Liftstream looks at how the emerging markets is placing demands on talent and creating gaps in expertise within key functions like regulatory affairs.
Why Emerging Markets…
The ambition that drives the pharmaceutical industry to capitalise on the growth in emerging markets is irrefutable. As western and mature markets have levelled off, or forecast moderate growth, the BRICS and the next 11 (N-11) countries have continued to show encouraging growth. South Korea, Mexico, Turkey, Indonesia and the Philippines are worthy of particular note in their sustainable growth. The BRICS contributed almost 30% to global growth in the period between 2000-2008, a significant upturn from the 16% they delivered during the 90’s decade. In recent years, during the contraction, the emerging markets have begun to show considerably higher contributions to world economic growth and there is greater divergence between these and the slowing markets of the developed world.
The increasing pressure on healthcare budgets bought about by western austerity, clearly mean that the currently prospering economies of the emerging markets are producing the economic conditions for pharmaceutical companies to increase sales. In a period of challenging conditions for the industry; with patent expirations, reduced R&D expenditure and fewer blockbuster products coming to market, these emerging markets are key. As markets they are driven by high populations breaking through new income thresholds, greater life expectancy and burgeoning middle-classes wanting better healthcare.
Of course this is not a new phenomenon, the emerging markets have been part of the global picture for a few years, but perhaps their relative value to depressed western markets is what brings them to prominence now. While the large pharmaceutical behemoths plunder these markets, equally other companies are looking to them for expansion. Namely, companies like Gilead, Celgene, Shire and Biogen IDEC who have recently experienced tremendous growth, begin to plan their respective forays into these markets too.
How best to structure…
Since the emerging markets story scaled the industry boardroom agenda a few years back, companies have grappled with different models to find the one which works best for them. The thesis that seems to have most weight nowadays is that where possible, you recruit local. With this approach you get a more rounded understanding of doing business in that region as well as the cultural awareness, albeit you face considerable resourcing challenges.
Currently we’re seeing a more regionalised model evolving in the sector. Move beyond the companies big enough to have affiliates in every important market, and you are beginning to see increasing focus towards a regional structure, supplemented by partners or distributors. Even among the giants of the sector, we are seeing increased devolution to the regions, getting better strategic oversight and decision making closer to the markets it affects. In the Middle East; Dubai or Turkey have become the favoured hubs. Singapore remains the main Asian hub and Brazil or Mexico seems to garner the destination dollars in Latin America investment. China is naturally in everyone’s crosshairs and this will likely become the focus for more globalised activities in the future.
…And the talent gap
This has placed new emphasis on key functions to ensure the skills and experience align with the commercial priorities in these emerging markets. One such function is regulatory affairs. Traditionally managed to a greater extent from the HQ, the role of International regulatory affairs has always been very different from that which exists in the more drug development oriented functions of Europe and the US. The focus towards the more commercial end of the regulatory process has deterred those with greater scientific inclinations or perhaps those wanting greater involvement in the relatively complex procedures of the EMA or FDA.
At this current time, companies are trying to find the best regulatory professionals they can to populate their international regulatory affairs functions. They are doing this, aware of the fact that many of the traditional skills are evolving, and certainly the role priorities are changing where emerging markets are concerned. As these markets grow in commercial relevance, so too does the sophistication they require. It is projected that by 2032, the BRIC countries will overtake the G7, with China becoming as big as the US by 2027. Also evident, is the fact that these markets will continue to create more sophisticated regulatory frameworks and stringent requirements which will increasingly demand inclusion in the overall drug development strategy from the outset.
This over-arching business trend towards the emerging markets will require new skills among those regulatory affairs professionals who will manage products towards successful regulatory outcomes. When you reflect further on the product profiles of most drug companies, there is considerable focus towards the orphan drug category, with some $50bn of drugs sales now orphan drugs, versus around $170bn of non-orphan drugs. Despite specific orphan regulation in the US, EU, Japan, Singapore and Australia, many of the emerging markets do not make provisions for orphan drugs. Although markets like Russia are beginning to do so. Given the rather nascent nature of orphan drug regulation in these emerging markets, it clearly represents an evolving landscape which will require advocacy and policy navigation.
