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BRIC BY BRIC(K) White Paper Life Sciences
Life Sciences
White Paper
BRIC BY BRIC(K)
Winning the Life Sciences Battle in the Emerging Markets
About the Authors
Fali J Seervai
Fali has over 21 years of management and IT consulting experience. He currently heads
the consulting business of TCS’ Life sciences industry unit aside of managing internal
strategy, market entry planning and growth identification for the unit.
During his journey of assisting global and Indian companies in finding innovative
solutions to their complex business problems, Fali has advised clients in areas including:
– Strategic planning- through the development of corporate and business
strategy/plans, market entry/protection strategy, new growth and diversification
options analysis, market insights and new initiatives scoping
– Operationalization of strategy - steering growth enablement or cost containment
driven transformational initiatives that involved a combination of process
definition/reviews, due diligence, business case articulation and change management
facilitation
– Enhancing the business value of IT - through business-IT alignment, application/
vendor consolidation and IT roadmap definition
He has worked across several business verticals including retail, trading and distribution,
CPG, transportation/logistics, life sciences, healthcare, travel and hospitality, utilities,
manufacturing, financial services and education
Amita Singh
Amita has over 6 years of professional experience spanning diverse functions of Strategy,
Marketing and Supply Chain Management. She is currently part of the consulting group
within TCS’ Life Sciences industry unit providing advisory services to Pharma and
Medical Device Manufacturers. She also assists the Leadership Team with inputs on
market analysis and competitive insights
Outside of life sciences, Amita’s experience also includes research, consulting and
marketing assignments with leading firms in Retail, Telecom and CPG Industries
She holds a Bachelor's Degree in Science from St. Stephens College, Delhi University and
a Master's in Business Management from Xaviers Institute of Management, Bhubaneswar
Life Sciences majors, for whom developed markets are the home turf and
constitute a significant portion of their revenues, are faced with market
saturation, pricing and reimbursement pressures, and increased regulatory
hurdles in their domestic markets. A major patent cliff and late-stage pipeline
attritions have aggravated near-term revenue prospects further. As a result, it is
now accepted wisdom that a substantial portion of revenue growth in the
foreseeable future will emanate from the Emerging Markets—notably Brazil,
Russia, India and China, or the BRIC. Large, growing populations, rapid GDP
growth, rising disposable incomes, improving health infrastructure and
changing disease profiles are some of the key factors underlying this growth. In
addition to the growth potential, Emerging Markets also offer strong potential
for cost savings through localized supply chain operations, and as hubs for EMfocused as well as global innovation. However, given the uniqueness of each of
these markets, it is vital that companies approach them with a thorough
understanding of the opportunities and challenges presented by each.
To this end, TCS has constructed an Emerging Markets Index (EMI)—to guide
life sciences companies in the assessment of relative strengths and future
potential of BRIC markets. The EMI has been designed to offer you a holistic
view of BRIC markets along three complementary yet distinct perspectives –
Revenue, Savings and Innovation (taking into account both their current and
anticipated states). A granular analysis of key ‘drivers’—population growth,
economic growth, healthcare reforms, supply of well-educated, low-cost talent,
capabilities in R&D and manufacturing and an improving IPR
