Pharma Faces Hurdles in Emerging Markets

Monday, January 4, 2016

Faced with slowing markets and impending patent cliffs in the U.S. and Europe, pharma companies are increasingly looking to develop and launch new drugs in emerging markets in Asia, Latin America, Eastern Europe and the Middle East.

Indeed, emerging markets are poised to occupy a third of the global pharmaceutical market by 2016, where aging populations will seek improved care for chronic diseases like diabetes, heart disease and cancer.

Despite the huge growth potential, however, a number of challenges have tempered initial enthusiasm by the pharmaceutical industry. Among the perceived barriers to market growth in emerging markets, according to a report from Strategy&, are limitations in health infrastructure public funding, healthcare affordability, IP protection, and talent management.

Biotech Connection – Bay Area (BCBA) recently held a panel discussion at the UCSF Mission Bay Campus to review key challenges and opportunities for biotech and pharma companies seeking to enter emerging markets. Invited speakers included Anton Espira, Chief Operating Officer of Neopeutics; Dennis Holl, Global Market Planning Manager at Genentech; and Miguel Martin de Bustamente, an Associate at the consulting firm CB Partners. BCBA president Ben Cohn moderated the discussion.

The panelists agreed that emerging markets should be seen from a long-term perspective. While some larger markets in China, Brazil and Indonesia — areas of intense interest from big pharma, says Holl — other markets will take longer to bear fruit.

Commitment by pharma companies to a developing region can signify confidence in the market’s growth potential and willingness to forgo short-term gratification.

Indeed, even usage of the term “emerging market” reveals the substantial challenges faced by Western pharmaceutical companies seeking to create a go-to-market strategy in these regions.

For example, “emerging markets” often refers to Brazil, Russia, India, China, Mexico, and Turkey but can also be extended to Southeast Asian and African regions as well. As Miguel Martin de Bustamente pointed out, the term arose from recognition of a globalized health economy, where developing countries were categorized as a whole as “emerging markets.”

Yet the risk in this blanket categorization is that it obscures huge variance between the different countries, differences which can include epidemiology, culture, governmental prioritization, developmental stage, and healthcare infrastructure.

Indeed, pharmaceutical leaders that were surveyed by Strategy& cited “insufficient tailoring of approaches to local needs” as the top strategic shortcoming.

Key distinctions between countries often emerge from the government’s involvement and unique policies in the healthcare and biotech space. For example, the degree of private versus public healthcare coverage varies substantially and can subsequently influence how a country decides to allocate limited healthcare expenditure.

Should they reduce cost-sharing for the patient, reimburse more products, or extend population coverage?

A country may also have unique tactics to foster biotech innovation and distribution. Many provide incentives to stimulate local growth and manufacturing, such as tax breaks offered by the Malaysian government or matching investment from a specialized fund in India. In Russia, regulators require drug developers to conduct clinical trials domestically before gaining approval.

Overall, emerging markets can be highly political with a notable amount of protectionism. While some countries may allow a foreign pharmaceutical company to do business, they may encourage technology transfer and licensing with local partners.

India, in particular, is a leader in generic production and distribution, and has denied patent rights to foreign companies in several instances.

In these situations, a foreign pharmaceutical company may find it necessary to license their product to a local company and collect royalties, simply to access the market and compete with low generic prices.

Anton Espira emphasizes the benefits of partnering with local companies to facilitate entry into a new market, as well as participating in local policy creation. Such involvement can take the form of lobbying efforts, but also can be a way to genuinely share expertise in regions where there has been little local experience in biotech.

This strategy may help to counter the lack of transparency that can occur with regulatory enforcement and decision-making.

Beyond facing policy barriers, Western companies may also encounter unexpected cultural barriers at the patient level.

For example, sometimes seemingly simple details like the color of a pill can influence whether a patient adheres to a therapy regimen. Or, as Espira discussed, adoption of a Western drug can be limited in some regions where there has been a long history of traditional medicine.

Again, companies may benefit from actively engaging with local medical societies or physician-patient groups to increase patient awareness and incorporate patient feedback.

Lastly, even if interests of the country and the foreign pharmaceutical company are aligned, there are often resource constraints that limit access and distribution among the population.

When asked how distribution can be boosted, the panelists suggested public-private partnerships, collaborations between companies and payers like insurance companies or private foundations, as well as patient assistance programs.

Interactions like these have been successfully executed with programs like Novartis’s Glivec International Patient Access Program (GIPAP), which partnered with The Max Foundation to provide imatinib to eligible cancer patients in developing countries.

Private foundations can also powerfully transform access. Because the Bill & Melinda Gates Foundation acts as a payer for HIV medication in certain African countries like Botswana, they have allowed for market entry by the pharmaceutical industry. The large demand coupled by reimbursement has resulted in a substantial drop in product cost and further acceleration in distribution.

For those interested in pursuing careers involving the pharmaceutical and biotech industries in emerging markets, Martin de Bustamente emphasizes the importance of going to the ground level to experience the local environment and gain insight in prioritization differences. Depending on your goals, Holl recommends looking at opportunities in large multinational corporations that have rotation projects abroad.