Today, we started the day off by touring Andrómaco, a highly renowned Argentinian pharmaceutical laboratory that is known for their topical medical and cosmetic creams and ointments. Although I am not a business major, I still really enjoyed learning about the supply chain because it will directly impact my future work as a nurse. Andrómaco is a major stakeholder in the pharmaceutical industry, as it has a 30% share in the cream and ointment market.
However, despite their strong market presence, Andrómaco, and the pharmaceutical industry at large, is facing challenges that affect their revenue and company potential, and I think the country’s unstable economic situation and high inflation rate is the main cause for most of them. The high inflation rate devalues the peso and makes importing materials and equipment necessary to produce their products more costly for the company and reduces profits. This is significant because Andrómaco only has a 10% profit margin to begin with and must import most of their inputs and equipment from other countries. Additionally stifling their revenue, the Argentinian government is decreasing the industry’s profit margin with legislation that makes pharmaceutical products more affordable for the average consumer, which is a good healthcare initiative, but it is harmful to pharma.
Andrómaco, and other Argentinian pharmaceutical companies, are not able to offset these losses by exporting their goods because the standards set by ANMAT, the Argentinian equivalent to the FDA, sets lower standards than foreign industries. So, Argentinian pharmacy labs have limited markets since their products usually can’t be distributed in many other countries.
Andrómaco does not undertake research, and has very little product development activity (since it is income-based), so they only manufacture. We’ve learned a lot about innovation in healthcare in past lectures and hospital visits, but Andrómaco is unable to participate in this research and innovation, so they miss out on an opportunity to recoup some financial losses due to inflation, and this makes it hard to compete with other companies that have the funds to research and develop new and improved products. However, Andrómaco is attempting to innovate in other ways. For example, on the production line, one process used to take 5 hours, but they were able to cut it down to 2.5 and are aiming to cut it further down to 1 hour to save time and money.
The part that interested me most during the visit was when the guide spoke about the distribution of pharmaceuticals to public hospitals. Although the government operates public hospitals through the Ministry of Health, they do not subsidize the companies that produce pharmaceuticals for them. So, oftentimes those companies will cut corners and produce cheaper, less potent, lower quality goods to maximize profits. This leads to a poverty and access problem and a healthcare disparity based on socioeconomic status and ability to pay for care since those that rely on public hospitals receive poorer medications. Also because of this, pharmaceutical companies compete end up competing heavily with each other for whatever market power they can get, which I imagine is a potent price control mechanism.
Tomorrow, we will be hearing a lecture from a representative of the Ministry of Health, as well as visiting two primary health centers and a palliative care facility, and I am excited to see what they have to say about the economy’s influence on their operations as well.
