Innovation and investment help boost Mexico health care capacity

Steady progress has been made in the expansion and modernisation of Mexico’s health care sector in recent years. Some of these improvements have stemmed from the sector increasingly turning to public-private partnerships, with the private sector playing a larger role in operational management, outsourced services and construction. Major steps have also been taken to support the expansion of the country’s pharmaceutical industry. Significantly, the Mexican Institute of Social Security (Instituto Mexicano de Seguridad Social, IMSS) announced in 2017 that they would begin to undertake clinical trials for the development of new medicines, a first since 2012. This, coupled with the more robust regulatory standards being put forward by the industry regulator, Protection Against Sanitary Risk (Comisión Federal para la Protección contra Riesgos Sanitarios, Cofepris), appear set to support the expansion of Mexican pharmaceuticals (see analysis).

Structure

In Mexico an individual’s health care provider depends on their employer. Those working in the formal sector must be registered with IMSS. Each month the employee pays 2.7% of their salary to IMSS, while their employer contributes between 9.9% and 24.4%, depending on the worker’s wage.

According to the latest figures, IMSS covered 62m people in 2016, and an additional 12m were covered by IMSS Prospera, a free-of-charge programme designed to provide vulnerable sectors of Mexican society with access to medical care. The country’s public sector workforce of nearly 13m is covered by the Institute of Social Security and Services for Government Employees (Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado, ISSSTE). Meanwhile, the country’s armed forces as well as the state-owned oil producer, Petóleos Mexicanos, also offer health coverage to several million citizens.

Following the introduction of the People’s Health Insurance Scheme (Seguro Popular de Salud, SPS) in 2004, the country has been able to achieve near-universal health coverage. The programme, which receives funding from federal and state governments, provides access to medical treatment for citizens who are working in the informal economy. The number of patients enrolled in SPS was 54.9m in 2016.

Vital Statistics

The country has performed well in a range of different health criteria. Between 1980 and 2016 life expectancy at birth increased from 66.5 years to 77.2, according to the World Bank. The mortality rate per 1000 births fell from 56.1 to 14.6 over the same period, and as of 2017, 98% of births were attended by a health professional.

Furthermore, the spread of infectious diseases has been brought under control. According to World Health Organisation (WHO) figures published in 2018, the tuberculosis incidence is 22 in 100,000, there are 0.1 new cases of HIV per 1000 uninfected people and there were 0.4 cases of malaria for every 1000 people at risk, demonstrating a marked improvement.

Demographics

Mexico is undergoing a profound demographic shift that is common among emerging countries. According to the National Population Council (Consejo Nacional de Población, CONAPO), the average life expectancy doubled in the second half of the 20th century: in 1950 the average life expectancy was 36 years, in 2000 it was 74 years and by 2050 CONAPO predicts it will reach 80 years. As death rates fall at a much higher rate than birth rates, the share of the elderly population has been rising.

“People in Mexico are living longer, and this trend will only go up,” Francisco Acosta, director-general of Inteligencia Sanitaria, a local consultancy in health regulation, told OBG. “We also have quite a large number of elderly citizens arriving in the country who will drive up demand for elderly care, this will present a challenge for the health care industry, which is currently not prepared for this increase.”

Non-Communicable Diseases

This shift has brought with it a transformation of the country’s disease burden. With increased development, Mexico’s disease profile has shifted from being dominated by transmittable illnesses to having more incidences of non-communicable diseases (NCDs) associated with rising prosperity and problematic lifestyle choices. During the 1990s the primary causes of premature death were transmittable diseases such as diarrhoea and respiratory infections, though this has changed. According to the WHO’s 2018 report, the probability of an individual between the ages of 30 and 70 dying from an NCD in Mexico was 15.7%.

While there are a number of factors contributing to this disease burden – including tobacco and alcohol consumption – one of the most significant factors is obesity. According to the OECD’s “Health at a Glance 2017” report, roughly 33% of the adult population in Mexico is obese, which is significantly higher than the OECD average of 19.4%, giving the country the second-highest obesity rate among the included countries. This challenge appears set to continue, with 35% of teenagers aged between 12 and 19 being overweight or obese. The country’s high obesity rate in part explains the rising incidence of diabetes. Mexico has the highest prevalence of the disease in the OECD, with 15.8% of adults suffering from the illness in 2017, more than twice the OECD average of 7%.

