A Manufacturing Move

By changing a law, Mexico could bring in more pharmaceuticals

by Emily Waltz

For as long as the biotechnology industry has been around, Mexico has required international drug makers who want to sell their products there to conduct at least part of their manufacturing operations on Mexican soil. The rule forces such companies to either build facilities in Mexico or partner with Mexican drug makers—barriers that have locked out some biotechs from this market. But in August 2008, the Mexican government lifted those barriers. "Clearly this is an example of Mexico opening its market in another area," says James Jones, former U.S. Ambassador to Mexico.

Now international biotech companies are eyeing the nation as a new market opportunity. Amgen has been active in Mexico for some time—starting clinical trials there in 2003 and opening a clinical-development office in Mexico City in 2006 to oversee the company's clinical trials in Mexico and Latin America. A company spokesperson says that the company plans to expand its presence in Mexico to include commercial operations, now that the manufacturing requirement has been lifted.

The new rule reforms part of Mexico's Ley General de Salud, or general health law, enacted in 1984. According to the new regulations, therapies for HIV, vaccines, serums and biological hormones are among the first products to be accepted for importation without a Mexico-based facility. Biotech drug imports will be accepted starting in August 2009 and other types of imports will be permitted in 2010.

Mexican government officials hope the amended regulations will introduce new competition and bring down prices. The rule should also give the people of Mexico treatment options they wouldn't have otherwise had. But not everyone is convinced that the rule will achieve those goals. "This policy was decided without any information about the changes Mexico might see in drug prices," says Jorge Espinosa, an attorney and the director of consulting firm Grupo de Asesoría Estratégica in Mexico City. "There were no studies," he says.

Another concern is that international companies already selling drugs in Mexico—which includes most big pharmas—will close their manufacturing facilities there or discontinue partnerships with Mexican-based companies, taking away skilled jobs. "If all relevant manufacturing and developing activities are done abroad, then only low added-value activities will be done in Mexico, such as storage and distribution," says Tonatiuh Ramirez, a professor at the biotechnology institute at the National Autonomous University of Mexico. "I'm concerned we'll end up being a country of warehouses."

Since 2003 Massachusetts-based Genzyme has partnered with host labs in Mexico, but is re-evaluating that now. Because of this law, "we will no longer need these host labs," says Bernardo Tinajero, a government affairs director for Genzyme Mexico. "We'll be able to directly export to Mexico," he says.

Proponents of the law, however, counter that biotech companies lured to Mexico by the new law might find that they like the market there and decide to expand operations. Says Ambassador Jones: "If you invite world-class companies to come in … there's a real possibility that the companies will see opportunities for manufacturing." If that comes about, this changed law could bring Mexico a broader selection of pharmaceuticals and an economic boost.