Steady progress has been made in the expansion and modernisation of Mexico’s health care sector in recent years, though there remains room for improvement. According to the 2017 National Survey of Employees and Social Security published by Mexico’s National Institute of Statistics and Geography, the percentage of the population covered by health services increased from 59.9% in 2009 to 82.7% in 2017. This was partly due to the introduction of the People’s Health Insurance Scheme (Seguro Popular de Salud, SPS), which provides informal workers access to free health care.
However, an estimated 20m-30m Mexicans still do not have access to adequate care, a provision gap the current administration of President Andrés Manuel López Obrador is keen to address. Following an election victory in July 2018, the government placed an emphasis on providing universal coverage to the 126m-strong population. The National Health Plan (Plan Nacional de Salud, PNS) 2019-24 aims to strengthen infrastructure, weed out corruption, and improve the access of pharmaceuticals and care to the lowest-income groups in society. Although, some sector stakeholders have called into question just how such ambitious goals can be accomplished given the increasing strain on public coffers.
Structure
In 2019 Numbeo, a statistical website that compiles data from contributors, ranked Mexico as having the third-best health care system in Latin America. However, it is highly fragmented, and public health care is divided across several institutions. Many people are covered by more than one service, making actual figures difficult to estimate accurately. The largest public provider, the Mexican Institute of Social Security (Instituto Mexicano de Seguridad Social, IMSS) provides health insurance for formal employees through employer-employee contributions and government funding. In 2018 an estimated 80m citizens were covered by the IMSS, representing around six in 10 Mexicans. Meanwhile, over 13.3m public sector employees are covered by the Institute of Social Security and Services for Government Employees. Additionally, state-owned oil company Petróleos Mexicanos and the Mexican armed forces provide coverage to their employees.
General Indicators
The country has performed well in a range of different health criteria. Life expectancy over the last two decades increased from 69.6 years in 1987 to 77.9 years in 2018, according to the World Bank. Equally, the mortality rate per 1000 live births dropped from 64.7 in 1990 to 29.4 in 2017. The maternal mortality rate has decreased by 60% over the last 25 years. In 2018 the Ministry of Health (Secretaría de Salud, SDS) estimated the maternal mortality rate at 35.4 per 100,000 women, significantly better than the Latin American average of 67 deaths per 100,000 women.
The latest figures show that there were 4629 hospitals in Mexico in 2015, with around one-third of these state-run. That same year there were 1.5 hospital beds per 1000 people. To compare, the OECD average stands at 2.7 hospital bed per 1000 inhabitants. Health and social care workers made up 9.36 out of every 1000 jobs in Mexico in 2017. There were over 297,000 registered physicians and 355,000 nurses employed that year, equating to 2.4 doctors and 2.9 nurses for every 1000 people. This places Mexico in the bottom 10 of all OECD countries for doctor-to-patient ratio, and below the OECD average of 9 nurses per 1000 patients. In July 2019 the government announced a new plan to address the shortage of doctors by increasing the number of medical students through enhanced coordination with universities and medical schools. As it stands, Mexico needs 123,000 more doctors and 255,000 more nurses to be on par with global standards.
Spending
According to the latest figures from the SDS, public spending on health care reached MXN622.9bn ($32.2bn) in 2017, or around 2.8% of GDP, up from MXN621.4 ($32.1bn, 2.9% of GDP), the previous year. Total spending on health care amounted to MXN1.21trn ($62.6bn) in 2017, up from MXN1.19trn ($61.5bn), representing 5.5% of GDP both years. The average OECD total spend stood at 9%, ranging from 4.3% in Turkey to 17.2% in the US.
Health care expenditure has risen steadily on a per capita basis, from a respective $1066 and $1105 in 2016 and 2017, to $1138 in 2018, however, this is well below the OECD average of $3992 per person. From the total budget, around 13%, or MXN79.4bn ($4.1bn), is spent on medicines. This is a reduction of around 10.5% on the 2013 budget, a measure that has been repeatedly criticised in the local media.
The sector could face further strain as President López Obrador’s austerity measures mean additional budget cuts. In May 2019 Germán Martínez, the director-general of the IMSS, stepped down from his position, citing cuts in the health care budget as a primary factor. “Excessive savings and controls in health spending is inhumane,” Martínez stated in his public resignation letter. The uncertainty surrounding the impact that budget cuts will have was echoed by several experts. “The government is thinking primarily about savings, not about patient outcomes,” Alexandro Arias, the director of business development at Deloitte México, told OBG.
Disease Burden
Adding to challenges, rates of non-communicable diseases (NCDs) continue to increase as doctors report more cases of obesity, diabetes, cardiovascular diseases and cancer. According to data from the IMSS, NCDs accounted for an estimated 80% of deaths in Mexico in 2016, compared to a world average of 71%. Additionally, around 4.2m Mexicans suffered from diabetes in 2018, the second-largest cause of death after cardiovascular diseases, equating to three in every 20 people. The IMSS uses significant time and funds to combat NCDs. Around 15 people per hour are diagnosed with diabetes countrywide, placing extra burden on the system and costing 2.5% of GDP.