For regulatory professionals covering emerging markets, the strategic input to the business will need to be higher and the interactions with commercial teams, affiliates and partners will need to be reorganised to reflect the growing commercial importance. There will remain very stiff challenges in terms of how to best organise and manage the geographical complexity, complete with geo-political issues. Interwoven with the very considerable challenges mentioned above, exists the very prominent issue of cultural awareness. In Europe and in the US, we follow the EMA or FDA unified regulatory framework almost unwaveringly. This centralised control allows for common procedure to drive efficiency and understanding. However, travel further into these emerging markets, and suddenly you are confronted with very individual and specific regulatory requirements, with increasing demands for in-country clinical studies. It is true that these markets often follow these more mature western approaches, but they are still characterised by very individual requirements, as well as the cultural nuances and business practices which are unique to each market.
Aforementioned, the relative complexity of European, US or Global regulatory projects has appealed greatly to the talent base. Maturing professionals in the field of regulatory affairs have gravitated towards these drug development or life-cycle management roles and their inherent strategic value. This has meant highly skilled people, developing professionally, migrating away from international regulatory affairs. Many of those who have remained in the International regulatory affairs arena have evolved towards leadership oriented roles. The importance of the emerging markets in the past 3-4 years has prompted companies to look to new talent entering regulatory for the first time to populate their International regulatory functions. Yet, experience that sits in between these opposing scales of seniority have largely defected to the drug development environment, leaving behind a considerable talent gap that is proving difficult to plug.
This situation is no better inside the emerging countries either. In recent discussion with Global Regulatory Heads of top 10 pharmaceutical companies, identifying and recruiting experienced and qualified regulatory professionals remains incredibly challenging. In China, staff attrition has previously proven a real problem, meaning sustained training and personal development towards a qualified employee-base is hard to accomplish. Big challenges remain around how to get the quality of professional experience necessary in the markets like China and India, where attrition rates are high. Inflation of wages drives motivation for change, coupled with high demand for skills and short supply of them, it increasingly creates a candidate driven market. This is not a situation unique to these BRIC powerhouses. It is also true in other markets with highly nuanced hiring requirements, like Saudi Arabia, where nationality and academic qualifications drive the hiring process, again alongside very challenging wage requirements.
As the BRICs, and more particularly China, take the positions of regional headquarters and possibly even global, we see again how the rapid evolution of skill-sets might be required to reflect this new status and perspective. This once more begs the question of whether people will need to be pulled from mature markets to help meet the talent gap, as well as act as trainers and mentors for the embryonic regulatory skill-base in these markets. In Brazil, there is perceived a generally better capability, yet there is still little spare capacity and this leads to a tight talent marketplace. And so during a time when companies large and small are readjusting their international regulatory affairs structures, moving increasingly to regionalised hubs and operating from lower-cost centres, the gaps in talent are as prevalent regionally as they are in Europe and the US. As markets, and the constituent companies, mature in these markets, so too do the talent markets. The infinite elasticity of demand normally proves to be far more brittle. The enterprising global solutions to talent take new paths and resource is redistributed, helping new companies and new markets progress their fledgling status.
But with a changing landscape comes changing attitudes. Today, Emerging Markets is the main story in town and this has provoked regulatory professionals who are planning their careers, to think about the future of regulatory affairs in a global context. The question any leadership-minded regulatory professional will surely be asking themselves is whether they can expect to manage a global department, without at least some knowledge of these highly important, commercially relevant emerging markets. Therefore, the appeal of emerging markets regulatory affairs should stimulate new talent flows but for the moment though, there remains a challenging talent gap that needs addressing.