2015 IMS Asia-Pacific Insight Magazine

Inside this issue
• Calculating risk and reward: Understanding and optimizing risk-sharing agreements in Asia Pacific
• Re-evaluating our relationship with data: Real-world evidence as a catalyst for success in Australia’s oncology market
• New market, new rules: Decoding China’s county hospital market
• Achieving excellence by re-engineering the hospital supply chain in India
2,000counties in
Chinac o v e r
M o r e t h a n
70% o f t h e
total population
- a r o u n d
900million people
In the next
5 years,
10 more
c o m p a n i e s
w i l l e n t e r
Australia's
o n c o l o g y
m a r k e t
Up to
40%of
hospital
c o s t s
relate to
inventory
and supply chain
p r o c e s s i n
India
IMS Asia-Pacific
InsightIssue 5 | 2015

2
Welcome letter..................................................................................................................................................................................3
Calculating risk and reward
Understanding and optimizing risk-sharing agreements in Asia Pacific.........................................................................5
Increasingly, these stakeholders and governments are faced with the dual (and sometimes contradictory) challenge of ensuring
financial sustainability and expanding access. This article reviews the types of risk-sharing agreements emerging in APAC, and
discusses the importance of developing a strong healthcare economic model to enable win-win schemes for manufacturers and
payers alike.
Re-evaluating our relationship with data
Real-world evidence as a catalyst for success in Australia’s oncology market ...................................................11
In a mature oncology market,opportunities to provide cancer patients with optimal health outcomes and cost efficient therapies
are challenging. This article will explore two drivers to improving efficiency in oncology treatment today – biosimilars and
targeted therapies – and the role credible real-world evidence can play in extracting value for the patient.
New market, new rules
Decoding China’s county hospital market ...............................................................................................................................................17
Following several years of tremendous expansion, the Chinese pharma market is now experiencing slower growth due to
increasing cost-containment measures, restrictions on antibiotics usage and maturing core markets. However, a closer look
reveals that while this is the case in top-tier cities, there remains significant opportunity for growth in the broader, county-
level market segment.
Achieving excellence by re-engineering the hospital supply chain in India.............................23
Across the globe, healthcare spending accounts for an ever-increasing portion of countries’GDPs. This sector is therefore
challenged to manage costs and simultaneously improve patient outcomes. This is particularly true in hospitals, as they often
represent the largest component of national healthcare expenditure. To manage costs better, many hospitals are taking a new
look at their supply chain, which can account for 35-40% of their overall costs.
Contents

3
Welcome letter
Driven by strong healthcare investments and socio-economic growth, Asia Pacific is
the single largest contributor to global pharmaceutical market growth and has become
the priority playing field for healthcare companies worldwide. Similar trends emerge
across the region, including cost-containment policies, a dominance of generics, and
expansion in Tier 2 cities. Yet, each country has distinct distribution channels, pricing
and reimbursement structures, and fast-evolving patient-provider dynamics that vary
greatly from one another.
At IMS Health, we are dedicated to unraveling these complex environments to help
companies run smarter, through connecting industry stakeholders across the entire
healthcare continuum and equipping companies with the insights and technology to
succeed.
In the pages to follow, you will find analyses on the hot topics and hurdles that many companies are facing, ranging from
discovering new opportunities when growth is stabilizing, to managing the mounting burden of operational costs and patient
access to innovative drugs.
Combining a wealth of data, technology solutions and our best-in-class local and regional expertise, we hope to bring you
fresh perspectives to navigate through the challenges and opportunities in this dynamic region.
In this issue, you will find:
• A discussion on how healthcare economic modeling can help manufacturers and payers in Asia Pacific
achieve win-win situations in the crisis of patient access to innovative drugs
• A roadmap to successful launches, maximized revenues and sustainable engagement in the context of
the slowing Australian healthcare environment
• An exploration of China’s county markets as a significant growth opportunity
• Recommendations on managing hospital supply chain costs in large markets like India
Moving forward with great investments in technology and service delivery, we are committed to partnering with our clients to
help them achieve success and improve healthcare outcomes across the region.
Sincerely,
Robert Chu
President Asia Pacific & China

