Puerto Rico Pharmaceuticals and Healthcare Report Q2 2008

Puerto Rico's drug market did not suffer the same problems as its pharmaceutical industry during 2007. While the pharmaceutical manufacturing industry was hit by a spate of quality scares and factory closures over the course of the year, drug expenditure on the island continued to grow. By the end of 2007, drug expenditure reached an estimated US$2.67bn ? representing a healthy 14% increase on 2006. The island?s weak economic outlook is expected to have serious consequences for the over-the-counter (OTC) drug market, which is largely funded by out-of-pocket expenditure. We expect OTC spending to increase at only 3% year-on-year (y-o-y) between 2008 and 2012 to reach US$488mn by the end of the forecast period. However, the prescription drug market, driven largely by private health insurance contributions, should fair better, growing at around 6% a year to reach US$3.01bn by 2012.

In December 2007, US drugmaker Bristol-Myers Squibb announced the closure of a second factory on the island. However, it continues to operate two further plants on the island and remains committed to a significant investment in its Manat plant. Multinational downscaling continued into 2008, with Canadian contract manufacturer Patheon putting its loss-making factory in Carolina up for sale.

An Associated Press investigation gave Puerto Rico?s pharmaceutical industry more bad press in February 2008, when it revealed several serious lapses in good manufacturing practice at the island?s plants over the past few years. However, the US FDA maintains that the number of incidents are proportional to the number of pharmaceutical plants on the island. Despite the erosion of its traditional US tax advantages, Puerto Rico's business environment remains one of the most attractive outside North America. In BMI?s updated Business Environment Ratings for Q208, Puerto Rico scores 56, placing it fourth out of 10 countries in the Americas. US FDA standards will remain a major draw for multinationals looking to utilise the island as a base for exports to the US mainland.

Standards of healthcare in Puerto Rico remain a concern. A fiscal deficit is not helped by unequal Medicare funding, which is estimated to stand at 75% per capita compared with the US mainland. The government?s financial position leaves it little room to manoeuvre. Moreover, the privatised healthcare system makes reform challenging.