Colombia Pharmaceuticals and Healthcare Report Q4 2009

BMI calculates that pharmaceutical sales in Colombia reached COP4,466bn (US$2.27bn) in 2008. This represents impressive growth of 11.4% in local currency terms between 2007 and 2008 (compared with a
-3.2% decline in the drug market between 2006 and 2007). However, our forecast for 2009 is more conservative and we calculate that the drug market will see growth of 7.0%, reaching a value of COP4,778bn (US$2.24bn) in 2009. By 2013, we forecast the Colombian pharmaceutical market will be worth COP6,494bn (US$4.56bn), increasing at a compound annual growth rate (CAGR) of 7.8%. BMI notes that as a result of the weakening Colombian peso, drug market expenditure in US dollar terms will experience a decline in 2009, to US$2.24bn, before rising to US$2.98bn in 2010 and to US$4.56bn by 2013 - a 15% CAGR.

In BMI's Business Environment Ratings table for the Americas, Colombia scores 52.8, maintaining its ranking of sixth place among the 10 major markets in the Americas. On the positive side, the country's population (expected to reach almost 50mn in number by the end of the decade), combined with rising per-capita expenditure are important draws. However, the persistent shortcomings of the intellectual property (IP) and pricing and reimbursement regime continue to hamper the more direct involvement of foreign companies.

In August 2009, with the aim of boosting health tourism in Colombia and becoming a recognised leader in the sector, the country's authorities launched a business plan to support its development. BMI cautions that, despite Colombia's seemingly favourable indicators, public sector health spending as a percentage of total health expenditure is forecast to decline. Growth in the number of hospitals and doctors has remained stagnant and the country has serious epidemiological issues. Therefore, we believe that medical tourism in Colombia may not represent a sensible choice for most patients.

In July 2009, Venezuelan President Hugo Ch??vez froze diplomatic relations with Colombia and threatened to find a substitute for Colombian imports, arguing that they are not essential. This could significantly affect the Colombian pharmaceutical industry, particularly after Sam??n's recently stated goal to halt all pharmaceutical imports in a bid to promote local production. In 2008, almost 30% of all Colombian pharmaceutical exports went to Venezuela, the loss of which would be bad news for the sector in Colombia. Yet we are also highly sceptical about Venezuela's ability to establish domestic production, as not only is it heavily reliant on imports, but Ch??vez's socialist policies have made many industry majors wary of doing business in Venezuela. Without external research and funding, it appears highly unlikely that Venezuela can attract the level of investment required to start up a domestic pharmaceutical industry, and we therefore sincerely doubt the long-term success of such a strategy. As a result we have maintained our forecast for Colombia's pharmaceutical exports.