The pharmaceutical majors' strategic shift to emerging markets relates to those markets' strong growth. The global prescription-pharmaceutical market was valued at $837 billion in 2009, according to an April 2010 analysis by the market research firm IMS Health. Led by growth in emerging markets, the global prescription-drug market increased 7% in 2009, up from 4.8% growth in 2008. IMS projects that global pharmaceutical sales growth will increase 4–6% in 2010 and will increase at a 5–8% compound annual growth rate during the next five years, when the market is projected to reach $1.1 trillion in 2014.Growth in the pharmerging markets, defined by IMS to include Brazil, Russia, India, China, Turkey, Mexico, and South Korea, will be more than double overall pharmaceutical industry growth. Pharmerging markets are expected to grow at a 14–17% pace through 2014, compared with only 3–6% growth in the developed markets. Relating these percentages to absolute growth, the aggregate growth through 2014 from pharmerging markets will be similar to the growth experienced in developed markets; both will be around $120–140 billion. This projected parity of aggregate growth compares with growth during the past five years of $69 billion in pharmerging markets and $126 billion in developed markets.
Part of the focus of the pharmaceutical majors' activities in emerging markets has been to expand into these markets with locally based companies that have manufacturing, supply, and distribution networks in their domestic markets, as well as in other markets in India, China, South America, and Central and Eastern Europe. The focus is largely on established products—generic drugs or innovator drug products that may be late in their product life cycle—reflecting the lower-cost product mix that may be needed to compete effectively in those markets.
Kimberly Wagner, senior partner and managing director at The Boston Consulting Group, who spoke at the Drug, Chemical, and Associated Technologies Association's (DCAT) Business Development Forum held during DCAT Week in mid-March 2010, explained some of these differences (1). "In established markets, product strategy evolves around new chemical entities, a long innovation cycle, building a strong patent position, and seeking registration or approval of pharmaceutical products in the US and European Union," she said. "In contrast, the criteria for success in emerging markets evolve around line extensions and fixed combinations, a rapid innovation cycle, speed to market, brands, and local registration," she said. With these requirements, the emphasis in emerging markets is on local manufacturing, low-cost sourcing and manufacturing, and product registration of multiple small products that can be differentiated at a local level, explained Wagner. For established markets, the product strategy is different, marked by an emphasis on achieving higher scale in manufacturing to meet larger volumes, the use of imports from high-cost countries such as the US or countries in Western Europe, and more reliance on the global blockbuster model (1).