New Gusto from Government
While the numbers alone suggest high potential for growth, the landscape for emerging markets is not uniformly fertile. Improvements
in IP enforcement and a commitment by many governments to upgrade product regulation must be balanced by insular industrial
policies that favor local producers, particularly in generics. Patients still carry much of the burden of healthcare spending,
which requires customized investments around willingness and ability to pay for innovations.
More important, government interest in the sector, while largely positive, could lead to price controls and the adoption of
European-style measures to limit the overall size of the drugs bill. Turkey is emblematic of this trend, having imposed earlier
this year a new pro-generic pricing and reimbursement regime that will cut market growth to around 5 percent through 2013.
"Uncertainty is a killer for investment in any market, and unfortunately the emerging bloc is not immune. Turkey made its
reforms with little notice and minimal consultation and as a result industry expectations for the market have dimmed considerably.
Actions were taken in isolation of the impact on the country's future as a global competitor in innovative pharmaceuticals,"
says Jeff Kemprecos, Public Affairs Director for Emerging Markets at Merck.
Where the Money Is
To help companies clarify the level of opportunity in each market, IMS has produced a new global analysis that separates out
the mature markets (those with a per capita GDP threshold of $25,000 or higher) and then groups the pharmerging segment into
three tiers based on each country's minimum anticipated added value to the total pharmaceutical market between now and 2013.
IMS Market Prognosis evaluations were also used to provide a broader policy and horizon-scanning context.
Tier 1: China—In a League of its Own
With a GDP of $7.9 trillion in 2008—third-largest in the world—and a pharmaceutical market that is expected to drive $40 billion
in growth through 2013, China, as Tier 1, occupies its own space in the rankings. An increasingly affluent population of 1.3
billion is raising pent-up demand for healthcare, and drugs to treat chronic diseases and manage a looming transition to a
much older society are keys to meeting the need. At the heart of China's healthcare transformation is a comprehensive $125
billion investment to provide basic health insurance coverage for all citizens by 2011. Massive investments are also under
way in health infrastructure, particularly outside the major coastal cities. These moves, which presage a much stronger government
hand on the health till going forward, is forecast to double the size of the pharmaceutical market by 2013.
The growing role of government in healthcare does carry possible downsides. Ray Hill, IMS Senior Vice President for Consulting
and Services, told Pharm Exec, "Public reimbursement rules around the essential drugs list will lead to more government scrutiny of pricing by foreign multinationals.
Companies ought to be figuring in their operation plans a possible 20 to 30 percent contraction in margins for products on
the essential drug list sometime in the next two years, due to pricing reform." Interestingly, however, the fact that India
is not moving closer to a subsidized reimbursement system has led IMS to conclude that growth there will lag the potential
indicated by its population size and income expansion. "India shows the trend can work both ways," said Hill.