The saturated US and European pharma, biotech and medical device markets for existing drugs and devices has lead to price cutting measures and looking at the emerging markets or BRICK (Brazil, Russia, India, China and Korea(South) for growth. Most companies are focused primarily on China and India with China having the main emphasis because it currently has the fastest-growing drug market in the world and the second-largest consumer health market.

The Chinese are aggressively planning to grow their economy. According to an official at the China Securities Journal, China's five year plan (2011-2015) for growth includes continuing to grow their pharmaceutical industry and actively growing their strategic industries which include biotechnology at an initial average rate of 24.1 percent and then slowing to 21.3 percent in the next five years. To reach these goals, China is considering investing up to $1.5 trillion over the next five years in these industries, sources told Reuters.

While emerging markets have tremendous growth potential, price cutting is still an issue since most countries can not afford US prices. Pharma companies are hoping that volume will make up for the significant price reductions. Other challenges are discussed in doing business in emerging markets.

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According to IMS, Pharmaceutical sales in China will increase by 25 to 27 percent or more than $50 billion in 2011. To access the broadest market in China, foreign drugmakers must list their products on the country's National Reimbursement Drug List, which subjects them to price reductions. The drug list proposes a cap of 23 percent for sales margin on brand-name drugs. These cuts so far apply to Pfizer Inc., Merck & Co., Eli Lilly & Co., Novartis AG, Takeda Pharmaceutical Co., Astellas Pharma Inc. and Daiichi Sankyo Co.

"Making money in these markets (BRIC) is not easy," said Murray Aitken, senior vice president at pharmaceutical market information company IMS Health. "They're mostly dominated by domestic companies that are well-established, well-entrenched and well-connected."

For these reasons major pharma companies have acquired a number of local companies in these markets.

1. Sanofi-Aventis acquired BMP, in China
2. Nycomed bought majority stake in Guangdong Techpool, in China
3. GSK acquired Nanjing MeiRui Pharma, in China
4. GSK acquired Laboratorios Phoenix in Argentina
5. GSK acquired Dong-A Pharmaceuticals in South Korea
6. Merck partnered with Sinopharma, Chinese vaccine maker
7. Merck partnered with Adcock Ingram, South Africa for China
8. Abbott Laboratories acquired Piramal Healthcare in India
9. Novartis acquired Zhejiang Tianyuan in China

Emerging markets are not only attracting western country corporations, but companies in these emerging countries are pushing hard to retain and grow their countries market share as well as gain market share in other emerging markets. Adcock Ingram Holdings Ltd., Africa's largest over-the-counter drug company, is planning to spend as much as 1.4 billion rand ($198 million) on acquisitions in emerging markets (Latin America, Eastern Europe and Asia Pacific), Chief Executive Officer Jonathan Louw said.

Hypermarcas SA, a Brazilian consumer-goods company, bought out Brazilian consumer drugmaker Mantecorp Industria Quimica & Farmaceutica in securing development and distribution in their country.

Challenge - Collaboration across borders - Indian drug makers are teaming up with China in a bid to outpace western drug makers who've been actively trying to gain market share in both countries. Industry leaders on both sides of their common border are inking an agreement to collaborate and boost bilateral trade. The rapid deal making of Big Pharma has rattled government officials, especially in India, which has been considering protections for its domestic pharma industry. Now, Indian officials have negotiated an agreement with China's pharma industry association. "The collaboration between the two will give an edge over pharma companies from developed countries.

Senior officials from China and Taiwan signed an agreement to cooperate in the development of new drugs, as the two economies continue to move closer. The deal will allow the two sides to work together on the clinical trial of new drugs. Taiwan's budding biotechnology industry has been limited by the island's small market, and the new pact is expected to help accelerate the entry of Taiwanese products into the lucrative mainland market.

US R&D Investments in Emerging Countries - Major Pharma companies are also investing heavily in R&D in these emerging markets. Every recently arrived western company in China is pursuing its own particular strategy:

1. Pfizer - the new market inspired an ambitious effort to develop an anti-inflammatory compound into      a new therapy for hepatitis B, a common ailment in China and other Asian nations.
2. J&J teamed with Tsinghua University to launch an early-stage studies on hep B, TB and bird flu.
3. Bristol-Myers Squib has taken a less risky approach by licensing out a promising cancer                   compound to Simcere, thereby allowing the Asian company to handle the initial R&D work through      mid-stage studies.
4. Sanofi-Aventis is teaming up with investigators at Oxford University and an Indian oncology network     to pursue new research efforts in India.
5. Novartis' pledge to invest $500 million in Russian manufacturing, R&D, and public health is among       the biggest. "Novartis is making a strategic investment in Russia for long term growth," said CEO       Joe Jimenez in a statement. "The ongoing partnership with Russia enables us to expand our              commercial presence in a key emerging market."

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While there has been a tremendous amount of activity from the pharma industry to penetrate the emerging markets through acquisitions and investments, there has not been a lot of activity from the medical device industry. This is probably due to a number of reasons:

1. The medical device industry is young compared to pharma and therefore have not yet established        themselves as big power house like pharma.
2. The device markets are smaller than the billion dollar pharma markets.
3. The cost of devices or equipment is not affordable to the emerging market main population and the      procedures to use the devices are complex.
4. Intellectual Property rights and reinforcement particularly in China and India are a critical issue            since it is easier to copy a device than it is to copy a modified molecule or protein.
5. Manufacturing devices in the emerging markets are difficult due to quality and meeting FDA                requirements.

Most large medical device companies have offices or distribution systems in emerging countries to sell their products today. The focus is to initially penetrate the more-developed countries like Singapore or Taiwan where the population is more affluent and to penetrate select affluent cities of emerging countries.

Also, the acquisition activity in the medical device industry has been towards innovation, expanding into other therapeutic areas or enhancing their product line in specific therapeutic areas. Acquisitions are not limited to US or European countries as Bangalore, India Opto Circuits Ltd. acquired US Cardiac Science Corp. Some western medical device companies are also tapping into the defense market for growth.

Cook Medical, one of the world's largest privately-held medical-device makers, predicts to nearly triple its sales in Asia by the middle of the decade. The company, which conducts research and makes products for expensive procedures like bioengineered tissue replacement, tissue regeneration, and in- vitro fertilization, is betting on the fast growing affluent population in the emerging economic power-house.

A joint venture has been formed between Chindex International, an American provider of Western healthcare products and services in the People's Republic of China, and Shanghai Fosun Pharmaceutical (Group) Co., Ltd., a leading manufacturer and distributor of western and Chinese medicine and devices in China. The joint venture will market, distribute, sell, and service medical devices in China and Hong Kong, as well as R&D and manufacturing of medical devices for the Chinese and export markets.

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