Over the last half-century, globalization has been regarded as one of the most important—if not the most important—drivers of economic activity around the world. Increased global connectedness has spurred a shift of focus to developing and emerging markets in many industries, including automotive and mobile devices.
Pharma, on the other hand, remains a traditional industry in which high-income countries dominate both production and consumption. Although lower-income countries are on their radar, pharmaceutical companies are moving more slowly in this direction than others. Despite this tentative progress, emerging and developing markets open up a host of opportunities in the global pharmaceutical industry.
Currently, six growth markets generate three-fifths of pharma’s revenues from prescription products: the U.S., Japan, France, Germany, UK, and Canada. Behind them stand the BRIC markets (Brazil, Russia, India, and China), where demand for prescription products is expected to increase. Several fast followers with an expanding middle class—such as Argentina, Egypt, Indonesia, Mexico, Pakistan, Poland, Romania, South Africa, Thailand, Turkey, Ukraine, Venezuela, and Vietnam—are similarly expected to fuel demand.
Spending on medicines in the growth economies is increasing at a faster pace than elsewhere. Aggregate annual spending may reach $499 billion by 2020—up from $205 billion in 2011—as demand grows due to economic expansion and improved access to healthcare.
Elsewhere, GIIPS economies (Greece, Ireland, Italy, Portugal, and Spain) pose financial challenges in the global pharmaceutical industry. The European Federation of Pharmaceutical Industries and Associations estimates that price cuts and discounts in these countries reduced the industry’s revenues by more than €7 billion ($8.8 billion) in 2010 and 2011. By 2020, pharma sales revenues are expected to fall to $65.4 billion by 2020, a decrease from $81.3 billion in 2011.
Another challenge threatening drug sales in growth markets is their intrinsic societal gaps. In addition to political, geographic, religious, social, and structural differences, there is often a great variance between countries in terms of the types of therapies demanded by the populace, as ethnic origin, diet, and environment contribute to the prevalence of particular disease subtypes in specific locales. Moreover, the ability and willingness to pay for new medicines may vary from country to country; a factor that undermines the global connectedness of pharma markets.
Future expectations and how to adapt
Even in the face of these uncertainties, pharma is alive and thriving. Clinical trial activity continues at a furious pace—many of these trials global in scale—with sites not only in the big six growth markets, but also in developing markets with a growing presence of certain diseases, including India and Latin America.
The number of clinical trials and commercialized products in developing countries will also grow as governments increase their healthcare budgets. The public, as it becomes more aware of specific populations predisposed to particular diseases, will also have influence.
Before searching emerging markets for eligible clinical trial participants or making these markets more prominent in product launch rollout plans, pharma companies must be mindful of two things: regional differences that may affect adoption, and increased regulatory scrutiny as developing countries crack down on ethical conduct compliance. But this shouldn’t hinder companies from embracing change. Globalization is likely to give drug development programs a broader geographic footprint—which is never a bad thing—and interest in personalized medicine, rare diseases, and special populations will continue to drive clinical investigation efforts.
This blog post is based on a chapter of our new whitepaper, Adapting to Geographic Shifts in the Pharmaceutical Market: Forces of Change in the Industry. To download a copy and learn more about global changes in pharmaceutical practices, click here.