PM360 April 2011

PM360 COVER STORY: Emerging Marketing

By Nick Colucci and Ashley Kuchel

Guiding biopharma clients to on-the-ground success in “pharmerging” markets requires sensitivity, creativity, and flexibility.

THE BIOPHARMACEUTICAL INDUSTRY’S FASCINATION WITH EMERGING MARKETS IS NO SECRET. With 85% of the world’s population living in the “pharmerging” markets, potential for impacting both bottom lines and public health is tremendous. Though they differ dramatically from one another in language, political climate, and culture, these markets share in common a need for sensitivity, creativity, and flexibility.

The 17 pharmerging markets (as identified by IMS Health) are expected to expand by $90 billion between 2009 and 2013, accounting for 48% of annual pharmaceutical sales growth by 2013.¹ These countries—China, India, Russia, Brazil, Mexico, and Korea, among others—also share 1) a rapid growth in demand for healthcare due to an aging population, 2) previously limited and often unequal access to quality care, and 3) population disease profiles that are notably different from those in major pharma markets.

In addition, each government has its own health reform agenda, involving quality assurance, generic policies, and access and distribution. Keeping pace with the policy reforms within countries is essential to balancing the organization’s approach with opportunities. As companies seek to deliver medicines and improved health to these populations, marketing takes on new significance—and faces new challenges.

A HEIGHTENED SENSITIVITY TO CULTURE
The familiar Western paths for reaching physicians, patients, payers, and regulators may not apply in pharmerging markets. Reliable information we so often find via trusted websites or media in the U.S. and Europe is less readily accessible in these nations. Medical infrastructure, insurance coverage, regulatory processes, and even patient biology are just a few of the factors impacting outreach strategy. All of this demands that marketers establish strong local networks and personnel bandwidth to keep up.

Colleagues who understand the culture are invaluable in this context. The Chinese concept of guanxi, implying a mutual understanding that favors will be returned at some future time, impacts legal oversight and organizational relations.² Social norms and beliefs play a strong role, too. In China, for example, oral contraceptives are seen as harmful to the body and therefore have less than 5% usage penetration—a striking difference from Western markets. Thus, targeting “best in class” local agencies to join existing start-up operations is a strategy very much worth considering.

Importantly, local social, professional, or financial culture (or custom) is rarely homogenous across a given region. In the rapidly growing Asia Pacific region (APAC), the diversity of lifestyles, social status, language, and cultural maturity encompassed by Japan, Australia, China, Korea, Thailand, and India (just to name a few) is striking. In business culture, mature markets such as Japan and Australia have much more in common with India regarding business practice than with China and Korea. The varying currencies, exchange rates, and tax principles require careful business decisions on how money should be kept and moved.

MEETING UNIQUE MARKETING CHALLENGES
The whole world is hedging its bets on BRIC (Brazil, Russia, India, and China), but pharma’s horizons are broader. Significant changes in the global economic and healthcare landscape—including rising levels of healthcare access and funding— and the changing mix of generic and innovative products have contributed to the ongoing market realignment.

There is not one emerging market. There are different tendencies or trends in different countries and within each country there are large differences among urban, suburban, and rural areas.

SCOPE MATTERS
Given the sheer size of some markets, careful consideration of entry or expansion strategy is needed. In China, for example, trying to enter or expand too quickly with a broad approach could prove disastrous given the number of developing rural provinces that must be reached. The heterogeneity found within “single” emerging market territories may also influence the number of pharmerging markets a given company wishes to enter. Participating in a large number might require a broader portfolio than smaller companies own (or want).³ Understanding the social and demographic dynamics of each subpopulation is vital as well. For example, very large birth cohorts will increase the demand for infant and childhood vaccines. Are mothers, families, and communities educated on the importance of vaccinations? Can they access vaccination clinics, or is partnership with a community health outreach organization worth considering? (More on partnerships below.)

KNOW YOUR CUSTOMER
When it comes to product sales, two distinct strategies may be needed to address the different needs and means of the poor and the emerging middle class. While companies may be able to leverage successfully existing global marketing strategies with upper-class urbanites, the mass-market segment is highly sensitive to price and resource constraints, often requiring a different approach.⁴ Messaging and pricing will differ for large government payers compared to poor individuals bearing most of the cost out-of-pocket. In other words, the most appropriate channels to market will be influenced by the sophistication of the channels and the maturity of the audience. Despite increasing affluence in some emerging markets, many of the drugs common in Western markets may remain beyond the means of an average citizen.⁵

OLD PRODUCTS ARE NEW AGAIN
Resetting our conventional brand wisdom is critical. Emerging markets are brand-driven economies, thus “mature” products such as Augmentin, a 30-year-old antibiotic, continues to grow at more than 20% in some parts of the world where it was not previously accessible.⁶

The proliferation of generics like Augmentin has also led to a need for branded generics and generic protection strategies. Meanwhile, innovative products are being introduced into pharmerging markets much sooner than in the past, thanks in large part to improved regulatory environments and IP protections. IMS Health estimates that the time to market between first global launch and first launch in a pharmerging market has been halved over the past decade.⁷ From 2006 to 2009, products launched in the BRIC markets were responsible for 19.9% of global sales, compared to 15.5% of sales in the top eight mature markets.⁸

The type of drug launched in emerging markets is also evolving. IMS Health reports that specialty products now account for 55% of launches in BRIC compared to only 47% in 1998 to 2001.⁹ This increase reflects in part a shift in RD focus to complement entry into pharmerging markets. An increasing number of clinical development programs now include patients from these countries,¹⁰ and major pharma players are seeking to better understand patient biology so as to more effectively address the diseases most prevalent and pressing in these populations. For example, Asian populations have relatively high rates of liver, stomach, and head and neck cancer; Asian patients also respond differently than Caucasians to some oncology treatments.¹¹ Now that a larger portion of the patient base is Asian, greater attention is being paid to researching relevant biomarkers in existing and pipeline products.

