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Chile Pharmaceutical Market Intelligence Report Quarter III 2009

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Page 1: Chile 09 q3 Wpm

Chile Pharmaceutical Market

Intelligence Report

Quarter III 2009

Page 2: Chile 09 q3 Wpm

A World Pharmaceutical Market Report

ISSN 1460-0781

© Copyright 2009 Espicom Business Intelligence

All rights reserved. No part of this publication may be reproduced or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping or storage in information retrieval systems without the express permission of the publisher.

Every care has been taken to ensure that the information contained in this report is correct. The publisher accepts no liability for decisions made on the basis of information contained herein.

British Library Cataloguing in Publication Data.

A catalogue record for this report is available from the British Library.

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PHARMA OUTLOOK CHILE

Pharma Outlook © espicom BUSINESS INTELLIGENCE

Quarter III 2009 i

Contents

EXECUTIVE SUMMARY ............................................................................................................ 1

Introduction ............................................................................................................................... 2

Pharmaceutical Market Analysis ............................................................................................. 3

Size ............................................................................................................................................................................ 3

Market Structure......................................................................................................................................................... 4

Pharmacy Sector ...................................................................................................................................................................... 6

Hospital Sector ....................................................................................................................................................................... 10

Prescribed Medicines ............................................................................................................................................................. 11

Generic Medicines ................................................................................................................................................................. 11

OTC Medicines ...................................................................................................................................................................... 12

Draft Law to Sell OTC Medicines Outside Pharmacies .................................................................................. 12

Projections & Outlook............................................................................................................................................... 13

Drug Quality Assessment Loophole Found in 2008 ....................................................................................... 14

Imports ................................................................................................................................................................................... 19

Trade Associations ................................................................................................................................................................. 21

ASILFA ................................................................................................................................................................................... 21

CAMEVED.............................................................................................................................................................................. 22

CANALAB............................................................................................................................................................................... 22

CIF .......................................................................................................................................................................................... 22

Domestic Production .............................................................................................................................................................. 24

FTA Developments ................................................................................................................................................................ 25

Local Manufacturers ............................................................................................................................................................... 28

Andrómaco ............................................................................................................................................................................. 28

Financial Indicators ......................................................................................................................................... 28

Product Portfolio ............................................................................................................................................. 29

Manufacturing Capabilities ............................................................................................................................. 30

Exports ........................................................................................................................................................... 30

International Divisions .................................................................................................................................... 30

Bagó ....................................................................................................................................................................................... 31

Financial Indicators ......................................................................................................................................... 31

Product Portfolio ............................................................................................................................................. 31

Manufacturing Capabilities ............................................................................................................................. 31

Exports ........................................................................................................................................................... 31

Bestpharma ............................................................................................................................................................................ 31

Product Portfolio ............................................................................................................................................. 32

Biosano .................................................................................................................................................................................. 32

Financial Indicators ......................................................................................................................................... 32

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Product Portfolio ............................................................................................................................................. 32

Manufacturing Capabilities ............................................................................................................................. 33

LabChile ................................................................................................................................................................................. 33

Financial Indicators ......................................................................................................................................... 33

Product Portfolio ............................................................................................................................................. 33

Manufacturing Capabilities ............................................................................................................................. 33

Exports ........................................................................................................................................................... 33

Distribution ...................................................................................................................................................... 34

Labomed ................................................................................................................................................................................ 34

Maver ..................................................................................................................................................................................... 34

Mintlab .................................................................................................................................................................................... 35

Recalcine................................................................................................................................................................................ 35

Financial Indicators ......................................................................................................................................... 35

Product Portfolio ............................................................................................................................................. 36

Manufacturing Capabilities ............................................................................................................................. 36

Research & Development ............................................................................................................................... 36

Sanderson .............................................................................................................................................................................. 36

Financial Indicators ......................................................................................................................................... 36

Product Portfolio ............................................................................................................................................. 36

Manufacturing Capabilities ............................................................................................................................. 36

Exports ........................................................................................................................................................... 37

Saval ...................................................................................................................................................................................... 37

Financial Indicators ......................................................................................................................................... 37

Product Portfolio ............................................................................................................................................. 37

Manufacturing Capabilities ............................................................................................................................. 37

Exports ........................................................................................................................................................... 38

Exports ................................................................................................................................................................................... 39

Research & Development ........................................................................................................................................ 43

Pharmaceutical Regulatory Analysis .................................................................................... 43

Pharmaceutical Regulation ...................................................................................................................................... 43

Public Consultation on New Pharmaceutical Regulations ..................................................................................................... 43

Pharmaceutical Registration .................................................................................................................................... 44

Quality Standards ........................................................................................................................................... 45

Stock Control .................................................................................................................................................. 45

Legal Proceedings .......................................................................................................................................... 45

Drug Approval Process ............................................................................................................................................ 45

Advertising ............................................................................................................................................................... 45

Patent Protection & Intellectual Property Rights ...................................................................................................... 46

China and Chile Agree Customs IP Cooperation Agreement ................................................................................................ 47

Pricing & Reimbursement ........................................................................................................................................ 47

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Reimbursement ........................................................................................................................................................ 48

Pharmaceutical Distribution ................................................................................................... 49

Distribution Developments in the Retail Market ..................................................................................................................... 50

Pharmacy Own-Labelled Production........................................................................................................................ 50

Retail Pharmacy Chains........................................................................................................................................... 51

Cruz Verde ............................................................................................................................................................................. 51

Farmacias Ahumada .............................................................................................................................................................. 51

Farmacias SalcoBrand ........................................................................................................................................................... 52

FarmaLider ............................................................................................................................................................................. 53

CENABAST .............................................................................................................................................................. 53

Healthcare Analysis ................................................................................................................ 54

Demographics .......................................................................................................................................................... 54

Population .............................................................................................................................................................................. 54

Birth Rate ........................................................................................................................................................ 54

Death Rate ..................................................................................................................................................... 55

Infant Mortality ................................................................................................................................................ 55

Life Expectancy at Birth .................................................................................................................................. 55

Public Health .......................................................................................................................................................................... 55

Causes of death ............................................................................................................................................. 55

Incidence of Communicable Disease ............................................................................................................. 55

Incidence of Non-communicable disease ....................................................................................................... 56

Chileans Suffer From High Rates of Digestive Illness ........................................................................................................... 56

HIV/AIDS ........................................................................................................................................................ 56

Healthcare System ................................................................................................................................................... 56

SNSS / FONASA...................................................................................................................................................... 59

Isapres ..................................................................................................................................................................... 59

Isapre Changes, Problems and Price Increases .................................................................................................................... 60

The Reform .............................................................................................................................................................. 63

Financing Government Expenditure Law ............................................................................................................................... 64

Health Authority & Management Law .................................................................................................................................... 64

Health Guarantees System Law ............................................................................................................................................ 64

Private Health Law ................................................................................................................................................................. 66

Rights & Duties Law ............................................................................................................................................................... 66

Health Expenditure................................................................................................................................................... 67

Health Expenditure Projections .............................................................................................................................................. 67

Healthcare Infrastructure.......................................................................................................................................... 68

Inpatient Analysis ........................................................................................................................................... 69

Healthcare Personnel............................................................................................................................................... 69

Physician Projections ............................................................................................................................................................. 69

DIRECTORY ............................................................................................................................. 70

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Government Organisations ...................................................................................................................................... 70

Trade Associations................................................................................................................................................... 70

Methodology and Sources ..................................................................................................... 72

List of Tables

Summary of Key Data Projections, 2009-2014 ........................................................................ 3

Summary of the Chilean Pharmaceutical Market, 2009 ......................................................... 4

Market Value by Sector, 1993-2007 (US$ Million) ................................................................... 4

Change in US$ Market Value by Sector, 1993-2007 (%) ......................................................... 5

Market Value by Sector, 1993-2005 (As % of Total) ................................................................ 5

Market Value by Sector, 1993-2002 (Billion Pesos) ................................................................ 5

Pharmacy Sector by Value & Volume, 2006 ............................................................................ 6

Pharmacy Sector by Value & Volume, 2005 ............................................................................ 6

Pharmacy Sector by Value & Volume, 2004 ............................................................................ 6

Pharmacy Sector Value by Leading Producers, June 2005 (Million Pesos) ........................ 7

Pharmacy Sector Value by Leading Producers, June 2005 (US$ Million) ............................ 7

Pharmacy Sector Value & Volume by Origin of Supplier, March 2005 (%) ........................... 8

Leading Therapeutic Categories by Value & Volume, 2004 (US$ Million & Million Units) .. 9

Leading Therapeutic Categories, 2004 (Million Units) ........................................................... 9

Market Projections at Retail Prices, 2009-2014 .................................................................... 13

SWOT Analysis of the Chilean Pharmaceutical Market, 2009 ............................................. 15

SWOT Analysis of the Chilean Health System, 2009 ............................................................ 16

Espicom Analysis of the Chilean Pharmaceutical Market, 2009 ......................................... 17

Pharmaceutical Imports, 2003-2007 (US$000’s) ................................................................... 19

Import Trends .......................................................................................................................... 19

Leading Suppliers of Raw Materials, 2007 (US$000s) .......................................................... 20

Leading Suppliers of Medicaments, 2007 (US$000s) ........................................................... 20

ASILFA’s Members, 2008 ........................................................................................................ 21

CANALAB’s Members, 2008 ................................................................................................... 22

CIF’s Members, 2008 ............................................................................................................... 23

Summary of Pharmaceutical Establishments & Workforce, 2000-2005 ............................. 25

Pharmaceutical Establishments & Workforce by Company Size, 2000-2005..................... 26

Summary of Pharmaceutical Production, 2000-2005 (Million Pesos) ................................. 27

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Summary of Pharmaceutical Production, 2000-2005 (US$ Million) ..................................... 27

Pharmaceutical Production by Company Size, 2000-2005 (Million Pesos) ........................ 28

Andrómaco’s Sales, 2000-2007 (Billion Pesos) .................................................................... 29

Biosano’s Product Portfolio, 2008 ......................................................................................... 32

Pharmaceutical Producers Represented by Labomed, 2007 .............................................. 34

Pharmaceutical Exports, 2003-2007 (US$000’s) ................................................................... 39

Export Trends .......................................................................................................................... 39

Leading Destinations, 2007 (US$000s) .................................................................................. 41

Leading Exporters of Pharmaceuticals, 2002-2007(US$ Million) ........................................ 42

Number of Product Registrations, 1999-2006 ....................................................................... 44

Summary Demographic Data 2005-07 ................................................................................... 54

Projected Population, 2009-2014 ........................................................................................... 54

Health Beneficiaries, 1990-2008 ............................................................................................. 58

Isapres’ Beneficiaries, 1990-2007 .......................................................................................... 61

Beneficiaries by Isapre Type, 2007 ........................................................................................ 62

Major Structural Implementations, 2000-2010 ...................................................................... 63

The Five-Law Reform Bill, 2004 ............................................................................................. 63

Total AUGE Programme Patients, October 2007 .................................................................. 65

AUGE Pilot Programme Patients, August 2002-November 2004 ......................................... 66

Healthcare Expenditure, 2006 ................................................................................................ 67

Projected Health Expenditure, 2009-14 ................................................................................. 67

Hospitals and Beds, 2005-06 .................................................................................................. 68

Hospital Bed Projections, 2009-2014 ..................................................................................... 68

Projected Number of Physicians, 2009-14 (000s) ................................................................. 69

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List of Figures

Pharmacy Sector by Value & Volume, 2005 ............................................................................ 7

Pharmacy Sector by Value & Volume By Supplier’s Origin, March 2005 ............................. 8

Radar Graph of the Chilean Pharmaceutical Market, 2009 .................................................. 18

Pharmaceutical Imports, 2007 (As % of Total) ...................................................................... 19

Leading Suppliers, 2007 (%) ................................................................................................... 21

Pharmaceutical Production, 2000-2005 ................................................................................. 27

Andromaco’s Sales, 2000-2007 .............................................................................................. 29

Saval’s Sales, 2003-2006 ........................................................................................................ 37

Pharmaceutical Exports by Category, 2007 (%) ................................................................... 40

Leading Destinations, 2007 (%) ............................................................................................. 41

Leading Exporters of Pharmaceuticals, 2007 (US$ Million) ................................................ 42

Drug Pricing by Product Type, 2002-05 (US$) ...................................................................... 48

Pharmacy Sector by Distribution Channels, 2006 (%) ......................................................... 49

FASA’s Sales, 2000-07 (US$) .................................................................................................. 52

Healthcare Institutions’ Organisation .................................................................................... 57

Isapres’ Benificiaries, 1990-2007 ........................................................................................... 61

Beneficiaries by Isapre Type, 2007 ........................................................................................ 62

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Quarter III 2009 1

EXECUTIVE SUMMARY

Chile is the sixth largest market in the region, valued at US$1.8 billion in 2009.

Protectionism towards the domestic industry characterises the Chilean pharmaceutical market, which is currently the sixth largest in Latin America, at nearly US$1.8 billion at retail prices. Inflated by the appreciation of the peso, the pharmacy sector alone was valued at US$920.0 million at manufacturers‟ prices in 2007.

Government’s US$4 billion boost to economy.

In 2009, the government is activating a US$4 billion economic recovery package as a reaction to global financial problems. This will include spending US$700 million on public works and tax incentives for SME‟s as well as subsidies for low income families.

Export growth increased by 10.8% in 2007.

The domestic industry is heavily reliant on imports of raw materials. Due to a lack of quality standards, exports, valued at US$83.5 million in 2007, were mainly restricted to Andean countries. The 2007 increase was mainly due to a rising level of finished medicaments. The industry is slowly meeting GMP practices with a 2008 deadline.

Bioequivalence in 16 selected active ingredients between 2005 and 2009.

GMP standards are not fully implemented, therefore safety and efficacy issues are not a priority. The Ministry of Health and the Institute of Public Health are testing bioequivalence in 16 selected active ingredients between 2005 and 2009. The aim is to encourage generic substitution, which is a threat to copycat producers.

Domestic producers accounted for 60.1% of the pharmacy sector by value in 2005.

There are 40 reported pharmaceutical producers. Domestic producers lead the pharmacy sector, led by LabChile, Recalcine, Saval and Andrómaco. More than 80% (81.8%) of drugs consumed in Chile were produced in Chilean laboratories in 2007.

The market is increasing, although prices remain low at regional levels.

TRIPS-related patent enforcements and health reforms will increase pharmaceutical spending in the long term. The government has created an intellectual property body INAPI to strengthen protection. Domestic manufacturing is expected to shift from copy products to branded products under licence from multinationals. The average drug price remained at around US$4.0 in 2007, whilst the Latin American average was higher at US$7.2 in 2007.

Three pharmacy chains control the pharmacy sector.

Farmacias Ahumada, Cruz Verde and SalcoBrand remain the three pharmacy chains which control around 90.0% of the pharmacy sector. They have strong vertical distribution systems and practice product & market diversification. SalcoBrand was sold to the Santiago based business group Empresas Juan Yarur in February 2007.

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Introduction

The Chilean pharmaceutical market is the fifth largest market in the region, after Brazil, Mexico, Venzuela, and Argentina. The pharmacy sector is very competitive due to the presence of a well-developed domestic industry specialised in generic and copycat products, which supplied 59.4% by value and 81.2% by volume of the pharmacy sector in 2006. The hospital sector has increased in value terms since the Ministry of Health initiated health reform and launched programmes such as AUGE, which provides universal healthcare access for the poor.

Chile‟s patent laws are in line with international standards, including TRIPS compliance. Nevetheless, the United States Trade Representative (USTRP) has placed Chile on Priority Watch List, despite acknowledging improvements. In April 2009, China, Chile‟s main trading partner, agreed a customs co-operation agreement which will strengthen IP investigations and information sharing to prevent, investigate and repress customs offences. In 2004, an Ethics Code (Código de Ética) was enforced to solve discrepancies between national and foreign producers, in terms of regulation, consumer rights, with respect to the industry, competition and advertising. An Ethics Commission was also created to act as intermediary under the Chilean Industrial Society (SOFOFA– Sociedad de Fomento Fabril).

Equity, participation, solidarity and quality are the four pillars of the Chilean Healthcare Planning Objectives 2000-2010. Goals are for a more preventative and universal primary care system, to enforce and expand the AUGE programme to 56 ailments by 2007, improve IT health systems and management. The goals for 2010 include increasing health equity and meeting the ageing population‟s needs.

The pharmacy sector was valued at over US$800 million at manufacturers‟ prices in 2006 and US$920 million in 2007. LabChile, owned by Teva, continues to be the leading producer. Other leading producers include Recalcine, Saval and Andrómaco. In March 2005, Andrómaco acquired Silesia, further consolidating the sector. The largest producers meet GMP standards but smaller producers have not fully complied. Bioequivalence standards are not compulsory yet although tests are being performed on selected active ingredients.

Pharmacy prices are still among the lowest in the region, at an average of US$4.0 in 2007. The pharmacy chains Cruz Verde, Farmacias Ahumada and SalcoBrand control around 90% of the pharmacy sector. As the distribution channel is so consolidated, pharmacy chains are engaged in aggressive price wars. They also practice own-label production, vertical distribution and product & market diversification. In the Chilean hospital sector, CENABAST controls expenditure on pharmaceuticals.

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Summary of Key Data Projections, 2009-2014

2009 2010 2011 2012 2013 2014

Pharmaceutical market (US$ millions) 1,800 2,000 2,100 2,300 2,500 2,700 Per capita (US$) 106 114 123 133 144 153 As % of health expenditure 22.2 24.7 23.9 23.5 22.9 22.9 Generic (%) 10.6 10.6 10.6 10.6 10.6 10.6

Population (millions) * 16.9 17.1 17.3 17.4 17.6 17.7 Growth (%) * 1.0 1.0 0.9 0.9 0.9 0.8 Number aged 65+ (millions) * 1.5 1.6 1.7 1.7 1.8 1.9 Aged 65+ (%) * 9.1 9.3 9.6 9.9 10.2 10.5 Health expenditure (US$ billions) 8.1 8.1 8.8 9.8 10.9 11.8 Per capita (US$) 479 474 509 563 619 667 As % of GDP 5.3 5.3 5.3 5.3 5.3 5.3 Private (%) 22.0 22.0 22.0 22.0 22.0 22.0 Hospital beds (000s) 42.3 42.7 43.1 43.5 43.9 44.4 Private (%) 20.5 20.5 20.5 20.5 20.5 20.5 Rate/000 population 2.5 2.5 2.5 2.5 2.5 2.5 Physicians (000s) 20.3 20.5 20.7 20.9 21.1 21.3 Private (%) 20.8 20.8 20.8 20.8 20.8 20.8 Rate/000 population 1.2 1.2 1.2 1.2 1.2 1.2 GDP (US$ billions) * 152.5 152.9 165.9 185.8 206.2 223.5 Per capita (US$) * 9,010 8,940 9,620 10,670 11,740 12,630 Real growth (%) * 0.4 2.3 4.6 4.8 4.9 4.7

Source: Department of Health, *Economist Intelligence Unit (EIU), Espicom estimates.

Pharmaceutical Market Analysis

Size

The Chilean pharmaceutical market is the fifth largest in the region, behind Brazil, Mexico, Venezuela and Argentina. In 2009, the market is estimated at US$1.8 billion at retail prices. This is equivalent to US$106 per capita, behind Venezuela, Mexico and Argentina. At manufacturers‟ prices, pharmacy sales represent around 80% of the total.

