The pharmaceutical industry is quickly evolving; to stay relevant and competitive, companies need to stay on top of the most recent trends and technologies. One important piece of the puzzle that has been getting more recognition lately is the role of emerging markets. Financial Times defines emerging markets as “a developing country in which investment is estimated to lead to high income but with great risk.” Many of these markets are experiencing exponential population and financial growth. Consequently, they represent promising targets for Pharma to broaden their reach and increase profits. However, breaking into a new market, especially one characterized by different health issues, priorities, and regulations, represents a serious challenge.
Leading Emerging Markets
At this time, Brazil, Russia, India, China, and South Africa (“BRICS”), followed by Mexico, Indonesia, South Korea, and Turkey (“MIST”) are considered key emerging markets. While pharmaceutical sales in many mature markets are showing stagnant growth or even regressions, the sales estimates in the emerging markets point to continued growth. In fact, it is estimated that emerging markets will account for >30% of the market in 2020.
This shift towards emerging markets is attributable to several economic and demographic factors, including increased life expectancy and prosperity, improved access to healthcare services and public or private funding, and growing populations. Secondary to these changes, the lifestyles and healthcare needs in these markets are also shifting. In places where infectious diseases were once the single major threat, steep increases in the rates of “Western” diseases such as diabetes, heart disease, and cancer are occurring, with no signs of slowing down.
On paper, this suggests that emerging markets are “easy” targets for pharmaceutical companies, since effective treatments for most of these conditions are already available and could be easily marketed. However, the road is far from straightforward. The strategies for expanding to these markets must be customizable and take into account each region’s specific healthcare needs, infrastructure, and regulations.
Potential Hurdles to Navigating Emerging Markets and How to Overcome Them
In addition to the need for customization, and thus the need to first fully understand each market and its characteristics, there are multiple other obstacles to tackling emerging markets. These include things like poor healthcare infrastructure, limited public funding, minimal or no intellectual property protection and regulations, complex market access regulations, and local competition, often in the form of generics. To overcome these hurdles, pharma needs to work closely with a range of local and global stakeholders.
Thinking globally but acting locally
One needs to keep in mind that the needs and regulations of emerging markets differ not only between countries but also between regions. This includes between urban and rural areas. A strategy that works in rural Brazil will not necessarily work in urban cities in the same country and will likely also not directly translate to most rural areas in India or Mexico. That said, customer clusters based on common demographic features and health needs exist both within and between regions, and identifying these will help when designing market access or marketing strategies.
Insight-gathering into local market trends
Insight-gathering into the current and anticipated future market trends is key to navigating any emerging market. This includes gathering insights on things such as local healthcare access, care paths, reimbursement and funding (including for both original and generic products), health policies, market demands, the competitive landscape, and the data requirements for market access. This can be done on a large scale by analyzing quantitative data from similar markets. Alternatively, companies can collect qualitative insights directly from local healthcare stakeholders such as physicians, payers, and patients. For the latter approach, digital technologies such as online advisory boards and virtual collaboration tools can be leveraged to streamline the progress. Moving the advisory boards online has multiple benefits, including substantial cost- and time-savings and facilitation of cross-border interactions and insight-gathering.
Development of a standardized approach with room for flexibility
Currently, country- and region-specific regulatory and submission requirements vary, and adequate enforcement resources are lacking. This can lead to long delays in getting approval for a product. Hence, as one of the first steps to developing a successful strategy for navigating emerging markets, there is a need for a “standard” approach for navigating foreign rules and regulations. However, at the same time, this approach must be able to account for the variability in national or regional regulatory requirements and market demands. Although regulations vary between markets, there are also common steps for all regions and products. By understanding which points will vary and which are commonalities, companies can plan their timelines and processes accordingly. Establishing a harmonized approach will no doubt be difficult, but is by no means impossible.
Determination of appropriate resource allocation
When entering a new emerging market, many pharmaceutical companies choose to partner with a local third-party vendor. Such a vendor will be familiar with the current regulatory and reimbursement landscape. Vendors can help navigate specific phases or help with the whole process. Although this will require substantial upfront costs, the time-savings of such a partnership often proves well worth the investments. Related to this, and just like it is important for companies to create a single, coherent strategy rather than trying to coordinate multiple strategies, there is likewise a need to centralize the company’s resource allocation to avoid duplication of efforts and partnerships.
Are Emerging Markets Worth the Risk?
Short answer: most likely, yes. Clearly, navigating emerging markets will require a great deal of time and effort by Pharma. These markets are highly dynamic, and the regional variations in healthcare access, market demands, and regulations can result in substantial risks. However, for companies that can anticipate and quickly adapt to these dynamic conditions, emerging markets represent a promising business opportunity. By considering and understanding all potential barriers to entering a new, emerging market and by having a standardized, but flexible, strategy prepared for how to navigate these hurdles, Pharma can minimize the risks involved and ensure sustained growth for years to come.