CONPES affirms that in the past 15 years there has been an increase in highly trained human resources, internationally recognized research groups and centres; an increase in the number of alliances between universities, companies, and research and technology development groups and centres; and an increase in the number of companies that have access to the different innovation and technological development support tools.
The CONPES document, however, affirms that the process of development has been slow and insufficient, due to the fact that scientific activity in Colombia (measured in terms of publications, training of highly qualified staff and patents, among other things) and Colombian corporate dynamics lag behind those of other countries in the region. In addition, CONPES points out six major limitations of the system: (i) low levels of company innovation, (ii) weak institutionalization of the system, (iii) shortage of human resources to carry our research and innovation, (iv) lack of focus on strategic areas, and (v) low appropriation of knowledge and regional disparities in terms of scientific and technological capacities, which, altogether, causes (vi) low capacity to generate and use knowledge. This diagnosis agrees with the conclusions of other studies (Vestergaard, 2006).
CONPES seeks to address these issues in the future and has formulated a number of recommendations to this effect, establishing health as one of the strategic areas on which CONPES should focus future activities.
Source: CONPES (2009).
Colombian science and technology indicators show the following: investment in R&D represented 0.161% of GDP in 2009 (equivalent to US$ 995 million), and expenditure on scientific and technological activities (STA) reached 0.391%
(equivalent to US$ 410) (Observatorio Colombiano de Ciencia y Tecnología, 2009). This expenditure on R&D and STA is well below that in other countries in the region.62 Investment in R&D occurs in both the public and private sectors, at 68.05% and 27.61%, respectively.
With regard to the development of new medicines, Law No. 788 of 2002 established specific tax incentives for technological advances in medication and software. The incentives for medicines consist of an exemption for income tax on revenue generated by new medicines by 31 December 2012. This exemption is subject to a few conditions: (i) that they have been developed after 2003; (ii) that they are manufactured in Colombia; (iii) that a patent has been granted on them; and (iv) that they have a high content of national scientific and technological research (at least 80% of staff).
The experience has been satisfactory in relation to software incentives, with 66 exemptions granted between 2003 and November 2008 (DNP, 2010). However, the experience has not been satisfactory in relation to medicines – not a single
62 Brazil: R&D, 1.09%; STA, 1.43%. Mexico: R&D, 0.38%; STA, 0.81%. Argentina: R&D, 0.51%; STA, 0.61% (2008 data) (RICYT, 2010).
exemption has been granted (DNP, 2010), showing that Colombian authorities overestimated the level of development of the domestic pharmaceutical industry when they established the legal requirements to receive tax incentives.
6. Analysis of Tecnoquímicas
Tecnoquímicas is a locally owned pharmaceutical laboratory that has managed to acquire the necessary knowledge to formulate medications from chemical synthesis and to carry out innovations in terms of processes, new formulations, new associations and release systems. However, its R&D laboratory does not have the capacity to research or develop new molecules. It does not have much experience in the development and formulation of biotechnological medications, or the formulation of antineoplastics, immunomodulators or ARVs, but it has the human resources necessary to receive transfer of technology related to these.
One of the key elements of Tecnoquímicas’s relative success is the company’s powerful and efficient marketing policy, and the fact that it possesses what might be considered the best distribution network in Colombia. Tecnoquímicas is a key player in the OTC market and is the fifth-ranking company in the prescription market – but if we consider only generic products, the company ranks first with its MK line. Its portfolio of medications is for the treatment of type I diseases exclusively.
The 1990s posed a challenge for Tecnoquímicas: to change its business model due to the loss of important licenses, such as MSD and SmithKline Beecham.63 The response of Tecnoquímicas was to diversify its range of products (e.g.
nappies/diapers, adhesive bandages, agrochemicals), to invest in its own trademarks, and to launch a generic line. Fifteen years later, the reconverted TECNOQUÍMICAS proved to be even more successful and the new lines of business allowed it to continue growing.
