Emerging Markets—An Opportunity for Pharma to Drive Sustainable Growth
Cambridge Consultants engaged in a workshop-style dialogue with a cross section of senior personnel from both Indian and multinational pharma companies to debate whether emerging markets are an opportunity to drive sustainable growth. Conclusions from the workshop are presented in this article.
The rise of emerging markets has been a defining feature of the global economy in the 21st century. These markets now contribute more than half of global gross domestic product (GDP). When it comes to healthcare, most of the emerging markets are expected to experience double-digit growth and account for 30% of global pharmaceutical spend by the end of 2016 (1).
The traditionally lucrative Western pharma markets are becoming challenging from a growth perspective, with governments exerting downward pressures on healthcare costs. Not only are drug pipelines dwindling, but the risks associated with developing innovative products for regulated markets are constantly increasing. In response to these challenges, companies are now committing dedicated resources to conquer emerging markets as a way of sustaining growth. A key driver is the increasing prosperity in emerging markets, coupled with a growing awareness of the advantages of good healthcare and improved lifestyles.
Cambridge Consultants engaged in a workshop-style dialogue with a cross section of senior personnel from both Indian and multinational pharma companies to debate whether emerging markets are an opportunity to drive sustainable growth. The participants had a wide range of backgrounds and expertise-from strategy, commercial, and medical to research and development, marketing, and consulting-and represented organizations of all sizes to ensure insights were gathered from all corners of the pharma industry. This article discusses the important conclusions drawn from this workshop.
Focus areas in emerging markets
In considering market selection on the basis of therapy areas, delegates were clear that communicable diseases will remain a major focus area in emerging markets and form a core revenue stream. Strategic investments, however, will be more inclined towards chronic diseases.
Communicable diseases such as tuberculosis, HIV, malaria, water-borne diseases, and hepatitis are highly prevalent in most emerging markets, hence, the focus will be to ensure patient access to the necessary medicines. The same set of markets, however, is now facing rapid growth of Western chronic diseases such as diabetes, hypertension, chronic respiratory problems, cancer, cardiac diseases, neurological disorders, and allergies. In leading emerging markets like India and China, many of these conditions (e.g., diabetes) are turning into near-epidemic situations. In India, the prevalence of diabetes and cancer is projected to rise by 25–40% in the next 10 years (2). This shift gives pharma companies the opportunity to market their global products in emerging markets, backed by tested “go-to-market” strategies and operating models.
Evolving stakeholder landscape
Just like mature markets, emerging markets have multiple stakeholders in the value chain. In a typical emerging market, the physicians play a key role in deciding the uptake of a particular drug product-consequently, pharma sales forces tend to focus on the physicians. This situation, however, presents a challenge for pharma companies because most physicians often do not have enough time for every sales representative, which means there are restricted opportunities for brand education.
The landscape, however, is evolving quickly, and more stakeholders are expected to become engaged in the selling process, for example:
- With the access to information easily available partly because of the Internet, a number of patients are taking it upon themselves to know more about their diseases, medications, and brands, instead of relying solely on the physician to educate them.
- Although modest, healthcare insurance penetration in emerging markets is expected to grow significantly over the next few years. Insurance companies are, therefore, likely to become more important in the overall value chain, and become stakeholders in the consumption process.
Innovation in emerging markets
Innovation and technology will be important differentiators for companies trying to drive sustained growth in emerging markets. The innovation focus and process will be determined by the overall objective of the organization, whether it is aligned with market needs and backed by inputs from patients or other stakeholders such as governments, physicians, or insurance companies.
The relevance and affordability of innovation in emerging markets was discussed by the workshop participants. Investment in innovation was deemed necessary for growth in markets like India, which has 80% generic-drug penetration, multiple iterations of the same drug, and a dwindling pipeline of new drugs. Upgrades to therapies using innovation or technology were seen as drivers to improve access to healthcare and patient adherence. Participants categorically disagreed with the prevalent perception that the sole focus of innovation in emerging markets has to be cost reduction. Any concerns expressed about emerging markets in terms of “affordability” of technology were felt to be erroneous. The example of smartphones and how their adoption has penetrated all levels of society was raised, suggesting that that value at the right price point is more relevant in driving adoption of new technologies.
Technology as an enabler
Technology is affecting all areas of life, and the pharma business is no exception. Companies are turning to technology to help address challenges in various therapies-whether it is reducing the pain of an injection or improving the patient’s experience through devices that are simpler to use. Another focus area is the drive to be closer to the patient through connected devices. With chronic diseases becoming more prevalent, there is an increasing need to engage with patients and improve medication adherence.
Conclusion
Emerging markets are vital for sustaining growth for leading pharma organizations. They represent a significant proportion of the world’s population under the control of governments that are seeking better treatment outcomes and improving their healthcare systems. As emerging countries vary so much, a pharma company needs to closely examine its strengths and objectives in relation to the target markets it wishes to enter.
Successful growth strategies for success in emerging markets will include:
- Continuing the performance engine for base growth-because emerging markets are significantly underpenetrated, there is sufficient room for solid base growth in the short term.
- Focusing on innovation and technology, with patient and stakeholder needs at the center of that focus but aligned with a company’s vision and values. The use of technology or innovation has to be for impactful purposes. Market needs must first be identified in order to add perceivable value to address that need.
- Recognizing that the sequence of innovation focus in the next 10 years will be drug formulation, followed by drug-delivery devices, and patient services.
References
2. IMS, The Global Use of Medicines: Outlook Through 2016.
About the author: Ambuj Jain is general manager at Cambridge Consultants, India
