Colombia Pharmaceuticals and Healthcare Report Q1 2019

Q1 2019
www.fitchsolutions.com
Colombia
Pharmac
Pharmaceuticals
euticals & Healthcar
Healthcare
e
Report
Includes 10-year forecasts to 2027
Colombia Pharmaceuticals & Healthcare Report | Q1 2019
Contents
Key View............................................................................................................................................................................................ 4
SWOT .................................................................................................................................................................................................. 5
Industry Forecast........................................................................................................................................................................... 6
Pharmaceutical Market Forecast ........................................................................................................................................................................................... 6
Healthcare Market Forecast ..................................................................................................................................................................................................... 9
Prescription Drug Market Forecast......................................................................................................................................................................................12
Patented Drug Market Forecast............................................................................................................................................................................................14
Generic Drug Market Forecast...............................................................................................................................................................................................16
OTC Medicine Market Forecast .............................................................................................................................................................................................18
Pharmaceutical Trade Forecast ............................................................................................................................................................................................20
Industry Risk/Reward Index ....................................................................................................................................................23

Americas Innovative Pharmaceuticals Risk/Reward Index .......................................................................................................................................23
Colombia Innovative Pharmaceuticals Risk/Reward Index.......................................................................................................................................30
Regulatory Development ..........................................................................................................................................................32

Regulatory Review......................................................................................................................................................................................................................32
Market Overview..........................................................................................................................................................................39
Competitive Landscape.............................................................................................................................................................47
Company Profile...........................................................................................................................................................................52
Profile: Laboratorios Bussié ....................................................................................................................................................................................................52
Profile: Laboratorios Genfar SA .............................................................................................................................................................................................54
Profile: Lafrancol .........................................................................................................................................................................................................................55
Colombia Demographic Outlook ............................................................................................................................................57
Pharmaceuticals & Healthcare Glossary .............................................................................................................................60
Pharmaceuticals & Healthcare Methodology ....................................................................................................................62
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Key View
Key View: Healthcare reforms and the rising burden of chronic diseases will drive demand for medicines. However, price control
measures and a weak intellectual property will continue to challenge innovative drugmakers in Colombia, who will continue to focus
on sales and marketing operations.
Headline Expenditure Projections
• Pharmaceuticals: COP10,092bn (USD3.42bn) in 2017 to COP10,641bn (USD3.69bn) in 2018; +5.4% in local currency
terms and +7.9% in US dollars. Forecast broadly unchanged from previous quarter.
• Healthcare: COP58,448bn (USD19.80bn) in 2017 to COP63,198bn (USD21.91bn) in 2018; +8.1% in local currency terms and
+10.7% in US dollars. Forecast broadly unchanged from previous quarter.
HEADLINE PHARMACEUTICALS & HEALTHCARE FORECASTS (COLOMBIA 2016-2022)

Indicator 2016 2017 2018f 2019f 2020f 2021f 2022f
Pharmaceutical sales, USDbn 3.138 3.419 3.690 3.835 4.014 4.203 4.405
Pharmaceutical sales, % of GDP 1.11 1.10 1.09 1.08 1.07 1.06 1.06
Pharmaceutical sales, % of health expenditure 17.8 17.3 16.8 16.5 16.2 15.9 15.7
Health spending, USDbn 17.674 19.798 21.913 23.291 24.832 26.396 28.031
f = Fitch Solutions forecast. Source: World Health Organization (WHO), National Sources, Fitch Solutions
Risk/ Reward Index
Colombia will continue to present opportunities for drugmakers, reflected by the country scoring 50.7 out of 100 in our Innovative
Pharmaceuticals Risk/Reward Index. While the demand for innovative medicines will remain given the rising burden of chronic
diseases, the challenging medicine pricing environment will pose a significant downside risk to drugmakers seeking to launch a
patented drug in the country.
Latest Updates
• In August 2018, the District Council of Bogotá, Colombia approved COP236bn (USD80mn) for the construction of Usme hospital,
which is expected to require COP290bn (USD98.31mn) in public-private funds. The bidding process for the public-private
partnership project will open by the end of 2018.
Economic View
The strong export growth seen in Colombia in 2018 will likely decelerate in 2019 as global energy prices stabilise. An attractive
environment for foreign investment will spur capital inflows, offering support to Colombia's external position. We have revised our
2019 forecast for the Colombian current account deficit upwards to 2.6% of GDP.
Political View
President Iván Duque will struggle to build a legislative coalition to pass corporate tax reform and anti-corruption legislation over the
coming quarters. A more tenuous security environment driven by surging coca production and the Venezuelan refugee crisis will
test Colombian policymakers and challenge the country's social stability. Colombia will likely seek additional multilateral and bilateral
aid to help manage the narcotrafficking and Venezuelan refugee crises.
SWOT
SWOT Analysis
Strengths • Steadily expanding pharmaceutical sales in line with economic growth.
• Increased state investment in healthcare services, which has driven demand for pharmaceuticals,
especially for generics.
• Increased presence of non-profit organisations addressing Colombia's healthcare needs.
• Unprecedented political and security stability is improving the business environment and allowing for
the implementation of needed health insurance reforms.
Weaknesses • Large price cuts and compulsory licensing enacted on certain high-priced innovative pharmaceuticals.
• Collection of social security contributions and lack of universal coverage remains a serious problem for
the health insurance system, leading to enduring financial problems.
• Most local production is dependent on imported active pharmaceutical ingredients.
Opportunities • The implementation of tighter regulations on bioequivalence should drive rapid growth in the
bioequivalent generic drug market.
• Rising incomes are driving take-up of more advanced medicines and more comprehensive health
insurance plans.
• Growing burden of communicable diseases, with significant mortality from cardiovascular disease.
• Commitment from health authorities in Colombia, Mexico and Chile to streamline regulatory approval for
manufacturing and distribution.
Threats • The high cost of modernisation to the local industry will drive continued political resistance to regulatory
reform and enforcement.
• Government attempts to improve access to essential medicines by undermining patent standards and
enforcing price cuts could limit attraction to innovative drugmakers.
• Other Latin American markets, notably Mexico and Brazil, offer multinational exporters greater
opportunities in terms of a large domestic market and infrastructure for manufacturing.
Industry Forecast
Pharmaceutical Market Forecast
Key View: Despite Colombia's struggle with counterfeit medicines and restrictive pharmaceutical pricing environment, the country's
large and burgeoning population and recent legislative commitments to improving healthcare access will continue to offer growth
opportunities to drugmakers, particularly those operating in the generics sector.
Latest Updates
• In June 2018, Colombian health minister, Alejandro Gaviria published a draft of the ‘circular 07 of 2018’ for approval, which
included 1,645 medicines that will be incorporated into the direct control regime. If approved, the total number of medicines on
the price control list will rise to 2,624, which includes medicines ranging from contraception to treatment for high blood pressure
and mental health disorders.
Pharmaceutical Market Forecast

(2013-2027)
f = Fitch Solutions forecast. Source: AFRIDRO, AESGP, Fitch Solutions
Structural Trends
The Colombian pharmaceutical market is the fifth-largest in Latin America, a position we expect to be maintained and solidified over
our forecast period, thus driving foreign investment in the market. Pharmaceutical sales totalled COP10,092bn (USD3.42bn) in 2017
and we forecast this to increase to COP13.427bn (USD4.40bn) by 2022, equating to a CAGR growth of 5.9% in local currency terms
and a US dollar CAGR of 5.2%. Over our 10-year forecast period, we expect a CAGR of 6.2% (5.1% in USD) with the market reaching a
value of COP18.41trn (USD5.63bn) in 2027.
Colombia's drug approval timeframe remains one of the fastest in Latin America, which is attractive to foreign innovative
drugmakers. However, companies must balance this against pricing and reimbursement challenges, meaning that market growth
will be largely driven by generics over our forecast period. Affordability levels among the majority of the population are low for high-
value patented drugs. Moreover, aggressive medicine price policies focused on the innovative medicine segment will pose
additional headwinds to drugmaker opportunities
Market Challenges
Colombia's pharmaceutical market also poses certain investment risks. While the Colombian government avoided issuing a
compulsory licence in 2016, the country's pricing and reimbursement environment has deteriorated, and price regulations pose
significant risks for multinational drugmakers.
Pharmaceutical companies operating in Colombia will continue to face challenges from the recurring price cuts by the government
for high-value medicines. In June 2018, Colombian health minister, Alejandro Gaviria published a draft of the ‘circular 07 of 2018’ for
approval, which included 1,645 medicines that will be incorporated into the direct control regime. If approved, the total number of
medicines on the price control list will rise to 2,624, which includes medicines ranging from contraception to treatment for high
blood pressure and mental health disorders. In June 2017, 148 medicines were subjected to price controls by the Colombia's
National Medicines and Medical Devices Pricing Commission compared to 1,645 in 2018. The total number of medicines under
pricing controls in Colombia will significantly increase from 978 in 2017 to a potential 2,624 medicines in 2018. The Ministry of
Health reports that the new regulation will reduce the price of these drugs on average by 50%, to generate annual savings of
COP366mn (USD0.12mn).
The sharp drop in prices will impair pharmaceutical sales for patented medicines as price controls become more stringent, limiting
commercial opportunities for foreign drugmakers. The pricing regime and the low affordability levels among the majority of the
population will drive an increase in generic drug uptake, which combined with Colombia's weak intellectual property environment
poses downside risks to patented drugmakers. Additionally, counterfeit medications remain a severe market risk. Operationally, the
Fuerzas Armadas Revolucionarias Colombia (FARC) continues to pose a significant risk for pharmaceutical investors as the group
generates partial funding through the production and sale of counterfeit medicines. FARC also utilises tactics that hinder political
stability, which undermines Colombia's larger business environment.
PHARMACEUTICAL SALES, HISTORICAL DATA AND FORECASTS (COLOMBIA 2014-2022)

Indicator 2014 2015 2016 2017 2018f 2019f 2020f 2021f 2022f
Pharmaceutical
4.316 3.315 3.138 3.419 3.690 3.835 4.014 4.203 4.405
sales, USDbn
Pharmaceutical
sales, USDbn, % y-o- -0.71 -23.21 -5.33 8.95 7.93 3.95 4.66 4.72 4.78
y
Pharmaceutical
8,643.328 9,101.052 9,580.886 10,092.456 10,640.918 11,235.919 11,900.626 12,636.768 13,426.681
sales, COPbn
Pharmaceutical
sales, COPbn, % y-o- 6.36 5.30 5.27 5.34 5.43 5.59 5.92 6.19 6.25
y
Pharmaceutical sales
constant exchange 2.928 3.083 3.245 3.419 3.604 3.806 4.031 4.281 4.548
rate, USDbn
Pharmaceutical
90.3 68.7 64.5 69.7 74.6 76.9 79.9 83.1 86.5
sales, USD per capita
Pharmaceutical
1.14 1.14 1.11 1.10 1.09 1.08 1.07 1.06 1.06
sales, % of GDP
Indicator 2014 2015 2016 2017 2018f 2019f 2020f 2021f 2022f
Pharmaceutical
sales, % of health 15.7 18.4 17.8 17.3 16.8 16.5 16.2 15.9 15.7
expenditure
Healthcare Market Forecast

Key View: The state of Colombia's public healthcare system remains volatile and many news sources in the country have begun
highlighting the system as being in a state of 'crisis'. The government has negated these accusations, but controversy continues to
shroud the Nueva Entidades Promotoras de Salud's efficiency. Compounded by financial instability in the sector, Colombia's health
system will remain disadvantaged in coming years and limit the country's appeal for foreign investment. Despite these risks,
Colombia's health market remains on the rise as medical demand continues to grow, while the country's epidemiological burden
transitions from infectious disease to chronic conditions.
Latest Updates
• In August 2018, the District Council of Bogotá, Colombia approved COP236bn (USD80mn) for the construction of Usme hospital,
which is expected to require COP290bn (USD98.31mn) in public-private funds. The bidding process for the public-private
partnership project will open by the end of 2018.
• President Duque’s election in June 2018 will bode well for the healthcare and pharmaceutical sector in Colombia as he
emphasises healthcare reforms including digitalisation of the health system to combat fraud and measures to address financial
hardship in the country's health insurance sector.
Healthcare Expenditure Forecast

(2013-2027)
f = Fitch Solutions forecast. Source: World Health Organization (WHO), Fitch Solutions
Structural Trends
We expect Colombia's total healthcare expenditure to grow relatively strongly y-o-y as the cost of healthcare provision escalates and
an increasing number of drugs are demanded under the POS. Our forecasts also take into account the government's efforts to
contain costs and the possible implementation of further schemes to increase out-of-pocket payments.
The market is expected to grow from COP58,448bn (USD19.80bn) in 2017 to COP63,198bn (USD22.02bn) in 2018. Over our
10-year forecast period, spending on healthcare should grow with a compound annual growth rate of 7.7% in local currency terms
and 6.6% in US dollar terms to reach COP122,692bn (USD37.55bn) by 2027. Health expenditure as a percentage of GDP will rise
from 6.4% in 2017 to 6.9% by 2027, and per capita spending will increase from USD404 in 2017 to USD716 in 2027. In 2017
government healthcare made up 76% of total healthcare spending and is expected to grow faster than overall healthcare spending
to reach 77% by 2027.
The robust growth in healthcare spending driven by the country's concerted effort to improve the health and well-being of its
population. For instance, on February 19 2018, the Bogota municipal government announced that it will launch the tender for
seven hospital projects as public-private partnerships in August 2018, the first such use of the PPP model for healthcare
infrastructure in the country. The projects, for which the municipal government will contribute COP1.5tn (USD525mn), include the
construction of seven new hospitals in the city with a combined floor area of 200,000sq meters
President Duque’s election in June 2018 will bode well for the healthcare and pharmaceutical sector in Colombia as he emphasises
on healthcare reforms. One of the key healthcare reforms proposed by Iván Duque includes the digitalisation of the entire health
system to combat fraud and the subsequent loss of capital, propose solutions and evaluate fair prices of medicines in real time. High
drug prices and fraud has been a recurring concern for the Colombian healthcare system. Revenue loss by the public healthcare
system in Colombia attributed to fraud continues and a loss of USD160mn in 2017 alone has been reported by news outlets.
Experts such as Francisco Rossi, director of IFARMA, a pharmaceutical research centre in Bogotá reported in 2012 that the use of
high-priced proprietary drugs rather than generic products contributed to a price explosion, which ‘created a massive crisis in the
health system’.
Duque also proposes to address the financial hardship faced by the country's health insurance sector, through the evaluation and
remuneration of the health promoting entities in Colombia - Entidades Promotoras de Salud for the quality of the service, ensuring
that citizens are not abused by such entities. Over the past decade, Colombia's healthcare sector growth has been hindered by the
continued financial hardship experienced by the country's health insurance sector, which the government in 2012 declared was on
the brink of collapse due to a lack of auditing and accountability. Additionally, the number of hospitals and doctors has remained
stagnant, which further increases pressure on the healthcare system. The current government has made several announcements
indicating that it will implement new regulations for healthcare financing, hinting at the possibility of using various options (such as
raising taxes) to increase finance for the healthcare sector.
HEALTHCARE EXPENDITURE TRENDS, HISTORICAL DATA AND FORECASTS (COLOMBIA 2014-2022)

