Вы находитесь на странице: 1из 28

Accenture Life Sciences

Winning in Emerging
Markets to Drive
Growth in the Life
Sciences Industry
Introduction
The importance of emerging markets in life sciences

As mature markets in many What are the barriers to effective execution the continuously evolving patchwork of
of an emerging-markets strategy? Selling laws and rules. The need for more effective
areas of the developed world and operating in these markets presents monitoring of pricing and reimbursement
become saturated, global life numerous challenges. A variety of market may increase. Talent shortages can also be
sciences companies are aware access elements such as supply chain obstacles to growth.
planning, manufacturing and distribution
that growth and sustained can become more complex when selling Thus, although “expansion into emerging
competitive advantage may to markets in emerging economies. The markets” is now a popular topic for boards
regulatory environment, including taxation at many life sciences companies, it is time
be increasingly dependent and import regimes, can be a significant to turn the talk into effective action in
on the effective planning and barrier to growth, both in terms of working order to stay competitive and win.
execution of an emerging- across borders and in terms of tracking

markets strategy.
These markets, particularly the BRIC nations Figure 1. Top 10 total pharmaceutical markets in the world, 2005-2016
(Brazil, Russia, India and China), have $Billion—all figures in US Billion
experienced significant and rapid change.
Total = $496.1 Total = $711.3 Total = $812-$952
In 2005, China and Brazil constituted just 5
BRIC = $25.9 BRIC = $96.6 BRIC = $244-$284
percent of the total pharmaceutical market
BRIC % = 5% BRIC % = 14% BRIC % = 30%
of the top 10 nations; by 2016, however, at
least one projection is that the four BRIC 2005 2010 2016
nations will all be in the top 10 of global
Rank Size $B Rank Size $B Rank Size $B
pharmaceutical markets and will constitute
30 percent of the top-10 market (See 1. USA 249.2 1. USA 322.0 1. USA 350-380
Figure 1.). 2. Japan 84.9 2. Japan 111.2 2. China +1 155-165
-1
3. France 33.3 3. China +6 66.7 3. Japan 105-135
In spite of this opportunity, many pharma-
4. Germany 33.1 4. Germany 45.0 4. Brazil +2 42-52
ceutical firms have not been able to get a
-2 -1
major foothold in emerging markets. Looking 5. Italy 21.3 5. France 41.3 5. Germany 39-49
at the publicly available financials of the 6. UK 16.4 6. Brazil +4 29.9 6. France -1 32-42
top-nine pharmaceutical companies, many 7. Spain 16.1 7. Italy -2 28.6 7. Italy 23-33
of them have no more than 10 percent to -1
8. Canada 15.9 8. Spain 22.7 8. India +5 24-34
30 percent of their revenues coming from
9. China 14.1 9. Canada -1 22.4 9. Russia 23-33
emerging markets. +2

10. Brazil 11.8 10. UK -4 21.5 10. Canada -1 19-29

Emerging markets Placement movement

Source: IMS Health report, May 2012. Spending in US$ with variable exchange rates.

2 | Driving Growth in the Life Sciences Industry: Winning in Emerging Markets


To help life sciences companies plot more Find cross-border similarities.
effective growth strategies in the emerging Elements of the value chain appear to be
markets, Accenture has performed an at similar maturity levels across multiple
analysis of some of the most important emerging and/or developed markets. Firms
market access issues and trends in the BRIC may benefit from creating solutions that
countries. Our study evaluated the current are better positioned to cross geographic
supply chain maturity levels of the life sciences borders by exploiting these similarities.
industry, the regulatory environment, the
overall dynamics around pricing, and other Establish global reach with
challenges that life sciences companies local relevance.
need to overcome to run successful market
It is important to standardize globally
access strategies.
whenever possible to gain economies
of scale, but also to customize where
Many of the large, international life sciences
appropriate to achieve local relevance.
firms have already established some level of
Solution themes can benefit from cross-
presence in these BRIC markets. However,
market applicability, but the implemented
these companies are at different levels of
design may need customization to address
maturity in terms of capabilities they have
market-specific nuances at the local or
acquired to this point. Accenture believes
regional levels.
that life sciences companies may be able
to gain a competitive edge in emerging
Create effective and rapid
markets with a thorough knowledge of the
six primary issues faced with emerging
execution capabilities.
market growth and adoption of a four-point The ability to understand the customer, and
integrated strategy. to execute solutions across markets that
are aligned with customer needs in a timely
Think customer clusters: and cost-efficient manner, can be a key to
success and competitive differentiation.
The importance of submarkets.
This is a difficult goal for many companies
Each emerging market is a combination of because many still operate within functional
diverse segments requiring differentiated silos of supply chain, R&D and commercial,
treatment. Companies should consider rather than working toward one common
plotting their access strategies by thinking goal according to one strategy.
of customers and clusters of customers
(also known as “submarkets”) rather than
focusing only on countries and continents.
This approach can enable companies to
have more targeted and effective customer-
centric strategies.

3
4 | Driving Growth in the Life Sciences Industry: Winning in Emerging Markets
Developing Market
Access Capabilities
It is generally understood that The fragmentation of the distribution there can be regular, seamless flow of
environment has been an ongoing challenge products and an effective reverse flow of
BRIC markets pose a number for some companies, though this situation information within the supply chain.
of similar challenges in areas may be changing because of market
such as economic development, consolidation. Some manufacturing Furthermore, based on a recent Gartner
processes are becoming more aligned survey, many pharmaceutical manufacturers
infrastructure growth, availability
with global standards, and many industry see a critical gap in the supply chain
of skills and resources, technology players are starting to appreciate the capabilities they need to execute their
developments, regulatory maturity benefits that increased collaboration with market access strategies around the world.
and the pricing environment. vendors and channel partners can bring to Sixty-four percent of manufacturers
their businesses. surveyed affirm the importance of developing
However, life sciences companies effective supply chain capabilities in emerging
may also benefit from an Supply chain skills are typically not as markets. However, only 21 percent say
understanding of the differences widely available in emerging markets which their performance is currently adequate—
can be a clear obstacle toward achieving a 43-point gap between aspiration and
and nuances that can shape market growth in these regions. Infrastructure reality (See Figure 2.).
how they develop market access and technology adoption in emerging
capabilities focused on supply markets have yet to reach a stage where
chain and pricing, including
how they deal with regulatory
and tax environments.

Figure 2. Importance versus performance: A gap analysis of key supply chain components
Percentage of respondents
75
66 69
61 61 61 64
53 54

29 31 31
23 24 25 23
19 21

-24
-31 -31
-37
-41 -42 -43 -44 -46
Leverage contract Better use of Develop a supply Develop value Ability to A balanced Develop effective Achieve compliant, Align manufacturing,
manufacturers for technology to chain vision chain strategies forecast demand S&OP (Sales and supply chain predictable supply chain, sales
successful new drive down costs supported by versus accurately and Operations Planning) capabilities in product supply and marketing and
product launch, and enhance governance and functionally respond quickly processes which emerging markets by manufacturing regulatory interaction
lower costs and productivity change management siloed supply to changes in profitably matches right-first-time for profitable
agile response to processes to guide chain capabilities demand demand and operations
demand execution of supply constrained supply and driving value
chain priorities to customers

Importance Performance Gap


N = 114

Source: “Demand Visibility Critical to Success of Healthcare and Life Science Value Chain,” Gartner analysis, May 2012 5
According to Accenture analysis, most of Overcoming these challenges to the overall
the BRIC markets are still at low levels of value chain may require innovative approaches
maturity in terms of distribution capabilities, such as focusing on customer clusters,
infrastructure, manufacturing, supply chain leveraging solutions across markets with
skill availability and technology adoption local flavor and executing with speed
(See Figure 3.). Establishing and running in an effort to maximize the business
supply chain operations in emerging markets opportunities that these markets offer
is a challenging proposition. It may be to life sciences players.
difficult to gain penetration down to
the last mile in the market, navigating
through the complex networks of cities
and towns and the vast geographic span.
There are also significant differences in
the level of economic and infrastructure
development as focus shifts from cities
to smaller towns, and then to rural areas
which are typically not well-connected
from an infrastructure perspective to the
more urban economic centers.

