Rx for pharmaceuticals.

Latin American governments seek to replace copycats with generic drug-makers.

LO MISMO PERO MAS BARATO: THE SAME but cheaper.

This tempting pitch has been the rallying cry for local pharmaceuticals companies across Latin America, where big multinational drug firms have groused for years about poor patent protection and billions of dollars in losses due to copycat drugs. The region's governments have traditionally been caught in the middle, struggling to get quality drugs at cut-rate prices and getting neither. Now, they think they have finally found a middle ground: generic drugs.

In the last 12 months, Argentina, Brazil, Mexico and other countries have taken major steps to reinforce patent protection and open the way for legal production of drugs whose patents have expired, known as generics. The new measures come just as the patents for many of the world's blockbuster drugs--like anti-depressant Prozac (US$2.6 billion in 1999 sales), allergy medicine Claritin ($2.7 billion) and cancer-fighting Taxol ($1.5 billion)--are running out.

Once a patent expires, companies that produce generics are permitted to sell identical versions of the drug at a fraction of the cost Miami-based Ivax Corp., for example, recently received permission from a California court to begin producing a generic version of Bristol-Myers Squibb's Taxol, which it plans to sell at a fraction of the cost in the United States before marketing it in Latin America.

"We are very committed to bringing low-cost generics to Latin America," explains Ivax President Neil Flanzraich, who has spearheaded the $650 million company's expansion in the region through acquisition.

To be sure, Flanzraich faces many obstacles before generics take hold in the region. "This is not an overnight process," says Jorge Lanzacorta, director of Mexico's pharmaceutical chamber, Canifarma. He says that the Mexican government will first have to crack down on the 350 renegade copycat drug-makers, known as similares, that confuse consumers by marketing their products as identical as the name brand drugs but at rock bottom prices.

Generic producers can't compete against these renegades. In Mexico, generics have nabbed a dismal 1% of a $4.5 billion market despite government efforts to promote them. Mexico's recently installed Fox administration is expected to begin closing the loopholes that allow the similares to operate.

"Unfortunately, these [generic] companies are kept out by unfair competition that confuses the public with false claims about their products," says Rafael Gual, head of the Mexican Pharmaceutical Association (AMIF). "These companies have fallen through cracks in the legal system."

Tough competitors. Beyond the legal issues, it is unclear whether companies like Ivax can afford to undercut prices on the already discounted brand name drugs while financing new distribution networks. Bristol's Taxol in Mexico, for example, sells for only $118 per 100 milligrams, compared to $487 in the United States.

Ivax's Flanzraich says that multinational companies are still making "outrageous" profits on discounted drugs they sell in Latin America. There is still room to make a profit, he says.

Nonetheless, the huge disparity in pricing between markets has spurred some U.S. patients to cross the Mexican border to buy their prescriptions at discounted rates. U.S. lawmakers have responded by drafting legislation that would speed approvals for generic drug makers in the United States while allowing pharmacists to "re-import" U.S. made prescription drugs from foreign markets like Mexico.

Argentine consumers pay high prices while their government ranks among the world's weakest enforcers of patent law. Renegade drug-makers there control more than half of the $3.4 billion annual domestic market, according to Pharmaceutical Research and Manufacturers of America, a Washington, D.C. trade group. Drugs patented by companies like Bristol, Lilly and Merck may have as many as 80 imitators each in Argentina.

There are so many copycat companies that the United States filed a complaint with the World Trade Organization, which eventually prompted the passage of stronger patent protections in Argentina. The new law that took effect in November 2000 has been widely viewed as a compromise that accommodates local companies while keeping international pressure at bay.

Brazil recently strengthened its 1997 patent protection law, pushing copycat producers to meet the same testing standards as multinational companies and requiring them to print on their packaging a product's active ingredient. No small feat considering that copycat manufacturers dominate the $5 billion annual domestic market. Brazil's strategy aims to hold down prices while improving the quality of medicine in the region's largest pharmaceutical market.

"If you want to play a part in the international economy, you must accept international rules," says Eldo Francin, who heads the pharmaceuticals research firm IMS in Brazil. "If the government is able to enforce its new official generic policy, those companies selling copies will disappear."

Venezuela, Latin America's fourth largest pharmaceutical market, is also engaged in strengthening its patent protection and now requires tough testing standards for generic drugs.

Roberto Prego, CEO of Venezuelan drug manufacturer Elmor, recently bought by Ivax, says Venezuelan copycat manufacturers will have to merge to have sufficient resources to conduct expensive drug studies or, simply, sell out. "Many of them are in trouble," Prego says.