Indicator 2014 2015 2016 2017 2018f 2019f 2020f 2021f 2022f
Health spending,
27.483 18.023 17.674 19.798 21.913 23.291 24.832 26.396 28.031
USDbn
Health spending,
5.70 -34.42 -1.94 12.02 10.68 6.29 6.62 6.29 6.20
USDbn, % y-o-y
Health spending,
55,036.923 49,488.025 53,967.509 58,448.169 63,197.719 68,232.925 73,622.142 79,351.915 85,448.041
COPbn
Health spending,
13.23 -10.08 9.05 8.30 8.13 7.97 7.90 7.78 7.68
COPbn, % y-o-y
Health
expenditure
26.502 23.830 25.987 28.145 30.432 32.856 35.451 38.210 41.146
constant FX rate,
USDbn
Health spending,
575.1 373.7 363.3 403.5 443.0 467.2 494.5 521.9 550.5
USD per capita
Health spending,
7.27 6.19 6.26 6.36 6.49 6.57 6.63 6.68 6.73
% of GDP
GOVERNMENT HEALTHCARE EXPENDITURE TRENDS, HISTORICAL DATA AND FORECASTS (COLOMBIA 2014-2022)
Indicator 2014 2015 2016 2017 2018f 2019f 2020f 2021f 2022f
Govt. health
20.816 12.758 12.564 14.103 15.644 16.666 17.808 18.965 20.176
spend, USDbn
Govt. health
spend, USDbn, % 4.41 -38.71 -1.52 12.26 10.92 6.53 6.86 6.49 6.39
y-o-y
Govt. health
41,684.994 35,030.605 38,361.943 41,635.723 45,117.194 48,823.261 52,796.677 57,012.627 61,503.555
spend, COPbn
Govt. health
spend, COPbn, % 11.85 -15.96 9.51 8.53 8.36 8.21 8.14 7.99 7.88
y-o-y
Govt. health
spend, % total 75.74 70.79 71.08 71.24 71.39 71.55 71.71 71.85 71.98
health spend
PRIVATE HEALTHCARE EXPENDITURE TRENDS, HISTORICAL DATA AND FORECASTS (COLOMBIA 2014-2022)
Indicator 2014 2015 2016 2017 2018f 2019f 2020f 2021f 2022f
Private health
6.667 5.265 5.111 5.695 6.269 6.625 7.024 7.431 7.855
spend, USDbn
Private health
spend, USDbn, % 9.95 -21.03 -2.93 11.43 10.08 5.68 6.02 5.79 5.71
y-o-y
Private health
13,351.929 14,457.420 15,605.567 16,812.446 18,080.526 19,409.664 20,825.465 22,339.288 23,944.486
spend, COPbn
Private health
spend, COPbn, % 17.78 8.28 7.94 7.73 7.54 7.35 7.29 7.27 7.19
y-o-y
Private health
spend, % total
24.26 29.21 28.92 28.76 28.61 28.45 28.29 28.15 28.02
health
expenditure
Prescription Drug Market Forecast

Key View: Price controls on high-priced innovative medicines will provide headwinds to prescription market growth. However, this
will be offset by expanded health insurance coverage, which will drive strong growth in the prescription sector; therefore, the market
share of prescription drugs will increase over the forecast period.
Prescription Drug Market Forecast

(2013-2027)
Structural Trends
We calculate the Colombian prescription drug market was worth COP8,403bn (USD2.85bn) in 2017, accounting for 83% of total
drug sales and this will increase to COP8,877bn (USD3.09bn) in 2018 (+5.6% in local currency and +8.7% in US dollar terms). By
2022, it is expected that the total market for prescription medicines will reach a value of COP11,229bn (USD3.68bn), growing at a
CAGR of 6.0% in local currency terms (5.3% in US dollar terms).
Future growth of the prescription drug market will be dependent on pricing and other regulatory factors. The prices of those
medicines included within the reimbursement system can only be increased once per year and only to the level of the rate of
inflation, which brings clear disadvantages. At the same time, despite notable improvement over the past few years, outstanding
intellectual property shortcomings will continue to discourage multinational involvement - offsetting an improving business
environment on the back of near-term policy continuity and consistent government successes in the rebel war - while regulatory
delays mean that innovative medicines are slow in reaching the market.
Furthermore, generic medicines are seeing an increase in preference due to a 2014 decree by President Santos which mandates
the reduction of generic medicine prices by 30%-60%. Such increases will increase the Colombian preference for drugs that are
considered more affordable. However, such significant price reductions will impair drugmakers' abilities to earn profit on medicine
production.
On a positive note, manufacturers of drugs for infectious and parasitic diseases will continue to enjoy considerable opportunities in
a country that still records a high prevalence of such conditions. Antiretrovirals are also in high demand, although access to such
drugs has been hampered by the lack of coordination between national authorities and insurance funds, among other factors.
PRESCRIPTION DRUG MARKET INDICATORS, HISTORICAL DATA AND FORECASTS (COLOMBIA 2014-2022)
Indicator 2014 2015 2016 2017 2018f 2019f 2020f 2021f 2022f
Prescription drug sales,

3.584 2.755 2.610 2.846 3.075 3.199 3.351 3.512 3.683
USDbn

-0.61 -23.13 -5.25 9.05 8.02 4.04 4.75 4.81 4.87
USDbn, % y-o-y

7,176.230 7,563.560 7,969.877 8,403.226 8,867.958 9,372.181 9,935.316 10,558.937 11,228.578
COPbn

6.47 5.40 5.37 5.44 5.53 5.69 6.01 6.28 6.34
COPbn, % y-o-y
Prescription drug sales, %

83.0 83.1 83.2 83.3 83.3 83.4 83.5 83.6 83.6
of total sales
Patented Drug Market Forecast

Key View: The patented prescription sector will continue to benefit from healthcare modernisation (finances permitting), rising
consumer income and regulatory improvements - enhanced by the 2012 United States-Colombia Trade Promotion Agreement,
also known as the Colombia Free Trade Agreement. However, price controls on high-priced innovative medicines will hold back
growth in the near term.
Patented Drug Market Forecast

(2013-2027)
Structural Trends
The patented drug market was valued at COP3,976bn (USD1.35bn) in 2017 and will grow to COP4,234bn (USD1.50bn) in 2018
(+6.5% in local currency and +9.5% in US dollar terms). By 2022, we calculate that originator drug sales will have reached a value of
COP5,666bn (USD1.86bn), equating to a CAGR of 7.3% in local currency terms and 6.7% in US dollar terms. Over the extended
2017-2027 forecast period, patented drug market growth will accelerate, growing at 8.8% per year in local currency terms (7.7% in
USD terms) over the 10-year forecast period to reach a value of COP9,204bn (USD2.82bn) in 2027.
In the public sector, the substitution of patented drugs with generic medicines is encouraged, given that the inclusion of brand
names - as opposed to an international non-proprietary name (INN) - on prescription scripts is optional. Since public funds are
generally limited, most state-operated healthcare institutions are actively promoting the use of generic drugs.
A recent survey showed that many public sector pharmacies did not stock patented drugs at all, while private pharmacies also
stocked 50% of the cheapest generic versions. We note that as the government is working towards improving its universal
healthcare system by reducing costs and improving service, generic drugs will become a key element in Colombia's healthcare
system overhaul. 'Unfortunately the health ministry is prioritising cost over safety and efficacy. We think this is a mistake,' said
Francisco De Paula Gomez, the executive president of the R&D Association of Pharmaceutical Industry in Colombia.
In February 2018, the Pharmaceutical Researchers and Manufacturers of America (PhRMA) published its annual submission for the
United States Trade Representative (USTR)'s Special 301 Report, in which it highlights market access barriers and intellectual
property concerns in the major international pharmaceutical markets. Colombia has consistently been on the PhRMA 2018 priority
list since 2016. The main key issues of concerns presented by the PhRMA report stay unchanged. Concerns remain over restrictive
patentability criteria, weak patent enforcement, issuance of a declaration of public interest to force a price discount and market
access barriers (increased regulatory barriers under the National Development Plan, Substandard biologics regulation, and arbitrary
and non-transparent market access policies). 2018 did, however, see an addition of regulatory data protection failure as a concern.
Colombian legislation requires five-year data protection for new chemical entities upon approval. However, the Colombian
regulatory authority INVIMA (Instituto Nacional de Vigilancia de Medicamento) has denied new chemical entities protection due to
minor chemical structure similarities with those approved. According to PhRMA, this inconsistency between regulations and
approvals undermines the development of new pharmaceutical products.
PATENTED DRUG MARKET INDICATORS, HISTORICAL DATA AND FORECASTS (COLOMBIA 2014-2022)
Indicator 2014 2015 2016 2017 2018f 2019f 2020f 2021f 2022f
Patented drug sales, USDbn 1.671 1.289 1.227 1.347 1.467 1.540 1.634 1.740 1.859
Patented drug sales, USDbn,

-1.01 -22.88 -4.82 9.79 8.88 4.99 6.09 6.52 6.81
% y-o-y
Patented drug sales, COPbn 3,347.093 3,539.399 3,746.126 3,976.428 4,229.765 4,511.222 4,843.555 5,231.622 5,666.059
Patented drug sales, COPbn,

6.04 5.75 5.84 6.15 6.37 6.65 7.37 8.01 8.30
% y-o-y
Patented drug sales, % of

46.6 46.8 47.0 47.3 47.7 48.1 48.8 49.5 50.5
prescription sales
Patented drug sales, % of

38.7 38.9 39.1 39.4 39.8 40.2 40.7 41.4 42.2
total sales
Generic Drug Market Forecast

Key View: Generic drugs will play an increasingly important role in the Colombian government's attempts to control healthcare
expenditure - though the Declaration of Public Interest on imatinib highlights Colombia's deteriorating regulatory regime, which will
act as a drag on growth.
Generic Drug Market Forecast

(2013-2027)
Structural Trends
Colombia's generic drug market as a percentage of the total market incorporates all non-patented registered medicines. An
obstacle to growth of generic drugs is that local players continue to resist stronger bioequivalence standards of the type that have
been introduced in Brazil and Mexico. Despite this, the market share of legitimate generic products has risen steadily in recent years.
Estimated at 5% in the mid-1990s, we estimate that the market share of bioequivalent generic medicines has more than tripled
since that time.
We calculate that Colombia's generic medicines market was worth COP4,427bn (USD1.50bn) in 2017, accounting for 44% of total
pharmaceutical sales and will increase to COP4,643bn (USD1.62bn) by 2018 (+4.9% in local currency and +7.9% in US dollar terms).
By 2022, we forecast the generic medicines market will be worth COP5,563bn (USD1.82bn), growing at a CAGR of 4.7% in local
currency terms and 4.0% in US dollar terms. In value terms, generic drugs will gradually decrease their share of the total market by
value due to intense competition and the prominence of a few major multinational drugmakers.
Generally speaking, consumption of generic products grew significantly in the hospital sector during the 1990s as a result of
mandatory health plans based on generic drugs. Prescribing by international non-proprietary name (INN) was also promoted, which
helped to increase the share of generic medicines in the pharmacy sector. Although generic drugs must meet very strict standards,
bioequivalence is requested for only a selected number of generic products, most of which are indicated for the treatment of
chronic diseases.
Sales of generic drugs in the pharmacy sector have been attractive, but sales of generic medicines in the hospital sector have
registered higher growth in recent years. Local pharmaceutical companies, most of which produce generic drugs, have about 45.0%
of the pharmacy sector by sales and 70.0% by volume. Additionally, local pharmaceutical companies control about 80.0% of the
hospital sector by volume. Nevertheless, the leading foreign producers, including Bayer, Sanofi via Winthrop and GlaxoSmithKline,
are strengthening their operations in the hospital sector.
Most consumers are unaware of any distinction between non-bioequivalent copies of patented products and legal, off-patent
generic drugs. Indeed, with no modern legislation pertaining to bioequivalence, distinctions between copies and genuine generic
products are likely to remain blurred. Nevertheless, legislation does provide for the substitution of patented drugs with generic
drugs in the public sector, as the inclusion of brand names (as opposed to INN) on prescription scripts is optional. Additionally, many
public sector pharmacies do not stock patented drugs at all, which will continue to boost the use of generic medicines. The generic
drug market is also forecast to grow in the near future on the back of the rising popularity of cheap drugs within public healthcare
institutions.
GENERIC DRUG MARKET INDICATORS, HISTORICAL DATA AND FORECASTS (COLOMBIA 2014-2022)
Indicator 2014 2015 2016 2017 2018f 2019f 2020f 2021f 2022f
Generic drug sales, USDbn 1.912 1.466 1.383 1.500 1.608 1.659 1.717 1.772 1.825
Generic drug sales, USDbn,

-0.27 -23.35 -5.62 8.40 7.25 3.17 3.50 3.18 2.97
% y-o-y
Generic drug sales, COPbn 3,829.137 4,024.162 4,223.751 4,426.799 4,638.193 4,860.960 5,091.762 5,327.315 5,562.519
Generic drug sales, COPbn,

6.84 5.09 4.96 4.81 4.78 4.80 4.75 4.63 4.42
% y-o-y
Generic drug sales, % of

53.4 53.2 53.0 52.7 52.3 51.9 51.2 50.5 49.5
prescription sales
Generic drug sales, % of total

44.3 44.2 44.1 43.9 43.6 43.3 42.8 42.2 41.4
sales
OTC Medicine Market Forecast

Key View: The OTC medicines market will see consistent growth in consumption as the country adopts a favourable approach
towards the regulation and promotion of these drugs. However, competition from low-priced generic drugs will continue to limit the
total value of Colombia's OTC medicine market and prescription drugs will continue to dominate.
OTC Medicine Market Forecast

(2013-2027)
Structural Trends
The OTC market in Colombia reached a value of COP1,689bn (USD572mn) in 2017 and will grow to COP1,775bn (USD618mn) in
2018 (+5.1% in local currency and +8.1% in US dollar terms). By 2022, Fitch Solutions calculates that the OTC drug market will be
worth COP2,198bn (USD721mn), equating to a CAGR of 5.4% in local currency terms and of 4.7% in US dollar terms. By this point,
OTCs will account for a slightly lower proportion of the total market, on account of widening public healthcare coverage and price
competition in the OTC market.
In recent years, consumers have adopted an increasingly proactive attitude with regard to their health. Painkillers and supplements
have benefited from this proactive approach in particular. However, volume growth has been partly offset by competition from low-
priced generic medicines. Additionally, an aspect of the 2005 Decree 2200 was the establishment of a limit of 75 metres between
retail pharmacy outlets, which is aimed at reducing the influence of large chains on patients' purchasing decisions.
In order to counter such challenges, manufacturers of branded OTCs have been steadily increasing their advertising spending, as
direct-to-consumer (DTC) advertising of OTC products is permitted, while it is banned for prescription products. The Colombian
manufacturers association, ANDI, has also embarked on a campaign to raise consumer awareness of counterfeit drugs, which pose
a major threat to the image of legitimate OTCs. Together with other industry associations, ANDI has threatened to impose a
blockade on all pharmacies that are found to sell counterfeit drugs.
In fact, establishing a clear identity for OTC medicines is an ongoing and challenging process in Colombia. Lower income groups
may not be able to afford a consultation with a doctor; hence pharmacists often take on the role of diagnosing and prescribing. As
many consumers can obtain prescription drugs as easily as OTCs, the differences between the two categories are often unclear to a
significant proportion of the poorer population.
In Colombia, OTCs are free from price controls unless they are included within the mandatory health plan, known as the POS.
Examples of OTCs in the POS include the antacids Pfizer's Mylanta range and Sanofi's Pepsamar. Inclusion in the POS brings clear
advantages, principally that the government is obliged to purchase a large quantity of the product, assuring strong market
penetration. The downside is that the marketer can raise its price only once annually and that the rise must not be higher than the
rate of inflation.
Although OTC regulations are generally liberal, Colombia operates a brand-by-brand switch mechanism, rather than any wider-scale
switching of active ingredients. This often enables two identical products to be purchased with or without prescription, heightening
consumer misconceptions regarding self-medication.
Most of the major multinational OTC companies have a significant presence in Colombia's OTC market. In terms of major local
companies active in the OTC market, MK, the pharmaceutical business of local chemicals group Tecnoquímicas, is also a major
player.
OVER-THE-COUNTER (OTC) MEDICINE MARKET INDICATORS, HISTORICAL DATA AND FORECASTS (COLOMBIA 2014-2022)
Indicator 2014 2015 2016 2017 2018f 2019f 2020f 2021f 2022f
OTC medicine sales, USDbn 0.733 0.560 0.528 0.572 0.615 0.636 0.663 0.691 0.721
OTC medicine sales, USDbn,

-1.19 -23.57 -5.78 8.45 7.44 3.48 4.20 4.27 4.33
% y-o-y
OTC medicine sales, COPbn 1,467.099 1,537.491 1,611.009 1,689.230 1,772.960 1,863.738 1,965.309 2,077.832 2,198.103
OTC medicine sales, COPbn,

5.85 4.80 4.78 4.86 4.96 5.12 5.45 5.73 5.79
% y-o-y
Over-the-counter (OTC)
medicine sales, % of total 17.0 16.9 16.8 16.7 16.7 16.6 16.5 16.4 16.4
sales
Pharmaceutical Trade Forecast

Key View: Colombia's negative trade balance will widen over the next five years, as the country's heavy dependence on foreign
pharmaceuticals and limited domestic medicine manufacturing capabilities continue. The government's focus on negotiating
favourable trade agreements will also solidify Colombia's growing import trade.
Pharmaceutical Trade Forecast

