Realities Starting to Dispel Pharma's BRIC and Biosimilar Myths

Recently there's been some discussion in pharma's higher circles that biosimilars may not offer the road to riches along the lines touted by the industry's C-suite officers.  It is becoming increasingly clear that only a few companies may make substantial profits in that area and, in fact, biosimilars may actually represent a "fool's gold" for most pharmas.

Even as biosimilars aren't likely to be pharma's road to enormous profits, the recent events concerning Russia's incursion in the Ukraine open a light of reality into another of the industry’s illusions, this one involving the golden mountain of Emerging Markets.

It now appears that none of the BRIC countries that supposedly are the spearhead of pharma’s Emerging Markets strategy are meeting expectations.  China’s growth is slowing, the government is exercising price controls on drugs and they intend to grow their domestic pharma companies at the expense of foreign multinationals.  India and Brazil are even more aggressive at controlling prices, with India declaring compulsory licensing (i.e., breaking the patents) on several brands.  

Now comes Russia to the fore, where the ruble is falling drastically and investors are fleeing.  Putin requires a compliant Ukraine because gas and oil remain Russia's major exports and most of those pipelines flow through that neighboring country.  As with China and India, Russia wants to become a global pharma player (see here) by growing its domestic companies.  The kleptocracy that runs the government and society there appears unlikely to permit western, multinational pharmas the sort of unfettered operational room they enjoy in the developed countries.

So what’s the next big ruse that pharma CEOs are creating for investors?  Some observers suspect it’s the notion of immunotherapy as an R&D platform capable of making the industry as a whole enormously profitable again.  Opportunities are certainly there, but the situation noted above with biosimilars probably obtains here too and it belies the pitch from CEOs about unlimited horizons.  In other words, there will likely be a couple of big winners and several more also-rans.

These efforts among pharma CEOs to distract investors with illusions about the BRIC countries and biosimilars have always received vital support from some top-tier consultancies and sell-side equity analysts.  The flimflam artists atop the industry wanted a misdirecting scenario with which to beguile investors and the analysts of negotiable virtue were only too eager to provide one.

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