Latin America Pharmaceuticals

Q3 2022
www.fitchsolutions.com
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Includes 10-year forecasts to 2031
Latin America Pharmaceuticals & Healthcare Report | Q3 2022
Contents
Key View............................................................................................................................................................................................ 4
SWOT .................................................................................................................................................................................................. 6
Industry Forecast........................................................................................................................................................................... 7
Pharmaceutical Market Forecast .......................................................................................................................................................................................... 7
Healthcare Market Forecast .................................................................................................................................................................................................... 9
Industry Risk/Reward Index ....................................................................................................................................................11

Americas Innovative Pharmaceuticals Risk/Reward Index .......................................................................................................................................11
Market Overview..........................................................................................................................................................................19
Industry Trend Analysis.............................................................................................................................................................21

Mounting Macroeconomic Risks Will Apply Pressure To Pharmaceutical Markets In Latin America.......................................................21
Industry Trends And Developments .....................................................................................................................................26

Americas Pharmaceuticals & Healthcare Q222 Round-Up.......................................................................................................................................26
Pharmaceuticals & Healthcare Glossary .............................................................................................................................30
Pharmaceuticals & Healthcare Methodology ....................................................................................................................32
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Key View
Key View: While we forecast robust growth across our pharmaceutical and healthcare markets in Latin America, driven by the rising
burden of chronic disease which will, in turn, increase demand for innovative pharmaceuticals. We expect drugmakers will continue
to face a number of headwinds such as the implementation of cost containment, which will result in more stringent price
regulations and a likely preference for generic drugs. Additionally, macroeconomic factors such surging inflation and political
uncertainty will continue to weigh on policy direction and the business operating environment.
Headline Expenditure Forecast
• Pharmaceuticals: USD67.0bn (EUR56.7bn) in 2021 to USD85.5bn (EUR68.9bn) in 2026. The Latin American market will post a
five-year compound annual growth rate (CAGR) of 4.0% in US dollar terms and 4.2% in euro terms. Forecast revised upwards
from last quarter.
• Healthcare: USD433.6bn (EUR366.6bn) in 2021 to USD578.2bn (EUR466.3bn) in 2026. The region's healthcare market will
post a five-year CAGR of 5.9% in US dollar terms and 4.9% in euro terms. Forecast revised upwards from last quarter.
PHARMACEUTICALS & HEALTHCARE FORECASTS (LATIN AMERICA, 2020-2026)

Indicator 2020 2021 2022f 2023f 2024f 2025f 2026f
Pharmaceutical sales, USDbn 54.729 67.046 70.990 73.125 76.847 81.098 85.461
Pharmaceutical sales, % of GDP 1.23 1.34 1.27 1.24 1.25 1.25 1.25
Pharmaceutical sales, % of health expenditure 13.2 15.5 15.1 14.8 14.8 14.8 14.8
Health spending, USDbn 414.611 433.637 469.722 493.064 519.045 548.165 578.247
f = Fitch Solutions forecast. Source: Fitch Solutions
Risk/Reward Index
The Americas region will remain characterised by highly divergent levels of market attractiveness for innovative drugmakers. While
North America represents high growth potential and presents considerable opportunities for the commercialisation of
pharmaceuticals, it is vital that companies appreciate the varying levels of investment risks and rewards that are present in the
emerging markets of Latin America. Fitch Solutions' Innovative Pharmaceuticals Risk/Reward Index tool, which provides a globally
comparative and numerically based assessment of a market's attractiveness for companies looking to launch a high-value drug, was
established to address this.
Key Economic View
At Fitch Solutions we forecast Latin America will grow only 2.0% in 2022, down sharply from 6.7% in 2021, lagging behind peer
regions and overall global growth. Growth will be held back by the withdrawal of fiscal stimulus, elevated inflation and interest rates
and softer external demand, particularly from the US and Mainland China. Our forecasts suggest Colombia and Argentina will
outperform, while economic activity in Brazil, Chile and Mexico will be dampened by varying degrees of political uncertainty. While
we already forecast Latin American growth to trail other regions, risks are to the downside, particularly if growth in the US or China
disappoints or if inflation proves more durable than we expect.
Key Political View
We have made three upwards and seven downwards changes to our proprietary Short-Term Political Risk Index (STPRI) scores for
markets in the region this quarter. In Latin America, the STPRI score fell both on a simple average basis and on a GDP-weighted basis
(lower score implies higher risks).
In Peru, we lowered the STPRI score following a cabinet reshuffle, which we believe increases policy uncertainty, while risks of
another impeachment attempt against President Pedro Castillo have risen due to a new corruption investigation involving the
president. We have somewhat lowered the STPRI score in Chile (specifically the social stability component), based on our view that
the electorate will reject the new document produced by the country’s constitutional reform process, leading to an uptick in public
discontent later in 2022 and in 2023. In Argentina, we see growing risks to the implementation of the country’s IMF deal due to
multiplying disagreements between the more centrist President Alberto Fernández and more leftist Vice President Cristina
Fernández de Kirchner. This has led us to lower the policy-making process component of the STPRI. We have lowered the policy
continuity component of the STPRI score in Brazil, where we expect former president Luiz Inácio Lula da Silva to win the October
2022. Lula’s victory would lead to a policy shift towards greater government spending, taxation, and other state interventions in the
economy, overall implying a less favourable business environment.
SWOT
SWOT Analysis
Strengths • The shift in the demographics towards an ageing population and non-communicable diseases increases
demand for medication of chronic diseases.
• The region's geographic position and low operational cost will keep pharmaceutical exports cost
competitive.
Weaknesses • Institutional corruption allegations and a weak rule of law increases operational difficulties faced by the
pharmaceutical industry.
• Price control measures, compulsory licensing and the lack of regulatory enforcement will threaten
multinational drugmakers' long-term growth potential.
Opportunities • Local government's commitment to improving healthcare systems to increase patient access and
pharmaceutical opportunities.
• Successful implementation of reforms to improve the regulatory and intellectual property environment
will improve patient access to high-quality, safe and efficacious drugs while increasing market access for
innovative drugmakers.
Threats • The region's political environment will remain volatile, suggesting substantial downside risks to
economic growth and policy continuity. There will be increasing risks to short-term regional growth
prospects for multinational healthcare providers as governments focus on containing spending.
• The failure to implement intellectual property reforms will continue to pose downside risks to innovative
drugmakers while undermining progress made by governments to reform their national
healthcare systems.
Industry Forecast
Pharmaceutical Market Forecast
Key View: We expect robust mid-single-digit growth over our forecast period across the Latin American markets. An ageing
population and rising incidences of chronic diseases will continue to drive demand for pharmaceuticals; however, increasingly
repressive drug pricing regulations and growing intellectual property protection concerns will remain at the fore for drugmakers
operating in the region.

2017-2031
Structural Trends
Latin America's pharmaceutical market is forecast to expand from USD67.0bn (EUR56.7bn) in 2021 to USD71.0 (EUR64.5bn) in
2022. Over the next five years we expect the market will grow to USD85.5bn (68.9bn) by 2026, growing at a 5.0% compound annual
growth rate (local currency growth weighted by USD sales) and 4.0% in euro terms.
Latin America will remain a key emerging region for multinational pharmaceutical firms. We note that a few markets dominate the
regional landscape because of their significantly larger populations and higher economic development; Brazil, Mexico and Argentina
account for almost two-thirds of total medicine sales across the region. While these larger markets are more likely to be targeted by
multinational drugmakers, intellectual property protection concerns and increasing implementation of cost-containment measures
will weigh on drugmakers in the region. Specifically, growing impetus for repressive drug pricing regulations and a preference for
generic drugs over patented drugs.
The region as a whole has a significant burden of chronic non-communicable diseases, with diabetes and cardiovascular diseases
particularly prominent. Alongside an expanding population size, the burden of these diseases will continue to drive significant
demand for pharmaceuticals. Market growth is anticipated to remain robust across the region over the coming years, boosted by
increased reform momentum within the healthcare sector to increase the population's access to services.
PHARMACEUTICALS SALES, HISTORICAL DATA AND FORECASTS (LATIN AMERICA 2019-2026)

