Latest news on the Pharmaceutical and Cosmetic Industries

The Pharmaceutical and Cosmetic industries have experienced significant growth in recent years. According to ANDI, since 2000, the cosmetics sector has experienced significant growth in terms of production, sales, and foreign trade.

Who Regulates the Pharmaceutical Industry in Latin America?

The Latin American Association of Pharmaceutical Industries (ALIFAR) is the entity that brings together nationally owned companies in the pharmaceutical industry in Latin American countries.

ALIFAR is a private, non-profit international association, completely independent of governments and intergovernmental organizations. It is composed of and governed by chambers, associations, and companies in the pharmaceutical sector with national capital in Latin America.

Alifar currently represents more than 400 companies from 12 Latin American countries, representing more than 90% of the regional pharmaceutical market.

Pharmaceutical Industry and the Cosmetics Sector in Chile

Competition in the Chilean pharmacy market has recently been questioned following the price-fixing case involving the country’s three largest pharmacy chains.

Distributing Pharmacies

Pharmacies act as distributors and marketers of products manufactured by pharmaceutical companies.

In Chile, by employment, there are three major chains:

Cruz Verde
Ahumada
Salcobrand

These pharmacies tend to be concentrated in regions with higher populations and incomes, with approximately 40% of their locations.

Price-based competition analysis assumes that companies compete according to the Bertrand model, in which the key decision variable is the selling price and the final equilibrium depends on the firms’ cost structure.

The location dimension (the decision to open a new store and where to open it) allows us to consider other competitive structures in which the company’s strategic decisions have a lesser degree of reversibility. It is relevant because it allows us to analyze other medium- and long-term strategies.

What should we expect from a pharmacy’s distribution?

First, market size is expected to positively influence the number of stores; that is, places with a larger population should have a greater number of pharmacies.

Jointly, there should be more stores in areas with greater demand for these products (for example, higher disease burdens).

Second, areas with fewer budget constraints should have a greater number of stores.

Third, the costs of opening a new store (in a given geographic location) should be a relevant variable to explain the differences in the number of stores across regions.

Finally, transportation costs are a combination of the price of transportation (time plus direct costs) and the distances traveled. In this sense, a greater number of stores would be expected in locations with higher transportation costs (public transportation prices, fuel, opportunity costs) and greater distances.

Firms make their decisions rationally, maximizing their utility function (total revenue, less total cost).

For a general cost function of the form
C(q)=cq+F, the firm’s problem would be: max π = Pq – cq – F = (P – c)q – F
Where P is the selling price to consumers, C represents the marginal cost of production of each unit, Q is the quantity sold, and F is a fixed operating cost.

It is essential to consider possible solutions that allow for an efficient supply of products that are relevant to the inhabitants of each country.