Figure 3. Comparison of the maturity of life sciences value chain elements across the BRIC markets
Maturity Parameters Brazil Russia India China
Distribution Highly fragmented, Highly concentrated, Highly fragmented, multiple Highly fragmented, multiple
regionally focused, low further consolidation layers, unionized channel, layers, low visibility
visibility expected low visibility
Manufacturing (Compliance) Local regulation compliant Low GMP compliance Majors follow GMP, GMP compliance is an issue,
universal compliance only monitoring of adherence universal compliance only
by 2014 to norms is critical by 2015
Manufacturing (Reliance Heavy reliance on imports Heavy reliance on imports Predominant local Predominant local
on Imports) (80% APIs imported) (> 75% of the market) manufacturing (local manufacturing (including
players) MNCs)
Availability of niche skills Limited availability of niche Skills availability is not an Skills available, but LS not a Limited availability of niche
supply chain skills issue at present preferred choice supply chain skills
Technology Usage (LS Firms) Localized systems High Usage, ERP systems High Usage, ERP Systems Legacy Systems
Technology Usage (Channel Basic technology used by ERP used by large channel Basic technology used by Basic technology used by
Partners) channel partners partners channel partners channel partners

Common among categories

Source: Client Interviews, Espicom World Pharmaceutical Market Report 2012, Accenture analysis

6 | Driving Growth in the Life Sciences Industry: Winning in Emerging Markets


According to Accenture
analysis, most of the BRIC
markets are still at low
levels of maturity in terms
of distribution capabilities,
infrastructure, manufacturing,
supply chain skill availability
and technology adoption.

7
Market Access
Focus on six primary issues

As market access for emerging Figure 4. Issues for life sciences companies in emerging markets
economies becomes increasingly
important, Accenture believes
that life sciences companies 6 1
Shortage of Immature Logistics
can benefit from an awareness Skilled Talent and Distribution
of six primary challenge areas
across the broader value chain. Emerging
(see Figure 4). This section 5 2
Complex Market Inadequate
explores each of these areas Taxation Life Sciences Manufacturing
Structure Infrasturcture
in detail. Issues

1. Immature logistics and distribution


4 3
Life sciences companies generally have Uncertainty Diverse Regulatory
available to them a spectrum of distribution in Pricing and Environments
options as they seek access to markets in Reimbursement
BRIC countries. One challenge that companies
typically face in this area is that the
distribution value chain in emerging
markets is often immature—inefficient, Sources: Espicom World Pharmaceutical Market Report 2012, Client Interviews, Accenture analysis
mostly inflexible and highly fragmented.

Take the example of the typical Chinese


distribution system which, by Western China now has a large number of distribution The situation is similar in India, with many
standards, is complex and much more companies operating at all levels. In theory, companies encountering complexity and
restrictive, with a large number of all products could be distributed through fragmentation in the distribution chain
distribution companies operating at the state-controlled system, but many local at every level. A typical distribution value
all levels. Many distributors are province- companies establish their own preferred chain in India goes through a distribution
based or city-based and few cover more methods of purchasing and distribution. network that may involve 30 Clearing and
than just a small area of the country. Five Direct selling by manufacturers and Forwarding Agents (CFAs), 60,000 stockists
primary distribution centers supply more wholesalers at all levels is increasingly and 550,000 pharmacies in addition to sub-
than 200 provincial-level wholesalers, which becoming the norm. Many suppliers desire stockists, hospitals and non-government
in turn supply around 3,000 local distributors. to gain broad geographic coverage but find organizations (NGOs). Thus, as in China,
Such a distribution system may have the themselves restricted by strong regional the distribution networks in India are
advantage of simplicity, but it can also be governments and poor transportation and exceedingly complex.
highly inefficient. communication systems which, in effect,
make China a collection of independent and
fragmented markets.

8 | Driving Growth in the Life Sciences Industry: Winning in Emerging Markets


In Russia, a large number of small regional In the coming years, Accenture anticipates In Russia, manufacturing has often not
drug wholesalers exist, but these are some consolidation amongst the distribution been able to cope with the growing needs
sometimes losing out to a smaller number players. We also expect to see some of the Russian market. Currently, local
of national wholesalers. The national development of segmented capabilities pharmaceutical companies are able to
wholesalers are typically more efficient to reach the farthest areas of the country meet only a small percent of the country’s
and better capitalized. Because they are (tier 2 and tier 3 cities as well as rural requirements; therefore, reliance on imported
generally based in Moscow or St. Petersburg, areas) and the use of technology as an pharmaceuticals is growing. Around 80
they may be better placed to deal with enabler in an effort to create a more agile percent of the public procurement (DLO)
overseas companies. and secure distribution value chain. budget for additional medicines is spent on
foreign pharmaceuticals.
The distribution system situation in Brazil One potential challenge posed by these
is more in line with that of a developed trends is in creating targeted solutions Further analysis suggests that the local
market. Brazil has about 300 drug whole- focused on sets of customers segmented industry’s falling market share may be
salers and five major pharmacy chains in by region, attitudes, behaviors and per capita rooted in part in the inability of Russian
addition to other players. The five pharmacy income, but with solutions closely aligned manufacturers to produce innovative drugs.
chains comprise 49 percent of the market to the needs of particular customer segments. Some producers blame the high costs
but have only 10 percent of the outlets in This situation could also give rise to more associated with drug development, clinical
the country. Those numbers may continue collaboration across borders to leverage evaluation, marketing and promotion and
to fall due to mergers and acquisitions. For solutions and increase the value of learning the uncertainty of the return on their
example, in September 2011, Drogaria São during the course of speedy execution. investment. In Russia, the cost of developing
Paulo, the leader in the state of São Paulo, and launching a new drug is estimated at
and Drogarias Pacheco, the leader in Rio de 2. Inadequate manufacturing between US$100,000 and US$5 million.
Janeiro, announced a merger, creating the infrastructure Some manufacturers therefore claim
largest pharmacy chain in Brazil, DPSP, with that they need to acquire licenses for
Different emerging economies have very
a combined 691 outlets located in five states.1 the reproduction of fully established
different levels of maturity in terms of
generic products.
fully developed manufacturing ecosystems.
Furthermore, lack of adequate cold-chain
Although most of the manufacturing bases
capabilities across the country has contributed Another problem often lies with a lack of
in the BRIC countries are focused on providing
to serious gaps in distributing drugs that financing for R&D. Many Russian scientific
Active Pharmaceutical Ingredients (APIs)
require specialized handling. The market research institutes that were previously
and preparations (China and India), and
does not have distributors or logistics players solely responsible for the end-to-end process
manufacturing generic products (all BRICS),
who have cold-chain capabilities across the of developing and launching new products
a great deal of fragmentation exists among
entire country. These kinds of constraints now tend to be involved only in the initial
pharmaceutical manufacturers. For example,
may need to be addressed to improve market drug-discovery stage. After that point in
in India, no single company has more than
access in emerging economies. the process the project is often shelved
7 percent of market share; in China by
due to extensive laboratory and clinical
contrast, 70 percent of the players have
evaluation costs, as well as marketing and
revenues of less than $45 million. India
sales expenses. If a new drug is successfully
is ahead of other emerging economies in
developed, insufficient laboratory and clinical
formulations due to their domestic generic
testing as well as non-compliance with
manufacturing capabilities.2
international Good Manufacturing Practices
(GMP) standards could prevent it from
entering the international market place.