environment—helps perform a well-rounded assessment of each market.
Further, an in-depth analysis of ‘constraints’—limited access to healthcare,
political and economic instability, difficulty in conducting business, growing
regulatory hurdles in initiating trials and in product approvals, rise in R&D
costs—ensures that you approach these markets armed with superior
knowledge of what to expect in terms of current challenges as well as
potential risks.
Our analysis indicates that China currently leads the group in terms of revenue
potential, primarily due to large domestic demand, sustained economic growth,
and strong policy reforms. When it comes to ‘savings’ potential, India emerges
the clear leader—availability of a large, well-educated workforce, lower wage
costs relative to other BRIC peers, and a strong manufacturing and R&D base
(especially for pharmaceuticals) being the major contributors. From an
‘innovation’ point of view, China and India share the leadership position,
powered by a strong R&D talent base, capabilities in process re-engineering and
an improving policy regime.
In terms of constraints, India’s score in revenue potential is pulled down by low
public health expenditure, while Russia and Brazil grapple with economic
volatility and relatively weak corporate governance. Similarly, in savings
potential, Brazil, Russia and China score low on account of diminishing cost
differentials (vis-a-vis developed markets), coupled with higher risk of
regulatory non-compliance (in manufacturing, for instance).
Finally, this paper focuses on the Indian market and the challenges and critical
success factors specific to this market. Poor access to healthcare—in terms of
affordability, inadequate medical infrastructure, and low awareness
levels—poses the greatest challenge to market growth. This is further
aggravated by geographically dispersed demand and an inadequate supply
chain infrastructure that makes it a herculean task to reach certain markets,
especially the sub-urban and rural. In order to tackle this market, companies
need to deeply understand the market dynamics, innovate around the issues of
low affordability and weak distribution infrastructure, develop the market
through collaborative platforms within and outside the industry, and forge
alliances with local players across the value chain, where necessary.
Contents
1. Introduction
7
2. Defining Emerging Markets and Their Importance
7
3. Emerging Markets and the Life Sciences Industry
8
4. The Emerging Markets Index– a comparative
assessment of the BRIC markets
11
5. Challenges faced in India and Critical Success Factors
15
6. Conclusion
18
Select Bibliography
WHO, country profiles on non-communicable disease 2011
WTO, world trade report 2012
UNCTAD, world investment report 2012
World Economic Forum, global competitiveness report 2010-011
Wall Street Journal, 2012 index of economic freedom
Economist Intelligence Unit, Social Unrest 2009
The World at Work: McKinsey Global Institute, 2012
Breakout Nations, Ruchir Sharma. Penguin Books, 2012
Getting China and India Right, Anil K Gupta and Haiyan Wang. Jossey-Bass, 2009
India’s Latest Medical Device Regulation Developments: Ames Gross and Arthur Chyan.
Accessed August 2012
Medical technology industry in India: Riding the growth curve. Deloitte and CII report.
Accessed August 2012
Changing the innovation equation in India: BCG Report. Accessed August 2012
Emerging Markets Review 2012: Brazil, Russia, India, and China. Eyeforpharma Report.
Accessed July 2012
India Pharma 2020: McKinsey report. Accessed July 2012
India’s potential in the global pharma value chain: Accenture report. Accessed July 2012
1. Introduction
Worldwide, the life sciences industry is in a state of flux due to a spate of changes driven by economic forces,
regulatory agencies and governments. Some of the key challenges facing life sciences companies at the
moment are:

