DRUG MULTINATIONALS SEE ANDEAN PROCUREMENT 'FAVOURITISM'

Amid negotiations on a U.S. free trade agreement (FTA) with the Andean countries, research-based pharmaceutical firms continue to highlight the key role played by "discriminatory" government drug tenders. Controversial legislation allowing national companies an automatic bidding preference in Peru and Colombia is likely to be a crucial consideration in the final shape of the FTA.

The problem is acute in Peru, where government tenders account for roughly half the US$375mn legitimate drug market. With few official price controls, the health ministry's purchasing system, SISMED, is the key means by which the government is able to impact local market and price factors.

In Colombia, U.S. trade association PhRMA notes that a 2003 law also gives preference to bids by local companies. Although government procurement accounts for a lesser proportion of the local market -- valued at US$1.5bn in 2004 -- such tenders are a boon to local pharmaceutical firms. However, local sources argue that both countries' rules reflect judgements by the Andean community, and it is currently unclear whether the FTA will be able to supersede the regional bureaucracy's protectionist measures.