PharmExec Blog

Big Pharmas Mystery Market Segment

Just who are those “bottom billion” potential consumers in developing countries?  A new report sheds some light.

Big Pharma’s future depends on tapping new sources of business opportunity.  One segment on virtually everyone’s must do list is the “bottom billion”—poor consumers in the world’s poorer countries. Market analysis suggests that when the bottom billion’s potential purchasing power for health care is organized in a community setting it is actually quite substantial.  Companies are ceding a rich opportunity for long-term gain by pursuing the historically narrow path of serving only the highest income decile in these countries.

A new report* just published by a UK development research foundation, The Institute for Development Studies, provides a close-up look at this large base of consumers. Companies seeking to shape a medicines access strategy for underserved populations might be advised to look closely at its findings.  Perhaps the most surprising conclusion is that most of  the bottom billion consumers are  now to be found in key emerging markets with status as middle income countries. It is no longer accurate, the report states, to assume that the poor – defined as those living on $1.25 per day or less – always  inhabit aid dependent poor countries with fragile institutions, inadequate resources and other elements of a low development threshold.

Specifically, the authors present fresh data indicating that while in 1990 some 93 per cent of the bottom billion lived in low income countries, disproportionately represented by the 39 nations of sub-Saharan Africa, today more than three quarters of this group reside in what the UNDP and OECD classify as relatively “stable” middle income states.  All of these countries have a strong record of indigenous growth in GDP and in many cases no longer qualify for traditional forms of ODA [official development assistance] provided by governments and multilateral agencies.   Four countries – India, Indonesia, Pakistan and Nigeria – are now home to the majority of the bottom billion but there is a strong representation among other middle income markets as well, including the Ukraine and the former republics of the Soviet Union, Vietnam and Nicaragua.

What implications does the report hold for big pharma medicines access strategies?  Here are a few:
Effective strategies for market segmentation within countries become more important. Tiered pricing that discourages “leakage” through partnerships with strong local institutions is more plausible if companies focus on building the right contacts.   The opportunity now exists to do this outside the traditional parameters of engagement required in low income countries, where the power base is concentrated among government and the aid bureaucracy.

Focus attention on geographies where the need for medicines access is more concentrated – and where the political will to address it is measurable. This gives companies more of a leg up in ensuring their efforts will enhance reputation for progress in serving neglected populations.  Data in the report indicates just where companies might be able to secure the best “bang for the buck.”  For example, eight states in India alone have as many poor people [421 million] as in all of sub-Saharan Africa outside  South Africa and Botswana [410 million].  Thus, a rural market development approach to the Indian consumer may not only lead to a viable business but to policy leadership in the global access to medicines debate.

There is also opportunity to tie in to local poverty alleviation programs  that tend to be better executed than foreign administered ODA. The report provides independent information to help companies decide how to contribute to access – as a charity/philanthropist or as a real business committed to profitable long term engagement?. The review of various country classification schemes on poverty and stability produced by multilateral agencies and the non-profit development sector is a useful tool in this regard. The study also makes the point that growth without accompanying social, economic and political transformations is empty growth – viable, independent local institutions are vital to seeding a foothold for the middle class, which  in turn constitutes the foundation for long-term investments  in health.

Finally, Big Pharma should monitor reaction to the report, as it is sure to hit a sensitive nerve  in the bilateral/multilateral aid community — reeling as it is from declining government funding commitments,  criticism for failing to prioritize among conflicting development challenges, and  inadequate metrics  to measure progress on key performance  benchmarks like the Millennium Development Goals.  aidIf the poor are likely to be more of  a focus for middle-income countries,  then it is also likely that expectations on what the private sector should do will increase, as these markets “graduate” from formal ODA support.

* Global Poverty and the New Bottom Billion:  What if Three Quarters of the World’s Poor Live in Middle Income Countries? Institute for Development Studies; September 2010.

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