Winning in Emerging Markets to Drive Growth

8/10/2019 Winning in Emerging Markets to Drive Growth

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Accenture Life Sciences

Winning in EmergingMarkets to DriveGrowth in the LifeSciences Industry



IntroductionThe importance of emerging markets in life sciences

As mature markets in manyareas of the developed worldbecome saturated, global lifesciences companies are awarethat growth and sustainedcompetitive advantage maybe increasingly dependenton the effective planning and

execution of an emerging-markets strategy.

These markets, particularly the BRIC nations(Brazil, Russia, India and China), haveexperienced significant and rapid change.In 2005, China and Brazil constituted just 5percent of the total pharmaceutical marketof the top 10 nations; by 2016, however, atleast one projection is that the four BRICnations will all be in the top 10 of global

pharmaceutical markets and will constitute30 percent of the top-10 market (SeeFigure 1.).

In spite of this opportunity, many pharma-ceutical firms have not been able to get amajor foothold in emerging markets. Lookingat the publicly available financials of thetop-nine pharmaceutical companies, manyof them have no more than 10 percent to30 percent of their revenues coming fromemerging markets.

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

What are the barriers to effective executionof an emerging-markets strategy? Sellingand operating in these markets presentsnumerous challenges. A variety of marketaccess elements such as supply chainplanning, manufacturing and distributioncan become more complex when sellingto markets in emerging economies. Theregulatory environment, including taxationand import regimes, can be a significantbarrier to growth, both in terms of working

across borders and in terms of tracking

Emerging markets Placement movement

+6

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

Rank

1. USA

2. Japan

3. France

4. Germany

5. Italy

6. UK

7. Spain

8. Canada

9. China

10. Brazil

Total = $496.1

BRIC = $25.9

BRIC % = 5%

Total = $711.3

BRIC = $96.6

BRIC % = 14%

Total = $812-$952

BRIC = $244-$284

BRIC % = 30%

2005

Size $B

249.2

84.9

33.3

33.1

21.3

16.4

16.1

15.9

14.1

11.8

Rank

1. USA

2. Japan

3. China

4. Germany

5. France

6. Brazil

7. Italy

8. Spain

9. Canada

10. UK

2010

Size $B

322.0

111.2

66.7

45.0

41.3

29.9

28.6

22.7

22.4

21.5

Rank

1. USA

2. China

3. Japan

4. Brazil

5. Germany

6. France

7. Italy

8. India

9. Russia

10. Canada

2016

Size $B

350-380

155-165

105-135

42-52

39-49

32-42

23-33

24-34

23-33

19-29

+4

-2

-2

-1

-1

-4

+1

+2

+5

+2

-1

-1

-1

-1

the continuously evolving patchwork oflaws and rules. The need for more effectivemonitoring of pricing and reimbursementmay increase. Talent shortages can also beobstacles to growth.

Thus, although “expansion into emergingmarkets” is now a popular topic for boardsat many life sciences companies, it is timeto turn the talk into effective action inorder to stay competitive and win.

FIGURE 1. Top 10 total pharmaceutical markets in the world, 2005-2016$Billion—all figures in US Billion



3

To help life sciences companies plot moreeffective growth strategies in the emergingmarkets, Accenture has performed ananalysis of some of the most importantmarket access issues and trends in the BRICcountries. Our study evaluated the currentsupply chain maturity levels of the life sciencesindustry, the regulatory environment, theoverall dynamics around pricing, and otherchallenges that life sciences companiesneed to overcome to run successful market

access strategies.

Many of the large, international life sciencesfirms have already established some level ofpresence in these BRIC markets. However,these companies are at different levels ofmaturity in terms of capabilities they haveacquired to this point. Accenture believesthat life sciences companies may be ableto gain a competitive edge in emergingmarkets with a thorough knowledge of thesix primary issues faced with emerging

market growth and adoption of a four-pointintegrated strategy.

Think customer clusters:The importance of submarkets.

Each emerging market is a combination ofdiverse segments requiring differentiatedtreatment. Companies should considerplotting their access strategies by thinkingof customers and clusters of customers(also known as “submarkets”) rather than

focusing only on countries and continents.This approach can enable companies tohave more targeted and effective customer-centric strategies.

Find cross-border similarities.

Elements of the value chain appear to beat similar maturity levels across multipleemerging and/or developed markets. Firmsmay benefit from creating solutions thatare better positioned to cross geographicborders by exploiting these similarities.

Establish global reach withlocal relevance.

It is important to standardize globally

whenever possible to gain economiesof scale, but also to customize whereappropriate to achieve local relevance.Solution themes can benefit from cross-market applicability, but the implementeddesign may need customization to addressmarket-specific nuances at the local orregional levels.

Create effective and rapidexecution capabilities.

The ability to understand the customer, andto execute solutions across markets thatare aligned with customer needs in a timelyand cost-efficient manner, can be a key tosuccess and competitive differentiation.This is a difficult goal for many companiesbecause many still operate within functionalsilos of supply chain, R&D and commercial,rather than working toward one commongoal according to one strategy.






5

Developing MarketAccess Capabilities

It is generally understood thatBRIC markets pose a numberof similar challenges in areassuch as economic development,infrastructure growth, availabilityof skills and resources, technologydevelopments, regulatory maturityand the pricing environment.However, life sciences companiesmay also benefit from anunderstanding of the differencesand nuances that can shapehow they develop market accesscapabilities focused on supplychain and pricing, includinghow they deal with regulatoryand tax environments.

The fragmentation of the distributionenvironment has been an ongoing challengefor some companies, though this situationmay be changing because of marketconsolidation. Some manufacturingprocesses are becoming more alignedwith global standards, and many industryplayers are starting to appreciate thebenefits that increased collaboration withvendors and channel partners can bring totheir businesses.

Supply chain skills are typically not aswidely available in emerging markets whichcan be a clear obstacle toward achievingmarket growth in these regions. Infrastructureand technology adoption in emergingmarkets have yet to reach a stage where

53 5461 61

6661 64

7569

2923

3124 25

19 21

3123

-24-31 -31

-37-41 -42 -43 -44 -46

Percentage of respondents

Importance Performance Gap

N = 114

Source: “Demand Visibility Critical to Success of Healthcare and Life Science Value Chain,” Gartner analysis, May 2012

Leverage contractmanufacturers forsuccessful newproduct launch,lower costs andagile response todemand

Better use oftechnology todrive down costsand enhanceproductivity

Develop a supplychain visionsupported bygovernance andchange managementprocesses to guideexecution of supplychain priorities

Ability toforecast demandaccurately andrespond quicklyto changes indemand

A balancedS&OP (Sales andOperations Planning)processes whichprofitably matchesdemand andconstrained supply

Develop effectivesupply chaincapabilities inemerging markets

Achieve compliant,predictableproduct supplyby manufacturingright-first-time

Align manufacturing,supply chain, salesand marketing andregulatory interactionfor profitableoperationsand driving valueto customers

Develop valuechain strategiesversusfunctionallysiloed supplychain capabilities

there can be regular, seamless flow ofproducts and an effective reverse flow ofinformation within the supply chain.

Furthermore, based on a recent Gartnersurvey, many pharmaceutical manufacturerssee a critical gap in the supply chaincapabilities they need to execute theirmarket access strategies around the world.Sixty-four percent of manufacturerssurveyed affirm the importance of developingeffective supply chain capabilities in emergingmarkets. However, only 21 percent saytheir performance is currently adequate—a 43-point gap between aspiration andreality (See Figure 2.).

FIGURE 2. Importance versus performance: A gap analysis of key supply chain components




According to Accenture analysis, most ofthe BRIC markets are still at low levels ofmaturity in terms of distribution capabilities,infrastructure, manufacturing, supply chainskill availability and technology adoption(See Figure 3.). Establishing and runningsupply chain operations in emerging marketsis a challenging proposition. It may bedifficult to gain penetration down to

the last mile in the market, navigatingthrough the complex networks of citiesand towns and the vast geographic span.There are also significant differences inthe level of economic and infrastructuredevelopment as focus shifts from citiesto smaller towns, and then to rural areaswhich are typically not well-connectedfrom an infrastructure perspective to themore urban economic centers.

