LatAm’s pharma logistics market: A lucrative opportunity for operators

The pharmaceutical industry in Latin America, estimated at US$136.5 billion in 2024, is expected to grow at a CAGR of 9.7% until 2026, faster than any other region globally.^{1 2} The industry is driven by the increasing demand for healthcare services the expansion of the middle class, and the development of innovative products such as gene therapies and biologics.³

LATAM’s four key markets are Mexico, Brazil, Argentina, and Colombia. Pharmaceutical sales for these key markets are expected to reach US$90 billion in 2024 and grow at 3.7% annually (in dollar terms) to 2027, reaching a total value of US$101bn.

BMI, a risk consultancy, foresees a robust expansion of the pharmaceutical sector, driven primarily by the increasing prevalence of chronic diseases. This upsurge in chronic conditions due to increased urbanization, increased consumption of processed foods, lack of exercise, and an aging population is expected to elevate the demand for innovative pharmaceutical products.

Along this path, pharmaceutical companies will likely confront several challenges, including implementing cost-control measures that will result in more stringent pricing regulations and a potential preference for generic drugs. Additionally, macroeconomic factors such as rising inflation and ongoing political uncertainty are anticipated to continuously influence policy decisions and the overall operational landscape of the industry.

In the region, local and multinational players co-exist:

The pharmaceutical industry places exacting demands on logistics. It requires precise supply chain management to ensure the seamless flow of temperature-sensitive medications while maintaining rigorous compliance with Good Distribution Practices (GDP) and industry-specific regulations. Navigating complex customs and trade regulations is essential due to the international nature of pharmaceutical trade. Security measures, such as GPS tracking and tamper-evident packaging, are crucial to protect pharmaceutical shipments from theft or tampering. The pharmaceutical industry’s logistics requirements revolve around product integrity, regulatory compliance, and security, making it a specialized and exacting field within the broader logistics landscape.

AMI estimates that the pharma industry’s transportation spending in the region will be worth US$13.7 billion by 2024 and continue to grow steadily.

The product sold in the pharmacy must have the same quality that it had when it exit the factory.

Mexico’s: a strategic opportunity for operators

The pharmaceutical industry in Mexico represents close to 5% of GDP and has grown at a CAGR of 6.68% over 2014-2022.⁴ Mexico is the region’s largest exporter, with more than 900 companies actively operating, split into two large groups. The first group comprises Big Pharma, the world’s largest publicly traded pharmaceutical companies, while the second group comprises laboratories born out of Mexican funding. The former are grouped in the National Chamber of the Pharmaceutical Industry (Canifarma), founded in 1946; the latter, in the Mexican Association of Pharmaceutical Laboratories (Amelaf), whose creation dates to 2003.

The Mexican market strongly favors branded products instead of generic alternatives, rendering it an attractive destination for licensing novel pharmaceuticals. Mexico’s proximity to the US further amplifies this attractiveness, the world’s largest pharmaceutical market. As a result, many healthcare professionals and patients in Mexico remain well-informed about the latest therapeutic advancements and express a keen interest in obtaining access to them.

Spending on transportation represents close to 4% of the industry’s spending on inputs.⁵ The pharmaceutical industry relies on logistics to distribute products throughout Mexico, export to markets such as the US, and import critical raw materials. AMI estimates transportation spending at US$2.65 billion in 2023, growing 2% annually through 2027.

Key players

Brazil: a major player driven by local production

Brazil boasts the second-largest pharmaceutical market in LATAM. Although it remains a relatively untapped opportunity for major pharmaceutical manufacturing players, local companies dominate the competitive landscape and successfully manufacture medicines catering to local demand. This domestic dominance is set to expand, thanks to favorable government protectionist policies and funding opportunities encouraging local manufacturing, especially for the “copies” market. In addition, Brazil has made significant progress in enhancing its infrastructure, scientific capabilities, and technological resources, establishing a sustainable framework for drug discovery and research initiatives.

Over the past decade, Brazil’s pharmaceutical industry has experienced substantial growth, driven by rising household incomes, positioning the nation to serve other emerging markets. Brazil’s healthcare system, Sistema Único de Saúde (SUS), is the largest government-run public healthcare system globally in terms of beneficiaries. It operates on a decentralized, universal model, financed through taxes and contributions from federal, state, and municipal governments. Administration and care delivery are primarily managed at the state and municipal levels.