NCD Prevention

In attempt to lessen the negative impacts of NCDs on not only mortality, but also on labour productivity and educational performance, the government launched the National Strategy for the Prevention of Overweight, Obesity and Diabetes in 2013. The strategy is comprised of three components: the promotion of public health through early diagnostics and improved lifestyle choices, the provision of effective access to quality medical care, and stronger regulation of the labelling and advertising of foodstuffs. Under this programme, the administration has also issued a range of new policies. In 2014 the government introduced a new tax on sugary beverages and brought in legislation to increase nutritional labelling on products and regulate how food is advertised to children. Following the introduction of the levy the purchase of soft drinks has fallen dramatically, decreasing 5.5% the following year and 9.7% in 2016, with the country’s poorest households showing the most dramatic drop in consumption. While these policies highlight the commitment of the Mexican government to overcoming the challenges posed by NCDs, issues remain in terms of early diagnosis and the quality and consistency of care provided to sufferers. In particular, socio-economic and regional inequalities affect the provision of treatment.

“While the private market is well stratified and patients receive diabetes treatments of all generations, 80-90% of patients are treated by the public sector and receive limited options for their medication,” Yiannis Mallis, CEO of Novo Nordisk, a pharmaceutical firm, told OBG. “Diabetes care that does not achieve patient outcomes will actually end up costing the government more in the long run.” Due to these issues, the government was compelled to declare diabetes as a national health emergency in 2016.

Universal Service

Despite the issue of inequality in health care, improvements have been made in the expansion of health insurance coverage. The introduction of the SPS in 2004 made access to health care close to universal. This allowed the country to reduce out-of-pocket (OOP) payments as a share of health spending by 12.6% between 2009 and 2017, according to OECD data. Nevertheless, the public insurance policy provided by SPS does not cover all treatments. While it grants employees in the informal sector and the unemployed coverage for 100% of all conditions treated in health centres and 95% of conditions that require hospitalisation, only 60% of high-speciality conditions are covered. Furthermore, around 9m people, or 7% of the population, were uninsured as of 2017, largely small business owners and the self employed, according to the Mexican Association of Insurance Companies. The industry association stated that these gaps could be covered by complementary private insurance products, which could halve the current OOPs, saving $19bn or 1.6% of GDP.

Balanced Budget

This issue forms part of a broader challenge regarding the funding of health care services. In 2016 Mexico spent an average of $1080 per person, when adjusted for local living standards, the lowest amount in the OECD in absolute figures and the third lowest in terms of spending as a share of GDP. Furthermore, health rate expenditure has slowed since 2009 in variance with other countries with similar GDP levels to Mexico. Addressing these issues will not only require increases in government investment, but also efforts to achieve efficiency savings in order to ensure the long-term sustainability of health care spending. “The government should restructure health care budgets to be more focused on hospital rather than government departments,” Xinlei Jia, general manager of Mindray, a global provider of medical devices and solutions, told OBG. “More fiscal autonomy would allow hospitals to improve efficiency and tailor their needs to local demand.”

“Unfortunately in the health care sector, the distribution infrastructure lacks capacity and it remains difficult to transport the most innovative products,” Carlos Rabago, CEO of Alliancesfa, an application solutions provider for marketing and sales in pharmaceutical products, told OBG. “However, this can be seen as an opportunity for companies with the capacity and know-how to fill this gap in the market.”

Pharmaceuticals

Mexico constitutes the second-largest pharmaceutical market in Latin America, with the industry making up 0.5% of domestic GDP in 2016, according to financial consultancy firm KPMG. Most major international pharmaceutical firms have a presence in the country, with around 300 drug manufacturers operating 770 production units. A major driver for the growth of the sector has been public sector purchases of high-value medicines that are not affordable for most public health care users. According to PwC, pharmaceutical sales to the Mexican government account for 30% of the industry total and 27% of the government health budget.

Nevertheless, the price of certain high-value pharmaceutical products and even certain generics have rendered them prohibitively expensive for the public sector. While the government has traditionally used public tenders to push for the best prices, alternative models are currently being examined.

One option being discussed is the adoption of risk-sharing agreements between the public sector and the pharmaceutical industry. These models, which have been successfully applied in the EU and US, involve pharmaceutical companies offering the medicine in question at a slightly higher cost, while at the same time accepting liability for the frequency of purchases and the efficacy of the medicine. For instance, the international pharmaceutical manufacturer Novartis has proposed a contract to the IMSS for a high-value drug designed to reduce the likelihood of kidney transplant rejection.

Regulatory Challenges

The country’s pharmaceutical industry is regulated by Cofepris, which oversees products representing approximately 9% of GDP. “The country’s regulatory framework has improved markedly over the last decade,” Melissa Rosales, CEO of clinical research company RM Pharma, told OBG. “Notably, the time it takes to complete approval processes has been cut to 90 days, but there are still irregularities when it comes to the framework’s implementation.” One segment that has presented challenges to regulators is the biosimilars industry. The new technology, which replicates human antibodies in advanced disease treatments, is still trying to gain traction in the Mexican market, as there have been challenges in the first stages of market development.

