Thinking of expanding into pharmerging markets? Then read below!

As Benjamin Franklin said, “By failing to plan, you are preparing to fail”. This saying could not be more relevant for the pharma industry, where the competitive and ever-evolving landscape calls for meticulous planning, especially when entering new markets. Pharma companies must consider risks and benefits to create winning market entry strategies when expanding into emerging markets.

Saturation in developed markets shifts the Pharma focus to emerging ones.

The global economic crisis, the Covid-19 pandemic’s impact on the pharma industry, patent protection/expiration, inflation, pricing pressure, and generics’ competition are reasons behind the slow growth in developed markets. According to IQVIA’s report, the global medicine market is expected to grow at 3.6% CAGR ($1.8 trillion in total market size) through 2026. However, the US market net CAGR growth in the next five years is expected to be only between 0-3%, while in the past five years, it was 3.5%.

At the same time, forecasts see rapid growth for Pharma in emerging markets. With this “growth gap” in developed markets, it is no surprise that pharma companies explore new business models and seek to diversify their investments. And emerging markets, despite their challenges, are attractive investment alternatives and hold the key to pharma industry growth.

Within the following paragraphs, we will explain the term “pharmerging markets” and discuss what makes them attractive investment destinations without overseeing the associated risks. We will present market entry strategies and discuss real-life best practices along with the poor decisions of pharma companies across the globe.

Which are the top pharmerging markets, and why should Pharma care?

Pharmerging markets are the most promising, fast-growing relevant to the pharma industry emerging markets. Although some drugs face revenue declines, these markets have faster growth rates than the developed ones.

According to the Precedence Research report, published in May 2022, “the global pharmerging market size was valued at USD 1.48 trillion in 2021, and it is expected to surpass around US$3.21 trillion by 2030” (8.98% CAGR 2022-2030).

The same report classifies pharmerging countries into three tiers according to their growth rate.

Tier I includes China, Tier II includes India, South Africa, Brazil, and Russia, and Tier III includes Indonesia, Turkey, Mexico, Argentina, Saudi Arabia, Poland, Ukraine, Algeria, Egypt, Thailand, Nigeria, Pakistan, and others.

Countries in Tier I and II are expected to have faster growth than those in Tier III, which are expected to have a steady growth rate over time. Nigeria, Thailand, and Indonesia are exceptions, as rapid growth is expected in their case.

Why investing in pharmerging markets is a good idea.

Besides the pharma industry reaching saturation levels in developed countries, specific characteristics in the pharmerging markets favor healthcare investments at the latter ones. The high pharma growth rate in these markets, where “hunger for medicines” is observed, is the primary reason that makes them attractive investment destinations. Demographic and socio-economic factors such as the geriatric population increase, the prevalence of chronic non-communicable diseases, the growing awareness of diseases and treatment options, and improved adherence contribute to this growth.

Two strategies to overcome barriers when expanding into pharmerging markets.

Despite their promising speedy growth, pharmerging markets are characterized by political instability, IP protection issues, local competition, organizational setup and regulatory framework hurdles, local infrastructure limitations, and elevated out-of-pocket costs.

Pharma companies can overcome a few of the above limitations by adapting their pricing strategy and building partnerships (also proceeding to acquisitions) to strengthen their distribution channels.

Formulating a winning pricing strategy in pharmerging markets.

Assessment of each country’s health economics to adjust pricing strategies properly is necessary. When designing their health economics plans, cost-effectiveness analysis (CEA), and budget impact models, the pharma companies should formulate strategies aimed at the public (government, regulatory agencies, reimbursement situation, etc.) and private sector (collaborations, access pricing programs, etc.).

For example, a pharma company that plans to expand into Iran with oncology and diabetic drugs should consider that QALYs (Quality-Adjusted Life Year) and DALYs (Disability-Adjusted Life Year) are the most used metrics to evaluate their cost-effectiveness.

A pharma that invests in biosimilars and generics in any emerging market should lower out-of-pocket costs and ensure sustainable medicines are available at affordable prices to broaden patient access. As healthcare expenditure in emerging markets relies primarily on out-of-pocket spending and private insurance, pharmaceutical companies usually develop programs targeting specific diseases to facilitate patients’ low-cost access to medication.

Building strategic partnerships in pharmerging markets

Access and growth in emerging markets depend heavily on building the right partnerships with local stakeholders. Joining forces with manufacturers, governments, and even NGOs allows pharma companies to enter those markets successfully, understand them better, and serve them better by establishing powerful distribution channels.

Pharma partnerships with manufacturers

Partnering with manufacturers is a standard localization initiative pharma companies follow in the pharmerging markets to leverage their reputation and strengthen their marketing and distribution channels. As local companies understand local needs, such partnerships help the Pharma companies establish their pricing strategy, prevent culture mismatches, and facilitate disease awareness activities (health education campaigns).

Merck & Co. followed this strategy when it entered a licensing agreement with Indonesia Bio Farma to produce the MSD four-valent HPV vaccine locally. AstraZeneca, in Abu Dhabi, entered a strategic partnership with local G42 Healthcare to boost the manufacture of innovative drugs locally.

Pharma partnerships with governments/government organizations

Another common entry strategy in pharmerging markets is partnering with governments/government organizations, for example, through public procurements. These collaborations secure the deal, ensure continuity in the supply chain, and give access to local media to run advertising campaigns resulting in higher locals’ trust.

For example, in 2018 in Argentina, four public entities (Ministry of Health, IOMA, PAMI, SSS) designed a tender to procure factor VIII for hemophilia to facilitate access and save millions. The winning bid achieved a reduction of 80% in the price of factor VIII and saved ARS 1.4 billion.