The economy has been performing well, which has boosted out-of-pocket pharmaceutical expenditure. However, the government has recognised the continuing global financial problems and will implement a US$4 billion economy boosting plan in 2009. At manufacturers‟ prices, the pharmacy sector was valued at US$840.0 million in 2006 and US$920.0 million in 2007, a 10% increase. Copycats represented 50.1% of the sector in 2005, equal to US$344.0 million, followed by patented drugs (39.3%) and generic drugs (10.6%).

A key component of the healthcare reform is the Plan for Universal Health Access & Rights (AUGE). As a result, the institutional sector expanded from US$130 million in 2004 to US$178 million in 2005. This is good for domestic producers, although competition is expected from Indian producers and pharmacy chains‟ own-labelled production.

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Summary of the Chilean Pharmaceutical Market, 2009

2009

Market size (US$ millions) 1,800 as % of total health expenditure 22.2 as % of GDP 1.2 as % of world market 0.2 Growth rate (%) 9.0 Per capita expenditure (US$) 106

Source: Espicom estimates.

Market Structure

According to ASILFA, which represents domestic producers, the Chilean pharmaceutical market was estimated at US$864.6 million at manufacturer‟s prices in 2005, the latest year for which there is complete market data compared to US$828.4 in 2004 and US$573.8 in 2002. This includes the pharmacy sector plus the hospital (public and private) sector. The pharmacy sector amounted to US$686.6 million, equal to 79.4% of the total, whilst the hospital sector stood at US$178 million, equal to the remaining 20.6%. The latest pharmacy market figures released for 2007, show it was worth US$920 million in 2007. There is no equivalent hospital data available for that year as yet.

Excluding the private hospital sector, the Ministry of Health (MINSAL) valued the pharmaceutical market at 395.3 billion pesos (US$573.8 million) at manufacturers‟ prices in 2002. The pharmacy sector represented 87.3% of the total, equal to 345.0 million pesos (US$500.8 million). Between 1993 and 2002, the market at local currency grew by 169.3%.

According to ASILFA, the Chilean pharmaceutical market was worth US$650 million at manufacturers‟ prices in 2001. The pharmacy sector amounted to 325.1 billion pesos (US$512 million), equal to 78.9% of the total. The hospital sector stood at US$137 million, accounting for the remaining 21.1%.

Market Value by Sector, 1993-2007 (US$ Million)

Pharmacy Public Hospital Total

1993 300.1 63.1 363.2 1994 336.0 61.2 397.2 1995 401.0 66.8 467.8 1996 443.6 74.0 517.6 1997 542.6 71.8 614.4 1998 563.1 70.8 634.0 1999 551.5 73.3 624.8 2000 552.9 75.4 628.4 2001 512.0 71.2 583.2 2002 500.8 73.0 573.8 2004 698.4 *130.0 *828.4 2005 686.6 *178.0 *864.6 2006 840.0 n/a n/a 2007 920.0 n/a n/a

Source: 1993-2002; MINSAL, April 2004, 2004-07; ASILFA, * includes private hospital market.

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Change in US$ Market Value by Sector, 1993-2007 (%)

Pharmacy Public Hospital Total

1993 n/a n/a n/a

1994 12.0 -3.0 9.4

1995 19.3 9.2 17.8

1996 10.6 10.8 10.6

1997 22.3 -3.0 18.7

1998 3.8 -1.4 3.2

1999 -2.1 3.5 -1.5

2000 0.3 2.9 0.6

2001 -7.4 -5.6 -7.2

2002 -2.2 2.5 -1.6

2004 39.5 *78.1 *44.4

2005 -1.7 *36.9 *4.4

2006 22.3 n/a n/a

2007 9.5 n/a n/a

Source: 1993-2002; MINSAL, April 2004, 2004-07; ASILFA, * includes private hospital market

Market Value by Sector, 1993-2005 (As % of Total)

Pharmacy Public Hospital Total

1993 82.6 17.4 100.0 1994 84.6 15.4 100.0 1995 85.7 14.3 100.0 1996 85.7 14.3 100.0 1997 88.3 11.7 100.0 1998 88.8 11.2 100.0 1999 88.3 11.7 100.0 2000 88.0 12.0 100.0 2001 87.8 12.2 100.0 2002 87.3 12.7 100.0 2004 84.3 15.7 100.0 2005 79.4 20.6 100.0

Source:1993-2002 MINSAL, 2004-05; ASILFA,

Market Value by Sector, 1993-2002 (Billion Pesos)

Pharmacy Public Hospital Total

1993 121.3 25.5 146.8 1994 141.2 25.7 166.9 1995 159.1 26.5 185.6 1996 182.9 30.5 213.4 1997 227.5 30.1 257.6 1998 259.2 32.6 291.8 1999 280.6 37.3 317.9 2000 298.3 40.7 339.0 2001 325.1 45.2 370.3 2002 345.0 50.3 395.3

Source: MINSAL, April 2004. Note: MINSAL did not publish data about private hospital pharmaceutical expenditure.

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Pharmacy Sector

The pharmacy sector was valued at US$920.0 million at manufacturers‟ prices in 2007, which compares to US$840.0 in 2006, US$686.6 million in 2005 and US$698.4 million in 2004. Generic and copycat products represented 59.4% of the sector in 2006 equal to US$499.0 million (the categories were not given separately as in previous years), followed by patented drugs (40.6%)

In volume terms, the sector was valued at 202.0 million units in 2006, compared to 190.3 million units in 2005 and 192.5 million units in 2004. Copycat and generic products accounted for 81.2% of the sector in 2006, equal to 164.0 million units, followed by patented drugs (18.8%). National producers represented 81.1% of the sector by volume in 2005.

Pharmacy Sector by Value & Volume, 2006

US$ Million As % of Total Million Units As % of Total

Copycat & generic drugs 499.0 59.4 164.0 81.2 Patented drugs 341.0 40.6 38.0 18.8 Total 840.0 100.0 202.0 100.0

Source: ASILFA.

Pharmacy Sector by Value & Volume, 2005

US$ Million As % of Total Million Units As % of Total

Copycat drugs 344.0 50.1 81.8 43.0 Patented drugs 269.8 39.3 9.9 18.9 Generic drugs 72.8 10.6 72.5 38.1 Total 686.6 100.0 190.3 100.0

Source: ASILFA.

Pharmacy Sector by Value & Volume, 2004

US$ Million As % of Total Million Units As % of Total

Copycat drugs 349.6 50.1 79.3 41.2 Patented drugs 280.3 40.1 37.0 19.2 Generic drugs 68.5 9.8 76.2 39.6 Total 698.4 100.0 192.5 100.0

Source: ASILFA.

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Pharmacy Sector by Value & Volume, 2005

0

100

200

300

400

500

600

700

800

Copycat drugs Patented drugs Generic drugs Total

US$ Million Million Units

Source: ASILFA

LabChile, Recalcine, Saval and Andrómaco constituted 27.1% of the annual cumulative sector by value in June 2005. LabChile had 7.8% of the sector, with sales valued at US$55.1 million, followed by Recalcine (7.0%). As Andrómaco acquired Silesia in March 2005, Saval and Andrómaco had very similar shares, at 6.2%.

Pharmacy Sector Value by Leading Producers, June 2005 (Million Pesos)

Jan-June Change (%) Annual Cumulative

Change (%)

LabChile 17,821 8.4 34,083 5.9 Recalcine 15,486 10.1 30,456 10.2 Saval 13,970 4.9 27,093 5.9 Andrómaco 9,754 4.5 19,060 3.6 Silesia 4,031 2.1 8,009 -1.4 Subtotal Andrómaco Corporation 13,785 3.8 27,069 2.1 Total 225,993 9.6 438,131 7.8

Source: ASILFA.

Pharmacy Sector Value by Leading Producers, June 2005 (US$ Million)

Jan-June As % of Total Annual Cumulative

As % of Total

LabChile 28.8 7.9 55.1 7.8 Recalcine 25.0 6.9 49.2 7.0 Saval 22.6 6.2 43.8 6.2 Andrómaco 15.8 4.3 30.8 4.4 Silesia 6.5 1.8 12.9 1.8 Subtotal Andrómaco Corporation 22.3 6.1 43.7 6.2 Total 365.1 100.0 707.8 100.0

Source: ASILFA.

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The value of own-label products from the leading pharmacy chains fell by 0.3% in the pharmacy sector between January and June 2005. Sales amounted to 10.0 billion pesos (US$16.1 million), equal to 4.4% of the total. Considering the annual cumulative total by June 2005, sales amounted to 19.3 billion pesos (US$31.1 million), equal to 4.4% of the total.

By March 2005, foreign companies, most of them importers of original drugs from Europe and the USA, represented 39.9% of the pharmacy sector value and 18.2% of the pharmacy sector volume. European producers, with drugs priced at US$7.3, had 28.2% of the sector value, while American producers, with drugs priced at US$10.1, retained only 11.7%.

Pharmacy Sector Value & Volume by Origin of Supplier, March 2005 (%)

Value 12-Month Change Volume 12-Month Change

American 11.7 6.0 4.2 -2.2 European 28.2 13.1 14.0 4.6 Subtotal foreign 39.9 n/a 18.2 n/a Domestic 60.1 19.7 81.8 9.7 Total 100.0 n/a 100.0 n/a

Source: ASILFA.

Pharmacy Sector by Value & Volume By Supplier’s Origin, March 2005

0

20

40

60

80

100

Value Volume

Domestic Foreign

Source ASILFA

In 2004, non narcotic analgesic antipiretics was the leading therapeutic category by value, with sales of US$36.7 million, equal to 5.2% of the pharmacy sector, followed by oral contraceptives (4.6%) and non steroidal antirheumatics (4.4%). By volume, the leading therapeutic category was non steroidal antirheumatics, with 17.1 million units sold, equal to 8.9% of the total, followed by non narcotic analgesic antipiretics (8.5%).

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Leading Therapeutic Categories by Value & Volume, 2004 (US$ Million & Million Units)

US$ Million As % of Total

Non narcotic analgesic antipiretics 36.7 5.2 Oral contraceptives 32.4 4.6 Non steroidal antirheumatics 31.0 4.4 Antidepressants and stabilisers 24.7 3.5 Infant supplements 18.3 2.6 Antiflu, excluding anti-inflammatories 17.6 2.5 Anticholesterol 17.6 2.5 Antiulcers 14.8 2.1 Antiepileptics 14.1 2.0 Antiobesity 14.1 2.0 Subtotal 221.4 31.7 Other 477.0 68.3 Total 698.5 100.0

Source: ASILFA, 2005.

Leading Therapeutic Categories, 2004 (Million Units)

Million Units As % of Total

Non steroidal antirheumatics 17.1 8.9 Non narcotic analgesic antipiretics 16.4 8.5 Antiulcers 7.3 3.8 Antiflu, excluding anti-inflammatories 5.6 2.9 Oral contraceptives 5.4 2.8 Antimigraine 4.9 2.6 Expectorants 4.8 2.5 Antihistamines 4.5 2.3 Penicillins 4.4 2.3 Laxatives 4.1 2.1 Subtotal 74.5 38.7 Other 118.0 61.3 Total 192.5 100.0

Source: ASILFA, 2005.

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Hospital Sector

The Plan for Universal Health Access and Rights (AUGE – Acceso Universal con Garantías Explícitas) started providing treatment for 25 ailments on 1st July 2005. As a result, the hospital sector increased to US$178 million in 2005. Each ailment covered by AUGE has a definite budget, which means that price is the key for competitiveness.

The public sector, via FONASA, was accountable for around US$140 million. National producers of generics and branded generics will have more advantages. However, competition might arise from Indian producers. Foreign producers are likely to be priced out, except in niche areas such as drugs for HIV/AIDS and insulins, valued at US$20 million.

The private sector, via Isapres, will stay at US$38 million. Producers in vertical distribution systems with leading pharmacy chains will benefit, i.e. Mintlab, linked to Cruz Verde, and Recalcine and Medipharm, both linked to SalcoBrand. In practice, these pharmacy chains, which will act as intermediaries for Isapres, will also favour own-labelled products.

According to ASILFA, the hospital sector was estimated at US$130 million in 2004, equal to 15.7% of the total. Domestic producers accounted for 85% of the total, whereas the remainder was imported. Antihypertensives, analgesics and medicines to treat diabetes accounted for 50% of the total.

Public Hospital Sector

In 2005, the public hospital sector, via FONASA accounted for around US$140 million compared to 2002, when the public hospital sector was estimated at 50.3 billion pesos (US$73.0 million), itself an 11.3% increase over 2001. Overall, domestic producers account for 90% of the sector. In 2004, the leading producers were LabChile, Sanderson, Andrómaco, Biosano and Bestpharma.

Based on a study comprising 1,270 pharmaceutical products with active ingredients included in the national list of essential medicines (Formulario Nacional), branded medicines accounted for around 62.0% of the public hospital sector in 1999, equal to 23.1 billion (US$45.4 million), the remainder being generic. New List of Essential Medicines

Under Decree No. 194/2005, HIV/AIDS drugs and insulin were some of the new medicines to be incorporated in a new essential medicines list, published in March 2006. The list extended the number of essential medicines from 460 to 760. The new list also included drugs used in the treatment of pathologies covered by AUGE.

According to a socio-economic survey (CASEN – Encuesta de Caracterización Socioeconómica) undertaken by the Ministry of Planning and Cooperation, the public sector increased the provision of free medicines considerably in the 1990s. In 1990, it provided free medicines to 38.6% of all population, compared to 56.0% in 1998.

According to MINSAL, the average cost per prescription amounted to 1,390 pesos (US$2.2) in 2001, assuming one prescription per consultation. The public sector was valued at 45.2 billion pesos (US$71.2 million) and the number of public emergency, specialty and primary consultations was estimated at 32.5 million in 2001.

Only people covered by the public insurance system (FONASA) who fall under A and B categories receive free medications in Chile. In 2001, there were 7.3 million beneficiaries under these two categories, representing around 70% of all FONASA‟s beneficiaries. In 2001, they accounted for 21.8 million consultations.

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Again, assuming one prescription per consultation at a cost of 1,390 pesos, the public sector provided free medicines to beneficiaries under A and B categories at a cost of 30.4 billion pesos (US$47.9 million) in 2001, covering 67.3% of all FONASA‟s beneficiaries. The remaining 14.8 billion pesos (US$23.3 million) was accountable to FONASA‟s beneficiaries under C and D categories, who receive free medicines in the primary sector.

Prescribed Medicines

In 2002, prescription-only medicines (POM), either research-based or copycat, represented 72.8% of the pharmacy sector, equal to US$364.6 million at manufacturers‟ prices. The remainder was over-the-counter (OTC) medicines (19.5%), either research-based or copycat, and generics (7.7%).

In 2002, the national medicines agency (ISPCH) switched 17 pharmacological compounds to OTC status. This resulted in a decreasing POM market share, already diminished by less consumption power since the 1999 economic crisis. According to ASILFA, about 71% of all prescriptions are for domestic drugs.

Generic Medicines

Bioequivalent generics are not enforced in Chile. Instead, there are two types of generics, including branded generics and generics under International Common Denomination (ICD). Both types are local copycats of successful original drugs. Laboratorio Chile is the leader with a 60% market share, followed by Andrómaco and Mintlab, each with a further 15%.

Between January and June 2005, unbranded generics increased by 20.6% over the same period in 2004, reaching 23.8 billion pesos (US$38.7 million), equal to 10.6% of the total. Considering the annual cumulative total by June 2005, unbranded generics increased by 18.6%, reaching 44.6 billion pesos (US$72.1 million), equal to 10.2% of the total.

In 2004, unbranded generics represented 9.8% of the pharmacy sector, equal to US$68.5 million. This compares to 7.7% of the pharmacy sector in 2002, equal to US$38.5 million. Also, of the 192.5 million units sold in the pharmacy sector in 2004, about 39.6% were unbranded generics, equal to 76.2 million units.

Strong lobbying undertaken by national producers stopped the implementation of bioequivalence in 1999. Currently, the country only has two centres to perform bioequivalence tests. However, the Ministry of Health plans to start bioequivalence tests on 16 selected active ingredients, including anticoagulants, coagulants and antiepileptics, between 2005 and 2009.

Bioquivalence tests would cost manufacturers between US$20,000 and US$30,000 per product. Considering around 4,000 products are sold in the Chilean market, this would total an investment of US$80 million. Importantly, producers were expected to fully comply with GMP standards by the end of 2005, but this deadline has been extended until 2008.

ASILFA and CIF Chile, representing domestic producers and foreign importers, respectively, are against generic substitution, which is currently practiced. They believe in physician prescribing and do not support the increasing role of the pharmacist, as it favours generics and own-labelled products. By applying bioequivalence, ASILFA believes that generic prices might increase.

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OTC Medicines

According to the Ministry of Health, the incidence of self-medication is high in Chile, representing around 50% of total consumption. However, the list of OTC medicines is very restricted and, in fact, many prescribed medicines are dispensed without an appropriate prescription. This practice is known as under-the-counter (UTC) sales.

The problem with OTC medicines is compounded by the fact that they can only be sold in pharmacy counters. For CAMEVED, the national association which represents OTC producers and importers, the point of sale of OTC medicines should be extended at least to pharmacy aisles between 2005 and 2006. This issue has been subject to national debate.

For CAMEVED, pharmacists promote under-the-counter sales and own–labelled drugs, which has diminished the penetration of OTC medicines. CAMEVED believes that consumers should be empowered, so that they can freely choose OTC medicines in pharmacy aisles. If passed, this initiative might be promoted in supermarkets.

The sale of OTC medicines in supermarkets would increase access to drugs in rural areas, and might even bring their prices down. For the Chilean Association of Pharmacists (Colegio de Químicos Farmacéuticos) and the national medicines agency (ISPCH), however, pharmacies should be the only points of sale, under the supervision of pharmacists.

According to the national paper El Mercurio, the OTC sector at manufacturers‟ prices amounted to US$97.7 million in 2002. Roughly, this was equivalent to 19.5% of the pharmacy sector. Major OTC producers included Maver (12.3% of the OTC sector), Bayer (11.7%), Nestle (8.3%) and LabChile (7.3%).

Draft Law to Sell OTC Medicines Outside Pharmacies

In August 2007, the socialist members of the Parliament, Marco Enríquez-Ominami and Manuel Monsalve, presented a draft law to authorise OTC sales in supermarkets and other establishments. The aim is to increase competitiveness in the pharmaceutical market, resulting in cheaper drugs and increasing drug access. The Chilean Association of Pharmacists (Colegio de Químicos Farmacéuticos) is not in favour of this draft law, as it goes against their interest.

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Projections & Outlook

The pharmaceutical market is expected to increase by around 9.0% per annum in the next five years, reaching US$2.7 billion at retail prices by 2014. This growth is comparable to Argentina, and close to Mexico. Cheap prices, copycat and generics competition are slightly containing the pharmacy sector in local currency terms, while in US$ terms the market is increasing due to the peso‟s appreciation.

Domestic producers are important to the Chilean market. By March 2005, they represented 60.1% by value at manufacturers‟ prices and 81.8% by volume of the pharmacy sector. In an effort to diversify their market opportunities, still concentrated in Latin America, they are implementing international standards.

Bioequivalence standards will be tested on 16 active ingredients between 2006 and 2009. This is the first stage for future bioequivalence and bioavailability implementation. Domestic producers of copycat drugs do not admit that this is the way for the pharmaceutical industry to go ahead, but this might be their key to compete in the domestic market and increase exports.