5
While health technology assessments and economic evaluations are helpful in
calculating the value of new drug therapies in relation to their costs, the allocation
of appropriate financial resources for manufacturers and payers is a real issue.
Increasingly, these stakeholders are faced with the dual (and sometimes contradictory)
challenge of ensuring financial sustainability and expanding access.This is particularly
true in low- and middle-income countries where spending is constrained and cost-
effective reimbursement schemes are necessary to alleviate the often-prohibitive
cost of innovative treatments.
To address these challenges, stakeholders are exploring risk-sharing agreements, or
‘pay-for-performance’agreements, that link reimbursements directly to the patient
population, with either financial- or outcomes-based conditions. But entering into
such agreements has its own risks for manufacturers and payers alike, and evaluating
the potential financial impact is key to choosing a successful, sustainable model.
Calculating risk and reward
Understanding and optimizing risk-sharing agreements
in Asia Pacific
A crisis of access
Asia Pacific, like other low- and middle-income countries,
is struggling to reconcile rising healthcare standards and
patient expectations with reliable, affordable access to
necessary, often life-saving, treatments. Here, disease
categories that are considered high cost, and high risk, pose
significant challenges for manufacturers and payers who
are searching for cost-effective ways to improve patient
care in the region. Such categories include:1
• High unmet needs (e.g. Hepatitis, oncology, rheumatoid
arthritis, multiple sclerosis)
• Small populations (e.g. Acute lymphoblastic leukemia,
hemophilia, Kawasaki disease)
• Uncertain evidence bases (e.g. Drotecogin alpha, Bosentan)
More often than not, patients facing these illnesses also
face significant barriers to the innovative, but expensive,
medicines they need. Research conducted at the Southeast
Asian Cancer Care Access Network in 2011, for example,
revealed that only 15% of patients in the region had access
to the basic standard of cancer care.2
Unfortunately, in markets that are characterized by limited
funds and even scarcer resources, increasing access can
come at a high price. Risk-sharing agreements, while new
and largely untested in Asia Pacific, may offer decision
makers the structure they need to minimize financial
uncertainty and maximize healthcare outcomes.
Risk-sharing basics
The concept of risk-sharing agreements (RSAs) is rooted in
the need to create an accessible, sustainable cost structure
for manufacturers and payers as they launch innovative
medicines.
Unfortunately, the very nature of the diseases that require
high cost medical innovations means that outcomes are
uncertain. As a result, bottom line value is hard to guarantee
for both manufacturers, who must demand a profitable
initial list price, and payers, who must strategically direct
resources to those treatments that deliver the greatest
value to the overall health system. Nevertheless, attempting
to value a drug’s clinical and economic effectiveness is
becoming a major factor in both launch and reimbursement
decisions.
In effect, RSAs are alternative pricing schemes that use
patient population and outcome data (clinical or financial)
to reduce the cost of treatment without affecting the list
1.
Coulton,Lisbet,et.al.Outcomes-basedRisk-sharingSchemes:IsThereaPotentialRoleintheAsia-PacificMarkets?HealthOutcomesResearchinMedicine,Vol.3,Issue4,Nov.2012,Pagese205-e219
2.
Lopes,GilbertodeLima,“IssuesinAccesstoCancerMedicationsinLow-andMiddle-IncomeCountries,”CancerControl,2013.

6
Calculating Risk and Reward:
Understanding and optimizing risk-sharing agreements in Asia Pacific
price – increasing access for patients while decreasing the
burden on manufacturers and payers.
• For patients, RSAs reduce the cost burden of
co-payments and increase access to the newest therapeutic
advances, thereby improving overall health outcomes.
• For manufacturers, RSAs preserve the list price of drugs,
avoiding any negative ripple affects when lower, market-
specific prices are referenced by other countries. They
also help“build trust and good faith in products with
payers by providing their therapeutic value via real-
world evidence collections.”3
• For payers, RSAs are intended to“diminish the impact
on the payer’s budget…brought about by either the
uncertainty of the value of the medicine and/or the
need to work within finite budgets.”4
Although there is still some uncertainty or variation in
definition, there are fundamentally three types of risk-sharing
agreements:
• Finance-based: Such agreements base the conditions
for reimbursement on an overall patient or disease
population, and can include caps on per-patient costs,
sales volumes, or dual-price deals.
• Outcomes-based: These are referred to as pay-for-outcome
or performance-based agreements, and set conditions
on a pre-determined outcome or response to treatment.
Here, the manufacturer guarantees a certain level of
performance and reimbursement is handled on a
per-patient basis.
• Coverage with evidence development: Here, access is
granted on a conditional basis while evidence is gathered
over a defined period. Such an agreement enables
payers to simultaneously increase the availability of a
treatment, while gathering real-world data on its
effectiveness.
While RSAs are still relatively new, they are proving to be
a viable option for both payers and MNC manufacturers,
both of whom are keen to play a role in improving patients’
access to medicines. According to the International Society
for Pharmacoeconomics and Outcomes Research (ISPOR),
outcomes-based agreements in particular“are increasingly
part of pricing models for the development of new molecules.”
But how can stakeholders avoid entering into agreements
that could be financially non-viable, or unsustainable in the
long-term?
The budget-impact model
Again, the irony of risk-sharing agreements is that they are
designed to mitigate uncertainty for therapies (such as
oncology) where outcomes are, in fact, the most uncertain.
This dynamic is further complicated by the fact that outcomes
will vary by product, indication and, sometimes, patient
populations. Arriving at a‘win-win’arrangement for
manufacturers and payers, therefore, requires developing a
model that analyzes a range of unique variables to quantify
the impact of a given agreement on revenue, cost and
profitability. With this information, stakeholders can then
settle on a proposed scheme that has the best likelihood of
meeting the desired business outcomes.
The backbone of a budget-impact model (BIM) is an intricate
web of variables, including local demographic, epidemiologic
and market data, taking into account local clinical practices
and relevant healthcare financing features. Of course the
features of the potential agreement schemes must also be
included to ensure relevant and focused analysis. The key
is to ensure that the BIM is flexible enough to allow the
interplay of all input values.
“Payers and manufacturers are both invested in improving
patients’access to innovative therapies,”explains Seng Chuen
Tan, Director, HEOR and Real-World Evidence at IMS Health
Asia Pacific.“But by necessity they want to minimize the risk
of financing treatments with uncertain value. Risk-sharing
schemes offer a good option, but all the pricing and budget
parameters of any given formulae must be carefully assessed.”
3.
Hunter, Glasspool, et. al“A Literature Review of Risk-sharing Agreements”J. Korean Academy of Managed Care Pharmacy Vol. 2, No. 1
4.
Adamski, Jakub, et al.,“Risk sharing arrangements for pharmaceuticals: potential considerations and recommendations for European payers,”BioMed Central, 2010.
Example:
In 2014, South Korea’s Ministry of Health and Welfare (MOHW)
began piloting risk-sharing schemes with manufacturers in
order to improve access to innovative medicines that fulfill the
criteria for “semi-essential drugs.” The MOHW has laid
out four finance-based risk-sharing options available to
manufacturers: expenditure capping, utilization capping,
dual price, and outcome-based cost sharing.
Example:
In2000AIFA(ItalianMedicinesAgency)launchedtheCRONOS
project to evaluate the real-life effectiveness of Alzheimer’s
disease drugs. Theirmethodology included collecting and
analyzing well-defined health outcomes from a cohort of
patients. In the study, the public insurer reimbursed the cost of
medication only forthosepatientswhohadrespondedafter4
monthsoftreatment(thecostoffornon-responderswascoveredby
manufacturers)