(2013-2022)
f = Fitch Solutions forecast. Source: United Nations Comtrade Database DESA/UNSD, Fitch Solutions
Structural Trends
Colombia's weak pharmaceutical manufacturing sector will ensure the country's continued commitment to foreign drug purchases,
with its pharmaceutical trade deficit forecast to grow from USD1,722mn in 2017 to USD2,271mn in 2022. Colombia's growing
population and increasing burden of chronic conditions - namely diabetes, cancers and neuropsychiatric conditions - will lead to a
further increase in the demand for necessary medicines - ensuring the country's negative trade balance until 2022.
Multinational investment into pharmaceutical research and development and production in Colombia is minimal, indeed of the top
50 global pharmaceutical firms, none has an innovative medicines production facility in the country. Nevertheless, while domestic
drug production accounts for two-thirds of medicine consumption by volume, multinationals reportedly account for three-quarters
of medicine sales by value.
The collapse of the Trans-Pacific Partnership (TPP) and the shift towards greater global interest in the Latin America Pacific Alliance
(PA) could be a boon for Colombia, as the country was not a signatory of the TPP. The increased interest in the PA could thus lead to
stronger trade links between Colombia and the nations that Bogota does not have free trade agreements with, particularly China.
As part of the PA's efforts to expand its trade linkages, the four member countries (Mexico, Peru, Chile, and Colombia) held a
ministerial-level meeting in March in Chile, inviting counterparts from the remaining TPP nations as well as China and South Korea.
The aim of these talks is to discuss the creation of a Trans-Pacific trade bloc, and we believe that Colombia could eventually benefit
from increased access to the Chinese market. Beijing's observer status in the PA would remove some of the difficulties in
establishing stronger trade links, possibly smoothing the path for a trade agreement of sorts.
Pharmaceutical Imports
The Colombian government's preferential focus on multinational drugmakers and its willingness to negotiate favourable trade
agreements will continue to strengthen the country's growing import of pharmaceuticals. This is further solidified by the country's
weak regulatory standards for domestic drug production, leaving room for multinational drugmakers to maintain a stake in
Colombia's medicine market.
Colombia has been a member of the World Trade Organization since 1995, as well as an associate member of Mercosur, a regional
trade agreement between Argentina, Brazil, Paraguay and Uruguay that aims to promote free trade and the fluid movement of
goods, people and currency. On top of this, Colombia has bilateral trade agreements with Algeria, the Czech Republic, Egypt,
Hungary, India, Indonesia, Israel, Cote d'Ivoire, Malaysia, Romania, Russia and South Africa.
Over our five-year forecast period, Colombia's medicine imports will grow at an annual rate of 5.5% in US dollar terms, from
USD2,046mn in 2017 to USD2,680mn by 2022. In 2014, Colombia's top five import partners included the US (USD417mn),
Germany (USD398mn), Switzerland (USD208mn), France (USD177mn) and Italy (USD123mn). Other top import partners included
Mexico (USD108mn), Brazil (USD95mn) and Belgium (USD98mn).
Pharmaceutical Exports
Despite its broadening trade exposure, Colombia remains highly reliant on Latin America for pharmaceutical exports, with its lax
manufacturing quality regulations limiting the prospects of sales in advanced markets in the short-term. While the domestic
manufacturing sector performs reasonably in terms of exports in volume terms, most exports are low-value products and domestic
manufacturers remain reliant on imported active pharmaceutical ingredients.
Pharmaceutical exports in Colombia were valued at USD324mn in 2017. This figure will grow to USD409mn by 2022 with a five-
year CAGR of 4.8% in US dollar terms. Colombia's top five export partners in 2014 include Venezuela (USD133mn), Ecuador
(USD121mn), Peru (USD51mn), Panama (USD42mn) and Chile (USD26mn). Other top export partners were Mexico (USD24mn), the
US (USD21mn) and Brazil (USD10mn).
PHARMACEUTICAL TRADE DATA AND FORECASTS (COLOMBIA 2016-2022)

Indicator 2016 2017 2018f 2019f 2020f 2021f 2022f
Pharmaceutical exports, USDmn 396.52 324.03 360.15 375.53 388.56 399.52 409.02
Pharmaceutical exports, USDmn, % y-o-y -16.54 -18.28 11.15 4.27 3.47 2.82 2.38
Pharmaceutical imports, USDmn 1,978.84 2,046.32 2,249.44 2,360.76 2,470.75 2,577.48 2,680.16
Pharmaceutical imports, USDmn, % y-o-y -9.61 3.41 9.93 4.95 4.66 4.32 3.98
Pharmaceutical trade balance, USDmn -1,582.32 -1,722.29 -1,889.29 -1,985.24 -2,082.19 -2,177.96 -2,271.14
PHARMACEUTICAL TRADE DATA AND FORECASTS LOCAL CURRENCY (COLOMBIA 2016-2022)

Indicator 2016 2017 2018f 2019f 2020f 2021f 2022f
Pharmaceutical exports,
1,210,731.77 956,576.40 1,038,659.36 1,100,128.91 1,151,993.76 1,201,066.64 1,246,848.23
COPmn
Pharmaceutical exports,
-7.18 -20.99 8.58 5.92 4.71 4.26 3.81
COPmn, % y-o-y
Pharmaceutical imports,
6,042,241.17 6,041,055.39 6,487,380.79 6,916,030.44 7,325,176.13 7,748,582.05 8,170,082.11
COPmn
Pharmaceutical imports,
0.52 -0.02 7.39 6.61 5.92 5.78 5.44
COPmn, % y-o-y
Pharmaceutical trade
-4,831,509.40 -5,084,478.98 -5,448,721.43 -5,815,901.53 -6,173,182.37 -6,547,515.41 -6,923,233.88
balance, COPmn
Industry Risk/Reward Index

Americas Innovative Pharmaceuticals Risk/Reward Index
Key View: The Americas remains a region with varying opportunities for multinational drugmakers. While some markets present
high growth potential or favourable regulatory environments, it is vital that companies appreciate the varying levels of investment
risk and reward that are present in the markets in the Americas region. 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.
Americas: Opportunities Vary Across The Region

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) slightly underperforms 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 are 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, the RRI identifies industry-specific factors, such as the size of the pharmaceutical market, and
country-specific factors, such as the size of the pensionable population, which present opportunities for potential investors. The
US scores the highest for the Rewards component of the index, boosted by its large multi-billion dollar drug market, high per
capita pharmaceutical spending and large pensionable population. Meanwhile, Venezuela scores the lowest in the sub-sector.
• With regard to assessing risks, we identify industry-specific dangers, such as a country's pricing regime, 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. Venezuela scores the lowest in the Risks component of the RRI. Compared to its peers, Venezuela's
score is dragged down by industry characteristics such as a lack of patent respect and protectionist government policies, which
are further exacerbated by the considerable long- and short-term political, economic and operational risks in comparison to the
regional average. Meanwhile, the US scores the highest in the sub-sector.
Americas: North American Markets Provide Larger Rewards

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 eighth 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. The North American countries boast the world's largest drug
market and a high per capita spending figure.
The US and Canada boast large, wealthy, urbanised populations which, combined with strong drug approval processes, which serves
to boost their appeal for innovative product launches. However, growth, in terms of both 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
indicator, significantly below the regional and global average.
• In the US, the ‘Tax Cuts and Jobs Act' was pushed through by congressional Republicans and the Trump administration late in
2017. It reduces the Federal corporate income tax rate from 35% to 21%, and transitions the US international taxation system
from a worldwide tax structure to a territorial tax arrangement. It also imposes a repatriation tax that is repayable over eight years
on foreign earnings. Tax reform would provide more flexibility to the pharmaceutical companies' deployment of capital, such as
R&D spending, share repurchases, reducing leverage and dividend payments. With many foreign firms that generate high levels
of profit in the US also benefitting from these reforms, tax reform in the US will influence many areas of pharmaceutical company
activity in 2018, but will not bring the full range of benefits expected by some stakeholders. However, the lack of a widespread
reimbursement system in the US is a major drawback. While schemes such as Part D allow low-income patients to access many
pharmaceuticals, significant co-payments can often exist for many patient groups, which is negative for the market.
• Canada's strong publicly funded healthcare system and stable political environment make for an attractive base for drug
companies. Pricing and reimbursement pressures represent the main headwinds domestically. The country's Patented Medicine
Prices Review Board (PMPRB) is mandated to protect patients by ensuring that the prices of patented medicines sold across
Canada are not excessive. The increasing role of generic medicines also acts as a control over drug pricing. As of April 2018,
member companies of the Canadian Generic Pharmaceutical Association have agreed to reduce prices of Canada's 70 top-
selling off-patent drugs by 25% to 40%. The deal sets the prices of these drugs in Canada at either 10% or 18% of the brand-
name price, so these drugs will be priced 90% lower than their branded equivalent. Canadian export-focussed companies will
need to be aware of the decisions of the Trump administration and the impact they will have on trade and the operating
environment in North America.
Underperformers: Low-Reward And High-Risk Markets
Venezuela and Cuba sit at the bottom of the Americas Innovative Pharmaceuticals Risk/Reward Index. Both countries are
characterised as low-reward, high-risk markets.
• Venezuela is one of the least stable countries globally and ranks 109th of the 110 markets in the Innovative Pharmaceutical
Risk/Reward Index. It is an extremely unattractive market, and a combination of hyperinflation, which has severely weakened the
Venezuelan bolívar, and the deteriorating political and economic outlook continues to weaken the drugmaker operating
environment. The long-term picture remains unclear following the May 2018 re-election of President Nicolás Maduro of the
Partido Socialista Unido de Venezuela (PSUV) for another six-year term. Venezuela's pharmaceutical market growth prospects
will depend highly on a resolution to the economic and political turmoil.
• In the Innovative Pharmaceutical Risk/Reward Index, Cuba ranks 17th out of 18 markets in the region and 102nd out of 110
markets globally, mainly due to the purposed unification of currencies in Cuba. The country currently has two official exchanges
rates: the ‘convertible peso’ (CUC) - pegged one-to-one with the US dollar (USD) and used in foreign-facing sectors such as
tourism - and the ‘national peso’ (CUP) – set at CUP24.0/USD and used for most domestic transactions. While the average
Cuban is paid in CUP, those with access to CUC have an edge in purchasing power, particularly for sought-after imported
goods. Currency unification will be broadly positive for economic growth in Cuba in the long term. A devaluation of the CUC
exchange rate as part of unification will increase the competitiveness of Cuba's exports while reducing distortions in pay in
different sectors. Unification will also simplify pricing across the economy, and increase the country's attractiveness to foreign
investors. In December 2017, the Cuban Parliament reiterated the importance of unification to the party’s economic reform
programme, suggesting that it will move forward in 2018, although uncertainty remains surrounding the timeline and scope of
changes.
REWARDS AND RISKS SCORES

Industry Country Industry Country Regional Global
Rewards Risks RRI
Rewards Rewards Risks Risks Rank Rank
US 91.9 64.4 85.1 92.6 89.4 91.3 87.2 1 1
Canada 82.1 68.8 78.8 64.6 89.9 74.7 77.4 2 8
Puerto Rico 71.3 62.2 69.0 84.8 45.4 69.1 69.0 3 22
Chile 69.2 61.5 67.2 61.0 73.4 66.0 66.8 4 24
Brazil 77.3 56.4 72.1 56.9 39.8 50.1 64.4 5 30
Mexico 68.0 53.7 64.4 62.8 44.7 55.6 61.3 6 33
Argentina 63.9 62.4 63.5 42.8 31.9 38.5 54.7 7 49
Colombia 56.0 50.2 54.5 42.8 44.8 43.6 50.7 8 54
Peru 46.6 54.4 48.5 52.8 48.5 51.0 49.4 9 56
Costa Rica 45.7 56.0 48.3 47.2 48.2 47.6 48.0 10 62
Panama 41.2 54.4 44.5 46.1 56.3 50.2 46.5 11 67
Ecuador 49.5 50.5 49.8 37.3 30.9 34.8 44.5 12 70
Guatemala 45.8 39.7 44.3 22.0 23.4 22.5 36.7 13 78
El Salvador 30.8 45.6 34.5 18.6 25.7 21.4 29.9 14 89
Nicaragua 31.5 40.1 33.6 25.0 14.8 20.9 29.2 15 91
Honduras 20.6 42.0 25.9 25.0 19.0 22.6 24.8 16 97
Cuba 13.2 55.5 23.8 9.7 27.0 16.6 21.3 17 102
Venezuela 10.0 58.0 22.0 4.2 2.1 3.4 15.5 18 109
Global Average 50.0 50.0 50.0 50.0 50.0 50.0 50.0 ~ ~
Regional
50.8 54.2 51.7 44.2 42.0 43.3 48.7 ~ ~
Average
INDUSTRY REWARDS SCORES

Rewards Market Expenditure, USDbn Spending Per Capita, USD Sector Value Growth, % Industry Rewards Rewards
US 100.0 100.0 19.3 91.9 85.1
Canada 90.8 86.2 17.4 82.1 78.8
Puerto Rico 67.9 99.1 8.3 71.3 69.0
Chile 73.4 64.2 58.7 69.2 67.2
Brazil 92.7 49.5 68.8 77.3 72.1
Mexico 87.2 41.3 33.0 68.0 64.4
Argentina 68.8 42.2 99.1 63.9 63.5
Colombia 67.0 36.7 47.7 56.0 54.5
Peru 52.3 32.1 56.0 46.6 48.5
Costa Rica 36.7 59.6 57.8 45.7 48.3
Rewards Market Expenditure, USDbn Spending Per Capita, USD Sector Value Growth, % Industry Rewards Rewards
Panama 33.0 58.7 37.6 41.2 44.5
Ecuador 49.5 48.6 52.3 49.5 49.8
Guatemala 44.0 38.5 78.0 45.8 44.3
El Salvador 24.8 43.1 30.3 30.8 34.5
Nicaragua 22.0 40.4 61.5 31.5 33.6
Honduras 16.5 26.6 26.6 20.6 25.9
Cuba 6.4 11.0 60.6 13.2 23.8
Venezuela 0.0 0.0 100.0 10.0 22.0
Global Average 50.0 50.0 50.0 50.0 50.0
Regional Average 51.8 48.8 50.7 50.8 51.7
COUNTRY REWARDS SCORES

Rewards Urban/Rural Split Pensionable Population, % Population Growth, % Country Rewards Rewards
US 75.2 71.6 39.4 64.4 85.1
Canada 76.1 76.1 46.8 68.8 78.8
Puerto Rico 94.5 68.8 16.5 62.2 69.0
Chile 90.8 56.9 41.3 61.5 67.2
Brazil 84.4 51.4 38.5 56.4 72.1
Mexico 71.6 40.4 62.4 53.7 64.4
Argentina 91.7 54.1 49.5 62.4 63.5
Colombia 65.1 46.8 42.2 50.2 54.5
Peru 69.7 43.1 61.5 54.4 48.5
Costa Rica 70.6 52.3 48.6 56.0 48.3
Panama 50.5 45.9 75.2 54.4 44.5
Ecuador 43.1 44.0 70.6 50.5 49.8
Guatemala 25.7 24.8 83.5 39.7 44.3
El Salvador 51.4 47.7 35.8 45.6 34.5
Nicaragua 37.6 33.0 56.9 40.1 33.6
Honduras 34.9 27.5 78.0 42.0 25.9
Cuba 64.2 67.9 22.0 55.5 23.8
Venezuela 89.0 39.4 64.2 58.0 22.0
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 71.1 99.1 92.6 91.3
Canada 78.0 5.5 81.7 64.6 74.7
Puerto Rico 89.4 61.5 92.7 84.8 69.1
Chile 55.0 71.1 64.2 61.0 66.0
Brazil 60.1 11.9 81.7 56.9 50.1
Mexico 55.0 71.1 70.2 62.8 55.6
Argentina 49.5 11.9 52.3 42.8 38.5
Colombia 38.5 39.0 52.3 42.8 43.6
Peru 38.5 89.0 52.3 52.8 51.0
Costa Rica 38.5 61.5 52.3 47.2 47.6
Panama 38.5 56.0 52.3 46.1 50.2
Ecuador 38.5 11.9 52.3 37.3 34.8
Guatemala 10.6 56.0 18.3 22.0 22.5
El Salvador 10.6 39.0 18.3 18.6 21.4
Nicaragua 10.6 71.1 18.3 25.0 20.9
Honduras 10.6 71.1 18.3 25.0 22.6
Cuba 3.7 11.9 18.3 9.7 16.6
Venezuela 3.7 11.9 0.0 4.2 3.4
Global Average 50.0 50.0 50.0 50.0 50.0
COUNTRY RISKS SCORES

