After decades of rapid economic growth, emerging nations now have a critical mass of middle- and high-income consumers. With 85 percent of the global population living in these countries, citizens, their employers and governments are spending more on health care than ever before. Unfortunately, affordability is outstripping access to quality care in most emerging markets.
Each emerging market is different in terms of regulatory requirements, health care delivery, insurance penetration, disease areas and more. Yet, all are facing significant obstacles. In order to expand access to broader geographic and socioeconomic segments, both the public and private sectors are working toward creative solutions that will establish and improve local capabilities in manufacturing, research and development.
Some supply chain challenges currently being faced in emerging markets include the following:
- Selling prices are significantly lower than in developed markets, resulting in lower product target costs.
- There is high variability in quality, manufacturing practice regulations and reliability of supplier base.
- A highly fragmented, multi-tiered distribution system impairs supply chain visibility.
- There are vast geographies with multiple segments, such as urban versus rural or coastal versus inland.
- Transportation, warehousing and distribution infrastructure are limited.
- There are high incidences of counterfeits.
As emerging markets grow, these networks also must grapple with volumes that double every three-to-five years; sales and marketing efforts targeting rural, often difficult-to-reach segments; and newer vaccine and biopharma products, which require reliable cold-chain distribution infrastructure.
A low-risk, learn-as-you-go solution
The companies involved must approach emerging markets with a long-term perspective and fresh eyes. Based on a thorough analysis of market opportunity, competition and internal capabilities, decision-makers would be wise to develop a laser-sharp focus on in which countries, and, more importantly, in which market segments they should do business.
Once the “where” has been narrowed down, work can start on how to get the “win.” Learn from the success of consumer goods companies that have effective supply chains. First, segment the market into manageable and attractive regions and prioritize the establishment of supply chain infrastructure and commercial presence. Next, carefully select the product portfolio and product design based on detailed analysis of regulatory requirements, competition, target cost and in-country capabilities.
Partnering with established, multinational and local biopharma companies can help stakeholders leverage existing in-country capabilities. Global manufacturing and research and development networks should be designed in a way that creates capability and capacity in important emerging markets. This could result in lower costs and faster regulatory approvals.
Import only key ingredients, and maximize local value-add to reduce cost of goods. Consider supplying on demand rather than pushing product through the multi-tier distribution channel — for instance, ship expensive drugs directly to hospitals, but use the postal system to get over-the-counter medicines to rural markets. Lastly, implement rigorous life-cycle supply chain plans for on-market and pipeline products.
Supply chain professionals must lead when formulating market entry and product launches. This will help develop an integrated strategy that can overcome local limitations and ensure that the network can support business evolution over time.
Once emerging markets start contributing positively to business objectives, the organization is more likely to embrace the opportunity. Until then, it is also important for supply chain professionals to help ensure internal comfort levels using the following strategies:
- Create excitement by sharing examples of competitors or other industries that are successfully leveraging emerging-market opportunities.
- Engage in-country trusted and knowledgeable advisors who can help avoid potential pitfalls.
- Tap into internal subject-matter experts from all functional areas who can objectively evaluate and lay the groundwork to leverage opportunities.
- Choose in-country business partners who show technical competence as well as share similar cultural and ethical values.
- Create a well-defined mechanism for communications, governance and escalation for internal and external stakeholders.
Going global is a valuable opportunity for biopharma organizations. Besides the business reasons, the prospect of improving the lives of the five billion people in emerging markets is highly compelling. With proper guidance and planning, it is possible to avoid pitfalls, leverage learning, expand the product portfolio and ultimately achieve a profitable presence.
Shankar Suryanarayanan is a global operations leader specializing in strategy development and execution in the areas of sourcing, manufacturing and supply chain. He has worked for life science companies including Baxter, Roche, Novartis and Takeda. Shankar may be contacted at firstname.lastname@example.org.