Expanding into Emerging Markets – Latin America, APR and Eastern Europe

It is no secret that the global pharmaceutical industry is big business. Estimates vary – but $770 billion is a pretty accurate number. Of that global total the United States is still a nation of big spenders when it comes to prescription drugs – annual sales in 2009 were estimated at $300 billion – with a projected growth rate of 5%. However, looking at these numbers in the context of global sales, a 5% (single digit) growth rate is modest, especially when compared to the projections for growth in ’emerging markets’. The off shoring and outsourcing of manufacturing operations in the USA and Europe to ‘lower cost countries’ has resulted in breath-taking economic growth in the so-called BRIC nations (Brazil, Russia, India and China) with a spill over to their neighbors. Not only are these nations of ‘new consumers’ enjoying the new found luxury of consumer goods, their citizens are becoming more aware of, and concerned about personal health and welfare. In addition to increased spending by governments on preventative healthcare, there is an increased awareness and interest from the populace in products for both prevention and cure!

An increasingly mobile global population has increased the incidence of outbreaks of some illnesses that had been virtually eliminated in First World nations – for example Tuberculosis – highlighting the need to vaccinate the population as part of a prevention and eradication strategy. Vaccines, previously the red-haired step child in some organizations, have gained in importance – boosting the profits and growth for companies like GSK, Sanofi and Merck – to name but a few. In addition to pediatric vaccines, there is an increase in the market for adult vaccination, particularly for global travelers concerned about malaria, typhoid and the glowing lexicon of flu species. Which brings me back to the single digit growth of the drug market in the USA and Western Europe – contrasted with “emerging markets” to include the BRIC nations – as well as Venezuela, Poland, Argentina, Turkey and Mexico – to name a few. Sales in these countries in 2009 were close to $123 billion – accounting for 37% of industry growth – and GROWING! Just looking at vaccines as a market sector, the Indian and Chinese vaccine markets are estimated at a CAGR of 16 and 17.8 percent respectively from 2006 to 2013!

Estimates of further growth – current ’emerging market’ 16% of global drug sales increasing to 21% by 2013 are not unrealistic are adding fuel to the fire, with many European and US based pharmaceutical companies expanding into these emerging markets.   No wonder the Consulates of the BRIC nations are busy – a recent need for a visa in order to visit Brazil encountered several unexpected delays due to increased demand!

What is surprising however, is the fact that the top 15 pharmaceutical companies – to include Pfizer, Merck and Eli Lilly – collectively derive less than 10% of sales from emerging markets (according to a recent report by IMS Heath, Norwalk CT based research company).

Using this virtual forum I would like invite readers to share your own perspectives on the risk and rewards of establishing manufacturing and distribution operations in these emerging markets. Some questions I am seeking answers to include:

1. What are some of the key considerations when exploring new manufacturing locations – supply chain concerns? Regulatory constraints? Financial considerations?

2. Is there an evolving ‘global patient’ or does each market have specific ethnic and cultural considerations that need to be taken into account?

3. How can world class pharmaceutical companies bring affordable health-care to patients – across a global landscape that includes some of the poorer nations?

4. Is there a ‘one size fits’ all when it comes to global markets – or do regional demographics need to be factored into business models for manufacturing and distribution?

5. Are there lessons that can be shared by those that have already opened the latch to the  ‘Pandora’s Box’ of emerging market development? If yes – please share!

 I look forward to a lively exchange – as the expression goes – It is a small world after all!


Carla Reed will be speaking at the INTERPHEX 2011 Education Conference.  She has more than 20 years’ experience working in global supply chain and logistics environments. An authority on ‘discovery to distribution’ supply chain best practices in the life sciences industry Carla leads the Supply Chain Management team at Tunnell Consulting. Tunnell Consulting integrates strategic, technical, process and organizational skills to boost its clients’ business performance.

Contact Carla directly at reedc@tunnellconsulting.com


Official blog of: INTERPHEX New York - www.interphex.com
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