Indicator 2019 2020 2021 2022f 2023f 2024f 2025f 2026f
Pharmaceutical sales, USDbn 57.425 54.729 67.046 70.990 73.125 76.847 81.098 85.461
Pharmaceutical sales, USDbn, % y-o-y -0.71 -4.69 22.50 5.88 3.01 5.09 5.53 5.38
Pharmaceutical sales, USD per capita 93.1 87.9 106.7 112.1 114.6 119.5 125.2 131.0
Pharmaceutical sales, % of GDP 1.09 1.23 1.34 1.27 1.24 1.25 1.25 1.25
Pharmaceutical sales, % of health expenditure 13.2 13.2 15.5 15.1 14.8 14.8 14.8 14.8
Healthcare Market Forecast

Key View: As a number of major markets in the region look to implement larger healthcare budgets following the pandemic,
healthcare systems will benefit from government initiatives and improved funding. That said, healthcare financing will remain limited
when compared internationally. Political uncertainty and rising inflation will continue to pose downside risks to the business
environment of the region.
Healthcare Expenditure Forecast

2017-2031
Structural Trends
The Latin American healthcare market (excluding Venezuela) is forecast to grow from USD433.6bn (EUR366.6bn) in 2021 to
USD469.7bn (EUR426.8bn) in 2022. Our five-year forecasts indicate the market will expand to USD578.2bn (EUR466.3bn) by 2026
at a compound annual growth rate of 5.9% (local currency weighted by USD sales) and 4.9 in euro terms.
The regional push to improve healthcare systems is driving the observed growth in healthcare expenditures in Latin America. With
the incidence of non-communicable diseases rising and an expanding middle-class population, the increasing demand for branded
drugs will continue to boost healthcare spending. In the long term, as access to healthcare improves, considerable commercial
opportunities will be available for drugmakers, medical device companies and healthcare providers. However, the region's political
environment will remain volatile, suggesting substantial downside risks to economic growth and policy continuity. These risks may
permeate into repressed healthcare spending, with greater fiscal constraints increasing the need for cost containment.
HEALTHCARE EXPENDITURE TRENDS, HISTORICAL DATA AND FORECASTS (LATIN AMERICA 2019-2026)
Indicator 2019 2020 2021 2022f 2023f 2024f 2025f 2026f
Health spending, USDbn 434.442 414.611 433.637 469.722 493.064 519.045 548.165 578.247
Health spending, USDbn, % y-o-y -1.73 -4.56 4.59 8.32 4.97 5.27 5.61 5.49
Health spending, USD per capita 704.2 665.7 690.2 741.6 772.5 807.3 846.4 886.6
Health spending, % of GDP 8.21 9.29 8.67 8.40 8.38 8.42 8.46 8.49
Industry Risk/Reward Index

Americas Innovative Pharmaceuticals Risk/Reward Index
Key View: The Americas region will remain characterised by highly divergent levels of market attractiveness for innovative
drugmakers. While North America represents high growth potential and presents considerable opportunities for the
commercialisation of pharmaceuticals, it is vital that companies appreciate the varying levels of investment risks and rewards that
are present in the emerging markets of Latin America. Fitch Solutions' Innovative Pharmaceuticals Risk/Reward Index tool, which
provides a globally comparative and numerically based assessment of a market's attractiveness for companies looking to launch a
high-value drug, was established to address this.
Varying Challenges And Opportunities In A Diverse Region

Americas - Innovative Pharmaceuticals Risk/Reward Index
Note: Scores out of 100; higher score = lower risk. Source: Fitch Solutions' Innovative Pharmaceuticals Risk/Reward Index
Main Regional Features And Latest Updates
The Americas' average in our Innovative Pharmaceuticals Risk/Reward Index (RRI) marginally outperforms in comparison to the
global average. The region is highly diverse, with a number of mature markets scoring highly for access to, and demand for,
innovative medicines, while there are also a number of underdeveloped and small markets with poor access to healthcare services
and significant industry-specific risks.
• The region's aggregate attractiveness to innovative drugmakers masks considerable disparities between its markets. Broadly, the
risk profile of the region can be divided into two distinct groups: North American countries and Latin American countries. The
former group is characterised by large market sizes and high per capita pharmaceutical spending. In the latter, affordability and
access are key issues leading to low-cost generic drugs becoming increasingly dominant.
• With regard to assessing rewards, our RRI identifies industry-specific factors, such as the size of the pharmaceutical market, and
country-specific factors, such as urbanisation rates, which present opportunities for potential investors. The US scores the
highest for the Rewards component of the index, boosted by its large multibillion-dollar drug market, high per capita
pharmaceutical spending and large pensionable population. Cuba scores the lowest in the component.
• With regard to assessing risks, we identify industry-specific dangers, such as a country's patent respect, and those emanating
from the state's political and economic profile, which call into question the likelihood of anticipated returns being realised over
the assessed time period. Cuba scores the lowest in the Risks component of the RRI. Compared to its peers, Cuba's score is
dragged down by industry characteristics including its 'patent respect' score. Furthermore, the country's score is also dragged
down by its significant political and economic challenges. The US scores the highest in this component.
North American Markets Provide Larger Rewards

Americas - Innovative Pharmaceuticals Risk/Reward Index
Outperformers: High-Reward And Low-Risk Markets
North American markets are some of the most attractive globally for companies looking to launch innovative pharmaceuticals. The
US is ranked first globally, while the region's second-ranked country, Canada, is ranked ninth globally. Together, these markets
present significant rewards that counterbalance the risks present in Latin America. Scoring in the Innovative Pharmaceuticals RRI
favours larger markets with greater sales potential for multinationals. North American countries boast the world's largest drug
market and a high per capita spending figure.
The US and Canada have large, wealthy and urbanised populations which, combined with strong drug approval processes, serve to
boost their appeal for innovative product launches. However, growth in terms of market size and population may prove problematic
for market attractiveness over the long term. Industry risks, such as drug price cuts and government cost-efficiency measures, also
weigh on the potential rewards for multinational firms. Canada, in particular, scores poorly for the 'pricing regime' sub-component,
significantly below the regional and global averages.
• Potential legislation to reform medicine pricing is the key risk to the US pharmaceutical market and thereby drugmaker revenues
globally. While negotiations towards the Build Back Better Act have stalled due to opposition from more moderate Democrat
politicians, significant public support for medicine pricing reform means that they are likely to pass, potentially as a separate bill.
The latest estimate of savings from proposals to the public purse is around USD100bn through measures such as caps on out-
of-pocket payments, negotiations between Medicare and suppliers, and penalties for price increases above inflation that would
begin to be implemented from 2025. The latest form of the proposals represents a much better outcome for drugmakers than
the initial proposals, and we will look to make revisions to our forecasts once there is a firm consensus in congress.
• We expect Canada will partially implement drug pricing reform in 2023 that will significantly impact drugmakers operating in the
market. Given high medicine spending per capita (ranking ninth globally) and strong public support for lower costs, Canada’s
government has, since 2019, attempted to implement three key measures as part of the country’s revised Patented Medicine
Regulations, with a view to reduce the country’s pharmaceutical expenditure over the long term. These proposals have been met
with significant and continued backlash from industry and patient groups, various court cases have been heard to contest the
updates, resulting in two different rulings on the topic. Initial cost-benefit analysis carried out by Health Canada placed the
impact on pharmaceutical expenditure over 10 years at around CAD8.6bn (USD6.7bn); however, given the significant opposition
from industry, we expect this figure will sit higher at around CAD17.4bn (USD13.7bn).
Underperformers: Low-Reward And High-Risk Markets
Nicaragua and Cuba sit at the bottom of the Americas Innovative Pharmaceuticals RRI. Both countries are characterised as low-
reward, high-risk markets.
• Nicaragua provides few revenue-earning opportunities for international innovative pharmaceutical firms. An unfriendly business
environment, low per capita spending on medicine and a relatively small market size offset any drugmaker opportunities
presented by the rising incidence of chronic diseases, limiting the country’s attractiveness. Nicaragua is ranked 91st out of 109 in
our Innovative Pharmaceuticals RRI and 16th out of the 17 American markets.
• In the Innovative Pharmaceutical RRI, Cuba ranks 17th out of 17 markets in the region and 103rd out of 109 markets globally.
The country has a small and relatively young population and its national income is among the lowest in the region, all of which
contribute to restricting innovative medicine sales. Additionally, the market offers little commercial potential for multinationals
due to its relatively competitive local pharmaceutical industry and troubling history with patent law. Furthermore, in December
2020, the Cuban government announced that it will no longer subsidise a series of medicines and announced a substantial
increase in the prices of medicines. This, in combination with US sanctions has led to medicine shortages. While the US has
signalled openness to easing restrictions on remittances, we expect any loosening of sanctions will be minimal.
REWARDS AND RISKS SCORES