7
Narrowing a list of potential RSAs to evaluate is a key priority,
and usually requires deep discussion between experts in
Health Economics and Outcomes Research, Medical Affairs,
Clinical Research, and Commercial. Once a short list of RSA
structures are selected, the model can be built to accept the
specific features of the deals under evaluation, such as:
• The number of treatment cycles to be covered by each party
• The sequence of treatment protocols
• The point at which outcomes will be measured for a
performance-based structure
Using baseline costs as a starting point, a well-constructed
BIM will be able to estimate projected costs that account
for a myriad of input values.Then, by looking at the difference
between baseline and projected costs, the net budget
impact can be determined (See Fig. 1).
Keys to success
Of course the best BIMs are tailored to the proposed agreement
and the intricacies of the treatment in question. However,
in some cases it is possible to use an existing model that has
been built around similar (though not identical) parameters.
To ensure any model delivers the best possible results,
though, the following principles must be in play:
1. It must be designed specifically to accommodate the
treatment indication in question
2. It must be designed to reflect local clinical practice and any
unique features of the healthcare delivery system
3. The perspective of one party in the proposed arrangement
(meaning the manufacturer, payer, or patient) must be
clearly articulated
4. All inputs must be evidence-based, supported by a
Randomized ClinicalTrial (RCT), scientific publication,
or established data source, as examples
5. The basic design elements must include the time horizon
of the scenario and the desired model results (e.g. total
costs or cost breakdown between drug costs and safety
monitoring)
6. When modeling performance-based schemes, the desired
performance must be both defined and quantifiable
But regardless of the source, designing a feasible scheme
means looking at all the angles.“The most meaningful risk
sharing schemes are ultimately the ones where all possible
uncertain factors are evaluated, and the model is supported
by the best available evidence,”concludes Mr. Tan.
Fig. 1: The structure and outcome of the budget impact model
Baseline
Costs
Product
Variables
Number of eligible patients
Drug adoption rate
Number of treatment cycles
Treatment delays
Dropout rates
Responder rates
Costs incurred if no
coverage or no
risk-sharing agreement
Budget Impact Model
Net Budget Impact
Projected Costs
Costs arising from covering the product
Baseline Costs
Costs incurred if no coverage or no risk-sharing agreement

8
Calculating Risk and Reward:
Understanding and optimizing risk-sharing agreements in Asia Pacific
SUMMARY
Across Asia Pacific, developing creative, alternative pricing schemes across the value chain, from manufacturers to
payers is essential to ensuring patients across the region receive affordable, sustainable access to even the most
innovative treatments.
Risk-sharing agreements provide a unique and powerful vehicle to achieve these goals, delivering‘win win’outcomes
for all stakeholders. However, finding the best scheme often means weighing a multitude of variables to ensure that the
final agreement is both financially viable and sustainable, and ultimately able to deliver reliable benefits to the patient.
A well-designed budget impact model enables an objective, informed perspective on the impact of various schemes in
advance of proposals between payers and manufacturers, and ultimately becomes a key tool in the ability of stakeholders
in the region to increase both access and affordability.
To continue the conversation, please contact
Seng Chuen Tan, Director, HEOR and Real-World Evidence, IMS Health Asia Pacific at sctan@sg.imshealth.com and
Joe Caputo, Regional Principal, HEOR and Real-World Evidence, IMS Health Asia Pacific at jcaputo@sg.imshealth.com
In this scenario, a scheme was designed using the best available clinical evidence. A win-win situation was achieved by
improving access for more patients, which also meant stronger uptake and revenue for the manufacturer.
2014
2015
2016
2017
2018
¥ 20,000,000 ¥ 40,000,000 ¥ 60,000,000 ¥ 80,000,000 ¥ 100,000,000 ¥ 120,000,000 ¥ 140,000,000
Sample business impact model results
Base case
Scenario 1
Revenue
@IMSHealthAPAC
IMS Health Asia Pacific