Common among categories

Maturity Parameters

Distribution

Manufacturing (Compliance)

Manufacturing (Reliance

on Imports)

Availability of niche skills

Technology Usage (LS Firms)

Technology Usage (Channel

Partners)

Brazil

Highly fragmented,

regionally focused, low

visibility

Local regulation compliant

Heavy reliance on imports

(80% APIs imported)

Limited availability of niche

supply chain skills

Localized systems

Basic technology used by

channel partners

Russia

Highly concentrated,

further consolidation

expected

Low GMP compliance

universal compliance only

by 2014

Heavy reliance on imports

(> 75% of the market)

Skills availability is not an

issue at present

High Usage, ERP systems

ERP used by large channel

partners

India

Highly fragmented, multiple

layers, unionized channel,

low visibility

Majors follow GMP,

monitoring of adherence

to norms is critical

Predominant local

manufacturing (local

players)

Skills available, but LS not a

preferred choice

High Usage, ERP Systems


channel partners

China

Highly fragmented, multiple

layers, low visibility

GMP compliance is an issue

universal compliance only

by 2015

Predominant local

manufacturing (including

MNCs)

Limited availability of niche

supply chain skills

Legacy Systems


channel partners

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

FIGURE 3. Comparison of the maturity of life sciences value chain elements across the BRIC markets

Overcoming these challenges to the overallvalue chain may require innovative approachessuch as focusing on customer clusters,leveraging solutions across markets withlocal flavor and executing with speedin an effort to maximize the businessopportunities that these markets offerto life sciences players.



7

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.




Market AccessFocus on six primary issues

As market access for emergingeconomies becomes increasinglyimportant, Accenture believesthat life sciences companiescan benefit from an awarenessof six primary challenge areasacross the broader value chain.(see Figure 4). This section

explores each of these areasin detail.

1. Immature logistics and distribution

Life sciences companies generally haveavailable to them a spectrum of distributionoptions as they seek access to markets inBRIC countries. One challenge that companiestypically face in this area is that thedistribution value chain in emergingmarkets is often immature—inefficient,

mostly inflexible and highly fragmented.

Take the example of the typical Chinesedistribution system which, by Westernstandards, is complex and much morerestrictive, with a large number ofdistribution companies operating atall levels. Many distributors are province-based or city-based and few cover morethan just a small area of the country. Fiveprimary distribution centers supply morethan 200 provincial-level wholesalers, which

in turn supply around 3,000 local distributors.Such a distribution system may have theadvantage of simplicity, but it can also behighly inefficient.

Emerging

Market

Life SciencesIssues

1Immature Logistics

and Distribution

6Shortage of

Skilled Talent

3Diverse Regulatory

Environments

4Uncertainty

in Pricing and

Reimbursement

5Complex

TaxationStructure

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

2Inadequate

ManufacturingInfrasturcture

China now has a large number of distributioncompanies operating at all levels. In theory,all products could be distributed throughthe state-controlled system, but many localcompanies establish their own preferredmethods of purchasing and distribution.Direct selling by manufacturers andwholesalers at all levels is increasinglybecoming the norm. Many suppliers desire

to gain broad geographic coverage but findthemselves restricted by strong regionalgovernments and poor transportation andcommunication systems which, in effect,make China a collection of independent andfragmented markets.

FIGURE 4. Issues for life sciences companies in emerging markets

The situation is similar in India, with manycompanies encountering complexity andfragmentation in the distribution chainat every level. A typical distribution valuechain in India goes through a distributionnetwork that may involve 30 Clearing andForwarding Agents (CFAs), 60,000 stockistsand 550,000 pharmacies in addition to sub-stockists, hospitals and non-government

organizations (NGOs). Thus, as in China,the distribution networks in India areexceedingly complex.



9

In Russia, a large number of small regionaldrug wholesalers exist, but these aresometimes losing out to a smaller numberof national wholesalers. The nationalwholesalers are typically more efficientand better capitalized. Because they aregenerally based in Moscow or St. Petersburg,they may be better placed to deal withoverseas companies.

The distribution system situation in Brazil

is more in line with that of a developedmarket. Brazil has about 300 drug whole-salers and five major pharmacy chains inaddition to other players. The five pharmacychains comprise 49 percent of the marketbut have only 10 percent of the outlets inthe country. Those numbers may continueto fall due to mergers and acquisitions. Forexample, in September 2011, Drogaria SãoPaulo, the leader in the state of São Paulo,and Drogarias Pacheco, the leader in Rio deJaneiro, announced a merger, creating the

largest pharmacy chain in Brazil, DPSP, witha combined 691 outlets located in five states.1

Furthermore, lack of adequate cold-chaincapabilities across the country has contributedto serious gaps in distributing drugs thatrequire specialized handling. The marketdoes not have distributors or logistics playerswho have cold-chain capabilities across theentire country. These kinds of constraintsmay need to be addressed to improve marketaccess in emerging economies.

In the coming years, Accenture anticipatessome consolidation amongst the distributionplayers. We also expect to see somedevelopment of segmented capabilitiesto reach the farthest areas of the country(tier 2 and tier 3 cities as well as ruralareas) and the use of technology as anenabler in an effort to create a more agileand secure distribution value chain.

One potential challenge posed by these

trends is in creating targeted solutionsfocused on sets of customers segmentedby region, attitudes, behaviors and per capitaincome, but with solutions closely alignedto the needs of particular customer segments.This situation could also give rise to morecollaboration across borders to leveragesolutions and increase the value of learningduring the course of speedy execution.

2. Inadequate manufacturinginfrastructure

Different emerging economies have verydifferent levels of maturity in terms offully developed manufacturing ecosystems.Although most of the manufacturing basesin the BRIC countries are focused on providingActive Pharmaceutical Ingredients (APIs)and preparations (China and India), andmanufacturing generic products (all BRICS),a great deal of fragmentation exists amongpharmaceutical manufacturers. For example,in India, no single company has more than

7 percent of market share; in China bycontrast, 70 percent of the players haverevenues of less than $45 million. Indiais ahead of other emerging economies informulations due to their domestic genericmanufacturing capabilities.2

In Russia, manufacturing has often notbeen able to cope with the growing needsof the Russian market. Currently, localpharmaceutical companies are able tomeet only a small percent of the country’srequirements; therefore, reliance on importedpharmaceuticals is growing. Around 80percent of the public procurement (DLO)budget for additional medicines is spent onforeign pharmaceuticals.

Further analysis suggests that the localindustry’s falling market share may berooted in part in the inability of Russianmanufacturers to produce innovative drugs.Some producers blame the high costsassociated with drug development, clinicalevaluation, marketing and promotion andthe uncertainty of the return on theirinvestment. In Russia, the cost of developingand launching a new drug is estimated atbetween US$100,000 and US$5 million.Some manufacturers therefore claim

that they need to acquire licenses forthe reproduction of fully establishedgeneric products.

Another problem often lies with a lack offinancing for R&D. Many Russian scientificresearch institutes that were previouslysolely responsible for the end-to-end processof developing and launching new productsnow tend to be involved only in the initialdrug-discovery stage. After that point inthe process the project is often shelved

due to extensive laboratory and clinicalevaluation costs, as well as marketing andsales expenses. If a new drug is successfullydeveloped, insufficient laboratory and clinicaltesting as well as non-compliance withinternational Good Manufacturing Practices(GMP) standards could prevent it fromentering the international market place.




