The Pharmerging Future - Pharmaceutical Executive


The Pharmerging Future

Pharmaceutical Executive

Two Success Stories

The experience of GSK in India provides a model for success in a pharmerging market. The company implemented a "going local" strategy that targeted and licensed customized drugs. GSK entered the market very early, positioned from the beginning to focus on small drugs that had minimal market value in mature markets but met local market needs. The company built an Indian product portfolio that was dramatically different from its global portfolio (see "Britain vs. India," this page). Now the number three player in India, GSK has a significant share of the nation's market and continues to show favorable revenue growth.

Likewise, Schering-Plough scored notable success in China, aggressively pursuing an over-the-counter strategy that, along with its prescription business, grew the company's sales more than five-fold, from $20 million to $100 million, in a five-year period. The company made significant, well-targeted investments in sales and marketing resources, as well as in consumer spending for its OTC business, to achieve this high rate of growth.

The Right Organizational Model

As pharmerging markets gain increasing attention, their importance within a pharma's overall corporate structure rises. Business leaders for the pharmerging markets are today in some cases reporting directly to CEOs, as growth and profitability are increasingly linked to tapping these new markets.

Tactical execution is 80 percent of the game in pharmerging markets. Even though a strategy is sound, it could still fail miserably because of challenges in on-the-ground execution. Four points to watch for are:

1. Regionalization To overcome differences among regions in purchasing power and business practices, adopt a regional strategy for management, with sales force, marketing, commercial, human resources, and government affairs teams structured by region. This will ensure that they will adopt practices suitable for that region, and react promptly to the changing environment. Companies that regionalize only their sales force run the risk of relying too much on first-line sales managers in the region. If a very competent sales manager is in place, they'll do well. However, with a mediocre manager, they run the risk of losing touch with the market.

2. Strengthen HR and Training Comprehensive programs are required to retain talent and develop bench strength to take on junior and middle-management roles. Keeping the team happy requires not only monetary compensation but also a focus on career development. The commitment to focus on people must come from senior management. Personnel must be reviewed on a regular basis, and comprehensive talent development plans must be put in place. To succeed, a company needs to be perceived as a place where career development is an integral part of the culture. In addition to providing superior products, successful firms distinguish themselves by providing long term career growth and personal development opportunities, as well as demonstrating a sustained commitment to the region, including the continued investment in expanding manufacturing facilities and setting up R&D centers.

3. Local Government Affairs Team Recruiting former government employees is an attractive option for many companies. These candidates offer an invaluable understanding of the regional policymaking processes, and have access to key government stakeholders and authorities.

4. Stable Senior Leadership A stable senior leadership team is critical for successful execution. This provides continuity, consistency, and commitment for the company's long term growth.

The Global Economic Crisis Angle

While the global pharmaceutical industry navigates a challenging economic climate, it's worth noting that economic conditions affect markets to varying degrees. The extent of the economic impact on each pharma market is influenced by the healthcare burden borne by patients, and the short and long term policy responses that governments implement. In this regard, the importance of some pharmerging markets may actually increase with the global recession.

For example, the effect of the global economic crisis on Russia has been much different from that on China. Forty percent of Russia's GDP is comprised of oil and gas revenue, which has made the country much more vulnerable to the steep recession. Additionally, industry experts question the Russian government's ability and resolve to improve health insurance coverage and reimbursement for low-income groups. By contrast, the Chinese government recently laid the groundwork for substantial healthcare reform through enactment of a $125 billion stimulus package. This landmark package aims to provide near-universal coverage and substantial improvement to the nation's healthcare infrastructure, especially in rural areas (see "Smashing China!,".)

Expectations for 2009 economic growth in the 15 key developed and emerging countries have declined since the onset of the global economic crisis. However, growth in publicly funded markets is likely to ameliorate some of the stress, potentially offering a positive uptick in market growth going forward. The era of blockbuster drugs may be coming to an end, but the pharmerging markets can provide great value and new opportunities as they gain an increasing share of the global market.

Raymond Hill is General Manager, Consulting & Services, at IMS Health; he can be reached at
. Mandy Chui is Senior Principal, Consulting & Services, at IMS; she can be reached at


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