Pharma's Emerging Markets

John MacDonald
The global pharmaceuticals market is undergoing rapid change, with future growth likely to occur outside of traditional core markets.

Many pharma companies plan ambitious geographical diversification to engage with new opportunities in the emerging economies where public health is increasingly affected by chronic diseases. These problems are associated with an ageing global population, rapid unplanned urbanisation and the globalisation of unhealthy diet and lifestyle.

Pharma companies anticipate significant opportunity as these locations show strong GDP growth, expansion of government healthcare, increased purchasing power of growing middle classes, and better awareness around health. Pharma industry sales in emerging markets are estimated to reach US$300 billion by 2017, equivalent to today’s American market plus the top five European markets. This is significant in an industry battling with mature market stagnation, patent expirations, and increased regulatory hurdles.

Pharma industry sales in emerging markets are estimated to reach US$300 billion by 2017...

In recent years, companies operating in mature markets have reduced capital and revenue expenditure, consolidated assets, and focused on improving asset efficiency and driving out unnecessary operational costs. Some have reallocated these savings to build up local operations in emerging markets, resulting in go-to-market models that include local R&D, manufacturing and large salesforces.

Brazil, Russia, India, China, Mexico, and Turkey (the BRICMT economies) have become more competitive as industrial locations. Pharma companies have already targeted these markets, via collaboration with governments, local salesforces, local manufacturing and local R&D. Government policy is especially influential. The Chinese government, for example, has committed to invest billions in healthcare reforms. China is now the fastest-growing market for pharmaceuticals and is expected to be the largest by 2050.

Southeast Asia is the second-largest emerging market, with Africa in third place. Government relationships, partnerships and other collaboration within the existing infrastructure are an especially important part of the strategy for project delivery in second-tier and African markets. Close collaboration with local distributors allows firms to leverage the distributor in order to increase market coverage.

The BRICMT markets are the most mature of the three clusters, and here companies expect to apply strategies similar to those used in mature markets. In the second tier, however, companies are feeling their way carefully, concentrating on networking and distribution. In Africa, strategies are really only just being formulated, with a more cautious approach based on risks balanced against market share, before committing resources. The focus is very much on local partnerships and only limited investment in building local infrastructure.

The BRICMT markets are the most mature of the three clusters, and here companies expect to apply strategies similar to those used in mature markets.

As well as developing the right products and strategy for the right market, pharma companies also face real estate challenges. Outside of staffing costs, owning, operating and maintaining facilities constitute the largest expense, and these emerging markets are no exception. Companies are therefore exploring leaner ways of working, to ensure that their new market’s property portfolio is fit for purpose and aligned with the overall business strategy.

The first challenge is to define market-tailored and effective business procurement strategies for each market segment, with appropriate schedule timeframes. Get this wrong and the result is project delivery with cost and schedule failures, potentially leading to loss of both revenue and business confidence.

Challenges, risks, and investment needs can be addressed by developing long-term robust plans, including a procurement strategy tailored to the local construction market. Effective stakeholder engagement plans will facilitate a timely decision-making process (particularly where issues need to be referred to a central organisation). Other essentials include understanding and detailing the risks and potential mitigation process, addressing a risk-based contingency approach to delivery and understanding total project cost.

Challenges, risks, and investment needs can be addressed by developing long-term robust plans...

Faithful+Gould has a strong track record in all the above service elements, delivered via our integrated project and programme management approach. We have 30 years' sector experience, working with leading pharma companies, from our long-standing operations in the Americas, UK and Europe, Middle East and Asia Pacific. We lead viable project delivery within the right cost model and the right schedule time frame, reinforced by a detailed understanding of the asset life cycle.

We are committed to supporting the global pharma sector. Our highly mobile team of professionals are already bringing best practice to some of the emerging markets, as well as gathering cost data for others. We continue to invest in talent to successfully deliver these complex projects.

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