Forecasting in emerging markets
Maria Lamont, VP finance and operations at Genzyme, on the essentials of global financial management.
By on Feb 16, 2010Maria Lamont, VP finance and operations at Genzyme, on the essentials of global financial management.
Advances in forecasting have helped streamline the manufacturing, distribution, and sales of pharmaceuticals in the US and Europe. But in emerging markets, where gathering raw data is a challenge and delays and cultural misunderstandings are commonplace, forecasting is still a highly uncertain field and makes global financial management difficult.
Trying to get data out of Russia, China, Brazil, parts of India, you cant accomplish that the way you can [in the US or Europe], says Maria Lamont, vice president of finance and operations at Genzyme. You have state-run healthcare systems, and if the government is funding purchases, end-pipeline data is not available.
Value dossiers and technology assessments
Beyond data collection, emerging markets present myriad challenges. For instance, in many emerging markets global pricing and reimbursement is still evolving. If you talk to ten countries and ask them X factory price, youll get ten different answers, says Lamont.
Larger markets like the US and Europe have reliable value dossiers and technology assessments in place, but not so in emerging markets, which makes aligning a regulatory strategy difficult. Some markets will base their dossiers on the US and Europe, says Lamont, but others submit to completely different pharmacopeias, which means the resulting work, timelines, and cost vary tremendously.
And then theres the challenge of delays. Hashing out a regulatory timeline is difficult when time for approval may be anywhere from three months to three years. And thats if you can get your product into the country. It may sound silly, but if it takes you a long time to get your product through customs, that impacts your supply chain, and impacts how you can deliver that product to the market, and as a result [impacts] your revenue. And if first-to-market is what you need to be, or second-to-market, but you cant get your product in and you havent planned for that, it becomes really important in terms of how you address your resourcing.
Global perspective
Thus, a pharma firms approach to global financial management must negotiate these challenges. One key, says Lamont, is to embrace a holistic, global perspective: Every person brings their experience and learning from their own individual lens, their perspective, and that includes their cultural perspective as well. As a financial and business leader and focusing on the global environment, you have to see every side of the story.
Along this line, Lamont says, its critical that a firms governance body is sensitive to global complexities when devising standards: Otherwise, you rollout US standards or European standards that folks [in emerging markets] cant follow and you start to have major deviations that are not explainable from a forecasting perspective.
And make sure that these standards are clearly worded and defined, she says: Definitions become so important when youre dealing with different languages. The definition isnt just to say, Here is what something means. You need to say what it doesnt mean. By doing that, youre creating a frame around the environment.
Incentivizing distributors
Another key is incentivizing distributors. When you have a government-controlled environment, all youre getting is your sell-in to that distributor, you dont get see-through, says Lamont. But if you motivate distributors and make them feel a part of the company, you can foster a relationship in which theyll give you see-through data so that you can track your product all the way to patients and youll ensure they arent partaking in any questionable or illegal practices that could reflect poorly on your company.
The last thing you want to have happen is to have counterfeiting to become an issue for you, or cross-border transactions that you cant identify and track, says Lamont. If you are a US- or EU-based company and your distributor has engaged in something unsavory, youre still accountable because that distributor is perceived as an arm of you.
Cultural understanding
A third important step, and one of the most critical, is cultural understanding. Lamont says that many Western pharmaceutical companies mistake discretion in emerging markets for dishonesty. What we view as dishonest or purposefully withholding some of the truth, other cultures might view as honorable and respectful discretion, says Lamont. I know that sounds bizarre but its true. So you need to take this into consideration when youre doing forecasting. Folks are not consciously lying to you. They didnt think it was going to be important to you. Some folks may lie, but often its cultural. Theyre very respectful of your time. They dont want to embarrass you; they dont want to embarrass themselves. So how do you get around this? If you have sufficient understanding of the business, you can actually ask a lot more clarifying questions (without conducting) an interrogation.
Which returns to one of Lamonts central points: Understanding reduces uncertainty. For any pharma firm to thrive in an emerging market, its essential to establish a transparent environment in which high-level management takes ownership for forecasts (instead of hedging them) and commands a familiarity with local complexities and business drivers.
Performance requires well-educated business decisions, says Lamont. Good clean accurate forecasts and clarity around the business environment leads to excellent and fabulous execution. That dialogue and the conversation are so vital. Its not just the numbers, its what comes with the numbers.