The SDS attributes 90% of all Type 2 diabetes cases in Mexico to obesity, a rapidly growing health problem in the country. A survey conducted in 2016 by the National Institute of Public Health found that 72.5% of adults over the age of 20 were overweight or obese, up from 71.2% in 2012. Likewise, three in every 10 children between the ages of five and 11 fell into this category. The obesity trend is similar across both rural and urban populations, and is attributed principally to a lack of physical activity and poor diets. Adding to this phenomenon, Mexico is the biggest consumer of sugary drinks in the world, leading the government to introduce a sugar tax in 2016 to curb the trend. This campaign was supported by the introduction of strict nutritional information standards and changes to the advertising of unhealthy foods. Nevertheless, the SDS predicts that obesity-related illnesses will cost the country approximately MXN272bn ($14.1bn) by 2023.
Reproductive Health
Despite progress in maternal and infant health in the past 25 years, improving reproductive health presents a pertinent challenge. “There are three key factors that need to be addressed with regard to reproductive health in Mexico,” Anne Engerant, senior vice-president of Latin American operations at the UK’s Reckitt Benckiser Health, told OBG. “We should boost accessibility to health products, increase the quality of sexual and reproductive education programmes, and work to change cultural misconceptions. For instance, many women continue to believe they will be more empowered in the family if they get pregnant.”
There also remains a urban-rural divide in women’s public health care coverage. Indigenous communities have a maternal death rate of up to three times higher than the national average. Indeed, states with largest indigenous populations – including Aguascalientes, Chiapas, Chihuahua, Guanajuato, Michoacán, Oaxaca, Quintana Roo, Sinaloa and Tamaulipas – have the highest maternal death rates.
Public Health Sector
One of the biggest obstacles to public health care delivery is the disparity between urban and rural access. At present around 5m Mexicans have limited access to care, and approximately 2% of the population lives more than two hours away from a medical facility. This is especially true for indigenous communities, many of whom do not speak Spanish and live in hard-to-reach areas. However, improvements to the public system have been made with increased public coverage under the SPS scheme that was implemented in 2004. Since its introduction, medical costs that previously fell on the individual are now covered by the state. According to a 2016 OECD survey, the percentage of the population that is subject to high-impact medical expenses was reduced from 3.3% to 0.8%. However, the public system is often criticised for being fragmented, overly complex and inefficient. In the absence of a nationwide digital health care system, patients are often registered in more than one service and may have treatments in multiple hospitals or care centres with little coordination across the different platforms. This is not only time consuming for both the patient and medical staff, but also wastes crucial public resources.
Gabriela Dávila, regional director of clinical research for Latin America at US pharmaceutical company Pfizer, told OBG that greater digitisation of the national registry could enhance coordination across different public services, while also saving money and time, and ensuring that patient outcomes are at the centre of focus. “Having just one health system would benefit the overall population and simplify many of the processes,” she added.
Reform
The PNS 2019-24 is aiming to address current issues in public provision by federalising the state health system, building a culture of health education and preventable disease management, and strengthening the national pharmaceutical industry through innovative research and development. Moving away from the response-based treatment of existing diseases towards better preventive mechanisms could save the Mexican health care system a sizeable amount of money every year. But as the public health sector in Mexico is the largest in Latin America, this presents a formidable task.
“In light of structural challenges, such as an ageing population and the increase of cardiovascular diseases, Mexico has no choice but to move towards a universal health coverage system,” Ana Longoria, CEO and country president of pharmaceutical company Novartis Mexico, told OBG. “This should begin by creating more innovative models that more accurately measure outcomes, leading to more effectively targeted treatments,” she added.
However, budget cuts in the sector are expected to make this increasingly difficult. Dávila added that there remains a need for increased state funding, firstly in response to annual inflation but also to sustain institutions and contribute to clinical research, modernisation and training. To date, the government has yet to deliver a comprehensive strategy to achieve greater coverage, and questions remain as to how ambitious reforms under the PNS 2019-23 will come to fruition as budget cuts loom.
In addition to increased government funding, Fabián Bifaretti, CEO of Sports World, a Mexican company dedicated to the management of fitness clubs, told OBG that the development of the sector will also depend on preventive campaigns. “To fully develop the health industry the government needs to promote communication and awareness in schools about exercise and healthy habits, as well as improve the fiscal framework for companies in the sector and reduce the red tape required to open health-related businesses,” he said. “An increase in the number of market players will boost and diversify the offering of services and facilities.”
Private Health Sector
Many Mexicans are turning to the private sector for treatment, potentially due to gaps in the public system. The public-private spending divide is relatively similar, with the latest figures from the SDS showing that private spending accounted for 47% of the total in 2016, amounting to around MXN535.5bn ($27.7bn). Much of private health care spending is made up of out-of-pocket payments, which equates to approximately 4% of household expenditure. Not surprisingly, private hospitals outnumber public facilities almost two to one. In 2016 there were 28.6 private facilities compared to 11.4 public institutions for every 1m inhabitants – the OECD’s highest private-to-public ratio.
