Emerging market challenges no hindrance to pharma

China and India are the emerging markets that have attracted the most interest from pharma companies and although they both strengthened their commitment to IP by agreeing to adhere to the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement as part of its entry into the World Trade Organization (WTO) in 2005, the countries have failed to deliver on their promise of improved IP protection, according to Datamonitor senior pharmaceutical analyst Tijana Ignjatovic.

In a recent report, Ignjatovic cited a series of patents on lifesaving drugs that have not been recognised since 2005 - when India also passed the Patent Act of 2005, recognising product and not only process patents for pharmaceuticals - being rejected mostly on the grounds of prior known use or incremental innovation.

Eli Lilly's Forteo (teriparatide), Novartis' Glivec (imatinib) and Astra Zeneca's Iressa (gefitinib) are among these.

"Multinational pharma companies active in India are now reconsidering their portfolio of marketed drugs and may decide to focus on more mature products", said Ignjatovic.

A sliver of light at the end of the tunnel is the fact that last December Pfizer's HIV/AIDS drug Celzentry (maraviroc) became the first known HIV/AIDS drug to get a patent in India.

However, although this event may signal "a change in the tide for patent protection" in India, post-grant opposition from local manufacturers and patient groups could still result in the decision being overturned", Ignjatovic said.

Meanwhile, other emerging market countries are also failing the industry when it comes to IP.

Brazil issued a compulsory license for Merck's HIV/AIDS drug Sustiva (efavirenz) in May last year and Thailand also issued a line of compulsory licenses, and should this trend continue in other countries or expand beyond the HIV/AIDS drugs it may "seriously undermine the position of foreign pharma", she said.

Another major challenge for pharma firms operating in emerging markets are tight drug price controls, which threaten market potential, although Russia is an exception, which at present has virtually free drug pricing and consequently the highest prices in Europe.

Since 2004 Turkey has had in place a reference pricing system and the country now has the lowest drug prices in Europe.

Other countries such as Brazil and India also already have different mechanisms for price controls that may be expanded in the future and China is in the process of implementing a strategy of price cuts on reimbursable drugs.

"This practice is leaving global pharma with a choice of opting out of price cuts and losing the reimbursable status that would reduce their market penetration, or sticking to their reimbursable status, albeit with lower margins, with a hope that the pricing environment will improve and that drug consumption will grow", said Ignjatovic.

Despite these challenges though, the industry appears unperturbed, with many companies still flocking towards the fast growing emerging markets seeking new sustainable sources of revenue growth, on the back of slowing growth rates in western pharmaceutical markets.

Vast potential patient populations and rising drug consumption amongst a growing middle class are also key drivers.

There are other advantages beginning to emerge too - for example, according to Ignjatovic, the preference for foreign brands exhibited by the rising middle class in many emerging market countries, especially in India and China, is enabling branded companies to compete with generics in certain market segments.

"Thus, emerging markets present new opportunities for mature drugs whose sales are declining in the major markets of the West, a highly attractive option especially at the time when many drugs are at the edge of the patent expiry cliff".