Industry Country Industry Country Regional Global
Rewards Rewards Risks RRI
Rewards Rewards Risks Risks Rank Rank
US 91.7 64.1 84.8 92.5 85.8 89.8 86.5 1 1
Canada 82.2 68.8 78.9 64.4 90.4 74.8 77.4 2 9
Puerto Rico 62.2 81.0 66.9 84.7 41.9 67.6 67.1 3 24
Brazil 71.5 56.9 67.8 59.0 42.0 52.2 62.4 4 31
Chile 64.3 55.6 62.1 62.1 58.4 60.6 61.6 5 32
Mexico 63.4 52.8 60.8 62.1 45.9 55.6 59.0 6 35
Argentina 67.5 63.2 66.4 45.0 34.6 40.9 57.5 7 42
Colombia 58.5 52.8 57.1 42.7 39.2 41.3 51.6 8 55
Panama 45.1 54.2 47.4 46.1 53.4 49.0 47.9 9 59
Peru 43.7 54.4 46.4 52.8 36.0 46.0 46.3 10 62
Costa Rica 40.9 57.9 45.2 47.2 49.7 48.2 46.2 11 63
Ecuador 41.9 47.9 43.4 37.4 33.1 35.7 40.7 12 71
El Salvador 41.4 46.8 42.7 18.1 19.8 18.7 34.3 13 81
Guatemala 37.1 39.4 37.7 21.5 29.2 24.6 33.1 14 84
Honduras 31.3 41.9 33.9 24.5 19.4 22.5 29.9 15 87
Nicaragua 27.2 41.9 30.9 24.5 21.4 23.3 28.2 16 91
Cuba 16.1 51.9 25.0 9.1 20.1 13.5 21.0 17 103
Global
50.0 50.0 50.0 50.0 50.0 50.0 50.0 ~ ~
Average
Regional
52.1 54.8 52.8 46.7 42.4 45.0 50.0 ~ ~
Average
INDUSTRY REWARDS SCORES

Market
Spending Per Sector Value
Rewards Expenditure, Industry Rewards Rewards
Capita, USD Growth, %
USDbn
US 100.0 100.0 16.7 91.7 84.8
Canada 91.7 88.9 5.6 82.2 78.9
Puerto Rico 51.9 95.4 25.0 62.2 66.9
Brazil 89.8 46.3 37.0 71.5 67.8
Chile 63.0 57.4 92.6 64.3 62.1
Mexico 86.1 38.9 0.9 63.4 60.8
Argentina 71.3 49.1 100.0 67.5 66.4
Colombia 69.4 44.4 35.2 58.5 57.1
Panama 34.3 60.2 64.8 45.1 47.4
Peru 48.1 31.5 53.7 43.7 46.4
Costa Rica 35.2 55.6 31.5 40.9 45.2
Ecuador 44.4 41.7 27.8 41.9 43.4
El Salvador 30.6 53.7 69.4 41.4 42.7
Guatemala 38.0 28.7 57.4 37.1 37.7
Honduras 24.1 34.3 65.7 31.3 33.9
Nicaragua 15.7 37.0 66.7 27.2 30.9
Cuba 10.2 21.3 36.1 16.1 25.0
Global Average 50.0 50.0 50.0 50.0 50.0
Regional Average 53.2 52.0 46.2 52.1 52.8
COUNTRY REWARDS SCORES

Pensionable Population Growth,
Rewards Urban/Rural Split Country Rewards Rewards
Population, % %
US 75.9 69.4 41.7 64.1 84.8
Canada 72.2 75.0 52.8 68.8 78.9
Puerto Rico 95.4 91.7 45.4 81.0 66.9
Brazil 83.3 50.9 42.6 56.9 67.8
Chile 84.3 57.4 23.1 55.6 62.1
Mexico 71.3 39.8 60.2 52.8 60.8
Argentina 92.6 51.9 56.5 63.2 66.4
Colombia 74.1 50.0 37.0 52.8 57.1
Panama 48.1 46.3 75.9 54.2 47.4
Peru 65.7 47.2 57.4 54.4 46.4
Costa Rica 75.0 52.8 50.9 57.9 45.2
Ecuador 40.7 40.7 69.4 47.9 43.4
El Salvador 59.3 44.4 38.9 46.8 42.7
Guatemala 21.3 25.0 86.1 39.4 37.7
Honduras 37.0 25.9 78.7 41.9 33.9
Nicaragua 35.2 32.4 67.6 41.9 30.9
Cuba 62.0 63.9 17.6 51.9 25.0
Global Average 50.0 50.0 50.0 50.0 50.0
INDUSTRY RISKS SCORES

Risks Patent Respect Pricing Regime Protectionism Industry Risks Risks
US 97.2 70.8 99.1 92.5 89.8
Canada 77.3 6.5 81.5 64.4 74.8
Puerto Rico 89.4 61.1 92.6 84.7 67.6
Brazil 64.4 12.0 81.5 59.0 52.2
Chile 54.2 70.8 69.4 62.1 60.6
Mexico 54.2 70.8 69.4 62.1 55.6
Argentina 54.2 12.0 51.9 45.0 40.9
Colombia 38.9 38.4 51.9 42.7 41.3
Panama 38.9 55.6 51.9 46.1 49.0
Peru 38.9 88.9 51.9 52.8 46.0
Costa Rica 38.9 61.1 51.9 47.2 48.2
Ecuador 38.9 12.0 51.9 37.4 35.7
El Salvador 10.2 38.4 17.6 18.1 18.7
Guatemala 10.2 55.6 17.6 21.5 24.6
Honduras 10.2 70.8 17.6 24.5 22.5
Nicaragua 10.2 70.8 17.6 24.5 23.3
Cuba 2.8 12.0 17.6 9.1 13.5
Global Average 50.0 50.0 50.0 50.0 50.0
COUNTRY RISKS SCORES

