Drug makers need to more aggressively target so-called "pharmerging" markets – but not just the usual suspects. Brazil, Russia, India and China remain highly important, but in a March 16 report, IMS Health predicts that 17 countries, in total, will contribute 48 percent of annual market growth in 2013, up from 37 percent last year.
Since late 2006 when IMS singled out BRIC, Mexico, Turkey and South Korea as rapidly growing markets, patent expiries for blockbuster drugs, increasing generic competition, and a growing biotech industry have caused the commercial landscape to shift, slowing performance in developed markets. At the same time, pharmerging markets began to pick up steam as their economies and health care landscape vastly changed, and continue to do so.
Joining IMS' original list, with the exception of South Korea, the new roster of pharmerging markets includes: Venezuela, Poland, Argentina, Vietnam, South Africa, Thailand, Indonesia, Romania, Egypt, Pakistan and Ukraine. IMS reclassified South Korea as a "developed" market in the "Pharmerging Shake-Up" report based on its current GDP level. Study authors classified countries as developed or emerging sectors using a per capita GDP threshold of $25,000.
But as drug makers increasingly strike deals to expand their global footprint – evident in the interest that Teva Pharmaceuticals, Actavis and Pfizer have expressed in the German generics firm ratiopharm ("The Pink Sheet", March 15, 2010) – IMS stresses that, so far, the push by drug makers to grow sales in pharmerging markets has not been great enough.
In 2009, 15 major pharma companies derived just 0.9 percent of their combined sales from China; 2.9 percent from Brazil, India and Russia; and 5.6 percent from the remaining 13 countries, which IMS dubs "fast followers." China alone is expected to drive $40 billion in market growth through 2013, with Brazil, Russia and India falling in the middle; each is expected to add $5 billion to $15 billion through 2013. The fast followers are expected to have a cumulative contribution in each market of $1 billion to $5 billion through this time.
In terms of fast followers, IMS points out that Romania is a "consistently high-performing market" relative to other Central and Eastern European countries, growing at nearly 23 percent. Vietnam also offers drug makers opportunities given its growing population of citizens who are 65 years and older, a widening private insurance market and increased public funding that will facilitate growth in the hospital sector.
"Securing only single-digit percentages of annual sales from markets that offer a virtual clean slate for pharmaceutical investment leaves significant potential untapped," the report notes, adding that the sooner drug makers break into these newer markets, the better off they will be. ‘Companies that take the lead in market entry can often reap the benefits of more discernible differentiation and earlier local entrenchment compared to those that choose to wait.’’
But each market carries its own challenges. Vietnam, for example, is highly fragmented with ongoing concerns about drug registration and intellectual property protection, while in Thailand, registration for a new drug typically takes one to two years, which is considerably longer than Argentina's approval process.
At the same time, disease profiles, treatment paradigms and diagnostic rates vary from market to market, and can be vastly different from those drug makers are used to encountering, particularly, in developed countries.
Still, growing a presence in new territories is inarguably on the agenda for most pharma companies. The trick is to figure out how each drug maker can best branch out and align existing portfolios with high growth opportunities. European pharmas have generally fared better than their U.S.-based counterparts in establishing a local presence, IMS says, noting that Novartis, Bayer and Novo Nordisk have achieved "good penetration" in Russia while many U.S. players are left to catch up.
Carlene Olsen (c.olsen@elsevier.com)
This article is reprinted from "The Pink Sheet" DAILY –March 16, 2010
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