9
In Brazil, some companies have focused on addition, there may be an increased emphasis
encouraging more effective collaboration on production of biosimilars, creations of
between contract manufacturers and essential drug lists, strategic sourcing, and
pharmaceutical companies. Due to the development of talent with the required
strong Brazilian currency, companies can skills to be successful in this extremely
find it infeasible to produce drugs in Brazil dynamic market environment.
for export. This situation, in turn, can
result in underutilization of manufacturing Accenture believes that manufacturing
capacity. For example, Accenture recently solutions could be leveraged across borders
visited one plant performing manufacturing in the areas of training to develop required
for a major pharmaceutical company; skills, process mapping and technology
the plant is running at only 50 percent enablers. Joint ventures and M&As could
capacity utilization. also lead to solutions that are more
effective, and that can be pushed to
The availability of manufacturing facilities market faster, potentially creating a more
that are GMP compliant can vary significantly agile company.
across these markets. Russia faces challenges
in becoming GMP compliant because only New initiatives to create pilot solutions could The costs and processes associated with
12 percent of local facilities are GMP be leveraged across the BRIC countries. seeking approvals in these markets typically
certified. India, on the other hand, has Indeed, many of these solutions are already also vary significantly. China accepts
many GMP-certified facilities, but faces in the pipeline. For example, in Brazil, a pharmacokinetic bridging clinical studies
challenges because many players of all sizes multinational pharmaceutical firm acquired along with global clinical data, while
have been exposed as being, in practice, non- a local producer and reacquired a number Russia requires enrollment of local patients
adherent to norms. Many large multinationals of products previously licensed to another in clinical trials.
prefer to invest in captive facilities in company. Another multinational pharma-
these markets to increase the availability ceutical firm has confirmed its plans to Despite a generally low cost of patient
of high-quality and compliant local build a plant for the production of vaccines recruitment and a typical ability to run
manufacturing partners. against meningococcal B within three years. concurrent trials in India along with global
trials, many large companies prefer not to
In the future, more manufacturing facilities 3. Diverse regulatory environments engage in Phase I clinical trials because
may become GMP compliant across the some companies believe that regulations
Successful expansion in emerging markets
emerging economies. Accenture sees a regarding data exclusivity are not strong
can depend on a comprehensive understanding
significant trend among multinationals to enough to guarantee protection of pre-
of the different regulatory environments of
use Contract Manufacturing Organizations clinical data.
these nations. For example, gaining approvals
(CMOs) and other local suppliers as a part
for new products typically takes longer
of the manufacturing ecosystem. These Intellectual property rights for pharmaceutical
in the BRIC countries than in developed
suppliers can be developed specifically for products are also regularly evolving, with
markets. Approval times can range from
these markets but can also be fully integrated many local governments seeking to strike
about 18 months in Russia to more than
into the overall manufacturing strategy. In a balance between World Trade Organization
three years in China—over and above the
(WTO)-related norms and local patient
timelines for registration in the United
needs for access to affordable and
States and the European Union.3
innovative drugs.

Although compulsory licensing may not yet


be a significant threat in most emerging
markets, other factors such as the scope of
patentability for new products in India and
patent review processes in Brazil have had
an effect on the creation of patent-protected
products in these markets.

10 | Driving Growth in the Life Sciences Industry: Winning in Emerging Markets


Regulators in the BRIC markets are often Although these changes may help life detailed knowledge of local regulatory
aware of the delay in making innovative sciences firms gain faster market access, policies and putting in place a dedicated
medicines available to patient populations. companies can still benefit from recognizing workforce to liaise with the local regulatory
Some regulators are working toward that patent laws in these markets may bodies—an approach that can improve
rationalizing approval timelines to reduce not readily evolve to a stage where patent speed to market.
this lag. Brazil is looking at initiating a recognition will be at par with that of
fast-track approval process for lifesaving developed markets such as the United For more information about the current
drugs, while China and Russia are looking States and the European Union. Thus, for situation in BRIC countries with regard to
for multinational cooperation in the area of life sciences companies to be successful in the regulatory environment, and on future
clinical trial regulation to reduce the time these markets, they may need to become trends, see the summary chart in Figure 5.
and cost associated with repeating clinical more selective about their portfolio choices.
trials with the local population. In general, firms may benefit from gaining

Figure 5. Comparing the regulatory environments in the BRIC countries


Regulatory Brazil Russia India China
New product registration New Drug take more than 2 Actual approval usually takes New products take more than NCEs face 3 to 4 years
years, while generics are > 18 months although 2 years, while generics are than the US or EU to be
approved within 1 year official timelines are far lower approved within 6-12 months approved
Intellectual property Patent review timelines ~ 8 Russia became a WTO Issues concerning Data Issues concerning Data
protection years. Review by patent office member in 2011 and patent Exclusivity regulations, and Exclusivity regulations
and medicines agency. No law is still evolving scope of patentability which can allow generics
explicit Data exclusivity which often lead to access to clinical data
regulations rejection of applications
Clinical trials Trial Protocols are approved Minimum of 2000 local Phase I trials allowed only if Bridging pharmacokinetic
by multiple agencies with patients need to enrolled on compound originates in studies allowed with 100
timelines stretching to > 10 trials for marketing India or pre-clinical data is patients
months approval submitted for review
Manufacturing GMP norms implemented in < 12% local units are GMP Although many facilities are All manufacturers will need
the ‘90s. Stricter norms for certified. Some MNCs prefer GMP and even FDA to comply with GMP norms
APIs (in line with US and to setup captive facilities in compliant, adherence to by 2015
EU) implemented since 2010 Russia norms remains questionable

Future trends Potential introduction of a Mutual new product Establishment of a National Regulatory cooperation is
fast track approval process registration between Russia, Medicines Agency as the being explored with Asian
for life saving drugs Belarus and Kazakhstan sole approval authority may countries for harmonization
Patent office indicates aims designed to reduce approval happen in the distant future of clinical trial regulations
to reduce review timelines timelines and grant faster Clinical trial requirements, and reduction of trial
to 4 years market access including patient consent timelines

Post marketing surveillance May see mutual recognition and ADR reporting may get Manufacturing regulations
rules including ADR of clinical trials between more stringent governing API manufacture
reporting may get more the EU and Russia reducing may become more stringent
stringent clinical trial timelines and Government may resort to
costs compulsory licensing in the
> Some manufacturing area of ARVs
units may not achieve GMP
compliance by 2014, leading
to some consolidation
among local manufacturers

Source: Espicom World Pahrmaceutical Market Report 2012, Accenture analysis

11
Although each market 4. Uncertainty in pricing Similarly, in India, winning a tender does
and reimbursement not necessarily guarantee that the product
employs some combination Achieving success in emerging markets
will succeed. Sales teams are often called
upon to work with hospital formularies to
of free-market pricing and requires a deeper understanding of how
generate regular orders. Given the trend
pricing and reimbursement systems work
price controls, pricing and in the different regions. Although each
of increased public healthcare spending
in emerging markets, some regions are
market employs some combination of
reimbursement in general free-market pricing and price controls,
experiencing increasing demand for skilled
resources in areas such as tendering and
can vary significantly across pricing and reimbursement in general can
auctioning. Shortages of experienced
vary significantly across markets and is
professionals in these areas often result
markets and is in part a in part a reflection of local economic
in more cross-industry recruitment
conditions and the government’s role in
reflection of local economic healthcare provisioning.
and training.

conditions and the The countries with better-established


For example, although both Brazil and India
reimbursement markets—including China
government’s role in have similar market sizes in terms of value,
and Brazil—may see stagnation or erosion
drug prices in India are only a fraction of
healthcare provisioning. the prices in Brazil. Although a large portion
in prices because the healthcare systems in
these countries are generally facing increasing
of the market by value is unregulated in
cost pressures and budget constraints.
Russia and India, resulting in positive price
Although the non-regulated retail markets
evolution, the reverse is true for Brazil and
in Russia and India may see positive price
China, with the latter experiencing negative
evolution, increased pressures from patient
price growth. In China, government-mandated
and activist groups are likely to result in
cuts of about 20 percent every three years
more monitoring of prices, especially for
are becoming commonplace.4
innovative lifesaving drugs and medications
for chronic illnesses, which can impose a
In terms of government reimbursement,
significant burden on the self-paying patient
both Russia and India are largely self-pay
population. Calls for greater reimbursement
markets with limited coverage for pharma-
coverage in Russia may not occur for some
ceutical products. By contrast, both Brazil
time, while India may remain a self-pay
and China have established reimbursement
market for the foreseeable future.
systems through a combination of social
insurance and government funding.
When setting their pricing strategies, life
Outpatient drug reimbursement is also
sciences firms should be cognizant of
fairly common in Brazil and China, while
consumers’ disposable incomes in these
many patients in Russia and India must
emerging markets. Company also may
pay themselves for drugs used outside of
benefit from focusing on improving the
a hospital stay.
cost effectiveness of their supply chains
to maintain suitable gross margins.
Reimbursement listing can improve market
access in many markets. In China, in addition
For more on the current situation in
to reimbursement listing, companies generally
BRIC countries with regard to pricing
focus on getting their products listed on the
and reimbursement, and on future trends,
formularies of hospitals. Even then, two to
see the summary chart in Figure 6.
three years may be required before bids for
such products are invited.

