Regulatory agencies in charge of protecting the population against health risks have a large burden divided, mainly, between two large areas. The first is a direct consequence of the mission, that is, to effectively protect the population against health risks across the diverse industrial sectors and activities which might generate risks.
This implies that the State must guarantee the safety of all the products used and consumed by the population. The second is an indirect consequence of the constant intervention of the regulatory agency in day to day trading activities of the economy as a whole. When this intervention by the regulatory agency distorts trade by generating additional transaction costs to economic agents, the normal flow of the market is disrupted and, hence, the growth rate of the economy is reduced.
In the past, when the supply chain was entirely located domestically it was relatively simple for regulators to establish traceability processes linking the diverse production units involved in the manufacturing activities. Nowadays, the production setup of firms requires constant and up-to-date communication between regulatory agencies as a consequence of the granularity in the necessary activities to place a finished pharmaceutical product at the point of sale ready for consumption.
The concept of reliance has several degrees spanning simple communication among regulatory agencies at one end of the spectrum to complete mutual recognition of each other’s processes on the other.
Unfortunately, there is not a one size fits all recipe to achieve the right balance and coordination needed for an appropriate and comfortable level of regulation with reliance. The longer it takes the regulatory agency to reach this desired state at the frontier; there will be opportunity costs that are to be realised not only for producers, but also for consumers. At the end of the day, those flexibilities that are not implemented may manifest themselves in diverse constraints, thus affecting the price of a product.
Mexico´s experience could be an important case study on regulatory reform and administrative modernisation which has generated considerable benefits to all who could be classified as users of the regulatory agency. Starting from a serious problem of administrative impasse during 2009-2010 a bold modernisation plan was implemented with the objective of creating a world class regulatory agency operating under the best international regulatory practices.
During the process of updating, the agency has been adjusting to new regulatory and production environments which required creative thinking and quick implementation of action plans. These strategies are geared towards achieving economic efficiencies swiftly without losing sight that protecting the population against health risks is the primal concern.
The modernisation plan consisted of four pillars which interacted with each other. The first two pillars were highly correlated as they consisted of having a solid regulatory agency operating with a robust process to grant marketing authorisations to products that are safe, efficacious, and of high quality.
The third and four pillars were also highly correlated among themselves and they consisted of eliminating barriers to market entry and elevating the regulatory standards to adopt best international regulatory practices and harmonisation to eliminate unnecessary transactional costs for both Mexican product imports and exports.. It is clear that a health regulator´s first responsibility is not to drive the economy and sometimes it is portrayed as a necessary cost.
Mexico has accomplished the aforementioned benefits by relying on international best practices which have been scrutinised to avoid gaps. Moreover, they are constantly updated to account for innovation in manufacturing process.
In 2012, Mexico unilaterally decided to implement accelerated pathways for innovative products, new molecules, which have received marketing authorisation by reference regulatory agencies. This accelerated pathway allows the Mexican consumer to be the beneficiary of the newest and best products which are now able to cure diseases that, in the past, were treated with products that were only able to provide temporary relief. Recall, that economic research has found that the introduction of new medicines increases annual income by 0.75 to 1 per cent yearly; they increase life expectancy, and increase the quality of life of the individual.
The third example on reliance is exemplified by outreach activities performed by COFEPRIS. With the aid of Panamerican Health Organisation, Mexico has engaged in training activities through instruments that have allowed countries which do not have the same regulatory standards to implement rapid access pathways for generics which have been already approved by Mexico.
There is then a multiplier effect, as COFEPRIS is able to authorise innovative products which later on can be quickly authorised and found in countries located in Central and South America that do not have the same regulatory strength as COFEPRIS. This has a double objective; in the short run the supply of products increases immediately lowering domestic prices and in the long run, through training activities, the domestic regulator can strengthen its regulatory capacity and focus on necessary activities and rely on other regulators for activities which are not a priority as they build technical capacity.
These examples have put forth the benefits that reliance and increased knowledge of the production process may bring to a health regulator and the economy. Achieving the ¨right interaction¨ between the activities of the regulatory agency and the activities of the economic agents to maximise efficiency should be a priority.
Going from a necessary cost to a valuable asset, especially when the interaction of the health regulator with the economic flow is large, can certainly unlock efficiency benefits which can be exploited not only by firms, but more importantly by the consumer. The guiding principle in the regulatory reform plan implemented in COFEPRIS has always been to benefit the consumer by increasing access, while additionally generating opportunity areas to firms.
Fortunately, this plan has shown high payoffs both to consumers as retail prices have fallen on an average by 60 per cent for certain products, the growth rate of the industry has reached two digits, during the period 2011-2014 it has grown by 13.2 per cent, and exports have increased by 30 per cent during the same period. There are seven countries which rely, at varying degrees, on the marketing authorisations issued by Mexico thus expect this double digit growth rate for the industry and for exports to continue.
About the Author
Ricardo H Cavazos Cepeda is the Chief of Staff at the Federal Commission for the Protection against Sanitary Risks (COFEPRIS) since July of 2014. Before being Chief of Staff he was Director General of International Affairs from July 2011 to June 2014 in the same institution.