The expansion of the coverage and the consolidation of the SGSSS with universal health coverage allowed the emergence and consolidation of a generic market.
This segment of the market is becoming more competitive, not only because of the competition from locally owned laboratories but also because some multinational innovative laboratories perceive opportunities there. In addition, in the near future, it is predicted that large laboratories from India, China, Canada, Israel and the United States may attempt to enter this market (Abbott, 2007). Although these companies possess large scales of productions, which might threaten Tecnoquímicas’ position, Tecnoquímicas possesses no lesser competitive advantages, such as its large and efficient distribution network, its ability to understand and adapt to the needs of Colombian consumers
63 Although Tecnoquímicas still has some licences, in terms of sales they do not account for more than 7–8% of sales value. Tecnoquímicas’s licensors include Angelini Francesco, Pfizer Italia, Recordati and Sigma Tau (Italy); Astellas Pharma and Takeda (Japan); Diffucap Eurand, Elea and Gador (Argentina); Heber Biotec (Cuba); Uriach and Juste (Spain); Medispray Laboratories Pvt. Ltd. (India); and Nutricia (United States).
and patients, and the fact that the supply of APIs in the global market is quite diversified and is thus very competitive in terms of price and quality.
The fierce competition in the Colombian pharmaceutical market of products without patent or data protection (generics and branded generics) and the importance that Tecnoquímicas has taken on may preclude further growth in the domestic market, as a certain level of stagnation in its sales figures shows.
The company strategy has been to expand outside Colombia and to try to position itself as one of the large generic products laboratories in the region, with a strong presence in the Andean region and an even stronger position in Central America and the Caribbean. This regional expansion will allow Tecnoquímicas to achieve larger scales of production, thus achieving better competitiveness and efficiency, which will in turn become an advantage for it to operate in all the markets.
It is the small Central American markets that Tecnoquímicas perceives as the best prospects for short-term progress, for a couple of reasons: (i) the large international pharmaceutical laboratories do not pay as much attention to these markets as they do to bigger markets; and (ii) cultural similarities might make the exportation of marketing and distribution know-how easier, thus allowing the swift positioning of Tecnoquímicas in the new markets.
The selection of the Salvadorian laboratory Teramed as a stepping stone for the expansion of the company into Central America is an example of Tecnoquímicas’s strategy: to start out in the smaller markets to learn about their distinctive traits, and to move on to larger ones later, and then to purchase large strong local laboratories with a good distribution network. The expansion into Central America is facilitated by the fact that, from a regulatory point of view, Tecnoquímicas’s Colombian plants meet the standards established by health regulatory authorities of the countries in the region.
The expansion into the Brazilian, Mexican and Argentine markets – the most important pharmaceutical markets in the region – is limited by the fact that Tecnoquímicas’s plants do not possess the GMP certification demanded by these countries. If Tecnoquímicas decided to enter these markets, it would have to invest more than what it is currently spending to improve its GMP and other standards and to obtain the required certifications.64 Some Colombian companies are taking steps in that direction and have hired foreign consultants to advise them.65
64 The Brazilian, Mexican and Argentine health regulatory authorities do not recognize INVIMA GMP certifications, which is why these health regulatory authorities must inspect the Colombian plants to authorize the marketing of products manufactured there in the Brazilian, Mexican and Argentine markets, respectively. Colombian businesspeople complain that the Argentine and Brazilian health regulatory authorities delay sending the inspectors, which prevents export to these markets. On the other hand, Colombian businesspeople claim that INVIMA carries out these inspections without delay, which is why Argentine and Brazilian generic laboratories can sell their products on the Colombian market without regulatory obstacles – the reverse is never the case. See also Abbott (2007).
