Pharma’s next challenge – working in global emerging markets

The global market for the pharmaceutical industry is rapidly expanding

As is the case with consumer goods, technology, and defense spending, emerging markets are becoming a major force in the global biotech and pharma industry. There’s even a (slightly clunky) term for it: “phamerging.”

In 2014, the size of emerging markets was tagged at US$281 billion – topping the pharma spending of the big five European nations (Germany, France, Italy, UK, and Spain) by some US$90 billion. Emerging markets are going to be an important driver of the world-wide pharma market and the total size is looking at a major increase, according to analysts like McKinsey. Most of the growth is coming out of growing countries like Brazil, Russia, India, China, Mexico, and Turkey, though others players include everyone from Algeria and Gabon to Costa Rica and Cuba. Asia and Eastern Europe are also poised to see growth, though not by as much.

Fueling the growth is the rise in non-communicable diseases, particularly diabetes, cancer, and cardiovascular disease. Rapid population growth – through falling infant mortality and increasing life spans – are being paired with large investments in health care.

This emerging marketplace will test many established and upstart pharma companies, however, as growing countries grapple with factors such as cost, regulation, and licensing. So how do biotech and pharma firms stay relevant in this new field? Strategies abound, analysts say, but cost-effective approaches must stay sensitive to market, regulatory, and consumer attitudes. Hussain Mooraj, from Accenture Life, recommended focusing on customer cluster submarkets, finding cross-border similarities, establishing local relevance, and focusing on cost-effectiveness and rapid execution.

Still, as expanding nations find their footing there will be unique obstacles which biotech and pharma firms face, from shady business practices to shady testing practices. One need not look too hard to find accusations against major pharma companies.

Other challenges are similarly vexing. “Overall,” according to a report from the University of California at San Diego,  “emerging markets can be highly political with a notable amount of protectionism. While some countries may allow a foreign pharmaceutical company to do business, they may encourage technology transfer and licensing with local partners.”

Price will play a big role in access no matter what nation a pharma firm is moving into, said Andrew Witty, the outgoing CEO of GlaxoSmithKline. Drug consumption is emerging markets is likely to be heavily favored toward low-cost generics, so while “phamerging” economies are going to be buying more drugs, pharma companies are not necessarily going to make a lot more money – at least not right away.

“If you look around the developing world it’s obvious that price plays a big role in access,” Witty said, “which is why we’ve been so aggressive in terms of trying to make sure that price isn’t a problem for large numbers of people in the emerging markets.”

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