The Ministry of Health is keen to encourage imports from India and China, in order to contain public expenditure in the hospital sector, expected to increase in coming years due to AUGE‟s implementation. They need drugs at cheaper prices, and Indian producers are ready to meet their needs. Domestic producers question the quality of Indian medicines.

Market Projections at Retail Prices, 2009-2014

Market (US$ Billion) Per Capita (US$)

2009 1.8 106 2010 2.0 114 2011 2.1 123 2012 2.3 133 2013 2.5 144 2014 2.7 153

Source: Espicom projections.

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Drug Quality Assessment Loophole Found in 2008

As the Ministry of Health implements the Universal Health Access and Rights (AUGE) Programme, its demand for generics is rapidly increasing. ASILFA, the domestic producers trade association has concerns about the quality and bioequivalence of Indian drugs and the lack of resources to analyse them at the National Institute of Public Health (ISPCH).

When registering new products, the ISPCH consults an external commission made up of university specialists, which relies on the validity of the data supplied by original research-based producers. However, clinical studies are not required for generics to prove drug efficacy and quality. Instead, ISPCH refers to clinical studies undertaken by original research-based producers. This has resulted in problems assessing some generic alternatives, particularly biologicals.

In January 2006, the Ministry of Health had to stop using a DTP vaccine which was imported by Volta from Serum Institut of India, due to many adverse reactions. There were also questions about the quality of two other Indian products, Wosulin and Olivin. Wosulin is Wockhardt‟s generic insulin alternative to Eli Lilly‟s Humulín, imported by Laboratorio Pentalfarma. Alpes Ceime‟s Olivin (olanzapin), imported by Royal Pharma, is an alternative to Eli Lilly‟s Zyprexa, used for the treatment of schizophrenia.

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SWOT Analysis of the Chilean Pharmaceutical Market, 2009

Strengths

The domestic industry is highly developed, accounting for 60.1% of the pharmacy sector and 90.0% of the hospital sector.

Physician-prescribing of domestic drugs is estimated to represent 71.0% of the total, which is a strength for domestic producers.

Weaknesses

The association of domestic producers (ASILFA) has reiterated that domestic producers meet Good Manufacturing Practices (GMP). However, GMP compliance is not 100%. The new deadline is the end of 2008.

Domestic producers rely on pharmaceutical imports of raw materials, which amounted to US$131.6 million in 2007.

Pharmacy chains monopolise the pharmacy sector, accounting for around 90% of the total.

Drug prices in Chile remain among the lowest in the region, at a pharmacy average of US$4.0 in 2007.

Pharmaceutical R&D, mainly in the form of clinical studies undertaken by foreign producers, is valued at around US$16 million annually.

The Chilean medicines agency (ISPCH) is very bureaucratic. Due to different registration procedures and the lack of „pipeline‟ patent protection, locally produced copycat drugs have a strong commercial advantage.

Opportunities

Chile signed Free Trade Agreements in 2006 with Colombia, Panama and Peru which, when in force, should bring opportunities for Chilean producers to penetrate the pharmacy and hospital sectors in these markets.

Politically and socially, Chile is changing, as reflected by the victory of the first woman president, Michelle Bachelet, in December 2005.

The country is one of Latin America‟s better economic performers. GDP rose by 12.7% in 2007, to reach US$186.1 billion in 2008. A more modest rise of 0.4% is expected for 2009.

New health reforms will boost pharmaceutical expenditure in the hospital sector. Cheap local copycat products will be favoured in the public hospital sector. In the private hospital sector, pharmacy chains will act as distributors for Isapres, favouring own-labelled medicines and medicines produced by associated producers.

Threats

In November 2006, a new patent law was enforced. This will make Chilean patent law TRIPS-compliant, which might threaten some domestic producers.

GMP standards were due to be enforced in full at the end of 2008. Those producers which do not meet the standards, particularly small domestic producers, could be closed down.

Bioequivalence tests are expected to be performed on 16 selected active ingredients between 2005 and 2009, which is not a good sign for domestic producers.

The Ministry of Health is keen to promote generic substitution, which could have an adverse effect on domestic copycat producers and foreign companies which import research-based drugs.

The three major pharmacy chains keep increasing their production of own-labelled drugs. In 2004, their sales ranked seventh in the pharmacy sector at manufacturer‟s prices.

The Ministry of Health is keen to import Indian retail medicines, which might diminish the market share of domestic producers in the hospital sector.

Out-of-pocket pharmaceutical expenditure is increasing in all the regions, but it is decreasing in the metropolitan areas.

Source: Espicom.

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SWOT Analysis of the Chilean Health System, 2009

Strengths Weaknesses

Pro-active government

Health education amongst the population

Well-established NHS, dating from 1952

Strong sanitary code

Wide coverage of the public health system

Sophisticated private services

Highly skilful medical personnel

General population supporting AUGE

High level of poverty in some areas

Imbalance of private vs public and urban vs rural health services

Mixed role of the government as provider and regulator

Mixed role of Isapres as insurers/providers

Shared attributions in environmental health

Insufficient health technology

Public health workforce worried about job security

Weak consumer groups Opportunities Threats

Poverty alleviation

Further development of AUGE, primary healthcare and outpatient/ambulatory solutions

Further decentralisation of health providers and new national and regional health authories, ie the Health Superintendency

New healthcare network management: self-managed hospitals

New human resources management: improvement of health training and education

Fostering public-private health partnerships

Modernisation of IT health systems

Development of patient charts

Establishments of people‟s health rights and duties

High level of communicable diseases and increasing chronic illnesses

High financing for the health reform, although this has been partially covered with a general VAT increase

Isapres‟ opposition to the functional change

Opposition from private insurers and public health workforce

Source: Espicom.

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Espicom Analysis of the Chilean Pharmaceutical Market, 2009

Demographics Rating Strong Trend / Comment The population is estimated at 16.9 million in 2009. The birth rate has been

declining steadily in recent years, but births still outnumber deaths. The crude mortality rate is low, and the decline in the number of infant deaths has been striking. Life expectancy at birth is among the highest in the region.

Economic performance

Rating Strong Trend - Comment Chile is perceived as one of Latin America’s better economic performers. GDP in

dollar terms is expected to increase to US$152.5 billion in 2009. Real GDP growth is expected to be 0.4% in 2009.

Healthcare expenditure

Rating Fair Trend + Comment Health expenditure represents around 5.3% of total GDP in 2009. This equals

US$8.1 billion in 2009 or US$479 per capita. Per capita levels are around the same level as Mexico (US$548).

Healthcare system Rating Strong Trend + Comment The healthcare system is partially financed through compulsory health insurance

contributions. For the size of the country, the number of hospitals, hospital beds and outpatient facilities is relatively high.

Pricing & Reimbursement

Rating Below Average Trend / Comment There are no price controls, although the Central Purchasing Agency (CENABAST)

acts as a reference centre for pricing. Pharmaceutical prices are among the lowest in the region (US$4.0 average in 2007), due to the presence of a well-developed domestic industry and generics penetration.

Domestic manufacturing

Rating Strong Trend / Comment In 2005, there were 40 pharmaceutical producers. Most multinationals have closed

their plants, and serve the market from strategic regional plants located mainly in Argentina and Brazil. Pharmaceutical production stood at 476.6 billion pesos (US$851.0 million) in 2005, a 13.4% increase in local terms.

Health policies Rating Very strong Trend + Comment ‘Equity, participation, solidarity and quality’ are the four pillars of the Healthcare

Planning Objectives 2000-2010. This is a major step to strengthen a more preventive and universal primary care system, enforce and expand the AUGE programme, improve IT health systems and better respond to management and auditing needs

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Use of generics Rating Fair Trend + Comment Generics represented 10.6% of the pharmacy sector by value in 2005, equal to

US$72.5 million. Generic penetration is very high in volume terms, equal to 38.1% of the pharmacy sector in 2005.

Intellectual property Rating Fair Trend + Comment Legislation to bring Chilean patent law in line with international standards (TRIPS

compliant) was brought in in 2005. Nevertheless, the USTR placed Chile on the 2006 Priority Watch List where it remained for 2007 & 2008. The Chilean government is replacing the IP body DPI with INAPI to improve IP protection.

Source: Espicom. Ratings go from: ‘Poor’, ‘Below average’, ‘Fair’, ‘Strong’, ‘Very Strong’. Trends run from ‘- -‘, to ‘-‘, ‘/’, ‘+’, ‘+ +’.

Radar Graph of the Chilean Pharmaceutical Market, 2009

0

1

2

3

4

5Demographics

Economy

Healthcare Expenditure

Healthcare System

Pricing & ReimbursementDomestic Production

Health Policies

Use of Generics

Intellectual Property

Chart derived from the tables on the previous page. Very strong = 5, Strong = 4, Fair = 3, Below average = 2, Poor = 1.

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Imports

In 2007, total pharmaceutical imports increased by 25.5%, making a five year increase of 96.4%, reaching US$541.5 million. Imports have grown every year since 2000, apart from 2002 when there was a 10.6% fall.

The largest imports category for Chile is retail medicaments, which represent around three quarters of total imports, or US$399.4 million, an increase of 21.3%. However, the largest increase was seen in the smallest category, semi-finished medicaments, which grew by 176.2% over five years, to reach a US$10.6 million. Raw material imports made up 38.9% of the total, valued at US$131.6 million in 2007.

Pharmaceutical Imports, 2003-2007 (US$000’s)

2003 2004 2005 2006 2007

Raw materials 63,802 66,942 74,973 94,694 131,549

Semi-finished medicaments 3,835 5,959 4,462 7,528 10,593

Retail medicaments 208,028 245,936 292,243 329,198 399,378

Total 275,665 318,837 371,678 431,420 541,520

Import Trends

2006 2007 % of Total % Change, 2007

5-yr % Change

Raw materials 94,694 131,549 24.3 38.9 106.2

Semi-finished medicaments 7,528 10,593 2.0 40.7 176.2

Retail medicaments 329,198 399,378 73.7 21.3 92.0

Total 431,420 541,520 100.0 25.5 96.4

Pharmaceutical Imports, 2007 (As % of Total)

Raw materials

24.3%

Retail medicaments

73.7%

Semi-finished

medicaments

2.0%

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France was the leading supplier of raw materials in 2007, with US$15.3 million, equal to 11.6% of imports. Austria followed with 7.2% and Spain (5.2%). The EU-15 was well represented, with 38.8% of Chile‟s raw materials originating from this area. China which had been a lead supplier for raw materials and medicaments did not feature at all as supplier for raw materials in 2007.

Leading Suppliers of Raw Materials, 2007 (US$000s)

Total As % of Total

France 15,295 11.6

Austria 9,438 7.2

Spain 6,864 5.2

Belgium 6,049 4.6

USA 4,898 3.7

Netherlands 4,772 3.6

Italy 3,263 2.5

Germany 2,464 1.9

Denmark 1,702 1.3

Ireland 1,229 0.9

Brazil 558 0.4

Subtotal 56,532 43.0

EU-15 51,076 38.8

Total 131,549 100.0

The USA was the leading supplier of medicaments, with shipments valued at US$41.3 million, equivalent to 10.1% of the total, followed by Germany (10.0%), Brazil (9.6%) Switzerland (9.2%) and Argentina (8.4%). Meanwhile the EU-15 supplied 38.3% or US$157.1 million‟s worth of medicaments.

Leading Suppliers of Medicaments, 2007 (US$000s)

Total As % of Total

USA 41,270 10.1

Germany 41,065 10.0

Brazil 39,546 9.6

Switzerland. 37,552 9.2

Argentina 34,403 8.4

France 29,857 7.3

Italy 22,353 5.5

Mexico 21,019 5.1

Colombia 17,991 4.4

United Kingdom 14,063 3.4

India 12,082 2.9

Netherlands 11,570 2.8

Subtotal 322,771 78.7

EU-15 157,093 38.3

Total 409,971

100.0

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Leading Suppliers, 2007 (%)

USA

10.1%

France

7.3%

Colombia

4.4%

United Kingdom

3.4%

Other

27.0%

Switzerland.

9.2%

Brazil

9.6%

Germany

10.0%

Argentina

8.4%

Italy

5.5%

Mexico

5.1%

Trade Associations

ASILFA

Founded in 1986, the Industrial Association of Chilean Pharmaceutical Manufacturers (ASILFA - Asociación Industrial de Laboratorios Farmacéuticos Chilenos) represents large domestic manufacturers. Currently, it has ten associated manufacturers which represent 36.8% of the market volume. ASILFA claims that domestic producers had 60.1% of the pharmacy market value and 81.8% of the pharmacy market volume in 2005.

ASILFA is a member of the Chilean Industrial Society (SOFOFA - Sociedad de Fomento Fabril), the Latin American Pharmaceutical Association (ALIFAR - Asociación Latinoamericana de la Industria Farmacéutica), and the Pan American Network for Drug Regulatory Harmonisation (PARF - Red Panamericana para la Armonización de la Reglamentación Farmacéutica de la OPS).

ASILFA’s Members, 2008

Andrómaco – Silesia (Chile)

Bagó (Chile)

Biosano (Chile)

LabChile (Chile)

Labomed (Chile)

Pharma Investi (Argentina/Chile)

Sanderson (Chile)

Sanitas (Chile)

Saval (Chile)

Tecnofarma (Chile)

Source: ASILFA.

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CAMEVED

The Chamber of OTC Medicines (CAMEVED – Cámara de Medicamentos de Venta Libre) represents national and foreign producers or importers of OTC medicines. Major objectives are to restrict UTC sales and promote OTC sales. CAMEVED has argued for the rule of selling OTC medicines at the counter to be relaxed, and for OTCs to be legally stocked on pharmacy shelves.

CANALAB

Founded in 1999, the National Association of Manufacturers in Chile (CANALAB – Cámara Nacional de Laboratorios Farmacéuticos de Chile) represents 14 domestic producers. Together they operate 17 manufacturing plants and employ 1,168 people in Chile, equal to 37.0% and 19.3% of the total, respectively. They produce about 1,050 different products, accounting for 21% of total production in Chile. They export to Bolivia, Canada, Costa Rica, Ecuador, Guatemala, Paraguay, Peru and Uruguay.

CANALAB’s Members, 2008

Beta

Biotoscana

Condecal

Ecifarma

Group Pharma

Heel

Knop Laboratorios

Laboratorio Hochstetter

Laboratorio Libra

Laboratorio Valma

Laboratorio y Drogueria Nacional

Laboratorios Ximena Polanco

Pasteur

Prater Laboratorios

Weleda

Source: CANALAB.

CIF

The Chamber of the Pharmaceutical Industry in Chile (CIF – Cámara de la Industria Farmacéutica de Chile) represents 21 international research-based producers. Most of them operate as importers in Chile. CIF defends intellectual property rights, physician prescribing, Good Manufacturing & Laboratory Practices, research & development activities, postmarketing and free competition.

CIF is a member of the Latin American Federation of the Pharmaceutical Industry (FIFARMA – Federación Latinoamericana de la Industria Farmacéutica), the International Federation of Pharmaceutical Manufacturers Associations (IFPMA), the Pharmaceutical Research & Manufacturers of America (PhRMA) and the European Federation of Pharmaceutical Industries & Associations (EFPIA).

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CIF’s Members, 2008

Abbott (USA)

Alcon (USA)

AstraZeneca (UK)

Bayer (Switzerland)

Boehringer Ingelheim (Germany)

Bristol-Myers Squibb Chile (USA)

Eli Lilly (USA)

GlaxoSmithKline (UK)

Janssen Cilag (USA)

Merck (Germany)

Merck Sharp & Dohme (USA)

Novartis (Switzerland)

Novo Nordisk (Denmark)

Organon (Netherlands)

Pfizer (USA)

Roche (Switzerland)

Sanofi-Aventis (France)

Sanofi-Pasteur (France)

Schering Plough (USA

Stiefel (Germany)

Wyeth (USA)

Source: CIF.

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Domestic Production

In 2007, around 81.8% of the total pharmaceuticals consumed in Chile were produced domestically. This is despite the fact that, in recent years, the number of companies operating in Chile has dropped considerably, from 58 domestic and 51 foreign producers in 1999 to 32 domestic and 31 foreign companies in 2004. In 2005, there were around 61 companies operating in the Chilean market. Of these, 24 were domestic producers and the remainder were importers.

There are about 46 manufacturing plants in Chile, which provide about 5,440 jobs. The ten largest producers are associated to Association of Chilean Pharmaceutical Manufacturers (ASILFA). Its members include the market leaders LabChile, Recalcine, Saval, Andrómaco and Bagó. LabChile was acquired by IVAX in 2001 and is currently owned by Teva, following Teva‟s acquisition of IVAX, formally completed in January 2006.

Most of the large domestic producers have adopted GMP standards. However, small producers are still implementing them. July 2001 was the first deadline to meet GMP certification. By 2003, it was estimated that only 18 pharmaceutical production sites had complied with GMP standards. ISPCH established a new deadline for meeting GMP standards by the end of 2005, which has been extended to 2008.

Domestic producers continue to expand or create new manufacturing capabilities in an effort to increase pharmaceutical exports; exports were valued at US$74.4 million in 2006, which represented a rise of 18.1% over US$63.0 million in 2005. Overall, investments in manufacturing facilities are valued at US$100 million in 2007. These mainly include;

LabChile has started to build a new US$30 million manufacturing plant, which will be operational in 2008.

Saval is modernising its manufacturing facilities, with investments valued at US$22 million in 2007.

Andrómaco will complete the acquisition of a Colombian producer in the first half of 2007. Details have not been disclosed although the value of the transaction is estimated at US$15 million.

Sanderson invested US$23 million to extend its existing plant in 2006.

Most multinationals have now closed their plants, and serve the market from strategic regional plants located mainly in Argentina and Brazil. In 2007, there are 21 foreign companies associated to the Chamber of the Pharmaceutical Industry (CIF). Some other foreign producers have formed strategic alliances or joint-ventures with domestic producers. Additionally, there are between 15 and 20 other importers.

Trade agreements, including the US-Chilean FTA, might affect domestic manufacturers negatively in the long-term, considering new patent enforcements. ASILFA believes they could be anticompetitive. There are also fears that this could result in higher pharmaceutical expenditure per capita, increasing public health expenditure and less drug access among the less well-off.

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FTA Developments

By 2008, Chile had bilateral and multilateral agreements with Canada, the USA, the EU, some Australasian countries, China and India. Most recently, in March 2007, Chile agreed to a strategic economic partnership with Japan, which is now in force.

In 2006, Chile signed a Free Trade Agreement (FTA) with Colombia in October of that year, becoming an associate member to the Andean Community (CAN). CAN represents further market opportunities for Chile; pharmaceutical exports to this trade group amounted to US$42.9 million in 2005, equal to 66.9% of the total. The Colombian FTA is yet to come into force, as are the other FTA agreements signed in 2006, with Panama and Peru.

In June 2005, Chile established a Trans-Pacific Strategic Economic Partnership Agreement (Trans-Pacific SEP or P-4 Agreement), with Brunei Darussalam, New Zealand and Singapore. In the Latin American region, Chile has links with both the Mercosur and CAN groups but is not a full member.

In recent years, Chile has also established important links with Asian countries, which will result in increasing pharmaceutical imports to the country, at „more cost-effective prices‟. As part of the FTA with China, Chile will be importing vaccines against rotavirus and hepatitis B in the next few years; pharmaceutical imports from China amounted to US$27.4 million in 2005, equal to 7.4% of the total. Lack of quality standards in China and India, however, are a concern.