Long Term Economic Short Term Long Term Political Short Term Political Op Risk Country
Risks Risks
Risk Index Economic Risk Index Risk Index Risk Index Index Risks
US 90.8 80.3 83.5 92.7 94.5 89.4 91.3
Canada 78.9 78.9 97.2 97.2 93.6 89.9 74.7
Puerto Rico 45.9 50.0 30.3 27.1 59.6 45.4 69.1
Chile 68.3 74.8 84.4 72.5 70.2 73.4 66.0
Brazil 55.0 47.7 56.0 15.6 32.1 39.8 50.1
Mexico 61.5 62.8 38.5 22.9 41.3 44.7 55.6
Argentina 34.9 13.8 41.3 35.3 33.0 31.9 38.5
Colombia 59.6 56.9 35.8 43.1 36.7 44.8 43.6
Peru 66.1 71.6 43.1 29.4 40.4 48.5 51.0
Costa Rica 47.7 43.6 67.0 41.3 45.0 48.2 47.6
Panama 67.0 52.3 58.3 59.2 50.5 56.3 50.2
Ecuador 49.5 41.3 12.8 13.8 33.9 30.9 34.8
Guatemala 46.8 46.8 11.9 3.7 15.6 23.4 22.5
El Salvador 35.8 21.1 36.7 11.0 24.8 25.7 21.4
Nicaragua 11.9 9.2 8.3 21.1 19.3 14.8 20.9
Honduras 26.6 45.4 11.0 3.7 13.8 19.0 22.6
Cuba 17.4 6.0 17.4 78.9 21.1 27.0 16.6
Venezuela 0.9 0.0 7.3 0.9 1.8 2.1 3.4
Global
50.0 50.0 50.0 50.0 50.0 50.0 50.0
Average
Regional
48.0 44.6 41.2 37.2 40.4 42.0 43.3
Average
Colombia Innovative Pharmaceuticals Risk/Reward Index

Key View: Colombia will continue to present opportunities for drugmakers, reflected by the country scoring 50.7 out of 100 in our
Innovative Pharmaceuticals Risk/Reward Index. While the demand for innovative medicines will remain given the rising burden of
chronic diseases, the challenging medicine pricing environment will pose a significant downside risk to drugmakers seeking to
launch a patented drug in the country.
Colombia: Innovative Pharmaceuticals RRI - Global And Regional Ranks
• Regional rank (out of 18): 8th

• Global rank (out of 110): 54th
Colombia: Innovative Pharmaceuticals Risk/Reward Index

Q119
Note: Scores out of 100, higher scores = lower risk. Source: Fitch Solutions' Innovative Pharmaceuticals Risk/Reward Index
Industry Rewards: Colombia’s score of 56.0, above the regional average of 50.8. A pharmaceutical market size of USD3.42bn in
2017 reflects the country’s small pharmaceutical industry. Access to patented medicines will remain limited as the public healthcare
system in Colombia remains engrossed with financial difficulties. Colombia’s per capita spending on pharmaceuticals remain lower
than the regional average, highlighting a challenging environment for innovative drugmakers.
Country Rewards: Colombia scores 50.2 out of 100, lower than the regional average of 54.2. Colombia’s young population, with a
low proportion of pensioners (8% of the population over 65 in 2017) and a low population growth rate (0.8% in 2017) limits the
demand for high-value innovative medicines. While the opportunities for innovative drugmakers will remain weak, the rising burden
of chronic diseases such as cardiovascular diseases will have important implications for public healthcare provision and the long-
term potential of Colombia’s pharmaceutical market.
Industry Risks: With a score of 42.8 out of 100, Colombia scores below the regional average of 44.2. Patented medicine sales will
continue to face a challenging business environment in the country as concerns for intellectual property protection and
pricing persist. While the Colombian government avoided issuing a compulsory licence in 2016, the country's pricing and
reimbursement environment has deteriorated, and price regulations pose significant risks for multinational drugmakers.
Country Risks: Colombia’s score of 43.6 out of 100 is slightly higher than the regional average of 43.3. Political risks in the country
remain following the presidential elections in June, despite the incoming administration of president-elect Iván likely to support
investment and business activity. A positive economic outlook, with an uptick in real GDP growth in 2018 due to stronger private
consumption, low inflation, rising oil prices and increased investment will help maintain Colombia’s attractiveness for drugmakers.
Regulatory Development
Regulatory Review
The main regulatory authority is the National Institute of Medication and Food Surveillance (INVIMA), which operates under the
auspices of the Ministry of Social Protection (MSPS). All drugs must be registered with INVIMA, which recognises six types of
registration: manufacturing/sales, importing/sales, importing/packaging/sales, importing/part of manufacturing/sales, part of
manufacturing/sales and manufacturing/export. The basis for market regulation is Decree 2092 of 1986 and Decree 677 of 1995,
although there have been a number of amendments to both since they were published.
The Comisión Revisora de Productos Farmacéuticos (Review Commission of Pharmaceutical Products) is in charge of the
pharmacological evaluation, which is required for all new drugs (in addition to the standard technical and legal evaluations). On
receipt of the relevant documentation, the Review Commission has a period of 180 working days in which to issue its opinion. If the
product has been registered in at least two reference countries and has not been rejected in any, a clinical information summary
with its respective bibliography is acceptable for the pharmacological evaluation.
On completion of the pharmaceutical and legal evaluations, documentation and results must be submitted to INVIMA with an
application for sanitary registration. If the documentation is incomplete, the application will be automatically rejected. The process
can last for a minimum of 20 to a maximum of 90 days. The sanitary registration lasts for a 10-year period, and can be renewed if
requested within a set time frame prior to expiry (three months for imports, for example).
In addition to the technical evaluation, which may include INVIMA visiting manufacturing facilities for a product in question, a legal
evaluation is required to determine the manufacturer's legal rights to produce the product in question. This is particularly important
when the local manufacturer is a third party, since production must be authorised by the product's originator.
Pharmaceutical Advertising
Advertising of non-prescription drugs is regulated by Resolution No. 481 and Resolution No. 114, both issued in 2004. This no
longer allows advertising of price discounts and 'buying more for the same price'. Discount coupons, directly advertised in drug
packaging, are valid, as per the 2004 legislation.
Advertising of prescription drugs, hospital drugs or controlled substances is forbidden in the mass media. These products can only
be promoted in scientific or technical publications, specifically aimed at the odontological or medical community.
Sales promotion and personal selling of prescription drugs is not entirely controlled and bribery is not uncommon. The Ministry of
Health has indicated that there is a need to issue guidelines for medical visits. Moreover, in November 2011, Camilo Uribe of the
International Narcotics Control Board (INCB) and Colombian police said that prescription drug abuse presents the biggest hurdle in
the country's fight against drug cartels. Although the country's aggressive stance against organised crime has helped to stop illicit
drug trade, it has struggled to curb the growing abuse of prescription medicines, according to Uribe.
Around 70% of drug advertisements in Colombia are misleading, according to the results of a survey by the National University of
Colombia published in February 2012. Alexander Mountain, the pharmacy department student who led the study, said it found that
most of the drugs would only cure symptoms, not the disease. Mountain said that about 55% of the drugs lacked a correlation
between information given on television adverts and the indication reported in the INVIMA database. According to Mountain,
government regulations neither emphasise the correct use of drugs, nor consumer protection. Francisco Gonzalez Baena, the
deputy director of medicines at INVIMA, said that the agency plans to regulate closed channels of television where the
advertisements appear to try to control the advertising of medicines.
Intellectual Property Regime
The patent protection regime in Colombia is still one of the weakest of the main Latin American markets. Improvements have not
kept pace with more robust rules, such as those for bioequivalence enacted in Brazil and Mexico in the last few years. At present,
protection relates almost exclusively to so-called 'process patents'. This is mainly due to the fact that the government has used weak
regulation as a means of keeping the local pharmaceutical industry afloat in order to maintain jobs and ensure low drug prices,
often through cheap copies. Parallel imports and compulsory licensing are allowed.
The Superintendency of Industry & Commerce (SIC) regulates intellectual property rights (IPR). Under Andean Decrees No. 344 and
486, Colombia has ratified the provisions of the World Trade Organization (WTO)'s Trade-Related Aspects of Intellectual Property
Rights (TRIPS) Agreement. Since 1994-1995, patents have been enforced for 20 years, providing that they are requested within one
year of the original patent. However, not all the provisions are fully implemented. On average, around 90% of all patent requests are
accepted and patent reviews take around five years.
Decree 2085 concerns confidential regulatory information on new chemical entities. The decree - which was agreed during
negotiations on benefits to Colombia under the US Andean Trade Preferences Act - established five-year data protection only for
new chemical entities (NCEs), albeit non-retroactive.
In February 2018, the Pharmaceutical Researchers and Manufacturers of America (PhRMA) published its annual submission for the
United States Trade Representative (USTR)'s Special 301 Report, in which it highlights market access barriers and intellectual
property concerns in the major international pharmaceutical markets. Colombia has consistently been on the PhRMA 2018 priority
list since 2016. The main key issues of concerns presented by the PhRMA report stay unchanged. Concerns remain over restrictive
patentability criteria, weak patent enforcement, issuance of a declaration of public interest to force a price discount and market
access barriers (increased regulatory barriers under the National Development Plan, Substandard biologics regulation, and arbitrary
and non-transparent market access policies). 2018 did, however, see an addition of regulatory data protection failure as a concern.
Colombian legislation requires five-year data protection for new chemical entities upon approval. However, the Colombian
regulatory authority INVIMA (Instituto Nacional de Vigilancia de Medicamento) has denied new chemical entities protection due to
minor chemical structure similarities with those approved. According to PhRMA, this inconsistency between regulations and
approvals undermines the development of new pharmaceutical products.
Patent Protection
Patent enforcement remains lacking in Colombia despite the implementation of special measures to address patent infringement
by the National Institute of Food and Drug Surveillance (INVIMA - Instituto Nacional de Vigilancia de Medicamentos y Alimentos) in
2013. PhRMA notes that 'until recently, patent litigation took more than eight years'. While modifications were made in 2014 to
improve the system's timeframe, PhRMA remains cautious of the country's efficacy in dealing with patent infringement going
forward.
PhRMA has also expressed worry surrounding the scope of patentable subject matter. New guidelines for the granting of patents for
polymorphs, selection inventions and pharmaceutical kits have been deemed inconsistent with the TRIPS Agreement. The Andean
Court of Justice has also released several legal opinions contradicting TRIPS regulations, which allow for the recognition of patents
for second use, compounding the problem within Colombia.
In January 2018, PhRMA wrote to the Colombian government asking them to revoke Resolution 5246 and the Declaration of Public
Interest (DIP) process to guarantee access to antivirals for the treatment of hepatitis C. PhRA stated that 'Resolution 5246 is
deficient, both from a legal and procedural point of view, and it seems that be consistent with Colombia's international obligations
and aspirations'.
In June 2016, the MSPS issued a Declaration of Public Interest (DPI) on Novartis' Gleevec/Glivec (imatinib) oncology drug. In
Colombia, a DPI is the first step towards a compulsory licence. This move followed numerous threats from the Colombian
government that it intended to grant a compulsory licence during the year. We had previously noted that the economic and
political costs would be too high for the Colombian government to issue a compulsory licence, and this view has so far played out.
While the threat of a compulsory licence has not materialised, government authorities did move to cut the price of Glivec by 45% in
September 2016 (citing 'public interest') and new regulations introduced in Q416 have broad implications for multinational
drugmakers with operations in Colombia. In November 2016, Colombia's National Pricing Commission set out a general pricing
methodology that will apply to all medicines subjected to a DPI. This methodology is the same as that used in the Glivec price
reduction, and likewise targets innovative products by effectively expropriating relevant patents. The risk for pharmaceutical
companies is that the Glivec episode may have set a precedent for the Colombian government (and other Latin American
authorities) to act in a manner inconsistent with market access and trade commitments, with the potential for recurring DPIs and
price cuts.
We note that the annual cost of Glivec is about USD15,000 per patient in Colombia, which is much higher than the per capita
national income (USD8,000). Between 2008 and 2014, Colombians paid COP400bn (USD136mn) for the drug. The government
estimated that between 2016 and 2018, Colombia will pay COP97bn (USD33.7mn) for Glivec. The Ministry of Health in Colombia
has tried to negotiate prices with Novartis to reduce the drug price from USD324 per milligram to USD140, as before Glivec's patent
was enforced in Colombia, local generic drugmakers offered the bioequivalent imatinib at USD78.5 per milligram. However, Novartis
rejected the negotiation.
A Novartis spokesperson told swissinfo.ch that the company was not against the practice of issuing compulsory licenses in
exceptional circumstances, such as a public health crisis, but was against the use of such a clause to force price negotiation. 'In the
case of Glivec in Colombia, a Declaration of Public Interest is inappropriate as there is no shortage of Glivec or evidence of other
access issues, the price is already subject to government controls and there is no monopoly with multiple generics already on the
market.' The Association of Pharmaceutical Laboratories Research & Development (Afidro) noted, 'as an association we regret the
decision of the minister and hope the compulsory license will not be issued. It will affect the confidence of our industry in the
Colombian intellectual property regime.'
Biologics Regulation
In September 2014, the Colombian government issued Decree 1782, which establishes marketing approval evaluation
requirements for biologic medicines, through three approval routes. The most controversial of these is called the abbreviated route,
which is utilised for well-known drugs in which the active pharmaceutical ingredient (API)'s behaviour is understood. The
abbreviated route allows for a summary approval and requires no clinical studies, diminishing clarity of the safety and efficacy of the
product.
Due to its lack of regulatory accountability, the abbreviated route has been heavily criticised by the US FDA, Afidro and Afidro's
associated drugmakers Sanofi, Abbott Laboratories, Bayer, GlaxoSmithKline, Novartis, Janssen, Boehringer Ingelheim and Pfizer.
Concerned about the safety of the abbreviated route, these organisations have agreed that the decree is not in line with
international legislation and will potentially allow dangerous drugs into the country.
Price Control
PhRMA notes that the current pricing system in Colombia 'sets a maximum price for both the private and institutional markets by
setting the price at the level of the distributor.' This creates a failure to recognise the value of pharmaceutical innovation. However,
the government's plans to modify the system would completely eliminate market freedom by further extending price controls to
non-concentrated markets. Another major concern lies in the government's elimination of the National Pricing Commission,
granting full control of pharmaceutical pricing to the Ministry of Health, which PhRMA worries will result in a one-sided approach
that may disregard the promotion of innovation.
Counterfeit Pharmaceuticals
In 2013 Colombia's counterfeit drug market grew to nearly the same size as its illegal drugs market. Between 2012 and 2013,
Colombian officials seized more than five million units of counterfeit medicines, valued at approximately USD2mn. The figures
exclude reports from the judicial police, the Technical Investigations Corps or ministers of health. The Pharmaceutical Security
Institute placed the country among the top 10 countries worldwide for fake and counterfeit drug trading in the last 10 years.
According to data provided to the WHO Impact project, 30-40% of medicines in Asia and Latin America are counterfeit.
However, beyond counterfeits, the marketing of products of unproven patentability by leading local companies appears to have
continued unabated. The government has begun an education programme to help warn consumers about the dangers of
unregulated, illegal drugs, but efforts to promote genuine, bioequivalent generic medicines are in their infancy.
COLOMBIA-US FTA MECHANISMS RELEVANT TO INTELLECTUAL PROPERTY

