Last week, we discussed Part 1 of our Perspectives on Emerging Pharma Competition. Today, we continue that discussion, focusing on the biosimilar and biobetter industries of China, South Korea, and Brazil, and how those industries affect the United States pharma landscape.
South Korea, with the 13th largest economy in the world (based on GDP), is clearly a country to watch. While South Korea’s pharma manufacturers originally focused on producing generics, health supplements and traditional Korean medicine, it is now a frontrunner in biotechnology globalization due in large part to government support.
Companies like Celltrion, a leader in biosimilars, have benefited from a government that has aggressively invested in biotechnology. In 2009, South Korea introduced regulatory guidelines and funding to expand biosimilar development. At the same time, private companies, such as Samsung, channeled monies into the same market. South Korean manufacturers are now looking at biobetters as the logical market segment.
Both biosimilars and biobetters are derivative variants of the original biologic molecule. A biosimilar is a near-perfect facsimile of the biologic, analogous to a generic. Biobetters are enhanced versions of biosimilars. Focusing on both can position pharma manufactures for broad market penetration.
This evolving pathway was not coincidental. Korean pharmaceutical companies — with the strong support of the South Korean government —reacted to aggressive cost-reducing price cuts on generic drugs in January 2012 and increased competition from Indian and Chinese manufacturers with innovative new strategies.
Low prices associated with China’s domestically produced pharmaceuticals, gives the Chinese pharma industry a significant share of its local market, the third largest in the world. Despite efforts by the Chinese government to change the industry’s image and stimulate growth, Chinese pharmaceutical manufactures have a reputation for questionable quality. Even Chinese citizens who want guaranteed efficacy and quality assurance often choose foreign-made products if they can afford to do so.
With the support of its government, Chinese pharma is trying to pivot from cheap generics to innovative research and development and biotechnology, and increasing exports. The biggest hurdle is meeting the strict regulatory and quality mandates in other markets, a challenge they are attempting to overcome through international certifications and pre-qualifications through the World Health Organization.
Brazil also has a large domestic pharmaceutical market and is second only to China in sales value among emerging nations. It, too, has a government that supports pharma’s efforts to expand market penetration, especially for similares (branded drugs that are considered pharmacologically equivalent to the originator drug).
With heavy promotion in local pharmacies and the 2010 Generic Drugs Act, which requires that these similar products meet the same bioequivalence standards as generics, Brazilians have a more favorable view of their pharmaceutical manufacturers than the Chinese have of theirs. Pharmaceutical companies from other countries, such as Japan’s Takeda, see the acquisition of Brazilian-based manufacturers as an opportunity to expand their presence in a country with vast sales potential.
Like South Korea and China, the Brazilian government recognizes that it must facilitate innovation if it is to be truly competitive in the global market. As part of a plan to boost production and competitiveness, the government launched Inova Saùde (Innovate Health) in 2015 to invest nearly $1 billion in healthcare technologies by 2017.
It is imperative for U.S. pharmaceutical executives to witness and seriously consider the desire on the part of companies from emerging markets to successfully compete in the global market place. U.S. pharma should not make the mistake of undervaluing the level of support these companies receive from their governments and their long-term goals for expanding and becoming more competitive. If U.S. pharma is to remain the gold-standard for quality and market penetration, the only answer is a purposeful long-term strategy that is built on future-focused innovation in all aspects of operations, sales and marketing.
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