A major patent cliff in the pharma/bio-pharma businesses

A host of cost containment measures adopted by regulators and
payers across key markets, adversely affecting the pricing and
reimbursement environment

Low R&D productivity and late-stage pipeline attritions

Government tightening on healthcare budgets/spending; newly
levied excise tax on Medical Devices and Diagnostics (MDD)
manufacturers (U.S.)

Rising costs of commercialization
DEFINITION OF TERMS USED:
For the purposes of this paper,
TCS has defined Life Sciences
Industry to include
Pharmaceuticals, Biopharmaceuticals, and Medical
Devices and Diagnostics.
There have been shifts in the markets too; changes in the demographic
structure in developed economies and shifting disease profiles in the developing economies have created large
patient populations there with chronic/lifestyle diseases. The key emerging markets Brazil, Russia, India and China
(BRIC) offer new opportunities with growing population, increased purchasing power, expanding healthcare
infrastructure, and progressively greater access to healthcare for the masses, supported by the proliferation of
private health insurance.
However, as experience has shown, each emerging market (EM) displays a high degree of uniqueness in terms of its
market conditions, consumers, trade constituents and regulators, amongst others. Deep insights and a thorough
understanding of these nuances are central to engaging in the EMs successfully. This white paper aims to provide a
more granular understanding of each BRIC market, with a special focus on the opportunities and challenges the
Indian market presents. To this end, we have constructed an Emerging Markets Index (or the EMI) to help
understand and evaluate each BRIC market’s current strengths and future potential along key dimensions of
relevance to the life sciences industry.
This paper aims to provide a granular understanding of each BRIC market, with a special focus on the
opportunities and challenges that India presents.
2. Defining Emerging Markets and Their Importance
After the International Financial Corporation brought the term into fashion in the 1980s, “emerging markets”
have been defined in various ways. Several acronyms such as BRIC (Brazil, Russia, India, China), BRICS
(BRIC + South Africa), and BRICTM (BRIC + Turkey + Mexico) have been coined to represent the largest among the
emerging markets.
7
IMS Health has defined Emerging Markets for the Life Sciences industry and has subsequently identified
17 EMs in 2010 (referred to as ‘pharmerging markets’), up from seven identified in 2006. This expansion in number
clearly displays the increasingly important role they play in the global economy.
Key Characteristic
I)
Rapid GDP growth and industrialization
ii)
A large, growing population
Implication
Emergence of a sizeable middle class with robust purchasing power
A large consumer/patient base with assured demand for diverse
products and services
Need for R&D and innovation around the issues of access to
healthcare and market penetration
Need to hedge against certain key risks in order to secure profits
and growth
Success requires a strong understanding of the local markets,
regulations and operating environment
iii) Inadequate, but growing infrastructure
iv) Volatile economy; weak intellectual
property rights
v) Complex policy regime
Table 1: Emerging Markets – Key Characteristics and their Implications
The above-mentioned characteristics make Emerging Markets highly
attractive due to their sustained growth potential, especially in the current
global economic scenario. These emerging markets also offer competitive
advantages in the form of cost savings, and as hubs for cost-effective
innovation, sourcing and manufacturing. For the purposes of our white
paper, we will focus on the big four emerging markets – Brazil, Russia, India
and China, collectively known as the BRIC.
3. Emerging Markets and the Life
Sciences Industry
i
The life sciences industry in developed markets is going through a troubled
phase. Primary Pharma markets like North America, Europe and Japan have
grown sluggishly with CAGRs below 5% in the past five years (and closer to
ii
1-2% of late), which is below the global average of 6.1% . The forecasted
growth of 0-4% for the next five years does not look very promising either
and could be difficult to achieve. By 2016, developed markets will account
for 57% of the global spending in life sciences, which is a sharp decline from
73% in 2006.
The relevance of emerging
markets
“Developed economies offer
slow growth on a huge base,
whereas the emerging ones
offer high growth on a small
base… In these markets,
companies have seen productrelated successes, there has
been growth in provider/
hospital networks and patients
are now more willing to spend
on healthcare. Only the
insurance bit is still lacking and
can drive growth in future.”
- Biten Kathrani,
Director, Asia-Pacific
Innovation Center,
Johnson & Johnson viii
The Emerging Markets are highly attractive due to their sustained growth potential, capability for costeffective innovation and significant cost savings.
i]
Developed nations for the purposes of this report are defined as North America, EU5 and Japan. Pharmerging countries are defined as those with >$1 billion absolute
spending growth over 2012-16 and which have GDP per capita of less than $25,000 at purchasing power parity (PPP). Pharmerging markets include China, Brazil, India,
Russia, Mexico, Turkey, Poland, Venezuela, Argentina, Indonesia, South Africa, Thailand, Romania, Egypt, Ukraine, Pakistan and Vietnam.
ii] IMS, 2011
viii] TCS Research and Interviews, August 2012
8
For several global life sciences players, revenue erosion triggered by the patent cliff has been compounded by a
relatively dry product pipeline and intense competitive pressure from generic products. With healthcare systems
under acute financial scrutiny in developed markets, there is growing pressure on life sciences firms from payers,
providers and regulators to demonstrate comparative cost-effectiveness, leading inevitably to increased R&D costs.
These issues have led life sciences firms to shift their focus from conventional territories to the emerging markets
where there are opportunities for strong and sustainable growth for Pharma and Medical Devices businesses.
Consider these projections:
1) According to IMS Health, pharmaceuticals spending in the 17 ‘Pharmerging’ markets would double from $24Bn
in 2012 to $35-45Bn in 2016, accounting for 30% share of global spendiii.
2) In the Medical Devices business too, China, Brazil and India continue to lead the pack in terms of best perceived
growth potentialiv. China and India med-tech markets are expected to grow at healthy double digit CAGRs (14-16%,
2010-15).
Growth in these markets can be attributed to factors like growing populations, economic growth, rise in incomes
and affordability, concomitant changes in consumption patterns, government efforts to improve access to
healthcare, investments in infrastructure, sustained healthcare reforms, etc.
An environment assessment demonstrates clearly why emerging markets are the next big bet for life sciences
companies (see Figure 1).