Mechanism Impact
Data protection Generic companies may not make commercial use of confidential information used in regulatory submissions for
original products. Protection of test and other data submitted to the government for the purpose of product
approval against unfair commercial use allowed for a period of five years from product approval for pharmaceuticals.
'Second use' patents Allows additional patents, eg, for additional therapeutic indications.
Patent term Extends patent life, eg, to reflect delays in licensing process.
extensions
Patent 'linkage' Creates a mechanism ensuring that no copy drug that infringes a valid patent can be launched. Protection against
arbitrary revocation of patents provided, as well as the ability for patent-holders to seek remedies prior to the
marketing of the allegedly infringing product.
'TRIPS-plus' rules Alleged to include measures undermining the flexibility of the WTO TRIPS treaty, such as procedures on compulsory
licensing.
Source: ASINFAR, Fitch Solutions
Pricing Regime
Pharmaceutical price deregulation - implemented in 2006, in combination with improved IPR protection - has resulted in increasing
health-related litigation. As a result, Colombia is one of the Latin American countries with the highest and most expensive number
of right-to-health litigation cases, which has placed negative pressure on public finances. In the last decade, thousands of
Colombians have used a judicial action for the protection of basic rights (Tutela) and demanded the provision of health services,
which are excluded from the Mandatory Health Plan (POS).
The National Price Commission of Pharmaceuticals and Medical Devices (NCPM), which forms part of the Ministry of Commerce,
Industry & Tourism, is the authority responsible for drug pricing. Colombia operates a two-part pricing system for public sector
pharmaceuticals, one of which covers all government medicines and the other just those covered by the Institute of Social Security
(ISS). However, PhRMA has criticised the fact that the maximum reimbursement prices determined for the public health insurance
system are often used across the board, which leads to low prices for a number of medicines.
Private sector prices have been deregulated since 2006. Consequently, all the players in the distribution channels have abused their
power to increase drug prices, particularly for drugs not included in the Mandatory Health Plan (POS) or drugs for which there is no
competition.
According to a May 2013 statement by Juan Gonzalo Zapata, from the Foundation for Higher Education and Development
(Fedesarrollo), Colombia has some of the most expensive medications in South America. Although drug price controls exist in
Colombia, they are not effectively enforced in the private sector. Drugmakers are required to report price adjustments on a quarterly
basis, but about 70% of those operating in the country do not comply with this requirement.
Decree 1782, passed in September 2014 by Colombia's President Juan Manuel Santos, will encourage the lowering of drug prices
throughout the country. The decree aims to reduce the price of biotechnological medicines by 30%-60%. Currently,
biotechnological medicines make up 35% of Colombia's pharmaceutical market, and include treatments for diabetes and cancer.
With Colombia facing an obesity crisis, the new decree comes at a time when biotechnological therapies are set to become more
necessary, creating a need to expand the biotechnological market by introducing more competition through lowered prices.
Once marketed, each product's manufacturer must submit quarterly cost estimates to price regulators, although around 70% of
drugmakers operating in the country reportedly do not comply with this requirement. The discounts obtained by the ISS, for
example, were reportedly as high as 92% of the list price, according to reports in late 2006. Furthermore, it is claimed that
manufacturers and wholesalers inflate list prices for many of their products, in order to account for subsequent discounting by
pharmacy chains and other suppliers.
Under Resolution No. 01/2012, published in September 2012, the NCPM added 70 medicines - including treatments for
hypertension, heart failure, epilepsy, depression, acid reflux, Alzheimer's and arthritis - to the direct control system in the institutional
sector and fixed their maximum prices. Overall, the NCPM added 151 medicines to the direct control system between January and
September 2012.
Around the same time, the NCPM decided that prices of drugs that require control and that have an impact on ISS sustainability will
be included in the direct control system. The NCPM will also fix the maximum retail price (Precio Máximo de Venta al Público, PMVP)
to the institutional sector. The NCPM will continue to monitor prices in the institutional sector and will be able to extend measures to
the private retail sector, when it determines that it is necessary to guarantee the system's sustainability.
In November 2015, Colombia's competitiveness regulatory agency SIC imposed a fine of COP1.5mn (USD530.7) on six drugmakers
for overcharging for drugs. The implicated drugmakers were Memphis Products, Sanofi-Aventis de Colombia, Novartis de Colombia,
Procaps, Quideca and Lafrancol. The regulator found that these firms sold 17 drugs at higher prices than set by the National
Commission on Drug Pricing and Medical devices between November 2012 and July 2013.
Pharmaceutical companies operating in Colombia will continue to face challenges from the recurring price cuts by the government
for high-value medicines. In June 2018, Colombian health minister, Alejandro Gaviria published a draft of the ‘circular 07 of 2018’ for
approval, which included 1,645 medicines that will be incorporated into the direct control regime. If approved, the total number of
medicines on the price control list will rise to 2,624, which includes medicines ranging from contraception to treatment for high
blood pressure and mental health disorders. In June 2017, 148 medicines were subjected to price controls by the Colombia's
National Medicines and Medical Devices Pricing Commission compared to 1,645 in 2018. The total number of medicines under
pricing controls in Colombia will significantly increase from 978 in 2017 to a potential 2,624 medicines in 2018. The Ministry of
Health reports that the new regulation will reduce the price of these drugs on average by 50%, to generate annual savings of
COP366mn (USD0.12mn).
Reimbursement Regime
With the reforms, Colombia has continued its system of price ceilings and now offers reimbursement in the public sector for drugs
included on a positive list known as the Regimen de Libertad Vigilada, or Regulated Freedom Regime. The list covers all active
ingredients designated as 'essential' under Resolution 1746 of November 1993. An 'essential' drug must be the most cost-effective
drug to treat an illness, meeting pharmacological safety and efficacy requirements; provide a favourable answer to problems of
morbidity/mortality within the community; and be economically viable.
All products on the list have three or fewer designated competitors, as established by a 2004 decree. It comprises around 300
mainly generic APIs in more than 400 presentations. The packaging of such products features a distinctive green stripe.
There are two broad systems for reimbursement in Colombia: the subsidised scheme for the poor and the contributory scheme.
Drugs are provided free under the subsidised scheme, although the introduction of moderating fees is under consideration in an
effort to contain the current abuse of the system. Under the contributory scheme, drugs are provided free for inpatients, providing
the hospital has sufficient funds in its budget. EPS are granted a budget from FOSYGA which, together with co-payments and
moderating fees, constitutes their funding for social security healthcare coverage.
Drugs for outpatients are free in principle, though moderating fees are in place for excessive use of the system at above defined
limits or for what is considered to be elective treatment. EPS are free to establish the limits for reimbursement within MSPS
guidelines, but the frequency and amount of moderating fees must be published at least once per year in a national newspaper.
Under national guidelines, patient contributions to prescription drugs under the contributory scheme vary according to financial
circumstances. For people in income groups one, two and three, the current contribution is 10% of the total cost of the prescription,
up to a maximum of 20% of the minimum legal monthly salary. For people in income groups four, five and six, the contribution is
20% of the total cost of the prescription, up to a maximum of 40% of the minimum legal monthly salary.
A positive list for reimbursement is defined in the Manual of Essential Drugs and Therapeutics. Drugs are listed by generic name and
pharmacological presentation. In addition, the MSPS, health departments, local directorates, EPS and IPS are allowed to design their
own therapeutic guides to cover drug prescriptions, frequency of use of the service and other such criteria.
Under normal circumstances, only drugs that fall into the categories below are free of charge or reimbursable (in the outpatient
sector). Other drugs may be prescribed at the request of a patient, but these can only be covered under a complementary health
plan.
• Drugs for special programmes, which form part of the Plan de Atención Básica (Basic Attention Plan), are provided free to
persons not affiliated to an EPS. The whole population are entitled to free vaccinations under the Extended Programme of
Immunisation
• Drugs for the treatment of chronic illnesses, which are high-cost and not covered for general use, may be reimbursed by
EPS in certain circumstances, through a fund or insurance mechanism. Drugs must be prescribed by authorised personnel and
the patient must be eligible under the Guías de Atención Integral (Integral Attention Guidelines); and
• Alternative essential drugs are included for patients who are hypersensitive or resistant to drugs on the basic list. Alternative
essential drugs for reasons of risk, sanitation or convenience may be added. These drugs are subject to the approval of the
National Health Social Security Council.
According to the WHO, the active ingredients on Colombia's essential drugs list represent about 40% of prescriptions written
annually. Medicines not included on the list must be paid for in full. Prices of essential list drugs are allowed to increase only in line
with the official level of inflation. As this is often lower than the real level of inflation, companies see their profit margins gradually
reduced over time.
The MSPS has acknowledged that there might not be enough financial resources for FOSYGA to reimburse non-POS
pharmaceutical drug expenditure to EPS. This amount was estimated at over COP3,000bn (USD1.4bn) in 2010, compared with
initial estimates of between COP2,400bn (USD1.1bn) and COP2,500bn (USD1.2bn). ACEMI had valued it at COP2,800bn (USD1.3bn).
This expenditure amounted to COP1,900bn (USD0.8bn) in 2009, comprising 2.0mn requests, compared with COP626.0bn
(USD301.3mn) in 2007, comprising 835,000 requests.
Market Overview
Colombia boasts one of the larger pharmaceutical markets in Latin America, though it continues to be overshadowed by still larger
markets, including Mexico, Brazil and Argentina. While the government's continued commitment to health and pharmaceutical
reform make the country appealing for investment, Colombia's continued battle against counterfeit medicines and troublesome
intellectual property regime continue to keep it from becoming a regional outperformer.
In 2017, Colombia's per capita spending for pharmaceutical sales was USD70, while pharmaceutical spending as a percentage of
GDP was 1.1% - below the OECD average of 1.5%. Overall pharmaceutical spending came in at a value of COP10,092bn
(USD3.42bn) in 2017. That same year, patented drug sales accounted for 40% of total market sales, while generic medicines made
up 44% and OTC medicines accounted for 17% of Colombia's total pharmaceutical sales.
Colombia also represents one of the larger healthcare markets in the region, worth COP58,448bn (USD19.80bn) in 2017 with
healthcare per capita spending that amounted to USD404. Total healthcare expenditure as a percentage of GDP was 6.4% in 2017.
Private healthcare spending accounted for 24% of total healthcare spending while public healthcare accounted for 76% of total
health expenditure in 2017.
Colombia, like many neighbouring developing countries, is seeing a decreased rate of communicable diseases, replaced by an
increase in non-communicable diseases. This is due to lifestyle changes which include the increased consumption of foods with
higher caloric intake and smoking. These changes are caused by increased household finances from developing economies. In
particular, Colombia's most notorious chronic diseases include neuropsychiatric conditions, depression, cardiovascular disease, also
called CVD, cancer, Alzheimer's disease, respiratory conditions and diabetes. The burden of disease from neuropsychiatric
conditions significantly outweighs the burden of all other chronic diseases. Diabetes will also continue to be a popular topic within
the market due to its growing global concern.
Colombia's competitive landscape has seen interest from both domestic and foreign pharmaceutical companies. Domestic
drugmakers include Laborarios Genfar SA and Laboratorios Bussie. Foreign manufacturers include Pfizer, Sanofi and
GlaxoSmithKline. Multinational drugmakers will continue to face a tough business environment in Colombia. With a low oil price
environment affecting government revenues, authorities will be incentivised to curb pharmaceutical expenditure as a means of
expanding access to healthcare. This includes price revisions or the threat of compulsory licenses, which will affect products beyond
Gleevec (imatinib).
Healthcare Sector
Colombia has emerged remarkably well from decades of civil conflict, which at the height of fighting displaced nearly three million
people. However, many Colombians have remained in shanty towns where they have little access to health or educational services.
WHO statistics show that there is a severe lack of healthcare human resources in the Latin American country. In 2014, the WHO
reported that there were 14.7 physicians and 6.2 nurses per 10,000 people.
In 2012, Colombia introduced its first ever 10-year health plan, which outlines objectives for sector progress between 2012 and
2021. However, corruption and graft remain a problem in healthcare. For example, after the embezzlement of more than USD50mn
through health insurance firms known as EPS, such facilities were banned by law. Currently, the Nueva EPS has been established in
its stead. In the few months since its existence, the Nueva EPS has already accounted for multiple fraudulent actions within the
healthcare sector and taken action toward strengthening anti-counterfeit medicine strategy. However, scepticism still remains due
to the organisation's namesake.
Major recognised providers of pharmaceuticals include public and private hospitals, state social enterprises from the Social Security
Institute and public and private EPS. Institutional sales are very large by volume, due to the high consumption of generic medicines.
Generic drugs, for instance, account for around 90% of the sector by volume consumed by EPS. As generic prices are very low,
however, institutional sales by value are smaller.
The health sector reform in Colombia, initiated by Law 100 (1993), introduced a regulated health insurance market with a managed
competition model. However, access to healthcare - particularly to secondary care - is perceived as complex because of four
obstacles with synergetic effects: segmented insurance design with insufficient services covered, insurer-managed care and
purchasing mechanisms, provider networks' structural and organisational limitations, and the price of insurance.
Due to the proportion of the population at low-income levels, there has been an increase in the presence of non-profit
organisations addressing Colombia's healthcare needs. With the aim of meeting the immediate emergency health needs of
Colombia, Concern America - a non-profit organisation - is working in the country to develop a sustainable, public health
programme that is operated at a local level.
Health Insurance
The ISS is charged with overseeing public sector health insurance. Since 2003, the government has organised public sector health
insurance through a simplified structure operated by seven state-owned, largely autonomous healthcare providers, known as State
Social Enterprises (ESEs). These had varying degrees of success and additional reforms were required, although some 14% of
Colombian population remains uninsured.
As part of its previous reforms, the government approved Healthcare Law 1122 in 2007, which had the stated objective of 'making
adjustments to the Healthcare Social Security System, with the priority being the improvement of services to end-users'. The law
created the Commission of Health Regulation (CRES), which operates under the auspices of the Ministry of Social Protection and
which would ultimately replace the medicines evaluation committee (CNSSS).
Subsequently, ISS health insurance activities have been brought under the umbrella of a newly created EPS health insurance
provider (known as the Nueva EPS), which runs alongside existing privately owned EPSs. However, the New EPS has experienced
financial difficulties, owing to the fact that it incorporates a larger number of high-cost, chronically ill patients over the age of 45
than is the case for private EPSs. In light of this, the six Cajas de Compensación Familiar have been reconsidering whether it is viable
for them to participate in the government's scheme.
After legalising health as a fundamental right in June 2014, the government has planned to establish a single healthcare funding
pool, 'Salud Mia' (My Health), to distribute its annual healthcare budget. Salud Mia will make payments only after treatment has been
approved to ensure some level of government control over its own funds. The government will also create a number of 'health
consultancies' to replace the EPS system. They will not directly manage any health funds but define medical service networks, audit
accounts and direct payments to healthcare institutions. Certain existing EPSs will be allowed to take on the role of health
consultancies under strict regulations.
As for more broad healthcare programmes, the government has decided to extend its Familias en Accion programme, which is
designed to enhance health provision for low-income families through conditional cash transfers. Despite official endorsement, the
programme has attracted criticism from consumers, politicians and other organisations. Although the programme has seen a rapid
uptake by families, some critics argue that coverage across municipalities can be grossly uneven and that funds are being accessed
by people who are not financially eligible.
Additionally, as healthcare professionals and health management organisations have complained of restrictions limiting their
autonomy to work privately and set user fees, we believe that providers have turned to fraudulent billing to compensate for lost
income. Other abuses under investigation include: providers billing for services not delivered; double billing state agencies for
private patients; charging for deceased persons receiving benefits; and budget overruns within government offices and
departments.
Healthcare Funding
The state of Colombia's public healthcare system remains volatile as many news sources in the country have begun highlighting the
system as being in a state of 'crisis'. The government has swiftly negated these accusations but controversy continues to shroud the
Nueva EPS' efficiency. Compounded by financial instability in the sector, Colombia's health system will remain disadvantaged in
coming years and limit the country's appeal for foreign investment.
Although health costs account for only 2.43% of the consumer basket, this expenditure is not spread uniformly over time. The rising
healthcare costs are likely to place a significant burden on household incomes in times of emergency. The barriers to public access
mean that patients often seek private consultations when there is a sense of emergency and waiting times for public services are
too long. Since the Colombian healthcare system was decentralised in 1993, there has been a significant increase in private health
insurance uptake, in line with decreasing out-of-pocket spending.
The system also remains plagued by underpayment from active workers to healthcare insurance and other social security funds.
With nearly half of the economically active population reported to be earning wages at or below the minimum wage, there is a
growing consensus that the current social insurance system in Colombia - one of the high-profile reforms of the present
government - appears unable to remain structurally viable over the longer term.
Specifically, the technical committee now assesses whether a patient is eligible for treatment paid for by the state. If a patient is
declared ineligible, they will have to use personal savings in order to fund healthcare costs. The government has also established a
special fund to provide coverage to those living in severe poverty, although - as this particular demographic is a significant
percentage of the population - funds are likely to be insufficient. We note that the government has pledged investment in
healthcare and social service provision for the poor in the past. However, the weakening local currency and lower exports revenues
have hampered the effective collation of resources.
Colombia's healthcare system has a deficit of COP5.3trn (USD1.6bn), mainly caused by mismanagement and corrupt practices in
healthcare intermediaries, according to Health Minister Alejandro Gaviria, speaking in December 2015. To improve the situation, the
government had previously pushed for healthcare reform through congress in 2014, but failed to develop a system that removed
the chronically corrupt EPS healthcare intermediaries.
In 2015, the Colombian government bailed out health insurance provider Caprecom, after the company accrued COP1bn
(USD401,500) in debt. The company, which operates as an EPS, is responsible for the health insurance of more than 3mn
Colombians within the public health sector, resulting in the government's decision to pay for Caprecom's debts in order to continue
providing medical access for its members. Despite its title as an EPS, Caprecom operated outside of the traditional EPS system,
working as a 'mixed EPS' - meaning that the organisation funded public healthcare access through the social security system, but
offered insurance schemes similar to the private sector, whereby patients pay into higher coverage options. Patients will now be
forced to rely upon basic coverage provision through the Nueva EPS.
The Ministry of Health announced that beneficiaries of the bailed-out Caprecom would be forced to rely upon public health
promoting entities known as EPS for their medical needs. The announcement led to public outcry by Caprecom patients who called
the decision 'irresponsible' as mounting tension surrounding the infamous EPS system continues to worsen, diminishing healthcare
access in the country.
The Patients Association in Colombia, which represents the 3mn Colombians affected by the Caprecom bankruptcy stated that by
forcing patients to turn to the EPS system, now known as Nueva EPS, 'the Ministry of Health is ignoring the poor quality of care that
is offered by the Nueva EPS, which only has the resources to serve its current membership.' As such, the current Nueva EPS facilities
in Colombia, which already have limited resources, will offer very little assistance to new members, while the burden of expanding
membership will add further strain to the system's overall resources, causing waiting lists to lengthen.
Medical Tourism
The Colombian government has been engaged in promoting the country as a top destination to receive high-quality treatments
such as cosmetic surgery and dentistry at a reduced cost. The main attractions of the country for those travelling from North
America include ease of travel, low cost of care, and modern healthcare facilities. The government is working on alliances between
the private health sector and the hospitality industry in order to further promote Colombia as a destination for medical work. Spas
and spa hotels plan to offer high-end services and complementary care to clientele.
The sector is becoming increasingly competitive across Latin America as a greater number of countries in the region vie for medical
tourists. Gains made against rebel capacity under President Uribe's administration, as well as optimism over newly elected President
Juan Manuel Santos's approach to the conflict, should increase Colombia's appeal to medical tourism as the country experiences an
upturn in overall tourism. About 2.2% of the 2.4mn tourists to the country in 2008 visited Colombia for medical services, El Tiempo
reported, while 21% of this number claimed the reason was competitive prices.
HEALTHCARE RESOURCES (COLOMBIA 2012-2017)

