Why the life science industry should focus on emerging markets
According to a McKinsey Associates report conducted in 2017, the pharma industry began expanding into the emerging markets due to positive forecasts.
However, these emerging markets began suffering downturns or showed weaker growth forecasts as commodity prices fell and some healthcare systems struggled to scale up adequately their provision of care.
According to a report conducted by McKinsey Associates in 2017, the pharma industry began expanding into the emerging markets due to positive forecasts, but these emerging markets began suffering downturns or showed weaker growth forecasts as commodity prices fell and some healthcare systems struggled to scale up adequately their provision of care.
Has the pharma industry moved away from the emerging markets due to the perception of low profitability in these countries, and do the government’s of these countries have to take accountability for the affordability and hospitality of the expansion of the pharma industry into these markets?
Is it the case that the pharma industry needs to look at themselves in terms of how much they charge for the drugs they produce? Or, perhaps we should look with more focus on the governments not only of the emerging markets but of some developed countries such as the US, for not doing enough to subsidise the high prices and provide a feasible system of healthcare?
We are in a position where many pharma companies have dedicated business units to the emerging markets, but funding has decreased.
Why should the pharma industry focus on the emerging markets again?
From a profitability perspective:
- Sales in the BRICS (Brazil, Russia, India and China) and MIST (Mexico, Indonesia, South Korea and Turkey) countries doubled in 5 years, reaching a market share of approximately 20%. The shift toward these new markets has been attributed to the large populations, growing prosperity and increasing life expectancy in these emerging countries.
- The rate of growth in developed markets is less than that of emerging markets. This combined with the expiration of patents, such as Humira at Abbvie, and the subsequent growth of generic drugs and tight regulations enforced in mature markets limits the extent to which the pharma industry can continue to profit year on year in developed markets.
- According to BMI Rsearch (May 2017), the emerging markets are expected to grow in potential value from 190 billion dollars to 270 billion dollars between 2020 and 2025 – and that doesn’t include China (one of the most promising and fastest growing emerging market). When you include China, the potential value of the emerging markets is expected to be 340 billion dollars in 2020 and rise to 490 billion dollars in 2025.
From an ethical perspective:
- Emerging markets are some of the most troubled countries by infectious diseases due to a lack of medicines and efficient healthcare systems in these markets. This comes back to my point of government’s having to do more.
- When you consider that a large number of worldwide epidemics have originated from emerging markets, such as Ebola and Swine Flu, you have to question why there isn’t more of a focus/emphasis on emerging markets from the pharmaceutical industry. They are shooting themselves in the foot really – the need is there which means the opportunity is there.
I would suggest that it makes more sense to put in place a long term strategy to expand R&D into emerging markets, address the unmet medical needs in these countries, in anticipation of the growth forecasts that are widely reported.
We can draw from the above that the pharmaceutical industry has a lot to gain from reconcentrating its efforts on the emerging markets. The rate of expenditure in developed markets compared to the margin of profits, in addition to the ethical arguments that the industry should strive to satisfy, makes for a compelling case that the industry may be missing a trick in moving away from the emerging markets – at least in comparison to the level of development that the industry put into these markets before some negative forecasts. With forecasts now changing in favour of the emerging markets more recently, one would hope that the industry’s views and plans would change with them.