Patent cliff in major markets; generic erosion
Improved IPR climate in emerging markets
Improved EHS, GCP, GLP and GMP compliance in emerging markets
Established R&D capabilities
Public/private investments in R&D
Innovation focus of local players
Proven prowess in managing technology









High, sustained GDP growth
Burgeoning domestic healthcare demand
Focus on building healthcare infrastructure
Access to low-cost talent; low operating cost
Huge naïve pt. populations for clinical trials
Biotech a high priority sector for govts.
Growing domestic investments in the industry
Favourable fiscal and tax incentives
Healthcare reforms underway, with clear focus
on healthcare infrastructure modernization





Shift in disease patterns towards NCDs
Large, growing middle class; higher incomes
Increased access to healthcare, insurance
Greater acceptance of innovative treatments
Unmet medical needs in the EMs
 Rapid economic growth leading to environmental degradation and associated
illnesses (respiratory diseases, cancers and immunity-related illnesses)
 Leading in turn to growing demand for environment-friendly products and services
Acronym
EHS
GCP
GDP
GLP
GMP
IPR
NCD
Expansion
Environment, Health and Safety
Good Clinical Practices
Gross Domestic Products
Good Laboratory Practices
Good Manufacturing Practices
Intellectual Property Rights
Non-communicable Disease
Figure 1: Environment Scan – Emerging Markets
iii] The Global Use of Medicines: Outlook Through 2016. IMS
iv] 2012 Medical Device Survey: Emergo Group
9
This assessment clearly illustrates the potential of Emerging Markets. However, so far, these markets have largely
been viewed as low-cost destinations for cost-effective procurement and manufacturing operations, and for R&D
centres to tap the local talent pool, to an extent. It is only in the recent past that the Emerging Markets have been
seen as destinations meriting focussed investments to aid market expansion, boost long-term growth and gain
competitive advantage. As a result, companies have formulated specific strategies to approach these markets.
The following figure lists some of the notable efforts made by life sciences companies to gain a strong foothold in
the Emerging Markets.
Focus Area
Case Examples
Broad Trends
Low-cost Product
Development


Product Development
Product Line
Customization


Price Localization


Commercialization
Simultaneous Launch
across Markets
Leveraging Innovation
in Emerging Markets
Networked Innovation
Alliances with
Local Players






Business Model
Innovation

GE developed 14 products in India, at a
fraction of the original cost
GSK selectively markets drugs aligned
with the Indian disease profile
Abbot launched Aluvia (a heat-stable
tablet formulation) in Uganda
Merck launched Januvia in India at 1/5th
its price in the US
Pfizer offers drug discount-card system in
Russia, offering price rebates of up to 50%
Roche has announced a new strategy of
‘tiered pricing’ for emerging markets
BMS launched Baraclude in China with a
six-month delay; India launch soon after
Phillips R&D facility in India develops
health products for emerging markets
GSK has a 10-year collaboration program
with a Shanghai institute
Dr Reddy's and Merck will develop cheap
versions of cancer biologics
B. Braun introduced a dialysis service
offering via a public-private partnership
Stryker and Zimmer have mobile training
centres for remotely located physicians
GSK has partnered with Fiocruz in Brazil
to develop and manufacture a vaccine
for dengue fever
Figure 2: Success Stories in Emerging Markets
However, monetizing the burgeoning demand in the emerging markets is a complex and challenging task for most
multinationals. In addition, they face competition from talented and ambitious regional players who are keen to
take their low-cost designs/formulations to enthusiastic buyers in the markets of Europe and North America. Indian
MDD manufacturers, for instance, have been exporting to other Emerging Markets as well.
Given that most MNCs have been present in the Emerging Markets for very long now, the main challenge they face
is – how to grow quickly, widely (across geographies and across economic strata) and sustainably (with low-cost
but profit-making products for the masses).
10
Executives face fundamental strategic questions like:

What do I hope to accomplish through my Emerging Market Strategy – revenue growth, enhanced profitability,
sustained innovation, a combination of these?

Which geographies do I target given my strategic intent and current portfolio of products?

Is my current portfolio of drugs and/or devices suited to the intended market? How do I adapt existing
products/portfolio or design new products to suit local need?

When would be the right time to enter each of these markets? In what order?

How do I best enter these markets – pure exports, active presence, joint venture, alliance, co-marketing
arrangement?

How do I target the customer base given that each market is socially, economically and culturally diverse?

How will I overcome the challenges of distribution infrastructure, limited affordability, and basic access to
healthcare?

How can I leverage these markets’ complementary capabilities to build sustainable competitive advantage?