BE A TUNED-IN NEIGHBOR
Keeping pace with the policy reforms within countries can be a challenge as well. Companies must work closely with the government to ensure correct schedulings, listings, and reimbursement. Concerns about IP protection should also not be taken lightly. India and Thailand, for example, allow companies to produce generic versions of drugs patented in mature market countries, as long as the production methods differ from those developed by the original manufacturer; the drugs are then sold at very low cost to other developing countries—despite the Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement, the international standard for IP protection. Opportunities must be weighed against risk.

Identifying beneficial alliances as well as the local competition is also critical to success. The emerging market countries place great emphasis on local manufacturing and want success for them, even at the expense of multinational corporations (MNCs). In fact, a 2010 survey of physician attitudes toward reps in the major Western markets conducted with 4,000 BRIC physicians revealed they tend to favor domestic pharmaceutical companies, though they also show preference for companies with substantial experience in Western markets.¹² If global players can partner with local companies, they stand to gain competitive advantage in understanding market opportunities and the needs of local populations.





THE ONLY CONSTANT IS…
The increased focus on pharmerging markets is itself changing many market dynamics. A more crowded space is driving higher COGS and labor costs. Even if reluctant, companies across the biopharma space are feeling the need to be involved and not be left behind by the competition. Today, organizations really do need some presence in the pharmerging markets or they risk being left in the dust.

FLEXIBLE PATHS ARE KEY TO SUCCESS
The pharmerging markets represent great opportunity to expand pharmaceutical business, while also expanding access to quality care for millions of patients around the world. Pharmaceutical manufacturers that lead in building out organizational competencies, tailoring portfolios, and adapting business models to these new markets will reap the benefits of differentiation and entrenched presence compared to those that wait.

Bearing in mind important lessons learned—that careful, controlled approaches to market entry work best; that a thorough understanding of the market and local culture is essential; and that not all Western best practices are applicable—savvy pharmaceutical marketers will find ways to succeed in identifying new service opportunities and offering market-specific expertise to clients as they expand operations.

REFERENCES
1. IMS Health. Pharmerging Shake-Up: New Imperatives in a Redefined World. 2010. // Mansell P. Forecasting for ‘pharmerging’ markets. eyeforpharma. 8 Jul 2010. http://social.eyeforpharma.com/story/forecasting%E2%80%98pharmerging%E2%...
2. S.M. Burgess, J.-B.E.M. Steenkamp / Intern. J. of Research in Marketing 23 (2006) 337–356. https://www.business.auc.dk/ivo/present/Management/4th%20Semester/2008/E...
3. Anderson T, et al. Assessment of the Opportunities for Pharmaceutical Manufacturers in Emerging Markets. Journal of Managed Care Pharmacy. 2009; 15(5): 396-402.
4. S.M. Burgess, J.-B.E.M. Steenkamp / Intern. J. of Research in Marketing 23 (2006) 337–356. https://www.business.auc.dk/ivo/present/Management/4th%20Semester/2008/E...
5. Anderson T, et al. Assessment of the Opportunities for Pharmaceutical Manufacturers in Emerging Markets. Journal of Managed Care Pharmacy. 2009; 15(5): 396-402.
6. Hussain A. How Pharmaceutical Companies Can Succeed in Emerging Markets. Harvard Business Review – 28 Apr 2010. http://blogs.hbr.org/cs/2010/04/how_pharmaceutical_companies_c.html
7. IMS Health. Launch Evolution Across Pharmerging Markets – IMS LEAP Study 2010. http://www.imshealth.com/deployedfiles/imshealth/Global/Content/ Pharmerging/Document/Launch%20Evolution%20Across%20Pharmerging%20Markets.pdf
8. IMS Health. Launch Evolution Across Pharmerging Markets – IMS LEAP Study 2010. http://www.imshealth.com/deployedfiles/imshealth/Global/Content/ Pharmerging/Document/Launch%20Evolution%20Across%20Pharmerging%20Markets.pdf
9. IMS Health. Launch Evolution Across Pharmerging Markets – IMS LEAP Study 2010. http://www.imshealth.com/deployedfiles/imshealth/Global/Content/ Pharmerging/Document/Launch%20Evolution%20Across%20Pharmerging%20Markets.pdf
10. Hughes B. Evolving R&D for emerging markets. Nature Drug Discovery. 2010; 9: 417-420.
11. Hughes B. Evolving R&D for emerging markets. Nature Drug Discovery. 2010; 9: 417-420.
12. Reid P. Big Pharma Reps Still Competing with Local Players in Emerging Markets. PharmExecBlog. 15 Sep 2010. http://blog.pharmexec.com/2010/09/15/ big-pharma-reps-still-competing-with-local-players-in-emerging-markets/

Ashley Kuchel is president of PHCG Asia Pacific. He can be reached at ashley.kuchel@ publicishealthcare.com.au