Long Term Short Term Long Term Short Term
Risks Economic Economic Political Risk Political Risk Op Risk Index Country Risks Risks
Risk Index Risk Index Index Index
US 89.8 81.9 77.8 70.8 97.2 85.8 89.8
Canada 86.1 74.1 96.3 97.2 94.4 90.4 74.8
Puerto Rico 45.4 50.0 28.7 38.4 44.4 41.9 67.6
Brazil 61.1 39.8 55.6 26.9 34.3 42.0 52.2
Chile 55.6 49.1 70.4 42.1 66.7 58.4 60.6
Mexico 70.4 61.1 27.8 38.4 38.9 45.9 55.6
Argentina 34.7 36.6 49.1 16.7 35.2 34.6 40.9
Colombia 48.1 42.6 40.7 27.8 38.0 39.2 41.3
Panama 46.3 55.6 54.6 54.6 54.6 53.4 49.0
Peru 49.1 48.1 31.5 20.4 33.3 36.0 46.0
Costa Rica 50.9 44.4 66.7 36.1 50.0 49.7 48.2
Ecuador 40.7 57.9 22.2 18.5 29.6 33.1 35.7
El Salvador 25.0 13.9 14.8 25.9 19.4 19.8 18.7
Guatemala 71.3 54.6 10.2 7.4 15.7 29.2 24.6
Honduras 33.3 38.0 11.1 6.5 13.9 19.4 22.5
Nicaragua 31.5 28.7 3.7 45.8 9.3 21.4 23.3
Cuba 1.9 1.9 21.3 62.0 16.7 20.1 13.5
Global Average 50.0 50.0 50.0 50.0 50.0 50.0 50.0
Regional Average 49.5 45.8 40.1 37.4 40.7 42.4 45.0
Market Overview
Latin America continues to provide some opportunities for drugmakers through an attractive service sector in some countries and
the increasing consumption of medicines regionally. Nevertheless, affordability remains a key challenge in the region for
drugmakers. With most countries in the region continuing to launch more stringent cost-containment policies, the increasing
pricing pressure and generic drug competitions in the short term will continue to hinder revenue-generating opportunities.
In 2021, the Latin American drug market (excluding Venezuela) was valued at USD67.0bn (EUR64.5bn) and per capita
pharmaceutical spending in Latin America reached a value of USD106.7. In the same year, regional pharmaceutical spending as a
percentage of GDP stood at 1.3%, and pharmaceutical sales as a percentage of healthcare spending stood at 15.5%. In general,
generic medicines will continue to be favoured by healthcare payers across the region, either through imposed austerity measures
or a lack of affordability while inadequate intellectual property protection concerns will continue to repress innovative
drugmaker appetite.
In 2021, healthcare spending in Latin America was valued at USD433.6bn (EUR366.6bn). In 2021, per capita healthcare spending in
Latin America reached USD690.2 and healthcare spending as a percentage of GDP stood at 8.7%. A large chronic disease burden
associated with increasingly Westernised lifestyles continues to drive demand for healthcare services. However, access to
healthcare remains weak in a majority of markets across the region owing to a high degree of ruralisation. Moreover, there remains
significant uncertainty over governments across the region to afford this rising burden of diseases, particularly given the
macroeconomic climate.
• Cardiovascular Diseases: Argentina, Brazil and Mexico, followed by Colombia and Venezuela have the greatest burden of
cardiovascular diseases.
• Cancer: Cancer prevalence in Latin America is growing, with the top five cancers in the region identified in both sexes as
prostate cancer, breast cancer, colorectal cancer, lung cancer and stomach cancer. Lung cancer is one of the leading causes of
cancer mortality in Latin America among both sexes.
• Diabetes: Brazil has the largest population of diabetics in Latin America at 12.5mn adults, followed by Mexico (12.0mn),
Colombia (2.7mn), Argentina (1.8mn), Venezuela (1.3mn) and Chile (1.2mn). Total healthcare expenditure on diabetes in the
region (excluding Mexico) totalled USD33.0bn in 2017, corresponding to 4.0% of the total spent worldwide. This expenditure is
expected to increase by more than 30.0% by 2045, reaching USD44.0bn.
• Age-Related Conditions: According to the WHO and Alzheimer’s Disease International, the population in Latin America living
with dementia will increase four-fold to more than 27mn by 2050, with Argentina, Brazil, Chile, Costa Rica, Colombia, Mexico and
Uruguay experiencing the greatest impact from dementia.
The majority of multinational pharmaceutical companies have established a local presence in Latin America. Increasing demand for
high-quality medicines and expanding drug coverage will continue to boost the local market growth. Local market leaders have also
become increasingly competitive due to government support and collaborations with multinational drugmakers. Countries such as
Costa Rica continue to provide strategic and cost-effective positioning for drugmakers. However, the slow implementation of fiscal
reforms poses downside risks for companies operating in the pharmaceuticals and healthcare sector.
In February 2022, the Pharmaceutical Researchers and Manufacturers of America placed the five major markets of Latin America
(Argentina, Brazil, Chile, Colombia and Mexico) on the ‘priority watch list’ in its annual United States Trade Representative’s Special
301 Report. There were multiple issues raised for the listed countries including pricing concerns, flawed cost containment policies,
regulatory data protection failures and issues with patent enforcement. Additionally, four of these five countries (Argentina, Brazil,
Chile and Colombia) look to increase their utilisation of compulsory licenses to access patented medicines without the appropriate
compensation. Laws which expand compulsory licensing powers are often vague and lack clarity, with the potential to erase
revenue for drugmakers on entire treatment classes. That said, we note the laws allowing governments to expand their powers to
utilise compulsory licensing are at various stages of development, and face significant backlash from industry, which will likely hinder
implementation.
Industry Trend Analysis

Mounting Macroeconomic Risks Will Apply Pressure To Pharmaceutical
Markets In Latin America
Key View
• Our Country Risk team has revised down growth expectations for Latin America on the back of rising inflation and growing
political uncertainty.
• This in turn will constrain pharmaceutical budgets and likely increase the implementation of cost-containment measures, which
will weigh on innovative drugmaker revenue over the long-term.
• Additionally, a weakening business environment will reduce the region’s pharmaceutical market attractiveness to investors.
Macroeconomic headwinds will continue to weigh on pharmaceutical operations in Latin America. The Fitch Solutions
Country Risk team has revised down growth forecasts for Latin America as inflation continues to surge higher-than-expected across
the region, in-part due to the ongoing implications of the Russia-Ukraine war. Pharmaceutical budgets will be constrained as low
GDP growth combined with inflation weigh on spending, increasing the likelihood of governments implementing further cost-
containment measures. Additionally, out-of-pocket (OOP) spending will diminish as consumer purchasing power continues to be
eroded. Business operating environments across the region will become less attractive to multinationals as economic and political
volatility remains high. That said, resilience of Latin American foreign exchange (FX) could offset some inflationary pressure, and
signs of strengthening local currency in parts of the region, particularly in Brazil, will have a positive impact on revenue for
drugmakers who report their profits in US dollars (USD) or euros.
Weakening economic growth and political instability will reduce pharmaceutical market attractiveness. At Fitch
Solutions, our country risk team has revised down our 2022 Latin America growth forecast from 2.2% to 2.0%, as feed-through
effects from the Russia-Ukraine war weigh on the region. Additionally, despite government efforts to subsidise the cost of food and
gasoline across the region, higher prices against a backdrop of weaker growth will increase the risk of social unrest. Political
instability will contribute to an uncertain business environment which we expect will disincentivise investors from entering the
market over the near-term, reducing the pharmaceutical market attractiveness of the region.
Downward Revisions Across The Board In Latin America

Latin America - Real GDP Growth, % y-o-y
Source: Fitch Solutions
Rising inflation will constrain budgets and encourage stricter cost-containment. Recently, Latin America’s largest markets
released March 2022 inflation data, which generally came in above consensus expectations. As a result, the Fitch Solutions Country
Risk team has revised up our average inflation forecast for Brazil from 8.9% to 9.5%, for Chile from 7.6% to 8.3% and for Peru from
5.3% to 6.2%.
Inflation Soaring Away From Target Across The Region

Latin America (Selected) - Consumer Price Inflation, Deviation From Central Bank Target, %
Source: Bloomberg, Fitch Solutions
High inflation will constrain pharmaceutical budgets as increases in spending will be undermined by lower purchasing power. This is
likely to influence governments to opt for lower cost locally produced generics, over their more expensive innovative counterparts,
which will impact multinational revenue across the region. Additionally, as cost-containment remains a priority for governments,
countries are more likely to enact repressive pricing regulations to control pharmaceutical expenditure. We have observed rising
incidences of this across Argentina, Chile, Colombia and Brazil, where drug pricing regulations and government price controls are
increasingly being enforced, posing significant downside risks to innovative drugmakers.
Inflation Peaking In 2022 Will Weigh On Pharma Spending

Latin America: Pharmaceutical Expenditure And Inflation
Reduced consumer purchasing power will weigh on OOP spending. Rising inflation will place an increasing pressure on Latin
America’s central banks to accelerate or extend their rate hiking cycles, after aggressive tightening in late 2021 and early
2022. Rising inflation and increased interest rates erode consumer purchasing power, which is significant in a region like Latin
America, where OOP spending as a percentage of health expenditure (28.4%) is much higher than the global median (18.0%). As
the cost of living rises, consumers are most likely to forgo discretionary medicines and cosmetic products first, which will weigh on
revenues for multinationals that have a large consumer health presence in the country. Following this, essential medicine revenue
will be negatively impacted, with consumers potentially opting for cheaper generic over-the-counter (OTC) drugs where possible, or
reducing the number of doses they buy of a drug.
OOP Spending Among The Highest In The World

OOP Spending As A % Of Health Expenditure, 2019
Source: World Health Organization (WHO), World Bank, Fitch Solutions
That said, local currency appreciation presents upside risk to our outlook. Thus far, Latin American FX has been less
effected by financial market volatility after the invasion than many other emerging market (EM) peers. The region’s currencies have
benefited from high interest rates, favourable valuations after sell-offs earlier in the pandemic and the perception that Latin America
is less exposed to the conflict. In some countries across the region, particularly in Brazil, we have observed a strengthening local
currency against the US dollar. In the year through March 22, the Brazilian Real (BRL) has appreciated 13.4% against the US dollar
and currently sits at BRL4.92/USD, a multi-month high. Similarly, we expect that the Chilean peso (CLP) will strengthen in the near
term, but will end the year at CLP790.0/USD, essentially in line with the current exchange rate. This will be positive for drugmakers
who report their earnings in USD or euros, meaning they will not incur as much revenue loss when transferring back from local
currency. Additionally, as a number of drug manufacturers import raw materials, a strengthening local currency will make imports
cheaper.
Currency Stabalising In 2022

Latin America: LCU/USD, y-o-y change %
Source: Bloomberg, Fitch Solutions
Industry Trends And Developments

Americas Pharmaceuticals & Healthcare Q222 Round-Up
Key View
• Major markets across Latin America will continue to introduce repressive drug pricing regulations in a bid to curb rising
pharmaceutical expenditure.
• Similarly, we expect the US will continue to push to reduce drug prices, as seen in Canada, which will implement a new pricing
structure in July 2022.
• The region will see continued investment in pharmaceutical manufacturing plants as countries look to bolster domestic drug
supply.
• We continue to observe a shift to left-wing politics across Latin America, likely resulting in an increase in health expenditure and
strengthening of the healthcare system.
North America's pharmaceutical market is forecast to expand from USD425.2bn (EUR359.5bn) in 2021 to USD498.3bn
(EUR401.8bn) by 2026, growing at a 3.8% compound annual growth rate (CAGR) in dollar terms and 2.3% in euro terms. Latin
America's pharmaceutical market is forecast to expand from USD67.0bn (EUR56.7bn) in 2021 to USD85.5bn (EUR68.9bn) in 2026,
growing at a 5.0% CAGR in dollar terms and 4.0% in euro terms.

