As the major pharmaceutical companies target emerging markets in their growth strategies, a crucial question is how the supplier
base in those markets will evolve. Suppliers in countries such as India and China have long been a source of raw materials
and early-stage intermediates to the pharmaceutical industry, and suppliers in India have been a source of advanced intermediates
and active pharmaceutical ingredients (APIs) to the generic-drug industry. Suppliers from emerging markets, particularly India
and China, historically have been regarded as a source for lower-cost production for pharmaceutical ingredients exported to
North America and Western Europe.
(PHOTO: DIETER SPANNKNEBEL, DIGITAL VISIION, GETTY IMAGES)
As the pharmaceutical majors target emerging markets, however, an important consideration is how the players—Big Pharma through
its own captive production, domestic suppliers in emerging markets, and Western suppliers—will participate in the emerging-market
growth plans of Big Pharma. This participation can evolve around Big Pharma's positioning in emerging markets for established
and new products, research and development (R&D) activities for new product development as well the historical role of emerging
market suppliers in offering low-cost production for exported products. As with any customer–supplier relationship, the extent
to which suppliers move further up the value chain in serving innovator-drug companies market will be dictated by issues of
cost, quality, and security of supply.
Market numbers and strategies
Despite economic conditions affecting some emerging markets, projected growth in the BRIC countries (Brazil, Russia, India,
and China), Turkey, South Korea, and Mexico is strong as these markets are expected in aggregate to increase by 12–14% in
2010, and 13–16% through 2013, according to IMS Health. China's pharmaceutical market, alone, is expected to increase in excess
of 20% per year and contribute 21% of overall global pharmaceutical growth in 2013 (1).
Although the United States is projected to remain the largest consumer of APIs (both innovator and generic) with a projected
36.6% share in 2013, China will become the largest consumer of generic APIs with a projected 26% share of the global merchant
market for generic APIs followed by the US with a 20.5% share, according to a recent analysis by the Chemical Pharmaceutical
Association (CPA), a Milan-based association representing Italian producers of intermediates and APIs for generic drugs (1).
Responding to these dynamics, several pharmaceutical companies have reorganized operationally to support their growth strategies'
in emerging markets and emphasized their financial performance in these markets in recent investor presentations. Additionally,
select companies are increasing investment, including for R&D, and have developed supply arrangements for established products
in emerging markets.
Following its $68-billion acquisition of Wyeth (Madison, NJ) last year, Pfizer (New York) established an emerging-market business
unit as one of five business units in its biopharmaceutical business, which also includes a business unit for established
products. As part of its strategy for emerging markets and established products, in May 2009, Pfizer partnered with two Indian
pharmaceutical manufacturers: Aurobindo Pharma (Hyderabad, Andra Pradesh) and Claris Lifesciences (Ahmedabad, Gujarat). Under
the deal with Aurobindo, Pfizer acquired the rights to 55 solid oral-dose products and five sterile injectables in 70 emerging
markets and will commercialize those products. Pfizer also acquired the rights to 15 generic injectables from Claris Lifesciences.
In January 2010, Pfizer formed a collaboration with the contract manufacturer Strides Arcolab (Bangalore, Karnataka, India)
under which Pfizer will commercialize off-patent sterile injectable and oral products in the US. The finished dosage-form
products will be licensed and supplied by Strides, Onco Laboratories and Onco Therapies, two joint ventures between Strides
and the generic pharmaceutical company Aspen PharmaCare (Johannesburg, South Africa).
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