Indicator 2012 2013 2014 2015 2016 2017
Hospitals, total 1,217 1,201 1,185 1,169 1,154 1,139
Hospitals, public 865 849 833 817 802 787
Hospitals, private 352 352 352 352 352 352
Hospitals, beds 53,123 53,128 53,133 53,138 53,143 53,148
Hospitals, beds, per '000 population 1.13 1.12 1.11 1.10 1.09 1.08
Source: Fitch Solutions
HEALTHCARE PERSONNEL (COLOMBIA 2012-2017)
Indicator 2012 2013 2014 2015 2016 2017
Physicians, total 80,295 83,610 87,050 90,638 94,371 98,170
Physician, per '000 population 1.71 1.77 1.82 1.88 1.94 2.00
Nurses, total 45,623 48,550 51,593 54,864 58,322 62,194
Nurses, per '000 population 0.97 1.03 1.08 1.14 1.20 1.27
Dentists, total 42,193 42,608 43,012 43,405 43,788 44,159
Dentists, per '000 population 0.90 0.90 0.90 0.90 0.90 0.90
Pharmacists, total 23,440 23,671 23,895 24,114 24,326 24,532
Pharmacists, per '000 population 0.50 0.50 0.50 0.50 0.50 0.50
HEALTHCARE ACTIVITY (COLOMBIA 2012-2017)
Indicator 2012 2013 2014 2015 2016 2017
Public inpatient admissions, '000 1,746.95 1,761.94 1,777.07 1,792.32 1,807.70 1,823.22
Public inpatient admissions, per '000 population 37.26 37.22 37.18 37.16 37.15 37.16
Hospitals, average length of stay, days 5.5 5.6 5.7 5.8 5.9 6.0
Surgical procedures, '000 733.72 740.02 746.37 752.77 759.23 765.75
Outpatient visits, '000 50,369.49 54,399.05 58,750.97 63,451.05 68,527.13 74,009.30
Outpatient visits, per '000 population 1,074.40 1,149.04 1,229.31 1,315.63 1,408.48 1,508.37
Research & Development
The government is stepping up its efforts to increase pharmaceutical R&D in the country, and introduced income tax exemptions up
until 2013 for medicinal products largely developed in Colombia. However, although the country has a relatively large number of
local pharmaceutical firms, the vast majority have limited technological capabilities and are restricted to manufacturing small,
simple molecules. We believe that Colombia's domestic pharmaceutical industry would require large investments to compete
internationally on biopharmaceutical innovation. Nevertheless, in the longer term, we see governments in emerging markets
gradually increasing the levels of investment in local biopharmaceutical R&D as they become increasingly aware of the importance
of the sector in promoting economic growth and fostering global competitiveness, as well as of improving their citizens' health.
Founded in 1998, the Pharmaceutical Research and Science Centre is certified by the Colombian Institute for Science and
Technology (COLCIENCIAS). In 2012, it represented 26 entities, including the two leading trade organisations AFIDRO and ASINFAR,
pharmaceutical companies and universities.
PHARMACEUTICAL RESEARCH AND SCIENCE CENTRE MEMBERS, 2015

AFIDRO Laboratorios Bussie Laboratorios Lister
ASINFAR Laboratorios Ecar Laboratorios Medick
Corporación de Fomento Asistencial del Hospital San

Laboratorios GENFAR Promotora Médica Las Américas
Vicente de Paul
Corpaúl Laboratorios Heimdall Sanofi
Servicio Nacional de Aprendizaje

Droguería Popular Laboratorios Incobra
(SENA)
Laboratorio Franco-Colombiano
Escuela de Ingeniería de Antioquia Tecnoquímicas
(LAFRANCOL)
Laboratorio Profesional Farmacéutico

Humax Pharmaceutical Universidad Católica de Oriente
(LAPROFF)
Laboratorios America Laboratorios Lelve Universidad de Antioquia
Laboratorios Biogen de Colombia Laboratorios Licol Universidad CES
Vitrofarma
Source: CECIF
Clinical Trials
Colombia is developing as an attractive destination for clinical investigations and further government support in the form of new
legislation and commitment is expected to add to the benefits. This was stated by the delegates at the IV National Congress for
Clinical Investigation in Colombia, which was organised by the association for the advancement of clinical research (AVANZAR) in
Colombia. The country offers many advantages conducive to the growth of clinical investigations. These include the continued
creation of new research centres; the quality of professionals and their inclination towards research; the large urbanised population,
which is centred on five cities; and good patient retention rates. Colombia's communicable disease burden also makes it an
attractive location for vaccine trials. The country was one of eight dengue-endemic countries in Latin America and Asia chosen as a
location for Takeda's pivotal Phase III Tetravalent Immunisation against Dengue Efficacy Study (TIDES) trial, which completed
enrollment in March 2017.
Phase III clinical trials continue to be the outperforming group for clinical research in Colombia. Overall, clinical trials have seen slight
decreases in the country throughout the last five years with no interest in Phase 0 trials. Phase III trials remain dominant at 34 trials
in 2013, followed by Phase II (17), Phase IV (7) and Phase I (4). Resolutions have, however, been put in place to encourage proper
practice within clinical research, thereby encouraging further research. Resolution No. 2,378, issued by MSPS, establishes good
clinical standards for all institutions that carry out clinical studies involving human beings. In recent years, Bogotá has become an
attractive centre for conducting phase II-IV clinical studies due to this resolution.
Clinical Trial Registrations

2013-2016 (2013-2017)
Note: Early Phase I was formerly listed as Phase 0. Sourced by date of initial registration. Source: ClinicalTrials.gov, Fitch Solutions
Epidemiology
An increasing burden of non-communicable diseases - particularly cardiovascular disease, cancer and diabetes - will shape the
development of Colombia's pharmaceutical and healthcare markets over the coming years. Having said this, government policy will
still need to address communicable diseases such as HIV and tuberculosis, which remain public health issues.
According to Fit
Fitch
ch Solutions' Disease Database, non-communicable diseases are on the rise in Colombia, while communicable
diseases are expected to increase through the next 15 years. The number of disability-adjusted life years (DALYs) lost to non-
communicable diseases is expected to grow by 45%, from 8.62mn in 2016 to 12.53mn in 2030. During this same period, DALYs lost
to communicable diseases are forecast to fall by 26%, from 1.73mn to 1.28mn. Mental and behavioural disorders are the type of
diseases that will pose the highest burden, followed by intentional injuries and cardiovascular diseases.
Burden Of Disease Projection

(2005-2030)
f = Fitch Solutions forecast; DALYs = disability-adjusted life years. Source: Fitch Solutions' Disease Database
From our analysis of Colombia's epidemiological landscape, we highlight five therapy areas that will be a focus for drugmakers over
the coming years. These are:
• Cardiovascular diseases (non-communicable)

• Cancer (non-communicable)
• Diabetes (non-communicable)
• HIV/AIDS (communicable)
• Tuberculosis (communicable)
Cardiovascular Diseases
Multinational drugmakers should prioritise Colombia given the significant disease mortality and expanding burden. According to
Pan American Health Organization (PAHO) data, cardiovascular diseases were responsible for 25% of premature deaths (men and
women) in 2010. This data is mirrored in more recent studies, suggesting there is a significant unmet need for cardiovascular
treatments. Unsurprisingly, the majority of the premature deaths from cardiovascular disease are the result of ischaemic heart
disease. Lifestyle factors such as alcohol consumption and smoking are the primary drivers of this trend. In a recent review of the
UN's sustainable development goals, alcohol consumption was highlighted as an area where Colombia has made little progress
since 2000. A 2013 study in the Autoimmune Diseases journal also attributed Colombia's high rate of cardiovascular disease to the
coffee consumption of the population. Although PAHO is projecting declines in cardiovascular premature mortality over the next
decade, the total burden of cardiovascular disease will increase significantly by 2030.
Cancer
There are clear revenue opportunities for cancer drugs in Colombia but companies must be targeted in their approach to ensure
the greatest returns. The incidence of key cancers is greater across Latin America than in Colombia, highlighting the need for
drugmakers to choose which products to launch (and where). On an age-standardised per capita basis, the Latin America region
had a greater incidence of prostate, breast and cervical cancer in 2012 (compared to Colombia). The incidence trends are also
reflected in the 2012 prevalence data, with prostate and breast cancer the most prevalent (and contributing more than a third to
the total cancer prevalence in both Latin America and Colombia).
Diabetes
Colombia will be a leading choice for drugmakers with a diabetes focus. Colombia was above the global and regional (Latin America)
average for prevalence in 2015. Of the 221 countries analysed by the International Diabetes Federation, Colombia was ranked
joint-67th in terms of prevalence for 2015 (tied with Chile and Cuba on 10%). The prevalence is forecast to increase to 12.9% by
2040, mirrored by increases in health expenditure on diabetes. There is further upside given that 40% of Colombian adults with
diabetes are currently undiagnosed and the country has a relatively high prevalence of impaired glucose tolerance (a pre-diabetic
state of hyperglycaemia).
HIV/AIDS
Pharmaceutical companies must deploy sub-regional strategies to optimise revenues from in Colombia. According to UNAIDs,
Colombia had an estimated 150,000 people living with HIV (PLWH) in 2013, accounting for 10% of all PLWH in the Latin America
region. Only Mexico had a higher number of absolute PLWH. Colombia's metropolitan population is concentrated in the capital
Bogotá, but multinational drugmakers must be cognisant of the sub-regional HIV hotspots to maximise revenue-generating
opportunities. For example, Barranquilla, the country's fourth largest city, has the highest HIV incidence of the approximately 37
territorial entities listed by the Ministry of Health. Research has shown elevated levels of HIV infection in cities spanning Colombia's
Andean, Pacific and Caribbean regions and pharmaceutical sales strategies must account for this.
Tuberculosis
The opportunities presented by TB in Colombia may be negated by antibiotic resistance and a higher burden elsewhere in Latin
America. The incidence of TB in Colombia has consistently been below the median for Latin America between 1990 and 2014. From
an unmet need perspective, drugmakers may find that countries like Bolivia, Guatemala and Nicaragua provide higher utility. There
will also need to be consideration for the antibiotic resistance profile across strains of TB in Colombia, which may render products
ineffective. As of 2015, Colombia was one of 105 countries worldwide to have reported at least one case of extensively drug-
resistant TB (XDR-TB). Reports of such cases are becoming increasingly frequent. Companies selling TB antibiotics in Colombia must
also understand the sub-regional profile. According to PAHO, disparities persist in the incidence of TB, with appreciable challenges in
Colombian departments that have predominately indigenous and African-descent populations (which are concentrated in the
costal and Amazonian regions respectively).
Zika Virus
According to PAHO and WHO, 18 countries and territories in the Americas confirmed autochthonous circulation of the Zika virus
between February 2014 and January 17 2016. These territories include: Brazil, Barbados, Colombia, Ecuador, El Salvador, French
Guiana, Guatemala, Guyana, Haiti, Honduras, Martinique, Mexico, Panama, Paraguay, Puerto Rico, Saint Martin, Suriname, and
Venezuela. Between November 2015 and January 2016, local transmission of the virus was detected in 14 new countries and
territories, highlighting the rapid spread of the virus.
Competitive Landscape
Research-Based Industry
In the 1940s, Colombia started to receive foreign investment in the pharmaceutical sector, with the entry of large multinational
companies. Abbott, Bristol Myers-Squibb, Schering, GlaxoSmithKline, Merck KGaA and Bayer were the first multinational drugmakers
to establish operations in the country. Their arrival contributed to the development of Colombia's pharmaceutical industry sector.
More recently, multinational investment into pharmaceutical research and development and production in Colombia has
been minimal, indeed of the top 50 global pharmaceutical firms, none has an innovative medicines production facility in the
country. Merck Sharp & Dohme and Merck KGaA sold their local manufacturing plants in 2012. The latter's assets were acquired by
Altea Farmacéutica, a recently founded Colombian company, which has continued to produce Merck KGaA's products at the plant.
Merck KGaA will continue its sales operations in the country.
Nonetheless, while domestic drug production accounts for two-thirds of medicine consumption by volume, multinationals
reportedly account for three-quarters of medicine sales by value. Market competition between local and foreign companies has
intensified since the start of 2012, as Sanofi purchased GENFAR and Recalcine announced its acquisition of Lafrancol.
The Colombian population is a highly skilled workforce and wages in the industrial sector are highly competitive with other
developing and industrialised countries. The Colombian government has also sought to incentivise industrial production by
establishing a number of free economic zones and 'special import-export systems'. There are currently 11 free trade zones, which
are exempt from import tariffs and VAT on imports, and have special access to the country's foreign trade bank, Bancoldex.
Barranquilla, Cartagena, Santa Marta and Pacífico are on the coast and within easy access of the main ports while the others are
strategically located to serve different production centres. There are also five economic export zones where special tariffs apply.
Foreign multinational pharmaceutical firms are represented by the Association of Pharmaceutical Research and Development
Laboratories (Asociación de Laboratorios Farmacéuticos de Investigación y Desarrollo, AFIDRO).
Despite the aforementioned tax incentives and competitive labour force, pharmaceutical production by multinational drugmakers
has fallen in recent years due to more attractive tax incentives and fewer quality and procedural regulations in other regional
markets, according to a study of the domestic pharmaceutical production environment in Colombia, published in May 2016 in the
European Journal of Management and Business. The study also highlights that instabilities within the healthcare system, high
prevalence of drug counterfeiting and smuggling as well as control and surveillance deficiencies as specific weaknesses of the
Colombian market.
The foreign pharmaceutical industry in Colombia is well-represented. Founded in 1957, Asociación De Laboratorios Farmacéuticos
De Investigación Asociación De Laboratorios Farmacéuticos De Investigación (AFIDRO) had 24 members in 2018. AFIDRO has taken
an active role in defending intellectual property rights, physician-prescribing and drug regulation to FDA and WHO standards,
including drug bioavailability and bioequivalence.
Local companies are represented by the National Industrial Association (ANDI). Since April 1993, ANDI has run a Pharmaceutical
Chamber, which promotes pharmaceutical production. There are 41 companies associated with ANDI, jointly representing around
90% of total pharmaceutical sales. Most of them are involved in generic production. The Association of Colombian Pharmaceutical
Industries (ASINFAR) represents domestic (mostly generic drug) manufacturers.Local companies are represented by ANDI. Since
April 1993, ANDI has run a Pharmaceutical Chamber, which promotes pharmaceutical production. There are 41 companies
associated with ANDI, jointly representing around 90% of total pharmaceutical sales. Most of them are involved in generic
production. ASINFAR represents domestic (mostly generic drug) manufacturers.
ANDI's Pharmaceutical Chamber aims to support the industry for its affiliates, by seeking to enhance regulations, support fair pricing
policies and maintain a healthy competitive environment. As of 2017, the Chamber has 46 affiliates, including the major
multinational pharmaceutical firms as well as the major domestic players. In a survey published in 2014, a number of market issues
were highlighted as barriers to market access. These included:
• High levels of market competition

