleted due to the
economic crisis and this is set to progress in the
near future. In the 1990s, Argentina had access
to quality healthcare and highly trained doctors
and technicians who were familiar with the latest
technology. But the prolonged recession
spoiled that combination.
Now with the economy in recovery phase,
doctors and patients
should lead the
demand
for the latest medical technology and
supplies, which until recently
were readily
available in the market. This will help the industry
grow with the technology and
demand of
quality healthcare.
4. Low-cost generic drugs
Latin American markets are largely price driven,
and low-cost generic drugs are an appealing
option. Many governments encourage generics.
In Argentina, the government purchases only
generics for public health facilities. Apart from
that the government of Argentina approved a
law making compulsory for doctors to prescribe
pharmaceuticals by the generic names instead
of traditional practices of specifying branded
label. This is the driving factor of the generic
business in this region and there is a sign of
growth in generic segment.
Pharmaceutical market size
The market had seen a growth phase in the first
half of 90’s and a negative growth in the end of 90’s
during the recession and the market weathered the
Pharma sales in Argentina
sales (US$ million)
per-annum, mostly financed by private parties and
insurance companies. Insurers cover 43% of total
pharmaceutical expenses, with private parties
covering 38% and public expenditure covering 19%.
1600
1550
1500
1450
1400
1350
1300
2002
2003
2004e
2005f
2006f
2007f
2008f
Pharma sales in Argentina
Source: e=Estimate f=Forecast. Source: EIU Market Indicators and Forecasts
economic crisis. But from 2004 onwards it is
estimated to grow further and total sales of US$1.40
billion in 2003 would grow at 2% to US$1.55 billion
till 2008.
Industry structure
The market is fragmented. There are around 70
pharmaceutical companies operating. Out of those
majority are domestic players and number of global
TOLBIAC
PHOENIX
GADOR
The major MNCs
Lilly
Aventis
Roche
Novo Nordic
Argentina
Novartis
players is not more than a dozen. Domestically
manufactured products are predominant (71
percent) over imported products (29 percent) although laboratories use mostly imported drugs.
With in Argentina, local companies’ rules 52% of the
market and European companies have managed a
27 percent share against 21 percent share of US
companies. The market is characterized by the
growing market share of generics with the strategies
of price reduction and commercial integration. The
government is forcing physicians to prescribe basic
drugs rather than branded drugs and this has given
survival kit to small and generic players.
Most of the global players capture the Argentinean
market through their Brazilian set up and Indian
companies are no exception to that. Indian company
Strides Arcolab Limited has got a big market for its
HIV drugs in Argentina. But it also accesses
Argentina via Brazil.
Import and Exports:
There is a trend in decreasing of Pharmaceutical
imports to the country and growing exports from the
country. With the growing Percaptia drug
consumption in the country and the trends in imports
& exports indicates that the domestic production of
the drugs is on the rise.
350
324.31
308.53
300
US $ million
The major domestic
players
BAGO
BIOSIDUS
DESYNTH
ROEMMERS
Import & Export Trend in Pharmaceuticals
284.5
275.45
250
200
168.9
150
100
63.37
49.62
67.29
74.3
70.55
50
0
1998
1999
imports
2000
2001
2002
exports
Source: intracen.org
Therapeutic Segments
The largest therapeutic class, ATC (Alimentary Tract
& Metabolism) has declined from 18.4 percent in
1993 to 17.4 percent in 1998. It has further declined
to 16.7 percent in 2004 .This decline is expected to
continue and it has lost its leading position in 2004.
Therapeuticsegments
US$bn
Alimentary Tract and Metabolism
Systemic Anti-Infective
Cardiovascular System
Central Nervous System
Respiratory System
GU System and Sex Hormones
Musculo-skeletal System
1998
2.8
2.16
2.05
2.05
1.63
1.28
1.23
%
%
US$ bn
share
share
1998
2004
2004
17.4
2.88 16.72
13.5
1.56
9.06
12.7
2.76 16.03
12.8
3.12 18.12
10.2
1.34
7.78
7.9
1.18
6.85
7.6
1.39
8.07
CNS (central Nervous System) has shown marginal
growth and has gone up to 18.12% in 2004 from
12.8% in 2003 by occupying the leading therapeutic
segment slot.
CVS (Cardio-vascular System) is showing good
sales records over these days. It is holding the 3rd
position.
