Pharma: why the wandering eye towards emerging markets?

With slowing growth rates in western pharmaceutical markets, many companies are turning towards the fast growing emerging markets as new sustainable sources of revenue growth, according to a new report by Datamonitor. Brazil, Russia, India, China and Turkey are proving particularly attractive to the industry, as although the current pharma market values in these countries are not impressive compared to more mature markets, they are experiencing "tremendous",​ often double-digit growth rates compared to the "modest"​ four to six percent growth seen in the US and Europe. For example, citing 2006 figures, Brazil's $8.4bn pharma industry is growing at a rate of 24 per cent; and Russia's market, valued at $10.7bn has climbed 27 per cent from 2005. Along with booming economies, the "enormous"​ patient potential of the emerging market countries is the other major draw card for pharma. Although the Russian market has demonstrated tremendous growth over the last few years and Brazil and Turkey's healthcare systems are more mature, in this regard it is China and India that have attracted the most interest from pharma companies, said Datamonitor senior pharmaceutical analyst Tijana Ignjatovic. "The key attraction of India and China is obvious - their huge populations. Even if only a fraction of the population has access to modern drugs, this still represents a sizeable number of consumers."​ At this point, that is exactly what is happening - foreign pharma firms are only managing to tap into a fraction of potential patients in the emerging regions, due to typically poor access to drugs in countries like India and China, and to an extent in Russia, Brazil and Turkey. Reasons for the poor access include cost, availability and infrastructure. Nevertheless, many international companies are already scrambling to get a foothold for the future, as the huge potential of the growing middle class is evident - according to Datamonitor, "the new middle class wants better healthcare and is willing to pay for it". ​ As these countries' economies evolve, so does the disposable income of its populations, and this is ultimately resulting in increased drug consumption, particularly modern western drugs. Investment into public health provision is also now being seen in some of these countries, which is adding to the trend. "The governments are improving public provision of healthcare, more individuals can pay for drugs out of pocket and big pharma are there ready to bank on it and compensate for lower growth of the mature markets of the West,"​ said Ignjatovic. Meanwhile, a rise in the aged population, coupled with an increasingly westernised lifestyle is also resulting in epidemiological trends in emerging market countries becoming more similar to the major markets, thus opening up new revenue streams for the Western firms who already have well established products in these fields. For example, sales of anti-infectives that traditionally dominate emerging markets are slowing down and are being taken over by drugs targeting the nervous system, cardiovascular, gastro-intestinal and metabolic diseases such as diabetes. At present, sales of oncology drugs are still low compared to the major pharma markets, but they are growing at a fast rate. "A shift in therapeutic focus is evident,"​ said Datamonitor. The report is titled "Emerging markets series: Benchmarking key countries Brazil, Russia, India, China and Turkey."