1 MIAG 2 Response to Industry -Emerging markets Eva M A Ombaka

2 EMERGING MARKETS  China, Brazil, Russia and India.  Present attractive new consumer markets as well as potential research and development hubs.  New competition, particularly in generics  Recognition that these are home to millions of people who live in great poverty…and source of generic (inexpensive) drugs for most of “Most of the world”…

3 Issue  Business principle: Capture market, utilize brain, remove competition?  Going by history, what is to stop these markets behaving as the more mature markets once they reach their level of technology?  Whose company?

4 EMERGING MARKETS ISSUES  Complexity  Affordability and Low Relative Purchasing Power  Accessibility and Weak Healthcare Infrastructure  Uncertain Government Relations  The Social Contract Systemic market failure.

5 COMPLEXITY  Small size of the markets (but potential); unparalleled geographic, political, cultural and linguistic complexities, sheer physical size, chronic underdevelopment, rural- urban divide…

6 COMPLEXITY- issues  KPI including: approximate % of sales in emerging markets; % of profits made in emerging markets; the number of employees in emerging markets; the average price of key products in emerging markets versus developed markets; and the percentage of R&D spent in emerging markets.  ALL are business indicators, not public health indicators. What if not convincing for investment? Would there be entry into these markets?

7 COMPLEXITY- issues  Concern about the potential impact they may have on mature, more profitable markets Measure based on profit but the other side of equation is human lives. Would a measure of this be considered?  Potential for massive sales volume Would the ‘fortune at the base of the pyramid’ (volume-based business models)  a)… be explored?  b)… bought out (generics)

8 Affordability and Low Relative Purchasing Power  The models show how differentiating products for markets can work BUT  The industry and its investors, are wary of experiments – at least visible ones – with significantly different pricing models in emerging markets

9 Equitable Pricing Issues  In what ways will industry Address equitable pricing for treatments of chronic diseases (emerging disease pattern) Ensure transparency and predictability in pricing mechanisms and implementations? Make the rationale behind pricing mechanisms open?

10 Financing issues  Financing mechanisms that tap consumer willingness and ability to pay … How to differentiate payment by poor between choice and necessity? How will promotion on use of drugs be managed? Will other costs (open and hidden) covered by the PCT industry affect the price?

11 Uncertain Government Relations…… Issues Influencing policy  Transparency on companies’ public positions and advocacy activities at different levels (global, national; HQ, country reps and agencies)  Developed country interventions? Research and Development and Patents  -How transparent are companies in publicly stating/and implementing their commitment to TRIPS?  -How to ensure adequate disclosure and quantitative data on R&D activities?

12 Uncertain Government Relations…… Issues Licensing and technology transfer agreements  -Clear key performance indicators (KPI) to show the effectiveness of these agreements?  -What areas are these agreements focusing on? i.e. real technology transfer.  -How independent are the licensee? E.g. to establish the pricing policy, to sell in a wide range of markets, and to co-formulate drugs?

13 The Social Contract…Issues  Social enterprises are profit-making businesses set up to tackle a social or environmental need…Should PCT companies be such? Why not?  Policies to prevent exploitation of the locals/poor in the process of R&D (and clarity on the sharing of rewards/incentives once the product goes into the market)

14 Human-Centred…. Issues Places the local consumer, patient or human at the centre of the research and product development process- High ideal!  Stakeholder involvement- How are these relationships to be set (COI/power relations) How are the views of stakeholders at the end of the supply chain captured Whether views influence company strategies

15 Human-Centred…. Issues Drug Development Identified need as against market Delink R&D cost from price Treat profit margin as a variable Look at other models of business