Pharmaceutical companies that thought of the emerging markets as a solution to their woes in Europe and the USA need to tailor their operations to each individual country.
That is one of the conclusions from a new analysis from management consultants Booz & Co which interviewed 12 of the top 15 global drugmakers, accounting for some 50% of total global pharmaceutical revenues . It states that 52% of the top managers who took part in the survey claim that, by 2018, more than 30% of their respective companies’ revenue will come from emerging markets.
Today, the threshold is only 23%, Booz notes, which equates to $191 billion of revenue in emerging markets. Nevertheless, the report warns that "companies should be aware that whilst there is huge potential here, variations within the emerging markets themselves require different and tailored approaches".
Some 27% of those surveyed see current strategies insufficiently tailored to local market conditions to be the biggest failing. One of the executives interviewed said, “one of our biggest mistakes was to treat emerging markets like mature markets. We were wrong. Pharmaceutical strategies have to fit a country’s individual needs and development.”
Taking a local approach
77% of survey participants deemed the deployment of local operational teams in BRICMT (Brazil, Russia, India, China, Mexico and Turkey) markets to be a sensible move, while 67% voiced their support for a local production unit; 65% support the creation of a local R&D division. The Booz report notes that 78% are planning further expansion of their offices in BRICMT, "a sign of the degree of trust companies have in the stability of these countries".
The analysis goes on to say that "whilst emerging markets offer huge untapped potential, they also display a wide diversity in their stages of development". The BRICMT countries are much more developed than some in South-East Asia and Africa, and there is a huge difference in size, yet "they are all regarded as 'emerging markets'."
Booz claims that "the vast majority of decision-makers remain cautious about these second-tier markets, despite the projected growth rates in Africa of 28%". Collaborations with governments or local sales representatives are currently preferred in the latter.
Stephan Danner, partner with Booz’s health practice, concludes that "in the non-established markets, pharma companies have a unique opportunity to enter early and shape the market”. He added that the emerging markets "have long been regarded as the 'promised land' of the pharmaceutical industry, yet, so far, ambitious targets remain unachieved".
In terms of the drugmakers best-placed to succeed, participants in the Booz plump for Novartis and Sanofi, followed by GlaxoSmithKline, Roche, Pfizer and Merck & Co.