The role of Emerging Pharmaceutical Markets is changing…what will be the next growth driver?

January 20, 2016



In 2014 so called Pharmergings (Pharmaceutical Emerging Markets) grew, for first time in a decade, less than the Pharmaceutical Market average. According to IMS data, growth was 5.8% in emergings while the average was 6.4% and 6.6% in developed markets (US, Japan, WEU, Canada and ANZ). Just one year earlier the situation was opposite: Emergings were driving growth, 7.3%, while developed grew slightly above 2%. Coming back to 2007, Developed Markets were growing at an average of 8% and Pharmergings an astonishing 28%.


The fact is that Emerging Economies have slowed down abrupt and unexpectedly, not just the Pharmaceutical Market but almost in all Macroeconomic parameters.


Regarding BRICS, China has experienced three currency devaluations in one month, loss of 30% in the stock market in the same period and there is a feeling that maybe it is just the beginning. The situation in Russia doesn't looks better, with the ruble devaluated 49% in one year versus USD and the country immersed in commercial fights with NATO countries since the conflict in Ukraine. Brazil is entering into deflation and only India remains positive, although it is in low single digit growth.

Second and third tiers are also facing economical and political turbulences. In LATAM, Venezuela and Argentina, two of the biggest regional markets are dealing with high inflation and significant currency depreciation. Mexico, Chile, Colombia and the rest of Central and South American pharmaceutical markets are now growing in single low digits or decreasing.


MENA region remains unstable under the effects of the Arab Spring and the political and humanitarian crisis generated thereafter. Rich Arab countries, Saudi Arabia, Kuwait and UAE are also slowing down to single digit pharmaceutical expenses growth, with their economies being deeply affected by raw materials / oil low prices.


ASEAN Economies are still pursuing their free trade common marketplace, despite the fact that the scheduled date (2015) has showed to be unrealistic. After a decade of outstanding economical development with a skyrocketed pharmaceutic budget, the big 5 (Thailand, Malaysia, Philippines, Singapore and Indonesia) are now growing less than 5%.


Sub-Saharan Africa has also suffered a significant reduction in pharmaceutical market growth, from double digits to single in 2014. Corruption remains as one of the key barriers to growth in the region together with terrorist activities and local wars, particularly in biggest markets as Nigeria or Congo. In addition, international turbulences are expected to have a negative impact in some  investments that big emerging economies were doing in the Region. 


Last but not least, East European Region is highly influenced by the crisis between Western Europe-USA and Russia. Strong emerging economies as Poland or Hungary are showing low growth and old ex-Soviet Union republics are mostly in recession.

In summary, Emerging Economies have entered in a global crisis scenario that seems will be a consistent trend in the next future. Low growth rates or decreasing markets are the most probable landscape in the next future with important consequences for the Pharmaceutical Sector. Most pharmaceutical companies, particularly those among the Top 20 have identified Pharmergings as major growth drivers and have invested significantly to increase their presence there during the last years –for example, more than 35% of Sanofi’s revenues are generated in Emerging Markets-. Although developed segment recovery can help partially, it is not expected, in the present circumstances that Western Economies are willing to reduce cost controlling pressure over pharmaceutical budget as to fully offset the growth gap that will be generated in Emerging Markets. Finding growth drivers will be an even more challenging exercise for Big Pharma in the forthcoming years. Increased exposure to emerging markets is no longer a guarantee of growth. However other advantages, such as lower manufacturing / R&D costs are also important reasons to keep or increase presence in these markets. Despite global dependance between markets, crises don't always occur simultaneously and diversification keeps being a good strategy for risk management.








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