What other challenges and risks am I up against?
In light of such critical pre-requisites and a tough but attractive operating environment, it becomes critical for any
company to understand ‘what works’. The following sections talk about the opportunities, pitfalls and what it takes
to succeed in these emerging markets.
4. The Emerging Markets Index– a comparative
assessment of the BRIC markets
To succeed in the Emerging Markets, it is essential to realise that each country is unique and each presents a set of
different opportunities and challenges. Therefore, each would require a strategy designed to conform to the
regional regulatory environment, products tailor-made for local markets, and operational practices customized to
suit the prevailing business environment.
Ignoring this fact can be a costly mistake for any business aiming to tap the many opportunities in the Emerging
Markets. We built the Emerging Markets Index model in order to delve deeper into the individual markets and
understand the opportunities, challenges and risks in their entirety, and also to enable a comparative assessment of
these aspects.
The main challenge established MNCs face in the emerging markets is – how to grow quickly, widely and
sustainably.
11
Emerging Markets Index
Depending on a life sciences company’s strategic priorities and aspirations,
the potential benefits offered by the BRIC markets can be viewed in terms of
one (or more) of three distinct perspectives listed here*:

Revenue Potential

Savings Potential

Innovation Potential
It is critical to understand that while each of the BRIC nations offers
opportunities for revenue growth, cost savings and R&D/innovation, their
attractiveness levels differ depending on a range of factors. The four
countries have been ranked based on the potential benefits promised along
these perspectives.
"While we put them all
together, EMs are very, very
different. If you just look at
China and India, Bombay and
Beijing, physically they look
different, they feel different
and the way the markets work
are very different. You've also
got a range in there. You've
got Turkey, which operates
more like a mature European
market in that it is 100%
reimbursed, however still high
growth, versus India which is
almost 90% out-of-pocket.”
Annexure ‘A’ describes in detail our approach to constructing the EMI. Figure
3 shows the key elements (and explanatory variables/indicators thereof ) we
have considered while structuring the index.
Granular
Understanding
Revenue Potential

Emerging
Markets (BRIC)
Drivers Traditional


Pharma mkt: size and nearterm growth
MDD mkt: size and nearterm growth
Country GDP: size and
current growth
- Abbas Hussain,
President of Emerging Markets,
GlaxoSmithKlineV
Savings Potential





Workforce: assured supply
and cost arbitrage
Cost of clinical trials
Mfg attractiveness
Supply of raw material
IT/ITES capabilities
Innovation Potential






Strategic
Choices
Perspective 1
Revenue
Potential
Drivers


Drivers Emerging



Perspective 2
Savings
Potential
Perspective 3
Innovation
Potential
Discovery res capability
Clinical research capability
Clinical research velocity
Product engg capability
Availability of 3rd party R&D
vendors (CRO/CRAMS/DDD)
Process re-engg capability


Constraints Challenges



Total popn: size and growth
Urban popn: growth
Epidemiological shifts
GNI per capita (PPP terms)
Healthcare reforms: access,
insurance, infrastructure
Public healthcare exp
Access to healthcare
Economic infrastructure
Barriers to entry
Ease of doing business







Workforce: supply of
tertiary-educated labour
Workforce: supply of
healthcare personnel
Business transformation
and KPO capabilities
Rapidly diminishing cost
differentials across markets
Recruiting quality talent
Economic infrastructure
Ease of doing business





State of IPR environment
Technology policy, priorities
Fiscal policy (taxation
incentives for R&D, etc.)
Regulatory hurdles in
initiating clinical trials
Enforceability of IP laws and
contracts
Constraints


Constraints Potential Risks



Political instability
Economic volatility
Weak corporate
governance
Lax property rights
Intense local competition



Success of JVs and
outsourcing contracts
Non-compliance with
regulations
Political instability



Rising regulatory hurdles for
product approvals
Steep rise in R&D costs
Vertical integration by
CRAMS firms
Superior
Preparedness
Figure 3: Emerging Markets Index – The Framework
v] http://www.scripintelligence.com/home/Market-Insight-GSKs-strategies-for-emerging-markets-181404. Accessed on 17-07-2012
12
The EMI BRIC Assessment Report
1
Revenue Potential
China
2
13
0
10
0
26
8
8
20
41
11
7
11
10
28
7
20
0
Summary Scores
44
11
15
15
Brazil
Innovation Potential
14
19
India
Russia
3
Savings Potential
10
20
Figure 4: Summary of Findings – Emerging Markets Index *
*Note: Country ratings are based on an ordinal scale (that is, rank-order based) and not an interval scale. Therefore the
scores are only broad indicators of relative strength and do not fully represent true distances from each other along any
of the identified dimensions.
Our key findings are as follows:
China

Revenue Potential: China has a clear edge as due to its large captive demand, sustained economic growth,
investments in economic and health infrastructure, and strong policy support. Therefore, China is an important
consideration on the growth agenda of any life sciences company aspiring to build a strong(er) presence in the
EMs.

