Pharmaceutical companies donate large sums to support the treatment of patients in emerging markets. Can such companies profit there as well? In 2003 pharma products enjoyed double-digit growth in some countries, including China, Mexico, and Poland. But the market as a whole is small—together these three amount to only 8 percent of the US total. Moreover, pharmaceutical expenditures are strongly correlated with incomes, which remain comparatively low in most emerging markets.
The diversity within them, however, presents openings. One strategy concentrates on a country's affluent population, whose health care spending can meet or even exceed levels in developed markets. Since the affluent tend to use private health insurance, some drugmakers have formed partnerships with local providers to bring patients and products together. GlaxoSmithKline, for example, offers the customers of a Brazilian health insurer discounts on a smoking-cessation product. Or companies could focus on conditions, such as obesity and diabetes, that are increasingly common among the affluent. Novo Nordisk has promoted diabetes awareness in India—a move that ultimately benefits rich and poor alike.
About the Authors
Farhad Riahi is a consultant in McKinsey's New Jersey office.