Americas - USDbn (2018-2031)
Fitch/Solutions
North America
In June 2022, US Secretary of Health, Xavier Becerra, said that the new initiatives and health programs for the Americas announced
by President Joe Biden must also include Venezuela, Nicaragua and Cuba, which were not present in the IX Summit of the Americas.
Secretary Becerra talked about training programs for professionals in the region, expanding access to healthcare to all communities,
as well as of local vaccine production.
In June 2022, The US House Appropriations Committee released the draft fiscal year 2023 Agriculture, Rural Development, Food and
Drug Administration, and Related Agencies funding bill which has increased by 8% from 2022, and includes legislation looking to
rebuild public health infrastructure and securing the pharmaceutical supply chain.
In June 2022, a bipartisan group of six US senators accused the US Patent and Trademark Office (PTO) of granting excessive
amounts of patents, claiming it will limit competition and maintain high drug prices. The lawmakers have urged the PTO to issue a
notice of proposed rulemaking or public requests for comment over the next two months, outlining how it intends to address the
issue.
In May 2022, the New York State Senate passed two bills looking to curb drug prices throughout the state. One bill was to reduce
the cap on monthly insulin costs from USD100 to USD30, and the other bill forces drugmakers to provide notice of at least 60 days
if they intend to raise wholesale prescription drugs prices by over 10% of the current price.
In May 2022, the FDA released a guidance document urging pharmaceutical manufacturers to develop risk management strategies
as a means of avoiding medicine shortages, for some manufacturers the measures are mandatory, for others just recommended.
In May 2022, the US reported two confirmed cases of monkeypox and 50 suspected ones with President Joe Biden saying that the
virus 'is a concern in that if it were to spread it would be consequential.' We note that certain smallpox vaccines are also effective
against monkeypox with at least 85% efficacy, countries are currently looking to build stockpiles of these vaccines.
In May 2022, health ministers from Mexico and Cuba signed a bilateral cooperation agreement to solidify international cooperation
in medicine, research and human resources for both markets. Mexico’s president announced the country will receive medical
assistance from Cuba, including 500 doctors and Cuba’s homegrown Covid-19 vaccines.
In April 2022, Mexico’s government signed an agreement with India to produce vaccines and medicines in Mexico. The foreign
minister stated the country is working with various institutions in India for the production of a number of vaccines and therapeutics,
and that the agreement will involve investments from 2022 to 2032 to strengthen national production over the next 10 years.
In April 2022, members of the US House of Representatives and the US Senate introduced a legislation package that includes three
bills: the Discounted Drugs for Clinical Trials Act; the Pharmaceutical Research and Transparency Act of 2022; and the Generic
Substitution Non-Interference Act. These legislative reforms result from a three-year investigation conducted by the House
Committee on Oversight and Reform. The investigation highlighted anti-competitive tactics and business practices that
pharmaceutical companies use to obstruct generic and biosimilars competition and maintain market monopolies, which keep
prescription drugs high.
Central America
In June 2022, reports suggest that drug shortages in Honduras’ public sector have increased since the government introduced a
new procurement system in April 2022. Several observers, including Transparency International representatives in Honduras have
criticised the government's move, indicating that the previous drug procurement system secured the provision of medicines in a
relatively efficient way. Drug shortage concerns were already prominent in recent quarters, although this has apparently
deteriorated with the new policy.
In April 2022, Costa Rica elected Rodrigo Chaves as its next president, Chaves will introduce measures aimed at controlling the high
price of medicines, however, these measures will likely focus on breaking domestic monopolies in the supply chain, allowing for
increased competition. Chaves aims to simplify drug regulatory procedures and streamline permits, including recognition of
authorisations by foreign agencies.
Caribbean
In May 2022, Nigeria signed an agreement with Cuba to carry out manufacturing, technology transfer, vaccine production and the
commercialisation of Cuban biopharmaceutical products in Nigeria.
In May 2022, Cuban Medical Services and the Cubanacán Group signed an agreement that outlines various programmes to
promote health tourism in the country. Cubanacán has stated its group will provide all infrastructure, including logistics and medical
insurance, to the programmes that will be implemented.
Andean States
In June 2022, leftist Gustavo Petro won Colombia’s presidential election, Petro has stated plans to strengthen drug pricing regulation
and increase powers of compulsory licencing through ‘promoting an international agenda to make effective flexibilities on the
intellectual property rights of medicines and technologies of interest in public health’.
In May 2022, Peru’s Ministry of Health (Minsa) delivered equipment and furniture to strengthen telemedicine services in 678
establishments nationwide, with the aim of optimising procedures and improving the quality of care provided to citizens.
In May 2022, Peru’s Minsa secured funding for the implementation of the National Plan for Comprehensive Cancer Care, totalling
PEN4.2bn (USD1.1bn) over the next three years. For the first year, PEN1.1bn (USD0.3bn) will be allocated, then PEN1.5bn
(USD0.4bn) for 2023, and PEN1.6bn (0.4bn) in 2024. The funding will go toward improving access to new oncological treatments,
strengthening equipment, and improving infrastructure of the first level of care, among other things.
In May 2022, Ecuador’s President, Guillermo Lasso, said that the new medicine procurement and distribution model, dubbed
Medicina Siempre, will start in June 2022. The initiative has been postponed in recent months.
In April 2022, the drug regulatory authorities for Peru and Ecuador met to exchange experience and knowledge on regulations,
good practices and the illegal trade of pharmaceutical products with a view to strengthen their relations and improve access to
medicines in their respective countries.
In April 2022, AstraZeneca launched an innovation hub in Colombia to focus on offering digital solutions and technological
innovation to support the health system. Although the formal launch was in 2022, the hub has been in operation for 18 months and
has treated over 60,000 patients within its virtual clinic.
In April 2022, Colombia’s Ministry of Health (Minsalud) presented a roadmap for the digital transformation of the health sector,
stating the challenge in the public sector is supporting the development of telemedicine, as currently the participation of the private
sector is much higher (90%) than the public sector (10%). The roadmap consists of a plan for the adoption of electronic health
records, health data analytics unit, strengthening of Minsalud Digital, development of health contracts portal and Digital Health
policy, among other things.
In April 2022, Colombia’s Minsalud met with Ministers of Health of the Caribbean Region to launch a cooperation strategy, which will
focus on models of care, good practices, and vaccine supply and manufacturing.
Mercosur and Southern Cone
In June 2022, Argentina’s Health Minister, Carla Vizzotti, met with US Health Secretary, Xavier Becerra, to address different strategies
in health work between both countries. During the meeting the ministers agreed on the importance of working together to
strengthen and improve various health policies throughout the region.
In June 2022, Brazil’s Federal Government signed an ordinance that regulates telemedicine in Brazil, with a view to increase access
to healthcare for populations living in remote areas. The Ordinance establishes criteria, standards and parameters for care through
information technology, following the guidelines of competent agencies such as the National Health Surveillance Agency (Anvisa)
and the National Agency for Supplementary Health (ANS). One of the priorities is to ensure that distance care has the same
standard and meets the same ethical requirements and precepts as face-to-face, ensuring quality for the patient.
In June 2022, Brazil’s Ministry of Health launched 13 initiatives and strategies to expand actions related to mental health, with an
investment of BRL45mn (USD8.7mn). Among these initiatives are teleconsultations to cope with the impacts caused by the
Covid-19 pandemic and strategies to organise the care of patients with anxiety and depression.
In May 2022, Argentina’s Ministry of Health met with the Argentine chambers of laboratories to analyse the pharmaceutical sector,
the evolution of retail prices, the import and export of medicines, and the impacts of inflation on local production. The aim of the
meeting was to advance strategies to improve the populations access to medicines.
In May 2022, Argentina’s Health Minister, Carla Vizzotti, met with CanSino Biologics to discuss the work done during the pandemic
and the implementation of cooperation strategies for technology transfer.
PHARMACEUTICAL MARKET FORECAST (AMERICAS 2018-2031)