In 2005, there were 40 pharmaceutical producers in Chile, which represented an increase of 14.3% over 35 producers registered in 2004. Of those, ten were small producers with less than 50 employees, whereas the remaining 30 were large producers with more than 50 employees. Workforce in the industry rose by 15.6% in 2005, reaching 7,729 employees. Of these, 7,467 were employed by large producers, equal to 96.6% of the total.

Summary of Pharmaceutical Establishments & Workforce, 2000-2005

Establishments Change (%) Workforce Change (%)

2000 41 n/a 6,505 n/a 2001 39 -4.9 7,411 13.9 2002 37 -5.1 7,102 -4.2 2003 41 10.8 6,678 -6.0 2004 35 -14.6 6,688 0.1 2005 40 14.3 7,729 15.6

Source: INE.

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Pharmaceutical Establishments & Workforce by Company Size, 2000-2005

Establishments As % of Total Workforce As % of Total

1 to 49 12 29.3 306 4.7 50+ 29 70.7 6,199 95.3 Subtotal 2000 41 100.0 6,505 100.0

1 to 49 10 25.6 251 3.4 50+ 29 74.4 7,160 96.6 Subtotal 2001 39 100.0 7,411 100.0

1 to 49 11 29.7 274 3.9 50+ 26 70.3 6,828 96.1 Subtotal 2002 37 100.0 7,102 100.0

1 to 49 11 26.8 202 3.0 50+ 30 73.2 6,476 97.0 Subtotal 2003 41 100.0 6,678 100.0

1 to 49 9 25.7 262 3.9 50+ 26 74.3 6,426 96.1 Subtotal 2004 35 100.0 6,688 100.0

1 to 49 10 25.0 262 3.4 50+ 30 75.0 7,467 96.6 Subtotal 2005 40 100.0 7,729 100.0

Source: INE.

The Association of Chilean Pharmaceutical Manufacturers (ASILFA) represents ten large producers, including LabChile, Recalcine, Saval, Andrómaco and Bago. LabChile, the market leader, was acquired by IVAX in 2001. Following Teva‟s completed acquisition of IVAX in January 2006, domestic production of generics should increase.

Most of the large domestic producers have adopted GMP standards but small producers are still implementing them. Currently, only ten out of 25 pharmaceutical producers comply. ISPCH has continuously delayed GMP compliance. Producers are expected to meet GMP standards by 2008; previous deadlines included December 2005 and July 2001.

Most multinationals have closed their plants, and serve the market from strategic regional plants located mainly in Argentina and Brazil. In 2005, there were 22 foreign companies associated to the Chamber of the Pharmaceutical Industry (CIF). Some have formed strategic alliances or joint-ventures with domestic producers.

Pharmaceutical production stood at 476.6 billion pesos (US$851.0 million) in 2005, which represented an increase of 13.4% in local terms and 23.4% in dollar terms over 420.2 billion pesos (US$689.5 million) in 2004. Production undertaken by large producers represented 97.2% of the total in 2005, equal to 463.4 billion pesos (US$827.4 million). Small producers were responsible for the remaining production, equal to 13.2 billion pesos (US$23.6 million).

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Summary of Pharmaceutical Production, 2000-2005 (Million Pesos)

Revenues Change (%) Production Change (%) Added Value Change (%)

2000 303,864.7 n/a 303,247.7 n/a 184,977.5 n/a 2001 330,971.9 8.9 338,492.9 11.6 222,789.2 20.4 2002 338,256.3 2.2 350,281.1 3.5 225,073.3 1.0 2003 372,510.5 10.1 371,765.2 6.1 228,307.1 1.4 2004 409,080.8 9.8 420,161.9 13.0 277,369.0 21.5 2005 455,748.2 11.4 476,641.4 13.4 312,055.4 12.5

Source: INE.

Summary of Pharmaceutical Production, 2000-2005 (US$ Million)

Revenues Change (%) Production Change (%) Added Value Change (%)

2000 563.1 n/a 562.0 n/a 342.8 n/a 2001 521.3 -7.4 533.1 -5.1 350.9 2.4 2002 491.0 -5.8 508.4 -4.6 326.7 -6.9 2003 538.8 9.7 537.7 5.8 330.2 1.1 2004 671.3 24.6 689.5 28.2 455.2 37.9 2005 813.7 21.2 851.0 23.4 557.2 22.4

Source: INE.

Pharmaceutical Production, 2000-2005

0

100

200

300

400

500

600

700

800

900

2000 2001 2002 2003 2004 2005

Billion Pesos US$ Million

Source: INE.

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Pharmaceutical Production by Company Size, 2000-2005 (Million Pesos)

Revenues

As % of Total Production

As % of Total

Added Value

As % of Total

1 to 49 10,732.9 3.5 11,081.5 3.7 5,273.1 2.9 50+ 293,131.8 96.5 292,166.2 96.3 179,704.4 97.1 Subtotal 2000 303,864.7 100.0 303,247.7 100.0 184,977.5 100.0

1 to 49 9,778.1 3.0 10,203.6 3.0 6,003.8 2.7 50+ 321,193.9 97.0 328,289.4 97.0 216,785.4 97.3 Subtotal 2001 330,971.9 100.0 338,492.9 100.0 222,789.2 100.0

1 to 49 15,472.1 4.6 15,986.4 4.6 7,236.5 3.2 50+ 322,784.2 95.4 334,294.7 95.4 217,836.7 96.8 Subtotal 2002 338,256.3 100.0 350,281.1 100.0 225,073.3 100.0

1 to 49 9,404.2 2.5 9,227.4 2.5 4,883.4 2.1 50+ 363,106.3 97.5 362,537.8 97.5 223,423.7 97.9 Subtotal 2003 372,510.5 100.0 371,765.2 100.0 228,307.1 100.0

1 to 49 13,563.0 3.3 13,966.2 3.3 7,722.9 2.8 50+ 395,517.8 96.7 406,195.7 96.7 269,646.1 97.2 Subtotal 2004 409,080.8 100.0 420,161.9 100.0 277,369.0 100.0

1 to 49 13,143.1 2.9 13,226.4 2.8 7,238.6 2.3 50+ 442,605.1 97.1 463,415.0 97.2 304,816.9 97.7 Subtotal 2005 455,748.2 100.0 476,641.4 100.0 312,055.4 100.0

Source: INE.

Local Manufacturers

Andrómaco

Laboratorios Andrómaco was originally established in 1942 as a Chilean subsidiary of the Spanish company Laboratorios Lasa. During the 1970s, the company was bought by a group of Chilean and Spanish investors. Between 1979 and 1982, Andrómaco acquired Laboratorios Lumiere Americanos SACI and Laboratorios Benguerel Ltda, enabling the company to consolidate its position as a leading manufacturer.

On 24th March 2005, Andrómaco completed the acquisition of Silesia and its subsidiaries. The operation was valued at US$11.2 million. Silesia specialised in the gynaecology, psychiatry and dermatology therapeutic areas. Also, it had licences with international producers. As a result of the acquisition, Andrómaco became the third leading producer in the domestic pharmacy sector and increased its positioning in the export market.

Financial Indicators

Andrómaco‟s sales amounted to 77.5 billion pesos (US$148.1 million) in 2007, which represented an increase of 10.6% in local terms over 70.1 billion pesos (US$132.2 million) in 2006. In 2005, sales in Chile increased by 29.0% whilst sales in foreign subsidiaries rose by 46.0%. As a percentage of the pharmacy sector, Andrómaco claims to have a market share of over 6.0%.

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Andrómaco‟s sales in the generic pharmacy sector amounted to 9.0 billion pesos (US$16.0 million) in 2005, which represented an increase of 39.2% in local terms over 6.4 billion pesos (US$10.6 million) in 2004. In volume terms, Andrómaco‟s generic sales amounted to nearly 25.0 million units, equal to 32.9% of the sector. In volume terms, Andrómaco was the second leading producer in the generic pharmacy sector in 2005.

Andrómaco‟s sales in the hospital sector increased by 31.4% in local terms in 2005, reaching 7.9 billion pesos (US$14.2 million). This compared well over 6.0 billion pesos (US$9.9 million) in 2004 and 4.5 billion pesos (US$6.6 million) in 2003. Hospital sales represented 13.6% of the company‟s total sales in 2005, compared to 13.4% in 2004 and 11.0% in 2003.

Andrómaco’s Sales, 2000-2007 (Billion Pesos)

Sales Change (%) Operating Profit Change (%)

2000 31.5 n/a 2.7 n/a 2001 36.6 16.2 3.9 41.3 2002 40.2 9.9 3.5 -8.3 2003 41.7 3.8 4.6 28.6 2004 45.2 8.3 4.9 6.6 2005 58.3 28.9 6.8 39.0 2006 70.1 20.2 8.9 30.9 2007 77.5 10.6 9.4 5.6

Source: Andrómaco.

Andromaco’s Sales, 2000-2007

0

20

40

60

80

100

120

140

160

2000 2001 2002 2003 2004 2005 2006 2007

Billion Pesos US$ Million

Source: Andromaco.

Product Portfolio

Andrómaco manufactures its own range of ethical, hospital, generic, OTC and dermocosmetic products. The main division is ethical, with 150 brands in 250 presentations covering gynaecology, neuropsychiatry, cardiology and dermatology. It also has over 20 licences with international producers, including co-marketing agreements with Grünenthal for the contraceptive Lovinda.

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In 2005, ethical sales increased by 6.4% in dollar terms, as eight new brands and seven new presentations of existing brands were launched. The new brands were Amolex Duo, Dermaglós, Neolarmax, Sertac, Aerometrol Plus, Minidol Plus, Deatén and Tegasir. Traditional brands include Clarimax, Elcal, Gamalate B6, Lactulosa, Mesura, Maltofer and Spiron.

In the hospital sector, it has comarketing agreements with Claris from India, Ferrer from Spain and Mallinckrodt Pharmaceuticals from the USA. In the generic sector, Andrómaco has also a very strong presence, and claims to be the current second leading producer, after LabChile. In 2005, major OTC and dermocosmetic products included Hipoglos, Clarimir, Fittig and Predual.

Andrómaco represents several foreign pharmaceutical companies in the Chilean market, including Bioibérica (Spain), Chiesi (Spain), Ferrer (Spain), Fournier (France), Fujisawa (Klinge) (Germany), Isdin (Spain), Lacer (Spain), Leo (Denmark), Newport (Costa Rica), OM (Switzerland), Phoenix (Argentina), Recordati (Italy), Schwabe (Germany), Statem Serum (Denmark), Vifor (Switzerland) and Zambon (Italy).

Manufacturing Capabilities

Andrómaco‟s manufacturing site is GMP approved, occupies 10,000m2 and employs 300 employees. Overall, it produces and distributes over 70 million units of 500 products in more than 1,000 presentations annually. Andrómaco‟s acquisition of Silesia included two manufacturing plants. One facility produces solid and semi-solid pharmaceuticals. The second one, which was modernised in 2005, produces hormonal products, mainly Anulette, Novafac, Microgen, Midalet, Neolett and Trolit.

Exports

In 1989, Andrómaco started its operations in other Latin American markets. Currently, Andrómaco has subsidiaries in Bolivia, Colombia, Costa Rica, Ecuador, El Salvador, Panama and Peru. In total, Andrómaco employs about 400 people in its foreign operations. Exports represented 17% of the company‟s sales in 2006, with projections to increase to represent 40% by 2011.

Andrómaco plans to complete the acquisition of a Colombian producer in the first half of 2007. Details have not been disclosed but the value of the transaction is estimated at US$15 million. The objective is to export from Colombia to South and Central American markets. The company also plans to open four subsidiaries in Central America between 2007 and 2008.

International Divisions

ABL Pharma Bolivia ranks among the top ten leading producers in the pharmacy sector. Sales amounted to US$1.4 million in 2005.

ABL Pharma Colón centralises the Central American operations, particularly from Costa Rica and Panama. Sales amounted to US$1.1 million in 2005, which represented an increase of 31.0% over 2004.

ABL Pharma Colombia started its operations in June 2005.

ABL Pharma Costa Rica.

ABL Pharma Ecuador. Sales amounted to US$2.8 million in 2005, which represented an increase of 49.0% over 2004.

ABL Pharma Panama.

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ABL Pharma Peru had sales of US$9.3 million in 2005, which represented a rise of 84.0% over 2004. It includes Silesia‟s Peruvian subsidiary, which marketed 12 hormones in 2005.

Bagó

A subsidiary of the Argentinian-based Bagó group, Laboratorio Bagó de Chile has been active in Chile since 1947. Currently, it claims to be among the top five leading producers in Chile. The company employs around 330 people in Chile and has three regional offices in Valparaiso, Concepcion and Temuco as well as a main office in Santiago.

Financial Indicators

In 2005, Bagó‟s sales increased by 17.0%, reaching US$23.0 million, of which US$10.9 million was accountable to exports.

Product Portfolio

Bagó markets around 67 products in 151 presentations in Chile. Major therapeutic areas include cardiology, paediatrics, neurology, rheumatology, dermatology and general medicine.

Manufacturing Capabilities

Bagó‟s 3,700m2 manufacturing plant is GMP-certified. It produces pharmaceuticals for the domestic and export markets. Production is valued at around 20 million units annually, of which about 20% is exported to Ecuador, Peru and Bolivia. The company also has a quality lab certified by ISPCH since 1994.

Exports

Bagó was the third leading exporter of pharmaceuticals in 2006. Exports increased to US$11.7 million in 2006, compared to US$10.9 million in 2005, US$10.3 million in 2004, US$8.4 million in 2003 and US$2.5 million in 2002. Leading export destinations include Bolivia, Ecuador, Paraguay and Peru.

Bestpharma

Founded in 1987, Laboratorio Bestpharma is a Chilean pharmaceutical importer of GMP-certified products but also a manufacturer mainly responsible for retail product packaging. Originally, Bestpharma aimed at entering the Argentinian and Brazilian markets where profits were bigger than in Chile, but market entry barriers prevented this. Consequently, its main focus was on maximising the Chilean market.

A strategy based on good quality at competitive prices plus efficient delivery has made Bestpharma the second largest supplier to the institutional distributor CENABAST, after LabChile. Other strategies includes its focus on the generics gap left by LabChile in products listed by the Ministry of Health‟s national list. Also, it supplies low-consumption medicines not profitable for other manufacturers, i.e. for tuberculosis.

After over 15 years in the market, Bestpharma‟s annual sales reached around US$15 million in 2003; updated information has not been officially published. Since 1997, Bestpharma has its own manufacturing site. Employees amount to about 100, of whom 18 are chemical-pharmacists. Imports are mainly sourced from Austria, Brazil, China, Germany, India, Korea and Spain.

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Product Portfolio

Bestpharma‟s portfolio includes 400 marketing authorisations and 750 products registrations with ISPCH. Its products are distributed in Chile via CENABAST or directly. In the hospital sector, it sells products to 200 hospitals and 536 health centres. In the pharmacy sector, it sells to 130 hospitals or clinics and over 1,100 pharmacies. When Bestpharma entered the pharmacy sector in 2002, there were many obstacles from other competitors, particularly from LabChile, which saw a threat to its generics business.

Biosano

Established in the 1940s, Laboratorio Biosano manufactures hospital generic injectables in Chile. Competitors in the hospital sector include LabChile, Sanderson and Bestpharma. Apart from manufacturing injectables, Biosano also imports some drugs, mainly from Argentina, the Philippines, Italy and Switzerland.

Financial Indicators

Sales were estimated at US$13 million in 2005, which represented an increase of 62.5% over US$8 million in 2004. Exports represent about 25% of total sales, equal to US$3 million in 2005, compared to US$2 million in 2004. Exports are sent to the Caribbean and South America, with Venezuela as the leading export destination. Destinations to be exploited include Mexico, Brazil and Argentina, which are the largest pharmaceutical markets in Latin America.

Product Portfolio

Biosano’s Product Portfolio, 2008

Amikacin Lysine clonixinate

Aminophylline Magnesium sulfate

Amiodarona HCL Meperidine HCL

Ascorbic acid Methadone HCL

Atracurium besylate Metoclopramide

Atropine sulfate Midazolam

Calcium chloride Nandrolone decanoate

Chlorpromazine HCL Nitroglycerin

Chlorpheniramine maleate Oligoelements

Dexamethasone Oxytocin

Diclofenac sodium Papaverine HCL

Domperidone Phenylbutazone

Droperidol Piroxicam

Fentanyl citrate Propanolol HCL

Fluphenazine decanoate Ranitidine

Furosemide Sodium acetate

Glucose Sodium bicarbonate

Haloperidol Water for injection

Lorazepam Zinc sulphate

Source: Biosano.

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Manufacturing Capabilities

A 6,000m2 production site was inaugurated in Comuna de Cerrillos in 2002, at a cost of US$10million. As well as producing analgesics, anaesthetics, psychotropics and vitamins, the new site also produces pre-filled syringes and new dialysis and haemoderived products.

Production complies with national/ international standards. It currently employs 80 professional and specialised technical staff. It is capable of meeting demands such as low temperature sequences and standardised drug manufacturing processes. Biosano represents three producers, Fidex, Berna and Kebron.

LabChile

Founded in 1896, Laboratorios Chile (LabChile) is the leading pharmaceutical producer in the Chilean pharmacy and hospital sectors. LabChile was acquired by IVAX in mid 2001. Following Teva‟s global acquisition of IVAX, formally completed in January 2006, LabChile now forms part of Teva. LabChile employs around 1,000 people, of whom 220 are medical representatives.

Financial Indicators

Total sales, including pharmacy and hospital sales, were estimated at US$112 million in 2005. Considering annual cumulative pharmacy sales by June 2005, these amounted to US$55.1 million, which represented 7.8% of the pharmacy sector at manufacturers‟ prices. In recent years, the company has registered double-digit growth.

Product Portfolio

LabChile‟s portfolio includes 600 pharmaceutical products, of which 90 are hospital specialised. LabChile claims to be the leading producer in the pharmacy sector; of each 3.5 units sold in pharmacies in Chile, 1.0 unit is produced by LabChile. In the generics sector, LabChile claims a market share of at least 50% by value, with 260 products. LabChile is also the leader in the hospital sector.

LabChile produces branded, generic, clinical and veterinary medicines. These include analgesics, antibacterials, anti-infectives, anti-inflammatories, antipyretics, cardiovasculars, CNS products, gastrointestinals, glycocorticoids, hormones, oncologicals, ophthalmic products, respiratory products, urology-related products and vitamins.

Manufacturing Capabilities

LabChile has two manufacturing facilities in Chile, with annual production estimated at 90 million units. Also, LabChile is building a new manufacturing and distribution centre in Cerrillos, with investments close to US$40 million. The new 42,000m2 site will increase LabChile‟s production capabilities by around 50%. The new plant should become operational during 2007, increasing export opportunities in Brazil, Mexico and Argentina.

Exports

Exports represent around 20% of LabChile‟s sales and 25% of LabChile‟s production. In fact, LabChile claims to be the leading exporter in the country with 20% of all the exports. Leading destinations include Uruguay, Peru, Venezuela, Paraguay, Bolivia, Ecuador, Colombia, Panama, Guatemala, Honduras, El Salvador, Nicaragua and Dominican Republic. Exports amounted to US$13.6 million in 2006, compared to US$11.0 million in 2005.

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Distribution

Pharmatrade became LabChile‟s pharmacy distributor in December 1996. In 1999, Pharmatrade began trading via the company‟s web site, www.pharmatrade.cl. Also, LabChile participates in a joint venture with Consalud, Farmasalud. Both companies hold 50% of eight pharmacies located in the Isapres‟ medical centre system.

