Phil Leung: The China healthcare market: it is about 50 billion dollars in pharmaceutical today, about twenty billion in med tech. It’s a fraction of the developed markets, but is actually growing at about twenty percent a year and in four or five year’s time that will become a number two or number three healthcare market in the world in just pharmaceuticals and med tech. But within that fifty and twenty billion dollars, it’s actually a huge difference between the tier one cities and the rural areas. Even within the tier one cities, there are some very advanced, sophisticated hospitals and within the same city you can actually see some very primitive, not up-to-speed clinics.
So as a result, it’s actually a market with very diverse hospitals, clinics, and patient populations. And healthcare companies that address these opportunities actually must move away from the one-size-fits-all model from the developed markets–which is a relatively high-end, more premium product or service offerings–but really take some of those core capabilities and technologies and really customize those solutions for China.
Geographical differences and regional markets
China is actually not one market; there’s actually several regional markets, so having different regional commercial models, i.e., How do you do distribution? How do you service your customers? How do you educate your patients? How do you educate your physicians? [These things] need to be actually different.
We think there are really several key elements to win in emerging markets.
First, you really need to have the right product portfolio. We talk a lot with our clients about ‘good-enough’ products. In emerging markets, the high-end premium segment is pretty small, the mid-end market is really where the bulk of the volume is and very often is actually increasing its share of the overall profit pool. So if you really want to win in emerging markets, you need to win in the mid-market or good-enough market. Great example is in the DES and stents space in China for example. Five or six years ago, the three multinational companies controlled about 95% of the market in terms of volume. So the Chinese local players were about 5% of the market five or six years ago. Today, it’s actually the reverse. The Chinese companies control about 70-plus percent of the market, the multinationals only have about 20-25% of the market.
Distribution in emerging markets, whether it’s India, China or other developing markets is really important because there are diverse geographies, big land mass, a lot of population which are quite dispersed. So stay away from the one-size-fits-all go-to-market model. You probably need to come up with four or five distribution models.
Third key element is really about finding potential partners or doing [mergers and acquisitions] to help accelerate your growth in emerging markets. Being a key stakeholder in the whole healthcare system [is critical] whether it’s in China or India. We call it the stakeholder or PR strategy, i.e., you need to really build a brand and build relationships with key stakeholders–whether it’s with the government, whether it’s with the scientific opinion leaders–so your brand, your products and your organization is put into the forefront of the healthcare business in China.
Final point about organization, about commitment. A lot of the multinationals or companies in general we work with really have rather complicated, complex organizational reporting: country back to region, region back-to headquarters, etc. It’s a matrix that quite often will hinder the speed and the pace of the local team executing. We found that winners are typically the ones that actually enable and trust a local team within certain boundaries to execute on the local strategy. The speed of execution, the speed of decision-making and execution in-market is critical to win in emerging markets.