9
IMS Real-World Evidence Solutions & HEOR is a
scientifically credible partner to pursue more impactful
HEOR and increase the reach of your insights.
IMS Health is committed to helping you succeed
• Largest global team with HEOR, epidemiology, drug safety and
RWE expertise based across 18 countries
• Strong scientific voice reflected in over 2,500 publications
• Market leadership in developing and adapting robust
economic models
• Established success in generating and communicating RWE
to advance stakeholder engagement, including guideline
development, compliance program management and managed
entry agreements
• Most advanced RWE capabilities and technology driving
powerful scientific and commercial insights, including data
sourcing, warehousing, integration, curation and protection
• Broadest and deepest collection of scientifically validated,
anonymous patient-level data assets, enabling therapy area,
market-specific and global insights
RWE is ready to unleash the power of HEOR
Europe +44 (0) 20 3075 4800
USA +1 (703) 837 5150
Asia Pacific +65 6412 7365
Latin America +52 55 5089 5205
RWEinfo@imshealth.com
www.imshealth.com/rwe
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© 2015 IMS Health Incorporated and its affiliates. All rights reserved.
Trademarks are registered in the United States and in various other countries.
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TECHNOLOGY-ENABLED ANALYTICS
SERVICES AND ENGAGEMENT

11
From almost any angle, the Australian oncology market is
robust. Currently the 10th largest oncology market worldwide,
annual sales for the sector totaled AU$1.5 billion in 2014.1
Such figures are especially significant when considered in the
context of the larger Australian prescription market, which
has been experiencing slowing growth over the past 5 years
(see Fig. 1).
In Australia, growth in oncology is largely driven by the high
market need for activity and progress in R&D and treatments;
1 in 2 Australian men and 1 in 3 women will develop some form
of cancer (malignant or benign) in their lifetime, and 1 in 4 men
and 1 in 6 women will die of cancer before the age of 85.2
Many pharma companies have already identified potential
gaps in treatment options, and have committed to providing
oncology patients in Australia with better value: 43 companies
have active operations, with a total of 93 molecules on the
market. In the next 5 years, 10 more companies are poised to
enter, and 72 molecules will be submitted for reimbursement.3
However, though opportunities to capture market share may
seemabundant,anincreasinglydifficultregulatoryenvironment
and an even more complex patient landscape is creating a
gauntlet for companies who want to build or expand their
oncology portfolio in Australia. Here, as in the rest of the world,
scrutiny of both products and patients is intensifying, driving
the need for credible, long-term data into the spotlight.
An evidence-based strategy for oncology
The value of real-world evidence (RWE), or patient-level
data, to inform clinical and commercial decision making
is increasingly being recognized across healthcare, and
particularly in oncology. It has proven to be a key ingredient
in driving successful strategies across the product lifecycle:
• Pre-market – enabling more focused, informed R&D and
clinical trial design
• Post-market – enhancing pharmacovigilance, epidemiology,
patient compliance and other treatment insights (seeFig.2).
Source: IMS MIDAS, Dec 2013. Pharmerging includes retail only for Brazil and Mexico.
Oncology includes therapeutic treatments as well as supportive care, radiotherapy, and immunotherapies
Fig. 1: Evolution of Australian total prescription market
vs. oncology market
0
2010 2011 2012 2013 2014
4
2
6
8
10
12
14 9%
6%
3%
0%
-3%
-6%
-9%
-12%
Sales AU$B Growth
1.2
3.0%
6.7%
8.4%
6.8%
0.3%
4.2%
-1.2% -0.9%
1.3 1.4 1.51.1
Oncology market growth Total prescription markets
Total prescription market growth Oncology market
Source: IMS MIDAS (based on actual ex wholesale transaction price), MAT Dec 2014
In an ever evolving oncology market, with mature categories like alkylating agents
and cytotoxic antibiotics coupled with innovative targeted therapies like Keytruda
and Opdivo coming to market, the need for sound economic arguments is critical
for success. In the global oncology market, the application of real-world evidence
(RWE) can help life science companies not only achieve launch success but maintain
ifferentiated positions in their market. Nowhere is this more evident than Australia.
This article will explore two drivers to improving efficiency in oncology treatment today
– biosimilars and targeted therapies – and the role credible RWE can play extracting
value for the healthcare stakeholders.The end result could include better market
access, more directed patient engagement strategies, and ultimately a more valued
healthcare provider in Australia’s complex oncology landscape.
Real-world evidence as a catalyst for success in Australia’s
oncology market
1.
IMS MIDAS, MAT December 2014 (Ex-Manufacturer Price).
2.
http://canceraustralia.gov.au/affected-cancer/what-cancer/cancer-australia-statistics.
3.
Medicines Australia Oncology industry taskforce report,“Access to Cancer medicines in Australia,”July 2013;

