Going overseas to launch and develop a new business requires a different mindset. In the pharma/healthcare industry, it all requires the highest level risk management.
By Wilfred Smith

It is challenging enough to launch and develop a pharmaceutical or healthcare business in the home country due to the high risks involved and an ever stricter regulatory environment. Go overseas and everything gets that much more complex because no two countries have identical sets of laws and regulations, and it is more difficult to ensure high quality. Enter emerging markets, a source of new markets and thus revenues, and the risks are multiplied but so are the rewards, if the business can develop the right strategies for sustainability.

As the middle class continues to grow in emerging economies, the countries are prime target markets for expansion of existing businesses or the launch and development of new ones. However, some of the largest existing businesses have attempted to capture new overseas markets without success because they did not fully understand the importance of developing tailored strategies rather than a one-size-fits-all.

It is a lesson that applies to new businesses, too, if they want to achieve sustainability.

Discovering Potential in Emerging Markets
There are three emerging market tiers targeted as markets with the most potential for growth. The first one consists of China, India, and Mexico. The second is Southeast Asia. A third is Africa. Growing prosperity, an increase in the rate of chronic disease occurrences, and a flattening market in developed economies make going overseas to do business in emerging markets a more common growth strategy.

Some markets are more advanced along the “emerging” spectrum, like China, while others are viewed as long-term opportunities, like countries in Africa. It is important to realize that developed markets also offer many promising opportunities as drug and healthcare costs skyrocket, and the need for better outcomes and access to the newest technologies grow. Opportunities in mature markets include generics, health nutrition products, and value innovation such as coordinated treatment protocols and integrated electronic medical records.

Launching a business in the UK or Germany is easier than launching one in China, India or Africa. Each market has a different regulatory environment and needs. New businesses that can provide metrics to European purchasing managers and prove product efficiency or the ability to improve outcomes will have a competitive advantage. In emerging markets, it may be a healthcare delivery system that reaches an underserved population that is a top priority. New medical equipment, healthcare clinics and IT are just some of the opportunities in the growing markets.

Launching a new business requires a lot of research, of course, on markets, demographics and regulations. To jumpstart success, some countries have developed technology hubs to encourage businesses to invest in R&D.

Singapore, for example, developed a regional biotechnology research and development hub by partnering with seven institutes and five research consortia. More than 50 companies are utilizing the hub to do biomedical sciences R&D in drug discovery, and in translational and clinical research. Coming out of the hub is a flow of new therapies and technologies. Singapore also has several contract research organizations that support the pharmaceuticals growing outsourcing needs.

Lower Risks Through Hubs, Assessments
Businesses that want to go overseas should rely on hubs and other infrastructures because they lower risks. Getting approval to operate out of such hubs requires passing a complex application process, but businesses get the advantage of having the government’s stamp of approval as innovators. Singapore, as do other countries, also offer initiatives that promote collaboration and provide funding.

However, no business should lose sight of the fact that succeeding in any foreign country in the pharmaceutical or healthcare industries requires developing a deep understanding of, and the ability to work within, the regulatory framework. Research institutes and universities, plus the government agencies, are go-to organizations. Non-governmental organizations can also make important partners who understand the culture and rules for operating in the country.

Business sustainability requires developing strategies for maintaining quality, making efficient use of resources, and managing costs to compensate for lower prices and margins. The strategies used in the U.S. are likely ineffective in an emerging economy. For example, advertising is a common marketing strategy for selling products and services, but the government may assess a fine for certain marketing practices in some emerging economies.

At the same time, there may be financial incentives to start a business. They may be enticing, but without a thorough risk assessment, the incentives alone are not enough. Conducting a risk assessment includes assessing manufacturing processes, supply chain practices and local customs, in addition to research on regulatory requirements. It is likely that practices in emerging countries, in particular, are quite different from the U.S. Even in Europe, there will be some differences, though not as stark as in emerging economies.

Another risk needing careful assessment is the payment system for pharmaceuticals and healthcare services. In many underdeveloped countries, payments are out-of-pocket, which figures into revenue projections and product planning. Generics and technology can play into strategizing to minimize costs while delivering goods and services.

Due Diligence Across Borders
Any business that launches outside its home country must, of course, conduct the typical research any business would complete as part of the due diligence process. Research on market segments, demographics, market needs, and in this case the health services infrastructure.

It can be a fatal mistake to assume Western medicine and practices can be imported into other countries without adaptation. For one thing, the market may not be able to afford Western products or services. Education levels, the methods of distribution of pharmaceuticals and healthcare services are likely vastly different, also.

As people in countries like India develop more affluent lifestyles, they are developing chronic diseases similar to those found in the U.S. However, the pharma and healthcare industries have invested billions in consumer education programs so that people understand treatments. That may not be the case in many foreign countries.

There may be high risk in entering global markets, but the rewards can be higher. Business sustainability depends on fully understanding the market and the differences between the new market and the familiar market.

The most important lesson new businesses can learn from past attempts by other companies that failed is this: Do a thorough market analysis and then develop strategic approaches that fit each market segment and not the market in general.

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