12 | Driving Growth in the Life Sciences Industry: Winning in Emerging Markets


Figure 6. Comparing pricing and reimbursement environments in the BRIC countries
Pricing Brazil Russia India China
Extent of price control All drugs EDL (567 drugs) & DLO 74 drugs covered under NRDL (2400 molecules) ~
(covers 7 life threatening DPCO 60% of the market by value
diseases)
Price control mechanism International reference International reference 100% markup over cost for Patented products prices
pricing (10 countries) and pricing (20 European locally manufactured negotiated individually by
reference to local existing countries) and reference to products. 50% for imported NDRC and manufacturers
products local existing products products
Pricing norms for generics At least 35% discount to Average of last 12 months ~ 95% market is ‘branded’ First to market enjoys
innovator brands price generics premium over laggards
Price Increases/trends for Regulated based on Allowed only for locally Reviewed periodically for Prices cut every 3 years
price controlled products inflation and generic manufactured products cost escalation and price (10% to 20%)
penetration increases granted
Pricing trends for - Free pricing, controlled by >10% increase per year not -
non-controlled products competitive forces permitted
Pricing for government Compulsory discounts Local made products enjoy Purchased through sealed Average tender price drops
purchases (24%), bulk purchases and a 15% price premium over tenders primarily driven by by 2% to 3% each year
reverse auctions similar imported products price
Channel margins Average wholesale margin Margins vary by federal DPCO: Wholesale 8% and NDRC applies maximum
10%, retail margin 26% district and product price Retail 16%, non-DPCO: margins based on
10% and 20% respectively manufacturer’s price
Price comparison (500 mg Ciprofloxacin) - (500 mg Ciprofloxacin) - (500 mg Ciprofloxacin) - (500 mg Ciprofloxacin) -
Cost of a 7 day course Cost of a 7 day course Cost of a 7 day course Cost of a 7 day course
(2 tabs a day) (2 tabs a day) (2 tabs a day) (2 tabs a day)
Generics $15.6 $4.6 $1.7 $3.1
Innovator $106.5 $47.6 $2.0 $129.2

Reimbursement Brazil Russia India China


Scope of government Vast coverage with full Limited drug coverage (DLO Only inpatient coverage for Widespread coverage with a
reimbursement reimbursement for a range affects only 5% of the government employees mix of full reimbursement
of life saving and chronic population) and patient copayments
therapy drugs
Private health insurance Few plans provide coverage No coverage for outpatient No coverage for outpatient No coverage for outpatient
coverage (outpatient costs) for outpatient drug usage drug usage drug usage drug usage

Source: Espicom World Pahrmaceutical Market Report 2012, Accenture analysis

13
5. Complex taxation structure
Taxation and import regulations also have
important roles to play in attracting large,
multinational life sciences companies to
emerging markets. R&D and innovation
have contributed to the implementation
of specific tax incentives in many of the
emerging and developed markets. Many
local government bodies are trying to attract
investments in their regions by setting up
tax-free zones and by providing access to
better infrastructure and resource pools.

In Brazil, many of the manufacturing and


allied industries are currently focused in the
São Paulo region because that area provides
better access and varying tax plans compared
with the rest of Brazil. This situation
may be changing, however, because the
that include Berlin-Chemie. In Russia, about for imported drugs is also seen as a welcome
state of Rio de Janeiro is now attracting
80 percent of drugs are imported, so many move by some multinationals who wish to
pharmaceutical companies as well. Brazil’s
pharmaceutical companies are being provided keep manufacturing outside China.
tax structure on pharmaceutical products,
special status to promote manufacturing
34 percent, is considered high. Strict import
in Russia. For example, in the Skolkovo Because the need to provide incentives at
regulations typically prevail, as do mandates
region (near Moscow) residents are offered country, province and city levels may increase,
to manufacture locally to promote exclusivity
exemptions on VAT and property taxes. The life sciences companies should consider
of the drugs.
region also has a highly discounted social working to learn from similarities across
tax structure.5 borders and also to learn from industries
Similarly, in Russia, the Kaluga Oblast region
that have been successful in emerging
is preferred by many industries as a source
In India, some individual states are providing economies. This can help them design a
of innovation and the region’s industrial
tax incentives in special economic zones for more tax-efficient operating model. Such
parks are attracting pharmaceutical companies
pharmaceutical companies to set up operations a model can help provide better cost
in their regions. India offers incentives efficiency which can be important to
including a deduction of 100 percent of competing more effectively in a highly
eligible expenditures for the same year. In competitive and fragmented market.
addition, the long-awaited move from state
tax to Goods and Services Tax (GST) may 6. Shortage of skilled talent
bring dramatic changes in the way supply
Availability of skilled talent may be a
chains function within India. Because GST
challenge for life sciences firms seeking
provides a more transparent version of
to expand into emerging markets. As the
taxation, it may be a force for change for
emerging markets grow, the competition
pharmaceutical companies and for the
for skilled talent will be intense. Based
entire life sciences industry.
on a recent Economist Intelligence Unit
survey about talent challenges in emerging
In China, the government is being aggressive
markets (see Figure 7), most of the surveyed
in providing deductions. It provides a
executives feel that retention of employees
deduction of 150 percent on qualifying
and domestic recruitment will be significant
R&D expenditures.6 Although some multi-
issues for them over the next three years.
national companies have already begun
planning to use China as a global sourcing
As the emerging markets grow, the need for
base, many companies have also started
new skills increases in areas such as cold
setting up R&D labs in different cities in
chain management, biologics manufacturing,
China. Easing the norms on market access
demand planning and pricing analytics. The

14 | Driving Growth in the Life Sciences Industry: Winning in Emerging Markets


Figure 7. Factors hindering a company’s ability to recruit skilled talent
Which of the following factors are most likely to hinder your company’s ability to recruit talented employees over the next three years?
(% respondents, top 5 responses)
Brazil China India Russia
Candidates lack appropriate Inability to meet salary Inability to meet salary Inability to meet salary
skills/qualifications expectations expectations expectations
57 51 61 61

Candidates lack appropriate Candidates lack appropriate Candidates lack appropriate


Inability to meet salary expectations skills/qualifications skills/qualifications skills/qualifications
47 41 46 59

Inability to meet benefits Inability to meet benefits Inability to meet benefits Inability to meet benefits
package expectations package expectations package expectations package expectations
41 38 40 27

Undesirable work-life balance (long Undesirable work-life balance (long Lack of career opportunities Lack of career opportunities
hours, frequent business trips, etc) hours, frequent business trips, etc) and development paths and development paths
32 32 32 25

Lack of career opportunities Lack of career opportunities Undesirable work-life balance (long Undesirable work-life balance (long
and development paths and development paths hours, frequent business trips, etc) hours, frequent business trips, etc)
30 30 28 24

Source: Economist Intelligence Unit survey, 2008.

