Despite having over a third of the world's population, Asia accounts for only one fifth of global pharmaceutical drug consumption. As income levels rise, demand from this large population base is set to burgeon, opening up new growth opportunities for pharmaceutical and biotechnology companies. Even as emerging markets such as Brazil, Mexico, Poland and Russia exhibit strong development potential, the most exciting growth prospects are forecast for two Asian powerhouses - India and China.
As Europe grapples with rising R&D costs and declining drug outputs and as governments attempt to contain spiralling healthcare outlays, European pharmaceutical and biotechnology companies are beginning to explore other emerging markets, which offer a low cost structure along with other potential benefits such as a sizeable domestic market and opportunities for clinical trial, licensing and outsourcing.
High domestic pharmaceutical consumption levels coupled with their importance internationally as a supplier base for active pharmaceutical ingredients (APIs) and intermediates have made India and China a magnet for pharmaceutical and biotechnology companies. At the same time, these countries also hold out the promise of being able to conduct low-cost, large-scale clinical trials.
Both countries, however, offer distinct challenges such as invariable bureaucratic delays, corruption and red tapism along with the prospect of less transparency in China. Such hurdles are being offset by several encouraging trends. The market for over-the-counter (OTC) drugs is expanding. Industry participants and the government are increasingly displaying a global vision, demonstrated by the enhancement of patent protection legislation.
An improved patent protection situation is expected to favour foreign entry even as government initiatives to attract foreign direct investment (FDI) gain momentum. Licensing opportunities for large biotech/pharmaceutical companies offer another incentive to enter these regional markets. Overall, the large and rapidly expanding economies of India and China are set to have a positive ripple effect on both pharmaceutical and biotechnology sectors.
"As a destination for FDI, both the Tiger and the Dragon have proved themselves most popular among the emerging markets in the world," says Industry Analyst Himanshu Parmar from Frost & Sullivan. "The problem remains that the Dragon is more hidden whereas India is a crouching tiger, a slow taker, waiting to capitalise on the opportunities it presents to the West."
Both India and China offer the benefits of low-cost R&D, a strong scientific base together with a large and skilled (and in India's case English speaking) labour pool. While significant government involvement and well-developed research infrastructure offer added advantages in the Chinese context, India offers further inducements in the form of a strong IT industry, good natural resources and an expanding infrastructure.