Mexico jurisdiction report: Taking care of the pharma sector


Mariana Gonzalez

Mexico jurisdiction report: Taking care of the pharma sector

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On January 10, 2018, the Investigative Authority (IA) of the Federal Commission of Economic Competition (COFECE) published in the Federal Official Gazette a notice that it was initiating a new investigatory procedure on the investigation with file number IO-001-2017. The probe was to determine the existence of an unlawful concentration of companies in the market for the distribution and wholesale of pharmaceutical, personal care and beauty products.

This investigation (file number IO-001-2017)  had previously commenced ex officio on June 27, 2017, as a result of evidence suggesting an unlawful transaction among companies and that monopolistic practices, in the form of collusion among companies, price fixing and manipulation, and exchange of information that affects competition, are occurring in several segments of the Mexican private drug market.

COFECE is one of the autonomous constitutional enforcement agencies created from the deep constitutional amendments of 2013. The Telecommunications Federal Institute (IFT) is the other, which is in charge of acting as a competition enforcer of the telecommunications, radio and TV industries. COFECE watches over any other industry, including pharmaceuticals.

Since COFECE’s creation, the healthcare sector has been a priority because it includes essential products widely consumed by 120 million Mexicans. Between 2010 and 2016, the consumer price index for medicines was 10.4% higher than Mexico’s overall consumer price index. Moreover, in 2014, lowest-income households allocated 42% of their spending on medicines, the highest rate among OECD members, according to Deloitte’s Global Health Care Outlook 2017.

COFECE has carried out several anticompetitive investigations in this sector, such as on laboratory testing and blood banks services, medical-grade latex surgery/examination gloves, and bid-rigging practices.

In this regard, in July 2016, COFECE announced a broad-ranging study on generic drug entry into the Mexican market. The results of this study were released in August 2017; the main conclusions were
(i) that generic competitor numbers and their rate of market entry are excessively low and do not cause enough price reductions;
(ii) that patent expiration has not encouraged sufficient competition; and
(iii) that industry regulations are not promoting adequate competition conditions.

The commission accompanied these findings with several suggestions pertaining to different governmental authorities and affecting several issues of importance to industry stakeholders, such as allowance of so-called secondary patents (ie, polymorphs, formulations), the linkage system, clinical data exclusivity, prescription rules, and substitution/interchangeability.

"The study represented a solid intent to provide a serious analysis for setting the foundation of a more robust and fair pharmaceutical market."

The study represented a solid intent to provide a serious analysis for setting the foundation of a more robust and fair pharmaceutical market, but the evident lack of knowledge and domain over IP matters and international practices related to the promotion and protection of innovation led to the total rejection of the same from the top Mexican IP practitioners.

On another front, on October 19, 2016, COFECE announced an investigation into pharmaceutical production, distribution and commercialisation markets. It is the first anti-monopoly investigation including the scrutiny of the entire pharmaceutical value chain. It derived from the constant monitoring by the market intelligence unit of the IA of COFECE. This investigation, file number IO-001-2016, was commenced ex officio on May 19, 2016.

As part of investigation IO-001-2016, inspection visits were carried out by the IA of COFECE to Nadro (the largest pharmaceutical distributor in the country) and the Association of Pharmaceutical Distributors of Mexico (DIPROFAR), during which photographs and videos were taken and several documents were reproduced, according to COFECE.

However, DIPROFAR and Nadro both filed an amparo (a remedy for the protection of constitutional rights) against COFECE’s visits of inspection. Although these amparos were granted by a judge, COFECE did not suspend the investigations. Later, in October and November 2016, circuit collegiate courts specialising in economic competition dismissed the Nadro and DIPROFAR amparos on the basis that only the final resolution of this kind of investigation can be challenged and not its individual actions.

If a concentration is determined unlawful, COFECE may impose the following sanctions: order the correction or suppression of the unlawful practice; order partial or total divestiture; or order the termination of control or suppression of the acts and a fine of up to 8% of the company’s income. Directors who participated directly or indirectly in the unlawful concentration will be ineligible to act on behalf of the company for up to five years and will be fined up to $800,000, among other sanctions.

Investigations IO-001-2016 and IO-001-2017 are ongoing. The deadline to finish them is 120 working days from their date of initiation, a period that may be extended up to four times for another 120 working days. COFECE’s conclusions about competition have yet to be revealed, but they promise to be of utmost relevance for the pharmaceutical sector.

Mariana Gonzalez is an associate at Becerril, Coca & Becerril. She can be contacted at:

WIPR jurisdiction report, pharmaceutical investigation, Mariana Gonzalez, Becerril, Coca & Becerril, COFECE, Federal Commission of Economic Competition