E. Firm size, ownership and specialization

(c) Public procurement

The scope of commitments to open public procurement made by the countries of the region in their agreements with developed partners vary considerably. They are applicable only as follows: (i) above specified monetary thresholds (which vary according to the agreement, and also depend on whether goods, services or public works are involved); (ii) for the goods, services and public works that each country expressly designates; and (iii) to the entities (central, regional, local government, public enterprises or others) that each country expressly designates.9 (iv) According to the recognition, in several of the FTAs that the region’s countries have signed with developed partners (including the agreements with the European Union, CPTPP and USMCA) of the right of the parties to grant preferential treatment in public procurement to small and medium-sized enterprises (SMEs).

As a whole, points (i) to (iv) give countries a significant margin of flexibility in the management of their pharmaceutical procurement. Moreover, competition in public procurement between nationally-owned and international laboratories is diminished by the fact that the former specialize in generics and the latter in innovative/patented drugs. Nonetheless, additional information specific to each case is required to estimate the impact of FTAs on the capacity of countries to promote local pharmaceutical production.

Despite the fact that Latin America and the Caribbean generated just 3.5% of global pharmaceutical sales in 2020 (at ex-factory prices) (EFPIA, 2021), the major global transnationals in biopharmaceutical industry, based on research and development (R&D), have a strong presence in the region.

Most of these firms originate from Europe or the United States and have a long history. They are represented in the region through chambers and associations, at both the national and regional levels. Of the 20 transnationals most represented in the region’s trade associations, half were founded before the First World War, and only three in the twenty-first century (see annex 3.2). In fact, the most recent (2012) is a spin-off from the Abbott laboratory, which dates back to 1888. Although these are generally large firms, the largest being Johnson & Johnson with 132,200 employees and revenues of US$ 82.6 billion, several firms specializing in specific market niches have smaller revenues than the average of this group.

The Latin American Pharmaceutical Industry Federation (FIFARMA) encompasses 11 national associations in Latin America and the Caribbean and 15 global firms.10 The latter also have individual representation in other national chambers and associations, alongside firms from the region and other foreign transnationals.

National firms are also strongly represented in associations and chambers. Membership of the Latin American Association of Pharmaceutical Industries (ALIFAR), founded in 1980, includes more than 400 nationally-owned pharmaceutical companies from Latin American and Caribbean countries. The countries with chambers belonging to this association are Argentina, the Bolivarian Republic of Venezuela, Brazil, Colombia, Dominican Republic, Ecuador, El Salvador, Guatemala, Paraguay, Peru, the Plurinational State of Bolivia and Uruguay.

9 For example, Argentina and Brazil did not make commitments to openness at the subfederal level (that is, Argentine provinces and Brazilian states) in the

EU-MERCOSUR agreement. 10 Trade associations from Argentina, Bolivarian Republic of Venezuela, Brazil, Central America, Chile, Colombia, Dominican Republic, Ecuador, Mexico, Peru, Uruguay and Venezuela.

Within national chambers there are different partnerships of industry players. In Brazil, for example, Grupo Farma, which was founded in 2011 to represent domestically research, development and innovation firms, consists of 12 enterprises which account for 30% of the volume of drugs manufactured in the country. With a longer historical tradition, the Industrial Chamber of Argentine Pharmaceutical Laboratories (CILFA) was founded in 1964 and encompasses 36 relatively large laboratories, one of them public. The situation in Colombia is similar, where the Association of Pharmaceutical Industries (ASINFAR), created in 1974, has the most important nationally owned firms among its affiliates. In Mexico, in contrast, the National Chamber of the Pharmaceutical Industry (CANIFARMA), founded in 1946, has a mixed profile, with 186 members, including domestic firms and global transnationals (see annex 4.2 for a list of the main chambers and associations in the region’s countries).

This high rate of participation in trade associations demonstrates the importance of collective advocacy activities to defend the sector’s interests. This makes sense considering the great complexity of this industry’s regulatory framework, which includes ethical issues pertaining to research on human health and medical care, along with intellectual property issues and their derivations in trade agreements and market regulation, issues related to rights of access to health care and the public policies implemented by the states to guarantee them (Bianchi, 2021), and the impact and feedback of this regulatory framework on the structure, conduct and performance of the firms involved.

In some cases, the large transnationals compete in the region with nationally-owned laboratories, some of which have internationalized within the region, but generally produce for the domestic market. In countries that have local production capacity, foreign transnationals generally account for 40% of the value of sales in the domestic market while national firms generate 60% (see figure I.14).

Figure I.14 Latin America (4 countries): share of the pharmaceutical industry in domestic market sales, by firm ownership, latest available year (Percentages)

120

100

80

60

32

41 34 37

40

20

0

68

Argentina

59

Brazil

66

Mexico

63

Uruguay Foreign firms National firms

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of data from Industrial Chamber of Argentine Pharmaceutical Laboratories CILFA) for Argentina; Research-based Pharmaceutical Manufacturers Association (Interfarma), Guía 2020 Interfarma, April 2020 [online] https://www.interfarma. org.br/app/uploads/2020/12/2020_VD_JAN.pdf for Brazil; and data from IQVIA for Mexico (year-on-year as from April 2021) and Indufarma for Uruguay.

Market share varies by type of product. While transnational firms have a larger share in the sales of patented medicines, while national laboratories are more important in the generics market. In Brazil, for example, foreign transnationals accounted for 77% of retail sales of patented medicines (innovative or original) in 2019 (compared to an average of 41%), but just 24% of generics and 20% of biosimilars (Interfarma, 2020).