This article is part of a special issue on Preferred Providers.
Emerging markets are an important source of strategic growth for pharmaceutical companies. As companies expand, they must
consider not only how to position themselves in specific product markets, but also how they should align their sourcing, procurement,
purchasing, and related supply-management groups. Recent activity from the pharmaceutical majors shows the greater importance
and their positioning in emerging markets. Also, a pharmaceutical benchmarking analysis reveals the growing role of supply-management
organizations in emerging markets, and another survey shows the rising role of China and India in overall economic innovation.
The pharmaceutical industry's focus on emerging market stems from strong growth projections, which outpace overall pharmaceutical
industry growth. In 2011, the value of the global pharmaceutical market is expected to grow 5–7% to $880 billion, according
to October 2010 estimates by IMS Health, improving from 2010 industry growth of 4-5%. Seventeen so-called pharmerging countries,
as defined by IMS, are forecast to grow at a 15–17% rate in 2011, to $170–180 billion. China's pharmaceutical market, which
is predicted to grow 25–27% to more than $50 billion in 2011, is currently the world's third-largest pharmaceutical market.
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Other market estimates are equally bullish. The overall market for therapeutic drugs in emerging markets in 2009 was $131.4
billion and $145.8 billion in 2010, according to a January 2011 analysis by the market research firm BCC Research. The countries
and regions included in this analysis are Latin America, China, Eastern Europe, the Middle East, South Korea, India, Russia,
and South Africa. These markets are expected to collectively increase at a compound annual growth rate (CAGR) of 8% between
2010 and 2015 to reach $214.2 billion. The Eastern European market was estimated at $32.2 billion in 2010, an increase of
13.4% from 2009. CAGR of 13.4% is estimated through 2015, when the market is expected to reach $55 billion. Russia's pharmaceutical
market was estimated at $6.5 billion in 2009 and $7.4 billion in 2010. CAGR of 7.1% is estimated through 2015, when the market
is expected to reach $10.5 billion.
Pharmaceutical company positioning
Lured by the potential and the need to strengthen their positions in emerging markets, the pharmaceutical majors are investing
in development and manufacturing in emerging markets through several strategies. In some instance, they are making greenfield
investments, and in other instances, they are partnering with domestically domiciled firms to access local markets, particularly
for established products. A review of recent activity reflects those trends.
For example, in November 2010, Novartis signed a memorandum of understanding with the city of St. Petersburg, Russia, confirming
its intent to build a new full-scale pharmaceutical manufacturing plant there. The investment is part of an overall $500-million
commitment in local infrastructure and collaborative healthcare initiatives in Russia planned by Novartis for a five-year
period. Once completed and approved for commercial production, the facility will produce both branded generic drugs and pharmaceuticals.
Construction is scheduled to start in 2011, and the plant is expected to produce approximately 1.5 billion units per year.
In parallel with establishing a manufacturing facility in Russia, Novartis said it plans to continue to expand its investment
in research and development (R&D) and public healthcare collaborations with the Russian government. These activities include
collaborations with universities and emerging Russian private businesses in various areas of medical science. These collaborations
may include out-licensing of Novartis compounds to Russian companies, in-licensing and scouting for promising drug candidates
from Russian scientists and universities, and modeling and simulation activities for clinical trials. Additionally, Novartis
plans to double its investments in drug development in clinical trials in Russia and expects to enroll approximately 4000
individuals by 2013.
Novartis also is positioning innovator drug products in emerging markets. In September 2010, Novartis announced that the Russian
health authority, the Federal Service on Surveillance in Healthcare and Social Development, granted approval for the company's
Gilenya (fingolimod) 0.5 mg once-daily oral therapy for the treatment of relapsing remitting multiple sclerosis. Russia was
the first country to approve Gilenya. Novartis expects to launch Gilenya in Russia in early 2011. In September, Novartis reported
that Rasilez (aliskiren), a renin inhibitor, received regulatory approval in China for the treatment of high blood pressure
alone or in combination with other high blood pressure medicines. Rasilez/Tekturna is approved in over 80 countries and was
approved in the United States in March 2007, in the European Union in August 2007 under the trade name Rasilez, and in July
2009 in Japan.
Novartis has stated its interest in expanding in emerging markets. In a November 12, 2010, press statement, the company said
it "plans to strengthen its commercial position in fast-growing emerging markets and develop significant businesses in China,
Russia, Brazil, and India." As part of that strategy, Novartis announced several investments in those markets during the
past several years. The company is investing $500 million in a new vaccine-manufacturing facility in Goiana, Brazil, which
is scheduled to be operational by the end of 2014. The company opened a new technical R&D and active pharmaceutical ingredient
(API) manufacturing facility in Changshu, China to support the production of Tekturan/Rasilez, which included a $56-million
investment in 2009 as part of a $265-million investment in that facility. In November 2009, Novartis announced it is investing
$1 billion during the next five years to expand its research center in Shanghai, making it the company's third-largest research
institute in the world. The company also acquired an 85% stake in the Chinese vaccine company Zhejiang Tianyuan Bio-Pharmaceutical