Labomed

Founded in 1958, Labomed targets cardiology, CNS, dermatology, rheumatology & traumatology, urology and appetite stimulant drugs. The company has 1.1% of the pharmacy sector, but it excels in some niche markets, particularly for appetite stimulants, with a 34.0% market share, and urology, with a 14.0% market share. Sales were estimated at US$12.0 million in 2005, which represented a rise of 29.0% over US$9.3 million in 2004. Labomed has 152 employees.

Labomed is one of the domestic producers that does not produce generics. Apart from own-labelled drugs, Labomed has licensing agreements with producers in Japan, Switzerland, Italy and Spain, whose sales account for 40% of the total. Exclusive licences are established with Italfarmaco, OM, Sigma-Tau, and Zambon. Labomed also undertakes third-party manufacturing for Bayer Chile, Bristol Myers-Squibb, Quick AG, Pharma Investi and Sanofi-Aventis.

Pharmaceutical Producers Represented by Labomed, 2007

Astellas (Japan)

Baliarda (Argentina)

Dompe (Italy)

Errekappa (Italy)

IBSA (Swizerland)

Industrial Farmaceutica Cantabria (Spain)

Italfarmaco (Italy)

Juste (Spain)

Menarini (Italy)

OM Pharma (Switzerland)

Phoenix (Argentina)

Sigma-Tau (Italy)

Zambon Group (Italy)

Source: Labomed.

Maver

Founded in 1923, Laboratorio Maver manufactures generic pharmaceuticals, branded products and cosmetics at its 50,000ft2 plant in Santiago. Overall, it produces 48 brands in 255 presentations. In addition, Maver manufactures and distributes products under licence for various overseas companies. Maver employs nearly 300 people.

The company had a market share of around 3.3% in the pharmacy sector in 2004. The company‟s flagship products are Tapsin, the leading analgesic on the Chilean market, and the effervescent salt Disfruta, also a market leader. Other important products include the tranquilliser Armonyl and the sleep inducer Sueñum.

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Maver distributes its products directly to pharmacies, hospitals and health centres. Since 1989, it has been exporting to Central and South America. The company invested over US$20 million in a new 11,500m2 factory in La Lampa, which complies with GMP standards, and which is said to be one of the most advanced of its type in Latin America.

Mintlab

The pharmacy chain Cruz Verde owns part of Laboratorio Mintlab. Founded over a decade ago, Mintlab produces and supplies generics, claiming a 30% share of the generic sector by volume. The company has a 500m2 manufacturing plant specialising in penicillins, with an annual output of six million units, and a 4,000m2 manufacturing plant specilising in other products, with an annual output of 48 million units.

Mintlab‟s product range comprises over 200 presentations in most pharmaceutical forms, including tablets, capsules, suppositories, suspensions, ointments, powders, injectables and inhaled forms. The product portfolio is annually expanded by around 30 launches. Since 1997, Mintlab also exports to other Latin American countries, including Bolivia, Cuba, Ecuador, Guatemala, Honduras, Panama, Paraguay, Peru and Uruguay.

Recalcine

Laboratorios Recalcine forms part of Corporación Farmacéutica Recalcine (CFR), founded in 1922. CFR produces human & veterinary pharmaceuticals and personal care products. CFR exports to Central and South America. Additionally, it develops biotechnology & genetic programmes in the USA. In total, CFR claims to have 826 employees in Chile and 463 in its foreign subsidiaries. CFR‟s divisions include;

Biomedical Sciences.

Biopharm – pharmacologicals for diabetes therapies.

Drugtech – pharmaceuticals specialised in the cardiovascular, neuroscience and urology areas.

Fav – veterinary products.

Gynopharm – pharmaceuticals specialised in women‟s health. In December 2006, CFR signed an agreement with Office Pharmaceutique du Vietnam (OPV) to market its products in Vietnam, founding its subsidiary Gynocare.

K2 Health – innovative pharmaceuticals.

Laboratorios Recalcine – It comprises LAFI, Recetario Internacional and Representaciones, and specialises in human pharmaceuticals.

Mediderm – skin care pharmaceuticals.

Megahealth – other human health pharmaceuticals.

Pediapharm – paediatric medicines.

Pharmabiotics – anti-infective pharmaceucals.

Xenerics – hospital pharmaceuticals and biotechnologicals.

Financial Indicators

Laboratorios Recalcine claims to be Chile‟s second leading domestic pharmaceutical manufacturer, after LabChile. By June 2005, Recalcine‟s Chilean annual cumulative pharmacy sales reached US$49.2 million at manufacturers' prices, which represented 7.0% of the pharmacy sector.

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Product Portfolio

CFR‟s leading therapeutic areas include anti-infection, dermatology, gastroenterology, gynaecology, odontology, oncology, paediatrics and women‟s health. In addition to manufacturing its own products, CFR represents a number of major multinationals. These include AstraZeneca, Boehringer Ingelheim, Chiron, Ebewe, Eli Lilly, Ferring Pharmaceuticals, Pierre Fabre, P&G, Sanofi-Synthélabo, Schering Plough and Solvay Pharmaceuticals.

Manufacturing Capabilities

In 2005, CFR inaugurated its new 40,000m2 complex in Quinta Normal, Chile. This complex has eight manufacturing plants to produce different pharmaceutical forms, a storage & distribution centre, a research centre, a quality control lab and an administrative building. The new complex has trebled production, reaching 100 million units annually, and employs 750 people. One third of production is exported to other parts of Latin America, including Bolivia, Central America, Colombia, Ecuador, Paraguay, Peru and Venezuela.

Research & Development

CFR Chile has alliances with a number of international companies including Zeneca, Lilly, Solvay P&G and Ferring. It also regularly participates in joint research programmes with Universities such as Maryland, USA, University of Concepcion (Chile) and the University of Chile.

Sanderson

Laboratorios Sanderson is a privately-owned pharmaceutical manufacturer founded in 1942. The number of employees is over 250. Sanderson supplies to the public and private sectors, including hospitals, health centres, dialysis centres and pharmacies. Exclusively, it represents the medical device manufacturer, WL Gore.

Financial Indicators

Compared to the leading producers in the pharmacy sector, Sanderson‟s sales are relatively small. However, considering that the company targets the hospital sector, Sanderson is well positioned. The company had sales of US$22 million in 2006. Of these, US$7.2 million was exported pharmaceuticals, which represented 32.7% of the total. Comparatively, sales were valued at US$14.8 million in 2002, of which 40.0% was exports.

Product Portfolio

Sanderson mainly produces injectables, high-volume parenteral solutions (SPGV), low volume parenteral solutions (SPPV), concentrated solutions for haemodialysis, and other solutions for organ preservation and irrigation. Its 150 products are mainly sold to the Chilean public health system via CENABAST and to several Latin American countries.

Manufacturing Capabilities

Sanderson has a 10,000m2 manufacturing site, which meets GMP standards. This plant was built in 1996, with investments valued at US$7.5 million. In order to increase its production capabilities and meet export demands, Sanderson expanded its manufacturing plant in 2006, with investments valued at US$23 million. Sanderson also has a manufacturing site in Peru which serves the export markets.

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Exports

Exports fell slightly to US$7.2 million in 2006, compared to US$7.7 million in 2005 and US$6.6 million in 2004. Peru is the leading destination, where Sanderson has a subsidiary, followed by Ecuador. Colombia, Brazil and Mexico are potential leading destinations; Sanderson has already obtained Colombian INVIMA‟s certification and is currently applying for Brazilian ANVISA‟s certification. Exports are expected to rise to US$14.0 million in 2007.

Saval

Laboratorios Saval is Chile‟s third largest pharmaceutical company in the pharmacy sector, after LabChile and Recalcine. The company was founded in 1939 and is headquartered in Santiago. Saval employs 580 people, 450 of whom work in Chile.

Financial Indicators

Sales amounted to US$75.0 million in 2006, of which 17.1% was accountable to exports to other countries, equal to US$12.8 million. This compared well with sales of US$43.8 million in 2005 (annual cumulative sales in June), US$45.1 million in 2004 and US$42.7 million in 2003.

Saval’s Sales, 2003-2006

0

10

20

30

40

50

60

70

80

2003 2004 2005 2006

US$ Million

Source: Saval. Note: Estimated annual sales in 2004 and annual cumulative sales in June 2005

Product Portfolio

Saval produces around 80 products in 300 presentations. Originally, the company produced only ophthalmic products, but has since expanded into other areas including infectology, immunology, oncology, gastroenterology, bronchopulmonology, cardiology, rheumatology and psychiatry.

Manufacturing Capabilities

Saval modernised and expanded its 18,000m2 manufacturing plant in 2007, with investments valued at US$22.0 million. Production output is expected to increase by 40.0%. The aims is to increase exports, not only to traditional South American markets but also to more regulated markets. Consequently, Saval has announced that the modernised plant will meet European standards.

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Exports

Saval started to export in bulk in 1998. Currently, it is the second leading Chilean exporter of pharmaceuticals, after LabChile. Exports rose to US$12.8 million in 2006, compared to US$9.6 million in 2005 and US$8.1 million in 2004. Leading destinations include Argentina, Bolivia, Dominican Republic, Ecuador, El Salvador, Panama, Paraguay, Peru, United States and Uruguay.

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Exports

Chilean pharmaceutical exports are marginal but continue to grow. First of all, most of the raw materials need to be imported. Secondly, the industry has not complied with GMP standards in full; new enforcement was expected by the end of 2008. Thirdly and most importantly, the national industry mainly produces copycat products which do not meet quality and bioequivalence standards.

2007 saw a rise of 10.8% in exports, to reach US$83.5 million. This was due, for the most part, to an increase of over US$7 million in retail medicaments exports. Retail medicaments continue to be the most significant export category, equal to 93.7% of the total. Over five years, from 2003 to 2007, exports increased by 75.2%. The biggest increases were seen in semi finished medicaments, which increased their value more than six times.

Pharmaceutical Exports, 2003-2007 (US$000’s)

2003 2004 2005 2006 2007

Raw materials 938 3,517 3,298 3,993 4,173

Semi-finished medicaments 154 233 322 640 1,103

Retail medicaments 46,580 57,882 60,821 70,769 78,268

Total 47,672 61,632 64,441 75,402 83,544

Export Trends

2006 2007 % of Total % Change 2007

5-yr % Change

Raw materials 3,993 4,173 5.0 4.5 344.9

Semi-finished medicaments 640 1,103 1.3 72.3 616.2

Retail medicaments 70,769 78,268 93.7 10.6 68.0

Total 75,402 83,544 100.0 10.8 75.2

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Pharmaceutical Exports by Category, 2007 (%)

Raw materials

5.0% Semi-finished

medicaments

1.3%

Retail medicaments

93.7%

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Leading Destinations, 2007 (US$000s)

Exports % of Total

Ecuador 23,026 37.0

Peru 14,444 15.7

Bolivia 10,980 11.7

Venezuela 5,571 7.5

Paraguay 4,901 5.8

Panama 4,817 4.6

Colombia 3,366 2.3

Mexico 2,581 1.8

Brazil 2,173 1.8

Cuba 2,125 1.8

Honduras 1,505 1.6

Subtotal 75,489

90.4

Total 83,544 100.0

EU-15 510 0.6

Leading Destinations, 2007 (%)

Ecuador

37.0%

Venezuela

7.5%

Bolivia

11.7%

Peru

15.7%

Paraguay

5.8%

Colombia

2.3%

Panama

4.6%

Others

15.4%

Six producers are responsible for the bulk of pharmaceutical exports. In 2007, the combined exports of all six amounted to US$64.8 million, which represented a rise of 8.0% over US$60.0 million in 2006. This increase was tempered by poor yearly export figures from Bago whose exports dropped 42.7% in a year. Bago‟s exports have fluctuated from just US$2.5 million in 2002 to a high of US$11.7 million in 2006. In 2007, LabChile exported pharmaceuticals worth US$14.9 million, closely followed by Saval (US$14.4 million) and Recalcine (US$13.3 million), Andromaco exported the least amount of the six ( US$ 6.5 million). The top six exporters made up 80.0% of total exports in 2006.

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Leading Exporters of Pharmaceuticals, 2002-2007(US$ Million)

2002 2003 2004 2005 2006 2007

LabChile 11.6 n/a n/a 11.0 13.6 14.9 Saval 5.9 6.7 8.1 9.6 12.8 14.4 Recalcine 7.9 5.6 6.8 7.1 9.5 13.3 Sanderson 5.9 4.9 6.6 7.7 7.2 9.0 Bagó 2.5 8.4 10.3 10.9 11.7 6.7 Andrómaco 3.0 3.7 4.1 4.5 5.2 6.5 Total 36.8 29.3 35.9 50.8 60.0 64.8

Source: ProChile.

Leading Exporters of Pharmaceuticals, 2007 (US$ Million)

0

2

4

6

8

10

12

14

16

LabChile Saval Recalcine Sanderson Bago Andromaco

US$ Million

Source: ProChile

In order to maximise their export opportunities, domestic producers are expanding or creating new manufacturing facilities. Overall, investments are valued at an estimated US$100.0 million in 2007. These include LabChile‟s new US$30.0 million plant, operational in 2008; Saval‟s US$22.0 million to modernise its plant; Andrómaco‟s acquisition of a Colombian producer, valued at US$15.0 million; and Sanderson‟s US$23.0 million investment to extend its plant.

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Research & Development

The regulation of clinical studies on human beings took effect in Chile in 2001, under the Ministry of Health‟s Ruling No. 57. This late enforcement has resulted in postponed and limited R&D activities in the country. According to CIF, 14 of its 22 associated producers invested around US$16 million in 160 clinical studies in 2003, undertaken by 300 local R&D units.

Most of the studies are part of multicentric clinical studies. Therapeutic areas of interest include oncology, cardiology, neurology, diabetes, human vaccines, osteoporosis, prostate cancer, metabolic syndrome and kidney transplant. There is also interest regarding biotechnology developments to treat diabetes, cancer, AIDS and Alzheimer‟s disease.

The majority of exports from Chile go to other Latin and Central American countries, where quality standards are below international levels. In 2007, leading destinations were mainly Andean countries, including Ecuador, Peru and Bolivia, as in the previous couple of years. Ecuador, the lead destination, received US$23.0 million, over a third of the total. The EU-15 barely featured, amounting to just 0.6% of the total.

Pharmaceutical Regulatory Analysis

Pharmaceutical Regulation

The Institute of Public Health in Chile (ISPCH – Instituto de Salud Pública de Chile) is responsible for pharmaceutical regulation, including registration, importation, production, storage, distribution, publicity and promotion. Regulations are contained in Decree 1,876/1995. This updated the 1981 law and incorporated changes and improvements to the sanitary code. However, many regulations established by Decree 1,876 are ignored, and some are obsolete compared to those in other countries.

ISPCH is responsible for sanitary surveillance, public health promotion and public health research. More specifically, ISPCH is responsible for GMP processes, product registration & modification, production & control of vaccines, environmental health and occupational health. Inspection of the distribution chain is undertaken at local level by regional health services.

However, ISPCH has been criticised by domestic and international producers and importers in recent years. The Chamber of the Pharmaceutical Industry (CIF), which mainly represents foreign importers and some producers, has criticised the lack of GMP and bioequivalence compliance among domestic producers, and ISPCH‟s favouritism towards them.

For domestic and foreign producers, ISPCH is slow in processing product registrations, particularly for original products and legal proceedings, most of them advertising-related. They also agree that ISPCH ought to be more focused on assuring product quality and stock control. Overall, ISPCH is perceived as slow, old and in need of modernisation. As part of the health reform in Chile, ISPCH was revamped in 2004.

Public Consultation on New Pharmaceutical Regulations

The Ministry of Health asked for public comments on proposed new pharmaceutical regulations in Chile. The new regulations would apply to the Sistema Nacional de Control de los productos farmaceuticos (pharmaceutical products national control system). Comments were accepted up to 21st July 2008.

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Pharmaceutical Registration

Registered products may be subjected to quality control checks at any stage of manufacture, distribution or marketing. New product registrations are valid for five years, with renewals available after that. The registration of original drugs requires longer waiting periods and higher standards of documentary evidence than the registraton of similar drugs.

New registrations of original products increased from 228 in 1999, to 257 in 2002 and 287 in 2006. However, there were nearly double the amount of similar products compared with original products in 2006. Registration of original products took 180 days in 2006, compared with 267 days in 2001. Additionally, registration of similar products took 140 days in 2006 and 256 days in 2002. In 2004, ISP introduced on-line applications for product registrations, therefore only a total figure for registrations is available for 2004 & 2005 together, as seen in the table below.

Number of Product Registrations, 1999-2006

Original products Similar products Total

1999 228 710 938 2000 234 746 980 2001 214 825 1,039 2002 257 791 1,048 2003*- *250 *790 *1,040 2004 &2005 *550 *1,841 2,391 2006 287 511 798 Total* 2,020 6,214 8,234

Source: ISPCH, 2002.* estimated.

Applications for import registration must be accompanied by official certification, as recommended by WHO. Registration of pharmaceutical products under a licensing agreement from another country requires authorisation from the manufacturer to produce, import and distribute its products in Chile. In order to establish the identity, power, purity, stability and other requirements regarding physical, chemical, microbiological and biopharmaceutical quality of active elements and pharmaceutical forms of drugs for which registration is required, ISPCH follows the related norms contained in the pharmacopoeias and their supplements currently applicable in Chile.

These include the Chilean, International, European, US (including the National Formulary), British, French, German and Wilmar Schwabe Pharmacopoeias. In addition, the technical reports of WHO‟s Committee for Biological Standards and the relevant USA Code of Federal Regulations are in use. Anything not included in the above is subject to the discretion of the Institute.

The Institute will approve or refuse a registration application within 90 days of receipt, except where additional information is required from other bodies/experts, when the time period is extended by 30 days. The Ministry of Health makes the final decision for refusal of registration.

Once sanitary registration has been approved for the import of a finished product by any legal entity, further applications for registration are not required by other importers, provided the product is sourced from the same laboratory and country of origin. If not, the product must be proven to have the same formulae, quality and stability specifications as the registered product, through the free sale certificate or official certificate issued by the health authority in the manufacturer‟s country of origin.

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Quality Standards

Faults in product registration have resulted in product quality problems. Between 1997 and 1999, ISPCH analysed 218 products, of which 30 were faulty, equal to 14% of the total. However, the scope of this analysis is very poor, considering that there were 3,950 products in 8,000 presentations marketed in 2003. According to a review by the Journal of the Chilean College of Chemists-Pharmacists in 2001, pharmacy preparations do not meet the minimum quality standards either.

There is also a lack of control over active ingredients. Manufacturers can change product quality specifications after obtaining product registrations. They tend not to inform ISPCH; ISPCH does not have the resources to follow this up. For CIF, there is also a lack of procedures mainly affecting generic and similar products; whereas registration of original products must be complete, registration of generic and similar products is more simplified.

The domestic industry, however, claims that its products are safe and reliable. In fact, over 70% of physician-prescriptions are for generic and similar products. Also, the number of legal proceedings based on quality issues is equally split between domestic and foreign manufacturers. Domestic manufacturers such as Recalcine go further and claim that imported drugs should be more controlled in terms of quality.

Stock Control

Another problem is poor stock control, which was restricted to 80 products in 2002, most of them foreign, according to CIF. ISPCH claims that stock controls, although very limited in 2002, were applied to both the pharmacy and institutional markets.

