New Market Study Published: Puerto Rico Pharmaceuticals & Healthcare Report Q4 2010

Sept. 28, 2010 - PRLog -- Over the past 40 years, Puerto Rico has become a world-leading pharmaceutical manufacturing hub. Its US-like regulatory framework, intellectual property laws, geographic location and lower operating costs have attracted multinational drugmakers looking to export to the US market. However, the pharmaceutical industry in the territory is undergoing a restructuring and rationalisation of its manufacturing network as the result of a worsening macroeconomic environment, increasing manufacturing competition from emerging Latin American countries and the decline in US demand for Puerto Rican pharmaceutical exports.

The territory's fiscal profile describes a perilous situation, with tax revenues falling 7.9% in 2008 and 7.0% in 2009. Puerto Rico is expected to continue running a structural fiscal deficit for years to come, meaning it will remain dependent on debt issuance and funding from the US Federal authorities. Therefore, while ongoing attempts to cut government expenditure will continue to have a negative effect on the already under-funded healthcare system, the weak fiscal outlook implies municipal borrowing costs will remain higher than in most US states, making it harder for the government to meet its debt serving costs in the future.

Market growth potential for out-of-pocket pharmaceutical spending is unimpressive compared with neighbouring emerging countries such as Mexico. Puerto Rico's unemployment rate spiked again in January 2010 to 15.8%, having dipped to 14.3% in December 2009. BMI's Country Risk team believe Puerto Rico's unemployment rate will drop slightly to 14.0% by year-end as the economy records flat real GDP growth after three successive years of unemployment problems. It is BMI's view that with the government committed to continuing to cut jobs across the island's public sector, tough times remain in store for the territory's workforce.

Puerto Rico's pharmaceutical market was worth US$2.71bn in 2009 and BMI forecasts this figure to grow at a modest compound annual growth rate (CAGR) of 3.38% through to 2014, reaching a value of US$3.20bn. We project that this CAGR will decrease to 3.29% over the longer, 10-year forecast period to 2019, when the market is expected to be worth US$3.77bn, or US$897 per capita. Furthermore, drug expenditure as a percentage of GDP is set to decrease from 4.3% in 2009 to 2.6% in 2019.

The passing of the US healthcare reform in March 2010 will have a beneficial effect on public finances in Puerto Rico, with the commonwealth's Medicaid funding set to jump 182% to US$8.62bn over the next nine years. As well as expanding access to medical services by subsidising health insurance for an estimated 500,000 uninsured workers, the increased funding came as welcome relief to the island's government.

An increasingly competitive manufacturing landscape exists in Latin America and Asia, where operating costs are even lower. It is therefore likely that Puerto Rico will slip further down the matrix over the next few years, as Brazil and Mexico, for example, become increasingly attractive to multinationals wishing to capitalise upon the domestic market growth potential of emerging markets.

Puerto Rico's economy is highly dependent on its exports. With the slow recovery of the US economy and the immediate effects of the healthcare reform on demand for pharmaceuticals in the US, it is vital that the commonwealth diversifies its manufacturing capabilities in order to maintain export levels in the long-term. Incentives for research and development, with the aim of strengthening the biotechnology sector, are one of the government's strategies to encourage its manufacturing sector to move further up in the pharmaceutical value chain and increase its international competitiveness.

Despite a string of plants operated by US multinationals being closed over the past few years, Blu Pharmaceuticals opened a new production plant in the small tourist town of Dorado. The firm benefited from incentives offered by the government to attract investment to help the country overcome its prolonged recession. Blu expects to invest US$60mn in the next three years at the US Food and Drug Administration (FDA)-approved facility. Multinational drugmakers on the island are also exploring their capabilities in biologics through various joint ventures and acquisitions, and will undoubtedly use Puerto Rico as a manufacturing base for this new pharmaceutical segment in the long run.

In BMI's updated Q410 Business Environment Ratings (BER) matrix for the Americas, Puerto Rico remains third - below the US and Canada - with a pharmaceutical rating of 65.1. However, the territory dropped from 11th to 12th position in BMI's global rankings, with the United Kingdom and Belgium overtaking Puerto Rico in terms of attractiveness to pharmaceutical multinationals.

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-  http://www.fastmr.com/prod/83835_puerto_rico_pharmaceutic...

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Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.