Emerging markets get tougher for drugmakers
LONDON ( Reuters) – Emerging markets have lost their luster for big pharma making drug firms ever more dependent on the US for growth just as American anger over high medicine prices is building.
A few years ago, the developing world was seen as a savior as patent after patent expired across the United States and Europe, but emerging market sales growth at the top drug firms slowed to less than two percent in the latest quarter.
Forecasts from independent experts IMS Health now suggest the US would account for 55 percent of sales growth between 2016 and 2020, with emerging markets only contributing 30 percent.
The slowdown in China and other top emerging markets is being driven by a number of factors: government pressure on drug prices, slowing economies and in some cases significant currency devaluations.
But the end result is that prescriptions for Americans will fund an even greater slice of the $1 trillion-a-year pharmaceuticals industry.
Company executives insist markets from China to Colombia to Mexico to Myanmar are an important engine of long-term growth, given rising populations, increasing wealth, and the global march of diabetes, heart disease and cancer.
“We have seen some flattening of growth, notably in Brazil and Russia, but in the long run we still expect that emerging markets will outgrow mature markets by two to three percentage points,” Olivier Charmeil, who heads up emerging markets operations at French drugmaker Sanofi, told Reuters.
GlaxoSmithKline’s incoming chief executive Emma Walmsley, meanwhile, highlighted the potential of China, saying after being appointed to the top job this week that she was “very excited about what we can do with GSK there.”
But the short-term picture is not pretty. Emerging market growth is the slowest since drug companies started breaking out such regional sales numbers about seven years ago, with GSK languishing at the bottom of the class.
GSK’s drug sales in China fell 14 percent in the three months to the end of June as the company continued to reshape its business following a damaging corruption scandal in 2013, leaving a question mark over whether it can return to growth this year as hoped.
Others are doing better in China, which is now the world’s second biggest drugs market behind the United States, but all are struggling with slowing sales growth, which slipped to its lowest rate since 2008 in July.
“Across the board, we are seeing emerging markets register lower growth in local currency and in many cases there have also been big currency devaluations,” said Murray Aitken, IMS Health senior vice president and executive director.
The pharmaceutical industry tends to measure its sales performance in local currencies but in dollar terms devaluations wiped an estimated 77 percent off emerging market growth between 2013 and 2015, IMS calculates.