This from Pharmalot. Former Pfizer executive, Amal Naj, explains that multi-nationals likely can't rely on going to pharmerging markets to bail them out from their current revenue gaps. MNC's, he says, "have overestimated their ability to sell branded products in these markets" -- particularly at a price/profit premium.
Factors cited by Naj that mitigate against MNCs making good profits include:
- Local generics producers selling at less than 50% of MNC prices in these markets
- MNCs and generics often use the exact same manufacturers in emerging markets which blunts any "increased quality" claims that MNCs can make
- MNCs competing with each other in these markets with generics
- Brand power is dissipating from factors cited above. Products are becoming commodities
- Government controls to force lower prices (and margins)
- Greater difficulty than expected in getting products registered in these markets
- Quality from local companies is gettig better and they are getting more efficient
The upshot? Expect more and more competition from local competitors. Even some big MNCs to withdraw from some markets due to depresssed prices and profit potentials.
I think that once competition for generics begins to be widespread -- there is a greater drive toward commoditization (which payers and consumers want). That means not everyone will be able to compete profitably in every market and there will be withdrawal and consolidation. It may also mean that a generic producer business model won't favor everyone. Clearly, low cost producers are favored in such environments -- and not everyone can be THE low cost producer.
Posted by Bruce Lehr Aug 14th 2012