Legal Proceedings

Legal proceedings can be reported to ISPCH via two main routes; „oficio‟ when health authorities report any irregularity, and „denuncia‟ when manufacturers or competitors report each other. Most legal proceedings, mainly based on advertising issues reported by multinationals, are the result of commercial disputes among manufacturers.

In 2002, for instance, Pfizer and Recalcine engaged in legal battles over Viagra and Helpin, respectively, which instigated legal proceedings against each other. In 2003, there were many proceedings against Bestpharma, as it had apparently imported irregular products; some competitors reported it for labelling or advertising irregularities.

Drug Approval Process

Advertising

Under Decree 1,876 (1995), advertising is regulated by ISPCH. Drug promotion is allowed only through the accurate and complete reproduction of labelling, information booklets for patients, texts and appendices previously approved under the registration process, or which are specifically required for a product already registered. Previous authorisation from the Institute is not required but regulations must be met.

Prescription drugs cannot be advertised to the general public, but can be promoted among health professionals authorised to prescribe and dispense, without prior authorisation from ISPCH. Promotional material must contain approved text and include the product name and brand, if existing. Information must be truthful, complete and documented, and is subject to verification.

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No incentives for healthcare professionals are allowed, but this practice is difficult to control. Under Article 107, Decree 1,876 (1995), “publicity means which could lead to the supply of a non-indicated drug, such as samples or any other method which promotes consumption and self-medication” is not allowed in pharmacies.

On 5th January 2004, an Ethics Code (Código de Ética) was enforced to solve discrepancies between national and foreign producers, in terms of regulation, consumer rights, respect to the industry, competition and advertising. Under the Chilean Industrial Society (SOFOFA – Sociedad de Fomento Fabril), an Ethics Commission was also created to act as intermediary.

The Ethics Code is an agreement subscribed by the association of domestic producers (ASILFA) and the association of foreign producers (CIF), coordinated by SOFOFA. The Ethics Code is based on SOFOFA‟s ethical regulations and regulations issued by the Chilean Association of Advertising Agencies (ACHAP – Asociación Chilena de Agencias de Publicidad).

Patent Protection & Intellectual Property Rights

A patent, trademark and industrial design law was implemented in Chile in September 1991 (Law 19,039), under which patent protection is provided for pharmaceuticals. There were, however, deficiencies in the law. Patent protection only lasted for 15 years from the date of filing, five years less than the international standard.

There was also a lack of provision for extending patent terms for delays due to regulatory approval processes, and no „pipeline‟ protection for pharmaceutical products patented in other countries prior to patent protection being available in Chile. The first patent-protected products began to appear on the market in 1998.

Between 1999 and 2004, new legislation was debated to bring Chilean patent law in line with international standards (TRIPS compliant). Finally, the Chamber of Deputies and the Senate approved the modifications to Law No. 19,039 in November 2004. The new Law No. 19,996 was published in the official bulletin (DO - Diario Oficial) on 11th March 2005.

Further TRIPS compliance means the expansion of patented drugs for a period of 20 years and a five-year data exclusivity period. For the Ministry of Economy, however, drug prices will not increase in the short-term. Most current drugs are not protected by patents. Second-use patents are not applicable. Parallel trading and compulsory licensing remain. Linkage between health authorities and the patent office might increase.

Also, patents will be considered from the date that they were requested in the country of origin, not from the date that they were marketed in Chile. Currently, there is a large number of international drug blockbusters whose patent is or will soon be expiring. This guarantees that Chile will still be able to produce its copycat products to the detriment of international research-based companies. Consequently, the United States Trade Representative (USTR) placed Chile on the 2006 Watch List. It remained there for 2007 and 2008 despite the US acknowledging some improvements.

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In April 2008, the government created an Intellectual Property Institute to replace the Economy Ministry‟s Intellectual Property Department (DPI). On 14th April 2008, Law No. 20,254 was passed, which officially created the successor to the DPI. The President now has 180 days to set up the new building and recruit staff. The new organisation is called Instituto Nacional de Propriedad Industrial (INAPI). It will have technical and legal functions, and be entrusted with; administration and intellectual property services‟ supervision, promoting intellectual property protection and dispensing information. The public, decentralised body, will be headed up by a National Director and report back to the President of the Republic. INAPI will be housed in a new building, the annual cost of which will be under 2,450 million pesos (US$4.8 million). The Industrial Association of Chilean Pharmaceutical Manufacturers (ASILFA) hopes that the new organisation will promote innovation and production in Chile.

In January 2008, the US announced that Chile would remain on the priority watch list due to concern over IPR, with Chile still falling to meet expectations as a US free trade agreement (FTA) partner. The US said it will continue to work with Chile regarding the Implementation of Chile‟s IPR commitments to the FTA.The United States Trade Representative (USTR) placed Chile on the Priority Watch List in 2007. Chile had been elevated from the Watch List to the Priority Watch List in January 2007.

Although the US acknowledged that some US pharmaceutical companies have successfully challenged patent infringement cases, they think Chile needs to strengthen its legal IP regime. The US remains “concerned about inadequate protection against unfair commercial use of undisclosed data generated to obtain marketing approval for pharmaceutical products and insufficient coordination between Chile‟s health and patent authorities to prevent the issuance of marketing approvals for unauthorized copies of patented pharmaceutical products”. There are also issues surrounding continued copyright piracy and trademark counterfeiting.

Chile‟s Congress is considering legislation to implement provisions of the FTA regarding Internet service provider liability, limitations and exceptions to copyright protection, and enforcement and penalties against copyright infringement. The US wants additional amendments to Chile‟s IPR legislation to bring Chile‟s IPR regime into line with its multilateral and bilateral commitments.

China and Chile Agree Customs IP Cooperation Agreement

After two years of negotiation, in April 2009, the text was agreed on for a co-operation agreement for the two Customs authorities. They will carry out investigations on undervaluation, smuggling and breaking of IP rules, enabling information to be shared between the two countries. This complies with Article 37 n3 of the China Chile FTA. This will strengthen technical and trade bonds between China and Chile and international trade as a whole.

Pricing & Reimbursement

There are no price controls, although the Central Purchasing Agency (CENABAST) acts a reference centre for pricing. Pharmaceutical prices are among the lowest in the region, due to the presence of a well-developed domestic industry and generics penetration. In 2007, the average drug price was US$4.0 in Chile, compared to US$7.2 for Latin America as a whole. This is a slight increase on Chile‟s 2005 figure which was was US$3.9.

In 2007, the average price of a generic medicine in the pharmacy market stood at US$0.7; this is well below the average given for Latin America (US$3.4). Due to the peso‟s appreciation against the dollar the average generic price was US$1.2 in 2005.

In 2006, the market was split up as follows: 44.1% similar drugs, 37.1% generics and the remaining 18.8% branded drugs. The market was worth US$840 million in 2006.

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Prices of branded generic and original drugs increased in 2005, standing at US$4.9 and US$8.6, respectively. In 2004, the average price of a drug increased to US$3.6, still low by regional standards.

Drug Pricing by Product Type, 2002-05 (US$)

0

2

4

6

8

10

Generic Branded generic Original Average

2002 2004 2005

Source: MINSAL & ASILFA

Reimbursement

Reimbursement is by no means comprehensive. In 2001, around 60% of the population covered by the public insurance system (FONASA) was entitled to free drugs or minimum co-payments. Under the free election system (MLE - Método de Libre Elección), prescription reimbursement is virtually non-existent and there is very little drug reimbursement during hospitalisation.

Under FONASA, there are four income groups for reimbursement purposes. Group A has the highest level of reimbursement, whereas group D has the lowest. Health services are reimbursed as follows;

In general urban or rural surgeries, or rural first aid posts, pharmaceutical products included in the Essential Pharmacological Centres for Rural First Aid Posts and Health Centres are 100% reimbursed.

In specialty surgeries, pharmaceutical products included in the National List of Essential medicines are 100% reimbursed for patients in income groups A and B, 90% for group C and 80% for group D.

Inpatients receive reimbursement for pharmaceuticals at 100% for income groups A and B, 60% for group C and 35% for group D.

Drugs obtained under the public system must be charged according to a valid price list, issued twice a month by the Central Purchasing Agency (CENABAST). For drugs which are not listed, charges must be equivalent to the cost of replacement.

Within the private insurance sytem (Isapres), levels of reimbursement vary between companies and individual insurance schemes; not all companies reimburse prescription drugs. In general, Isapres usually cover drugs required during hospitalisation for a defined period of time. Drugs required during ambulatory care are covered in some cases, but are subject to an agreement between the Isapre and pharmaceutical suppliers.

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Pharmaceutical Distribution

There are over 1,500 pharmacies in Chile, but most of them are located in the richest areas of each region. Each pharmacy must have a qualified chemist or pharmacist. In the public sector, complex hospitals tend to have a pharmacist whereas primary care establishments tend to have an auxiliary, sometimes trained by the health centre. There is a lack of policies defining the role of the pharmacists and professionals.

After the disintegration of the distributors Farmacentral, Socofar and Drogueria Uñoa, the pharmacy chains Cruz Verde, SalcoBrand and Farmacias Ahumada dominate the distribution market. They own around 40% of the establishments and have around 90% of the pharmacy sector. Pharmacy chains are represented by the National Association of Pharmacy Chains (ANACAF - Asociación Nacional de Cadenas de Farmacias).

Pharmacy Sector by Distribution Channels, 2006 (%)

Cruz Verde

38.3%

Others

12.0%

SalcoBrand

24.7%

FASA

25.0%

Cruz Verde. Note: Annual cumulative pharmacy share by April 2006.

The number of independent pharmacies has decreased drastically in recent years. Around 600 are associated to the Union of Chilean Pharmacy Owners (UNFACH - Unión de Dueños de Farmacias de Chile). Others are associated to the Association of Independent Pharmacies (AFF – Asociación de Farmacias Independientes). UNFACH and AFF account for a combined 6% of the sector.

FarmaLider, the pharmacy subsidiary of D&S supermarket, leads the drug supermarket sector, mainly participating in the OTC sector. It accounts for the remaining 4% of the pharmacy sector. Finally, the Central Purchasing Agency (CENABAST) is responsible for purchasing and distributing medical and pharmaceutical products for the public hospital sector.

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Distribution Developments in the Retail Market

Farmacias Ahumada (Fasa), Cruz Verde and SalcoBrand are the leading pharmacy chains in Chile, concentrating around 90.0% of the market. In February 2007, the business group Yarur acquired SalcoBrand; this transaction was valued at US$174.0 million. One of the aims of Yarur is to use its financial knowhow to promote SalcoBrand‟s credit card among 250,000 clients. SalcoBrand has 296 establishments and annual sales of US$450.0 million, equal to a market share of 26.0%.

Own-label production, vertical distribution, product and market diversification are all factors contributing to the monopoly of these three leading pharmacy chains. As a result, independent pharmacies are struggling, and pharmaceutical producers and importers have seen their margins reduced. In terms of competition, promotional deals and price wars engaging these three leading pharmacy chains have constricted the growth of the retail market.

New players are also fighting to gain entry. The Mexican pharmacy chains Dr Simi and Dr Ahorro are testing the market with their range of cheap generics. Dr Simi inaugurated 50 pharmacies in Chile in October 2006, and plans to have 200 operational in 2008, of which 150 will be franchises. Dr Ahorro inaugurated its first Chilean pharmacy in January 2007. Additionally, FarmaLider, the pharmacy subsidiary of D&S supermarket, leads the drug supermarket sector, mainly participating in the pharmacy OTC sector in Chile.

In recent years, Fasa has expanded its international operations. However, after an unsuccessful attempt to penetrate Brazil, the company is readdressing its objectives in Chile. Fasa plans to open 50 new establishments in 2007, with investments valued at US$5.0 million. In 2006, Fasa inaugurated 20 new establishments and had ten more in the pipeline. The company expects to have a total of 320 establishments in Chile in 2007. Fasa also aims to increase its market share in the retail generics market, as at present only 10.0% of its sales are generics.

In December 2006, Fasa also announced the creation of seven strip centres with the insurance company Vida Corp. Vida Corp will be leasing US$11.0 million for the acquisition of the sites, whilst Fasa will be administering the new complexes. Another initiative undertaken by Fasa is the provision of medical services in its pharmacies; Cruz Verde and Dr Simi have responded with the same strategy, whilst SalcoBrand has decided not to test this initiative.

SalcoBrand and Cruz Verde sell generics too, competing with Fasa, Dr. Simi and Dr Ahorro. SalcoBrand has also announced plans to invest US$20.0 million between 2007 and 2008. In the local market, it aims to expand its convenience stores represented by OKMarket. Also, the company plans to launch its format in other countries. This expansion programme, however, might be altered after the sale of SalcoBrand to Yarur.

Pharmacy Own-Labelled Production

Pharmacy chains are diversifying their product sales. Outside the metropolitan area, 47.0% of pharmacy sales are food, perfume and home & personal care (HPC) products. Also, the three major pharmacy chains produce their own-labelled cosmetics, HPC products, natural products and medicines since 1998. In the pharmaceutical market, they mainly compete with OTC producers.

Sales of own-labelled products amounted to over US$51 million in 2003. Farmarcias Ahumada, through 40 third-party manufacturers, 30 domestic (including Prater) and ten foreign, has its own drug product lines, after launching its first products under the brand FASA in 1996. Its sales of own-labelled products, including drugs and cosmetics, account for around 8.5% of the total.

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SalcoBrand, via third-party manufacturing undertaken by Recalcine and Medipharm, produces its own drug product lines and cosmetics under the brand FarmaPrecio. Sales of own-labelled products, including drugs and cosmetics, account for around 7.0% of the total. Cruz Verde‟s production via Mintlab is relatively small compared to both Ahumada and SalcoBrand and is focused on HPC and natural products. Its sales account for 2.0% of the total.

Retail Pharmacy Chains

Cruz Verde

Founded in 1984, Cruz Verde (CV) Corporation is a holding comprising Farmacias Cruz Verde, Solventa, Cesfar, Farmacias Farmax, Munnich Pharma Medical, Mediline, Socofar and Transmet. CV is the chain which has seen the biggest expansion in Chile, with 439 outlets in August 2006, compared to 370 in January 2005 and 40 in 1995.

In May 2006, Cruz Verde operated 436 outlets and planned to have 500 operational outlets by the end of 2006. Additionally, it announced the extension of its distribution centre in Macul and plans to open a new distribution centre in two or three years in this region. Investments were valued at US$35 million, of which US$20 million were invested in new outlets and US$15 million in the distribution centre.

Unlike its two major rivals, business operations are focused almost entirely on pharmaceuticals. By August 2006, CV claimed to be the market leader, accounting for 38% of the sector, compared to 34% in October 2004. The company‟s acquisition of Conosur pharmacy chain in 2001 helped its aggressive market penetration. Prior to the merger with Conosur, CV had annual sales of US$216 million.

Farmacias Ahumada

Farmacias Ahumada (FASA) sells pharmaceutical, natural, nutritional, beauty and home & personal care products. FASA has operations in Chile, Mexico and Peru. FASA was also operational in Brazil via Drogamed. However, due to intensive local competition, FASA decided to abandon this market in 2005. FASA is expected to launch its operations in Colombia and Argentina. In December 2006, FASA acquired its competitor FarmaLider.

FASA claims to be a leading pharmacy chain in Latin America catering for over 204 million customers. In 2007, total sales in Latin America amounted to 853.3 billion pesos (US$1,631.1 million), which represented a rise of 17.6% in local terms over 703.1 billion pesos (US$1,325.9 million) in 2006. Sales in Chile represented 37.2% of the total in 2007, equal to 317.4 billion pesos (US$606.7 million), Mexico took the largest amount of sales (55.2%, US$947.8 million) with the remaining 7.6% being taken by Peru. In 2005, pharmaceutical products accounted for around 65% of turnover.

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FASA’s Sales, 2000-07 (US$)

0

500

1000

1500

2000

Sales (billion pesos) Sales (US$ million)

2000 2001 2002 2003 2004 2005 2006 2007

Source: FASA

In 2007, FASA had 1,176 outlets in Latin America, up 183 outlets from the year before. This compares to 909 outlets in 2005, 936 in 2004 and 942 in 2003. The number of outlets in Chile amounted to 360 in 2007, whilst there were 250 in 2005, 226 in 2004 and 229 in 2003. FASA opened a new distribution centre to improve stock control levels in May 2005. In 2005, FASA employed 10,141 people in Latin America, of whom 3,144 were located in Chile, equal to 31.0% of the total.

In 2006, FASA together with Laboratorio Volta, created a new company Pharma Genexx S.A, They two founding companies spent 1.6 million pesos. The aim of the new business is to commercialise generic medicines and imedical and hospital supplies both in Chile and overseas.

Farmacias SalcoBrand

Farmacias SalcoBrand (SB) was formed from a merger of the Salco and Brand pharmacy chains in 2001 and is owned by the Selman, Weinstein and Colodro families. SB had 24.7% share of the retail pharmacy sector in April 2006. Annual sales in Chile were estimated at US$500 million in 2005, a rise of 9.0% over US$458.7 million in 2004. Additionally, SB has operations in Peru, estimated at US$96 million in 2005.

Sales of personal care and beauty products account for around 30% of the total, the remaining 70% being pharmaceuticals. SB has the most comprehensive coverage in geographical terms with around 250 outlets. In 2005, SB planned to open 25 new stores. In 2003, SB also opened six minimarkets under the OKMarket brand, penetrating the supermarket sector. In 2005, SB planned to open another six OKMarket outlets. In 2008, there are 17 OKMarket stores listed, 10 of which are located in Santiago.

SB has two manufacturing entities, one for pharmaceuticals and one for cosmetics. SB also launched a new scheme to distribute drugs to independent pharmacies at competitive prices. Previously, this market had been served almost exclusively by Cruz Verde‟s Socofar. Also, SB is in direct price competition with Cruz Verde, with aggressive price wars. In 2006-2005, investments are valued at US$20 million.

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In April 2007, two of the founding families Selman and Colodro sold their stakes in the company and Farmacias Salcobrand was subsequently acquired by Empresas Juan Yarur S.A.C, a holding company operating in banking, insurance and food processing. The company is based in Santiago, Chile and owns Banco BCI amongst other enterprises.

FarmaLider

FarmaLider is a pharmacy chain which was owned by D&S, the largest Chilean supermarket, which started pharmacy operations in 2001. An aggressive expansion based on low prices and market increase positioned FarmaLider in direct competition with the three main pharmacy chains. From its origins in 2001, it expanded to 40 locations in 2003, 57 in 2004, 67 in 2005 and 72 in 2006. In December 2006, D&S agreed to sell the FarmaLider outlets to Farmacias Ahumadas. At the time of its sale, FarmaLider had sales of US$70 million per year.

In 2003, D&S had sales of US$1,959 million, of which 1.4%, equal to US$27.5 million, were accountable to FarmaLider. It is estimated that FarmaLider accounted for around 4.0% of the retail pharmacy sector in 2003. By the end of 2004, FarmaLider had 57 pharmacies, mainly located within D&S supermarkets.

CENABAST

The Central Purchasing Agency (CENABAST – Central de Abastecimiento del SNSS) centralises public expenditure on pharmaceuticals and medical products. It establishes buying agreements for the public sector for a basket of around 2,400 products. Pharmaceuticals represent around 68% of CENABAST‟s activity. Purchasing processes are managed through the Chile-Compra portal (www.chilecompra.cl).