65 Lafrancol is analysing the launch of some products on the Argentine and United States markets, and has hired Argentine and Canadian consultants to give advice on GMPs requested by the Argentine Administración Nacional de Medicamentos, Alimentos y Tecnología Médica (Drugs, Food and Medical Devices National Administration; ANMAT) and the United States Food and Drug Administration (FDA), respectively.
The involvement of the IFC in the company as a shareholder meant that there was fresh money to finance the expansion of Tecnoquímicas. This new shareholder increased Tecnoquímicas’s assets by US$ 25 million. IFC also gave Tecnoquímicas a loan of US$ 20 million (IFC, 2010), under such terms and conditions as had never been heard of in the Colombian market. In addition, IFC and Tecnoquímicas agreed that the former would provide a long-term financing package, comprising equity/quasi-equity and a loan for a total of US$ 100 million. At the time of writing, Tecnoquímicas has received US$ 45 million from IFC, which has been used to acquire the Salvadorian laboratory Teramed, to finance working capital, and to improve manufacturing practices and quality assurance.
The involvement of IFC can be valued not only in financial terms but also in terms of corporate organization. Tecnoquímicas opened itself up to corporate investors, albeit one with a public mandate, for the first time. Given the fact that this had been a family company since its foundation, the engagement of a corporate investor has had a very positive impact in terms of strengthening good practices of corporate governance. The participation of IFC can also represent a first step towards a possible opening of the company to the stock market by either going public or issuing bonds. IFC might also fulfil a relevant role to catalyse synergistic linkage opportunities for the company with pharmaceutical companies in other developing countries, such as China and India (IFC, 2008).
It is expected that the alliances with other companies, universities and research centres that Tecnoquímicas has patiently built over the years will turn into strategic assets for the development of the company in the future.
The areas of marketing and R&D have been the company’s powerhouse. In R&D, a key role is played by the chemistry-pharmacy professionals. ICESI is meant to play a very important role in the training of the future professionals who will join the Tecnoquímicas ranks to fill positions in the R&D laboratory and in the quality control centre. In addition, close ties between ICESI and Tecnoquímicas will have a beneficial effect on curriculum design and training of professionals, since the training received will be closer to the needs and realities of the Colombian pharmaceutical laboratory.
One of the topics being discussed in Colombia, and in all of Latin America, is the issue of bioequivalence tests. There is considerable pressure from multinational companies to demand bioequivalence in vivo tests for all medications.
Colombia does not possess a large infrastructure or the human resources to carry out these studies on a large scale. If INVIMA decides to broaden the list of medications for which bioequivalence tests in vivo are required, the strengthening of Tecnoquímicas’s ties with local R&D centres, which will provide Tecnoquímicas with extra human resources and infrastructure to carry out those tests, will be vital for Tecnoquímicas in its search for new markets.
The history of Tecnoquímicas shows that the expansion of the company into markets that were not familiar to it was achieved, in general, through joint
ventures with partners experienced in the new markets; such was the case of Limor and the anti-tick vaccine. One of the possible expansion scenarios for Tecnoquímicas is to become a manufacturer of vaccines for humans. This is a market with high potential not only in Colombia but also elsewhere in Latin America, since there are very few such factories in the region, as the H1N1 pandemic showed. Managing biological products is more complex than formulating medications obtained through chemical synthesis, and the products present other challenges. The joint venture with Limor was successful, and this company might be an ideal partner to penetrate the human vaccines market.
It must be highlighted that the CIDEPRO initiative is perhaps the most important project in Colombia in terms of finding solutions for neglected diseases that affect this country in particular. In Colombia there have not been many successful private–public associations with the aim of generating knowledge and transferring it in the form of technology to the private sector.
Although Tecnoquímicas does not have a direct responsibility in CIDEPRO’s R&D tasks, its financial support is a key factor. Even though it is premature to predict the results of the different projects that CIDEPRO has under way, Tecnoquímicas could be one of the beneficiaries of the possible transfer of technology for manufacturing medications, vaccines or diagnostic tests that the centre is working on.