AIDS is a major concern area in Argentina. Nearly
1,800 deaths were from AIDS in 2001 (AIDS
Epidemic Update December, UNAIDS, 2002). The
HIV prevalence rate is 0.7% having 130,000 infected
persons. Majority of all AIDS patients were between
20 and 34 years of age. There is an increasing shift
of infection towards a younger age group which is
attributed to an increase in intravenous transmission
associated with drug use. The epidemic’s profile
has changed not only in terms of the higher number
of women infected, but also because of the gradual
spread of intravenous drug addiction as a means of
transmission. This trend is supported by the fact
that there is an increasing trend of drug consumption
in urban areas and the country is notoriously known
to be used as transshipment for cocaine headed
for Europe and US. Other STDs (including syphilis
and gonorrhea) have maintained a low or stable rate.
A trend can also be observed in this market including
Brazil and Mexico that anti infective will be in
demand, analyzing the capacity of the healthcare
system to manage patients suffering from bacterial
hepatitis Virus (HCV) and Lower respiratory tract
infection. Hepatitis case reporting has improved
since 1993.
Legal Provisions for Export to Argentina
As per these provisions in Argentinean law, all drugs
exported to that country must be registered with the
National Administration of Drugs, Foodstuffs and
Medical Technology under its health ministry. The
Decree No. 150/92 contains two Annexes. Annex 1
requires that pharmaceutical imports from countries
listed therein be manufactured in facilities approved
by the relevant governmental bodies in the country
of export or by the Argentinean Health Ministry, and
meet manufacturing & quality control requirements
set out by Argentina’s National Health Authority.
Annex 2 states that manufacturing facilities in listed
countries must be inspected and approved by the
Ministry of Health before exports from these
countries are allowed into Argentina.
Regulatory Structure
The major regulatory bodies for pharmaceutical
industry are
Previously India was not listed in any of the annex
but later with representation of the Indian authorities,
the Argentinean authorities had assured that India
would be included in annex 2. Then India withdrew
the complaint.
· The ministry of Health and Social Welfare:
Registration authority for pharmaceuticals and
other health products prior to importation.
· The secretariat of industry and commerce: It is
the principal authority governing imports to
Argentina.
· The National Directorate of patents and
trademark is responsible for intellectual
protection.
· The National Institute of Industrial Property: The
agency responsible for implementing intellectual
property protection.
· ANMAT: The regulatory agency that licenses the
import, manufacture and marketing of medicines
and medical devices as well as foodstuffs.
Patent protection: Pharmaceuticals and items with
no industrial application are not patentable, but
legislation before the Argentine Congress would
provide internationally recognized patent protection
for pharmaceutical products. Typical is Argentina’s
patent law, which extends patent protection to drugs
that are produced outside Argentina.
In the recent efforts of government, many former
import restrictions and controls have been lifted.
However pharmaceuticals items require the
approval of the Argentine Ministry of Public Health
prior to importation and the concerned government
department prior to distribution in the market. If the
product comes from a country having higher
standards than that exists in Argentina, the approval
can be perfunctory. Currently Import duty of 11
percent tariff is applied to medicines.
Over the period Brazil exports of pharmaceuticals
to other MERCOSUR (created by Argentina, Brazil,
Paraguay and Chile with the signing of the Treaty of
Asuncion) countries has increased, mainly to
Argentina. In 2001, exports to those countries
increased 61 per cent, with Argentina being the
largest recipient. So, the trend supports the point of
foreign players capturing Argentina market via Brazil
Documentation & Procedure
Documents required for export to Argentina
generally include a commercial invoice (which must
be legalized by an Argentine consulate) a bill of lading
or air waybill, and a packing list. A pro forma invoice
and certificate of origin may be requested by the
importer. Foodstuffs and pharmaceutical products
must be registered with the Argentine Ministry of
Public Health prior to importation. Imports require a
submission of a statistical import registration to the
Trade Secretariat 48 hours before taking delivery of
merchandise from customs. Import authorization is
now approved through a special statistical import
system (Regiumen Estadistico de Importacion REDI) which automatically approves proper imports.
Imports: Only licensed importers are authorized to
register products. Separate applications need to be
filed for each presentation and applications generally
take 6 to 8 months to be processed. This may take
longer depending on the importer’s skills and
experience. There are many additional costs related
to notary certifications which many importers will
be hard pressed to pay, such as translation into
Spanish of service manuals.
Incentives
In 2002, Argentina passed Law to exempt a list of
new medical equipment, supplies, and medicines
from import duties, tax levies, and customs fees.
These products are considered critical for the
diagnosis and treatment of human health. This
exemption is temporary and will apply until the
national sanitary emergency situation remains in
Argentina.
Argentina permits 100 percent foreign ownership.
Investing in Argentina by foreigners is allowed
without prior approval of government and investment
is registered only for investment purpose. Domestic
and foreign players are treated equally and there is
no restriction on joint ventures with local partners.