Cofepris introduced a series of new regulations for the emerging biosimilars market in 2016. The authorities have attempted to harmonise national regulations with international best practice, but the biosimilars market is still in its early stages worldwide, given the relatively recent development of this form of treatment, which has made clarity difficult.

As such, the application of these regulations has created challenges for Cofepris, particularly regarding the correct application of regulatory procedures between international and local manufacturers. For example, there was a dispute over the biosimilar Rituximab, which was originally developed by Swiss pharmaceutical manufacturer Roche. Cofepris allowed Roche to be beaten to the market by Mexican manufacturer Probiomed, and the matter was taken to Mexico’s Supreme Court in December 2016. The Supreme Court ruled that Cofepris had to remove Probiomed’s generic version of the medicine and revoke the manufacturers licence, as it had incorrectly completed certification procedures. A similar issue is currently brewing over Cofepris certifying Probiomed’s distribution of the biosimilar Enbrel, which was also developed by another major multinational pharmaceutical player to treat advanced arthritis. These two high-profile disputes over the rulings of the national regulator have brought product quality of biosimilars into question among medical professionals, posing a major obstacle for industry growth in this emerging area.

In October 2017 the Health Commission of the Senate held a conference discussing how to ensure vigilant regulation over pharmaceuticals, particularly biosimilars, with the government noting the need to amend regulations to avoid resorting to the court.

Innovation Needs

A study published by consulting firm Deloitte in 2017 identified innovations that would provide Mexico’s health care system with muchneeded “more for less” value. The report identified multiple factors, including: the need for next-generation sequencing technologies, which can identify whether people are at risk of certain diseases and help direct therapies, particularly for cancer patients; 3D printing technology for low-cost, highly customisable products that can be adapted to meet the physiological needs of each patient; immunotherapy to provide cancer patients with treatment without the negative side effects and costs of traditional chemotherapy treatment; artificial intelligence (AI) so that tasks can be carried out with greater efficiency; point-of-care testing for more convenient and timely care; medical virtual reality therapies, which can be used to restore vision, speed recovery after traumatic brain injury and more; the use of social network data; biosensors and trackers to more easily monitor a patient; clinics and emergency care centres that provide less expensive and more convenient care for patients; and telehealth, which assists patients via telecommunications, reducing the need for office visits and transfer times.

A number of these innovations are already being implemented in the health system, particularly in the field of genetic sequencing. In late 2016 the first genetics diagnostics laboratory in Mexico and Latin America was opened by the National Institute of Genetic Medicine. This should augment the studies and abilities of the country’s health system to diagnose and identify correct treatments for patients.

AI

The arrival of AI programmes designed to detect and analyse diseases is also set to improve health care services. In mid-2017 Grupo Ángeles, Mexico’s largest private health care provider, announced it would use IBM Watson for oncology, an AI software that identifies treatment options for cancer diagnoses by undertaking big data analysis of the vast and growing peer-reviewed medical scholarship. The private health care group operates 28 hospitals across the country, including 10 in Mexico City, and the technology will be made available to all the oncology doctors across Grupo Ángeles. Furthermore, the agreement marks the first time in which a Latin American medical institution has adopted this diagnostics technology.

“Mexico is quite stretched when it comes to coverage, with two doctors per 1000 inhabitants,” Martha González Pérez-Sandi, director of Watson and Cloud Platform at IBM Latinoamérica, told OBG. “AI will allow us to better train and support doctors, and this will have a big impact on the patient experience and the ability to reach more patients with personalised treatments,” she added. Other possible applications for AI in the country’s health care sector, several of which are already operating in the US, include genomics and the visual analysis of radiology.

The sector’s existing distribution channels are also in need of innovation in order to lower the costs of supply. “Unfortunately in the health care sector our distribution infrastructure lacks capacity and it remains difficult to transport needed products,” Rabago told OBG. “However, this can be seen as an opportunity for companies with the capacity and know-how to fill this gap in the market.”

Furthermore, the trend towards e-commerce may help to reduce these inefficiencies. “E-commerce and digitisation are the future,” José Peña González, CEO of Casa Marzam, a local pharmaceuticals distributor, told OBG. “The question is whether the industry will be ready, as it may take time to incorporate these new links into the distribution chain.”

Outlook

Although the country is very close to achieving its goal of universal coverage for all citizens, as per its constitutional mandate, some obstacles still remain, such as the gaps in insurance coverage between sectors. In particular, the rise of chronic illnesses and NCDs, combined with the added needs of the country’s ageing population, appear set to place additional stress the country’s health system, which is still not currently capable of tackling these emerging health issues. The sector will need to balance private and public actors, while at the same time boosting its domestic profile and attracting important international investment in key segments of the industry.