12
Oncology includes therapeutic treatments as well as supportive care, radiotherapy, and immunotherapies
Real-world evidence as a catalyst for success in Australia’s oncology market
From an even broader perspective, RWE is helping to
chart the path toward value-based medicine. In this model,
patients become more than just the sum of doctor visits;
each patient is a unique mix of personalized experiences,
behaviors and preferences. RWE not only helps to elevate
an understanding of end-users, but also enables a more
effective use of resources that efficiently and proactively
caters to the needs of these individuals.
RWE’s future, however, is not without challenges. Australia,
like other countries, has had to confront a number of
ancillary concerns around the collection and use of RWE,
including privacy, consistency and objectivity. Generating
and collecting credible data, in particular, has proven to be
challenging, with many pharma companies in Australia mainly
relying on clinical trials and basic primary market research.
As a result, RWE has not been widely applied by Australian
commercial decision makers to date, even though a range
of formalized, sophisticated data is available (see Fig. 3).
But when the game changes, so too must its players.
As the types and prevalence of cancers rise in Australia, and
the market continues to fragment, opportunities emerge to
target specific markets to generate value. Certainly for niche
or less common cancers, where the patient population is too
small for controlled evaluations, RWE can compliment clinical
trial data to critically expand the universe of information
available.
Furthermore, when sourced and used appropriately, RWE can
enable“a move from effectiveness projection to effectiveness
measurement”4
– a significant benefit especially in markets
such as Australia where the regulatory and stakeholder
landscape is placing a high premium on pharmacoeconomics.
And so identifying, evaluating and capturing new market
segments may require a new approach to information –
where it comes from, how it is used (both pre and post
launch), and how it can bridge the gap between the patient
and pharmaceutical companies.
4
IMS Health AccessPoint: Volume 4 Issue 8, p. 7.
Fig. 2: Applications of real-world evidence in oncology
Fig. 3: Heterogeneity of RWE across the Asia-Pacific region: Illustrative drivers and market comparison
Research and Scientific Commercial Application
Clinical Outcomes Measurement Access and Pricing
Treatment Pattern Understanding
Clinical Pathway Understanding
Safety and Value Demonstration Launch
Patient Identification
Marketing Campaigns, Ongoing
Commercial Activities
Comparator Selection Partnering and Value-Added Services
Use of RWE in
oncology
Source: IMS AccessPoint, Oncology Special Edition, May 2014 Not a complete list of RWE applications
India
China
Japan
Australia
Taiwan
South Korea
Formalized evidence in access
Accessibility of sufficient data
Value with commercial decision makers
Standards, methods, legal structures in place
Compelling market fundamentals
Low
Low
Low
Low
Low High
High
High
High
High
Source: IMS Health AccessPoint, Volume 5, Issue 9

13
Biosimilars in Australia: Data-driven access
Globally, as an increasing number of biologic oncology
drugs approach patent expiry, the market value of
biosimilars is set to soar, reaching US$12 billion by 2020.5
In Australia, biosimilars will play an increasingly important
role in the market as a way to mitigate rising healthcare
costs. Especially in the oncology market, biosimilars can
also offer an opportunity for pharma companies to broaden
their portfolios and ensure continued growth in the face of
increasing market fragmentation.
However for most mature markets, including Australia,
there are significant barriers to entry, including:
• Higher development costs, as compared to generics
• High regulatory hurdles
• Brand recognition of original biologics
• Low price differentials from biologics (largely the result
of price negotiations undertaken by the biologic
manufacturer with hospitals as patent cliffs approach)
• Competition with generics
Australia’s access pathway for biosimilars is particularly
complex and highly regulated, with the Therapeutic Goods
Association (TGA) relying heavily on clinical proof in approval
decisions.The process can also be quite lengthy, especially
for oncology, with most products requiring two or more
submissions, price reductions and even risk-sharing agreements
(see Fig. 4). For biosimilars, the process is often duplicative,
demanding thorough, case-by-case-assessments for entities
that are often already approved by other regulatory bodies,
such as Europe’s EMA.6
In other words, each biosimilar product
introduced in Australia represents a brand new challenge,
despite its approval history worldwide; registration in Europe
does not necessarily guarantee registration in Australia,
despite nearly identical legislation.
Unfortunately, in oncology where treatments are time-
sensitive and often have uncertain prognoses, navigating
these prolonged legislative and regulatory requirements
can prove to be a prohibitively high barrier.
But the right data can drive much-needed expediency
and more successful outcomes. In fact, so critical is data
to Australia’s process that manufacturers are encouraged
to have a pre-submission meeting with the TGA to fully
understand the scope of data requirements.8
The market for biosimilars is also challenging at the other
end of the value chain. Because bioequivalence cannot
truly be shown, patient safety concerns – especially
immunoreactivity – are high, resulting in reluctance from
both doctors and patients. Also impacting uptake is a
limited awareness and understanding of variations in
sensitivity, cost and medical risk beyond clinical trials
and other controlled environments.
5
IMS Institute for Healthcare Informatics, May 2014, Global oncology trend report, p39 (note: assumes a developed US market).
6
Sanson, Lloyd, et. al“Review of Medicines and Medical Device Regulation”, Discussion Paper, November 2014.
7
http://medicinesaustralia.com.au/files/2013/07/140323_OIT_Wonder-Report_FINAL.pdf.
“As the sales of cancer treatments rise to
$100bn annually, more intensive scrutiny
of this market can be expected and a
deeper understanding of global oncology
trends will be required by all stakeholders.”
IMS Institute for Healthcare Informatics, May 2014,
Global Oncology Trend Report
Source: Reimbursement success rates and
timelines for new medicines for cancer;
An international comparison, February 2014 7
Fig. 4: Australia’s submission requirements for oncology products
Subsequent PBS listing
Number of submissions required
Number of submissions
1 2 3 4 8
0
1
1
2
2
3
4
4
5
5
6
6
Numberofproducts
Average: 2.5
Price reduction or risk-share agreement
Price reduction
Risk share agreement
56
44
44
56
No
Yes
First PBS listing
Number of submissions required
Price reduction or risk-share agreement
Price reduction
Risk share agreement
92
50
8
50
Average: 2.3
Number of submissions
1
0
2
4
6
8
1
2
22
7
3 4
Numberofproducts

