Report: The business case for global health equity - The investor view

The Business Case for Global Health Equity: The Investor View, published by SLR, and funded by the Gates Foundation, explores how improving access to medicines in low- and middle-income countries can drive commercial success for innovation-based pharmaceutical companies while progressing global health equity. The report captures the views of a group of investors representing a cross-section of international investors, including analysts from fundamental, impact and stewardship teams.

The Business Case for Global Health Equity: The Investor View

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Representatives from the following organisations participated in the discussion series that informed the report: BNP Paribas Asset Management, Columbia Threadneedle Investments, Legal & General Asset Management, Lombard Odier Investment Managers, M&G Investments, Nomura Asset Management, PGGM, Principles for Responsible Investment (PRI), Robeco, Stewart Investors

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The global pharmaceutical industry’s revenue and profits have predominantly been concentrated on a narrow set of 10 to 15 established high-income countries. However, the report identifies the macro-trends that signal the need for the sector to reassess this strategy:

• Emerging markets growth potential: Low- and middle-income countries are experiencing rapid economic expansion, with S&P Global [1] projecting annual GDP growth of 4% compared to 1.5% in high-income markets over the next ten years. With the middle-class population in emerging markets likely to double over the next decade, healthcare spend is set to expand.
• Improved market conditions: Governments in low- and middle-income countries are actively reforming regulatory frameworks to ease red tape as well as offering incentives to attract private sector investment.
• Operational advantages: Locating R&D and manufacturing in low- and middle-income countries can enhance research effectiveness, reduce costs, and accelerate speed to market.
• Challenges in traditional markets: Set against these trends are the growing pressures on price and margin in high income markets.

The report suggests a staged approach that pharma companies can use to evolve their current approaches to doing business in low- and middle-income countries into a self-sustaining commercial presence.

The report also gives practical guidance to fellow investors on the key questions to ask their portfolio companies to kick-start engagement on this important topic.

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References:

[1] https://www.spglobal.com/en/research-insights/special-reports/look-forward/emerging-markets-a-decisive-decade