No approvals or paperwork of any kind are required
to materialize foreign investments - there is
absolutely no red tape. Foreign investors face the
same tax liabilities as local firms.
OUTLOOK
The Pharmaceutical industry demand is influenced
by the level of income and increases with an
individual’s wealth than with the price reduction to a
larger extent. High-income patients are not as price
sensitive and are able to pay more out-of-pocket
for pharmaceuticals than are low- income patients.
This is why Argentina with picking up market can
have more demand. Living standards, income
levels, consumer preferences, disease patterns,
drug consumption patterns, exchange rates,
product liability, regulatory requirements, and the
degree of competition in markets for health care
and pharmaceuticals all contribute to this variance.
The increasing living standard is expected to drive
the demand after the recovery in the economy. And
the increasing percentage of health care spending
in Argentina is a good sign for the revival of the
sector.
Major Opportunities for Indian Players are
1. People in Latin America including Argentina have
accepted Ayurvedic medicines. Doctors are
preferring to go to India to study Ayurvedic
medicine. So, Ayurvedic medicine is generating
interest. Companies such as Dabur and
Himalayas have already made entry.
2. Catering to a niche market or segment like AIDS
will be fruitful for Indian companies. Majority of
all AIDS patients were between 20 and 34 years
of age and statistics infers the increase in the
ratio.
3. Because of the government incentives for
promoting generic drugs the market of generic
medicines is increasing steadily with
encouragement from the government. Generics
account only for 3% of the market currently. So
here is a huge potential for growth. It’s expected
to increase more in near term and India being a
low cost producer with generic products can
cater there properly.
4. Typical is Argentina’s patent law, which extends
patent protection to drugs that are produced
outside Argentina and local producers know the
patent law could change the entire game. As a
result, local firms are coming to form alliances
with multinational laboratories for co-production
and co-marketing of the multinationals´ products.
Indian biggies can look it as an option.
5. Companies in Argentina and Brazil are looking
for a manufacturing tie up with Indian companies
for intermediates and raw materials for
pharmaceuticals that is essentially life saving.
This is a welcome call for Indian bulk drug
companies to look at Argentina, especially those
companies who have yet to prove their presence
in this region.
6. Brazil exports pharmaceuticals to other
MERCOSUR countries, mainly to Argentina. In
2001, exports to those countries increased 61%,
with Argentina being the largest recipient. Here
the import from Brazil is too big for Indian
companies to ignore.
7. The prices of medicine in Latin American
countries were three to twenty times the prices
of medicine in India. The cost of production has
gone up due to the high interest rates and the
tight money supply in this region including
Argentina. In order to cut the cost of production,
the manufacturers have started importing more
inputs for their industries from countries such as
India. In case of Argentina, its comparatively high
production costs, particularly its electricity and
labour costs push the cost very high. Indian being
low cost producer has got a big advantage over
here. Indian players can also evaluate
outsourcing option.
8. As the market is highly fragmented with too many
small and medium players coupled with the after
shock of the economic crisis, they will be prone
to acquisition. Indian companies can look out for
those companies.
9. Most of the foreign players including Indian
companies are accessing Argentina market via
Brazil because it’s a bigger market and it’s
strategic location to cater the entire region. But
Argentina being in the southern part of the region
can become a hub for Chile as well as Argentina
market.
Market growth rate (1999-2004)
Venezuela
Peru
Mexico
Columbia
Chile
Brazil
Argentina
8
3
12
3
7
6
5
0
2
4
6
8
10
12
14
CAGR in % (1999 - 2004)
Source: IMS
The Flip side
1. In the region, Venezuela and Mexico hold highest
growth rate in the period 1999 to 2004. The graph
depicts the growth rate in CAGR terms.
Venezuela seems to be more promising than
Argentina.
2. There is no trade treaty with India whereas many
others countries have signed treaties including
china and US.
3. Registration takes time for companies in
Argentina compared to Venezuela and Mexico.
Companies having FDA approval it’s very easy
and takes too less cost for registration. In
Venezuela the cost of registration is low
compared to Argentina.
4. Free-Trade Zones: There is a lack of promotion
on free trade zone from Argentina government
and this might be because of currency problem
they had suffered. Many laws were developed
but most of the free trade zones are not
functioning properly.
5. The aftermath of the devaluation of currency in
1999 lead to a period of hyper- inflation and
economic uncertainty. The scarcity of U.S.
dollars in Argentina for trade purposes has
created a difficult environment for global
companies, including the pharmaceutical
industry, to trade. The scenario started to stabilize
from the last year.
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www.cygnusindia.com