The Winning Edge in Emerging Markets


PharmExec | December 9, 2016

The PharmExec article, “The Winning Edge in Emerging Markets," looked at the firm’s research on "Insights into the future of top pharma boards." The article is co-authored by Russell Reynolds Associates Consultant Christopher Burrows and Global Knowledge Leader Saule Serikova. The article is excerpted below.

In the eight years since the global financial/banking crisis and subsequent recession across most of the world’s leading economies, many of the emerging markets have proven to be much more resilient economically as well as becoming the longer-term engines for economic expansion, compared to the more stagnant health economies in Europe, Japan and the US.

Emerging markets outside these traditional, established terrains are, therefore, strategically critical to large multinational pharmaceutical companies. However, as the business and political environment in a number of these markets has become increasingly tough and unpredictable (e.g., Brazil and Russia) and others have accelerated their economic development, management needs to revise corporate strategies and “go-to-market” approaches. Support and expertise is needed from the very top, i.e., board level. This article gives some perspective on how boards can support the business to win in emerging markets, against increasingly challenging market conditions and competition.

Embracing change

In our recent publication, “Insights into the future of top pharma boards,” we analyzed the background, profiles and experiences of board directors in the 15 largest (by revenue) pharmaceutical companies in the world, all of which are still headquartered in the US and Europe. We also interviewed a significant number of these directors, both executive and non-executive, to understand better how board compositions are changing and to identify the key skills and competencies that will be required in the future.

The ability of boards to tackle effectively the complex and unique challenges of succeeding in emerging markets has developed as a key theme from our study.

Market hurdles

Over the last few decades, large pharma companies have been trying to expand their presence in emerging markets outside of the US and Western Europe. Indeed, a higher mission to make new medicines accessible to under-served populations, especially in these regions, seemed to be compatible with the significant business objective of achieving top-line growth.

It should be noted that the pharma business environment in emerging markets has always been different and often difficult for the top multinational companies. Many factors account for this difficulty, including government protectionism of local  drugmakers (mostly, in generics) and often a lack of IP protection, since many emerging economies do not recognize international patent law in their particular legislation. Additionally, the recent implementation of more aggressive pricing and reimbursement policies as well as compliance and ethical considerations have restricted daily operations and raised concerns about the short- and long-term growth opportunity for multinationals in these countries.

For example, since the top 15 pharma companies all trade in the US, the DoJ’s rules and code of conduct applies wherever they do business in the world, even though “different” and seemingly less ethical practices may be commonplace and indigenous to a number of emerging markets which they serve, potentially giving local competitors an unfair advantage.

Emerging markets account for 20% of revenues, on average, for the top 15 pharma companies—mostly generated from China, India, Russia, Brazil, Mexico and Turkey. The significant growth opportunity associated with generally increasing economic prosperity and healthcare spend further highlights the importance of capturing these markets to achieve future global success. However, the apparent unpredictability of several emerging markets has forced the leadership teams of the top pharma organizations to analyze and review more critically their previous strategies for extending into non-traditional pharma markets.

One of the key findings from our survey was that revising and improving business strategies requires input and advice from senior leaders with genuine understanding and successful track records in those markets, as they each have individual cultural, political and commercial differences that require non-traditional approaches and strategies for success.

To read the full article​, click here.

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The Winning Edge in Emerging Markets