In Brazil, some companies have focused onencouraging more effective collaborationbetween contract manufacturers andpharmaceutical companies. Due to thestrong Brazilian currency, companies canfind it infeasible to produce drugs in Brazilfor export. This situation, in turn, canresult in underutilization of manufacturingcapacity. For example, Accenture recently

visited one plant performing manufacturingfor a major pharmaceutical company;the plant is running at only 50 percentcapacity utilization.

The availability of manufacturing facilitiesthat are GMP compliant can vary significantlyacross these markets. Russia faces challengesin becoming GMP compliant because only12 percent of local facilities are GMPcertified. India, on the other hand, hasmany GMP-certified facilities, but faceschallenges because many players of all sizeshave been exposed as being, in practice, non-adherent to norms. Many large multinationalsprefer to invest in captive facilities inthese markets to increase the availabilityof high-quality and compliant localmanufacturing partners.

In the future, more manufacturing facilitiesmay become GMP compliant across theemerging economies. Accenture sees a

significant trend among multinationals touse Contract Manufacturing Organizations(CMOs) and other local suppliers as a partof the manufacturing ecosystem. Thesesuppliers can be developed specifically forthese markets but can also be fully integratedinto the overall manufacturing strategy. In

addition, there may be an increased emphasison production of biosimilars, creations ofessential drug lists, strategic sourcing, anddevelopment of talent with the requiredskills to be successful in this extremelydynamic market environment.

Accenture believes that manufacturingsolutions could be leveraged across borders

in the areas of training to develop requiredskills, process mapping and technologyenablers. Joint ventures and M&As couldalso lead to solutions that are moreeffective, and that can be pushed tomarket faster, potentially creating a moreagile company.

New initiatives to create pilot solutions couldbe leveraged across the BRIC countries.Indeed, many of these solutions are alreadyin the pipeline. For example, in Brazil, amultinational pharmaceutical firm acquireda local producer and reacquired a numberof products previously licensed to anothercompany. Another multinational pharma-ceutical firm has confirmed its plans tobuild a plant for the production of vaccinesagainst meningococcal B within three years.

3. Diverse regulatory environments

Successful expansion in emerging marketscan depend on a comprehensive understanding

of the different regulatory environments ofthese nations. For example, gaining approvalsfor new products typically takes longerin the BRIC countries than in developedmarkets. Approval times can range fromabout 18 months in Russia to more thanthree years in China—over and above thetimelines for registration in the UnitedStates and the European Union.3

The costs and processes associated withseeking approvals in these markets typicallyalso vary significantly. China acceptspharmacokinetic bridging clinical studiesalong with global clinical data, whileRussia requires enrollment of local patientsin clinical trials.

Despite a generally low cost of patientrecruitment and a typical ability to runconcurrent trials in India along with globaltrials, many large companies prefer not toengage in Phase I clinical trials becausesome companies believe that regulationsregarding data exclusivity are not strong

enough to guarantee protection of pre-clinical data.

Intellectual property rights for pharmaceuticaproducts are also regularly evolving, withmany local governments seeking to strikea balance between World Trade Organization(WTO)-related norms and local patientneeds for access to affordable andinnovative drugs.

Although compulsory licensing may not yet

be a significant threat in most emergingmarkets, other factors such as the scope ofpatentability for new products in India andpatent review processes in Brazil have hadan effect on the creation of patent-protectedproducts in these markets.



1

Source: Espicom World Pahrmaceutical Market Report 2012, Accenture analysis

Regulatory

New product registration

Intellectual property

protection

Clinical trials

Manufacturing

Future trends

Brazil

New Drug take more than 2

years, while generics are

approved within 1 year

Patent review timelines ~ 8

years. Review by patent office

and medicines agency. No

explicit Data exclusivity

regulations

Trial Protocols are approved

by multiple agencies with

timelines stretching to > 10

months

GMP norms implemented in

the ‘90s. Stricter norms for

APIs (in line with US andEU) implemented since 2010

Potential introduction of a

fast track approval process

for life saving drugs

Patent office indicates aims

to reduce review timelines

to 4 years

Post marketing surveillance

rules including ADR

reporting may get more

stringent

Russia

Actual approval usually takes

> 18 months although

official timelines are far lower

Russia became a WTO

member in 2011 and patent

law is still evolving

Minimum of 2000 local

patients need to enrolled on

trials for marketing

approval

< 12% local units are GMP

certified. Some MNCs prefer

to setup captive facilities inRussia

Mutual new product

registration between Russia,

Belarus and Kazakhstan

designed to reduce approval

timelines and grant faster

market access

May see mutual recognition

of clinical trials between

the EU and Russia reducing

clinical trial timelines andcosts

> Some manufacturing

units may not achieve GMP

compliance by 2014, leading

to some consolidation

among local manufacturers

India

New products take more than

2 years, while generics are

approved within 6-12 months

Issues concerning Data

Exclusivity regulations, and

scope of patentability

which often lead to

rejection of applications

Phase I trials allowed only if

compound originates in

India or pre-clinical data is

submitted for review

Although many facilities are

GMP and even FDA

compliant, adherence tonorms remains questionable

Establishment of a National

Medicines Agency as the

sole approval authority may

happen in the distant future

Clinical trial requirements,

including patient consent

and ADR reporting may get

more stringent

China

NCEs face 3 to 4 years

than the US or EU to be

approved

Issues concerning Data

Exclusivity regulations

which can allow generics

access to clinical data

Bridging pharmacokinetic

studies allowed with 100

patients

All manufacturers will need

to comply with GMP norms

by 2015

Regulatory cooperation is

being explored with Asian

countries for harmonization

of clinical trial regulations

and reduction of trial

timelines

Manufacturing regulations

governing API manufacture

may become more stringen

Government may resort tocompulsory licensing in the

area of ARVs

FIGURE 5. Comparing the regulatory environments in the BRIC countries

Regulators in the BRIC markets are oftenaware of the delay in making innovativemedicines available to patient populations.Some regulators are working towardrationalizing approval timelines to reducethis lag. Brazil is looking at initiating afast-track approval process for lifesavingdrugs, while China and Russia are lookingfor multinational cooperation in the area of

clinical trial regulation to reduce the timeand cost associated with repeating clinicaltrials with the local population.

Although these changes may help lifesciences firms gain faster market access,companies can still benefit from recognizingthat patent laws in these markets maynot readily evolve to a stage where patentrecognition will be at par with that ofdeveloped markets such as the UnitedStates and the European Union. Thus, forlife sciences companies to be successful in

these markets, they may need to becomemore selective about their portfolio choices.In general, firms may benefit from gaining

detailed knowledge of local regulatorypolicies and putting in place a dedicatedworkforce to liaise with the local regulatorybodies—an approach that can improvespeed to market.

For more information about the currentsituation in BRIC countries with regard tothe regulatory environment, and on future

trends, see the summary chart in Figure 5.




4. Uncertainty in pricingand reimbursement

Achieving success in emerging marketsrequires a deeper understanding of howpricing and reimbursement systems workin the different regions. Although eachmarket employs some combination offree-market pricing and price controls,

pricing and reimbursement in general canvary significantly across markets and isin part a reflection of local economicconditions and the government’s role inhealthcare provisioning.

For example, although both Brazil and Indiahave similar market sizes in terms of value,drug prices in India are only a fraction ofthe prices in Brazil. Although a large portionof the market by value is unregulated inRussia and India, resulting in positive price

evolution, the reverse is true for Brazil andChina, with the latter experiencing negativeprice growth. In China, government-mandatedcuts of about 20 percent every three yearsare becoming commonplace.4

In terms of government reimbursement,both Russia and India are largely self-paymarkets with limited coverage for pharma-ceutical products. By contrast, both Braziland China have established reimbursementsystems through a combination of social

insurance and government funding.Outpatient drug reimbursement is alsofairly common in Brazil and China, whilemany patients in Russia and India mustpay themselves for drugs used outside ofa hospital stay.

