The rise of emerging markets has been a defining feature of the global economy this century. The massive uptick in performance within these economies means they now contribute more than half of global GDP. When it comes to healthcare, most of these emerging markets are expected to experience double-digit growth. They’re predicted to account for 30% of global pharmaceutical spend by the end of next year.
The traditionally lucrative Western pharma markets are becoming challenging from a growth perspective, with governments exerting downward pressures on healthcare costs. On top of that, companies are experiencing dwindling drug pipelines – and the risks associated with developing innovative products for regulated markets are constantly increasing. In response to these challenges, corporate boardrooms are now committing dedicated resources to conquer emerging markets as a way of sustaining growth. The move is driven by the increasing prosperity in emerging markets, coupled with a growing awareness of the advantages of good healthcare and healthier lifestyles.
Against this background, 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 offer a realistic opportunity to drive sustainable growth. The participants had a wide range of backgrounds and expertise – from strategy, commercial and medical to R&D, marketing and consulting – and represented organisations of all sizes to ensure insights were gathered from all corners of the pharma industry.
The final decision on which market to prioritise will also be dependent on a company’s financial objectives
Strong opinions were formed about demand and supply issues being key parameters for shortlisting a market as part of a cluster. On the demand side, adapting to changes in local consumption patterns and capitalising on associated growth were judged to be critical. Such guidance might seem obvious but the final decision on which market to prioritise will also be dependent on a company’s financial objectives.
For example, South Africa may be bigger in size and growing, but a company may prefer launching in Vietnam first which, although smaller, may provide a faster return on investment. Supply factors include considerations of systems development – e.g. regulatory pathways, and healthcare and supply chain infrastructure – and how focused governments are on providing healthcare to their citizens. When deciding whether to enter a market, companies must balance demand and supply parameters with their own company culture, resource and vision.
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 as they still provide a core revenue stream. But strategic investments will be more inclined towards chronic diseases.
In India, the prevalence of diabetes and cancer is projected to rise by 25–40% in the next 10 years
Communicable diseases such as tuberculosis, HIV, malaria, water-borne diseases and hepatitis are highly prevalent in most emerging markets so the focus is on making sure the maximum number of patients have access to medicines. But the same set of markets is now facing rapid growth of chronic ‘Western’ diseases such as diabetes, hypertension, chronic respiratory problems, cancer, cardiac diseases, neurological disorders and allergies.
In leading emerging markets such as 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. 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
Similar to mature markets, emerging markets have multiple stakeholders in the value chain. At the moment, typical emerging markets have the physician at the centre of the selling process – so that is who pharma sales forces tend to focus on. This presents a challenge as physicians don’t have enough time to grant access to all pharma companies – so there are restricted opportunities for brand education.
But the landscape is evolving quickly and more stakeholders are expected to become engaged in the selling process.
Patients – with access to information becoming easier due to the Internet, and physicians lacking the time to educate patients, many patients are taking it upon themselves to know more about their disease, medication, brands, etc. This is leading to patients evolving into active ‘consumers’ and, in the process, becoming more self-reliant.
This evolving ‘consumer’ will have implications for pharma companies in terms of how and what to communicate. For example, in the management of acute infection, companies need to communicate simple key messages about the importance of completing therapy. Patients who cease therapy early when their symptoms subside may subsequently relapse and blame this on poor-quality medication. Such perceptions can have a severe impact on brand loyalty. Patient awareness, education and training will play a key role in reducing such cases and helping brand growth.
Insurance companies – healthcare insurance penetration in emerging markets is modest but expected to grow significantly. This means insurance companies are likely to become more important in the overall value chain, and become stakeholders in the consumption process. And if these companies are paying attention to what is happening in the US market, they will structure their plans based on value and performance from the outset. This could put the same pressure on pharma companies to provide evidence of outcome improvement as in developed countries.
Innovation and technology will be important company differentiators. The workshop participants deemed investment in innovation necessary for growth in markets such as India, with 80% branded generic penetration, multiple iterations of the same drug and a dwindling pipeline of new drugs.
Upgrades to therapies using innovation/technology may be used to improve access to healthcare as well as 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. Consider the example of smartphones and how their adoption has penetrated all levels of society. This suggests that ‘value’, at the right price point, is more relevant in driving adoption of new technologies.
Companies are turning to technology to help address challenges in various therapies
Companies are turning to technology to help address challenges in various therapies – whether for reducing the pain of an injection or improving the patient’s experience via devices that are simpler to use. Another focus area is the drive to be closer to the patient through connected devices. As chronic disease incidence grows, the need to engage with patients, to improve medication adherence and have an impact on the overall outcome increases as well. Use of sophisticated electronic devices is likely to grow as they will act as a platform to transmit valuable data regarding drug usage.
Connected drug delivery devices, along with accompanying smartphone applications, may initially be developed as premium offerings – either for expensive therapies that can absorb the added cost or for high-income self-pay patients who look for best-in-class healthcare. Mobile networks will provide a way of having contact with these patients on a regular basis, which can also help to spread awareness and develop brand loyalty. Connected devices also have the potential to monitor compliance with clinical study protocols when subjects are not under direct clinical supervision.
Diagnostics – helping drive growth?
A longer-term focus for promoting growth will be diagnostics. Most diseases are prevalent in emerging markets but a significant proportion of these diseases are not diagnosed, leading to undertreatment. One of the problems is that there are not enough diagnostics laboratories. Often physicians take the route of prescribing an empirical therapy because the cost of diagnosis is much higher than the cost of the therapy. For example, antibiotics are commonly prescribed for respiratory infections where the causative pathogen may be a virus. Hence innovation in minimally invasive diagnostics instruments to improve access to – and the affordability of – diagnosis is expected to drive growth.
Innovation in minimally invasive diagnostics instruments to improve access to – and the affordability of – diagnosis is expected to drive growth
Although this area is not a direct play for pharma organisations, partnership with diagnostics companies will be the most likely route to success in this area.
The conclusions that can be drawn are that emerging markets are vital for sustaining pharma growth. They represent a significant proportion of the world’s population under the control of governments that are increasing their focus on healthcare and seeking better outcomes for their population. As emerging countries vary, a pharma company needs to examine closely 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 – since emerging markets are underpenetrated, there is room for solid base growth in the short term.
- Focusing on innovation and technology, with patient and stakeholder needs at the core but aligned with a company’s vision and values.
- Technology or innovation has to have impactful purposes, in line with identified market need and adding perceivable value to address that need.
- Recognising the sequence of innovation focus over the next 10 years will be drug formulation, then drug delivery devices, followed by patient services.
