Graham Lewis, vice-president Europe, global pharma strategy, IMS Health, in an interview to Soma Das, underlines the changing global dynamics of pharma business and discusses the need to tap new frontiers of growth before China steals the show. Edited excerpts:
You would be addressing the CEOs of top Indian pharma companies.What would be your core message to them?
We expect global pharma market to touch $1.2 trillion by 2016, assuming an annual topline growth of 3% to 6%. We are referring to ex-manufacturing prices in US dollar terms here. This would imply, the mature markets would grow somewhere in the range of 3% annually for the next five years.
The clear message that this projection holds for pharma business is that compared to last 15 years, the coming years are bound to be much more challenging.
In that light, impact of every decision on where they invest, the market strategies they finalise and how efficiently they execute these strategies would get amplified to determine the fate of the companies.
The second forecast which would change the complexion of global business is that 17 pharmerging markets led by BRIC (Brazil, Russia, India and China) countries would match the share of US global spending on medicines in next five years, so that this bloc of pharmerging countries and US would command a share of about 30% each of the total global pharma market by 2016.
This means US?s share would plunge from 41% today while the share of pharmerging countries would swell to double from 14% today.
China would become the second-largest drug market after US, while Brazil, Russia and India would figure amongst top 10 markets by 2016.
This significant shift in growth dynamics and relative importance of geographies could form the cornerstone of how pharma companies prioritise their future strategies.
What are the fundamental differences between BRICS pharma markets?
The two fundamental differences within the most promising pharmerging markets of BRICS would be related to their size and relative strength of branded generics versus unbranded generics in these markets. By this I mean the share of branded generics vary in these markets. In terms of the size of drug market, China at over $ 160 billion would be bigger than Brazil ($47 billion), India ($29 billion) and Russia ($26 billion) put together by 2016. As a far as ratio of branded generics to unbranded is concerned, China has a 40% branded versus 43% unbranded, while Russia has a 33% branded versus 7% unbranded and India too is largely a branded generics market.
Our best guess is that around 2025, we would see the unbranded generics breaking the dominance of branded generics in these markets. With mounting cost pressures and rising life expectancy, pressure would soar to introduce more of innovative and targeted treatments that are expensive and this would come at the expense of cost cuts across the board both original drugs and generics.
As that happens, the price differential between branded and unbranded would come down making it almost unfeasible for companies to brand. But in emerging markets like India, where literacy levels and awareness is still low, quality measures need to be put in place and stricter and tighter regulation on launches of generics needs to be done before moving from branded to unbranded products.
Do you foresee consolidation intensifying in the generic drug industry in near future?
Consolidation is the way forward amongst generic players as the commercial cost of doing business would mount immensely, making today?s business models unfeasible and unsustainable to large extent in future. Competitive pressures would increase especially as payers (government, insurance companies) start pushing down prices for generics as they have been doing for original brands. Also, the ways of doing business in biosimilars would be way different and much more complex than what had been the case with the generics.
Do you feel any change in the global perception with respect to quality issues of drugs originating from India?
I have maintained that Indian pharma industry should collectively achieve and showcase a gold standard manufacturing, making a statement of high quality both in manufacturing and supply chain.
Indian drug industry needs a global branding initiative, the underpinnings of which should be consistent high quality and consistency in supply to the market.
By and large, during our interaction with stakeholders across the globe, there is a recognition of the intent on part of Indian players to adhere to good manufacturing practices and they are close to gold standards, even though there have been some issues in the US.
But you can?t just rest in your laurels and must do more to embellish your high quality. If you don?t, two things may happen?there may be slippages or China may steal the show.
There is also a strong need to find successful commercial models for China, Japan, and Latin America, while continuing to seize the opportunities which exist in Eastern Europe, notably Russia: before China accelerates it?s international capabilities.