support structure to provide a good stream At a recent workshop conducted by Accenture a kind of “chicken and egg” situation;
of skilled talent is being developed but, at in Brazil, one of the major pharmaceutical one cannot be resolved without resolving
the moment, demand is outpacing supply. companies reported that it is sourcing much the other.
Even though the emerging markets produce of its operations talent from CPG companies
plentiful talent from their universities, too that have been successful in emerging Accenture believes that life sciences
few candidates are industry ready. markets. It is becoming more common to companies should focus more intensely
see life sciences companies taking talent on the talent strategies they need to be
In India, where skills shortages are particularly from CPG companies—not only because of successful in emerging markets. Skill and
acute, many companies are looking for talent gaps but also because of the fact capability requirements need to be tightly
ways to bring uneducated workers into that CPG knowledge and experience can integrated into an overall customer centricity
their organizations, then working with be readily leveraged and applied to the life strategy, one that looks at customer clusters.
non-governmental organizations (NGOs) sciences industry. Companies also need to think about sourcing
to improve the skills those workers need to and managing talent across borders, and
become productive. The talent challenge is real and will help to about the culture and skills training required
determine whether companies and emerging to be successful in developing markets.
In the supply chain talent area, companies markets can realize their full potential. The
are either casting their net widely into Economist Intelligence Unit survey on talent Companies also should consider the different
related industries such as consumer packaged compared BRIC nations and found that technology considerations possibly necessary
goods (CPG) or going beyond their own borders most of the key talent issues across the to be successful in these markets. For
to recruit talent. In another strategy, the countries are similar. The most important example, in emerging economies, basic
India School of Business at its Mohali Campus issues that China, India and Russia are 2G phones are being used for tasks such
(near Chandigarh) has joined with an Indian facing are, first, higher salary expectations as training and counterfeiting detection;
Conglomerate Hero group to start Munjal because of shortage of talent and, second, by contrast, developed countries have
Global Manufacturing Institute, which increased demand for critical skills. This technologies such as tablets and 4G phones
has a mission of focusing on developing situation is causing higher employee attrition, available for such tasks.
manufacturing skillsets across industries something that creates skill gaps and high
based on industry needs. overhead for companies. Skills gaps and
inability to meet salary expectations are

15
Competing More Effectively
in the Emerging Markets
A four-point plan for life sciences companies

Establishing and executing a This section looks at each of these four For example, urbanization and per capita
integrated strategies, discussing some income can help identify common customer
growth strategy for the life potential approaches and implications clusters, which then plays an important
sciences industry in emerging and providing relevant examples. role in determining a life science company’s
markets includes taking market access strategy. “Consider, for
1. Think customer clusters: example, the clusters of urbanization and
a detailed view of the per capita income across states in India, as
The importance of submarkets
particularities of these Each of the emerging BRIC markets (and,
shown in Figure 8.
markets, while also finding indeed, others like them around the world)
Analysis of the data and clustering suggests
commonalities that enable is a combination of diverse segments. Each
that India can be divided into states having
market has nuances and distinctive features
cost-effective approaches urbanization levels of more than 35 percent
that life sciences companies can benefit
(five states), below 20 percent (three states)
and being sensitive to unique from understanding at a more detailed level.
and between 20 percent and 35 percent
Companies should approach these markets
market, governmental and and consumers with the individual attention
(remaining states). The infrastructure, policy
support and access to healthcare could be
consumer attributes within and respect they deserve. For example,
different in states with more urbanization.7
any specific region. urban or metro areas typically differ from
Why? Consider that our analysis finds a
rural areas in several ways. Population
direct correlation between higher rates of
Accenture recommends a four-pronged density, infrastructure development and
urbanization and higher per capita income.
approach: availability of logistics all can have an
As the Indian economy grows, per capita
impact on ready access to these markets.
income is also growing, resulting in higher
1. Think customer clusters: The importance In addition, customer profiles can differ
buying power for the typical urban consumer.
of submarkets. Focus on submarkets— in sometimes dramatic ways in terms of
This example indicates that by focusing
common customers and clusters of customers. people’s disposable income, willingness
on customer clusters and submarkets life
2. Find cross-border similarities. or ability to pay, and inclination to seek
sciences companies can achieve a more
Operationalize based on understanding modern healthcare treatments.
detailed understanding of the specific
elements of the value chain that are at needs of potentially profitable groupings
similar maturity levels across multiple markets. However, Accenture’s analysis of markets in
of customers—leading to more effective,
the BRIC countries suggests that customer
3. Establish global reach with local customer-centric R&D, and/or more effective
clusters or submarkets can be identified
relevance. Drive efficiencies from a global marketing and sales strategies. Submarkets
within a market based on an understanding
approach while maintaining local relevance. can be targeted with more focused products
of consumers who have common health
and services (some targeted at urban
4. Create effective and rapid execution needs, such as those suffering from a
consumers and others targeted at those
capabilities. Develop the ability to execute particular disease such as Type 2 diabetes.
in rural areas) supported by an effective
swiftly and with more agility. Submarkets can also be identified based on
supply chain infrastructure.
common characteristics related to factors
such as demographics, accessibility and
technology penetration.

16 | Driving Growth in the Life Sciences Industry: Winning in Emerging Markets


Figure 8. Distribution of states in India according to per capita income
and urbanization
Urbanization (%) 2008
60

Tamil Nadu
50
Maharashtra

40 Gujarat
Punjab
Karnataka
Haryana

30 West Bengal
Madhya Pradesh Andhra Pradesh
Outlier
Uttarakhand
Jharkhand Rajasthan
Kerala
20 Chhattisgarh
Uttar Pradesh
Orissa Urban clusters
Assam
10
Bihar

10,000 20,000 30,000 40,000 50,000 60,000 70,000


log (PCGSDP) 2008

Note: PCGSDP stands for per capita gross state domestic product.
Source: Report on Indian Infrastucture and Services, March 2011, Ministry of Urban Development, Accenture analysis

17
A similar situation with regard to submarkets Figure 9. Major causes of death in China
can be seen in China. Disease patterns in
urban and rural settings in China can be Malignant neoplasms 29.4%
960,125
very different. For example, respiratory 961000.000000
834,424
issues, poisoning and injuries result in far 800833.333333
more deaths in rural areas than in urban
areas but for malignant neoplasms the rates 640666.666667
are approximately similar across urban and Cerebrovascular disease 21.6%
480500.000000
rural areas (See Figure 9.). Therefore, market
access and innovation strategies for certain 320333.333333
diseases may need to be targeted to the Heart disease 17.3%
differences between urban and rural 160166.666667
consumers. Impacts on portfolios and
0.000000
supply chains can also differ. Respiratory disease 16.8% Urban Rural

Customers and clusters:


Innovative approaches Injury and poisoning 8.6%
As an example of an effective strategy Digestive disease 3.5%
based on insights into similar customers Endocrine and metabolic diseases 2.7%
and clusters within markets, consider
Source: National Bureau of Statistics China, Espicom World Pharma Market Report 2012
Novartis, which launched Arogya Parivar
(which means “Healthy Family” in Hindi),
a for-profit social initiative to reach the
740 million people living at the bottom One key to the success of the company’s 2. Find cross-border similarities
of the pyramid in rural India—a huge strategy was focusing on the needs of
submarket opportunity. Novartis created The concept of “customer clusters” also can
rural consumers at lower income levels. help life sciences companies employ strategies
an alternative distribution model to expand The program adapted the educational
its reach across the fragmented markets that have no borders—that is, products and
materials, training and product packaging campaigns that appeal to customer groupings
in rural India. To meet this submarket, the to local conditions and buying patterns.
company revamped its traditional supply across countries and continents.
For example, the company employed local
chain, including portfolio selection, pricing, women as educators and advocates. It also
packaging and partners. For example, consider a recent survey by
packaged products in smaller containers the Economist Intelligence Unit which found
that are more affordable to target consumers. that the top 24 cities out of 30 in the world
In 2010 Arogya Parivar reached out to 50 Arogya Parivar achieved a break-even point
million patients in 10 Indian states, partnering were from the United States and Europe.
within 30 months. Since 2007, sales have Such a finding might lead a company
with 30,000 doctors and 20,000 pharmacies. increased 25-fold.8
The program covered 11 therapeutic areas toward a particular strategic path. However,
and offered nearly 80 pharmaceutical, because emerging economies tend to grow
Things to consider at a rate faster than developed economies,
generic and over-the-counter products
To achieve success in the BRIC markets, the report also showed that 15 of the top
and vaccines, including products targeted
companies should think in more granular 20 cities based on “economic strength”
at conditions ranging from tuberculosis and
fashion about submarkets in urban/regional (highest weighted category) were in Asia.
diabetes to pain and colds.
clusters, finding commonalities in disease And seven of the top 10 cities were in
patterns and/or in demographic groupings. China. Singapore and Bangalore were rated
This approach would enable firms to prioritize higher based on economic strength compared
submarket attractiveness to help determine to Los Angeles, a trend that can also be
where to focus—targeting opportunities seen in the growing economies of India
and build/buy capabilities around people, and China.9
processes and technology with less risk and
greater chances of success. This focus on
submarkets could help companies capture the
differences across demographics, income,
religion, geography and access.