2018 2019 2020 2021 2022e 2023f 2024f 2025f 2026f 2027f 2028f 2029f 2030f
Latin America
pharmaceutical sales, 57.84 57.42 54.73 67.05 70.99 73.12 76.85 81.10 85.46 90.12 95.01 100.10 105.61
USDbn
US pharmaceutical
344.76 359.01 368.38 397.38 415.67 428.41 441.38 454.57 467.99 481.62 495.47 509.53 523.80
sales, USDbn
Canada pharmaceutical
28.02 28.78 30.18 34.90 32.85 34.21 35.41 36.62 37.85 39.08 40.28 41.47 42.64
sales, USDbn
e/f = estimate/forecast. Source: Fitch Solutions
Pharmaceuticals & Healthcare Glossary

Terms Used In Datasets, Daily Analysis And Reports
Pharmaceuticals, medicines, drugs: synonym terms used interchangeably.
Pharmaceutical market/sales: the sum of revenues generated by generic, patented and over-the-counter (OTC) drugs through
hospitals, retail pharmacies and other channels. Unless otherwise stated, market value is reported at final consumer price including
mark-ups, taxes, etc.
Prescription drugs: patented and generic medicines regulated by legislation that requires a physician's prescription before they
can be sold to a patient.
Patented drug: an innovative medicine granted intellectual property protection by a patent office. The patent may encompass a
wide range of claims, such as active ingredient, formulation, mode of action, etc, giving the patent holder the sole right to sell the
drug while the patent is in effect.
Generic drug: a bioequivalent medicine that contains the same active ingredient as an originator drug. The originator drug is an
innovative medicine that no longer has intellectual property protection due to patent expiry. The definition for generic drugs
includes off-patent originator medicines.
Over-the-counter (OTC) drug: a medicine that does not require a prescription to be sold to patients. Also known as non-
prescription medicines.
Biosmilar: a drug that is similar to a biological reference product, and which is manufactured by a company other than the
originator. Regulatory approval of biosimilars is technically possible following patent expiry of the reference product. There are
several terms used to describe these drugs in various markets, including 'similar biologics' (India), 'similar biological products'
(Singapore) and 'subsequent entry biologics' (Canada). However, biosimilars is the official name given in the EU pharmaceutical
directives, and that was adopted in the 2010 US legislation.
Healthcare expenditure: government and private spending on medical products and services. This includes the purchase of
healthcare services and goods by public entities such as ministries and social security institutions; government purchase of new
assets including investments into buildings, machinery (capital expenditure); or by private entities such as non-profit institutions and
households. The inclusion of this factor in our forecasts necessitates taking into account the essential attributes of market-specific
healthcare sector characteristics such as comprehensiveness, consistency, standardisation and timeliness.
Government healthcare expenditure (includes capital healthcare expenditure): refers to current healthcare expenditure which
includes healthcare goods and services used or consumed during the year, capital expenditure on assets, restoration or
enhancement paid by official entities such as a ministry of health, other ministries, parastatal organisations and social security
agencies, including transfer payments to households to offset medical care costs and extra-budgetary funds to finance healthcare
provision.
Private healthcare expenditure: spending on health by private entities such as commercial or mutual health insurance
providers, households, non-profit institutions serving households, resident corporations and quasi-corporations not controlled by
governments.
Medical devices: equipment and products used for diagnosis or therapy in patients. Whereas pharmaceuticals achieve their
principal action by pharmacological, metabolic or immunological means, medical devices act by physical or mechanical means.
Medical devices include a wide range of products, including syringes, thermometers, blood glucose tests, prosthetic limbs,
ultrasound scans and X-ray machines.
Clinical trials: for the purposes of registration, a clinical trial is any research study that prospectively assigns human participants or
groups of humans to one or more health-related interventions to evaluate the effects on health outcomes. Clinical trials may also be
referred to as interventional trials. Interventions include, drugs, cells and other biological products, surgical procedures, radiologic
procedures, devices, behavioural treatments, process-of-care changes and preventive care. This definition includes Early Phase I to
Phase IV trials.
Hospitals: health facilities larger than clinics, including general hospitals, specialised hospitals, public hospitals and private hospitals.
Hospital beds: a piece of furniture for recovery from illness, available at all facilities classified as hospitals by the relevant statistical
office.
Public inpatient admission: a person receiving medical treatment overnight in a hospital as defined by the relevant statistical
organisation. Excludes outpatient (non-overnight) visits. Units: thousands of visits.
Outpatient visit: a person who is not hospitalised overnight but who visits a hospital, clinic or associated facility for diagnosis or
treatment.
Physician: a skilled healthcare professional trained and licensed to practice medicine.
Proprietary Tool Terminology
Disability-adjusted life years (DALYs): the sum of the years of life lost (YLL) due to premature mortality in a population and the
years lost due to disability (YLD) for incident cases of the health condition. The DALY is a health gap measure that extends the
concept of potential years of life lost due to premature death (PYLL) to include equivalent years of 'healthy' life lost in states of less
than full health (broadly termed 'disability'). One DALY represents the loss of one year of equivalent full health.
Communicable disease: an infectious disease transmissible (as from person to person) by direct contact with an affected
individual or the individual's discharges or by indirect means (as by a vector).
Non-communicable disease: also known as chronic diseases, non-communicable diseases are not passed from person to
person. They are of long duration and generally of slow progression.
Innovative Pharmaceuticals Risk/Reward Index (RRI): quantifies and ranks a market's attractiveness in terms of its
pharmaceuticals industry; it balances the Risks and Rewards of launching innovative medicines in different markets. It should be
emphasised that the RRI broadly assesses the rewards and the risks that a company will face when looking to launch an innovative
drug in a market. For example, we do not differentiate between drugs that are part of different therapeutic groups or whether the
drug being launched is the first to be launched in the market or will be one of the many different drugs of the same therapeutic
class that has been launched in the market.
Rewards: this component of the RRI is composed of an evaluation of an industry's size and growth potential (Industry Rewards),
and also macro industry and/or characteristics that directly impact the size of business opportunities in a specific sector (Country
Rewards).
Risks: this component of the RRI is composed of an evaluation of micro, industry-specific characteristics, crucial for an industry to
develop to its potential (Industry Risks) and a quantifiable assessment of the market's political, economic and operational profile
(Country Risks).
Acronyms
CAGR: compound annual growth rate
WHO: World Health Organization
LHS: left-hand side
RHS: right-hand side
EUR: euro
USD: US dollar
Pharmaceuticals & Healthcare Methodology

Connected Thinking
We use a simple and transparent forecasting model as a base for our industry forecasts, but rely heavily on our analysts' expert
judgement to ensure our forecasts capture all of the insights we derive using our unique Connected Thinking approach. We believe
analyst expertise and judgement are the best ways to provide the most accurate, up-to-date and comprehensive insight to our
customers.
Our Connected Thinking approach to forecasting and analysis integrates macroeconomic variables from Fitch Solutions Country
Risk to provide our customers with unique and valuable insight on all relevant macroeconomic, political and industry risk factors
that will impact their operations and revenue-generating potential in the industry/industries they operate in.
For the Pharmaceuticals & Healthcare sector, we have historical data and 10-year forecasts for 10 pharmaceutical market-level, core
industry variables, and six for healthcare. Healthcare indicators include private and public healthcare spending. Pharmaceutical sales
are broken down into over-the-counter (OTC) and prescription (generic and patented) drugs. We also have historical data and five-
year forecasts for pharmaceutical trade balance for each market covered.
Our forecasts are a combination of regression modelling and analyst expert judgement. Our Pharmaceuticals & Healthcare analysts
interact with other analytical teams in Fitch Solutions, primarily the Country Risk team, to ensure they have a comprehensive
understanding of external factors that may impact the Pharmaceuticals & Healthcare industry outlook either on a market, regional
or global level.
In addition, our Pharmaceuticals & Healthcare forecasts draw on considerations of burden of disease levels, healthcare access,
spending power, market and regulatory regime characteristics (pricing, approvals and intellectual property) and company activity.
There is a rolling cycle of data monitoring, with databases being updated on a quarterly basis. Analysts will intervene outside of
these cycles to implement forecasts changes when necessary.
* Historical data only. ** Five-year forecasts.
Pharmaceutical Sales Forecast Model
Historic pharmaceutical sales data is collected from a range of sources, including:
• national statistics offices