Reimbursement listing can improve marketaccess in many markets. In China, in additionto reimbursement listing, companies generallyfocus on getting their products listed on theformularies of hospitals. Even then, two tothree years may be required before bids forsuch products are invited.

Similarly, in India, winning a tender doesnot necessarily guarantee that the productwill succeed. Sales teams are often calledupon to work with hospital formularies togenerate regular orders. Given the trendof increased public healthcare spendingin emerging markets, some regions areexperiencing increasing demand for skilledresources in areas such as tendering and

auctioning. Shortages of experiencedprofessionals in these areas often resultin more cross-industry recruitmentand training.

The countries with better-establishedreimbursement markets—including Chinaand Brazil—may see stagnation or erosionin prices because the healthcare systems inthese countries are generally facing increasingcost pressures and budget constraints.Although the non-regulated retail marketsin Russia and India may see positive priceevolution, increased pressures from patientand activist groups are likely to result inmore monitoring of prices, especially forinnovative lifesaving drugs and medicationsfor chronic illnesses, which can impose asignificant burden on the self-paying patientpopulation. Calls for greater reimbursementcoverage in Russia may not occur for sometime, while India may remain a self-paymarket for the foreseeable future.

When setting their pricing strategies, lifesciences firms should be cognizant ofconsumers’ disposable incomes in theseemerging markets. Company also maybenefit from focusing on improving thecost effectiveness of their supply chainsto maintain suitable gross margins.

For more on the current situation inBRIC countries with regard to pricingand reimbursement, and on future trends,

see the summary chart in Figure 6.

Although each market

employs some combination

of free-market pricing and

price controls, pricing and

reimbursement in general

can vary significantly acrossmarkets and is in part a

reflection of local economic

conditions and the

government’s role in

healthcare provisioning.



Source: Espicom World Pahrmaceutical Market Report 2012, Accenture analysis

Pricing

Extent of price control

Price control mechanism

Pricing norms for generics

Price Increases/trends for

price controlled products

Pricing trends for

non-controlled products

Pricing for government

purchases

Channel margins

Price comparison

Generics

Innovator

Brazil

All drugs

International reference

pricing (10 countries) and

reference to local existing

productsAt least 35% discount to

innovator brands

Regulated based on

inflation and generic

penetration

-

Compulsory discounts

(24%), bulk purchases and

reverse auctions

Average wholesale margin10%, retail margin 26%

(500 mg Ciprofloxacin) -

Cost of a 7 day course

(2 tabs a day)

$15.6

$106.5

Russia

EDL (567 drugs) & DLO

(covers 7 life threatening

diseases)

International reference

pricing (20 European

countries) and reference to

local existing productsAverage of last 12 months

price

Allowed only for locally

manufactured products

Free pricing, controlled by

competitive forces

Local made products enjoy

a 15% price premium over

similar imported products

Margins vary by federaldistrict and product price



(2 tabs a day)

$4.6

$47.6

India

74 drugs covered under

DPCO

100% markup over cost for

locally manufactured

products. 50% for imported

products~ 95% market is ‘branded’

generics

Reviewed periodically for

cost escalation and price

increases granted

>10% increase per year not

permitted

Purchased through sealed

tenders primarily driven by

price

DPCO: Wholesale 8% andRetail 16%, non-DPCO:

10% and 20% respectively



(2 tabs a day)

$1.7

$2.0

China

NRDL (2400 molecules) ~

60% of the market by value

Patented products prices

negotiated individually by

NDRC and manufacturers

First to market enjoys

premium over laggards

Prices cut every 3 years

(10% to 20%)

-

Average tender price drops

by 2% to 3% each year

NDRC applies maximummargins based on

manufacturer’s price



(2 tabs a day)

$3.1

$129.2

Reimbursement

Scope of government

reimbursement

Private health insurance

coverage (outpatient costs)

Brazil

Vast coverage with full

reimbursement for a range

of life saving and chronic

therapy drugs

Few plans provide coverage

for outpatient drug usage

Russia

Limited drug coverage (DLO

affects only 5% of the

population)

No coverage for outpatient

drug usage

India

Only inpatient coverage for

government employees


drug usage

China

Widespread coverage with a

mix of full reimbursement

and patient copayments


drug usage

FIGURE 6. Comparing pricing and reimbursement environments in the BRIC countries

13




5. Complex taxation structure

Taxation and import regulations also haveimportant roles to play in attracting large,multinational life sciences companies toemerging markets. R&D and innovationhave contributed to the implementationof specific tax incentives in many of theemerging and developed markets. Many

local government bodies are trying to attractinvestments in their regions by setting uptax-free zones and by providing access tobetter infrastructure and resource pools.

In Brazil, many of the manufacturing andallied industries are currently focused in theSão Paulo region because that area providesbetter access and varying tax plans comparedwith the rest of Brazil. This situationmay be changing, however, because thestate of Rio de Janeiro is now attracting

pharmaceutical companies as well. Brazil’stax structure on pharmaceutical products,34 percent, is considered high. Strict importregulations typically prevail, as do mandatesto manufacture locally to promote exclusivityof the drugs.

Similarly, in Russia, the Kaluga Oblast regionis preferred by many industries as a sourceof innovation and the region’s industrialparks are attracting pharmaceutical companies

for imported drugs is also seen as a welcomemove by some multinationals who wish tokeep manufacturing outside China.

Because the need to provide incentives atcountry, province and city levels may increaselife sciences companies should considerworking to learn from similarities acrossborders and also to learn from industriesthat have been successful in emergingeconomies. This can help them design amore tax-efficient operating model. Sucha model can help provide better cost

efficiency which can be important tocompeting more effectively in a highlycompetitive and fragmented market.

6. Shortage of skilled talent

Availability of skilled talent may be achallenge for life sciences firms seekingto expand into emerging markets. As theemerging markets grow, the competitionfor skilled talent will be intense. Basedon a recent Economist Intelligence Unitsurvey about talent challenges in emerging

markets (see Figure 7), most of the surveyedexecutives feel that retention of employeesand domestic recruitment will be significantissues for them over the next three years.

As the emerging markets grow, the need fornew skills increases in areas such as coldchain management, biologics manufacturingdemand planning and pricing analytics. The

that include Berlin-Chemie. In Russia, about80 percent of drugs are imported, so manypharmaceutical companies are being providedspecial status to promote manufacturingin Russia. For example, in the Skolkovoregion (near Moscow) residents are offeredexemptions on VAT and property taxes. Theregion also has a highly discounted socialtax structure.5

In India, some individual states are providingtax incentives in special economic zones forpharmaceutical companies to set up operations

in their regions. India offers incentivesincluding a deduction of 100 percent ofeligible expenditures for the same year. Inaddition, the long-awaited move from statetax to Goods and Services Tax (GST) maybring dramatic changes in the way supplychains function within India. Because GSTprovides a more transparent version oftaxation, it may be a force for change forpharmaceutical companies and for theentire life sciences industry.

In China, the government is being aggressivein providing deductions. It provides adeduction of 150 percent on qualifyingR&D expenditures.6 Although some multi-national companies have already begunplanning to use China as a global sourcingbase, many companies have also startedsetting up R&D labs in different cities inChina. Easing the norms on market access



15

At a recent workshop conducted by Accenturein Brazil, one of the major pharmaceuticalcompanies reported that it is sourcing muchof its operations talent from CPG companiesthat have been successful in emergingmarkets. It is becoming more common tosee life sciences companies taking talentfrom CPG companies—not only because of

talent gaps but also because of the factthat CPG knowledge and experience canbe readily leveraged and applied to the lifesciences industry.

The talent challenge is real and will help todetermine whether companies and emergingmarkets can realize their full potential. TheEconomist Intelligence Unit survey on talentcompared BRIC nations and found thatmost of the key talent issues across thecountries are similar. The most important

issues that China, India and Russia arefacing are, first, higher salary expectationsbecause of shortage of talent and, second,increased demand for critical skills. Thissituation is causing higher employee attrition,something that creates skill gaps and highoverhead for companies. Skills gaps andinability to meet salary expectations are

a kind of “chicken and egg” situation;one cannot be resolved without resolvingthe other.