18 | Driving Growth in the Life Sciences Industry: Winning in Emerging Markets


Looking at this data, one possible conclusion On the other hand, the number of households
is that companies should not be constricted earning less than $1,000 per month is roughly
by the concept of “emerging markets” in terms similar in India (196 million) and China
of national borders, but rather around (176 million) (See Figure 11.). This means
“customer clusters” in similar cities or that companies have an opportunity to
urban areas across countries, both in apply a common market access strategy
emerging and developed regions. in India and China based on similar customer
clusters in those countries and on common-
Based on Accenture analysis, we believe alities such as maturity of pharmaceutical
that some of the similarities across markets market, type of infrastructure and consumer
are not being sufficiently leveraged to create buying patterns.11
solutions that can move across borders. In
addition, the solutions are not segmented
enough to have a differentiated distribution Figure 10. Spending on healthcare versus income levels: Brazil, Russia,
infrastructure focused on customer service
India and China
in urban areas and on cost efficiency in
rural areas. Spending on healthcare (PPP, USD)
500
To understand this concept more deeply,
consider another study, a recent Credit
400
Suisse Global Wealth Report. Looking more
broadly at spending on healthcare and
income levels across the BRIC countries, 300
the report revealed that an average Brazilian
household spends 10 percent of income on
200
healthcare—almost double the level spent
in China (5.7 percent) and in India (5.5
percent). However, the number of households 100
earning more than US$2,000 per month
is three times more in India and six times
0
more in China than in Brazil. Clearly, these
different income levels will drive different 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
consumer preferences (See Figure 10.).10 Average monthly household income (PPP, USD)
Brazil China India Russia

Source: Credit Suisse Emerging Consumer Survey 2011

Figure 11. Household income distribution by market in selected emerging economies


Number (in millions) of households earning: % of households in each market earning:
Less than USD Greater than USD Less than USD 1,000 Greater than USD
1,000 per month 2,000 per month per month 2,000 per month
Brazil 32.9 10.8 57% 19%
China 176.8 66.6 50% 19%
India 198.1 37.0 66% 12%
Indonesia 51.1 0.6 91% 1%
Russia 18.0 11.7 39% 25%
Egypt 16.1 0.5 87% 3%
Saudi Arabia 0.2 4.8 3% 80%

Source: Credit Suisse Emerging Consumer Survey 2011, Credit Suisse Global Wealth Database, 2010

19
Cross-border solutions: Things to consider Looking again at the Economist Intelligence
Innovative approaches Given the dynamic nature of the emerging Unit research study, it is interesting to note
Although the following story comes from a markets in the life sciences, companies need that cities that may be similar in economic
related industry and not specifically from to think more about common customer strength are nevertheless often quite different
life sciences, Unilever provides a compelling attributes, and common customer clusters, in terms of human capital components such
example of a cross-border solution. Unilever’s across borders. Groupings and segmentation as population growth, working age population,
“Shakti” program was initially piloted with of customers can be made based on an quality of education, and an entrepreneurship
17 women from remote Indian villages understanding of common needs and and risk-taking mindset.
acting as micro-distributors, who sold behaviors. Companies can thus more
Unilever’s products to rural households. readily prioritize regions that align with In terms of economic indicators alone, one
The program is now a 45,000-women strategic and financial goals, and can focus can find some similarities around economic
micro-distribution network serving three their capabilities in those areas. This can strength, physical capital and human capital
million rural households. Unilever received increase the efficiency of operations and between cities such as Shenzhen and New
strong support from more than 300 partners, improve return on investment in R&D, sales York. Similarly, an analysis of the overall
including NGOs and banks, as well as state and marketing. attractiveness of cities (see Figure 12) shows
and local governments, that Shanghai could be similar to Miami
Many companies may also want to think (except in a couple of factors), while Buenos
On the foundation of Project Shakti, Unilever beyond income, age and profitability as Aires, São Paulo, Delhi and Mumbai might
also created “I-Shakti,” which is focused key drivers for segmentation and, instead, be grouped together as one type of cluster.
on creating kiosks with Internet-enabled consider a more granular approach about
computers run by the women entrepreneurs. issues such as purchasing behaviors, disease To take another example, cities across Brazil,
The I-shakti kiosks provide villagers with patterns, pricing elasticity, regulatory Argentina and India have very different
valuable and free information in the areas constraints and access. This approach taxation structures, and their health care
of agriculture, healthcare, education, finance can help them create more accurate and infrastructures are at different stages of
and entertainment. The content was developed effective cross-country segments, potentially maturity—again, as shown in Figure 12.
with local partners such as Aziz Premji unlocking new areas of demand and growth. Brazil, for example, has the highest taxation
Children Foundation on Education and on drugs at almost 34 percent. Therefore,
ICRISAT (International Crops Research 3. Establish global reach with the strategies employed by companies could
Institute for the Semi-Arid Tropics). Farmers be global in nature but also very different
local relevance
can find up-to-date information on agriculture at the local levels based on the maturity of
Whether in an urban or rural market, it the healthcare value chain network and the
best practices for their crops, and villagers
can be beneficial for companies to “think company itself.
can get timely medical advice from doctors.12
globally and act locally” in meeting the
needs of consumers in the BRIC markets.

Figure 12. Global city competitiveness comparisons


Economic Economic Economic
strength strength strength
Global 100 Global 100 Global 100
Physical Physical Physical
appeal 75 appeal 75 appeal 75
capital capital capital
50 50 50
25 25 25
Environment Financial Environment Financial Environment Financial
and natural 0 and natural 0 and natural 0
maturity maturity maturity
hazards hazards hazards

Human Institutional Human Institutional Human Institutional


capital effectiveness capital effectiveness effectiveness
capital
Social and cultural Social and cultural Social and cultural
character character character

Miami Shanghai New York Shenzhen Buenos Aires Delhi Mumbai São Paolo

Source: “Hotspots—Benchmarking Global City Competitiveness,” Economic Intelligence Unit, January 2012

