There is fresh momentum in big pharma's seismic shift toward emerging countries, with the latest surge looking more disruptive
to the industry business model than the early wave of interest around revenue growth. In this second-annual review of the
emerging market shock, Pharm Exec surveyed IMS Health and several pharma players to find that industry's vision for these markets is now much larger and ambitious,
extending to the global comparative advantage from creating innovative local precedents in how medicines are developed, distributed,
promoted, and reimbursed. The battle is on to lock in the loyalty of an enormous rolling wave of aspiring, diverse, and increasingly
networked health consumers.
GETTY IMAGES / MACIEJ FROLOW
Pithy phrasing from a software pioneer in emerging markets is equally fit for purpose in Big Pharma today: "We came for the
cost, we stayed for the quality, and we're now investing for the innovation."
For companies like Pfizer, which hopes to push emerging market sales as a percentage of total revenues to more than 20 percent
from 13 percent over the next five years, the appeal is equally simple. "Sheer growth is the allure, particularly in therapeutic
areas like cardiovascular, pain, and anti-infectives which have reached their peak in the mature markets," says Guilherme
Maradei, Vice President for Strategy in the company's Emerging Market Business Unit. "It's like gaining a second life for
these products. The unmet medical needs we find in the emerging markets gives us scope for improving the lives of patients
who previously did not have access to our existing medicines while we also have an opportunity for fresh innovations in how
we adapt the science to the patient."
The Hot List: From 7 to 17
New data and insights provided by IMS Health to Pharm Exec confirm that the trends explored in the July 2009 issue are stronger and more pronounced. The focus then was on just seven
"pharmerging markets"—China, Brazil, Russia, Turkey, India, Mexico, and South Korea—that were forecast to drive industry growth
to 2020. IMS has now expanded this list to 17 countries, whose growth rate in medicine sales over the next three years will
comprise about 50 percent of global market expansion. By 2014, IMS predicts the "pharmerging 17" will match the size of Europe
and Japan combined, adding $140 billion of incremental sales, with China occupying a class by itself, replacing Japan as the
world's second-biggest market for drugs after the US by 2016 (see chart).
Rising levels of healthcare access and funding, and the changing mix between generic and innovative products are contributing
to the market realignment. In the latter case, patents are expiring at an accelerated rate without a compensating flow of
new innovations, allowing cheaper generics to expand their reach in the US and Europe. The trend line may even be more pronounced
as prices in Europe contract sharply due to high government deficits. Surprisingly, most emerging markets are in far better
financial condition, with rising personal incomes, minimal entitlement exposures, and lower levels of public debt. The large
personal out-of-pocket segment in the pharmerging 17 is another factor that softens the impact of patent losses on the ability
of companies to price to the market.