Emerging Markets: Not The Promised Land They Once Were?
The announcement last week that India would no longer be licensing Fixed Dose Combination branded generics was another blow to big pharma's plans for the region, but does this signal a growing shift for all emerging markets?
As the governments of emerging economies bow to increasing pressure, both from within their borders and internationally to improve the health and wellbeing of their populations, it has become increasingly obvious that with their economies still at such an early stage, there has to be a payoff between the cost of healthcare and what the countries can realistically afford. But what are the implications for big pharma?
There has long been a huge discrepancy between the standard of healthcare provided in the West and that available to developing countries.
The only way that countries like India, China and Indonesia can move their citizens to anywhere near the level of healthcare provision that we take for granted in the West, is by offering a more benefits-driven healthcare system. And to do this, they have to take a more hands-on approach to controlling costs.
One way of doing this is to improve the countries’ infrastructure, sanitation, water quality, etc, but this takes time. So what is the only other real cost-saving area left to them? The price of drugs.
Indeed, the pressure to reduce the cost of medication is universal; the developed world’s governments are also working hard to contain spending on drugs, especially in the current climate of economic uncertainty.
So is the provision of branded generics for emerging markets, once seen as the Holy Grail for big pharma in the 'post-blockbuster era', turning into a bit of a damp squib? With legislation being pushed through quickly, and even the threat of strong action hovering over healthcare professionals who don't follow the guidelines by prescribing only generic drugs, there are certainly many changes happening fast.
The emerging markets are, in effect, trying to achieve in a few years what the West took decades to evolve. Fast-track procurement systems are pushing for decisions in weeks, not months, and governments are looking to the developing healthcare market to deliver results quickly. All this means that the big pharma companies are unable to use their tried and trusted methods to market their products and have instead to rapidly learn a different way of working.
This process is not only healthcare-driven but also political, with governments of emerging markets desperate to be recognised as global players. The need to improve has never been greater. According to a senior figure in a global ad network in China: “At the end of the day, in countries like China, with over 1.3 billion people, many with underlying health issues, the governments have to be pragmatic.”
In short they simply don’t have time to do things the usual way.
No more brand names
In India, states have now been ordered to stop issuing licences for the manufacture or sale of fixed dose combination drugs with brand names. And the health ministry has requested that all state health secretaries only issue licences for generic medicines, rather than those with branded or trade names.
Indonesia has also followed suit by authorising low-cost versions of HIV drugs, opening the door to intense generic competition. And it looks like this ‘domino effect’ is set to continue across therapy areas and developing countries alike.
We asked a senior emerging markets director from big pharma who, while in complete agreement, wished to remain anonymous. He added, “As it becomes increasingly difficult, albeit insurmountable to bring people above the poverty line in larger emerging market countries, governments should pay attention to help develop a distribution system that can handle tiered pricing within these countries.”
“Providing an infrastructure and legal framework to stop product diversion from public market to private (irrespective of the definitions of public & private) to the manufacturers will help gain broader access for medicines throughout the population pyramid.”
Drug Reimbursement Lists
China and South Korea have so far taken a different approach, allowing Western companies to tender for inclusion on fixed-price drug reimbursement lists. With massive pharma-related foreign investment going directly to China, it is perhaps not surprising that its Ministry of Health prefers to negotiate discreetly with big pharma for price discounts. However, China does have the legal framework in place to enable the approval of compulsory licensing for generic medicines, so there is the potential to bypass patents and implement low-cost generic drug manufacturing. Yet it seems highly unlikely that this will happen imminently.
Even though the Indian government has announced the end to branded generics, there is inevitably going to be huge kickback from the country’s pharmaceutical industry, which will question the abrupt nature of the decision. Implementation of the plan will doubtless carry extremely complex administration issues and cause a great deal of confusion.
Nevertheless, the global pharmaceutical industry needs to be prepared for what could eventually become the inevitable and use all its resourcefulness and innovation to keep its contribution to healthcare as significant as ever.
Time to take a fresh approach?
So what does big pharma do next, being squeezed as it is in both the emerging markets and at home, and no longer able to rely on the blockbuster pipeline? What is a successful strategy as the 21st century unfolds?
One way forward could be a closer link between the prescription-only and consumer sides of the business, offering a more holistic approach to healthcare. We are becoming much more patient-centric, and the over-the-counter and direct-to-consumer business brings with it a much greater understanding of patient/consumer behaviour. These insights can benefit both pharma and payers as they can help improve areas like compliance and outcomes which ultimately drive down costs.
With the incidence of chronic diseases like diabetes, obesity, and cardiovascular disease rising dramatically in places like China (and the West!), diagnostics is another area in which pharma can bring greater cost benefits to emerging markets because, by recognising conditions early, treatment can be better-managed in terms of getting the right treatment and the right dosage. And, by offering diagnostics and treatment as one package, pharma could potentially leverage rewards from this more personalised approach to patient care.
In the end, the global healthcare market will be governed by one set of needs: to offer the best level of healthcare available, in the most cost-effective way. A holistic approach is the answer: prevention, reliable diagnosis and tailored treatments, with patient choice at its heart.
Relying simply on making and selling drugs is not a sustainable strategy in the new global pharma market and, as the emerging and developed markets get ever closer, the patient will ultimately be the one who drives the industry.