The value of CENABAST transactions rose to 120.4 billion pesos (US$227.0 million) in 2006, which represented a rise of 25.0% over 93.8 billion pesos (US$167.5 million) in 2005. Purchases for SNSS hospitals and primary care establishments rose by 39.0% and 9.0% respectively in 2006 and made up the majority of the total. CENABAST increased efficiency, regarding the time taken for the buying process, reducing the average number of days taken from 107 in 2004 to 20 in 2006.

In the future, SNSS establishments aim to centralise at least 80% of their expenditure on pharmaceuticals and medical supplies, via CENABAST. Centralisation will also result in further savings to reduce expenditure; savings were valued at 7.4 billion pesos (US$13.2 million) in 2005. From January 2002, CENABAST‟s purchases have been published via its website, which also offers reference prices for hospitals.

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Healthcare Analysis

Demographics

More detailed figures on demographics in Chile can be found in Tables 1-11 of the accompanying Health Statistics document.

Population

Chile has a projected population of around 16,928,873 in 2009, of which about 40% live in the Metropolitan Region of Santiago according to the latest census in 2002. The population is scheduled to rise to 17.7 million by 2014.

In 2007, the projected population was 16.6 million, with the three largest areas being the Metropolitan Region of Santiago (40% of the total population), Bio-Bio (12% of total population), and Valparaiso (10%) according to the Department of Statistics and Heatlh Information (DEIS). There were about 21.9 inhabitants per km2 overall in Chile, but this varied from 1.2 in the Antartica & Magallanes region to 435.0 in Santiago.

Summary Demographic Data 2005-07

Number Year

Population Size (millions) 16.6 2007

Growth Rate (%) 1.0 2007

% Aged 65+ 7.9 2005

Birth Rate per 000 population 14.8 2006

Death Rate per 000 population 5.2 2006

IMR per 000 live births 7.6 2006

Life Expectancy at Birth (male) 75.5 2005-10

Life Expectancy at Birth (female) 81.5 2005-10

Source: Departamento de Estadísticas e Información de Salud (DEIS). Life Expectancy projected 2005-2010

In 2009, an estimated 1.5 million people are aged 65 or over, meaning that over 90% are under this age, making Chile in line with the average in the Americas.

Projected Population, 2009-2014

2009 2010 2011 2012 2013 2014

Population (millions) * 16.9 17.1 17.3 17.4 17.6 17.7

% Growth * 1.0 1.0 0.9 0.9 0.9 0.8

Number Aged 65+ (millions) * 1.5 1.6 1.7 1.7 1.8 1.9

% Aged 65+ * 9.1 9.3 9.6 9.9 10.2 10.5

Sources: Economist Intelligence Unit (EIU).

Birth Rate

The Chilean birth rate has been declining steadily in recent years, falling from 23.5 births per thousand population in 1990 to 14.8 in 2006 when there were 231,383 registered births, this is slightly lower than the average for the Americas, but higher than the European average.

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Death Rate

The crude mortality rate has been stable at between 5.2 and 5.5 deaths per thousand population since 1992. In 2006, it was around the same level as Vietnam; this is quite a low rate in comparison to the rest of the world.

Infant Mortality

In recent years, the decline in the number of infant deaths has been striking, due to the implementation of maternal and infant health programmes and the improvement in sanitation, health education and per capita wealth. In 1980, infant mortality in Chile stood at 32.0 per thousand live births. By 1992, it had fallen to 14.3 per thousand live births.

Maternal mortality stood at 45 deaths in 2006. Traditionally, abortion has been a leading cause of maternal mortality. In 2005, there were seven deaths directly attributed to abortion, compared to 13 in 2000.

Life Expectancy at Birth

Life expectancy at birth in Chile is among the highest in the region, at around 78.5 years projected for the 2005-10 period; 75.5 years for males and 81.5 years for females.

Public Health

Causes of death

The leading cause of mortality in Chile is circulatory diseases, which accounted for 28.1% of all registered deaths in 2006, equal to 24,087 deaths. Ischaemic heart disease and cerebrovascular disease accounted for nearly two thirds of the total, equivalent to 7,943 deaths and 7,608 deaths, respectively. The crude mortality rate for this cause group stood at 149.3 per 100,000 population in 2006.

The second most frequent cause of death is cancer, which accounted for 25.3% of the total in 2006, equal to 21,654 deaths. The death rate for cancer had increased from 107.5 per 100,000 population in 1990 to 125.9 per 100,000 in 2006. Other leading causes of death included external causes (9.2%), respiratory diseases (9.0%) and hepatic cirrhosis (4.4%).

Incidence of Communicable Disease

A widespread educational campaign, sanitary food control and epidemiological watch helped reduce the spread of cholera. As a result, the number of cases was reduced from 147 in 1991 to zero in 1995 and cases have stayed at this level since then. Reported cases of typhoid & paratyphoid fever remain relatively high, with 280 cases in 2008. Also, there were 16 cases of trichinosis.

The number of tuberculosis cases has remained at around 2,400 cases for the last three years available 2006-08, compared to over 6,000 new cases reported in 1990. There were also 101 cases of meningococcal infection. Among sexually transmittable diseases, syphilis is the most common, with 3,159 cases reported in 2008, followed by gonorrhoea, with 1,019 reported cases.

According to the Ministry of Health, the infant vaccination programme covers around 97.6% of infants for diphtheria, pertussis, tetanus and polio. Since 1997, there have been no reported cases of diphtheria. In 2008, there were 1,244 reported cases of parotiditis, 974 cases of whooping cough, 15 cases of rubella (compared to 4,279 cases in 2007) and eight cases of tetanus. Also, there were 1,416 reported cases of hepatitis in the period.

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Incidence of Non-communicable disease

Chileans Suffer From High Rates of Digestive Illness

The World Gastoenterology Association (WGO) in their Digestive Disorders and Diseases Report, released in May 2008, concentrated on six disease areas; colorectal cancer, Helibactor pylori (which causes ulcer diseases), acid reflux, constipation, dyspepsia (which causes swelling/ sore stomach) and irritated colon. The WGO found that Chile has among the highest rates in all these diseases. For example, stomach cancer in Chile kills 3,500 per annum, which is the highest mortality rate in the Americas and one of the highest in the world.

According to specialists, genes, an unbalanced diet and rushing or missing meals may all be contributory factors. The WGO President explained that the typical Chilean diet, primarily meat and hardly any vegetables, leads to an increased risk of colon cancer. Stress and depression, which many Chileans suffer, are also “ triggers” for the diseases.

HIV/AIDS

In November 2007, the Department of Epidemiology, DIPLAS & the Ministry of Health (MINSAL) released a report on the evolution of HIV/AIDS 1984-2006. The cumulative number of reported HIV/AIDS cases was given as 17,235 as of December 2006, of which 17,051 can be directly accounted for. The cumulative figure (17,235) has been used by UNAIDS in its latest report on Chile from 2008. Of the 7,844 AIDS cases reported between 1984 and 2006, 88.1% were male. Of the 9,207 HIV cases, 81.0% were male.

The three areas of Tarapacá region, the Metropolitan region and Valparaiso have the highest accumulated AIDS/HIV rates per 100,000 pop (1984-2006). Tarapaca had an accumulated AIDS rate of 85.7 per 100,000 pop. and an accumulated HIV rate of 107.5 per 100,000 pop., the highest in the country.

Healthcare System

The Ministry of Health (MINSAL – Ministerio de Salud) regulates the public and private health sectors. As well as providing healthcare services, the public and private sectors also participate in health insurance. Both the public and private systems offer the full range of health services, although the public sector is responsible for health promotion.

MINSAL has its headquarters in the capital, Santiago. Regionally, MINSAL is represented by Regional Ministerial Health Secretariats (SEREMIs – Secretarías Regionales Ministeriales de Salud). Under the current reforms, MINSAL will operate through the Undersecretaryship of Public Health and the Undersecretaryship of Networks. At a decentralised level, there will be four main units;

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The Health Superintendency (Superintendencia de Salud). Under Law 19,937, the Health Superintendency replaces the former Superintendency of Isapres (Instituciones de Salud Previsional), created in 1990. Being operational since January 2005, the Health Superintendency is responsible for supervising and controlling Isapres (private insurance system), the National Health Fund (FONASA – Fondo Nacional de Salud), and public and private providers.

The Health Services. They provide primary, secondary and tertiary care.

The Institute of Public Health (ISPCH – Instituto de Salud Pública de Chile) controls pharmaceutical products and produces vaccines.

The Central Purchasing Agency (CENABAST- Central de Abastecimiento del Ministerio de Salud).

Healthcare Institutions’ Organisation

Source: MINSAL, 2004. Note: discontinuous line indicates non-hierarchical relationship and decentralisation.

Undersecretaryship of Networks Undersecretaryship of Public Health

SEREMI - Regional

Ministerial Office (ASR)

Central Purchasing

Agency (CENABAST)

FONASA (Public)

Service Provider (Private)

Self-Managed Hospitals

Health Superintendency

ISAPRES (Private) Primary Health Care

Service Provider (Public)

Experimental Institutions Inspection

Authorisation

Purchase

Purchase

Ministry of Health

Institute of Public Health

(ISPCH)

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The health system is partially financed through a system of compulsory health insurance contributions. Employees contribute 7.0% of their wages to either a public or private health insurance scheme under a programme set up in the early 1980s, whereby people who were covered by the compulsory system were given the option of opting out of the national health system (SNSS – Sistema Nacional de Servicios de Salud) and channelling their health fund taxes into private pre-paid health plans called Isapres (Instituciones de Salud Previsional).

Isapres also receive additional voluntary contributions from their members. As Isapres‟ coverage grew during the 1980s and early 1990s, the number of people opting out of the state system increased. Between 1982 and 1997, the proportion of the population contributing to the National Health Fund (FONASA) fell from 85.1% to 58.8% (8.8 million beneficiaries). However, private membership has declined since 1998, and the proportion of the population relying on the public health system increased to 72.7% of the total (12.3 million beneficiaries) in 2008.

The remainder of the population, over 1.8 million in 2008, is covered by other health providers. These include the army, police, the university medical system and non-profit private healthcare providers. The Chilean armed forces and police force own and operate a small number of hospitals and a number of medical centres. The funding and purchasing functions of these bodies are independent of the Ministry of Health. Non-profit private healthcare providers include Red Cross establishments, non-government organisations, corporate medical services (for employees) and occupational health insurance funds (mutuales).

Health Beneficiaries, 1990-2008

Public Sector

As % of Total

Private Sector

As % of Total

Other As % of Total

Total

1990 9,729,020 73.1 2,108,308 15.9 1,463,068 11.0 13,300,396 1991 9,414,162 69.5 2,566,144 18.9 1,563,320 11.5 13,543,626 1992 8,788,817 63.7 3,000,063 21.8 1,997,977 14.5 13,786,857 1993 8,537,786 60.9 3,431,543 24.5 2,060,762 14.7 14,030,091 1994 8,644,479 60.6 3,669,874 25.7 1,958,971 13.7 14,273,324 1995 8,637,022 59.6 3,763,649 26.0 2,094,551 14.4 14,495,222 1996 8,672,619 59.0 3,813,384 25.9 2,209,787 15.0 14,695,790 1997 8,753,407 58.8 3,882,572 26.1 2,260,383 15.2 14,896,362 1998 9,137,599 60.5 3,679,835 24.4 2,279,496 15.1 15,096,930 1999 9,403,455 61.5 3,323,373 21.7 2,570,671 16.8 15,297,499 2000 10,157,686 65.6 3,092,195 20.0 2,234,851 14.4 15,484,732 2001 10,156,364 64.9 2,940,795 18.8 2,561,472 16.4 15,658,631 2002 10,327,218 65.2 2,828,228 17.9 2,677,085 16.9 15,832,531 2003 10,580,090 66.1 2,729,088 17.0 2,697,251 16.9 16,006,429 2004 10,910,702 67.4 2,678,432 16.6 2,591,194 16.0 16,180,328 2005 11,120,094 68.0 2,660,338 16.3 2,569,549 15.7 16,349,981 2006 11,479,384 69.5 2,684,554 16.3 2,351,436 14.2 16,515,374 2007 11,740,688 70.4 2,776,912 16.6 2,163,173 13.0 16,680,773

16,680,773 2008 12,248,257 12,248,257

72.7 2,780,396 16.5 1,820,428 10.8 16,849,081 16,849,081

Source: FONASA.

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SNSS / FONASA

SNSS comprises 29 health services (Servicios de Salud) across the country. Health services provide primary, secondary and tertiary care. The management of public health facilities is decentralised. Since the healthcare reforms were completed in 1988, primary care facilities, including most clinics, health posts and rural health centres, have been run by the 335 municipalities.

The public hospital sector is administered by the respective health services. SNSS currently serves around two thirds of the population, including the poor, assisted pensioners and family members covered by subsidies, who do not contribute directly to any health insurance scheme. Public health system beneficiaries are entitled to free primary care in doctors' offices. Contributions towards hospital care are income dependent. Until June 2004, they were;

A. Free for the poor, beneficiaries of welfare pensions and family members covered by subsidies.

B. Free for gross monthly income up to CH$115,648 (US$167.3).

C. 10% contribution for gross monthly income between CH$115,648 (US$167.3) and CH$168,846 (US$244.2). If the number of dependants are three or more, the status goes to B.

D. 20% contribution for gross monthly income greater than CH$168,846 (US$244.2). If the number of dependants are three or more, the status goes to C.

Individuals contributing to the National Health Fund (FONASA) and their dependants also have the freedom to choose their own doctors, institutions or health organisations for a particular health service under the free election system (Modalidad de Libre Elección). The service provider must be authorised by FONASA and beneficiaries are required to make co-payments for services in accordance with Health Services Tariffs, under Law 18,369 and FONASA provisions.

This system makes it possible for FONASA contributors to receive medical attention from authorised professionals and private healthcare establishments. These are coded as level one, two or three. Beneficiaries either buy a bond from FONASA which covers them for treatment at one of these levels or pay for a healthcare programme (Programa de Atención de Salud). The free election system also covers certain rooms within public hospitals. If a patient chooses to be hospitalised in one of these, an authorisation (sworn declaration) must be signed at the time of admission.

Isapres

Since the scheme began, both the quality of Isapres‟ healthcare services and consumer satisfaction have improved. However, healthcare costs and, consequently, Isapres‟ subscription fees, have increased faster than wages. Therefore, it is becoming more difficult for this sector to provide healthcare to middle and lower income groups. Lower wage workers have effectively been priced out of the market.

Falling numbers have also been attributed to higher unemployment. People who lose their jobs are transferred to the state FONASA system. Isapres are able to select their members and exclude high risk individuals from private insurance. Contributions to Isapres average 9% of salary, of which 7% is basic and 2% is additional. Around 80% of Isapres‟ members have additional catastrophic cover for high cost illnesses.

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Isapre Changes, Problems and Price Increases

In April 2008, Isapre providers, Chile‟s private health insurers, announced that the cost of private health care will increase by around 8% over the next two years because of increased customer use of services. There are currently 2.8 million users of the Isapre private health insurance scheme. The largest price increase was announced by Colmena, who will increase their prices by 12%.

A week after the announcement 5,000 people changed to the state-run Fonasa system which will not be affected by the price increases. Fonasa includes the AUGE plan which provides universal health coverage to the poor. Service users have three months to decide to change plans or drop health insurance altogether.

The Health Minister Maria Barria, following on from the Isapre providers announcement, presented planned government Isapre system reforms to;

1) Reduce the number of private plans down from the 1,800 which are currently available 2) Increase transparency in the system making contract criteria standardised 3) Guarantee that those with serious or pre-existing conditions are not excluded

This reform package aims to tackle alleged unfairness and inefficiencies and to make the system clearer for consumers, at the moment providers have different services at different prices.

Consequently in May 2008, the Chile Senator Guido Girardi met with the Health Minister, to discuss alleged abusive practices of clients and employees by the private health insurance providers. The senator asked Ms Barria to support a bill to address these issues. The allegations are that the insurance companies discriminate against certain sections of society and blacklist certain companies that have cost them too much in the past. There was also criticism about the recently announced price increases.

Following on from this meeting, the deputies sent the proposal to the Chamber of Deputies where it will be assessed.

Isapres‟ coverage grew from covering 1.4% of the population in 1982 to 26.1% in 1997. However, membership declined between 1998 and 2005. According to the Health Superintendency, the number of beneficiaries increased slightly to nearly 2.8 million in 2007; this represented a fall of 28.5% over 1997. The number of payers to Isapres rose to 1.4 million in 2007; the remaining 1.4 million were dependants.

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Isapres’ Beneficiaries, 1990-2007

Payers Dependants Total Change (%)

1990 863,262 1,245,046 2,108,308 n/a 1991 1,070,813 1,495,331 2,566,144 21.7 1992 1,264,148 1,735,915 3,000,063 16.9 1993 1,474,711 1,956,832 3,431,543 14.4 1994 1,592,751 2,077,123 3,669,874 6.9 1995 1,649,225 2,114,424 3,763,649 2.6 1996 1,686,530 2,126,854 3,813,384 1.3 1997 1,725,646 2,156,926 3,882,572 1.8 1998 1,621,018 2,058,817 3,679,835 -5.2 1999 1,462,007 1,861,366 3,323,373 -9.7 2000 1,359,726 1,732,469 3,092,195 -7.0 2001 1,294,463 1,646,332 2,940,795 -4.9 2002 1,262,514 1,565,714 2,828,228 -3.8 2003 1,233,630 1,495,458 2,729,088 -3.5 2004 1,232,092 1,446,340 2,678,432 -1.9 2005 1,244,859 1,415,479 2,660,338 -0.7 2006 1,286,165 1,398,389 2,684,554 0.9 2007 1,358,946 1,417,966 2,776,912 3.4

Source: Superintendencia de Salud.

Isapres’ Benificiaries, 1990-2007

0

500000

1000000

1500000

2000000

2500000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Payers Dependants

Source: Superintendencia de Salud.

Of the 2.8 million beneficiaries in 2007, about 95.8%, or 2.7 million, belonged to open Isapres, whereas the remaining 4.2%, or 116,263, belonged to closed Isapres. Open Isapres are profit-driven companies open to all the population. Closed Isapres provide health services for employees of specific companies, membership being restricted to employees of those companies. In general, this type of Isapre is not profit driven.

In 2007, Consalud had the largest number of beneficiaries, with 643,006, equal to 23.2% of the total, followed by Banmedica (21.9%), ING Salud (18.8%), Colmena Golden (14.7%), Más Vida (9.1%) and Vida Tres (5.0%). All of these were open Isapres. The closed Isapre with the largest number of beneficiaries was Fusat, with 37,911, equal to just 1.4% of the total.

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Beneficiaries by Isapre Type, 2007

Payers Dependants Total As % of Total

Colmena Golden Cross

200,049 209,152 409,201 14.7

Normédica 25,761 38,169 63,930 2.3

ING Salud S.A. 263,767 257,115 520,882 18.8

Vida Tres 69,887 67,907 137,794 5.0

Ferrosalud 12,407 11,890 24,297 0.9

Más Vida 127,126 125,790 252,916 9.1

Isapre Banmédica 311,304 297,319 608,623 21.9

Consalud S.A. 302,754 340,252 643,006 23.2

Subtotal open Isapres 1,313,055 1,347,594 2,660,649 95.8

San Lorenzo 1,903 4,150 6,053 0.2

Fusat Ltda. 15,538 22,373 37,911 1.4

Chuquicamata 11,929 24,521 36,450 1.3

Río Blanco 1,886 4,000 5,886 0.2

Isapre Fundación 13,219 12,522 25,741 0.9

Cruz del Norte 1,416 2,806 4,222 0.2

Subtotal closed Isapres

45,891 70,372 116,263 4.2

Total 1,358,946 1,417,966 2,776,912 100.0

Source: Superintendencia de Salud.

