Industry Trend Analysis - Operational Improvements Will Support Bright Spot Status - APR 2017

BMI View: Chile's pharmaceutical and healthcare market will remain a regional bright spot due to a combination of industry and macroeconomic strength. The country's accreditation as a Reference Regulatory Authority (RRA) by the Pan Amer ican Health Organization (PAHO) supports the business case for multinational drugmaker investment, incumbents will be incentivised to expand and new entrants will also be attracted. The promotion of generic medicines and drug pricing pressures will continue to pose a risk to market growth, but on balance, there is strong optimism for Chile's pharmaceutical and healthcare market over the next 10 years.

The Chilean pharmaceutical and healthcare market is a bright spot within the Latin America region and we highlight it as a prime investment opportunity for multinational drugmakers. Chile's strong market fundamentals, combined with a sound political and economic environment, mark it as an outlier amongst the widespread instability of its regional peers. Multi factor analysis of Chile's healthcare market shows that it outperforms other Latin America countries, with a combination of high per capita health spending, strong real health spend growth and a relatively large absolute market size.

While operating in Chile does not come without risks, these are counterbalanced by the strengths and opportunities that the market provides. This view is supported by recent developments, including the recognition of the Institute of Public Health in Chile (Instituto de Salud Publica de Chile [ISPCH]) as a Reference Regulatory Authority (RRA) by the Pan American Health Organization (PAHO). This accreditation certifies the quality of the Chilean operating environment and boosts the attractiveness of the market.

Chile Outperforms Regional Peers
Select Latin American Markets - Multi Factor Expenditure & Growth Analysis
Note: x-axis refers to per-capita health spend in US dollars for 2017; y-axis refers to local currency real health spend growth in 2017 ; Venezuela excluded due to hyperinflation. Size of bubble = total health spend in 2017 (USDbn). Source: World Health Organization, BMI

RRA Status Will Complement Local Market Expansion

Chile was conferred RRA status in H216, providing an immediate boost to its investment attractiveness for both local and multinational drugmakers. RRA status certifies the quality of the production of medicines across the life cycle of a drug from production to dispensing. The certification is expected to generate increased foreign investment because the Chilean manufacturing environment now has an international quality benchmark.

A number of the leading pharmaceutical companies have existing operations in Chile, including Novartis, Pfizer, Roche, Sanofi, Merck & Co, Johnson & Johnson, GlaxoSmithKline, AstraZeneca and AbbVie. In the short term, RRA status improves the positioning of these companies for both local distribution and exports. In the long term, these companies may now be motivated to expand operations, and multinational drugmakers that currently have operations in Chile may find it easier to build a business case for investment. The improving operational environment dovetails with the strong growth expected in Chile's pharmaceutical market. We forecast that the Chilean pharmaceutical market will increase grow from CLP2,381bn (USD3.5bn) in 2016 to CLP4,903bn (USD7.8bn) in 2026, at a local currency compound annual growth rate (CAGR) of 7.5%. This growth rate is above the regional median 10-year CAGR for Latin America (7.2%, when excluding Venezuela for hyperinflation) and while it is below the regional average (8.3%) Chile remains a bright spot due to its stable operating environment.

Solid Growth Expected
Chile - Pharmaceutical Market Forecast
e/f = BMI estimate/forecast. Source: AESGP, Asilfa, INE, AMCHAM, BMI