14
Real-world evidence as a catalyst for success in Australia’s oncology market
Here, credible patient-level data can alleviate concerns over
the unknown by delivering real world outcomes rather than
trial-based hypotheses. Such information also provides a
strong foundation for ongoing education and awareness
campaigns that, over time, can address incorrect or
misinformed assumptions about biosimilars.
And so, RWE will prove to be a windfall for those who are
able to generate and/or access it, enabling
a more complete assessment of biosimilarity
a thorough review of safety, quality and efficacy in
real-world settings
enhanced post-market pharmacovigilance
Targeted therapies
Just as biosimilars offer opportunities for cost reduction,
targeted therapies offer specific patients improved outcomes.
For pharma companies, targeted therapies also offer an
opportunity to achieve a greater penetration in these patient
segments and a more focused approach in supporting their
treatment needs.
Extracting the optimal value of targeted therapies is inextricably
linked to understanding patient pathways through disease
and treatment.Traditional research into the“patient journey”
is now being recognized as incomplete, focusing only on the
physician and bypassing key moments and behaviors for the
patient, pre- and post-visit. Building a better picture of the
patient has thus become a key application of RWE around
the world, driving more relevant launch strategies, marketing
campaigns and commercial planning.
In Australia, just as RWE can provide a foundation for
successfully navigating the regulatory environment, it can
also deliver a better, fuller understanding of the patient
experience. Such insights, gathered and linked from multiple
sources of information, can support significantly more
focused, more patient-centric engagement strategies.
Unfortunately, the ability (and willingness) to find credible,
anonymized, longitudinal patient data outside traditional
outlets has, to date, been limited.
But doing so could have considerable payoffs across the
value chain:
• Enabling pharma companies to realize unmet needs and
growth opportunities in the oncology market
• Empowering stakeholders across the journey (clinicians,
pharmacists, advocacy groups)
In the state of Victoria, such efforts are in fact underway
with the development of Patient Management Frameworks
(PMFs), which have been developed to encourage a statewide
approach to comprehensive care management. These PMFs
are tumor‑specific and are designed to describe, manage
and support care across the patient journey.
To succeed, then, will ultimately mean embracing creative,
innovative approaches to unlocking insights from multiple
channels and stakeholders, two of which are described here:
Personal Electronic Health Records
In 2012, the Australian government launched the
Personally Controlled Electronic Health Record (PCEHR)
system, marking the beginning of a new source of patient
and disease insight. Who, when, where and how are all
dynamics of healthcare delivery that are increasingly
being stored in shared electronic health records.
As a result, these records are becoming a veritable
treasure trove of longitudinal patient data and insights
into real-time treatment pathways.
With appropriate levels of privacy/access, patients and
providers alike have the opportunity to make more
efficient, more informed decisions about the trajectory
of care. Such data also provides pharma companies with
a unique opportunity to understand disease populations
from the patient’s perspective, uncovering latent behaviors,
preferences and unmet needs.
Patient Apps
The mobile healthcare app model is still in its nascent
stages, both in Australia and worldwide—though the
volume of apps available is high, functionality and uptake
is low. For those that are successful, the focus is primarily
on prevention and wellness, rather than on specific
therapy areas (though there is certainly a cluster of
disease-specific apps, especially for chronic conditions).
“Lessons learned from bio-pharma
oncology commercials teams indicate that
winners will leverage RWE in areas such as
key opinion leader and patient advocacy
engagement, messaging…and physician
and patient segmentation.”
Chirag Ghai, Director Real World Evidence Solutions & HEOR, IMS Health
[IMS Health AccessPoint, May 2014; Vol 4, Issue 8]
8
Journal and Proceedings of the Royal Society of New South Wales,“An overview of biosimilars”vol. 147, nos. 451 & 452, pp. 77-83

15
The future opportunity, however, is anything but limited.
As the model matures, and hurdles such as privacy,
reliability and standardization are addressed, healthcare
apps are poised to become a systemic part of healthcare
management and clinical evidence. Already in Australia
apps such as Bowel Cancer, ClinTrialRefer and other
disease-specific apps are in place, offering the potential
for – at the very least – closer, more knowledgeable
relationships between pharma companies and the end
users of their product.
Chris King, Head of Oncology, IMS Health Asia Pacific & China at cjking@sg.imshealth.com
or Sashindran Anantham, Analyst, IMS Consulting Group at sanantham@imscg.com
Summary
The oncology market in Australia is full of possibilities. New products, new policies and a newly visible and authoritative
patient population are all generating significant openings for pharma companies to generate meaningful value and a
competitive edge. Biosimilars represent a significant inroad to this new world, as does the development and understanding
of the patient pathway. Both offer access to the cutting edge of healthcare strategy, opening the door to previously
untapped segments and generating wholly new sales and marketing opportunities.
But capturing these opportunities might mean re-evaluating long-held hesitations about the value and use of real-world
evidence. Such data might need to be elevated beyond superfluous and understood as a necessary prerequisite to play.
Even a cursory look at Australia’s current market, regulatory and stakeholder intricacies makes clear that companies
across the healthcare value chain must find and embrace credible data to support their biosimilar and patient engagement
strategies – or risk losing out to better-equipped, better-informed competitors.
@IMSHealthAPAC