Beneficiaries by Isapre Type, 2007

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

Col

men

a G

olde

n C

ross

Nor

méd

ica

ING

Sal

ud S

.A.

Vid

a T

res

Fer

rosa

lud

Más

Vid

a

Isap

re B

anm

édic

a

Con

salu

d S

.A.

San

Lor

enzo

Fus

at L

tda.

Chu

quic

amat

a

Río

Bla

nco

Isap

re F

unda

ción

Cru

z de

l Nor

te

Payers Dependants

Source: Superintendencia de Salud.

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The Reform

„Equity, participation, solidarity and quality‟ are the four pillars of the Chilean Healthcare Planning Objectives 2000-2010. This is a major step to strengthen a more preventive and universal primary care system, enforce and expand the AUGE programme, improve IT health systems and better respond to management and auditing needs. The goals for 2010 are to decrease health inequalities, meet the needs of the ageing population, face sociological changes, service an „empowered‟ population, and continue to enhance sanitary surveillance.

Major Structural Implementations, 2000-2010

Implementations

Separation of health service providers from health authority functions

Network management

Self-managed hospitals

Financial incentives for health workforce and retirement incentive schemes

Prioritisation of diseases

Compensation fund for health discriminations

Improved regulation of Isapres

Patient charts

Other financing for the public health service

Source: MINSAL.

Legal changes needed to be implemented as part of the health reform. More concretely, a five-law bill was introduced. This included Financing Government Expenditure Law, Health Authority & Management Law (Law 19,937), Health Rights System Law (AUGE) (Law 19,996), Private Health Law and People‟s Rights & Duties Law.

The Five-Law Reform Bill, 2004

Financing Government Expenditure

Passed and in effect from 2003 Health Authority & Management (Ley de Autoridad Sanitaria y Gestión)

Modified Law 2,763

Law 19,937 published in February 2004

In effect from January 2005 Health Guarantees System (Régimen General de Garantías en Salud)

Law 19,996, approved in September 2004

In effect from July 2005 Amend Private Health Law

Modifies Law 18,933

Isapres‟ Solvency Project in effect

In effect from July 2004 People’s Rights & Duties in Health

In effect from January 2005

Source: MINSAL.

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Financing Government Expenditure Law

After the law implementation, public health services are funded through general taxes, whereas individual health services are funded through an adjustment of payroll fees and general taxes. In order to subsidise the health reform through general taxes, the law approved a VAT increase from 18% to 19% between 2003 and 2006. In January 2007, VAT was restored to 18%.

Health Authority & Management Law

Law 19,937 has been in effect since January 2005. It modifies previous Decree Law 2,763. New modifications include new national and regional authorities, new healthcare network management and new human resources management.

New national and regional authorities:

The Ministry of Health operate through two main departments: the Undersecretaryship of Public Health and the Undersecretaryship of Networks. The Regional Health Authorities (ASR) will act as the “watchdog” for the Ministry.

At a decentralised level, there will be four main units: the Health Superintendency, responsible for FONASA (public) and Isapres (private); the Health Services, in charge of primary healthcare; the Institute of Public Health (ISPCH) and the Central Purchasing Agency (CENABAST).

New healthcare network management:

Hospital administration is to be modernised and decentralised, resulting in „network management‟ developments. About 28 healthcare network managers are responsible for devising strategies to enhance outpatient and preventive medicine, in compliance with the Guarantee System and the Health Goals.

There were plans to have 57 self-managed hospitals in the network by March 2005. Critical areas for management are training, transfer of appropriate technology, information & communications technology, flow simulation, increasing ambulatory care and a reform support group.

The government wanted to expand the role of ambulatory medicine to relieve the pressure on hospitals. The long-term target is to treat 80% of diseases on an outpatient basis, but this would require many more family doctors to be trained.

Health Guarantees System Law

The Lagos administration drew up a far-reaching reform programme for the health sector. A key component was a minimum care plan known as the Plan for Universal Health Access and Rights (AUGE - Acceso Universal con Garantías Explícitas). AUGE was drafted in May 2000 with the aim of solving and re-addressing the inequalities between the poor and the rest of the society, and improving health resources in terms of effectiveness and efficiency.

AUGE legally enforces public and private insurers to offer a mandatory benefits package for a group of diseases, including guaranteed access, maximum waiting times, quality care and financial protection. The AUGE plan, for instance, fixed maximum waiting times for non-urgent medical attention, including two days for GP consultation, 15 days for routine diagnostic tests (blood, urine, X-ray, ultrasound) and one month for a specialist consultation. The National Advisory Council is responsible for reviewing the package every three years.

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Major criteria for determining this package included social values, universal coverage, „integral and incremental‟ input, health priorities and effectiveness. AUGE guarantees free or low-cost treatment for 56 serious ailments for the entire population irrespective of health insurance status. The minimum care plan will have to be offered by FONASA and Isapres to all their beneficiaries at the same rates, although Isapres will be able to continue to offer additional cover for other ailments/benefits.

Between August 2002 and November 2004, AUGE undertook a pilot programme covering 82,310 patients. Between August 2002 and December 2003, prompt treatment was provided for congenital heart disease, kidney disease, childhood cancer, uterine cancer and palliative care for terminal cancer. Between January and November 2004, AUGE was expanded to 12 health priorities. In April 2004, the Chilean Senate‟s Health Commission ratified the proposal to create a Compensation Fund (Fondo de Compensación Solidario) as a further measure to finance AUGE.Between January and May 2005, AUGE was trialled for 25 health priorities.

Since July 2005, AUGE has officially guaranteed health provision for 25 health priorities, including hypertension, type 2 diabetes, oral health and respiratory diseases, among others. By July 2005, AUGE had covered 1.6 million Chileans. Further implementation took place between 2005 and 2007, covering 56 health priorities which account for 70% of the „burden of diseases‟ in Chile.

By October 2007, the AUGE programme had treated almost 4.2 million patients, the majority of these (94.7%) were seen through the FONASA scheme. By the end of the year this had risen to 4.5 million in total, of which 1.8 million had been seen during the year. The most common treatments were for acute myocardial infarction (81,065 patients), cataracts (80,057), cervical cancer (39,592), palliative care for long-term cancer (27,628), and operable heart disease (13,741). During 2008 AUGE treated another 2.0 million taking the cumulative total to 6.5 million.

Total AUGE Programme Patients, October 2007

FONASA ISAPRES Total % of Total

Operable congenital heart disease 12,939 802 13,741 4.5 End-stage renal disease treatments and transplants

8,577 780 9,357 3.1

Childhood cancer (< 15 years) 2,272 272 2,544 0.8 Cervical uterine cancer 37,287 2,305 39,592 13.1 Palliative care for terminal cancer 26,671 957 27,628 9.1 Acute myocardial infarction 79,200 1,865 81,065 26.8 Breast cancer 19,386 4,528 23,914 7.9 Diabetes mellitus type 1 2,714 2,788 5,502 1.8 Schizophrenia 5,059 461 5,520 1.8 Testicular cancer (> 15 years) 3,599 587 4,186 1.4 Lymphoma (> 15 years) 2,822 534 3,356 1.1 Cataracts (> 65 years) 76,262 3,895 80,157 26.5 Hip replacements (> 65 years) 2,892 353 3,245 1.1 Palate fissures 807 78 885 0.3 Scoliosis (< 25 years) 814 335 1,149 0.4 HIV/AIDS - 1,049 1,049 0.3 Subtotal 281,301 21,589 302,890 100.0 Total AUGE patients, cumulative, October 2007

3,939,821 219,638 4,159,459 100.0

Source: MINSAL.

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AUGE Pilot Programme Patients, August 2002-November 2004

Aug-Dec 2002 Jan-Dec 2003 Jan-Nov 2004 Aug 2002-Nov 2004

Operable congenital heart disease 759 1,130 795 2,684 End-stage renal disease treatments and transplants

2,371 1,694 5,666 9,731

Childhood cancer (< 15 years) 413 916 662 1,991 Cervical uterine cancer 0 7,562 8,105 15,667 Palliative care for terminal cancer 0 8,505 12,737 21,242 Acute myocardial infarction 0 0 4,222 4,222 Neural tube defects 0 0 81 81 Breast cancer 0 0 2,227 2,227 Diabetes mellitus type 1 0 0 3,730 3,730 Schizophrenia 0 0 818 818 Testicular cancer (> 15 years) 0 0 426 426 Lymphoma (> 15 years) 0 0 708 708 Cataracts (> 65 years) 0 0 10,512 10,512 Hip replacements (> 65 years) 0 0 1,039 1,039 Palate fissures 0 0 1,428 1,428 Scoliosis (< 25 years) 0 0 304 304 HIV/AIDS 0 0 5,500 5,500 Total 3,543 19,807 58,960 82,310

Source: MINSAL, 2004, using data from FONASA and Health Services.

Private Health Law

This bill reformed the Isapres insurance system. It modified Law 18,933 and came into effect in July 2004. The bill included a separate section, the Isapres‟ Solvency Bill. At a general level, the Free Election System (MLE - Método de Libre Elección) has to be offered by Isapres. Also, Isapres no longer have the power to modify any programmes. In practice, the Superintendency of Health takes control, setting up any agreements with service providers, programming cover and prices, and facilitating other related processes.

Isapres’ Solvency Bill, 2004

Agreements

Isapres‟ net worth must be equal to or greater than 0.3 times its total debt.

Guarantee is equivalent to the debt held with its members and healthcare providers.

The Health Superintendency is given a supervisory and inspectorial role over Isapres.

Transitory regulation: random distribution of the beneficiaries of a bankrupted Isapre amongst other Isapres.

The sale of the member portfolio is permitted.

Source: MINSAL, 2004.

Rights & Duties Law

This bill regulated the rights and processes for a person to receive medical attention. It is important that patients are guaranteed healthcare without discrimination. There is also the right to receive visitors, religious assistance, and any other general information. This bill, in effect in January 2005, empowers patients to take advantage of the available health resources.

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Health Expenditure

More detailed figures on health expenditure in Chile can be found in Tables 12-17 of the accompanying Health Statistics document.

Public sector health spending mainly comprises central government funding for the health sector (which finances hospital services run by the national health service system (SNSS) and primary care services run by the municipalities) and spending under the public health insurance scheme FONASA. Private health expenditure includes spending undertaken by Isapres‟ private health insurance schemes, private patient co-payments and out-of-pocket expenditure. Other spending comes from health services run for the benefit of members of the armed forces, the police and employees of large corporations.

There is a lack of reliable compounded data. According to the World Health Organisation (WHO), health expenditure represented 5.3% of total GDP in 2006. Based on this percentage, Espicom has valued health expenditure at US$6.7 billion in 2006, equal to US$473 per capita. Public sector expenditure represented 52.7% of the total in 2006, equal to US$3.5 billion. After falling from 1998-2002, private health expenditure accounted for 47.3% in 2006, equal to US$3.2 billion. According to WHO, insurance payments represented 54.1% of private health expenditure in 2004.

Healthcare Expenditure, 2006

Expenditure Year

Total health expenditure (US$ billion) 6.7 2006

% Public 52.7 2006

Per capita (US$) 473 2006

As % of GDP 5.3 2006

Source: World Health Organisation (WHO).

Health Expenditure Projections

Taking the latest WHO Health Expenditure as % of GDP rate from 2006, in 2009, health expenditure in Chile is projected to be US$8.1 billion probably rising to around US$11.8 billion by 2014. Per capita rates may range from US$479 in 2009, to US$667 in 2014.

Projected Health Expenditure, 2009-14

2009 2010 2011 2012 2013 2014

Total Health Expenditure (US$ billions) 8.1 8.1 8.8 9.8 10.9 11.8

Per capita (US$) 479 474 509 563 619 667

% of GDP 5.3 5.3 5.3 5.3 5.3 5.3

% Private 22.0 22.0 22.0 22.0 22.0 22.0

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Healthcare Infrastructure

More detailed figures on healthcare infrastructure in Chile can be found in Tables 18-37 of the accompanying Health Statistics document.

From 1998 to 2005, the number of private hospitals and clinics shrank from 194 to 182, whilst public facilities have increased from 210 to 219, this means that the total hospital resources balanced out to a similar figure at the beginning and end of this period (404 hospitals in 1998, 401 hospitals in 2005).

In 2005, there were 401 hospitals. The public sector ran 219 hospitals, equal to 54.6% of the total. Of these, 205 belonged to the SNSS and 14 belonged to other bodies such as the armed forces, police or university. A number of private facilities offering childbirth services closed in 2003, therefore the number of private hospitals & clinics with bed facilities fell to 179 in 2003, and rose slightly to 182 in 2005, equal to the remaining 45.4% of the total.

The number of beds continued its downward trend to 38,072 in 2005, a decrease of 9.7% over 1999. In the public sector, there were 30,433 beds in 2005, equal to 79.9% of the total. Of these, 27,638 beds, equal to 90.8% of the sector, were managed by SNSS. The private sector, which was affected by decreasing membership to Isapres in 2002, also fell to 7,629 beds. In 2005, there were 2.3 beds per thousand population, compared to 2.8 in 1998. Bed occupancy stood at 71.3% in 2004.

In terms of outpatient, ambulatory care, there were nine speciality ambulatory centres, 675 primary care consulting rooms, 124 ambulatory consulting rooms in Type 3 & 4 hospitals and 1,171 rural health posts in 2005.

Hospitals and Beds, 2005-06

Hospitals/Beds Year

Hospitals 401 2005

% Public 54.6 2005

Beds 38,072 2006

Rate/000 pop. 2.3 2006

Source: INE.

Hospital Bed Projections, 2009-2014

2009 2010 2011 2012 2013 2014

Hospital beds (000s) 42.3 42.7 43.1 43.5 43.9 44.4

Private (%) 20.5 20.5 20.5 20.5 20.5 20.5

Rate/000 population 2.5 2.5 2.5 2.5 2.5 2.5

Source: Espicom.

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Inpatient Analysis

In 2005, there were 1,627,743 discharges from public hospitals. The most common cause of discharge was complications of pregnancy, childbirth and the puerperium (19.6%), respiratory diseases (11.7%) and digestive diseases (11.2%). In 2004, there were 1,627,657 discharges (101.1 per 1,000 pop.) of which 1,186,705 were from public hospitals. The average length of stay was recorded at 6.1 days in 2004 compared to 7.1 days in 1996.

In 2005, there were 10.5 million consultations, 12.7 million diagnostic examinations, 6.3 million diagnostic and therapeutic support procedures, 139,748 surgical procedures, 876,195 bed days and 284,669 other procedures.

Healthcare Personnel

More detailed figures on healthcare personnel in Chile can be found in Tables 38-41 of the accompanying Health Statistics document.

In 2007, there were an estimated 21,782 physicians in Chile, equal to 1.3 per thousand population.

Of the 21,100 total doctors accounted for in 2006, an estimated 1,195 (5.7%) were general practitioners compared to 1,442 in 2003 (7.1%) and 7.6% in 1999 when there were 17,853 doctors in total. The highest number and percentage work in internal medicine.

In 2004, there were also 16,359 doctors, 2,675 dentists and 6,325 nurses, 3,744 midwives, 34,496 auxiliary paramedics and 493 pharmacists working in the National Health Service (SNSS).

Physician Projections

Espicom predicts the rate of physicians per 1,000 population in Chile to remain stable up to 2014, which would take the number of physicians to 21,300 by this time.

Projected Number of Physicians, 2009-14 (000s)

Physicians Rate/000

2009 20.3 1.2

2010 20.5 1.2

2011 20.7 1.2

2012 20.9 1.2

2013 21.1 1.2

2014 21.3 1.2

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DIRECTORY

Government Organisations

BCENTRAL (Banco Central de Chile). Web: http://www.bcentral.cl

CENABAST (Central de Abastecimiento del Sistema Nacional del Servicio de Salud). Web: http://www.cenabast.cl

CENIMEF (Centro Nacional de Información de Medicamentos y Farmacovigilancia). Web: http://www.ispch.cl/ctrl/cenimef/cenimef.html

DPI (Departamento de Propiedad Industrial de Chile). Web: http://www.dpi.cl

FONASA (Fondo Nacional de Salud). Web: http://www.fonasa.cl

INE (Instituto Nacional de Estadística ). Web: http://www.ine.cl

Isapres (Institutos Previsionales de Salud). Web: http://www.isapre.cl

ISPCH (Instituto de Salud Pública). Web: http://www.ispch.cl

MINSAL (Ministerio de Salud Pública). Web: http://www.minsal.cl

ProChile. Web: http://www.prochile.cl

SISP (Superintendencia de Isapres). Web: http://www.sisp.cl

Superintendencia de Salud. Web: http://www.superintendenciadesalud.cl

Trade Associations

ASILFA (Asociacion Industrial de Laboratorios Farmacéuticos Chilenos). Web: http://www.asilfa.cl

CANALAB (Cámara Nacional de Laboratorios). Web: http://www.canalab.cl

CIF (Cámara de la Industria Farmacéutica de Chile). Web: http://www.cifchile.com

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Methodology and Sources

How does Espicom define the pharmaceutical market?

Figures for the national pharmaceutical markets are

Espicom estimates, in current US dollars.

Pharmaceuticals include retail prescription and over

the counter medications and hospital only

pharmaceutical products.

The markets have been estimated using a variety of

data, including public and private pharmaceutical

expenditure, domestic production and international

trade.

Domestic production data is sourced from national estimates from governments and industry associations, where possible. It has then been adjusted to take account of re-exporting, stockpiling and differences in the definition of medical production. Where this data is not available from a local source, the information has been estimated by Espicom.

What is the basis for our market projections?

The growth rate given for the market in this report is a real annual average rate for the five year period in question. The rate does take inflation into account, but makes no attempt to predict exchange rate movements. It does not attempt to track year by year fluctuations in growth, but rather provides a projection of the likely size of the market in five years‟ time.

The rate is calculated by looking at a number of factors. These include economic performance, health expenditure levels, provision of medical staff and hospital beds, trends in medicament and raw material import levels, size and performance of domestic manufacturing sector, national healthcare development plans, and international aid projects.

Need more information?

We welcome feedback on all our reports. If you have any further questions or comments about the contents of this report, send them to the editor, at:

[email protected]

SOURCES

World Pharmaceutical Markets Outlook is compiled using, where possible, primary data from local sources. This comprises national Ministries/Departments of Health, statistical bodies and professional associations. Market profiles draw on detailed statistical work by our Healthcare Markets Team. This is undertaken specifically for this report, and also in the course of research for other Espicom services, principally World Pharmaceutical Markets (WPM).

World Pharmaceutical Markets (WPM). Published by Espicom Business Intelligence, Lincoln House, City Fields Way, Tangmere, West Sussex PO20 2FS. http://www.espicom.com

Reference may also be made to a number of secondary sources, and these are listed below.

Economist Intelligence Unit (EIU), http://www.eiu.com

OECD Health Data, http://www.sourceoecd.org

PC-TAS trade data, published by International Trade Centre, UNCTAD/WTO, United Nations

World Bank, http://www.worldbank.org

World Health Statistics, World Health Organisation, Geneva, Switzerland. http://www.who.org