Insurance
There remains a clear need to improve the insurance culture in the country to achieve greater levels of penetration across different age and income groups. In 2018 the insurance penetration rate stood at 2.3% of GDP, compared with the OECD average of 8.9%. Private sector insurance covers around 8% of the population, the majority of whom are over the age of 40. It is estimated that Mexican families covered under private insurance spend an average of MXN35,000 ($1810) per year for coverage. However, in 2018 the minimum wage stood at MXN102 ($5.30) per day, meaning access remains out of reach for a significant portion of the population. Efforts to expand services will likely open space for new products aimed at a broader demographic, such as e-insurance and micro-insurance.
Medical Devices
Mexico is a market leader in medical device production, ranking first in Latin America and eighth worldwide, with over 40 plants in the country, according to the Mexican Association of Innovative Industries of Medical Devices. As of mid-2019, there were over 130,000 people employed in the segment, with 30 plants nationwide contributing 0.21% to GDP for a value of $4.9bn. On the demand side, innovative technologies have the potential to boost efficiency and reduce treatment costs over the long term, although price constraints remain an issue for the public sector. While some markets have a clear distinction between public and private hospitals when it comes to the quality of medical devices, in Mexico the picture is more complicated; government-run hospitals are often equipped with some of the best medical staff and devices available, according to sector stakeholders. However, because of the government’s austerity programme, budgets in the public sector have fallen. This could open the door to more integrated services, given that private sector operators are sometimes able to offer the same services more efficiently and at a lower cost.
Pharmaceuticals
With significant investment and a high number of facilities across the country, the pharmaceutical industry is a key contributor to the sector. Both manufacturing and research and development in the private sector have expanded in recent years. As such, pharmaceutical manufacturing comprised 1.4% of Mexico’s GDP in 2017. Multinationals are attracted to the country’s low price production costs, its proximity to the US market, and its openness to innovative original and biosimilar drugs. A number of pharmaceutical multinationals have already set up in Mexico, including Pfizer, US firm Merck and Germany’s Boehringer Ingelheim.
Companies have become especially interested in the Mexican market as trade tensions between the US and China showed no signs of abating in 2019. Ratified by Mexico in June 2019, the US-Mexico-Canada Agreement (USMCA) will provide pharmaceutical firms with the permission needed to work across Canadian, US and Mexican borders, and allow them to evade import taxes imposed on the US market.
Concerns over intellectual property rights have delayed the ratification process in the US, as lawmakers criticise the deal for preventing generic equivalents from reaching the market for 10 years. Under the current framework, medicine prices across the three countries could increase, causing public spending to go up and further impeding access to care. Barring further complications, however, section of the USMCA are expected to be amended, and the deal ratified by the US Senate and the Canadian Parliament in coming months.
On the domestic front, expansion is hindered by the Federal Commission for Protection against Sanitary Risks (Comisión Federal para la Protección contra Riesgos Sanitarios, COFEPRlS). Recognised formally by the World Health Organisation in 2012, COFEPRIS is the regulatory body tasked with setting standards in procedures, quality and transparency in Mexico. However, the lack of a digital registry means that it is slow compared to regional regulators.
Two of the top concerns cited by sector stakeholders as hindering the growth of the pharmaceutical industry are insufficient patent protections and price control measures. Some pointed to other examples in Latin America as possible sources of policy inspiration for Mexico, as it looks to carry out the PNS 2019-24 sector roadmap. When Colombia introduced drug price controls, for example, average rates reportedly dropped by up to 60% or 70%.
Stakeholders have also reported that COFEPRIS makes clinical errors when inputting important data, leading to backlogs and delays. “When we send a document, someone at COFEPRIS will copy and type it by hand. This document has several codes, numbers and addresses, meaning that the margin for error is high,” Germán García, director-general at UK medical equipment manufacturer Smith & Nephew, told OBG. “If we could do an electronic transfer of information, these errors would be reduced.”
The public procurement processes are rapidly changing under the new government, creating sweeping changes to the industry’s structure. “Mexico needs a strong and sound regulatory framework for foreign pharmaceutical products so that the country can avoid becoming a solely price-sensitive market,”Fabiola Trigueros, CEO of medical IT firm Smart Scale told OBG. “Quality and compliance should be the backbone of our system.”
Outlook
Although the country is moving closer to achieving its ambitious goal of universal health insurance coverage for all Mexican citizens, some obstacles still remain. The public health sector will require greater investment to meet key objectives set out in the PNS 2019-24, while the question of how to address the rural-urban divide remains. Neither of these problems will likely be helped through increased budget cuts at the national level. The pharmaceutical and medical devices industries remain potential bright spots as multinational companies move their practices to Mexico to avoid import duties. Meanwhile, efforts to boost the private insurance penetration rate presents an investment opportunity that could help strengthen the industry.
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