Savings Potential: China has strengths in low-cost raw material supply, competitive wage costs, businessfriendly policies and continued investments in infrastructure. It lags India on savings potential due to
diminishing cost differentials, but is a strong contender nonetheless.

Innovation Potential: A strong talent base in discovery research, clinical research and product engineering,
ease of patient enrolment, industry expertise in process re-engineering, and reasonable policy support put
China on top with regards to Innovation Potential.
India

Revenue Potential: India holds the second spot in revenue potential, following China. While the current life
sciences market is small relative to China, India promises growing future demand coupled with a relatively riskfree operating environment.

Savings Potential: India is ahead of its BRIC peers on Savings Potential due to an assured supply of a large,
qualified workforce, lower wage costs compared to other three markets, and an established domestic
manufacturing and R&D base (especially for pharmaceuticals).

Innovation Potential: It scores high on Innovation Potential, powered by the presence of skilled researchers
and a strengthening innovation ecosystem with adequate policy support. India shares this position with China.
13
Russia

Revenue Potential: Russia lags the other markets on Revenue Potential mainly due to a comparatively smaller
population that is not expected to grow in the foreseeable future. A host of political and economic risks further
reduce its potential.

Savings Potential: Russia scores the lowest on Savings Potential primarily due to low labour cost arbitrage,
high procurement costs, and added (and often hidden) transaction costs while conducting business in the
country.

Innovation Potential: Factors such as talent shortage (brain drain) and higher costs reduce Russia’s Innovation
Potential to a level lower than China and India.
Brazil

Revenue Potential: Brazil outscores Russia in Revenue Potential due to better accessibility, affordability and
acceptance of allopathic medicine. However, demand is concentrated in a few, very large urban pockets and
therefore offers limited potential for growth in the near- and middle-term.

Savings Potential: High wage costs, sub-optimal infrastructure and difficulty in conducting business are key
factors that make Brazil relatively unattractive in terms of Savings Potential.

Innovation Potential: It lags behind on Innovation Potential mainly due to the want of skilled researchers and
the lack of a well-established contract research and manufacturing services/contract research organization
(CRAMS/CRO) sector. Further, recent changes in the regulatory environment have made it tougher than earlier
to conduct clinical trials in the country.
Figure 5 shows the relative strengths/weaknesses of BRIC markets along key dimensions of revenue growth,
savings and innovation.
Savings Potential
Revenue Potential
30
Innovation Potential
25
20
15
EMI Score
10
5
0
China
India
Russia
Brazil
China
India
Russia
Brazil
China
India
Russia
Brazil
0
5
10
15
20
25
30
Current Scenario
Future Scenario
Current Challenges
Potential Risks
Figure 5: BRIC Markets – Position* along Key Dimensions [Drivers and Resistors]
* Note: Key indicators used have been explained in Annexure A.
14
Figure 5 clearly demonstrates that the markets of China and India hold the most promise along key dimensions of
interest to life sciences companies. Along the dimension of ‘revenue’, it is clear that all Emerging Markets hold
strong future potential. However, Brazil and Russia’s attractiveness is somewhat diluted by economic volatility and
relatively weak corporate governance. In savings potential, India is anticipated to maintain a lead over Brazil, Russia
and China due to sustained cost differentials (vis-a-vis developed markets). In case of ‘innovation potential’, variety
of aspects like presence of R&D talent base, growing innovation ecosystem, and adequate policy support raise
India’s and China’s prospects, while the other markets are likely to be weighed down by the constraints of growing
regulatory hurdles in initiating clinical trials and product approvals and significantly rising R&D costs.
In the following section, we will look at the Indian market in detail. We will especially focus on the market
challenges and factors critical to the success of life sciences ventures in India.
5. Challenges faced in India and Critical Success Factors
The foregoing analysis done on the EMI shows that the Indian Life Sciences market promises strong potential for
generating greater profits and driving cost-effective innovation. However, certain challenges remain. The key
challenges facing the industry today are primarily in the areas of sustained revenue growth and innovation. The
issues of affordability, accessibility and awareness need to be addressed in order to realize the market’s full revenue
potential.
Affordability: Low per capita income, inadequate public health spending,
and low penetration of health insurance mean that healthcare remains
unaffordable for large parts of the Indian population. As an example, the per
capita spend on medical technology in India is approximately US$2, as
compared to US$5 for China and US$231 for Germanyvi.
Accessibility: Medical infrastructure is inadequate. Low doctor density and
limited availability of public hospital beds makes healthcare inaccessible to
large parts of the population. Due to a number of factors such as limited
supply chain infrastructure, high prices and lack of insurance coverage only
40% of the population has access to modern medicinesvii.
Awareness: Low awareness levels, combined with limited access to
healthcare lead to low levels of diagnosis and hence low levels of treatment.
A recent survey (2012) conducted by the Health Ministry of India found that
the number of Indian diabetics ‘unaware’ of their disease condition is ~35%
larger than the total number of diabetic patients in all of UK.
Penetration is a key challenge
for life sciences companies
"A substantial par t of our
population lives in the states of
Uttar Pradesh and Madhya
Pradesh. Imagine, there are
only about six to eight centres
that can treat cancer or heart
re l ate d i s s u e s. Th e re fo re,
penetration is a key challenge
facing life sciences companies
in India.”
- Shivnath Bhattacharya,
Sr. Director, Medtronic viii
Apart from these fundamental issues, there are other challenges a life sciences firm faces in this market, such as:

