Mexico City’s “Mega Pharmacy” - What Does It Mean for Pharmaceutical Companies?

Since taking office in late 2018, Mexican President Andrés Manuel López Obrador has faced a number of challenges related to medication availability and distribution. The issues have grown so intense in recent years that parents of children with cancer have taken to the streets and blocked traffic to protest the lack of life-saving cancer medications such as chemotherapy. Anesthesiologists in Mexico have been known to reuse vials of morphine due to lack of availability, which has led to outbreaks of meningitis that have killed dozens of people.

On an institutional level, some of the systemic problems lie in the regulators of the Mexican pharmaceutical industry. The regulatory agency, which goes by the Spanish acronym Cofepris, has been known to delay the approval of new medications and demand bribes for their release. The “parallel” medication market is also so rampant in Mexico that it’s often difficult to determine which medications are real and which are fake. This has left López Obrador with major medication-related problems, ones that he has been desperate to solve since taking office.

Relief from a Mega Pharmacy?

López Obrador’s efforts to relieve Mexico’s medication shortages and distribution problems culminated at the end of 2023, with his inauguration of a massive “mega pharmacy” on the outskirts of Mexico City on December 29. This government-owned, 43,000-square-foot facility is intended to house and distribute any medication that Mexican patients might need.

The new pharmacy, which is actually more of a massive warehouse, is intended to work in concert with local health facilities such as hospitals, medical centers and pharmacies. The premise is straightforward: If a doctor or pharmacist is having difficulty obtaining the medication that they need for a patient through their usual channels, they can call the warehouse and have it delivered. In fact, López Obrador promised that any requested medication would be shipped within 24 to 48 hours.

Will It Work as Intended?

The idea of the new government-controlled warehouse sounds good in theory. And López Obrador does have some success in using government resources to facilitate the distribution of medications in the past. In 2021, for example, he relied on the armed forces and volunteers to distribute and administer COVID-19 vaccinations to anyone who wanted them. By the end of the year, they were available to just about all Mexicans for free if desired.

However, there’s also no question that some of the problems with Mexico’s pharmaceutical distribution model are directly tied to López Obrador’s policies. Earlier in his presidency, he grew frustrated with the high cost of medications. His solution was to cut private companies out of the process and make his government the direct buyer of all medications.

He enlisted the help of the World Health Organization in this plan, but even with their assistance, the Mexican government lacked the expertise in medication acquisition and distribution, and this endeavor has largely been perceived as a failure. Experts have noted that the government has created even more bottlenecks in distribution, and Mexico’s level of unfilled prescriptions went from 1.5 million in 2019 to 22 million by 2021. The COVID-19 pandemic may have played a role in these numbers, but that’s still a massive jump in unfilled prescriptions.

Some health care experts see similar risks with López Obrador’s current warehouse venture. They acknowledge that his efforts to distribute the COVID-19 vaccine in 2021 were largely successful, but distributing one drug effectively is quite a bit different than managing the distribution of thousands of different medications to an entire country of people.

The Mega Pharmacy’s Potential Impact on the Pharmaceutical Industry

Mexico’s current policy, the government control of medication purchasing, has already posed challenges to those in pharmaceutical manufacturing and sales. And at first glance, the opening of this massive mega pharmacy is certainly not going to change that paradigm. On the contrary, it appears that it will further strengthen the Mexican government’s hold over the pharmaceutical industry, as they could potentially have more buying power, as well as major distribution power over the medications in their possession.

However, if López Obrador’s grand warehouse project ends up being a success, then there may be potential opportunities in Mexico for pharmaceutical companies that hadn’t existed before. If it cleans up the distribution problems, for example, then the demand for drugs could potentially increase as more people know they can rely on the system. This could open up future opportunities for higher volumes of sales or the sales of new drugs to Mexico.

Of course, all of this remains to be seen based on the effectiveness of the new warehouse and its distribution model. But it’s certainly a significant development in the Mexican medication market that’s worth keeping an eye on for the remainder of 2024 and beyond.