Emerging Markets to Account for Half of Market Growth by 2013
Pharma companies that choose to ignore emerging markets might be in for a rude awakening. According to a new report from IMS Health, the number of untapped markets for pharmaceutical products has increased from seven to 17, and within the next five years these markets will contribute half the global growth in drug sales.
China is expected to contribute about as much growth over the next five years as the United States—a statistic that, while not new, is just beginning to show up on the bottom line. Each emerging market is also expected to contribute nearly a billion dollars in growth in the next half decade.
“Everyone is looking at emerging markets, but I don’t think there’s a consistency in terms of the preferred strategy or the extent to which the investments are being shifted to the emerging markets and away from the developed markets,” said Murray Aitken, senior vice president, Healthcare Insight, IMS Health.
Aitken explained that the Top 15 Big Pharma companies are currently underrepresented in the emerging markets. He expects, however, that this will change over the next decade.
“That said, [each market] has its own risks and issues, as every emerging market does. Therefore, companies must be judicious in terms of how they think of their investments and business models, and portfolios that can fit to those markets,” Aitken said.
To compete in emerging markets, there also needs to be a paradigm shift in how pharma companies earn money. Those expecting the same high profits they arn in established markers might be in for a surprise.
“Tapping into these markets requires a ‘rethink’ in how you define your business model and your product portfolio to be profitable,” Aitken said. “For example, companies that are building their branded generics business realize that the way you run a branded generics business is quite different from how you run an innovation-based business; and how you run a branded generics business is an emerging market is different from how you run it in Western Europe.”
IMS Health has been tracking data on emerging markets for years; going as far as coining the catchphrase “Pharmerging Markets” to represent countries where the economy has gross domestic product growth levels below $25,000 per capita.
Of the original seven emerging markets, South Korea has graduated to becoming considered a developed market, and IMS has added 11 additional countries to the “emerging” list.
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