Pills, Pills, Pills

Costa Rica’s growing pharmaceutical industry draws from several of the nation’s preexisting strengths to provide a stable new source of investment, jobs, and revenue. The Costa Rican medical tourism industry has long been one of the nation’s most important, using the population’s high education levels and connections with major western markets to attract consumers looking for high-quality, low-cost medical options. These same qualities have also led Costa Rica’s business processing outsourcing (BPO) industry to become one of the leaders in Latin America. More recently, pharmaceutical firms have begun to stake a bigger claim in the Costa Rican economy, taking advantage of well-established supply chains and investment-friendly free trade regulations to become a growing industry.

The Costa Rican pharmaceutical manufacturing industry grew steadily in the first decade of the 21st century as major firms, including Pfizer, Merck Sharp, Dohme, and Stein, all expanded operations. In 2009, pharmaceutical exports peaked at USD337 million. However, over the next three years, this dropped sharply to USD82 million in 2013. This decrease can be attributed largely to legal changes, leading to some companies moving operations to other Central American nations, with Guatemala and Panama picking up most of the slack. However, the sector has bounced back over the past three years, and by 2016, Costa Rica’s pharmaceutical exports had risen to USD151 million, according to Procomer.
Moving forward, Costa Rican authorities see the potential for continued growth within the industry, pointing to shifting trends within the market that have placed a premium on innovation, logistics, and quality—all of which Costa Rica specializes in. Medical device and pharmaceutical industry manufacturers also expect an increased emphasis on innovation and flexibility in manufacturing, qualities that Costa Rica is better equipped to meet than other Central American suppliers due to literacy and post-secondary educational rates that are the best in the region.

Costa Rica’s supply is also available to increasing demand. The South and Central American markets are expected to see rising demand over the next few years, and Costa Rica is well situated to provide export services thanks to its preexisting free trade agreements with major markets such as Colombia and the Caribbean Community.
To further incentivize investment, Costa Rica’s free trade zone (FTZ) system has become more streamlined in recent years, allowing companies to bypass the majority of Costa Rica’s licensing process and enjoy minimal customs and taxation policies. Current FTZ policies allow for tax exemption for the first eight years of operations, with future exemptions possible with continued investment. Recently, several pharmaceutical firms have taken advantage of this opportunity to expand their operations in the country. In 2015, Swiss firm Roche Pharma opened a new, USD5-million service and distribution center, located in the Ultrapark FTZ in Heredia. Irish firm Allergan, which opened a medical device plant in the Global Park FTZ in 2007, named its Costa Rica plant its 2016 Plant of the Year, citing the 600-person facility as a leader in best practices within the company’s global manufacturing network.
Elsewhere, pharmaceutical firms have also begun to use Costa Rica as a new support market, tapping into an already well-developed services sector. Pfizer inaugurated a new Global Finance Shared Services center that will support the Latin American and US markets in 2016, an expansion of a support system that had already established operations in San José in 2013. Mercke and Astrazeneca have similar plans underway, with financial services facilities planned to open in May 2018 and late 2017, respectively. Companies are eyeing Costa Rica’s potential for new vertical integration in the pharmaceutical industry, with firms taking advantage of the nation’s experience and skilled work force among every level of the supply chain to create thousands of new jobs.