The price cuts GlaxoSmithKline and now Sanofi-Aventis are undertaking in the developing world may soon be industry-wide. That's the conclusion of a new report, which shows that chronic diseases once thought to be the province of developed nations are gaining traction in poorer countries. It's a "silent pandemic" that will end up forcing pharma to set up tiered, country-by-country pricing.
Just which chronic diseases? Think diabetes, heart disease and cancer. Treatments for these maladies are increasingly in demand in developing countries in Asia and Africa, where more people are living longer--and growing economies are enabling more and better healthcare.
But it's problems with that healthcare that could hurt pharma, if the industry doesn't act first. Discounts have to become more widespread. Patent pools, such as the one for neglected diseases that Glaxo set up last year, will need to become more common, to give poor countries access to cheap copies of on-patent drugs. "[T]he divide which saw infectious diseases as primarily affecting the poor and chronic diseases affecting the rich is now changing," Tido von Schoen-Angerer of Medecins Sans Frontieres told Reuters, "and that will demand a change of strategy."
So will drugs become a high-volume, low-margin business? In some places, yes; for some drugs, yes. And Big Pharma will need to tailor some of its products to the needs of the developing world, where healthcare is delivered in entirely different ways, von Schoen-Angerer said. With so many pharma firms turning to emerging markets such as these for new growth, we expect lots more news about moves like this.