20 | Driving Growth in the Life Sciences Industry: Winning in Emerging Markets


Understanding these different levels of equivalents might have in the future. The Things to consider
maturity can give a company an overall result of the loyalty program was a doubling Although it can be important to think
assessment of a particular function and of Norvasc sales despite the expiration of globally and to have a holistic picture of
also help a company understand the drivers the patent in 2007.13 consumer segments, it can also be beneficial
that will can help in improving the existing for companies to employ local solutions
maturity of that function. Accenture believes When Pfizer later developed a loyalty to be successful. This approach may require
it is important to consider going through program in India, it was careful to adapt tweaking an already existing solution,
a granular assessment designed to develop it for that consumer environment. In this or it may require building an entirely
more customer-centric, localized solutions. case, consumers in India had existing access new solution.
to many inexpensive, generic versions of
Creating local relevance: cardiovascular medicines before Pfizer Keys to success include mapping customer
Innovative approaches launched its products. Pfizer realized that, needs to the capabilities required; under-
Consider the story of how life sciences although price was an important factor in standing the maturity of the country,
company Pfizer was able to adapt a deciding what product to buy, consumers industry, other industries and competition
loyalty program to different local markets. in fact had insufficient awareness of how (across function); identifying the gaps
The original program, developed for the a medicine was to be used as part of an between needs and capabilities; and
Philippines market, was “SULIT” or a “value” overall disease management program. prioritizing decisions in an effort to develop
card program. It was targeted at patients or buy the capabilities to successfully develop
in Manila and other urban centers who Pfizer’s pilot of its loyalty program in India solutions for different customer segments.
were using Pfizer’s leading cardiovascular therefore sought to fill that knowledge
drug Norvasc. The drug’s patent expiration void, helping consumers better manage It can be beneficial to perform a granular
date was approaching, with the consequent their cardiovascular disease from a more assessment of maturity by function (see
entry into the market of low-priced generic holistic perspective. Pfizer sees this approach Fig 13) using a maturity model diagnostic
equivalents. In anticipation of this market as giving it differentiation in a crowded tool, something that can help develop more
event, Pfizer instituted the SULIT card market. It is an excellent example of customer-centric solutions. One potentially
program in an effort to retain patient loyalty understanding the unique local situation valuable tool in this regard is a detailed
following the expiration of the patent. The and the needs of consumers, helping the diagnostics tool developed by Accenture
card enabled loyalty-based discounting, an company adapt an existing loyalty program for management and non-management
effort to mitigate the impact that generic for a different environment. employees to assess a particular company’s

Figure 13. Stages in the life sciences market access industry maturity model

Pharmaceutical
industry average

Leading
Advanced • Internal and external
• Market and supply network trade-offs
Progressive chain alignment • Profitable
• Focus on scale and • Structured supply/demand
efficiency integration within synchronization
• Separate core functions • Analytics seen as
Basic imple-mentation • Collaborative core competency
• Silo based decision of projects functional trade-offs
making • Cost and risk • Developing demand
• Lack of systemic controls aware supply chains
capabilities
• Inability to build on
learnings
• Fire fighting

Source: Accenture’s Maturity Model for the Life Sciences Industry

21
maturity in market access functions—from Figure 14. Diabetes prevalence comparisons: India and China 2010-2030
product launch to planning, sourcing,
manufacturing and delivery. The maturity India China
diagnostic can provide an overall assessment 38M
of a particular function and can also help
a company understand the drivers that
can help improve the existing maturity of
that function. 21M

4. Create effective and rapid Rural 29M 48M


execution capabilities 20M 41M

The fourth strategy to consider for potential


success in emerging markets in the life sciences
Urban 21M 22M
really ties all the other ones together: it’s
about executing the solution across the
markets in a timely and cost efficient manner.
Although this sounds like an obvious point, 2010 2030 2010 2030
in fact the ability to execute initiatives in a
Source Prevalence of Diabetes mellitus in World 2010-2030, International Diabetes Federation, Accenture analysis
timely manner across markets still can be
a difficult task for life sciences firms, given
that many of them continue to operate in
functional silos. Hence, it is important that
supply chain, commercial and other functions customer-centric approach. It is important
work together at different stages of the to have a holistic and integrated strategy,
product lifecycle to have an effective rather than trying to coordinate different
speed-to-customer capability. strategies for supply chain, commercial and
so forth.
Accenture believes that two capabilities are
especially critical to consider with regard Companies are looking to gain better
to rapid execution of an emerging-market understanding of their customers’ interests,
strategy. The first involves developing the intentions and behaviors. Voice of the
ability to understand and to get very close Customer (VoC) studies are critical tools
to the customer—by leveraging networks that can help firms identify relevant solutions
and chains of influence so that a market and execute them faster and more efficiently.
strategy can reach consumers quickly. The For example, looking at diabetes data across
second involves companies improving their BRIC countries compared with the United
risk management capabilities to the point States, the numbers suggest that China
that they can take well-considered risks as (42M) and India (50M) combined are more
a means to rapidly seize market share. than three times the market size of the U.S.
(26M) diabetic population. While the numbers
Understanding and getting close look somewhat similar across urban China
to the customer (41M) and India (48M) in 2010 and 2030,
In developed markets, companies generally the “consumer clusters” could be very
take an approach emphasizing high margins. different when actually executing the
In emerging markets, however, a more strategy (See Figure 14.).
appropriate approach emphasizes high
efficiency, with less emphasis on margins. Rigorous market research can help define
Furthermore, companies should focus on “who the customer is” and then can also
customer centricity and break the silos help ascertain the right products and
between different functions of their services to launch. For example, a large
organization (such as supply chain and pharmaceutical firm took an approach with
commercial) that might constrain that one of its chronic disease products in which

22 | Driving Growth in the Life Sciences Industry: Winning in Emerging Markets


it created a localized solution by understanding Although entering emerging
customer needs, behaviors, elasticity to
price, and attitudes. The result was exclusivity markets is often a risky
in its drug class for some time. The key to
success was speed to execution by targeting endeavor, that risk can also
the right set of customers with “responsible
pricing” supported by training and educational
be turned to competitive
support for the medical community. advantage by enabling a
The product itself was the same one marketed company to be a fast mover.
to the United States, but the company knew
that the ways to achieve success were very
much dependent on the customer dynamics
in each region. The firm launched a concerted Figure 15. Risk assessment of emerging countries vs. developed countries
effort to activate a network of key opinion Emerging markets are riskier across the board
leaders to address the concerns of the market.
(Risk rating: 0 = low risk, 100 = high risk)
The company engaged more than 11,000
physicians in peer group networks, in which 85
80
physicians discussed their experiences
75
treating patients with the product. Their
70
positive experiences encouraged others to 65
adopt the treatment. 60
55
The firm also established a patient 50
identification program to track prescriptions. 45
It conducted interviews with physicians to 40
understand the typical patient profile for 35
30
the drug, and shared this information
25
with their medical peers. These efforts
20
contributed to building credibility among 15
the medical community. All this was 10
possible because the company took the 5
time to understand the voice of the customer, 0
Security Political Legal & Financial Tax Policy Labour Infrastructure
developed autonomous decision making Stability Regulatory Market
process at country level and put in place an
Emerging China Brazil India Russia
effective network of influence. The company Developed US Japan Germany UK
made similar changes to its strategy across
the BRIC markets for the product, potentially Sources: Economist Intelligence Unit Survey
setting a benchmark for launching patented
products in BRIC countries.

Improving risk management capabilities


Although entering emerging markets is often
a risky endeavor, that risk can also be turned
to competitive advantage by enabling a
company to be a fast mover. For example,
based on an Economist Intelligence Unit
survey (see Figure 15), tax, legal, regulatory
and labor market risks were some of
the highest risk factors identified in
emerging countries.

23
To address these risks, companies should With strategies that have never been
consider focusing on developing better risk executed before, an element of risk is
management capabilities. They can also generally present. However, risk-adjusted
benefit from strengthening their ability to innovation can be a key to success in the
identify risks, evaluate impact across the emerging markets. For example, consider a
company, develop mitigation strategies and recent launch of a chronic disease product
finalize implementation plans. As a part in BRIC countries. By assessing the segments,
of the evaluation, companies can evaluate targeting the right regions and developing
risk exposure by assessing the likelihood local solutions such as responsible pricing
and impact of each risk while entering the for India, the firm had a head start in its
emerging markets (See Figure 16.). This class of drugs and had a successful launching
kind of risk-adjusted execution can provide pad to making the drug a blockbuster
companies with faster speed to customer. in India.

Technology can be an important enabler This example helps us see that companies
in emerging markets because it can help that can identify, assess, monitor and
companies reach the “last mile” to the mitigate risk to execute with speed have
consumer and can also provide better an edge in achieving high performance in
transparency and visibility in the supply emerging markets.
chain. Collaborating across functions such
as supply chain and commercial can also
help reduce a company’s risk profile as well
as break functional silos—something essential
to success in the emerging markets.

