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New realities of the pharmaceutical market: “Business in underwear” vs CEO




The article by Tatiana EMELYANOVA, CEO


You can expect a decrease of pandemic tension, strengthening the health care system, securing the exchange rates, and at the same time reviving purchasing power and stabilizing the market. And you can increase the share of revenues, achieve positive dynamics of business growth, confidently lead the company forward, regardless of emergency circumstances and market conditions. But is the current leadership of pharmaceutical companies able to offer anti-crisis measures and a bold business strategy?


Modern technologies and globalization, spurred on by coronaviruses, give us new opportunities. We don’t need to wake up early, put on a jacket to survive. Remote work is not a destiny only for desperate housewives and introvert programmers. First came a pleiad of freelancers - bloggers who travel the world, supporting their blog with photos of tablets or laptops in their hands. Currently, the majority have taken the role of this bloggers. They share the pictures with in pajamas at home office.


The companies with remote strategy will survive. And it’s not a temporary measure. Advanced companies are already forming KPIs for workers in home wear. Flexible management skillswill be in top. It is important for all pharmaceutical market players to analyze deeply the performance of standard work in the new environment. Time requires fundamental management decisions. Demand for digital B2B services such as data analysis, outsource, cloud storage will grow.


Some companies never get out of the crisis. All market players are in the ruthless competition with exception of new oriented companies on vaccines and drugs against coronavirus. For the rest, it is possible to step over troubled times only if you leave nostalgia for offline in the past and follow the plan. We propose to analyze and predict the next 10 years of Russian pharmaceuticals together in order to manage the situation and go into double-digit growth.



The dynamics of the pharmaceutical market


Growth in domestic retail in 2019 accelerated from 5% to 6% compared to 2018. Unexpected for analysts was the growth of the state segment in the amount of 30% in 2019. The upward movement provided a new molecule and biosimilars. Mostly, pharmaceutical industry leaders improved sales in 2019 compared to the trends of the last three years. International corporations have benefited from expanding channels financed by government. In 2019, Johnson & Johnson has been showing 14.6% growth of the total value, Novartis- 35.9%, Pfizer- 23.6%, Merck Sharp Dohme- 51.1%, Glaxosmithkline- 14.8%. Half of the top 10 pharmaceutical company players in the retail market were able to improve their dynamics relative to the average performance over the past 4 years.


2020 year will be extremely controversial for the Russian pharmaceutical market. In addition to drug marking and legalization of distance selling drugs, COVID-19 will also made adjustments. Despite instability, Russian pharmaceutical markets will grow in value terms by 6% approximately over the next five years, mainly due to state segment increase in relation to 4.6% of direct costs and 8.3% of reimbursement programs. There will be much more adjustments for analytics.


In the global perspective, according to official statistics from the international service statista.com, Russia expects the pharmaceutical sector to grow to 147%, which is only 13% less than the global figures. Russia will be rewarded with a lag, which means a high growth potential. It is important to build a new business strategy in an actively developing market, where the experience of previous years is no longer paramount.



Trends and Growth Factors 2020-2030


Natural selection in the world of the domestic pharmaceutical industry dictates its own rules. And the main rule of the new decade is real-time decision making. Sooner or later all that we see in the international arena will take root in our country. COVID-19 is just a testament to the continuity of global events in our country. Billion-dollar investments worldwide will take the toll. The Russian market will not be able to withstand the rush of technology and the socio-economic consequences. Success will be on the side of new players:


  • Those who learn to manage in real time, exclude completely paper media from the workflow. Who use advantages of cloud storage and will become the king of data analysis and management. More than ever, the art of change management and flexibility are the main conditions for company growth.


  • New player will stand at the origins of modern technology and service transfer to Russia. Based on the win-win strategy, the new Patient centricity model is the best harbinger of opportunities for all players in the pharmaceutical market.


  • Technically advanced companies and solved problems with low-quality data, inconsistencies and duplicated information.Unfortunately, the quality of data in business analytics of large companies does not exceed 80%in Russia nowadays. The motto of the new decade of the 21st century will be Data clearance and forecasting with an accuracy of 98%. More and more corporations are paying special attention to clean data, which gives the most reliable picture of the results and the ability to find problem areas, avoid pessimistic forecasts. Data corrosive manager in alliance with correct analysis right down to the last pharmacy has the key to success. Data clearance will help to find opportunities in the same cities and chains using the same marketing budgets simply by detection of problem areas. Optimization of company expenses is possible without reducing the product line even in conditions of market stagnation.


  • Business online. In a public report by the RAFM on October 2, 2019, it was announced that in Russia the internet sale of drugs amounts about 41 billion rubles. The users completed more than 25 million orders totally during this period. The average of purchase receipt is 1,650 rubles. Despite the current restrictions, the share of online shopping is growing. If in 2016 this channel accounted only 3% of all over-the-counter drug sales, in 2019 it was already 7%. After the adoption of the online trading and drug deliverylaw, rapid scaling and market reshaping will follow. Farsighted players are already preparing to conduct business in a new format.


  • Additional brand value. Medicines will cease to generate significant income, taking into account factors such as a purchasing power decrease, aging population, strengthening of government role, increasing share of generics. The market is going to redistribute towards to online sales and strengthening of some retailers.The power of brand can correct the insufficient growth of traffic profit. Additional income is hidden in additional services. Satisfaction with services and the brand's added value by patients and doctors-is an important component of the integrated approach of modern medicine. The time to expand the range of services through free diagnostics, drug delivery, online specialist consultations and new services has come.


Any player in the pharmaceutical market can feel much more stable if growth drivers are rooted in the company's strategy. Growth comes to active and corrosive managers who have access to important strategic information in the “here and now” moment. If the management has not taken any steps in the direction of trends over the past two years, most likely, it will be necessary to revise the business strategy as a whole. Not all companies will cope with a flurry of events. Of course, there will be a massive change of CEO in the industry. In the meantime, the whole world is in a fever from a pandemic, keep up to date and shape the future. The history of your company has not yet been written.


Photo: Dmitry Menshenin, Business planning and Performance lead, Sanofi

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