• Weak demand for high-value medicine
• Currency translation
• Cost of supply of raw materials
• Smuggling/counterfeit medicines
• Infrastructure and logistics costs
In addition to these issues, the Pharmaceutical Researchers and Manufacturers of America (PhRMA) have repeatedly highlighted
significant market access barriers for innovative drugs, including weak patent enforcement, arbitrary and non-transparent reference
pricing methodology in addition to the aggressive pricing scheme. Drugmakers with a wide product portfolio, including generic
medicines and over-the-counter drugs, will continue to have a more significant market presence and greater revenue growth
opportunities.
MEMBERS OF ASOCIACIÓN DE LABORATORIOS FARMACÉUTICOS DE INVESTIGACIÓN (AFIDRO), 2018

Abbvie Amgen Aspen Astellas
AstraZeneca Bayer BioMarin Boehringer Ingelheim
Bristol-Myers Squibb Genzyme GlaxoSmithKline Grunenthal
Janssen Lilly Menarini MSD
Novartis Novo Nordisk Pfizer Roche
Sanofi Sanofi Pasteur Shire Takeda
Source: AFIDRO.
Generics Industry
Generic medicines dominate the Colombian pharmaceutical market on a volume basis as a result of the high proportion of private
expenditure on medicines. More than half of the market by value is accounted for through retail sales (out-of-pocket expenditures)
while just under half of the market expenditure is from institutional sales (hospital sales and the various reimbursement schemes).
This, in addition to the aforementioned pricing and intellectual property issues, limit innovative drugmaker opportunities. Within
instructional sales, there is a heavy preference for generic medicines given their lower cost. Generic medicine sales account for
roughly 45% of the pharmacy sector by value and 70% by volume while they account for approximately 80% of hospital sales by
volume.
The generic medicines market is highly competitive, with a significant number of major multinational pharmaceutical firms and a
number of large domestic players competing for sales. Given the number of large players within the generic medicine sector, there
is fierce competition for market share and as a result prices remain highly repressed.
The competitive landscape within the generic medicine sector in Colombia has undergone a significant amount of consolidation by
major multinational pharmaceutical firms seeking to expand their presence in the market, and the Latin America region as a whole.
Sanofi acquired Brazilian generic drugmaker Medley in 2009 and launched in Colombia in 2012; it then acquired the second-largest
Colombian drugmaker, Genfar, in 2013. In 2014, Abbott Laboratories acquired CFR Pharmaceuticals to more than double its
branded generics presence in Latin America. CFR Pharmaceuticals was a majority shareholder in two major Latin American
drugmakers: Colombian Lafrancol, which ranked 3rd for drug sales by value in Colombia excluding the major multinational
drugmakers, and Colombian Laboratorios Synthesis. Other major generic drugmakers present are: Aspen Pharmacare, Bayer,
Boehringer Ingelheim, GlaxoSmithKline and Novartis (via Sandoz) are also major generic drugmakers present in the market.
We note that there have been growing reports of interest in the Latin American pharmaceutical market - and Colombia's in
particular - from Indian generic drugmakers. There are reportedly seven small Indian firms present in the market although none
have major market shares. However, according to the director of the Colombian Chamber of Commerce and Industry, major Indian
drugmaker Cipla is interested in opening a medicine production facility in the country. The major domestic generic players are
(ordered by sales value): Tecnoquímicas, Procaps, La Santé, and Tecnofarma. Tecnoquímicas is regularly cited as ranking amongst
the top three for sales by value in Colombia while Procaps is also reported to be amongst the top 10.
Recent Developments
• In June 2018, PharmaMar signed a commercialisation and distribution licensing agreement with Pint Pharma for the marine-
derived anticancer drug Aplidin (plitidepsin) in Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay
and Venezuela. According to the agreement, Pint will pay undisclosed milestone and royalty payments to PharmaMar in
exchange for the rights to register, commercialise and distribute Aplidin in each of the foresaid territories. PharmaMar will retain
exclusive production rights and will supply the finished product for clinical and commercial use.
• In April 2018, Puma Biotechnology and Pint Pharma entered into an agreement for Pint Pharma to commercialise Nerlynx
(neratinib) in Colombia and other Latin American markets. Neratinib was approved by the FDA in July 2017 for the extended
adjuvant treatment of adult patients with early stage HER2-positive breast cancer following adjuvant trastuzumab-based therapy,
and is marketed in the US as Nerlynx tablets.
• In October 2017, Melinta Therapeutics announced that the commercialisation and distribution agreement with Eurofarma
Laboratórios for delafloxacin (marketed as Baxdela in the US) has been expanded to include 19 countries in South and Central
America and the Caribbean. Eurofarma previously had the right to market, sell and distribute delafloxacin in Brazil per a 2015
agreement.
MULTINATIONAL MARKET ACTIVITY

Company Operations
Novartis Switzerland's Novartis has been present in Colombia since 1958. The company's pharmaceuticals and healthcare
businesses have five units in the country: ethical pharmaceuticals, generic drugs, animal health, CIBA vision and
consumer healthcare. Its Italy-based Biochemie subsidiary is also active in Colombia
Pfizer US drug giant Pfizer is Colombia's leading pharmaceutical company, present at around 14 sites across the country
Roche Roche began marketing products in Colombia in 1945 and commenced local manufacturing operations in 1956. Today it
operates through local subsidiary Roche Products SA, focused on areas including transplantation, infectious disease,
oncology and obesity
Sanofi French drug major Sanofi is well placed to boost turnover in the Colombian market. Aventis Pharma had several
operations across the country, while Sanofi-Synthelabo fielded an important range of brand name patented drugs. Sanofi
also has local operations for Sanofi-Pasteur, its vaccines arm. Sanofi's Andean Good Manufacturing Practice (GMP)-
certified manufacturing site at Cali produces both the company's own drugs and medicines for third parties. From this
plant, Colombia Winthrop also exports generic products to Ecuador, Peru and Uruguay
Company Operations
Merck & Co US-based Merck & Co has had a presence in Colombia since 1944 and has carried out research in the country for more
than 30 years. The country is an R&D site for Merck: it has more than 50 scientists working on research in the country and
the company invests USD2mn a year on local R&D operations. In 2003, Merck opened a new research centre in the
capital, Bogotá, joining the five clinical investigation units it has across the country
Johnson & Johnson & Johnson conducts manufacturing and sales & marketing operations across pharmaceutical, Consumer and
Johnson Medical Devices businesses in Colombia
GlaxoSmithCline GlaxoSmithKline mostly imports and distributes a variety of prescription and OTC products. It is one of the market leaders
in Colombia, with an increasing role in the hospital market over recent years. In the early 2000s, GlaxoSmithKline targeted
a 5% share of the market, with a focus on antiretrovirals, among other prescription medicines
AstraZeneca AstraZeneca's local subsidiary is focused on marketing products for its core therapy areas: anesthesiology, cardiovascular,
gastrointestinal, infectious, metabolic, neuroscience, oncology, respiratory and rheumatology
Takeda Following the acquisition of Farmacol in April 2011, Takeda has established its Colombia operations as a regional hub for
the Andean region (Colombia, Equador, Peru, Venezuela). The company initially focused on marketing OTC and out of
pocket prescription drugs, but plans to launch its oncology range in the coming years
AbbVie AbbVie conducts its local operations out of Bogota
Pharmaceutical Distribution
The distribution channel in the private pharmacy sector comprises pharmacy chains, hypermarkets, independent pharmacies,
wholesalers and social benefit funds (Cajas de Compensación). In recent years, independent pharmacies and wholesalers have their
lost market share, whilst pharmacy chains and hypermarkets have increased their shares. The distribution channel in the
institutional sector comprises hospitals, clinics, health centres, the former Social Security Institute, IPS and EPS.
Pharmaceutical Retail Sector
The Colombian Association of Pharmacies (ASOCOLDRO) reported that there were around 18,000 pharmacies in 2011. Of these,
about 90% were small- and medium-sized pharmacies and 10% were large pharmacies. The sector comprises independent
pharmacies, co-operatives of independent pharmacies, pharmacy chains and pharmacies run by Cajas de Compensación.
The leading pharmacy chains and supermarkets account for a third of pharmacy sales. In 2010/11, the major co-operatives and
pharmacy chains were Cooperativa Nacional de Droguistas Detallistas (COPIDROGAS), Cooperativa Multiactiva de Servicios
Solidarios (COPSERVIR), Audifarma (the leading chain with over 300 pharmaceutical care centres, which sells pharmaceutical and
medical device products to both hospital and retail pharmacies), Farmasanitas, Éticos Serrano Gómez (operating both wholesale
and retail arms) and EPSIFARMA (part of EPS Saludcoop, operating 220 outlets).
COPSERVIR is a co-operative that comprises 665 pharmacies located in 32 departments, covering 157 cities. These pharmacies
were located in the department of Antioquía and employed 175 people.
Founded in 1969, COPIDROGAS has six subsidiaries located in Barranquilla, Bogotá, Bucaramanga, Cali, Medellín and Pereira. The co-
operative manages a portfolio of around 13,000 products supplied by over 400 companies. COPIDROGAS comprises 4,500
pharmacies located in 31 departments, covering over 350 municipalities. COPIDROGAS operates distribution capabilities in five
main cities.
In January 2012, Chilean wholesaler SOCOFAR, which forms part of the Chilean Cruz Verde along the Chilean pharmacy chain
Farmacias Cruz Verde, acquired Farmasanitas. Founded in 1990, Farmasanitas was a subsidiary of the Spanish group Organización
Sanitas Internacional (OSI). It specialises in the acquisition, storage, distribution and sale of medicaments and medical and surgical
material. Farmasanitas operated 134 pharmacies located across 24 departments in 2011.
Droguerías Colsubsidio, which belongs to Caja Colsubsidio, has a commercial agreement with the French supermarket chain
Carrefour. The pharmacy chain operates 115 pharmacies as well as around 57 outlets within supermarkets.
Foreign chains have increased their presence. Locatel, the Venezuelan supermarket, has been present in Colombia since 2004.
Farmatodo, also a Venezuelan supermarket, has acquired a number of stores from Farmacity, the Argentine pharmacy chain.
Farmacity opened its first store in Bogotá in November 2003, but has since gone bankrupt.
Company Profile
Profile: Laboratorios Bussié
SWOT Analysis
Strengths • One of the leading local manufacturers.
• Product portfolio including both branded and unbranded generic medicines.
• Financial considerations favouring the use of generic drugs.
• A number of distribution agreements across the region.
Weaknesses • Lack of substantial in-house R&D activities.

• Potential strengthening of bioequivalence rules will hamper company's production abilities.
• Vulnerable to competition from foreign generic drug players.
• Public healthcare insurance system has been troubled financially.
Opportunities • Should the government attempt to introduce meaningful generic drug sector legislation in the wake of
the United States-Colombia Trade Promotion Agreement, the company would be well placed to benefit.
• Commitment by health authorities in Colombia, Mexico and Chile to streamline regulatory approval for
manufacturing and distribution should aid regional expansion.
• Local and regional demand for generic products should continue to be high.
Threats • The entrance of rival OTC and generic drug firms based in Latin America or Asia on the back of regional
regulatory harmonisation.
• Any tightening of intellectual property laws under the US-Colombia Trade Promotion Agreement.
Company Overview
One of the leading local manufacturers, the company was established under its current name, Laboratorios Bussié SA, in 1999 on
the basis of a partnership between Laboratorios Recipe and Bussié Quemotherapeutic Institute. Bussié is part of the Invekra group
that has operations in 10 Latin American countries.
Bussié currently operates three arms: branded medicines, unbranded generic medicines and veterinary products. It operates offices
in Bogotá, Medellín, Cali, Barranquilla, Pereira and Bucaramanga. Bussié first entered the export market in 1985. It has international
offices in Guatemala, Honduras, Dominican Republic, Panama, El Salvador and Ecuador through generic drug arm Recipe and
through Bussié branded products, with plans to enter more Latin American markets in the future, both through direct presence and
through local distributors.
Bussié claims to be the only local company involved in conducting clinical trials of Colombian-developed pharmaceuticals. It
operates bioavailability and bioequivalence laboratories, which should stand it in good stead if the government were to take a
tougher line on the use of non-bioequivalent copy drugs. Furthermore, it claims to be the only Colombian drugmaker to have
received business process management and ISO 901:2000 quality certification.
Strategy
The Bussié branded line includes around 40 molecules and 80 presentations including antibiotics and anti-inflammatory drugs. Its
generic drug line (through its Recipe arm) includes around 55 molecules and 100 presentations including cardiovascular and
central nervous system drugs.
Today the company has 500 employees and partnerships with both Pfizer and Novartis. The company has also invested in animal
health, manufacturing medications and vitamins for animal well-being.
Profile: Laboratorios Genfar SA

SWOT Analysis
Strengths • Genfar is Colombia's second largest generic pharmaceuticals company.
• Controlled by multinational drugmaker Sanofi.
• Wide-ranging offering in the ethical drug arena, covering a variety of therapeutic areas.
• The company has a considerable regional presence, forged through various strategies, including local sales
offices and distribution partnerships with local distributors.
Weaknesses • Limited international presence mostly focused on Central and Latin America.
• The company is vulnerable to strengthened bioequivalence rules and competition from foreign generic drug
players.
Opportunities • French pharmaceutical major Sanofi acquired Genfar, which should allow for geographical expansion.
• Government preference for generic products, with public-sector pharmacies not even stocking patented
products.
• Generic medicines market is due to grow relatively strongly over coming years.
• Health authorities in Colombia, Mexico and Chile commitment to streamline manufacturing and distribution
approval should support regional sales.
Threats • The entry of rival OTC and generic drug firms based in Latin America or Asia could threaten expansion.
• Any tightening of intellectual property laws under United States-Colombia Trade Promotion Agreement
(TPA).
Company Overview
Genfar, was acquired by French multinational Sanofi in 2013 and is now part of the Sanofi group, which includes Sanofi, Sanofi
Pasteur, Genzyme, Genfar, Merial and Medley in Colombia. The combined group is a leading player in Colombia and markets more
than 350 products across a range of therapy areas.
Genfar was established in 1967. It manufactures and markets both human (prescription and OTCs) and veterinary pharmaceuticals.
It operates two production facilities, located in in Villarica and Bogotá. Products are sold in the local market and exporetd across the
region.
Strategy
The company mostly produces OTCs and generic drugs for both human and animal consumption. Its OTC portfolio, numbering
around 15 main products, includes acetaminophen in tablet, syrup and other forms, vitamin C chewable tablets and ibuprofen
tablets. Prescription products include allergy medicines cetirizine, antibacterial drug ciproflaxin, anti-acid ranitidine and pain
medicine diclofenac. Its prescription portfolio numbers around 115 items, covering a variety of therapeutic areas. Genfar also offers
sildenafil, for the treatment of erectile dysfunction.
Profile: Lafrancol
SWOT Analysis
Strengths • Lafrancol is a leading Colombian manufacturer, with substantial local experience and resources.
• Expansion into foreign markets since 2003, with sales staff covering several regional markets, as well as
the US.
• Acquisition by Abbott offers international expertise and resources.
• Product portfolio including private-label brands, which are attractive to the price-conscious population.
• Strong emphasis on sales and marketing.
Weaknesses • Lafrancol's leading products include copies of internationally patented drugs, limiting price potential.
• As a relatively small producer of copy drugs, the company is vulnerable to competition from foreign
generic drug players.
Opportunities • Should the government attempt to introduce meaningful generic medicine legislation in the wake of the
United States-Colombia Trade Promotion Agreement, Lafrancol would be well placed to benefit, due to
its off-patent portfolio.
• The company has considerably expanded regionally, through various partnership types.
• Government preference for generic medicines, with public-sector pharmacies not even stocking
patented products.
• Harmonisation of manufacturing and distribution regulations between Colombia, Mexico and Chile could
aid exports.
Threats • The entry of rival OTC and generic drug firms based in Latin America or Asia could threaten expansion.
• Tightening of intellectual property laws under the US-Colombia Trade Promotion Agreement.
• Rising costs of raw materials.
Company Overview
Lafrancol, founded in 1911, is one of Colombia's most important pharmaceutical companies. It is now part of multinational
drugmaker Abbott after Lafrancol was acquired by Corporación Farmacéutica Recalcine (CFR) in 2012 and CFR was subsequently
acquired by Abbott in 2014.
Lafrancol has a 400 square metre warehouse in Bogotá and a 6,000 square metre good manufacturing practice-compliant
manufacturing plant in Cali. Production serves the internal and export markets, mainly South and Central America and the
Caribbean. Lafrancol also undertakes third-party manufacturing for German and Canadian producers, which export their products to
Central America. The company also invested around USD10mn in a new production facility in Cali.
The company employs some 2,500 staff, of which 40% work in sales of ethical prescription formulations, generic prescriptions,
OTCs, consumer health products and private-label prescription medicines. In addition to Peru (where its first foreign subsidiary was
set up), the company now also employs sales staff in Ecuador, Dominican Republic and the US. Its Guatemalan office is its base for
Central America.
The company's products are sold through local distributors in a number of other regional markets, including Panama, El Salvador,
Uruguay and Ecuador. In 2012, the company extended its operations to Brazil. In Mexico, Costa Rica, Venezuela and Panama, for
example, its products are offered through contract manufacturing agreements with various partners, including Apotex (Mexico,
Costa Rica, Panama and Nicaragua), Sandoz (Mexico) and Laboratorios Valmorca and Medline Farma (both in Venezuela).
Strategy
In the prescription-only sector, Lafrancol operates two companies, Lafrancol and Pauly Pharmaceutical. Lafrancol markets over 30
drugs, covering anti-inflammatories, analgesics, antihistamines, antihypertensives, antiulcers, hypolipemiants and antiobiotics. Pauly
Pharmaceutical has a portfolio of 22 medicines, ranging from antimigraine drugs to anxiolitics, antidepressants and antimicotics. Its
prescription-only line includes gastrointestinal, orthopaedic, osteoporosis, osteoarthritis and erectile-dysfunction (ED) drugs.
Lafrancol also offers around 200 branded generic drugs under the American Generics umbrella, which was created in 1994. Key
branded generic products include Nedox (esomeprazol), Melocam (meloxicam) and Osficar (alendronate).
Notably, Lafrancol's Eroxim and Eroxim Plus ED drugs contain sildenafil, the active pharmaceutical ingredient (API) in Pfizer's
patented impotence blockbuster Viagra. Osteoarthritis drug Osficar is a variant of Merck's Fosamax (alendronate sodium).
Cardiovascular lines include Valtan, which contains valsartan, the API in Novartis's Diovan, and Atorlip (atorvastatin) - a copy of
Pfizer's blockbuster Lipitor. Lanfrancol also markets a line of female contraceptives.
The company also markets OTCs, including calcium supplement Calduros and antiseptic Bactrodine, as well as food supplements
and herbal remedies. Back in 2001, Lafrancol sold a number of its leading OTC brands to the then Sanofi-Synthelabo, including
cough & cold line Pax, the systemic analgesic Calmidol and the topical analgesic Bengay.
Recent Developments
2015
• In November, Colombia's competitiveness regulatory agency Superintendency of Industry and Commerce imposed a fine of
COP1.5mn (USD530.7) on six drugmakers for overcharging for drugs. The implicated drugmakers were: Memphis Products,
Sanofi-Aventis de Colombia, Novartis de Colombia, Procaps, Quideca and Lafrancol. The regulator found that these firms sold 17
drugs at higher prices than set by the National Commission on Drug Pricing and Medical devices between November 2012 and
July 2013.
Colombia Demographic Outlook