Prolonged and cumbersome regulatory pathway: India does not have a separate regulatory body for medical
devices. There is overlapping jurisdiction between several bodies and this creates ambiguity and slows down
the regulatory procedure.
vi] Medical technology industry in India: Riding the growth curve. Deloitte and CII report
vii] IMS Health. EphMRA 2011 Conference
viii] TCS Research and Interviews, August 2012
15

Inadequate IP protection: Although India became TRIPS compliant beginning 2005, the enforcement of IPR
has not been to the satisfaction of the industry. Litigation over Novartis’ Glivec patent and Bayer’s EMR for
Nexavar are two cases in point. Such precedents make the environment uncertain for firms looking to launch
their innovative products in India.

Geographically dispersed, economically diverse consumer base: The
largest cities in India are deeply penetrated by most manufacturers. TierII/III cities are the new sources of growth and no business can afford to
ignore them. However, tapping this second-line market is fraught with
challenges due to geographic spread and underdeveloped infrastructure
(see following point). Moreover, an all-new ‘emerging middle class’
continues to grow in purchasing power. This group represents a large,
hitherto untapped market, and therefore businesses need to look for
ways to tap this segment profitably.

Weak supply chain infrastructure: Poor visibility of inventory across the
supply chain leads to inventory build-up and slows down speed of
response to market demand. Furthermore, slow trucking speeds, limited
availability of cold chain and special storage facilities, erratic power
supply and inadequate telecom networks are some of the infrastructural
limitations that businesses need to account for and innovate around
while expanding into the Indian market.
Placing affordability in the
right context
"When I am talking about
affordability... if you come to
India and China, and maybe
even to Russia, affordability
needs to be looked at in two
ways. One is – “I do not have
money at all... what do I do if I
h ave t h i s d i s e a s e o r t h i s
problem”. The second way to
look at affordability could be –
“look, I do not have money
today but I may have it in next
s i x m o n t h s.” Th e i s s u e o f
liquidity comes in there.”
- Shivnath Bhattacharya,
For companies looking to enter the Indian market (as opposed to those
Sr. Director, Medtronic viii
already present), there are additional challenges to overcome. Key among
those are – gaining an adequate understanding of a geographically and
culturally diverse market, identifying strong commercial allies, establishing working relationships with the trade
network, and navigating the bureaucratic environment of the country while
transacting business.
Overcoming such challenges requires a mix of effective collaboration within
and outside the industry as well as the development of robust internal
capabilities.
How J&J leveraged local
market understanding viii

Critical Success Factors
What makes a product or service work in India is a critical question. While an
answer to this would be product, service or target segment-specific, one can
look at the successes and failures of initiatives undertaken by various firms,
both in the life sciences domain and other industries. That helps us arrive at
some critical success factors which have worked in the past and are essential
to any strategy aimed at entering the Indian market/ growing in India.

