The notion that pharmaceutical companies are pondering which emerging markets they should target is slightly disingenuous. If your drug is the fifty-second calcium antagonist, you can be selective in your targeting – but if you’re launching a breakthrough medicine that can change lives, you really don’t have a choice. The pharma company that denies a developing nation access to a groundbreaking innovation will not be able to withstand the ethical or commercial heat. So the question isn’t ‘which emerging markets should you target?’ It’s ‘how can you target them effectively?’ With a plethora of access challenges and a range of market-specific access mechanisms in place to support them, the barriers to entry are manifold. But if your breakthrough cancer treatment can extend a patient’s life by five years, those barriers must be overcome. You just don’t have the choice.
Journey’s spend
With all emerging markets at different phases of their evolution, a broad brush approach will never work; every developing nation is different. But there’s a common denominator – almost all of them underspend on health. The acceptable standard for public spending on health is widely considered to be 5% of GDP. In developed economies the minimum level is generally between 7 and 8%. But the majority of emerging markets fall well short. According to World Bank data, each of the BRICS nations spent less than 5% of GDP on health in 2013, with China and Russia committing just 3% to healthcare and India a staggering 1.3%.
Despite this, some commentators question whether the biggest BRICS can still be defined as ‘emerging’, pointing to their growing market value as evidence that they’ve already ‘emerged’. For example, China is now the second biggest pharmaceutical market in the world, whilst Brazil is already bigger than the UK market and India is not too far behind. However, their consistent underspending underlines why they’re still considered emergent – and lays the foundation for pharma’s access challenges.
Most of what these countries are driving towards is consistent
Faithful attraction
“Emerging markets, in particular Asian emerging markets, are attracting attention because of their potential – not because they’re well-funded,” says Qi Guan, Director, Double Helix Consulting. “Budget constraints mean that access barriers are being put in place everywhere. Outside more mature markets like Japan, Korea and Taiwan, Asian governments are struggling to expand coverage to reach a greater percentage of populations. Moreover, where budgets are expanding, it’s to cover the cost of essential care rather than pay for high-cost innovative drugs.”
In fact, the global variation in access policies is so pronounced that even developing an overarching ‘emerging market strategy’ is questionable in itself. “The whole concept of emerging markets is dubious,” says Mark Chataway, Principal Consultant, Hyderus. “For example, there’s nothing in common between Indonesia and Argentina, whereas Argentina and France don’t look that different. Most of what these countries are driving towards is consistent, but the idea that there’s a strategy that’s going to work across the board is a non-starter. That said, it’s important not to look at markets in total isolation. The countries themselves are closely watching what others are doing. Mexico, for example, is probably one of the most depressing markets – but experts there are completely up-to-date with what’s happening in other emerging markets. What one country does may well affect another; whilst they won’t copy it exactly, they may use it as a basis for negotiation.”
There’s also regional variation. “India’s public spending on health is low, but there are states in the South providing good care and attempting to introduce universal healthcare coverage,” says Mark. “In China, richer regions are spending more and reimbursing some of the new cancer drugs. There are limitations, however, as regional formularies cannot stray too far from the National formulary. Most countries are grappling with regional inequity. In Brazil, thousands go to São Paulo for care each day simply because it’s not accessible at home. That’s never a good policy outcome.”
So are emerging nations introducing western HTA models? It’s a mixed picture. “One of the most aggressive British exports is NICE itself with its successful international consulting wing,” says Mark. “In Latin America, countries are looking at NICE models and talking about integrating and, to a lesser extent, adopting them. In Asia, however, people are less likely to import a ready-made system. In Indonesia, EU countries are funding a national institute. In India, despite enormous expertise, HTA is very nascent.
“Some of the more interesting work in developing nations is – quietly – being done by insurers. There’s growing evidence that insurers are negotiating with hospitals and drug companies on NICE-like models. In Brazil and Argentina, for example, insurers have negotiated deals with pharmaceutical companies for total payment caps, payment by results and even payment based on savings.”
China in your hands?