Demographic analysis is a key pillar of our macroeconomic and industry forecasting model. Not only is the total population of a
country a key variable in consumer demand, but an understanding of the demographic profile is essential to understanding issues
ranging from future population trends to productivity growth and government spending requirements.
The accompanying charts detail the population pyramid for 2017, the change in the structure of the population between 2017 and
2050 and the total population between 1990 and 2050. The tables show indicators from all of these charts, in addition to key
metrics such as population ratios, the urban/rural split and life expectancy.
Population
(1990-2050)
f = Fitch Solutions forecast. Source: World Bank, UN, Fitch Solutions
Colombia Population Pyramid

2017 (LHS) & 2017 Versus 2050 (RHS)
Source: World Bank, UN, Fitch Solutions
POPULATION HEADLINE INDICATORS (COLOMBIA 1990-2025)

Indicator 1990 2000 2005 2010 2015 2020f 2025f
Population, total, '000 34,271.6 40,404.0 43,285.6 45,918.1 48,228.7 50,220.4 51,854.5
Population, % y-o-y 1.47 1.31 1.11 0.91 0.74 0.58
Population, total, male, '000 17,020.8 19,980.9 21,376.0 22,640.9 23,743.5 24,683.9 25,443.7
Population, total, female, '000 17,250.8 20,423.0 21,909.7 23,277.2 24,485.2 25,536.5 26,410.7
Population ratio, male/female 0.99 0.98 0.98 0.97 0.97 0.97 0.96
KEY POPULATION RATIOS (COLOMBIA 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020f 2025f
Active population, total, '000 20,385.2 25,747.7 28,517.3 31,107.1 33,120.7 34,680.1 35,715.5
Active population, % of total population 59.5 63.7 65.9 67.7 68.7 69.1 68.9
Dependent population, total, '000 13,886.4 14,656.2 14,768.4 14,811.0 15,108.0 15,540.3 16,139.0
Dependent ratio, % of total working age 68.1 56.9 51.8 47.6 45.6 44.8 45.2
Youth population, total, '000 12,465.3 12,740.4 12,526.5 12,118.7 11,713.2 11,182.8 10,660.3
Youth population, % of total working age 61.1 49.5 43.9 39.0 35.4 32.2 29.8
Pensionable population, '000 1,421.1 1,915.8 2,241.9 2,692.4 3,394.8 4,357.5 5,478.7
Pensionable population, % of total working age 7.0 7.4 7.9 8.7 10.2 12.6 15.3
URBAN/RURAL POPULATION & LIFE EXPECTANCY (COLOMBIA 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020f 2025f
Urban population, '000 23,399.3 29,121.2 31,850.0 34,455.1 36,864.1 39,057.4 40,983.7
Urban population, % of total 68.3 72.1 73.6 75.0 76.4 77.8 79.0
Rural population, '000 10,872.3 11,282.8 11,435.6 11,463.0 11,364.6 11,163.0 10,870.8
Rural population, % of total 31.7 27.9 26.4 25.0 23.6 22.2 21.0
Life expectancy at birth, male, years 64.4 67.3 68.7 69.7 70.7 71.6 72.5
Life expectancy at birth, female, years 72.4 74.8 76.0 77.0 77.8 78.7 79.5
Life expectancy at birth, average, years 68.3 71.0 72.3 73.3 74.2 75.1 76.0
POPULATION BY AGE GROUP (COLOMBIA 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020f 2025f
Population, 0-4 yrs, total, '000 4,340.6 4,151.6 4,112.8 3,929.0 3,738.3 3,578.4 3,400.4
Indicator 1990 2000 2005 2010 2015 2020f 2025f
Population, 50-54 yrs, total, '000 986.7 1,573.0 2,003.1 2,365.2 2,806.5 3,125.7 3,035.0
Population, 55-59 yrs, total, '000 822.9 1,134.9 1,510.0 1,930.5 2,284.8 2,716.6 3,031.2
Population, 60-64 yrs, total, '000 678.7 879.5 1,068.5 1,427.5 1,831.3 2,174.2 2,592.3
Population, 65-69 yrs, total, '000 546.9 693.6 801.8 979.4 1,315.4 1,695.6 2,021.5
Population, 70-74 yrs, total, '000 385.2 522.0 601.0 700.4 862.2 1,166.5 1,512.7
Population, 75-79 yrs, total, '000 264.7 365.3 418.8 487.0 574.4 714.6 974.9
Population, 100+ yrs, total, '000 0.6 1.0 1.6 1.9 2.7 3.9 5.7
POPULATION BY AGE GROUP % (COLOMBIA 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020f 2025f
Population, 0-4 yrs, % total 12.67 10.28 9.50 8.56 7.75 7.13 6.56
Population, 100+ yrs, % total 0.00 0.00 0.00 0.00 0.01 0.01 0.01
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 country-specific
healthcare sector characteristics such as comprehensiveness, consistency, standardisation and timeliness. The inclusion of this
factor in our forecasts necessitates taking into account the essential attributes of country-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 government 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 national
statistical office.
Public inpatient admission: a person receiving medical treatment overnight in a hospital as defined by the relevant national
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
Disease Database: a fully country-comparative interactive tool that provides dynamic forecasts of the burden and number of
deaths of 268 diseases and injuries in 178 countries, from 1990 to 2030. Fitch Solutions’ disease database incorporates WHO, World
Bank, IMF and Fitch Solutions data to create a proprietary dataset. The data is quantified as the sum of disability-adjusted life years
lost to a disease in a particular country.
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 country's attractiveness in terms of its
pharmaceuticals industry; it balances the Risks and Rewards of launching innovative medicines in different countries. It should be
emphasised that the RRI broadly assess 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 country 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 country'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

Pharmaceutical Expenditure Forecast Model
Historic pharmaceutical market data is collected from a range of sources, including:
• regulatory agencies;
• pharmaceutical trade associations;
• company press releases and annual reports;
• subscription information providers;
• local news sources;
• information from market research firms that is in the public domain.
Currently available data varies in confidence levels, so it is calibrated by Fitch Solutions’ Pharmaceuticals & Healthcare analysts. In
the absence of a complete time series of numbers, intermediate years are calculated from secondary sources. This 'composite'
approach is used to ensure the accuracy and consistency of historic data, which is crucial for reliable forecasts.
To remove the effect of inflation, real pharmaceutical expenditure figures are then calculated by removing the annual average
consumer price index (CPI).
Real per-capita pharmaceutical expenditure numbers are calculated by dividing by population figures.
A linear regression (see Note 3 for explanation) is then performed on five years of real per-capita pharmaceutical expenditure
against real per-capita final consumption (see Note 4 for explanation). From analysis of the top 130 economies, Fitch
Solutions has established a strong statistical relationship between pharmaceutical expenditure and final consumption expenditure
(r = 0.985).
Healthcare Expenditure Forecast Model
Historic government and private healthcare expenditure data is sourced from the World Health Organization (WHO)’s Global Health
Expenditure Database, which contains the National Health Accounts (see Note 1 for explanation). This methodology has been used
for a few markets including Hong Kong, Taiwan, Somalia, Puerto Rico, Kosovo, Burkina Faso, Cuba and North Korea. This is due to
elements of healthcare sector-financed expenditures being omitted in the System of Health Accounts 2011 methodology, owing to
lack of appropriate methods and data sources.
For the remainder of the markets, historic government and private healthcare expenditure data is sourced from the World Health
Organization (WHO)’s Global Health Expenditure Database, which contains the System of Health Accounts 2011 (see Note 2 for
explanation). In December 2017, WHO released estimates of health expenditures through an updated framework called the System
of Health Accounts 2011. The new classification now captures more accurately the health financing reforms taking place in
member states, and enables more insightful and policy relevant analysis to be conducted. Each country’s health expenditure
estimates are available in absolute amounts in national current units (NCU) and common currencies including US dollars (USD) and
international dollars at purchasing power parity (PPP).
To remove the effect of inflation, real healthcare expenditure figures are then calculated by removing the annual average CPI.
Real per-capita healthcare expenditure numbers are calculated by dividing by population figures.
A linear regression is then performed (see Note 3 for explanation). This is first on five years of real per-capita public healthcare
expenditure against real per-capita government final consumption expenditure (see Note 4 for explanation). This generates a
10-year forecast of future real per-capita public healthcare expenditure figures from 'known' projected real per-capita government
final consumption expenditure figures. Another linear regression is simultaneously performed on real per-capita private healthcare
expenditure against real per-capita private final consumption expenditure.
To generate the nominal public healthcare spending forecast, population and CPI numbers are returned to both real per-capita
public healthcare expenditure figures and real per-capita private healthcare expenditure figures.
The overall healthcare expenditure forecast is then calculated by combining public and private healthcare expenditure.
Notes On Methodology
Note 1: National Health Accounts methodology. The global health expenditure database that WHO has maintained for the past ten
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 country
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 member countries, 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
macro-economic variables were also updated to calculate some indicators. At present, National Health Accounts (previously used
methodology) are at different stages of development in various countries 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
cross-country 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 country-specific analysis and is sufficiently flexible to accommodate future
changes. The framework also allows middle and low-income countries 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 countries 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 country's attractiveness in terms of its
pharmaceuticals industry; it balances the Risks and Rewards of launching innovative medicines in different countries. 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 a country's 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, the World Bank's Ease Of Doing Business Scores and 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 110 countries.
Benefits Of Using Fitch Solutions’ Innovative Pharmaceuticals RRI
• Global Rankings: One global table, ranking 110 countries 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 110 countries allows users to build lists of countries 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 country profile.
• Quantifiable: Quantifies the Risks and Rewards of doing business in the innovative pharmaceuticals sector in different countries
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 country 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 country's 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 countries 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

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

Fitch Solutions
Spending Per Capita, USD than low-value ones. Scores are based on annual average expenditure over a
Forecast
five-year forecast period.
Fitch Solutions Denotes sector dynamism. Scores are based on annual average growth over
Sector Value Growth, %
Forecast a five-year forecast period.
Country Rewards
Fitch Solutions Urbanisation is used as a proxy for the development of medical facilities.
Urban/Rural Split
Forecast Predominantly, rural states score lower.
Fitch Solutions Shows the proportion of the population over 65. States with ageing
Pensionable Population, %
Forecast populations tend to have higher per capita expenditure.
Fast-growing states suggest better long-term demand and thus growth for all
Fitch Solutions
Population Growth, % industries. Scores are based on annual average growth over a five-year
Forecast
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
IS SN: 1748-183X
ISSN:
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Q1 2019

Industry Risk/Reward Index ....................................................................................................................................................23

Regulatory Development ..........................................................................................................................................................32

Colombia Demographic Outlook ............................................................................................................................................57

Pharmaceuticals & Healthcare Glossary .............................................................................................................................60

Pharmaceuticals & Healthcare Methodology ....................................................................................................................62

Headline Expenditure Projections

HEADLINE PHARMACEUTICALS & HEALTHCARE FORECASTS (COLOMBIA 2016-2022)

Risk/ Reward Index

Pharmaceutical Market Forecast

f = Fitch Solutions forecast. Source: AFRIDRO, AESGP, Fitch Solutions

PHARMACEUTICAL SALES, HISTORICAL DATA AND FORECASTS (COLOMBIA 2014-2022)

Healthcare Market Forecast

Healthcare Expenditure Forecast

HEALTHCARE EXPENDITURE TRENDS, HISTORICAL DATA AND FORECASTS (COLOMBIA 2014-2022)

Prescription Drug Market Forecast

Prescription Drug Market Forecast

f = Fitch Solutions forecast. Source: AFRIDRO, AESGP, Fitch Solutions

Prescription drug sales,

Prescription drug sales,

Prescription drug sales,

Prescription drug sales,

Prescription drug sales, %

Patented Drug Market Forecast

Patented Drug Market Forecast

f = Fitch Solutions forecast. Source: AFRIDRO, AESGP, Fitch Solutions

Patented drug sales, USDbn,

Patented drug sales, COPbn,

Patented drug sales, % of

Patented drug sales, % of

Generic Drug Market Forecast

Generic Drug Market Forecast

f = Fitch Solutions forecast. Source: AFRIDRO, AESGP, Fitch Solutions

Generic drug sales, USDbn,

Generic drug sales, COPbn,

Generic drug sales, % of

Generic drug sales, % of total

OTC Medicine Market Forecast

OTC Medicine Market Forecast

f = Fitch Solutions forecast. Source: AFRIDRO, AESGP, Fitch Solutions

significant proportion of the poorer population.

OTC medicine sales, USDbn,

OTC medicine sales, COPbn,

Pharmaceutical Trade Forecast

Pharmaceutical Trade Forecast

PHARMACEUTICAL TRADE DATA AND FORECASTS (COLOMBIA 2016-2022)

PHARMACEUTICAL TRADE DATA AND FORECASTS LOCAL CURRENCY (COLOMBIA 2016-2022)

Industry Risk/Reward Index

Americas: Opportunities Vary Across The Region

Main Regional Features And Latest Updates

Americas: North American Markets Provide Larger Rewards

Outperformers: High-Reward And Low-Risk Markets

Underperformers: Low-Reward And High-Risk Markets

REWARDS AND RISKS SCORES

US 91.9 64.4 85.1 92.6 89.4 91.3 87.2 1 1

Canada 82.1 68.8 78.8 64.6 89.9 74.7 77.4 2 8

Puerto Rico 71.3 62.2 69.0 84.8 45.4 69.1 69.0 3 22

Chile 69.2 61.5 67.2 61.0 73.4 66.0 66.8 4 24

Brazil 77.3 56.4 72.1 56.9 39.8 50.1 64.4 5 30

Mexico 68.0 53.7 64.4 62.8 44.7 55.6 61.3 6 33