While the global biopharma industry retains its huge dependence on the U.S. market, emerging markets present great opportunities for biotech and pharmaceutical companies.
Development—and in particular, urbanization—means these markets offer greater potential than in the past. These markets often have larger populations than more established markets and higher population growth. This should, at least in theory, make them an appealing target for biopharma companies looking to expand beyond the hugely competitive markets of the U.S., Europe, and parts of Asia.
However, the regulatory environment, market access, and commercial landscape are very different to Europe and the U.S., and companies looking to expand into these regions need to consider a number of key elements in order to succeed. Regulatory approval in these countries is only the first step to long-term commercial success. Moreover, “emerging markets” cannot be seen as a homogenous opportunity where a one-size-fits-all approach will open up dozens of countries overnight.
All of which means that biopharma companies with a goal of global expansion must identify the markets that offer a combination of strong commercial opportunity and a reasonably receptive payer, access, and regulatory environment. It’s a balancing act, and one that relatively few players have mastered. However, the impending Inflation Reduction Act in the U.S. and similar pieces of legislation being touted in Europe and Japan mean there has rarely been a better time to cast the net a little wider.
Population Growth, Urbanization, and Epidemiology
Biopharma companies can focus on two broad areas in emerging markets: infectious diseases and what can be termed “diseases of affluence”—typically chronic diseases such as diabetes, heart disease, and some cancers. For biopharma companies, both these areas potentially represent an opportunity for significant patient return on investment. However, in the more swiftly developing countries, urbanization is fueling an increase in the latter.
The epidemiology of these indications should be a key area for investigation when identifying prospective markets for entry. A useful lens through which to explore these areas is burden of disease which can be used as a guide to unmet need and potential patient population.
The World Health Organization (WHO) measures burden of disease using disability-adjusted life year (DALY) data. One DALY represents the loss of the equivalent of one year of full health, which is used as a measure of disease burden. Comparing countries like the U.S. with markets such as Brazil and China (useful examples given their large populations), provides a guide to growing indications.
For example, in China, between 2000 and 2019 (the latest data available), lower respiratory infections dropped out of the top 10 of high disease burden, while type 2 diabetes is now at number seven on the list. Stroke remained the top cause of DALY indicating the high disease burden relating to cardiovascular disease. Interestingly, diseases relating to modern urbanization such as depression and back/neck pain became the ninth and tenth diseases with high burdens.
This is supported by epidemiology data from Evaluate Pharma. When comparing G8 and non-G8 countries on type 2 diabetes, we find that while populations are fairly static within the G8 nations, rates are increasing in non-G8 in terms of both absolute number of patients and prevalence rates. Rises are increasing in line with risk factors caused by urbanization and lifestyle factors.
Addressing Unmet Needs in Emerging Countries
Huge markets, including Brazil and China, may present tempting targets when purely viewing market size and the rising scale of chronic conditions that are increasingly treatable in developed nations. However, the reality is much more complicated. Countries with established, structured, and fairly predictable legislative and commercial environments will no doubt continue to have first access to new therapies. However emerging markets do not present certainty—and business hates uncertainty.
Pharma companies must understand three areas for any market they choose to enter: regulation, payer perspectives/market access, and supply. All three contribute to commercial viability.
Regulatory approval is a crucial first step and no opportunity exists without it, but this may be one of the easier hurdles to jump. There are clearly defined requirements for clinical trials and documented processes and structures in place for all but the most emerging of emerging markets. Given global trials prepared for global launching activity generally do not cover emerging markets, a local trial or a bridging study may be required for local regulatory and reimbursement submission.
Money and the Middle Classes
If regulatory approval is the price of entry, then reimbursement is the golden ticket to success—whether you are looking at established or emerging markets.
As an example, Novo Nordisk and Eli Lilly have developed what may be the most commercially successful treatments for decades in their new obesity drugs. However, while their diabetes-treating versions have a clear path for payers, the future remains unclear on how payers will treat the obesity landscape. These drugs have a clear market, excellent efficacy, and potentially additional benefits with co-morbidities such as cardiovascular conditions. If they are not guaranteed coverage, the less well-established structures of emerging markets remain highly uncertain.
While some state payment is likely for some treatments, success in emerging markets depends heavily on the rise of the more affluent middle class and the associated rise of healthcare expenditure.1 For example, WHO data shows the health expenditure per capita in Brazil has doubled from 2000 to 2020. As urbanized markets evolve, therapies that are based not only on saving lives, but on quality of life will have a greater demand. This presents a great opportunity for companies developing treatments for chronic diseases but also for more targeted therapies in areas such as oncology.
Pricing negotiation with the government might be a brave new world for the U.S. market, but it’s common in other countries and must be expected in emerging markets grappling with the price of modern healthcare. Companies must be prepared to collaborate with national and local government to gain access. “Gesture” projects, such as the supply of critical vaccines that pharma companies sometimes provide, may help in balancing the remaining need for such treatments for infectious diseases with the opportunity afforded by increased wealth and lifestyle-driven indications. Big pharma companies will need to collaborate to build mechanisms that benefit everyone.
Getting to grips with the payer landscape is crucial to commercial success in emerging markets, and this is an area where most businesses would be well advised to seek external, local support to identify access barriers. The reimbursement landscape in emerging markets means that policy may change and shift constantly. Pharmaceutical companies need to engage with the payers in a timely manner to ensure the successful launch and pricing strategy. Often, this is left too late in more traditional markets, but it must be a priority in addressing any new market.
The Last Mile
While urbanization may put more potential patients in closer proximity, supply remains a challenge in many emerging markets, simply because of the scales involved. If there was any upside to the COVID-19 pandemic, it was that new supply mechanisms were put in place in countries where such things didn’t exist before.
This is true for market access but also for the physical delivery of treatments, in which getting a therapy to a given country may be simple, but distribution within is another matter. This is particularly important for treatments for chronic diseases where frequent or regular appointments are required in the long term. It may be idealistic, but it would be a shame for some of the COVID-driven mechanisms to be wasted and developers might do well to learn lessons from what was achieved out of necessity.
In emerging markets, the landscape is often changing more quickly than companies are used to. A close eye on developments is critical, particularly on reimbursement issues. In addition, certain cultural differences must always be taken into account—for example, the appetite for taking risks, supporting novel therapies, or evaluating the perceived value. The conventional categories for payers may not apply for emerging markets. Furthermore, the out-of-pocket (OOP) cost, although the trend is on the decline,2 still remains in a high proportion in emerging markets. Therefore, patients’ voices and patient group engagement could play a vital role in successful access and market penetration. Again, local expertise is vital.
The reality is that in many cases, emerging markets become interesting to players as part of a lifecycle management approach when the big money has been made in the big markets. Commercially, this makes sense, but a longer-term view may suggest otherwise as companies have additional opportunities when considering new markets earlier. Meeting environmental, social, and governance (ESG) obligations may sound cynical, but increasingly those must be met to provide the best patient return on investment. One final opportunity: the chance to improve clinical trial structure—helping to speed regulatory approval, potentially lower some access barriers, and make the path for future treatments a little smoother.
References:
1. Current health expenditure per capita, World Health Organization Global Health Expenditure database.
2. Domestic private health expenditure (% of current health expenditure), World Health Organization Global Health Expenditure database.
