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How Big Pharma Can Win in Emerging Markets

June 19, 2013
Companies that are more advanced in areas such as manu­facturing infrastructure, logistics, distribution and talent management -- and, of course, in understanding consumer needs and behaviors -- can gain an edge in these coveted markets.

For the past several years, life sciences companies have consistently faced the doom and gloom of the patent cliff.  As widely reported by news organizations, the loss of patents for blockbuster drugs such as Lipitor, Vioxx and Zoloft were projected to impact the pharmaceutical industry’s performance for years to come. Indeed, the ratio of value created by new products entering the market versus the value lost by products going off patent declined consistently from 2002 to 2012.

But it looks like the worst is now over.

It appears the patent cliff has reached its peak, and certain companies are finding their way back to profit. While there has been no decisive solution for navigating in the post-blockbuster landscape, several high-performing, life sciences companies have turned to one option in particular—emerging markets.

Emerging Markets: The Next Big Growth Engine in Pharma

Now, more than ever before, life sciences companies are turning to emerging markets such as Brazil, Russia, India and China (BRIC countries) for new growth and a sustained advantage over the competition. The underlying data shows why. Emerging markets consist of 70% of the world’s population, generate 31% of GDP and will account for 30% of global pharmaceutical spending by 2016.

But despite the promise, many pharmaceutical firms have felt growing pains and have not yet been able to get a major foothold in these regions. In fact, analysis of the top nine pharmaceutical companies shows that less than 10% to 30% of revenues currently come from these areas.

This issue exists for several reasons. New entrants soon discover that selling and operating in these markets presents numerous challenges. Market access requirements such as supply-chain planning, manufacturing and distribution can be complex.

They also discover a regulatory environment, including taxation and import regimes, which can be significant barriers to growth, both in terms of working across borders.

There is also the need for more effective monitoring of pricing and reimbursement because they can increase. Finally, talent shortages can become obstacles to growth.

Four Ways Big Pharma Can Stay Competitive in New Markets

Establishing and executing a growth strategy for the life sciences industry in developing nations involves finding commonalities across the markets—commonalities that support cost-effective approaches while also being sensitive to unique market, governmental and consumer attributes within any specific region. Here is a four-pronged approach:

#1 Think Customer Clusters: the Importance of Submarkets

Any particular emerging market has some diverse segments requiring differentiated treatment.  However, Accenture’s analysis of markets in the BRIC countries suggests that customer clusters or submarkets can be identified within a national or regional market based on an understanding of consumers who have common health needs, such as those suffering from a particular disease such as Type 2 diabetes.

One example of customer clusters can be seen in Novartis’ initiative Arogya Parivar, which has improved access to medicine for 42 million patients across 33,000 villages in India.iii The program focuses on the needs of rural consumers at lower-income levels by adapting educational materials, training and product packaging to local conditions and buying patterns. To meet these needs, Novartis has trained more than 500 health educators and supervisors who teach communities about health and disease prevention and sales supervisors, who increase local medicine access across several therapeutic areas by informing local pharmacists about products.

#2 Find Cross-border Similarities

When developing an emerging-markets strategy, companies should not be constricted in their planning by national boundaries. An approach too focused on nations and regions could mean that customer similarities across markets are not being sufficiently leveraged to create solutions that can move across borders. Enter the concept of “customer clusters.”

For example, an October 2012 Credit Suisse Global Wealth Report revealed that an average Brazilian household spends 10% of its income on healthcare—almost double the level spent in China and India. However, the number of households earning more than $2,000 per month is three times more in India and six times more in China than in Brazil. These kinds of analyses can identify cross-border insights that enable companies to serve groups or clusters of customers more effectively and efficiently.

#3 Establish Global Reach with Local Relevance

Whether in an urban or rural market, it can be beneficial for companies to “think globally and act locally” to meet the needs of consumers in the BRIC markets.

Life sciences company Pfizer was able to apply this approach to a loyalty card program in different local markets.iv The program, which was developed for the Philippines following the patent expiration of its leading cardiovascular drug, was used in an effort to retain patient loyalty and mitigate the impact of generic equivalents entering the market.

But when Pfizer decided to bring the program to India, the company was careful to adapt it for the consumer environment. Consumers in India had existing access to many inexpensive, generic versions of cardiovascular medicines, so realizing price was an important factor in deciding what product to buy, Pfizer created an overall disease management program that sought to fill a knowledge gap and help consumers better manage their cardiovascular disease from a more  holistic perspective. This example shows the importance of understanding a local situation and creating an approach that gives differentiation in a crowded market.

#4 Create More Effective and Rapid Execution Capabilities

The fourth solution is really about tying all threesolutions together and executing across markets in a timely and more cost-efficient manner. Such execution can be a difficult task for life sciences firms, given that many of them continue to operate in functional silos. It is important for companies to create a single, coherent strategy instead of trying to coordinate separate supply chain strategies, commercial strategies and so forth.

Two capabilities are especially critical when planning the rapid execution of an emerging-market strategy. The first involves developing the ability to understand and to get very close to the customer—by leveraging networks and chains of influence so that a market strategy can reach consumers quickly. The second involves companies improving their risk management capabilities to the point that they can take well-considered risks as a means to rapidly seize market share.

In Conclusion

Growth strategies in the life sciences indus­try are increasingly dependent on expansion into emerging markets. A growing middle class in these areas represents an opportuni­ty for life sciences companies to improve the quality of life there, while also improving their own market standing. Companies that are more advanced in areas such as manu­facturing infrastructure, logistics, distribution and talent management—and, of course, in understanding consumer needs and behaviors—can gain an edge in these coveted markets.

Hussain Mooraj is the global managing director of Accenture Life Sciences’ Supply Chain practice.

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