Emerging Markets: A Cure for Big Pharma’s Ails

Abstract

Innovative multinational pharmaceutical companies have seen their profits substantially decelerate in recent years. Patent expiry, rising generic competition, and lower R&D productivity have all contributed to Big Pharma’s anemic growth in mature pharmaceutical markets. To solve for Big Pharma’s profitability problem, this thesis sets out to investigate whether emerging markets expansion is the solution. Given the obstacles of poor intellectual property, generic competition, and poor market access due to affordability and pricing, the question is not really whether Big Pharma should expand in emerging markets, but how. To answer these questions, theoretical principles from the economic literature are used to explain the opportunities and risks presented by various Big Pharma strategies. Specifically, quantitative and qualitative data are collected through two studies: (i) a broad, global survey of Big Pharma strategies in emerging markets based on Annual Reports and the literature; and (ii) an interview-based localized case study of Big Pharma in Indonesia. Results indicate that there are four key strategies Big Pharma should use to expand their presence in emerging markets: (i) tiered pricing and proof of economic value during tendering and negotiations; (ii) local development through collaborative education, research, and advocacy efforts; (iii) foreign direct investments to plan for long-term presence in emerging markets, and (iv) tying up intellectual property protection with international trade benefits through lobbying efforts. All of these strategies involve aligning Big Pharma interests with the incentives of local public and private sector actors. Although the question of Big Pharma profitability is business-oriented, executives must realize that successful emerging markets strategy depends on the development of local economies. Likewise, health policymakers who are able to understand the Big Pharma perspective can better leverage the power of the private sector to meet the healthcare needs of their populations.