How would you characterize the last year in terms of opportunity and risk for healthcare?
It’s been an interesting year for companies in the healthcare space globally. At Albright Stonebridge Group, I spend a considerable amount of time working with healthcare clients, whether they be pharmaceutical or device clients, service providers, or non-profits. China has been undergoing reforms since 2009 aimed at expanding the amount of healthcare financing in the system, while also controlling costs. They’ve been looking to develop their domestic biotechnology and healthcare industries. All of this has created a tremendous amount of opportunity, but there are also significant challenges there.
India has been an excellent growth market for many pharmaceutical and device companies, but continues to lag behind the rest of the world in healthcare spending, and will have interesting challenges in terms of addressing problems with access. Certain policy steps are being considered in India that could prove to be restrictive as well.
Brazil has traditionally been a good market for the industry, but the last few years have been a challenge due to economic stagnation and political uncertainty.
We’re seeing a more restrictive budget environment in places like Mexico. Even wealthier countries like Saudi Arabia are moving towards a more conservative fiscal spending environment and looking for ways to cut back on healthcare expenditures.
How are smart companies positioning themselves and navigating in Russia, given the complex developments in the US-Russia relationship?
Most countries are trying to improve healthcare outcomes and access for their population, while also trying to grow their economy in strategic areas. Most emerging markets want to develop their economy by developing their healthcare sector. This means developing biopharmaceutical industries, moving up the value chain on medical devices and technology, and enhancing the medical services they provide to citizens. These economies also have significant health challenges like inefficiencies and incomplete coverage. Most companies and NGOs believe these challenges are best met with some form of public-private partnership. The healthcare space is very much a public-private partnership space. It is crucial for the private sector partner to understand government priorities, as opportunities for success are limited without this understanding.
Russia is very interested in having companies shift manufacturing and technology into the country. Over the last few years, despite the political environment, several companies were able to launch innovative partnerships with Russian companies, enabling them to enhance their market access, while also allowing their Russian partners access to new technologies and therapies. These partnerships have been carefully communicated with the Russian government on how they line up with its priorities.
You mentioned China earlier. What are some of the tactics American companies use in order to successfully serve the Chinese market?
Pharmaceuticals and medical devices both fall under China’s Strategic Emerging Industries (SEI) as laid out under its past two five-year plants. As a result of falling under the SEIs, China has made policy changes to support domestic industry growth and has opened a significant amount of financing for Chinese companies in those sectors. Interest by the government is at both the central and provincial level. This creates opportunities and challenges for the multinational pharmaceutical and medical device industries. Chinese partners are increasingly open to international collaboration, which frankly creates opportunities across all sectors. That said, companies need to understand the risk and the market and ensure they have a strategy for protecting their interest, building allies and effectively communicating their plans.
“Today, China nearly has universal (health) coverage.”
Where do you see the difficulties in meeting the access issues in China? I know China is slowing down a bit nationally, but the city and provincial levels still see very robust growth rates. Are there specific challenges involved, or is it simply a matter of getting past the major cities?
China has several different insurance systems that cover the population. The historically underfunded rural system has been undergoing reforms for about ten years, and today, China nearly has universal coverage. Rural coverage is nowhere near as comprehensive as the urban scheme, however, with insufficient doctors, clinics and hospitals. China really doesn’t have a primary care system as we think of it in the US, which leaves a large segment of the population without access to innovative products.
Do you see multinationals being interested in second and third-tier cities in China? What issues do companies need to keep in mind with these environments and governments?
Companies are obviously interested in Tier 1 and Tier 2 cities, as they represent most of the potential in the Chinese market. Those above market tend to mistakenly think of China as a monolith. China has provinces that are larger than many European countries, and they have a fair degree of discretion over reimbursement and hospital systems and procurement practices. It’s important to understand not only national objectives, but to have a province-by-province or city-by-city strategy. The more sophisticated multinationals have been doing this for some time.
I’ve often heard about this dynamic in India. You mentioned there are new regulatory measures coming down the line, and that it is a popular market for devices and other health verticals. What are you seeing there?
India will likely continue to be a growth market for companies, and we see a lot of interest and activity there. There was a great deal of optimism about reforms that might take place under Prime Minister Modi. Many companies were eager to take advantage of the Make in India initiative. We’ve been working with companies to help build partnerships with provincial governments in order to establish proof of concept for addressing broad access problems. This could be addressing either a specific disease, or a policy challenge.
What would you say are some of the most exciting actionable opportunities in India?
In order to be successful, companies really need to align themselves with domestic priorities and have a strong message about the value proposition their company brings The Make in India policy remains a good opportunity for companies to do just that. There are a wealth of access challenges in India, most of which stem from a lack of infrastructure. A number of companies have been looking at ways they can collaborate with governmental and non-governmental partners on things like doctor training, and innovative access programs for vaccines or other therapies.
You said Brazil is an uncertain environment, but it’s still a large economy with a great deal of potential. What is your advice to companies that are looking to enter the country?
Before this current era, Brazil used a public-private partnership called Public Development Partnership (PDP) where companies were able to get a step up and prolong their exclusivity in the Brazilian market by transferring technology to a Brazilian partner. There are multiple instances where this has been done successfully, though there are some notable examples of it falling through. Whether companies consider a PDP or not, they should consider how they can most constructively work with governments and align the messaging around company goals to national or local priorities.
Do you see the questions surrounding Brexit as being so consequential that companies should hold off on most decisions, or do you feel that issues of market access will be easy enough to navigate that companies can proceed?
The UK and Europe will continue to be great markets for healthcare companies, Brexit doesn’t necessarily create some devastating uncertainty. Rather, there will be some questions that need to be addressed over the next few years. It will be important for industry to be engaged in that process, and be informing stakeholders on both sides of the English Channel as to what the future should look like.