Accenture believes that life sciencescompanies should focus more intenselyon the talent strategies they need to besuccessful in emerging markets. Skill and

capability requirements need to be tightlyintegrated into an overall customer centricitystrategy, one that looks at customer clusters.Companies also need to think about sourcingand managing talent across borders, andabout the culture and skills training requiredto be successful in developing markets.

Companies also should consider the differenttechnology considerations possibly necessaryto be successful in these markets. Forexample, in emerging economies, basic

2G phones are being used for tasks suchas training and counterfeiting detection;by contrast, developed countries havetechnologies such as tablets and 4G phonesavailable for such tasks.

Brazil China India Russia

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)

Candidates lack appropriateskills/qualifications

Inability to meet salary expectations

Inability to meet benefitspackage expectations

Undesirable work-life balance (longhours, frequent business trips, etc)

Lack of career opportunitiesand development paths

Inability to meet salaryexpectations

Candidates lack appropriate

skills/qualifications
















57

47

41

32

30

51

41

38

32

30

61

46

40

32

28

61

59

27

25

24

Source: Economist Intelligence Unit survey, 2008.

FIGURE 7. Factors hindering a company’s ability to recruit skilled talent

support structure to provide a good streamof skilled talent is being developed but, atthe moment, demand is outpacing supply.Even though the emerging markets produceplentiful talent from their universities, toofew candidates are industry ready.

In India, where skills shortages are particularly

acute, many companies are looking forways to bring uneducated workers intotheir organizations, then working withnon-governmental organizations (NGOs)to improve the skills those workers need tobecome productive.

In the supply chain talent area, companiesare either casting their net widely intorelated industries such as consumer packagedgoods (CPG) or going beyond their own bordersto recruit talent. In another strategy, the

India School of Business at its Mohali Campus(near Chandigarh) has joined with an IndianConglomerate Hero group to start MunjalGlobal Manufacturing Institute, whichhas a mission of focusing on developingmanufacturing skillsets across industriesbased on industry needs.




Competing More Effectivelyin the Emerging MarketsA four-point plan for life sciences companies

Establishing and executing agrowth strategy for the lifesciences industry in emergingmarkets includes takinga detailed view of theparticularities of these

markets, while also findingcommonalities that enablecost-effective approachesand being sensitive to uniquemarket, governmental andconsumer attributes withinany specific region.

Accenture recommends a four-pronged

approach:

1. Think customer clusters: The importance

of submarkets. Focus on submarkets—common customers and clusters of customers.

2. Find cross-border similarities.

Operationalize based on understandingelements of the value chain that are atsimilar maturity levels across multiple markets.

3. Establish global reach with local

relevance. Drive efficiencies from a global

approach while maintaining local relevance.4. Create effective and rapid execution

capabilities. Develop the ability to executeswiftly and with more agility.

This section looks at each of these fourintegrated strategies, discussing somepotential approaches and implicationsand providing relevant examples.

1. Think customer clusters:The importance of submarkets

Each of the emerging BRIC markets (and,indeed, others like them around the world)is a combination of diverse segments. Eachmarket has nuances and distinctive featuresthat life sciences companies can benefitfrom understanding at a more detailed level.Companies should approach these marketsand consumers with the individual attentionand respect they deserve. For example,urban or metro areas typically differ fromrural areas in several ways. Populationdensity, infrastructure development and

availability of logistics all can have animpact on ready access to these markets.In addition, customer profiles can differin sometimes dramatic ways in terms ofpeople’s disposable income, willingnessor ability to pay, and inclination to seekmodern healthcare treatments.

However, Accenture’s analysis of markets inthe BRIC countries suggests that customerclusters or submarkets can be identifiedwithin a market based on an understanding

of consumers who have common healthneeds, such as those suffering from aparticular disease such as Type 2 diabetes.Submarkets can also be identified based oncommon characteristics related to factorssuch as demographics, accessibility andtechnology penetration.

For example, urbanization and per capitaincome can help identify common customerclusters, which then plays an importantrole in determining a life science company’smarket access strategy. “Consider, forexample, the clusters of urbanization andper capita income across states in India, asshown in Figure 8.

Analysis of the data and clustering suggeststhat India can be divided into states havingurbanization levels of more than 35 percent(five states), below 20 percent (three statesand between 20 percent and 35 percent(remaining states). The infrastructure, policysupport and access to healthcare could bedifferent in states with more urbanization.7 Why? Consider that our analysis finds adirect correlation between higher rates ofurbanization and higher per capita income.

As the Indian economy grows, per capitaincome is also growing, resulting in higherbuying power for the typical urban consumerThis example indicates that by focusingon customer clusters and submarkets lifesciences companies can achieve a moredetailed understanding of the specificneeds of potentially profitable groupingsof customers—leading to more effective,customer-centric R&D, and/or more effectivemarketing and sales strategies. Submarketscan be targeted with more focused productsand services (some targeted at urbanconsumers and others targeted at thosein rural areas) supported by an effectivesupply chain infrastructure.



17

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

Urbanization (%) 2008

60

50

40

30

20

10

log (PCGSDP) 2008

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

Tamil Nadu

Maharashtra

GujaratPunjab

Karnataka

Urban clusters

OutlierMadhya Pradesh

RajasthanJharkhand

Uttar Pradesh

West Bengal

Uttarakhand

Chhattisgarh

Haryana

Andhra Pradesh

Kerala

Orissa

Assam

Bihar

FIGURE 8. Distribution of states in India according to per capita incomeand urbanization




A similar situation with regard to submarketscan be seen in China. Disease patterns inurban and rural settings in China can bevery different. For example, respiratoryissues, poisoning and injuries result in farmore deaths in rural areas than in urbanareas but for malignant neoplasms the ratesare approximately similar across urban andrural areas (See Figure 9.). Therefore, market

access and innovation strategies for certaindiseases may need to be targeted to thedifferences between urban and ruralconsumers. Impacts on portfolios andsupply chains can also differ.

Customers and clusters:

Innovative approaches

As an example of an effective strategybased on insights into similar customersand clusters within markets, consider

Novartis, which launched Arogya Parivar(which means “Healthy Family” in Hindi),a for-profit social initiative to reach the740 million people living at the bottomof the pyramid in rural India—a hugesubmarket opportunity. Novartis createdan alternative distribution model to expandits reach across the fragmented marketsin rural India. To meet this submarket, thecompany revamped its traditional supplychain, including portfolio selection, pricing,packaging and partners.

In 2010 Arogya Parivar reached out to 50million patients in 10 Indian states, partneringwith 30,000 doctors and 20,000 pharmacies.The program covered 11 therapeutic areasand offered nearly 80 pharmaceutical,generic and over-the-counter productsand vaccines, including products targetedat conditions ranging from tuberculosis anddiabetes to pain and colds.

One key to the success of the company’sstrategy was focusing on the needs ofrural consumers at lower income levels.The program adapted the educationalmaterials, training and product packagingto local conditions and buying patterns.For example, the company employed localwomen as educators and advocates. It alsopackaged products in smaller containers

that are more affordable to target consumers.Arogya Parivar achieved a break-even pointwithin 30 months. Since 2007, sales haveincreased 25-fold.8

Things to consider

To achieve success in the BRIC markets,companies should think in more granularfashion about submarkets in urban/regionalclusters, finding commonalities in diseasepatterns and/or in demographic groupings.

This approach would enable firms to prioritizesubmarket attractiveness to help determinewhere to focus—targeting opportunitiesand build/buy capabilities around people,processes and technology with less risk andgreater chances of success. This focus onsubmarkets could help companies capture thedifferences across demographics, income,religion, geography and access.

