Based on a column originally published in the Mexican newspaper El Economista (April 30, 2026).
The Latin American pharmaceutical industry faces a chronic problem: unfair competition driven by offering the lowest possible price at all costs. For years, many health systems have prioritized the supplier with the cheapest bid, overlooking the fact that some companies reduce prices by cutting corners on quality—saving on sanitary controls, good manufacturing practices, or data integrity. This deceptive “savings” undermines trust and puts public health at risk: when a substandard or falsified medicine—one of insufficient quality or deliberately fraudulent—enters the system, the consequences can be catastrophic.
The World Health Organization (WHO) has estimated that at least 1 in 10 medicines in low- and middle-income countries fails to meet quality standards, resulting in loss of life and an annual waste of USD 30.5 billion on ineffective or harmful products. In Latin America, one of the regions most exposed to the trade of illegitimate medicines, up to 30% of products in the market could be considered “irregular” (substandard or falsified) according to recent estimates. Every defective dose is not just a failed treatment—for example, a weak antibiotic that worsens antimicrobial resistance—but also a direct blow to the resilience of our health systems. In healthcare, cheap can be extraordinarily expensive: initial “savings” can quickly translate into higher hospital costs, reduced productivity, and—most importantly—lost lives.
Against this backdrop, it is increasingly clear that the traditional notion of competing solely on price is neither sustainable nor desirable. The lowest price has long been viewed as an “objective” and easy criterion in procurement processes, but its dominance has shown significant drawbacks. A European Commission report revealed that 83% of generic medicines facing chronic shortages in the EU are precisely those ultra-low-cost products (less than €0.10 per day of treatment). Moreover, unsustainable procurement models—such as “winner-takes-all” tenders—amplify this vulnerability. Concentrating the supply of an essential medicine in a single lowest-bid supplier may reduce short-term costs, but what happens if that supplier fails?
The good news is that viable alternatives to this destructive competition model are gaining traction in global policy discussions.
In Europe, the EU Pharmaceutical Strategy and the proposed Critical Medicines Act (March 2025) promote procurement based on the Most Economically Advantageous Tender (MEAT), rather than simply the lowest price.
This approach introduces multi-criteria evaluation, incorporating quality, reliability of supply, and ethical and environmental factors alongside price. The EU is also working to geographically diversify its sources of critical medicines, recognizing the risks of overdependence on a limited number of producers—especially those competing by lowering standards.
In the United States, this policy shift has also gained strong momentum. Following the comprehensive supply chain review ordered by the White House in 2021, further steps were taken. The 2024 Quadrennial Supply Chain Review concluded that decades of procurement focused on the lowest price had eroded the domestic pharmaceutical industrial base, increasing dependence on foreign APIs and the risk of shortages—justifying more active government intervention. In response, a 2025 Executive Order established the Strategic Active Pharmaceutical Ingredients Reserve (SAPIR) and reinforced the use of the Defense Production Act to fund domestic production of APIs and essential medicines, build redundancy, and diversify sourcing. As in Europe, the message is clear: ensuring access to critical medicines requires moving beyond the lowest price and internalizing the value of resilience, supply security, and reduced health risk.
The Proposal: Risk-Adjusted Pricing
How can Latin America translate this paradigm shift into pharmaceutical policy—reducing unfair competition without resorting to protectionism? One innovative tool is the introduction of risk-adjusted pricing in public tenders for medicines, with potential application also in private healthcare systems.
The underlying logic is to incorporate, as a premium or correction factor, the health and compliance risk associated with each bid. In practice, this means that, alongside price, procurement processes would quantitatively assess the reliability and quality of manufacturers—effectively increasing, for comparison purposes, the price of higher-risk suppliers.
But how should “risk” be measured? Several objective and verifiable indicators could be used, including:
- Regulatory compliance track record: If a pharmaceutical company has received critical observations from health authorities (e.g., FDA warning letters, Official Action Indicated (OAI) classifications, plant suspensions due to GMP violations, or WHO alerts), this reflects objective weaknesses in its quality system. The more serious, recurrent, or unresolved the incidents, the higher the risk factor applied to its bid. Importantly, this information is increasingly accessible through public databases and specialized regulatory intelligence tools that consolidate inspections, sanctions, and compliance trends over time. Conversely, manufacturers with a clean and sustained compliance record would benefit from a minimal risk factor.
- PIC/S membership and regulatory convergence: Manufacturers overseen by agencies that are members of the Pharmaceutical Inspection Co-operation Scheme (PIC/S) are presumed to be more closely aligned with global standards. Countries such as Argentina, Brazil, and Mexico are already full PIC/S members. Therefore, a manufacturing site located in Asia or Africa but inspected by EMA, FDA, or another PIC/S authority provides greater assurance than one operating without recognized oversight. All else equal, internationally verified suppliers should present a lower risk profile.
- Data integrity (ALCOA+ standards): Documentation and electronic data management are strong indicators of a company’s quality culture. Procurement frameworks can require bidders to demonstrate robust, reliable data systems following ALCOA+ principles (Attributable, Legible, Contemporaneous, Original, Accurate, complete, consistent, and enduring), while penalizing those with a history of data manipulation or incomplete records.
- Supply chain continuity and transparency: The COVID-19 pandemic demonstrated that a “low” price is meaningless if the product does not arrive on time. Buyers should reward companies that offer contingency plans, multiple backup manufacturing sites, diversified suppliers of key inputs (APIs), and traceability systems that track the product from active ingredient to patient. For instance, countries could require primary suppliers to maintain safety stock at national or regional levels, significantly reducing the risk of shortages during external shocks.
Conclusion
Internalizing risk into pricing would level the playing field and correct a distortion that currently penalizes those who do the right thing. Manufacturers that invest in quality, production robustness, and regulatory compliance—whether local or foreign—would no longer compete at a disadvantage against actors engaging in price dumping at the expense of patient safety.
By incorporating health and supply risks into economic evaluation, the unfair advantage of poor-quality competitors would disappear, creating clear incentives to raise standards across the industry. The result would not be less competition, but better competition: equal rules for all, rewards for quality, and a lower likelihood of shortages and critical failures.
For Latin America, advancing toward procurement frameworks that integrate price, risk, and value is not about protectionism—it is about modernizing health policy, better protecting patients, and strengthening a more reliable and sustainable pharmaceutical production base. The challenge ahead is both political and technical: to move beyond the cult of the lowest price and adopt procurement decisions that reflect the true cost—and the true value—of medicines reaching the population.
References
ASPE – HHS: Analysis of Drug Shortages, 2018-2023
WHO: Substandard and falsified medical products
Vanconez-González, Jorge, et al: Frontiers | The hidden peril: Ecuador’s struggle with substandard and falsified medicines
Cárdenas, José Luis: Compras públicas de medicamentos: más sostenibilidad, más salud
Cárdenas, José Luis: OCDE y la seguridad del abasto de productos médicos
Cárdenas, José Luis: Medicamentos subestándar y competencia: Un esfuerzo continuo
Cárdenas, José Luis: El desafío de la resiliencia de la cadena de suministro de medicamentos
Cárdenas, José Luis: Relocalización farmacéutica con propósito; resiliencia sí, pero con bisturí
The White House: Ensuring American Pharmaceutical Supply Chain Resilience by Filling the Strategic Active Pharmaceutical Ingredients Reserve – The White House
Maffioli, Elisa: Substandard and falsified antibiotics are associated with antimicrobial resistance: a retrospective country-level analysis – PubMed
EU: Critical medicines Act – Public Health – European Commission
