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.
BRITAIN VS. INDIA
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 firstname.lastname@example.org
. Mandy Chui is Senior Principal, Consulting & Services, at IMS; she can be reached at email@example.com