Recently we were hired by a pharmaceutical company with headquarters in an Asian country that had decided to expand to European markets. This client had invested a large amount of money in market research, registered more than 15 products and established an affiliate in a European country. They also negotiated with an external warehouse and a small laboratory to carry out the analysis/release and was preparing to launch his first product. They opted for selling directly in the market where the affiliate had been opened and finding local distributors for other countries. After a year of unsuccessfully touring the market in search of potential partners, and after verifying that the final prices, considering all costs, did not make them competitive in most markets, they decided to come to us in search of advice. After a short assessment, we found that about 70% of their estimates were wrong (product, chosen market or both), making it necessary to redesign strategy almost from the beginning. Based on this particular case, which has not been the only one, although the most relevant, we have summarized the main mistakes that were made and that could have been avoided by effective previous project management. Not having aligned the European and global strategies Some companies that intend to enter Europe are also undertaking vertical integration processes on a global scale, for example, API manufacturers who wish to be present in the final dose formulation (FDF) segment. If this factor has not been taken into account, it can easily happen that conflicts occur if API clients end up being competitors of the FDF in Europe, affecting relations among companies on a global scale. Confuse theoretical market potential with realistically accessible market Most companies, when calculating the market potential, use the data of the panels that facilitate companies such as IQVIA or Global Data. Then, calculate the units, the competitors, estimate their target MS and multiply by the expected price, usually provided also by these panels that are, almost always, sell-in prices not final ones. They also often forget that the theoretical market and accessible market are not the same things. As an example, a client company, manufacturer of injectable hospital generics, calculated the units of the four presentations of a molecule existing in some EU countries. The two most commonly used accounted for 80% of the total, so they decided to register only these two. Upon reaching one of the big markets, it turned out that this was public tender driven, and that the availability of the four presentations was mandatory to get access. Although "supposed to be market" was 80%, the accessible one, with only two presentations, barely reached 5% (private market). This error took two years of delay (the time needed to register the other two presentations) and significant economic losses. Do not evaluate the strengths and weaknesses of the portfolio in the target markets. Most if not all companies in emerging countries that decide to go to Europe sell versions of the products specially designed to meet the needs of their local markets. However, these preferences may not be those in Europe. Changing the preferences of markets as established as Europeans is an arduous and expensive task. In most cases, what the European markets expect from these companies, especially in the case of generic products, is that they produce products of similar quality and characteristics to those that exist, but at a lower price. If the available strength is different from that claimed, for example, a 20 ml vial versus one of 10, the company must assess whether it is worth making the necessary adjustments. It is clear that the market is not going to do them, and the cost of arriving with an unmarketable product can be huge. Consider that Europe is a single market The European Union is 28 markets, each with its own rules and specificities. Much progress has been made in regulatory matters so that any product approved in one of the markets can be in the others and it is also possible to request approval in several markets at the same time by a de-centralized process (DCP) or directly in all (centralized approval). It is also possible to analyze and release batch in one place, but it must be within the EU. The rest of the operations required for the product to physically reach the market require a series of steps that must be carried out locally. For example, each country follows a process to be included in the price lists, have different requirements regarding local pharmacovigilance, as well as on conditioning materials, which must be at least in their language (in the case of Nordic countries can be accepted to go in several at once, but it is a particular case). Access to the channels is also different: in Spain, for example, all cancer products are managed at the hospital level, while in Germany, those that can be prescribed on an outpatient basis (oral drugs such as Imatinib) are mostly sold in the retail channel. Finally, tender influence is very different according to the markets, as is the way products can be sold and even the doctor's prescription capacity. In summary, there is no homogeneous European market, something that, however, is often forgotten and leads to tremendous and expensive mistakes.
Do not investigate local distribution channels in-depth/ wrong distributor choice We have referred to them previously. A product that is for hospital sale must have a distributor that has access and experience in this channel. The problem can be slightly challenging if, as in the case mentioned above, a product is hospital driven in certain markets and not in others. In such a case, a specialized distributor in the hospital channel may be suitable for the first market, but not for the second, so granting the distribution in both to the same partner may not be the right option. Sometimes certain distributors use their strength in a given market to get products to expand in another in a segment in which they are not positioned. In such a case, choosing them means sharing the risks with them, something that must be taken into account in the negotiation. Another important issue is to understand how distribution channels work: for example, in Spain, the negotiation of hospital generics is carried out by individual batches, each of which corresponds to a molecule and is awarded individually. In other words, a company that has only one product can perfectly win. However, except in the case of Andalusia, generics that go to the pharmacy channel are negotiated in pools with several products, which benefits those companies that have more references available. Not considering all the costs involved in the process Although it is true that, in the case of generic products, having a low manufacturing cost is a necessary factor to reach the market with competitive prices, it is not enough. The costs of release and analysis can represent up to 20% of the final price, especially if it is outsourced and if the batch released is relatively small. If the commercialization is not carried out directly, the chosen partner will also require a minimum margin that will rarely fall below 20%. If the said partner does not have the minimum structure to cover other associated expenses, such as pharmacovigilance or local distribution, these costs may rise above 10% of the final price, not to mention serialization and other requirements demanded by Ministries of Health (MoH). If the product must compete with another 15 in an overcrowded market and over 90% is decided at auction in which the winner takes it all, the possibility of being out is high. Wise should be avoiding these cases from the beginning. Not paying enough attention to local tender specificities There is a growing general tendency for non-patent products to be acquired through public auctions. However, in each country, and within them according to the region, these have rules that can vary considerably from each other. In general, the companies that participate must prove technical and financial solvency, but not in all cases these two terms mean the same. The same happens concerning the selection criteria. Understanding that the main factor to consider, sometimes the only one, is price, sometimes the non-fulfillment of certain requirements (not having all the strengths, characteristics of the package, etc.) can strongly penalize or directly eliminate the candidate. These problems are easily solved if prepared in advance, but working against the clock under heavy time pressure can make a big difference. Being late can represent two years until the next auction is opened. Not considering batch sizes Many companies that want to sell in Europe do so as having succeeded in their respective local markets. Sometimes (China, India), these markets are very large and the batch sizes may not be suitable for European markets. Given the differences between countries, having smaller batch sizes may be essential to enter, although as mentioned above, the impact of release and analysis can make the final unitary cost considerably higher. It should be assessed before deciding to go to the market to avoid unpleasant surprises. Conclusion Getting to penetrate European markets is a complex and multifactorial task. To do it successfully it is necessary to have expert local advice, but at the same time to see the project as a whole at a strategic level. It can be done internally or outsourced, but performing this function in-company would require considering a presence in the markets before the approval of the products, having to place a team and investments two or three years before starting to sell with the corresponding costs. The model of learning by trying is dangerous either, since many of the mistakes made, like the case shown at the beginning of this article, may require to restart almost from the beginning and lose again two or three years at least, in addition to generating in the company the feeling that it cannot be done. An external solution is probably the most cost-effective, but it is important to choose well the advisor since in this aspect a bad decision can have disastrous consequences.