17
Shifting focus
The Chinese pharma market is undoubtedly still expanding.
But rather than a simple upwards trajectory, the trend is
instead evolving and restructuring. As the economy grows,
and as healthcare reform initiatives place more emphasis on
providing access to quality care in lower tier cities and county
areas, it is clear thatTier 1 and 2 cities are no longer the only
(or perhaps even the best) sources for capturing market share
and bottom line growth. Indeed, the entire structure of the
Chinese pharma market is expected to shift over the next five
years, with the county hospital market growing both in size
and strategic importance (see Fig. 1).
“County hospitals”are defined as those that are located either
in county cities or in counties outside of the urban boundary
of the prefecture city (most falling within the designation of
Tier 3-5 cities). These facilities are primarily Level II hospitals
with an average size of 300 beds. With nearly 2,000 counties
in China, this market covers approximately 900 million people
— more than 70% of the total population.
But it is more than sheer volume that makes this market
attractive.Today it is estimated that county hospitals account for
about 20% (~200 billion RMB, at retail price) of the total China
pharmaceutical market value. And although a preliminary
IMS Health study estimates that the average county spends
approximately 73 million RMB on drugs annually, counties are
rapidly evolving and hospitals are upgrading; some counties
have Level III hospitals with more than 800 beds and such a
county could spend more than 300 million RMB on drugs.
The shift in attention and investment from urban to county
markets is apparent when looking at changes in MNC
behavior; since 2009, MNC market share in county hospitals
has increased from 13% to 15%, and in some of the more
economically developed provinces, such as Zhejiang, it has
already reached 27% (see Fig. 2). Significantly this increase
has happened in tandem with a decrease in market share of
MNCs in urban hospitals from 35% in 2009 to 33% in 2014.
For the majority of these companies, the move to the county
market currently means relinquishing market position. Pfizer
Following several years of tremendous expansion, the Chinese pharma market has
slowed to a growth rate of 12-14%, due in large part to increasing cost-containment
measures, restrictions on antibiotics usage and maturing core markets. However, a
closer look reveals that although this is the case in top-tier cities, there still remains
significant opportunity for growth in the broader, county-level market segment.
FormostMNCs,reachingthissegmentwillrequireasignificantstrategicpivot.County-
levelmarketsexhibitdifferentdynamicsthanthecoremarkets,drivenbyfactorssuch
asgovernmentpolicies,physicianandpatientcharacteristics,andsalesanddistribution
models.Inordertosucceedinthisnewandrapidlyevolvingsegment,companieswill
needtoinvestinunderstandingthedistinctcharacteristicsofthissegmentandadjust
theirbusinessmodel–andtheywillneedtodoitquickly.
Decoding China’s county hospital market
Fig. 1: Estimated market share changes within the
hospital segment 2014 vs. 2020
Urban hospitals
County hospitals
2014
0%
30%
30%
60%
10%
40%
40%
70% 70%
60%
90%
20%
50%
80%
100%
2020
Source: IMS Health analysis

18
Fig. 2: Share of MNCs vs. local companies in county hospitals in selected provinces
Decoding China’s County Hospital Market
and AstraZeneca, for example, occupy the top two positions
in the overall hospital market in the top 6 provinces. However,
looking only at the county hospital market in these regions
reveals that they are not even in top 5 positions (see Fig. 3).
And while there are some exceptions – notably Novo Nordisk
– MNCs will need to make an effort to understand how, and
where to play in this new market to maintain or grow their
position.
Zhejiang
Sichuan
Jiangsu
Henan
Guangdong
13%
Fig. 3: Top 15 corporations in county hospital in 6 provinces*
Source:IMSCountyHospitalAudit2014.
*The6provincesincludeGuangdong,
Henan,Jiangsu,Shandong,Sichuan
andZhejiang
Rank — County Hospitals Rank — All HospitalsTop 20 Corporations
KE LUN GROUP 1 5
JS. YANGZIJIANG FTY 2 3
SHANDONG RUIYANG 3 13
C.T-TIANQING GP. 4 8
QILU PHARM GROUP 5 4
ASTRAZENECA GROUP 6 2
PFIZER GROUP 7 1
GUANGXI WUZHOU FTY 8 19
SHANDONG LUOXIN PH 9 24
JS. L. Y. G. HENGRUI 10 6
SANOFI GROUP 11 7
SD. LUKANG GROUP 12 23
NOVO NORDISK GROUP 13 25
SIHUAN GROUP 14 16
SHANGHAI FOSUN PH 15 18
Source: IMS Hospital Audit (>=100 beds), IMS County Hospital Audit (>=100 beds), 2Q2014
Shandong
27%
16%
7%
8%
14%
LOCAL
MNC

