Pharmerging markets refer to those emerging pharmaceutical markets which probably have absolute spending growth of over USD 1 billion and GDP per capita less than USD 25,000 at purchasing power parity. The global pharmerging market is expected to grow at an estimated CAGR of approximately 11% over the forecast period.
Factors such as rising population due to low infant mortality rates and focus on developing innovative drugs are expected to boost the growth in pharmerging market. Amongst the 17 emerging countries in pharmerging market, China, India and Russia are projected to hold a significant share of the market.
Sales in matured markets such as the U.S, Europe, Japan, Canada and the U.K are anticipated to slow down due to patent expirations and prevalence of low-cost generic drugs. As patents expire, major players are expected to bring in new products to maintain and even expand their market share. This factor is likely to drive the pharmerging market. The launch of innovative products for diseases such as lupus, diabetes, arrhythmia, melanoma, prostate cancer, osteoporosis, etc. will probably influence the market trends.
Macroeconomic factors expected to influence pharmerging market growth include greater awareness about drugs in semi-urban and rural markets, epidemiological changes coupled with age-related disorders, rapid development in the private hospital industry. Also, increased government expenditure in the healthcare industry is expected to drive pharmerging market over the forecast period.
Emerging markets are likely to focus more on low-cost generic drug development, which is supposed to restrain the market growth in these regions. Regulatory policy changes are likely to curb the market as these changes are anticipated to have long-term impacts on pricing and medicine usage in various regions. Price sensitivity is another challenge likely to be faced by major players operating in pharmerging market.
Regulatory norms such as Affordable Care Act in the U.S. and Japan’s price cut system are considered to rebalance the spending priorities for pharmerging markets. Affordable Care Act in the U.S. grants 12 years of market exclusivity to original drug manufacturers.
Another major factor likely to restrain the pharmerging market is the possibility of including major drugs under Drug Price Control Order (DPCO) which will affect the retail and wholesale margins earned by chemists. Lower margins are further expected to lead to production rate cut. Some of the major pharmaceutical companies which have experienced a negative growth rate due to DPCO include Sanofi-Aventis, Lupin, Zydus Cadila, etc.
Though pharmerging market is expected to be quite lucrative for major pharmaceutical industries in order to succeed in these markets, major pharmaceutical companies are anticipated to tailor their portfolio according to local needs.
Pharmerging markets can be segmented into three tiers based on pharma growth requirements. Tier-I includes China; Tier-II includes India, Brazil and Russia and Tier-III includes Turkey, Indonesia, Thailand, Vietnam, Egypt, South Africa and Mexico.
China is likely to become a very complex market and is expected to focus on sophisticated operating models. Significant challenges likely to be faced by pharmaceutical industries planning to enter in Chinese market include shrinking price, complex distribution system, variation in commercial models in different provinces and regulations favoring domestic manufacturers.
Indian Pharmaceutical market is expected to be highly fragmented and competitive. Strategic planning coupled with the well planned new product launches is expected to be the key factor for major pharmaceutical companies to be successful in this region. Companies are supposed to adapt to local market trends and implement market entry strategies accordingly.
The Brazilian market is anticipated to be commoditized in retail segment as unmet medical needs are mostly satisfied by nonretail drugs. Establishment of CITEC, an economic evaluation agency is likely to act as a barrier for product inclusions in funding programs. Innovation in Brazilian market is focused on niche private segments as demand for expenditure on complex therapies is usually avoided.
The Russian market is likely to be very volatile, due to the presence of price control on essential drugs. Also, a policy such as substitution of imported drugs with locally manufactured equivalents is likely to pose a challenge to major players.
Major players in pharmerging markets are AstraZeneca, Sanofi, Merck, Pfizer, GlaxoSmithKline, Novartis, Abbott Laboratories, CSL Behring, Johnson &Johnson, Sun Pharmaceutical, Aspen, Teva Pharmaceutical, Bayer, Valeant Pharmaceutical, Biogen, Baxter, STADA, Mylan, Takeda Pharma, Alexion Pharmaceuticals, Endo Health Pharmaceuticals, etc.
The pharmerging market is expected to be highly fragmented due to the presence of small and medium size vendors. The market competition is likely to be dominated by product extensions, mergers & acquisitions, and technological advancements. A majority of pharmaceutical companies are expected to focus on merger and acquisitions to expand their market presence and increase their profits. In 2014, mergers and acquisitions in the healthcare industry were approximately around $ 363 Billion.
Major pharmaceutical industries are expected to deal with some uncertainties including regulation, pricing policies, etc., to ensure a profitable business in pharmerging markets. Anticipate and analyze compliance risks, resolve the most pressing issues and implementing suitable market entry strategies based on the information available are probably the best strategies to be successful in pharmerging markets.
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