In China, primitive HTA mechanisms exist but they’re far from the NICE model. “That may come – but probably not for 5-10 years,” says Qi. “The way decisions get made is very multilateral. Negotiation is still the holy grail. Although there are many parameters within those negotiations, payers will ultimately use China’s size to their advantage. They’ll say: ‘look at my population. If you get access to me, you’re not reaching one or two million, you’re gaining access to 10 million people.’ Tier 1 or 2 cities are the size of a country – and stakeholders naturally exploit it!
“There’s also been changes in how drug pricing is determined. Previously it was determined by a pricing agency – you then had your procurement, your listing, your prescription and your reimbursement. That pricing control has largely been lifted for most drug categories. So you’re left with procurement and reimbursement-level control. Counter-intuitively, this actually means that the tender and reimbursement agencies are able to function more cohesively. It gives the reimbursement agency more tools. Conversely, while China pledges to update its reimbursement listing at the national level every two years, this isn’t happening. In reality, many of the sub-national and municipal agencies are doing their own updating using negotiation effort. Healthcare funding comes from the municipal level and it’s better for them to decide how money is spent due to China’s decentralised fiscal system. That central-local structure explains why you see some of the more classic targeted therapies gradually getting reimbursed, despite many being close to exclusivity. There’s hope this will become more dynamic. The country is getting richer, and the system is getting more agile too.”
Budget constraints mean that access barriers are being put in place everywhere
Tomorrow’s world
So how should pharma approach emerging markets? The answer is to be pragmatic and flexible. “Companies need to think carefully about how they classify each market; does it have commercial potential, is it smaller opportunity or a social responsibility market? It’s important to understand this to develop a framework of 10-15 key targets,” says Mark. “Depending on your portfolio and corporate approach, these target lists will be different in each company. For example, a company with a high capacity to take risks may look at Kazakhstan – which has been a fast-growing economy with decent spending on health. More conservative companies may be put off by allegations of corruption there. When you’ve drawn up your list, you need to examine each country in detail to establish similarities where one model may work across multiple markets. You have to do this in a systematic way so that you’re thinking about the knock-on effect of action in one on others.
“Then it’s a case of asking the obvious: is there a market there? Can I get reimbursement? Is there a private sector? What’s the capacity to treat in the private and public sector? If you look at Indonesia, for example, it’s got an enormous population but very few oncologists. Whatever you want to achieve in the next decade, there’s unlikely to be any extra treatment capacity. You therefore have to consider other services that may make more efficient use of existing capacity, like a telemedicine service or shared care protocols. It’s about listening to identify opportunities and developing mechanisms by which to respond to them. This requires an agile, responsive five-year plan.”
The need for longer-term thinking, as well as understanding the nuances each market presents, is crucial. “The primary challenge is to figure out where you want to focus. China, for example, may be a market where you can still capitalise on your classic products – but it won’t stay that way for long,” says Qi. “So you need to think about your portfolio strategy and how you’ll actually engage your customers. What language will you use? The answer is ‘evidence’ – particularly evidence of value. Throwing reps at the problem will have diminishing returns as payer and health systems evolve. What’s needed now is a capacity for generating, packaging and communicating evidence to deliver cohesive messages across the value chain and the stakeholders you’re engaging with. The global experience will help here.
“Evidence generation is about developing a clear, early understanding of the payer segments you want to target. Is it private or public? What’s the funding type or funding source, and what are payers’ evidence requirements? The communication mechanism will depend on the customer; if it’s a negotiation, it will be the commercial teams. If it’s physicians or payers, it may be medical/HEOR. If you want to talk at the corporate level, market access and public affairs may play the lead role. It’s only by resourcing in anticipation of where your market is heading that you can bring everything together and ensure access challenges are being appropriately addressed.”
Optimising emerging markets is a major strategic challenge for pharma. The diversity of access mechanisms means there is no quick-fix and that only focused, structured strategies – with in-built flexibility – will deliver results. Prioritising those markets will be critical – but if you get it right, there’s a real opportunity to set positive, sustainable examples of access in emerging markets. Fundamentally, however, doing nothing is not an option. If you’re blessed with a breakthrough medicine, you really don’t have a choice.