Pharma partnerships with NGOs

The NGOs, through humanitarian interventions, offer primary care, assist in medicine distribution and facilitate access to cheaper drugs by raising funds and donations.

Pharma companies engage in CSR activities by supporting charities and NGOs as part of their entry strategy in pharmerging markets. This engagement also helps them establish their presence afterward.

In Rajahmundry, India, GSK Asia Private Limited joined forces with Sevamob (NGO) and launched a primary healthcare mobile van to provide access to healthcare services. Over twenty free primary healthcare camps crewed with doctors, and nurses would benefit over 19,000 patients within the year, offering check-ups, free medicines, and in some cases, eyeglasses.

This is how Big Pharma wins in pharmerging markets.

Below, we discuss successful examples of pharma companies’ expansions into pharmerging markets per Tier.

Sanofi and Roche built partnerships with local companies to expand into China (Tier I)

China (Tier I) is considered the top pharmerging country of interest, so it is only logical that there are lots of pharma expansion examples.

Sanofi collaborated with the Chinese company Innovent Biologics to develop and commercialize innovative cancer treatments. Specifically, they entered a licensing agreement for two drugs, SAR408701 and SAR444245. Through this agreement, Innovent will have exclusive development and marketing rights of SAR408701, and Sanofi will be entitled to up to $81 million in milestones and royalties.

Roche collaborated with Hong Kong Science and Technology Parks (HKSTP) to build an innovation platform to support and guide startups and promote a data-sharing environment.

Big and small Pharma turn their eyes to India and Africa (Tier II). The AstraZeneca and Novartis cases.

As for Tier II, this list presents some recent pharmaceutical investments in India, including a technology transfer agreement between IIL and BIBICOL to boost vaccination in India and the AstraZeneca launch of the Clinical Data and Insights division.

Moreover, in Africa, Novartis collaborated with the Africa Medical Supplies Platform (online marketplace) to facilitate supply and access to 15 generics and OTC medicines related to Covid-19.

Janssen Cilag partnered with M8 and expanded into Mexico (Tier III).

In Mexico, M8 Pharmaceutical entered into an agreement with Janssen Cilag for exclusive promotion and distribution of selected drugs for various diseases of CNS (CONCERTA, HALDOL DECANOAS, REMINYL and more). The goal of this collaboration is to establish expanded access to medically established brands for more patients.

When Pharma expansion intro pharmerging markets did not go as planned…

Due to the inherent risk of investing in emerging markets, there are several cases in which things didn’t go as planned, and Pharma companies could have managed better.

Late entry made Pfizer sell its biologics facility to Chinese CDMO WuXi Biologics.

In 2021, Pfizer, after a comprehensive review of the biosimilars market in China (Tier I), decided to stop biosimilars programs there and sell its biologics facility ($350 million investment in 2016) to Chinese CDMO WuXi Biologics. The late entry of Pfizer’s biosimilars into the already saturated market did not allow Pfizer to gain market share.

What have price cuts done to GSK and AstraZeneca in China?

Two more examples of how the economic instability in emerging markets can influence pharma investments are the 2016 GSK’s and AstraZeneca’s high price cuts. Specifically, the lung cancer pill IRESSA (AstraZeneca) and the hepatitis B drug VIREAD (GSK sells it in China) faced a price cut from $2.29 to $1.06 and from $229 to $75, respectively. Τhis price cut made VIREAD eligible for state reimbursement, meaning broad access for patients.

Local player Biocad shrunk Celltrion’s market share for Infliximab in Russia.

Finally, an example of how regulatory framework and competition from local companies can impact expansion in pharmerging markets is the case of Celltrion and Biocad for infliximab biosimilar in Russia. Negotiations upon infliximab biosimilar discounts between the Russian government and Celltrion (along with its partner Egis) failed. The result was that the Russian government favored Biocad’s infliximab, and eventually, Biocad’s asset had 92.8% market share, while Celltrion’s infliximab had 7.2% even though it was launched earlier.

Key takeaways on expansion into pharmerging markets

The slow growth in developed countries and the promising growth rates forecasts for pharmerging markets shift the investment interest to the latter, making it “a must” growth strategy.

Pharma companies need to examine how to minimize risk as they proceed to high-cost investments to enter new markets. That is why they should adapt their pricing strategy accordingly and build partnerships with local private, public, and non-profit stakeholders. These partnerships help Pharma companies “get their foot in the door”, ensure continuity in the supply chain, strengthen their distribution and marketing channels, and gain local publicity and trust. The fact that pharma foreign investment contributes to the local economy and offers employment opportunities to the local population is also highly appreciated.

However, late entries, unpredicted high price cuts, or even negotiations that do not work can impact profitability and future returns, and Pharma companies may even have to consider deinvesting. That is why formulating both a market entry and a market exit strategy is required so that the Pharma company either wins or withdraws with minimum losses. When it comes to critical strategic decisions that impact long-term profitability and hurt the company’s bottom line and reputation, Pharma managers should gather all the available competitive intelligence and decide wisely “what they get themselves into”.

Are you planning to expand into a pharmerging market and do not know where to start?

Or do you need a partner to help you identify new pharmerging market opportunities?

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https://www.iqvia.com/-/media/iqvia/pdfs/library/publications/the-global-use-of-medicines-2022.pdf

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https://windrosecg.com/posts/emerging-markets-series-topic-3

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https://www.imarcgroup.com/pharmerging-market

https://www.sciencedirect.com/science/article/pii/B9780123756787012189

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https://kinapse.com/wp-content/uploads/2018/11/Market-Access-in-Emerging-Markets.pdf

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https://www.einnews.com/pr_news/596767929/pharmerging-market-to-develop-new-growth-story-despite-u-s-economic-crises-here-s-why