Bloomberg Businessweek reports that London-based GSK is in a "war for talent" in China and India as the pharmaceutical company looks to expand in emerging markets. GSK is trying incentive plans to keep workers. But right now, about 20 percent of GSK's sales force in China and India quits annually to work for a rival pharma, Abbas Hussain, GSK's president of emerging markets and Asia Pacific told Bloomberg Businessweek in an interview. So why is this important? It could be an obstacle to GSK's efforts to grow its business in some of these fast-growing regions of the world.
In 2008, GSK, which has its U.S. headquarters in Research Triangle Park, North Carolina, announced a reorganization that included a greater focus on emerging markets. The move is part of an ongoing diversification strategy, which CEO Andrew Witty has described as moving the company away from a reliance on sales of "white pills in Western markets."
The changes have become apparent during Witty's tenure. In 2007, these white pill sales in the West represented 40 percent of GSK's revenue, according to the company's annual reports. But in 2010, those sales made up just 25 percent of revenue. Those calculations exclude the sales of flu pandemic products.
GSK's strategy is aimed in part at offsetting sales challenges in the West as patent expiration on several blockbuster drugs opens the door to generic competition. Drugs that were blockbusters in the West can still represent sales opportunities in emerging markets. GSK can't charge as much for them in emerging markets as they did in the United States. But those drugs will still represent new sales in the fast-growing regions where the company is trying to grow. It's not a bad strategy. In fact, it's quite a good one, as it extends the life of drugs whose blockbuster days are at or near their end in the West. The problem is GSK isn't the only company with this strategy.
IMS Health forecasts that U.S. pharmaceutical growth will be between 3 percent and 5 percent in 2011. But in emerging markets such as Brazil, China, India and Russia, the pharmaceutical market is forecast to grow between 15 percent and 17 percent. All of the large, global pharma companies are eyeing emerging markets. Growth there won't by itself offset the loss of the sales of patented blockbusters in the West. But it sure goes a long way in easing the blow. In order to ensure continued sales growth in emerging markets, it will be important that GSK hires and retains a sales force to sell products in those markets.
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