Expansion in these countries is no longer about volume, cost and size
Expansion in Brazil, Russia, India and China is no longer about volume, cost and size
Pharmaceutical firms expanding into emerging markets such as Brazil, Russia, India and China (BRIC) are finding that promises of high growth are not being delivered, a presentation by Frost & Sullivan has revealed.
They are instead seeing increased state power, declining economic freedom and more protectionism, which is proving particularly challenging, said Frost & Sullivan Partner Reenita Das in her presentation to analysts, Is BRIC the Saviour for the Life Sciences and Medical Device Sector?
New entrants into the BRIC countries are finding that success is more about establishing value, customising to local needs, and building regional partnerships to build a sustainable business, she said.
She added: ‘While mature economies across the globe grapple with reducing cost, towering budget deficits, and anaemic growth, the BRICs are expanding rapidly and driving the global economy.
‘Although emerging markets are often touted as the way forward for healthcare companies, recent protectionism laws and fierce competition from generics may have reduced the appeal of countries such as India and China, leading some to believe they aren't the ‘promised land' they once were.’
Das said local needs have often been overlooked and investment in these countries has not been sufficient enough. For example, the level of education and training of doctors in the BRIC countries, particularly away from the main cities, is often much lower than that of doctors in mature markets. Another weak point is the lack of partnerships with local governments, NGOs and other trade organisations.
Although emerging markets are often touted as the way forward for healthcare companies, recent protectionism laws and fierce competition from generics may have reduced the appeal of countries such as India and China
Overall, the market is witnessing a slowing of growth and more protectionism and control by the state. In India, for example, price cuts have been introduced to make drugs or devices such as stents more accessible. China plans to introduce a fast-track approval process for new drugs that could exclude firms that have not conducted clinical trials in the country. Meanwhile, Russia is proposing to limit the state purchasing of foreign/imported drugs, and Brazil has introduced higher import tariffs to encourage local industry.
‘The success in the region will be less about emerging markets being cheap and more about how companies can capture the growth in these markets moving forward,’ said Das. ‘There is a real chance for the industry to innovate in emerging markets by using disruptive technology and establishing a new commercial model that has the potential to become a relevant option for use in the developed world as well.’
Das urged the industry to rethink its emerging market strategies and start changing the dialogue.
‘We must move away from looking at it as a volume business in terms of a large number of patients and demographics to more about where we can deliver the value to create the access that is required to meet demand,’ she said.