Strategic approaches to emerging markets

Three forecasting and marketing experts on the opportunities and challenges of emerging markets

Three forecasting and marketing experts on the opportunities and challenges of emerging markets

Recent years have seen pharmaceutical companies establishing presences in countries such as China, Russia, India, and Brazil by, for example, offshoring manufacturing, R&D, and data analysis to take advantage of lower labor costs. These countries are characterized by growing economies, not yet saturated in the healthcare space. These are attractive, untapped markets because there is substantial room for growth, unlike established markets, which are also experiencing tough price containment. But will emerging markets continue to grow?

AstraZeneca sees emerging markets as a source of future business, according to Nick Guthrie, head of forecasting. The company has defined nine future markets, of which two are considered strategic. Early market research indicates that patient and physician aspirations are little different from those in established markets. In essence, patients want to be well, he reports, and diseases still follow familiar patterns.

But these markets do differ in the way healthcare is delivered. Access to treatment is a key issue, and this might mean access to finance or to infrastructure. Interestingly, in such markets brands are often highly valued, and consumers mistrust locally produced material. Although this means that premium prices can sometimes be charged for branded products, Guthrie says, I don't know how long this can go on. He remembers countries such as Brazil being identified as emerging many years ago, and wonders when they are finally going to emerge!

Decisions on whether to enter a market are greatly assisted by qualitative information, even though forecasting is intrinsically quantitative. This is the view of Marty Groen in t'Woud, marketing director at Astellas. The forecaster has a crucial role in providing this qualitative information, which among other aspects provides insight into the market. But the definition of an emerging market is different at Astellas. Essentially, it means a country that does not have an Astellas affiliate. Groen in t'Woud highlights Africa as having considerable potential, in terms of number of people; that's the easy part, he asserts. Then you have to have insight into the market, so that you can make decisions about infrastructure and segmentation.

Richard Murgatroyd, forecasting manager at Roche, is interested in whether we are able to make decisions about drug development in emerging markets. Considerations include choice of comparator, economic endpoints, and quality of life measures that are appropriate to these markets. He gives two examples where local knowledge is essential.

In Brazil, medicines are valued entirely on the basis of external data. Price controls for innovative products are based entirely on external reference pricing, he states. There is no account of value relative to local standards of care. Conversely, in India there is little credit given to innovation, and shortages of funding and of health insurance force patients to pay for much of their care. Thus, with poor protection of intellectual property, innovative medicines are only accessible to the wealthier levels of society. Murgatroyd asks why, if these statements are true, we would make drug development decisions based on the needs of these countries.

Asked how easy it is to work with emerging markets, Guthrie reports that AstraZeneca has good rapport with China. Language isn't a major problem, and although people there have to be trained and mentored, that's the same as anywhere else. A possible downside is that Chinese people love the new, and are less likely to stick with an idea for the longer term. Roche is also developing China, but an issue is reliability of data for forecasting. Astellas is working more with smaller countries, in the Balkans and Africa, and as so much of the information is qualitative and perhaps even intuitive, the company accepts that risk is inevitable. But it is manageable because each country is small.

In the final analysis, pricing will weigh heavily on an emerging market decision. For example, AstraZeneca only sells in major cities in China where the population can afford the products. Even if lower prices can make business sense in some countries, problems such as parallel importing have to be addressed. Overall, there is potential in these markets, but there are many obstacles to overcome.

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