ANVISA (National Health Surveillance Agency) oversees the protection of Brazilian public health by regulating products and services subject to health standards. ANVISA has authority over areas where medicines are produced, sold, or distributed, as well as healthcare service facilities. Regarding the distribution and transportation of drugs, ANVISA enforces stringent requirements. These include storage, distribution, and transportation protocols; management of reverse logistics; continuous monitoring of transport; and vehicle hygiene and maintenance. AMI estimates transportation spending at US$3.21 billion in 2023, growing at 6% annually through 2027.

Key players

Argentina: a promising market plagued by economic issues

Argentina’s pharmaceutical industry is one of the country’s best-performing industries, employing over 43,000 people directly and around 120,000 indirectly. As a large manufacturer of pharmaceuticals with both local and foreign firms operating, Argentina exports some of its production to other countries in the region. Argentina still imports drugs, especially biopharmaceuticals. Roughly, imports represent 30% of revenues.⁶

The industry got off to a low start in 2023, with year-on-year sales falling about 20% in real terms, and faces challenges such as economic instability, high inflation, and low investment in R&D. However, pharmaceutical sales are forecast to grow at a CAGR of 3.8% in dollar terms. Currency weakness will pressure the prices of imported pharmaceuticals and active pharmaceutical ingredients (APIs) needed to produce medicines.

The structure of the pharmaceutical industry means Argentina is a big consumer of logistics services. Manufacturers must import APIs from abroad and export their end products. Retailers and distributors must import end products and distribute them nationwide. A report by the Argentine pharmaceutical companies CILFA association says that the industry’s distribution network is strong, reaching every corner of the country. However, there is an opportunity to reduce transport and logistics costs in the context of high financing costs and rampant inflation.⁷ AMI estimates transportation spending at US$390 million in 2023, growing at 3% annually through 2027.

Key players

Colombia: a growing market with significant potential

Colombia’s pharmaceutical industry is another sizeable market, representing around 1.5% of GDP and employing over 47,000 people. Colombia manufactures drugs for the domestic market but relies heavily on imports; local drugs represent 80% of all units sold but only represent 33% of revenues.⁸

In June 2023, INVIMA, the food and drugs authority, published a list in which, out of 214 medicines included, 36 were out of stock. Drug shortages in Colombia are mainly due to increased demand, restrictions in contracting between EPS (state health providers) and pharmaceutical managers, incomplete or untimely deliveries, bureaucratic factors, production problems, and lack of timely information on unsatisfied demand and available supply, aggravated by the COVID-19 pandemic.⁹

Growth prospects are good despite the recent shortage of critical pharmaceuticals; the industry is now 35% more productive, according to ASCIF, the local trade association. Four state-of-the-art production plants are currently under construction. The most relevant is a new vaccine production plant in Bogota, BogotaBio, which China’s Sinovac will operate. These facilities will manufacture medicines such as tablets, syrups, liquids, and injectables, enabling the company to expand its supply and further support the country’s health needs.¹⁰

AMI estimates transportation spending at US$240 million in 2023, growing 8% annually through 2027.

Key players

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Sources

1. “The outlook for the Latin American pharmaceutical market following the impact of the COVID-19 pandemic”, IQVIA, May 2022 ↩︎
2. “What you need to know about Latin American pharmaceutical markets and access pathways for 2023 and beyond”, Precision Advisors, February 2023 ↩︎
3. “Korean pharmaceuticals target Latin America market”, Pulse News, September 2023 ↩︎
4. “Contribución económica de la industria farmacéutica en México”, KPMG, April 2022 ↩︎
5. “Conociendo la industria farmacéutica”, INEGI, June 2022 ↩︎
6. “Industria farmacéutica en la Argentina”, INDEC, March 2023 ↩︎
7. “Escenario y perspectivas de la industria farmaceútica nacional 2021-2025, CILFA, 2021 ↩︎
8. “Farmacéuticas de Colombia piden política para autonomía sanitaria”, Portafolio, November 2022 ↩︎
9. “¿Cómo entender la escasez de medicamentos en Colombia?”, Bancolombia, July 2023 ↩︎
10. “El país aumentó su productividad en el sector farmacéutico a 35% de su capacidad”, La República, June 2023 ↩︎

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