2. Find cross-border similarities

The concept of “customer clusters” also canhelp life sciences companies employ strategiesthat have no borders—that is, products andcampaigns that appeal to customer groupingsacross countries and continents.

For example, consider a recent survey by

the Economist Intelligence Unit which foundthat the top 24 cities out of 30 in the worldwere from the United States and Europe.Such a finding might lead a companytoward a particular strategic path. However,because emerging economies tend to growat a rate faster than developed economies,the report also showed that 15 of the top20 cities based on “economic strength”(highest weighted category) were in Asia.And seven of the top 10 cities were inChina. Singapore and Bangalore were rated

higher based on economic strength comparedto Los Angeles, a trend that can also beseen in the growing economies of Indiaand China.9

Urban Rural

834,424

960,125

0.000000

160166.666667

320333.333333

480500.000000

640666.666667

800833.333333

961000.000000

29.4%

21.6%

17.3%

16.8%

8.6%

3.5%2.7%

Malignant neoplasms

Cerebrovascular disease

Heart disease

Respiratory disease

Injury and poisoning

Digestive diseaseEndocrine and metabolic diseases

Source: National Bureau of Statistics China, Espicom World Pharma Market Report 2012

FIGURE 9. Major causes of death in China



19

Source: Credit Suisse Emerging Consumer Survey 2011

1,0000 2,000 3,000 4,000 5,000 6,000 8,0007,000

200

100

400

300

Spending on healthcare (PPP, USD)

500

Average monthly household income (PPP, USD)

0

China India RussiaBrazil

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

Brazil

China

India

Indonesia

Russia

Egypt

Saudi Arabia

32.9

176.8

198.1

51.1

18.0

16.1

0.2

10.8

66.6

37.0

0.6

11.7

0.5

4.8

57%

50%

66%

91%

39%

87%

3%

19%

19%

12%

1%

25%

3%

80%

Less than USD

1,000 per month

Greater than USD

2,000 per month

Less than USD 1,000

per month

Number (in millions) of households earning: % of households in each market earning:

Greater than USD

2,000 per month

FIGURE 10. Spending on healthcare versus income levels: Brazil, Russia,India and China

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

Looking at this data, one possible conclusionis that companies should not be constrictedby the concept of “emerging markets” in termsof national borders, but rather around“customer clusters” in similar cities orurban areas across countries, both inemerging and developed regions.

Based on Accenture analysis, we believe

that some of the similarities across marketsare not being sufficiently leveraged to createsolutions that can move across borders. Inaddition, the solutions are not segmentedenough to have a differentiated distributioninfrastructure focused on customer servicein urban areas and on cost efficiency inrural areas.

To understand this concept more deeply,consider another study, a recent CreditSuisse Global Wealth Report. Looking morebroadly at spending on healthcare andincome levels across the BRIC countries,the report revealed that an average Brazilianhousehold spends 10 percent of income onhealthcare—almost double the level spentin China (5.7 percent) and in India (5.5percent). However, the number of householdsearning more than US$2,000 per monthis three times more in India and six timesmore in China than in Brazil. Clearly, thesedifferent income levels will drive different

consumer preferences (See Figure 10.).10

On the other hand, the number of householdsearning less than $1,000 per month is roughlysimilar in India (196 million) and China(176 million) (See Figure 11.). This meansthat companies have an opportunity toapply a common market access strategyin India and China based on similar customerclusters in those countries and on common-alities such as maturity of pharmaceutical

market, type of infrastructure and consumerbuying patterns.11




Cross-border solutions:


Although the following story comes from arelated industry and not specifically fromlife sciences, Unilever provides a compellingexample of a cross-border solution. Unilever’s“Shakti” program was initially piloted with17 women from remote Indian villagesacting as micro-distributors, who soldUnilever’s products to rural households.The program is now a 45,000-womenmicro-distribution network serving threemillion rural households. Unilever receivedstrong support from more than 300 partners,including NGOs and banks, as well as stateand local governments,

On the foundation of Project Shakti, Unileveralso created “I-Shakti,” which is focusedon creating kiosks with Internet-enabled

computers run by the women entrepreneurs.The I-shakti kiosks provide villagers withvaluable and free information in the areasof agriculture, healthcare, education, financeand entertainment. The content was developedwith local partners such as Aziz PremjiChildren Foundation on Education andICRISAT (International Crops ResearchInstitute for the Semi-Arid Tropics). Farmerscan find up-to-date information on agriculturebest practices for their crops, and villagerscan get timely medical advice from doctors.12

Things to consider

Given the dynamic nature of the emergingmarkets in the life sciences, companies needto think more about common customerattributes, and common customer clusters,across borders. Groupings and segmentationof customers can be made based on anunderstanding of common needs andbehaviors. Companies can thus morereadily prioritize regions that align withstrategic and financial goals, and can focustheir capabilities in those areas. This canincrease the efficiency of operations andimprove return on investment in R&D, salesand marketing.

Many companies may also want to thinkbeyond income, age and profitability askey drivers for segmentation and, instead,consider a more granular approach about

issues such as purchasing behaviors, diseasepatterns, pricing elasticity, regulatoryconstraints and access. This approachcan help them create more accurate andeffective cross-country segments, potentiallyunlocking new areas of demand and growth.

3. Establish global reach withlocal relevance

Whether in an urban or rural market, itcan be beneficial for companies to “thinkglobally and act locally” in meeting theneeds of consumers in the BRIC markets.

Looking again at the Economist IntelligenceUnit research study, it is interesting to notethat cities that may be similar in economicstrength are nevertheless often quite differentin terms of human capital components suchas population growth, working age population,quality of education, and an entrepreneurshipand risk-taking mindset.

In terms of economic indicators alone, onecan find some similarities around economicstrength, physical capital and human capitalbetween cities such as Shenzhen and New York. Similarly, an analysis of the overallattractiveness of cities (see Figure 12) showsthat Shanghai could be similar to Miami(except in a couple of factors), while BuenosAires, São Paulo, Delhi and Mumbai mightbe grouped together as one type of cluster.

To take another example, cities across Brazil,Argentina and India have very differenttaxation structures, and their health careinfrastructures are at different stages ofmaturity—again, as shown in Figure 12.Brazil, for example, has the highest taxationon drugs at almost 34 percent. Therefore,the strategies employed by companies couldbe global in nature but also very differentat the local levels based on the maturity ofthe healthcare value chain network and thecompany itself.

Economicstrength

Physicalcapital

Financial

maturity

Institutionaleffectiveness

Social and culturalcharacter

Humancapital

vironment

d naturalzards

Globalappeal

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

Economicstrength

Physicalcapital

Financial

maturity



Human

capital

Environment

and naturalhazards

Globalappeal

Economicstrength

Physicalcapital

Financial

maturity



Humancapital

Environment

and naturalhazards

Globalappeal

0

25

50

75

100

Miami Shanghai

0

25

50

75

100

Buenos Aires Delhi Mumbai São Paolo

0

25

50

75

100

New York Shenzhen

FIGURE 12. Global city competitiveness comparisons



Pharmaceuticalindustry average

Source: Accenture’s Maturity Model for the Life Sciences I ndustry

Basic

• Silo based decisionmaking

• Lack of systemiccapabilities

• Inability to build onlearnings

• Fire fighting

Advanced

• Market and supplychain alignment

• Structuredintegration within

core functions• Collaborative

functional trade-offs

• Developing demandaware supply chains

Progressive

• Focus on scale andefficiency

• Separateimple-mentationof projects

• Cost and riskcontrols

Leading

• Internal and externalnetwork trade-offs

• Profitablesupply/demandsynchronization

• Analytics seen ascore competency

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

2

Understanding these different levels ofmaturity can give a company an overallassessment of a particular function andalso help a company understand the driversthat will can help in improving the existingmaturity of that function. Accenture believesit is important to consider going througha granular assessment designed to developmore customer-centric, localized solutions.

