European Pharma Mid-Caps’ US Strategies: Complexity, Scale, Talent


Three US country managers for European pharma mid-caps explain the challenges in setting up an American affiliate, as well as how best to capitalise on the abundant opportunities in the world’s biggest pharma market.


For Jorge Alderete, president Americas & SVP commercial operations at Danish firm ALK, “Market access is the most complex part of the puzzle” in the US market, something which can be difficult to explain to European headquarters.

He adds, “When I speak to my colleagues in Europe, I love to show a slide summarizing all the actors in the US healthcare system, including pharma benefit managers (PBMs), private insurance players, wholesalers and so on. Invariably the Europeans are shocked at the complexity. The system is very convoluted and difficult to explain, and all these actors take a cut, which is why drug prices in the US are so high compared to other developed countries. However, while most drugs are more expensive in the US, it is these profits that fund the innovation for new medications through research and development. Without the higher prices in the US, innovation would be reduced significantly. Many, if not most Americans, do not understand their own healthcare system.”


Market access is the most complex part of the puzzle [in the US market]

Jorge Alderete, ALK


Moreover, Alderete notes that “At the same time, Americans are very reluctant to pay out-of-pocket for drugs. Even a monthly co-pay of around USD 50 is seen as far too high, which is why pharma companies also offer coupons for most of their drugs to reduce the co-pay to USD 25 or sometimes even nothing at all.”

“In this context, it is also sometimes challenging to explain the commercial environment to our European colleagues. The US is the biggest market in the world with many opportunities, but the environment is also a little more difficult than before. Gone are the days that you can launch a new product and it becomes a blockbuster with USD one billion sales almost immediately. These days, even for the Big Pharma players, it is starting to take around five to seven years to gain the sort of traction you want for key brands. You have to invest heavily in consumer education, disease awareness, sales calls to doctors and so on.”

Aldo Donati, US CEO for Swiss outfit IBSA, has dedicated most of his career to helping European pharma companies enter and navigate the US market. Like Alderete, he underscores the importance of explaining the complexity of the US market to European headquarters.

He states that “The US healthcare system is based on a complex system of private providers and insurance companies that is regulated both at the Federal and State level. The market is very large equally geographically and demographically making commercial operations and supply logistics quite challenging and expensive to manage. Finally, the environment is in continuous evolution compounding its complexity.”


In the global economy we are operating in, the US market cannot be ignored and if successful, the financial rewards and growth opportunities can be extremely interesting for an expanding pharmaceutical company

Aldo Donati, IBSA


However, despite this complexity, both Alderete and Donati are convinced that the US market is worth the effort for European mid-caps. “The prices in the US are a lot higher than in Europe so it is a lucrative market, but some patience is needed as well for our investments to generate the kind of returns expected,” admits Alderete.

“In the global economy we are operating in, the US market cannot be ignored and if successful, the financial rewards and growth opportunities can be extremely interesting for an expanding pharmaceutical company,” adds Donati. “While larger corporations have the critical mass and leverage to more easily navigate the market complexities, smaller and medium-sized companies such as IBSA need to rely on increased flexibility of their business model, fast decision-making processes and ability to think and adopt out of the box strategies.”

Jose Antonio Moreno Toscano, now CEO for the US affiliate of iconic French firm LFB, has spent over 15 years in the US, including ten years with ALK. He highlights how the size of the US market needs to be taken into account in European mid-caps’ strategies.

“For a typical pharma company, US revenues would range between 35 to 45 percent of global revenues and represents the most important single market,” he posits. “This is a very sensitive topic for European midcaps because while the US is the largest single market, taking the European bloc as a whole, Europe is bigger. The US market is not really a country market but a continental or regional market, and that is important to understand when a company set up US operations. It is not sensible to treat US affiliates or its management as a single country. The US is much bigger and more important to the global organization so there is a need to take into consideration the individuality and complexity of the US market. In addition, the working environment, management styles and cultures in the US and Europe are very different. Being able to recognize these points of difference is probably the single best advice I could give to any European company looking to roll out US operations.”

Costs are also a key factor for Moreno Toscano. “I will also add that it is expensive to do business in the US. The cost of doing business in the US has risen faster over the past 15 years when compared to Europe. European companies need to adapt to this and accept that if they want to be part of the very attractive US market with high prices and high margins, they need to pay the price of higher costs as well.”


European companies need to adapt … and accept that if they want to be part of the very attractive US market with high prices and high margins, they need to pay the price of higher costs as well

Jose Antonio Moreno Toscano, LFB


A final key consideration for these lesser-known firms in the US market is attracting talent. Both Moreno Toscano and Alderete posit that the smaller size of these European firms is actually an important selling point in this push.

“European companies are mostly small- and medium-sized enterprises, which allow employees the opportunity to truly make a difference. In a big company, it is difficult for individuals not to feel that they are just a cog in the machine,” suggests Moreno Toscano. “At the same time, if the global organization is able to recognize the importance of the US affiliate and grant a little more autonomy in its management and operations, that increases the attractiveness of working for a European company. Employees can then feel like they are working on an affiliate with autonomy and responsibility for their work, and benefiting from the longer-term vision that European companies tend to have. US companies are much more focused on short-term quarterly results. Of course, compensation is also a significant aspect, and one that sometimes causes friction between the US and European teams, but if you can create this ‘sweet spot’ environment, then it is not difficult to attract talent.”

Alderete strikes a similar tone. “What attracts talents to our company is the ability to become part of the decision-making process. As a mid-sized European biopharma, we have a very dynamic and flat structure that empowers people to strategize and lead, not just execute the business plan. What I have heard is that decision-making at Big Pharma is top-down. Here at ALK, it is bottom-up and inclusive, which is very attractive to many experienced industry executives.”

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