Money In Disease

Interesting article from the Economist about a new focus by pharmaceutical companies on developing countries. The standard operating procedure for most drug companies has been to market drugs to developed countries, where the population could afford the medication. Or they have developed niche products which cost a lot of money per dosage.

Over the past couple of years, emerging market countries have either created generic versions of the drugs marketed by Big Pharma, or just outright copied their drugs ignoring any patent protection. Most of the pharmaceutical companies have just ignored these developing countries.

That attitude may be changing due to these countries expanding middle class. 'McKinsey, a consultancy, estimates that the value of the Indian drugs market will grow from $6.3 billion in 2005 to $20 billion in 2015. China's market is expected to soar even more spectacularly. Given such prospects for growth, says Mark Feinburg of Merck, an American drugs giant, “you've got to be in these markets—it's a great opportunity.”'

To the right is a graph from the Economist showing the major causes of deaths in China, India & Brazil. The graph is not clear on what the percentage of minor deaths are, but looking at the percentages of the Big C's (Cardiovascular, Cancer, Chronic and Communicable) there is a lot of opportunity to sell some medication.

The three countries in the graph equal 2.6 billion people with a total GDP of $12 trillion dollars, growing at 8%. Developed countries (US, EU & Japan) have a population of 127 million, but a total GDP of $34 trillion dollars, growing at 2%. The developed countries are fairly saturated when it comes to the pharmaceutical market. However the market in the emerging economies is still under-served.

The Economist explains that for foreign companies tapping into these markets its not just as easy as opening a factory and selling drugs.

'Serving these markets will mean building up local expertise and research efforts. Where drugs firms have set up shop in developing markets, it has generally been to cut costs, rather than to cater to the needs of locals. But that is changing. Novartis has opened a research centre in Shanghai and has another outpost in Singapore focused on tropical diseases. Merck has struck several deals with firms in emerging markets to do early-stage research. The drugs giants argue that this new approach allows them to tap a global network of innovation, and also provides insights into local markets.'

Source:
'Quagmire To Goldmine ?', by The Economist
The World Fact Book, by The CIA