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MIAG 2Response to Industry-Emerging markets

Eva M A Ombaka

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EMERGING MARKETS

China, Brazil, Russia and India. Present attractive new consumer markets

as well as potential research and development hubs.

New competition, particularly in generics Recognition that these are home to millions

of people who live in great poverty…and source of generic (inexpensive) drugs for most of “Most of the world”…

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Issue

Business principle: Capture market, utilize brain, remove competition?

Going by history, what is to stop these markets behaving as the more mature markets once they reach their level of technology?

Whose company?

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EMERGING MARKETS ISSUES

Complexity Affordability and Low Relative

Purchasing Power Accessibility and Weak Healthcare

Infrastructure Uncertain Government Relations The Social ContractSystemic market failure.

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COMPLEXITY

Small size of the markets (but potential); unparalleled geographic, political, cultural and linguistic complexities, sheer physical size, chronic underdevelopment, rural-urban divide…

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COMPLEXITY- issues KPI including: approximate % of sales in emerging

markets; % of profits made in emerging markets; the number of employees in emerging markets; the average price of key products in emerging markets versus developed markets; and the percentage of R&D spent in

emerging markets. ALL are business indicators, not public

health indicators. What if not convincing for investment? Would there be entry into these markets?

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COMPLEXITY- issues Concern about the potential impact they

may have on mature, more profitable markets Measure based on profit but the other side of

equation is human lives. Would a measure of this be considered?

Potential for massive sales volume Would the ‘fortune at the base of the pyramid’

(volume-based business models) a)… be explored? b)… bought out (generics)

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Affordability and Low Relative Purchasing Power

The models show how differentiating products for markets can work BUT

The industry and its investors, are wary of experiments – at least visible ones – with significantly different pricing models in emerging markets

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Equitable Pricing Issues

In what ways will industry Address equitable pricing for treatments

of chronic diseases (emerging disease pattern)

Ensure transparency and predictability in pricing mechanisms and implementations?

Make the rationale behind pricing mechanisms open?

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Financing issues

Financing mechanisms that tap consumer willingness and ability to pay … How to differentiate payment by poor

between choice and necessity? How will promotion on use of drugs be

managed? Will other costs (open and hidden)

covered by the PCT industry affect the price?

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Uncertain Government Relations……Issues

Influencing policy Transparency on companies’ public positions and

advocacy activities at different levels (global, national; HQ, country reps and agencies)

Developed country interventions?

Research and Development and Patents -How transparent are companies in publicly

stating/and implementing their commitment to TRIPS?

-How to ensure adequate disclosure and quantitative data on R&D activities?

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Uncertain Government Relations……Issues

Licensing and technology transfer agreements

-Clear key performance indicators (KPI) to show the effectiveness of these agreements?

-What areas are these agreements focusing on? i.e. real technology transfer.

-How independent are the licensee? E.g. to establish the pricing policy, to sell in a wide range of markets, and to co-formulate drugs?

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The Social Contract…Issues

Social enterprises are profit-making businesses set up to tackle a social or environmental need…Should PCT companies be such? Why not?

Policies to prevent exploitation of the locals/poor in the process of R&D (and clarity on the sharing of rewards/incentives once the product goes into the market)

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Human-Centred…. IssuesPlaces the local consumer, patient or human at the centre of the

research and product development process- High ideal!

Stakeholder involvement- How are these relationships to be set

(COI/power relations) How are the views of stakeholders at the

end of the supply chain captured Whether views influence company

strategies

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Human-Centred…. Issues

Drug Development Identified need as against market Delink R&D cost from price Treat profit margin as a variable Look at other models of business