Figure 16. Risk response framework methodology

1. Identify 2. Assess 3. Monitor 4. Mitigate

Scan horizon to identify risks Assess each risk based on its Design risk dashboard to Develop contingency plans to
across different categories likelihood and impact monitor changing nature of mitigate high-impact risks
Map risks across risks
organisation to identify
pressure points

Risk Assessment Matrix Risk Categories Risk Exposure


High Security Business Units
1
12 7 4 Political Risk A B C D
1
8 Economic
6 4
Financial
6
Impact

2 3 Legal & Regulatory


13 14 5
Tax 7
9 11 10 8
Labour
Infrastructure 12

Low Likelihood High

Source: Accenture analysis

24 | Driving Growth in the Life Sciences Industry: Winning in Emerging Markets


25
Conclusion
A winning strategy in the emerging markets

Growth strategies in the life Accenture recommends a four-pronged


strategy to overcome these challenges and
sciences industry are increasingly grow revenues in the emerging markets:
dependent on expansion into
1. Focusing the strategy around customers
emerging markets. These and clusters rather than just countries or
markets represent a significant regions. Thinking in terms of submarkets
can help a company develop a more
opportunity, with the BRIC
targeted and customer-centric strategy.
nations predicted to be in the 2. Plotting a course forward based on cross-
top 10 of the world’s global border similarities. These similarities can
pharmaceutical markets in the help create products and services that are
relevant across regional differences.
coming years.
3. Becoming effective both from a global
Many companies face significant challenges perspective and a local one. Cross-market
in executing this emerging-market strategy, standardization can help from an efficiency
however, including market access elements perspective, but implementations may also
such as manufacturing, distribution, supply require customization at the local level.
chain planning, pricing, taxation regulation 4. Executing at speed. By understanding
and talent. These challenges explain why the voice of the customer and putting in
even the top pharmaceutical companies in place an influence network, companies
the world are having difficulty breaking have the potential to leap ahead of the
through to greater success. Many have no competition in actually executing their
more than 10 percent to 30 percent of emerging-market strategy.
revenues coming from these regions.
An emerging middle class in developing
This paper has presented an analysis of nations represents an opportunity for life
several critical market access challenges— sciences companies to improve the quality
logistics and distribution; manufacturing of life there, while also improving their own
infrastructure; regulation; pricing and market standing. Companies that are more
reimbursement; taxation; and talent. This advanced in areas such as manufacturing
analysis can give life sciences companies infrastructure, logistics, distribution,
the basis for their own detailed understanding regulation, tax and talent management—
of the individual value chain components of and, of course, in understanding consumer
their strategy. needs and behaviors—can gain an edge in
achieving high performance.

26 | Driving Growth in the Life Sciences Industry: Winning in Emerging Markets


References
1-5 “The Outlook for Pharmaceuticals in 6 China Law And Practice, R&D Tax 11 Ibid
Brazil, Russia, India & China,” February Incentives, May 2000 http://www.chinalaw 12 Unilever Global website:
2012, Espicom World Pharmaceutical andpractice.com/Article/1694602/Channel/ http://www.unilever.com/careers/
Report, http://digitaljournal.com/pr/614045 7576/R-D-Tax-Incentives.html insideunilever/oursuccessandchallenges/
World Pharmaceutical Markets (WPM) Outlook is compiled 7 Report on Indian Infrastucture and shaktiprogrammeindia/#
using, where possible, primary data from local sources. This
comprises national Ministries/Departments of Health, statistical Services, March 2011, Ministry of Urban 13 Pfizer Global website:
bodies and professional associations. Market profiles draw Development, Accenture analysis http://www.pfizersulitcare.com.ph/
on detailed statistical work by our Healthcare Markets Team.
This is undertaken specifically for this report, and also in the 8 Novartis Global website; http://www.
course of research for other Espicom services, principally novartis.com/corporate-responsibility/
World Pharmaceutical Markets (WPM). World Pharmaceutical
Markets (WPM). Published by Espicom Business Intelligence, access-to-healthcare/our-key-initiatives/

Contact
Lincoln House, City Fields Way, Tangmere, West Sussex PO20
2FS. http://www.espicom.com Economic and demographic us social-business.shtml
9 “Hotspots—Benchmarking Global City
forecast data is sourced from the Economist Intelligence Unit
(http://www.eiu.com), where indicated. Reference may also be Competitiveness,” Economic Intelligence
made to a number of secondary sources, and these are listed
below. OECD Health Data, http://www.sourceoecd.org PC-TAS Unit, January 2012
trade data, published by International Trade Centre, UNCTAD/
WTO, United Nations. World Bank, http://www.worldbank.org
10 Credit Suisse Emerging Consumer
World Health Statistics, World Health Organisation, Geneva, Survey 2011, Credit Suisse Global Wealth
Switzerland. http://www.who.org Database, 2010

Authors
Anne O’Riordan is the global industry Hussain Mooraj is the global lead for the Vishal Singal is a senior manager in
managing director for Accenture’s Life Accenture Life Sciences Supply Chain Accenture’s Life Sciences practice and
Sciences practice. She has been with practice and brings more than 20 years is the global lead for Life Sciences Market
Accenture for 23 years and has dedicated of experience in manufacturing, supply Access in Emerging Markets. Vishal has 14
her career to working with Life Sciences chain, technology, sales and marketing, years of management consulting experience
companies around the world, most recently strategy and consulting to his role. He working with leading Health & Life Sciences
covering Japan, China, Singapore and India. works closely with senior executives from companies, with a focus on supply chain,
Given the diversity of markets from mature global companies across the healthcare and commercial strategies and their
to emerging in Asia, Anne has worked on value chain (manufacturers, wholesalers, implementation. Vishal has recently
both market entry, business evolution and pharmacies, payers, and providers), advising presented at a Global Conference focused
business transformation projects. In addition, them on business strategy and technology on commercial excellence in emerging
Anne has worked on front and back office best practices. In 2009 he was voted by markets around driving growth in life
transformations for Life Sciences clients PharmaVOICE as one of the 100 most sciences for emerging markets. Vishal is
inclusive of business and IT strategy, sales influential and inspiring individuals in based in Indianapolis.
& marketing optimization, ERP implementation, Life Sciences. Hussain is based in Boston. vishal.singal@accenture.com
R&D transformation, Business Process hussain.mooraj@accenture.com
Outsourcing, Application Outsourcing and
Infrastructure transformation on a global,
regional and local basis. Anne is based
in China.
anne.oriordan@accenture.com

The authors wish to thank Jolyon Austin, Marcelo Aleja Duerto, Ricardo Cecilio Gouveia,
B.A. Shah, Arul Prakash, Vikash Poddar, Jennifer Seeley and Sriram Shrinivasan for
their contributions to this paper.
27
About Accenture
Accenture is a global management consulting,
technology services and outsourcing
company, with approximately 259,000
people serving clients in more than 120
countries. Combining unparalleled experience,
comprehensive capabilities across all
industries and business functions, and
extensive research on the world’s most
successful companies, Accenture collaborates
with clients to help them become high-
performance businesses and governments.
The company generated net revenues
of US$27.9 billion for the fiscal year
ended Aug. 31, 2012. Its home page is
www.accenture.com.

Life Sciences Practice


Accenture’s Life Sciences practice is
dedicated to helping companies rethink,
reshape or restructure their businesses
to deliver better patient outcomes and
drive shareholder returns. We provide
consulting, outsourcing and technology
around the globe in all strategic and
functional areas—with a strong focus
on R&D, Sales & Marketing and the Supply
Chain. We have a long history of working
hand in hand with our clients to improve
their performance across the entire Life
Sciences value chain. Accenture’s Life
Sciences practice connects more than
10,000 skilled professionals people in over
50 countries who are personally committed
to helping our clients achieve their business
objectives and deliver better patient
outcomes for people around the world.

Copyright © 2013 Accenture


All rights reserved.

Accenture, its logo, and


High Performance Delivered
Accenture Life Sciences
are trademarks of Accenture. Rethink Reshape Restructure...for better patient outcomes