The future of the pharmaceutical industry lies in the developing world and emerging markets. Although the US and Europe have long been major markets and research and development bases for pharmaceutical companies, the industry has been shifting its attention to areas that were once considered secondary markets. The COVID-19 pandemic accelerated this shift, but it’s not the only reason that developing economies are becoming critical locations in the global pharmaceutical landscape. In order to properly plan for and profit from this change in focus, it’s important to understand the scope of the opportunity and the contributing factors. These include changes in demographics and economies, health care spending, treatment development, regulations, and more.
The first and perhaps largest factor is evolving demographics that are creating changes in countries’ health care ecosystems. Emerging and developing markets across Asia, Africa, and Latin America are experiencing rapid population growth and urbanization. These regions are already home to 6.75 billion people as of 2023—the vast majority of the world’s population.1
Rising Health Care Access and Spending
As these regions continue to gain population, urbanize, and create more salaried employment opportunities, their middle class is also growing. Globally, the middle class now has 4 billion members, and that number is expected to rise to 5 billion by 2031.2 As the global middle class expands, more people will be able to afford health care services, treatments, and medications, creating attractive markets for pharmaceutical companies seeking to connect with a growing customer base.
At the same time, national governments and global non-governmental organizations are trying to expand access to essential medicines and treatments in developing countries. Many emerging markets are increasing their health care budgets to meet the needs of their growing populations and to improve their health care infrastructure. This spending trend creates an ideal environment for pharmaceutical companies to work with governments to help meet their need for products.
More Demand for Treatments Tailored to Local Populations
Pharmaceutical companies are adapting their product portfolios to address the specific health care needs of emerging economies—developing affordable generic medications, vaccines, and treatments for regionally prevalent diseases such as malaria and tuberculosis. Just as treatments for COVID-19 have resulted from close interaction between governments and pharmaceutical companies, there are opportunities for manufacturers to work with governments in developing economies to treat and cure diseases at the local level.
Currently, 75% of the 537 million adults with diabetes and two-thirds of the 1.28 billion adults with high blood pressure live in developing countries and emerging markets.3,4 As more people settle into salaried jobs and middle class lifestyles, there’s going to be an even greater need for medications to treat these conditions. This creates more opportunities for pharmaceutical companies to help governments produce these drugs in areas where rising cases are placing higher demands on health care systems.
Regulatory Reforms and Support for Intellectual Property Rights
Health care demand isn’t changing in a vacuum. In many developing and emerging markets, navigating the regulatory and patent landscape is getting easier for pharma companies. These changes have the potential to remove barriers to entry. For example, some emerging economies are streamlining their drug approval regulations and processes to align with international standards. Some are also updating their intellectual property rights laws to encourage innovation and investment by multinational pharmaceutical companies.
There are also opportunities to work with existing players in these markets. Many emerging markets already have robust resources for research and drug manufacturing, which opens the door to potential partnerships with pharmaceutical companies. For example, South Africa’s health ministry earned international attention amid the COVID-19 outbreak when its scientists detected a new variant.5 India has long been a major producer of pharmaceuticals, especially generic medications for export to markets including the United States, and India’s pharmaceutical manufacturing infrastructure is ideally positioned to help multinational drug makers maintain high-quality production of off-patent medicines. That kind of partnership can help meet rising demand and forestall the emergence of unauthorized knockoffs in more lightly regulated markets.
Local Manufacturing and Research Opportunities
Multinational pharmaceutical companies are also starting to set up their own manufacturing facilities in emerging markets to meet growing demand. These local investments reduce production costs and make it easier to partner with local providers and governments and facilitate development of in-country distribution networks for their products. Local manufacturing facilities also create jobs and foster economic development.
Developing countries offer unique advantages for pharmaceutical research and development, including lower costs, more diverse patient populations, and faster patient recruitment because advertising for trial participants is often less restricted than in the United States. Already, some American drug firms are partnering with researchers in emerging markets to conduct trials using different participant demographics and disease variants to improve treatment efficacy and make the drug development cycle more efficient. These kinds of partnerships also address the need for equity in clinical trials, which have traditionally included mostly men from higher socioeconomic backgrounds.
Pharmaceutical Company Challenges in Emerging Markets
New markets provide challenges as well as opportunities, especially with respect to pricing, market access, and complex regulatory environments. Overcoming these challenges requires a long-term strategy that’s tailored to each market, rather than a lift-and-shift approach that seeks to replicate US-style operating models in developing economies.
About the Author
Marcel Gradidge, the Vice President of Life Sciences at Capgemini Invent North America, boasts over a quarter-century of expertise in strategy, operations, and the life sciences sector, gained through his work in both industry and consulting. His life science industry experience spans the business, regulatory, clinical, and technology aspects of global life science business. Marcel's varied leadership roles across consulting, life sciences, and other sectors enable him to utilize his extensive experience to foster client success and achieve notable results.
For example, the industry’s pricing strategy in the United States, in which drugs are priced much higher in the United States than in other countries to subsidize the costs in emerging markets, isn’t sustainable over the long term. As the United States looks to change regulations to lower domestic drug prices, emerging economies can’t bear to shift those costs to their consumers—especially not abruptly. This means companies will need to partner with local governments and regulators to develop pricing models that are sustainable over time.
Rethinking the Role of Emerging Pharmaceutical Markets
Emerging economies and developing countries are moving from the periphery to the center of pharmaceutical industry growth. As these markets evolve, their health care needs, spending, regulatory reforms, and internal health care companies and research institutions offer significant opportunities that require dynamic strategies tailored to each market. If pharmaceutical companies make the most of these opportunities, the industry can have a historic impact on global health care and quality of life for billions of people.
References
1. Population. International Monetary Fund. 2024. Accessed February 20, 2024. https://www.imf.org/external/datamapper/LP@WEO/OEMDC/ADVEC/WEOWORLD/ARG
2. Lu M. 113 Million People Will Join the Global Middle Class in 2024. Visual Capitalist. October 19, 2023. Accessed February 20, 2024. https://www.visualcapitalist.com/113-million-people-middle-class-2024/
3. Global Diabetes Industry Overview. Aging Analytics Agency. 2023. Accessed February 20, 2024. https://analytics.dkv.global/diabetes/Report.pdf
4. Hypertension. World Health Organization. March 16, 2023. Accessed February 20, 2024. https://www.who.int/news-room/fact-sheets/detail/hypertension
5. McKenzie D. A new Covid-19 variant could show immune evasion and enhanced transmissibility, South African scientists warn. CNN. Updated November 26, 2021. Accessed February 20, 2024. https://edition.cnn.com/2021/11/25/world/covid-variant-south-africa-immune-evasion-transmissibility/index.html
