The Monopsony in Mexico’s Public Health System: A Legacy of Over 70 Years

Since the foundation of the Mexican Social Security Institute (IMSS) in 1941, Mexico has embarked on a journey to provide public health coverage, primarily through two main schemes. On one hand, institutions such as IMSS, the Institute of Social Security and Services for State Workers (ISSSTE), and health services for the Military (SEDENA & SEMAR) and PEMEX employees have catered mainly to those with fixed employment—whether in the private sector, government, armed forces, or the state-run oil company. On the other hand, the non-affiliated population, including the unemployed and marginalized, has traditionally relied on state-run health services. Recently, these have been centralized under the IMSS-Bienestar program, aiming to offer varying levels of care and quality to different sectors of the population.

Despite the existence of these different models, there is a common denominator in Mexico’s public health system: it has operated as a monopsony for over eight decades. The government has become the largest, and often the sole, buyer of medical supplies, services, and equipment, dictating the rules, selecting suppliers, and ultimately setting the lowest possible prices. This consolidated purchasing power, managed through centralized procurement, essentially transforms the government into a monopsonist—an entity that controls the market not by being the sole seller, but by being the dominant or only buyer. This practice has significantly influenced how healthcare is accessed and delivered in Mexico.

Understanding the Monopsony Concept

The term “monopsony” was first introduced by economist Joan Robinson in her seminal 1933 book, The Economics of Imperfect Competition. It describes a market situation where a single buyer exerts outsized influence over sellers, dictating terms, prices, and access. Unlike a monopoly, where one seller dominates the market, a monopsony wields power from the opposite end, often resulting in price suppression and restricted access for suppliers. Over time, this creates an environment where innovation is stifled, and suppliers struggle to remain viable, unable to offer their best products or services due to the overwhelming control of the single purchaser.

In Mexico, the public health system epitomizes this concept, with institutions like IMSS and IMSS-Bienestar acting as gatekeepers. By consolidating purchasing power, these entities effectively determine which products, medications, and medical devices are available, and at what price. Suppliers are left with little room for negotiation, and many cannot afford to participate, resulting in a limited range of options available for patients.

The Evolution of Mexico’s Health Monopsony

The transformation into a full-fledged monopsony didn’t happen overnight. Initially, Mexico’s health institutions aimed to provide comprehensive coverage to various sectors of society, and competition among suppliers was somewhat present. However, as time passed, the system’s structure began to favor consolidated procurement. The government increasingly acted as the sole purchaser, employing consolidated tenders to leverage volume discounts and control costs.

While the intent was to create efficiency and reduce expenses, this approach also had unintended consequences. Over time, as IMSS and other institutions gained more power, the market for healthcare suppliers shrank. By centralizing purchasing decisions, the government could impose restrictive conditions that often left out smaller, innovative companies unable to compete with established players capable of meeting the stringent requirements and low pricing demands. Consequently, the market’s competitive edge dulled, limiting options and hindering access to cutting-edge treatments and technologies.

The recent centralization of state health services under IMSS-Bienestar has further cemented this monopsony structure. As it stands, IMSS and IMSS-Bienestar are now expected to control over 80-85% of the public health sector procurement in Mexico, reinforcing their dominance and limiting competition even further.

How Mexico’s Monopsony Differs from Other Health Systems?

Unlike Mexico, most developed countries avoid such concentrated purchasing power in their public health systems. For instance, European nations, despite having robust public healthcare frameworks, maintain a more balanced approach that encourages competition and fair trade. The United Kingdom’s National Health Service (NHS), while a significant buyer, still allows room for private companies to offer innovative solutions, medical devices, and medications through competitive bidding processes. The NHS actively engages in partnerships and procurement models that prioritize both cost-effectiveness and access to high-quality products.

Similarly, in countries like Germany, France, and the Netherlands, healthcare procurement is designed to be inclusive, offering opportunities for a variety of suppliers to participate in the market. This competitive environment fosters innovation, as manufacturers and service providers are motivated to offer high-quality, cutting-edge solutions to meet the needs of a more diverse client base. These systems recognize that while cost containment is important, maintaining access to a broad spectrum of products and services ultimately benefits patients by ensuring quality and choice.

In stark contrast, Mexico’s approach has been driven by an overarching focus on cost-saving, often at the expense of quality and diversity. This “statist” model, with its roots in political and clientelist strategies, has been successful in projecting the image of efficiency and control, but it comes at a significant cost to the population. Patients are denied access to potentially life-saving treatments, advanced medical devices, and higher-quality options simply because these products cannot navigate the rigid and often opaque procurement system dominated by the monopsony.

The Impact on Patients and the Healthcare Ecosystem

The consequences of a monopsonistic health system in Mexico are far-reaching. The government’s relentless drive to reduce costs means that suppliers often have to cut corners, leading to compromised quality. Essential medications may be excluded from procurement lists if they don’t meet the monopsony’s strict price thresholds, regardless of their efficacy or necessity. Patients, especially those reliant on public healthcare, bear the brunt of this system—facing limited treatment options, outdated technologies, and medications that may not be the best available on the market.

Furthermore, the lack of competition discourages investment in research and development. Pharmaceutical companies and medical device manufacturers are less likely to introduce innovative products in a market where profitability is undermined by aggressive price controls. This lack of innovation further diminishes the quality of care, leaving Mexican patients at a disadvantage compared to their counterparts in countries with more competitive health systems.

Is There a Way Forward?

Addressing the challenges posed by Mexico’s monopsonistic health system requires a fundamental shift in how procurement and healthcare are managed. Lessons from other countries suggest that promoting a more competitive environment, even within a public health framework, can lead to better outcomes for patients. By opening up procurement processes, encouraging multiple suppliers, and emphasizing quality and innovation alongside cost containment, Mexico could develop a system that not only serves the needs of its population more effectively but also fosters a healthier, more dynamic healthcare market.