• regulatory agencies
• pharmaceutical trade associations
• company press releases and annual reports
• local news sources
Our pharmaceutical sales forecasts are based on a regression model, using a market's historical time series and key
macroeconomic explanatory variables, primarily total final consumption, from Fitch Solutions Country Risk.
To remove the effect of inflation, real pharmaceutical sales figures are calculated by removing the annual average consumer price
index (CPI).
In addition, we also apply analyst expert judgement to refine and finalise the pharmaceuticals sales forecast based on exogenous
and endogenous variables or events that are not captured by our regression model.
Pharmaceutical sales are expressed in local currency, US dollars and euros.
Healthcare Expenditure Forecast Model
Historic healthcare expenditure data comes from the World Health Organization (WHO).
Healthcare is defined by the WHO as the sum of the funds mobilised by government and private systems for the operation of a
healthcare system. It includes the purchase of healthcare services and goods by public entities such as ministries and social security
institutions; or private entities such as non-profit institutions, commercial insurances and households acting as complementary
funders to the previously cited institutions or unilaterally disbursing health commodities.
Our public and private healthcare expenditure forecasts are based on a regression model, using a market's historical time series and
key macroeconomic explanatory variables, primarily Government and Private Final Consumption, from Fitch Solutions Country Risk.
To remove the effect of inflation, real healthcare expenditure figures are calculated by removing the annual average CPI. The overall
healthcare expenditure forecast is then calculated by combining government and private healthcare expenditure.
In addition, we also apply analyst expert judgement to refine and finalise the healthcare data and forecast based on exogenous and
endogenous variables or events that are not captured by our regression model.
Healthcare expenditure is expressed in local currency, US dollars and euros.
Pharmaceuticals Trade – Exports/Imports Forecast Model
Historic pharmaceutical trade data is collected from UN COMTRADE and the ITC Trade Map.
Our trade balance is calculated as exports minus imports to determine if a market is a net exporter or importer of pharmaceuticals.
Pharmaceuticals trade data is broken down into blood, vaccines and cultures; pharmaceuticals in bulk form; and pharmaceuticals in
finished dose form.
Our five-year forecasts are based on a regression model, using a market's historical time series. In addition, we also apply analyst
expert judgement to refine and finalise the pharmaceuticals sales forecast based on exogenous and endogenous variables or
events that not captured by our regression model.
Pharmaceutical trade is expressed in local currency, US dollars and euros.
Notes On Methodology
Note 1: National Health Accounts methodology. The global health expenditure database that WHO has maintained for the past 10
years, provides internationally comparable numbers on national health expenditures. WHO updates the data annually, taking,
adjusting and estimating the numbers based on publicly available reports (national health account reports, reports from the Ministry
of Finance, Central Bank, National Statistics Offices, public expenditure information and reports from the World Bank, the
International Monetary Fund, etc). The estimates are sent out to the Ministries of Health for validation prior to publication but users
are advised that data may still differ in terms of definitions, data collection methods, population coverage and estimation methods
used. This database is the source for the health expenditure tables in the World Health Statistics Report and the WHO Global Health
Observatory.
Note 2: System of Health Account 2011
In response to the pressing need for reliable and comparable statistics on health expenditure and financing, the OECD, in co-
operation with experts from OECD members, developed the manual, A System of Health Accounts (SHA), releasing the initial 1.0
version in 2000. Building on SHA 2000, the OECD worked with the World Health Organization (WHO) and Eurostat to publish A
system of health accounts 2011 edition (SHA 2011). The formal process of producing SHA 2011 started in 2007 as a co-operative
activity of health accounts experts from the OECD, WHO and Eurostat, known collectively as the International Health Accounts Team
(IHAT). The resulting manual has been the subject of an extensive and wide-reaching consultation process aimed at gathering
inputs from national experts and other international organisations around the world.
This year, the WHO reported healthcare expenditure data using the framework of System of Health Accounts 2011 (SHA 2011). The
macroeconomic variables were also updated to calculate some indicators. At present, National Health Accounts (previously used
methodology) are at different stages of development in various markets and may not only differ in the boundaries drawn between
health and other social and economic activities but also in the classifications used, the level of detail provided and in the accounting
rules.
The SHA 2011 framework makes health accounts more adaptable to rapidly evolving health financing systems, further enhances
comparability of health expenditures and financing data, and ultimately improves the information base for the analytical use of
national health accounts (NHAs). SHA 2011 reinforces the tri-axial relationship and the description of healthcare and long-term care
expenditure – that is, what is consumed has been provided and financed. The framework provides an approach that better reflects
the complex and changing systems of healthcare financing, eliminates ambiguities regarding some of the financing categories,
provides new approaches for market-specific analysis and is sufficiently flexible to accommodate future changes. The framework
also allows middle and low-income markets to provide a more transparent picture regarding foreign assistance.
In summary, the SHA 2011 financing framework increases the transparency of health financing systems, creating the possibility to
monitor changes, compare health expenditures across markets and over time, as well as providing better information for analysis of
the performance of healthcare financing systems. This is due to the clear distinction between the following four elements: financing
schemes, financing agents managing the schemes; revenues of each scheme and the institutional units providing those revenues.
Note 3: Linear regression equation.
y = mx + b
Where y = unknown variable, m = slope of gradient, x = known variable, and b = where the line crosses the y-axis.
Note 4: Final consumption is the sum of government final consumption expenditure and private final consumption expenditure.
Government final consumption expenditure is the sum of expenditure on final goods and services made by the government.
Included in this are investments into healthcare infrastructure, buildings, machinery, public sector salaries, but it does not include
transfer payments such as unemployment benefits or pensions. Private final consumption expenditure is the sum of all private
consumption of goods and services within the economy, including both durable and non-durable goods. Housing purchases,
however, are excluded. Government final consumption expenditure and private final consumption expenditure are the 'G' and 'C' in
this equation:
GDP = C + I + G + (X - M)
Where GDP = gross domestic product, C = private final consumption expenditure, I = gross investment, G = government final
consumption, X = exports, and M = imports.
Innovative Pharmaceuticals Risk/Reward Index Methodology
Our Innovative Pharmaceuticals Risk/Reward Index (RRI) quantifies and ranks a market's attractiveness in terms of its
pharmaceuticals industry; it balances the Risks and Rewards of launching innovative medicines in different markets. It should be
emphasised that the RRI broadly assesses the rewards and the risks that a company will face when looking to launch an innovative
drug in a market. For example, we do not differentiate between drugs that are a part of different therapeutic groups or whether the
drug being launched is the first to be launched in the market or will be one of the many different drugs of the same therapeutic
class that has been launched in the market.
To form an RRI score, we combine industry-specific characteristics with broader economic, political and operational market
characteristics. We weigh these inputs in terms of their importance to investor decision-making in a given industry - in this case, that
of innovative pharmaceuticals. The result is a nuanced and accurate reflection of the realities facing investors in terms of the
balance between 1) opportunities and risk; and 2) sector-specific and broader market traits. This enables users of our RRI to assess a
market's attractiveness in both a regional and global context.
The RRI also encompasses a combination of our proprietary forecasts and analyst assessment of the regulatory climate, as well as
globally acceptable benchmark indicators (eg, Transparency International's Corruption Perceptions Index). As regulations evolve and
forecasts change, so does the RRI score, providing a highly dynamic and forward-looking result.
The Innovative Pharmaceuticals RRI universe comprises 109 markets.
Benefits Of Using Fitch Solutions’ Innovative Pharmaceuticals RRI
• Global Rankings: One global table, ranking 109 markets for the launch of innovative pharmaceuticals from least (closest to zero)
to most attractive (closest to 100).
• Accessibility: Easily accessible, top-down view of global, regional or sub-regional Risk/Reward profiles.
• Comparability: Identical methodology across 109 markets allows users to build lists of markets they wish to compare, beyond the
confines of a global or regional grouping.
• Scoring: Scores out of 100 with a wide distribution, provide nuanced investment comparisons. The higher the score, the more
favourable the market profile.
• Quantifiable: Quantifies the Risks and Rewards of doing business in the innovative pharmaceuticals sector in different markets
around the world and helps identify specific flashpoints in the overall business environment.
• Comprehensive: Comprehensive set of indicators, assessing industry-specific risks and rewards alongside political, economic and
operational risks.
• Entry Point: A starting point to assess the outlook for the innovative pharmaceuticals sector, from which users can dive into more
granular forecasts and analysis to gain a deeper understanding of the market.
• Balanced: Multi-indicator structure prevents outliers and extremes from distorting final scores and rankings.
Weightings Of Categories And Indicators
The RRI matrix can be split into two distinct components:
Rewards: This component of the RRI is composed of an evaluation of an industry's size and growth potential (Industry Rewards),
and also macro industry and/or market characteristics that directly impact the size of business opportunities in a specific sector
(Country Rewards).
Risks: This component of the RRI is composed of an evaluation of micro, industry-specific characteristics, crucial for an industry to
develop to its potential (Industry Risks) and a quantifiable assessment of the political, economic and operational profile (Country
Risks).
Assessing Our Weightings
We deliberately afford Rewards a greater weighting (65% of a market's final RRI score) and within this, the Industry Rewards pillar
accounts for a majority 75%. This is to reflect the fact that when it comes to long-term investment potential, industry size and
growth potential carry the most weight in indicating opportunities, with other structural factors weighing in but to a slightly lesser
extent. In addition, our focus and expertise in emerging and frontier markets has dictated this bias towards industry size and growth
to ensure we are able to identify opportunities in markets where regulatory frameworks are not as developed and industry size is
not as big (in USD terms) as in developed markets, but where we know there is a strong desire to invest.
INDICATORS - RATIONALE AND SOURCES