Creating local relevance:


Consider the story of how life sciencescompany Pfizer was able to adapt aloyalty program to different local markets.The original program, developed for thePhilippines market, was “SULIT” or a “value”card program. It was targeted at patientsin Manila and other urban centers whowere using Pfizer’s leading cardiovascular

drug Norvasc. The drug’s patent expirationdate was approaching, with the consequententry into the market of low-priced genericequivalents. In anticipation of this marketevent, Pfizer instituted the SULIT cardprogram in an effort to retain patient loyaltyfollowing the expiration of the patent. Thecard enabled loyalty-based discounting, aneffort to mitigate the impact that generic

equivalents might have in the future. Theresult of the loyalty program was a doublingof Norvasc sales despite the expiration ofthe patent in 2007.13

When Pfizer later developed a loyaltyprogram in India, it was careful to adaptit for that consumer environment. In thiscase, consumers in India had existing access

to many inexpensive, generic versions ofcardiovascular medicines before Pfizerlaunched its products. Pfizer realized that,although price was an important factor indeciding what product to buy, consumersin fact had insufficient awareness of howa medicine was to be used as part of anoverall disease management program.

Pfizer’s pilot of its loyalty program in Indiatherefore sought to fill that knowledgevoid, helping consumers better managetheir cardiovascular disease from a moreholistic perspective. Pfizer sees this approachas giving it differentiation in a crowdedmarket. It is an excellent example ofunderstanding the unique local situationand the needs of consumers, helping thecompany adapt an existing loyalty programfor a different environment.

Things to consider

Although it can be important to thinkglobally and to have a holistic picture ofconsumer segments, it can also be beneficialfor companies to employ local solutionsto be successful. This approach may requiretweaking an already existing solution,or it may require building an entirelynew solution.

Keys to success include mapping customerneeds to the capabilities required; under-standing the maturity of the country,industry, other industries and competition(across function); identifying the gapsbetween needs and capabilities; andprioritizing decisions in an effort to developor buy the capabilities to successfully developsolutions for different customer segments.

It can be beneficial to perform a granularassessment of maturity by function (seeFig 13) using a maturity model diagnostictool, something that can help develop morecustomer-centric solutions. One potentiallyvaluable tool in this regard is a detaileddiagnostics tool developed by Accenturefor management and non-managementemployees to assess a particular company’s




maturity in market access functions—fromproduct launch to planning, sourcing,manufacturing and delivery. The maturitydiagnostic can provide an overall assessmentof a particular function and can also helpa company understand the drivers thatcan help improve the existing maturity ofthat function.

4. Create effective and rapidexecution capabilities

The fourth strategy to consider for potentialsuccess in emerging markets in the life sciencesreally ties all the other ones together: it’sabout executing the solution across themarkets in a timely and cost efficient manner.Although this sounds like an obvious point,in fact the ability to execute initiatives in atimely manner across markets still can bea difficult task for life sciences firms, given

that many of them continue to operate infunctional silos. Hence, it is important thatsupply chain, commercial and other functionswork together at different stages of theproduct lifecycle to have an effectivespeed-to-customer capability.

Accenture believes that two capabilities areespecially critical to consider with regardto rapid execution of an emerging-marketstrategy. The first involves developing theability to understand and to get very close

to the customer—by leveraging networksand chains of influence so that a marketstrategy can reach consumers quickly. Thesecond involves companies improving theirrisk management capabilities to the pointthat they can take well-considered risks asa means to rapidly seize market share.

Understanding and getting close

to the customer

In developed markets, companies generally

take an approach emphasizing high margins.In emerging markets, however, a moreappropriate approach emphasizes highefficiency, with less emphasis on margins.Furthermore, companies should focus oncustomer centricity and break the silosbetween different functions of theirorganization (such as supply chain andcommercial) that might constrain that

customer-centric approach. It is importantto have a holistic and integrated strategy,rather than trying to coordinate differentstrategies for supply chain, commercial andso forth.

Companies are looking to gain betterunderstanding of their customers’ interests,intentions and behaviors. Voice of theCustomer (VoC) studies are critical tools

that can help firms identify relevant solutionsand execute them faster and more efficiently.For example, looking at diabetes data acrossBRIC countries compared with the UnitedStates, the numbers suggest that China(42M) and India (50M) combined are morethan three times the market size of the U.S.(26M) diabetic population. While the numberslook somewhat similar across urban China(41M) and India (48M) in 2010 and 2030,the “consumer clusters” could be very

different when actually executing thestrategy (See Figure 14.).

Rigorous market research can help define“who the customer is” and then can alsohelp ascertain the right products andservices to launch. For example, a largepharmaceutical firm took an approach withone of its chronic disease products in which

Rural

Urban

2010

Source Prevalence of Diabetes mellitus in World 2010-2030, International Diabetes Federation, Accenture analysis

2030

29M

21M

48M

38M

ChinaIndia

2010 2030

20M

22M

41M

21M

FIGURE 14. Diabetes prevalence comparisons: India and China 2010-2030



Sources: Economist Intelligence Unit Survey

0

5

10

15

20

25

30

35

40

45

50

55

6065

70

75

80

85

InfrastructurePoliticalStability

Financial Tax Policy LabourMarket

Security Legal &Regulatory

Brazil India

US

Russia

UKGermany

China

Japan

Emerging

Developed

Emerging markets are riskier across the board

(Risk rating: 0 = low risk, 100 = high risk)

FIGURE 15. Risk assessment of emerging countries vs. developed countries

23

it created a localized solution by understandingcustomer needs, behaviors, elasticity toprice, and attitudes. The result was exclusivityin its drug class for some time. The key tosuccess was speed to execution by targetingthe right set of customers with “responsiblepricing” supported by training and educationalsupport for the medical community.

The product itself was the same one marketedto the United States, but the company knewthat the ways to achieve success were verymuch dependent on the customer dynamicsin each region. The firm launched a concertedeffort to activate a network of key opinionleaders to address the concerns of the market.The company engaged more than 11,000physicians in peer group networks, in whichphysicians discussed their experiencestreating patients with the product. Theirpositive experiences encouraged others toadopt the treatment.

The firm also established a patientidentification program to track prescriptions.It conducted interviews with physicians tounderstand the typical patient profile forthe drug, and shared this informationwith their medical peers. These effortscontributed to building credibility amongthe medical community. All this waspossible because the company took the

time to understand the voice of the customer,developed autonomous decision makingprocess at country level and put in place aneffective network of influence. The companymade similar changes to its strategy acrossthe BRIC markets for the product, potentiallysetting a benchmark for launching patentedproducts in BRIC countries.

Improving risk management capabilities

Although entering emerging markets is oftena risky endeavor, that risk can also be turned

to competitive advantage by enabling acompany to be a fast mover. For example,based on an Economist Intelligence Unitsurvey (see Figure 15), tax, legal, regulatoryand labor market risks were some ofthe highest risk factors identified inemerging countries.

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.




To address these risks, companies shouldconsider focusing on developing better riskmanagement capabilities. They can alsobenefit from strengthening their ability toidentify risks, evaluate impact across thecompany, develop mitigation strategies andfinalize implementation plans. As a partof the evaluation, companies can evaluaterisk exposure by assessing the likelihood

and impact of each risk while entering theemerging markets (See Figure 16.). Thiskind of risk-adjusted execution can providecompanies with faster speed to customer.

Technology can be an important enablerin emerging markets because it can helpcompanies reach the “last mile” to theconsumer and can also provide bettertransparency and visibility in the supplychain. Collaborating across functions suchas supply chain and commercial can alsohelp reduce a company’s risk profile as wellas break functional silos—something essentialto success in the emerging markets.