Understand the market: Given the pace of change in markets—shifting
epidemiological profiles; evolving needs and demands of patients,


Bandages are sold in large
pack sizes (40 strips/100
strips) in the international
markets
J & J ’s M a r k e t i n g t e a m
discovered that people in
the developing economies
do not make such bulk
purchases
Subsequently, J&J launched
‘5-strip’ packs of bandage in
response
16
health care practitioners, payers and hospitals; growth of hospital infrastructure in Tier I, II and III cities, etc.—it is
critical to adequately assess and map tomorrow’s demand and align business strategy and operating models
accordingly.
A robust segmentation of the consumer and end-user base is key for any given market. As such, given the
challenges of limited affordability and geographic diversity within the country, products developed specifically for
India or adapted for India (along features and/or prices) are critical to gaining acceptance and market share.

Develop the market: Strong collaboration and enabling platforms are needed to spread awareness of disease
and drive diagnosis and treatment at grassroots levels. This may require partnering with local government
institutions, KOLs (key opinion leaders), healthcare institutions, universities/academia, independent researchers,
and insurance providers and other financial institutions. Innovative models would be required for broad basing
healthcare infrastructure access and quality in under-penetrated markets. As shown in Figure 6, collaboration
between pharmaceutical and MDD manufacturers to jointly develop the market can be explored – especially in
the two key segments of Diagnostic and Therapeutic care, where they do not work together currently. A
symbiotic model for growth such as this will ensure that the pie grows for both industries at a pace much faster
than is possible through singular, unaligned efforts of either industry.

Innovate around liquidity issues: Given that India is, in general, a cash/self-pay market, companies with
premium-price products need to adjust their pricing policy. This could mean: i) committing research to produce
low-cost designs for the cost sensitive market and/or, ii) tiered pricing and innovative payment options (EMI)to
attract cash-strapped buyers
Pharma
Getting the priorities right in
Emerging Markets
Rehabilitative
Care
Prophylactic Care
Therapeutic Care
Diagnostic Care
"Earlier, the focus was more
heavily skewed toward cost
arbitrage. This balance has
changed. Now the focus is on
managing costs, on accessing
great capabilities, added
capacity and on building
partnerships.”
- John Kurtz,
Sr. Sourcing Director, Janssen
Research & Development, LLC viii
MDD
Figure 6: India: Collaborative Market Development
17

Understand the distribution system: The distribution system in India is highly fragmented and ill-defined,
especially in Tier 2 or Tier 3 towns, where the anticipated growth is likely to be the highest. Companies should
focus on channel and distribution development even while their products are in the approval process. An
alternative approach would be to ride piggy-back on the supply chain capabilities of non-competing businesses
within and outside the industry that have deep distribution reach and extensive experience in serving markets
in the country’s interiors. Collaborative demand estimation through greater stakeholder participation and
information exchange, improved sales effectiveness through mobile and IT intervention, ensuring channel
effectiveness through improved distributor engagement, are some of the ways through which life sciences
companies can look to optimize their supply chains.

Keep an eye on local regulation: While India presents great opportunities, it is an evolving market and has
lengthy approval cycles and complex laws (including IP laws). It is thus essential to be thorough with the
procedures in order to avoid delays and financial losses.

Forge alliances with local players across value chain: Firms have successfully partnered with local players in
most of the functional areas (R&D through sales and marketing). Local manufacturing/packaging operations
ensure a faster time to market. Several companies have partnered with established networks to ensure efficient
distribution mechanisms.

Tap the local talent pool: India’s talent base is large and diverse. This ensures the supply of a cost-effective
talent pool across business functions. The benefit of local operating knowledge is an added advantage.
6. Conclusion
There is no one-size-fits-all strategy for capturing opportunities for growth and innovation in the emerging
markets. What is clear, however, is that traditional ‘Emerging Market’ strategies (BRIC level strategies, for instance) or
even country-level strategies may miss the mark if such strategies do not account for the variability and rapid
change in these markets. As the Emerging Market battle gains momentum for life sciences players, companies need
to look at opportunities at a more granular level (individual country or smaller) and explore the possibilities of
leveraging the complementary potential of individual markets.
China and India are the two markets that score high on all the three critical quotients of Revenue, Cost-efficiency
and Innovation, and therefore remain highly attractive for all life sciences companies. India holds robust revenue
potential in the longer term – especially so with increasing government support for health insurance coverage.
However, challenges persist in various forms – namely, weak medical infrastructure, low public funding of
healthcare, and IPR enforcement issues. In order to overcome these challenges, life sciences companies can
develop and tap the market in a collaborative manner, extract efficiencies and keep the innovation engine running
on high gear.
7. Acknowledgment
The authors would like to thank Debashis Ghosh, President — Life Sciences,
Manufacturing and Energy, TCS, for his contribution to the paper.
18
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