Source Rationale
Rewards
Industry Rewards
Denotes breadth of pharmaceutical market. Large markets score higher than

Market Expenditure, USDbn Fitch Solutions Forecast smaller ones. Scores are based on annual average expenditure over a five-
year forecast period.
Denotes depth of pharmaceutical market. High-value markets score better

Spending Per Capita, USD Fitch Solutions Forecast than low-value ones. Scores are based on annual average expenditure over a
five-year forecast period.
Denotes sector dynamism. Scores are based on annual average growth over
Sector Value Growth, % Fitch Solutions Forecast
a five-year forecast period.
Country Rewards
Urbanisation is used as a proxy for the development of medical facilities.

Urban/Rural Split Fitch Solutions Forecast
Predominantly, rural markets score lower.
Shows the proportion of the population over 65. Markets with ageing
Pensionable Population, % Fitch Solutions Forecast
populations tend to have higher per capita expenditure.
Fast-growing markets suggest better long-term demand and thus growth for
Population Growth, % Fitch Solutions Forecast all industries. Scores are based on annual average growth over a five-year
forecast period.
Risks
Industry Risks
Fitch Solutions Markets with fair and enforced intellectual property regulations score higher
Patent Respect
Subjective Indicator than those with endemic counterfeiting.
Markets with a free pricing environment score higher than markets where
Fitch Solutions
Pricing Regime governments and private sector payers put downward pressure on
Subjective Indicator
pharmaceutical prices as a mechanism to control expenditure.
High scores are awarded to markets which have realised the economic and
Fitch Solutions social benefit of pharmaceuticals, in turn modernising the provision of
Protectionism
Subjective Indicator healthcare through reforms and essential drug lists and encouraging local
manufacturing and research and development by foreign firms.
Fit
Fitch
ch Solutions, 30 North C
Colonnade
olonnade,, Canary W
Wharf
harf,, L
London.
ondon. E14 5GN, UK
Tel: +44 (0)20 7248 0468
Fax: +44 (0)20 7248 0467
Web: www.fitchsolutions.com
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Copy Deadline: June 2022

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Fitch
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Group
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Limited.
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eserved.
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using the service on a trial basis). All such content is copyrighted in the name of Fitch Solutions Group Limited and as such no part of this content may be reproduced,
repackaged, copied or redistributed without the express consent of Fitch Solutions Group Limited.
All content, including forecasts, analysis and opinion, has been based on information and sources believed to be accurate and reliable at the time of publishing. Fitch
Solutions Group Limited makes no representation of warranty of any kind as to the accuracy or completeness of any information provided, and accepts no liability
whatsoever for any loss or damage resulting from opinion, errors, inaccuracies or omissions affecting any part of the content.
This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 (‘FSG’). FSG is an
affiliate of Fitch Ratings Inc. (‘Fitch Ratings’). FSG is solely responsible for the content of this report, without any input from Fitch Ratings. Copyright © 2022 Fitch
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Q3 2022

Industry Risk/Reward Index ....................................................................................................................................................11

Industry Trend Analysis.............................................................................................................................................................21

Industry Trends And Developments .....................................................................................................................................26

Pharmaceuticals & Healthcare Glossary .............................................................................................................................30

Pharmaceuticals & Healthcare Methodology ....................................................................................................................32

Headline Expenditure Forecast

PHARMACEUTICALS & HEALTHCARE FORECASTS (LATIN AMERICA, 2020-2026)

Key Economic View

Key Political View

Pharmaceutical Market Forecast

f = Fitch Solutions forecast. Source: Fitch Solutions

PHARMACEUTICALS SALES, HISTORICAL DATA AND FORECASTS (LATIN AMERICA 2019-2026)

Healthcare Market Forecast

Healthcare Expenditure Forecast

f = Fitch Solutions forecast. Source: Fitch Solutions

Industry Risk/Reward Index

Varying Challenges And Opportunities In A Diverse Region

Main Regional Features And Latest Updates

North American Markets Provide Larger Rewards

Outperformers: High-Reward And Low-Risk Markets

market and a high per capita spending figure.

Underperformers: Low-Reward And High-Risk Markets

REWARDS AND RISKS SCORES

US 91.7 64.1 84.8 92.5 85.8 89.8 86.5 1 1

Canada 82.2 68.8 78.9 64.4 90.4 74.8 77.4 2 9

Puerto Rico 62.2 81.0 66.9 84.7 41.9 67.6 67.1 3 24

Brazil 71.5 56.9 67.8 59.0 42.0 52.2 62.4 4 31

Chile 64.3 55.6 62.1 62.1 58.4 60.6 61.6 5 32

Mexico 63.4 52.8 60.8 62.1 45.9 55.6 59.0 6 35

Argentina 67.5 63.2 66.4 45.0 34.6 40.9 57.5 7 42

Colombia 58.5 52.8 57.1 42.7 39.2 41.3 51.6 8 55

Panama 45.1 54.2 47.4 46.1 53.4 49.0 47.9 9 59

Peru 43.7 54.4 46.4 52.8 36.0 46.0 46.3 10 62

Costa Rica 40.9 57.9 45.2 47.2 49.7 48.2 46.2 11 63

Ecuador 41.9 47.9 43.4 37.4 33.1 35.7 40.7 12 71

El Salvador 41.4 46.8 42.7 18.1 19.8 18.7 34.3 13 81

Guatemala 37.1 39.4 37.7 21.5 29.2 24.6 33.1 14 84

Honduras 31.3 41.9 33.9 24.5 19.4 22.5 29.9 15 87

Nicaragua 27.2 41.9 30.9 24.5 21.4 23.3 28.2 16 91

Cuba 16.1 51.9 25.0 9.1 20.1 13.5 21.0 17 103

INDUSTRY REWARDS SCORES

US 100.0 100.0 16.7 91.7 84.8

Canada 91.7 88.9 5.6 82.2 78.9

Puerto Rico 51.9 95.4 25.0 62.2 66.9

Brazil 89.8 46.3 37.0 71.5 67.8

Chile 63.0 57.4 92.6 64.3 62.1

Mexico 86.1 38.9 0.9 63.4 60.8

Argentina 71.3 49.1 100.0 67.5 66.4

Colombia 69.4 44.4 35.2 58.5 57.1

Panama 34.3 60.2 64.8 45.1 47.4

Peru 48.1 31.5 53.7 43.7 46.4

Costa Rica 35.2 55.6 31.5 40.9 45.2

Ecuador 44.4 41.7 27.8 41.9 43.4

El Salvador 30.6 53.7 69.4 41.4 42.7

Guatemala 38.0 28.7 57.4 37.1 37.7

Honduras 24.1 34.3 65.7 31.3 33.9

Nicaragua 15.7 37.0 66.7 27.2 30.9