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

Likelihood

I m p a c t

Security

Political

Economic

Source: Accenture analysis

Financial

Legal & Regulatory

Tax

Labour

Infrastructure

Risk Categories

1

Risk Assessment Matrix

Low High

High

2 3

4

5

6

7

8

9 1011

12

13 14

Risk Exposure

Risk

Business Units

A B C D

1

4

7

6

8

12

Scan horizon to identify risks

across different categories

Design risk dashboard to

monitor changing nature ofrisks

Develop contingency plans to

mitigate high-impact risks

Assess each risk based on its

likelihood and impactMap risks across

organisation to identify

pressure points

FIGURE 16. Risk response framework methodology

With strategies that have never beenexecuted before, an element of risk isgenerally present. However, risk-adjustedinnovation can be a key to success in theemerging markets. For example, consider arecent launch of a chronic disease productin BRIC countries. By assessing the segments,targeting the right regions and developinglocal solutions such as responsible pricing

for India, the firm had a head start in itsclass of drugs and had a successful launchingpad to making the drug a blockbusterin India.

This example helps us see that companiesthat can identify, assess, monitor andmitigate risk to execute with speed havean edge in achieving high performance inemerging markets.



25




ConclusionA winning strategy in the emerging markets

Growth strategies in the lifesciences industry are increasinglydependent on expansion intoemerging markets. Thesemarkets represent a significantopportunity, with the BRICnations predicted to be in thetop 10 of the world’s global

pharmaceutical markets in thecoming years.

Many companies face significant challengesin executing this emerging-market strategy,however, including market access elementssuch as manufacturing, distribution, supplychain planning, pricing, taxation regulationand talent. These challenges explain whyeven the top pharmaceutical companies inthe world are having difficulty breakingthrough to greater success. Many have nomore than 10 percent to 30 percent ofrevenues coming from these regions.

This paper has presented an analysis ofseveral critical market access challenges—logistics and distribution; manufacturinginfrastructure; regulation; pricing andreimbursement; taxation; and talent. Thisanalysis can give life sciences companiesthe basis for their own detailed understandingof the individual value chain components of

their strategy.

Accenture recommends a four-prongedstrategy to overcome these challenges andgrow revenues in the emerging markets:

1. Focusing the strategy around customersand clusters rather than just countries orregions. Thinking in terms of submarketscan help a company develop a moretargeted and customer-centric strategy.

2. Plotting a course forward based on cross-border similarities. These similarities can

help create products and services that arerelevant across regional differences.

3. Becoming effective both from a globalperspective and a local one. Cross-marketstandardization can help from an efficiencyperspective, but implementations may alsorequire customization at the local level.

4. Executing at speed. By understandingthe voice of the customer and putting inplace an influence network, companieshave the potential to leap ahead of thecompetition in actually executing theiremerging-market strategy.

An emerging middle class in developingnations represents an opportunity for lifesciences companies to improve the qualityof life there, while also improving their ownmarket standing. Companies that are moreadvanced in areas such as manufacturinginfrastructure, logistics, distribution,regulation, tax and talent management—and, of course, in understanding consumer

needs and behaviors—can gain an edge inachieving high performance.



Contact us

References

Authors

1-5 “The Outlook for Pharmaceuticals inBrazil, Russia, India & China,” February2012, Espicom World PharmaceuticalReport, http://digitaljournal.com/pr/614045

World Pharmaceutical Markets (WPM) Outlook is compiled

using, where possible, primary data from local sources. This

comprises national Ministries/Departments of Health, statistical

bodies and professional associations. Market profiles drawon detailed statistical work by our Healthcare Markets Team.

This is undertaken specifically for this report, and also in the

course of research for other Espicom services, principally

World Pharmaceutical Markets (WPM). World Pharmaceutical

Markets (WPM). Published by Espicom Business Intelligence,

Lincoln House, City Fields Way, Tangmere, West Sussex PO20

2FS. http://www.espicom.com Economic and demographic

forecast data is sourced from the Economist Intelligence Unit

(http://www.eiu.com), where indicated. Reference may also be

made to a number of secondary sources, and these are listed

below. OECD Health Data, http://www.sourceoecd.org PC-TAS

trade data, published by International Trade Centre, UNCTAD/

WTO, United Nations. World Bank, http://www.worldbank.org

World Health Statistics, World Health Organisation, Geneva,

Switzerland. http://www.who.org

Anne O’Riordan is the global industrymanaging director for Accenture’s LifeSciences practice. She has been withAccenture for 23 years and has dedicatedher career to working with Life Sciences

companies around the world, most recentlycovering Japan, China, Singapore and India.Given the diversity of markets from matureto emerging in Asia, Anne has worked onboth market entry, business evolution andbusiness transformation projects. In addition,Anne has worked on front and back officetransformations for Life Sciences clientsinclusive of business and IT strategy, sales& marketing optimization, ERP implementation,R&D transformation, Business ProcessOutsourcing, Application Outsourcing and

Infrastructure transformation on a global,regional and local basis. Anne is basedin China.

[email protected]

27

6 China Law And Practice, R&D TaxIncentives, May 2000 http://www.chinalawandpractice.com/Article/1694602/Channel/7576/R-D-Tax-Incentives.html

7 Report on Indian Infrastucture andServices, March 2011, Ministry of Urban

Development, Accenture analysis8 Novartis Global website; http://www.novartis.com/corporate-responsibility/access-to-healthcare/our-key-initiatives/social-business.shtml

9 “Hotspots—Benchmarking Global CityCompetitiveness,” Economic IntelligenceUnit, January 2012

10 Credit Suisse Emerging ConsumerSurvey 2011, Credit Suisse Global WealthDatabase, 2010

Hussain Mooraj is the global lead for theAccenture Life Sciences Supply Chainpractice and brings more than 20 yearsof experience in manufacturing, supplychain, technology, sales and marketing,

strategy and consulting to his role. Heworks closely with senior executives fromglobal companies across the healthcarevalue chain (manufacturers, wholesalers,pharmacies, payers, and providers), advisingthem on business strategy and technologybest practices. In 2009 he was voted byPharmaVOICE as one of the 100 mostinfluential and inspiring individuals inLife Sciences. Hussain is based in Boston.

[email protected]

Vishal Singal is a senior manager inAccenture’s Life Sciences practice andis the global lead for Life Sciences MarketAccess in Emerging Markets. Vishal has 14years of management consulting experience

working with leading Health & Life Sciencescompanies, with a focus on supply chain,and commercial strategies and theirimplementation. Vishal has recentlypresented at a Global Conference focusedon commercial excellence in emergingmarkets around driving growth in lifesciences for emerging markets. Vishal isbased in Indianapolis.

[email protected]

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.

11 Ibid

12 Unilever Global website:http://www.unilever.com/careers/insideunilever/oursuccessandchallenges/shaktiprogrammeindia/#

13 Pfizer Global website:

http://www.pfizersulitcare.com.ph/



About Accenture

Accenture is a global management consulting,technology services and outsourcingcompany, with approximately 259,000people serving clients in more than 120countries. Combining unparalleled experience,comprehensive capabilities across allindustries and business functions, and

extensive research on the world’s mostsuccessful companies, Accenture collaborateswith clients to help them become high-performance businesses and governments.The company generated net revenuesof US$27.9 billion for the fiscal yearended Aug. 31, 2012. Its home page iswww.accenture.com.

Life Sciences Practice

Accenture’s Life Sciences practice is

dedicated to helping companies rethink,reshape or restructure their businessesto deliver better patient outcomes anddrive shareholder returns. We provideconsulting, outsourcing and technologyaround the globe in all strategic andfunctional areas—with a strong focuson R&D, Sales & Marketing and the SupplyChain. We have a long history of workinghand in hand with our clients to improvetheir performance across the entire LifeSciences value chain. Accenture’s LifeSciences practice connects more than10,000 skilled professionals people in over50 countries who are personally committedto helping our clients achieve their businessobjectives and deliver better patientoutcomes for people around the world.

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