19
While the county market undoubtedly presents an attractive
opportunity, it also comes with significant complexities.
Pharma companies interested in moving into this segment
should be aware of four key characteristics that set it apart
from core urban markets:
1. Access and health reform policies
Many of the recent healthcare reforms in China have been
directed at improving the overall standards and quality of
healthcare in counties and county-level cities. Nevertheless,
current access policies still present considerable challenges
for pharma companies:
• Lower reimbursement coverage
Today, more than 60% of patients in this market are
covered by the New Rural Co-operative Medical Scheme
(NRCMS). However, this scheme offers significantly lower
reimbursement coverage than its urban counterpart,
especially for severe diseases. Very expensive drugs,
therefore, will not fit in this market.
• Hospital drug expenditure capping
In the county hospital market, the government has put
a monetary cap on insurance payments granted to each
hospital. As a result, if the total volume of sales for a
product is too high in any one hospital, that product
will be removed and future entries delayed. Pharma
companies should thus consider marketing a broader
portfolio rather than relying heavily on one or two products.
• Outsourcing of the hospital pharmacy
County hospitals are increasingly obliged to adopt a zero
markup for the drugs they dispense. To compensate
for the resulting profit loss, many county hospitals have
outsourced the procurement of drugs to two or three
distributors who will provide guaranteed rebates for
the hospital. Thus, distributors have become critical
stakeholders, and engaging with the right ones early
is critical for achieving a better position.
2. Physician needs
As with any market, strong physician relationships and
communications are vital to ensuring the successful adoption
ofproductsandtherapyregimens. However, pharma companies
will quickly discover that the needs of county-level physicians
vary significantly from those of their urban peers.
• Education & communication
County physicians are less well-trained and often lag
behind the core market in terms of awareness of the
latest disease diagnosis and management, new products,
and treatment options. Therefore, they rely heavily on
sales reps for information and support regarding disease
management and optimal drug usage.
This reliance on sales reps naturally leads county
physicians to place enormous value on the development
of long-term, stable local relationships with their
suppliers, a demand pharma companies must consider
when developing their sales and marketing strategies.
• Academic promotion
Academic activity is currently lacking in this market, but
is essential to building the skills, product knowledge
and disease awareness of physicians in this market.
Here, such activity needs to be adopted at a local level,
ensuring maximum relevance and resonance with
the physician audience.
Being able to support and improve the capabilities of rural
physicians will become even more important in the next
five years. Not only will patient demands continue to push
for better diagnostic skills, healthcare reform plans will be
pushing for better capabilities of physicians, upgrading
county hospitals to treat a wide variety of diseases and
become better linked through telecommunications to
urban Level III hospitals for consultation and support.
3. Fragmentation
Unlike top-tier cities, where sales reps can approach multiple
major hospitals and a range of outlets easily, the county
market is geographically dispersed and fragmented.
• China has almost 2,000 counties and county cities, and
within each county there is only one major People’s
hospital and one TCM hospital.
• Across the 1,800+ counties, only 7% of counties have
drug sales exceeding 200 million RMB while 55% of counties
have sales of <50 million RMB (see Fig. 4).
Such an environment requires a markedly different approach
for companies, who may need to embrace a variety of new
sales strategies in order to cover such a large surface area
and to compensate for low spending to meet their targets.
Here, the traditional product-focused sales rep will be both
less effective and less efficient in capturing the value and
volume necessary to succeed.
4. Portfolio demands
In serving rural populations, county hospitals face different,
but rapidly changing characteristics that require a modified
portfolio of products versus their urban counterparts(seeFig.5).

20
New Market, New Rules.
Decoding China’s County Hospital Market
First, county hospitals have less division of specialties.
Departments such as endocrinology or nephrology are grouped
into internal medicine or cardiology, and rarely are there
oncology or neurology specialists. Patients with these diseases
are likely referred to the Level III hospitals in big urban centers.
Second, lower incomes and lower disease awareness
among rural patients combine to drive demand for simple
treatments, focused primarily on TCM, cheaper antibiotics
and local generics. This population is less likely to request
sophisticated, branded drugs – especially those that require
a complicated treatment regimen. However, as county
hospitals are upgraded to provide more comprehensive
medical services, this drug usage pattern is likely to change
and get closer to that of urban hospitals.
Finally, from a disease pattern perspective, diseases such
as hypertension, diabetes, coronary heart diseases and
respiratory infections are becoming more prevalent in rural
areas, driving a greater need for associated therapies.
To respond to these unique market characteristics of this
segment proactively, and to ensure that investments deliver
the necessary returns, MNCs will need to address three key
questions:
• Portfolio selection: What is the right portfolio for the
county market, considering lower affordability, changing
disease patterns, limited types of specialists and a widely
dispersed hospital environment?
• Sales coverage: What is the best sales coverage model
in the county hospital segment, considering the
fragmented market, physicians’needs and pharmacies’
practice of outsourcing? How might strategies such as
e-detailing and social media be leveraged to improve
sales coverage?
• Commercial models: What type of commercial model
will be the best fit for a given portfolio, taking into
account distributor dynamics, internal sales capabilities,
ROI requirements and appetite for risk?
Of course such strategic decisions must also be complemented
by a thoughtful, detailed implementation roadmap that
prioritizes provinces and counties for entry. Such an evaluation
should consider factors such as the current state of county
hospital reforms, the progress of the medical insurance
system, and the extent of control over drug usage.
By adopting this comprehensive approach, companies will
be able to deliver a relevant, responsive and sustainable
strategy for entering and thriving in China’s county hospital
market.
Fig. 5: Leading therapy areas in county vs.
urban hospitals in 2014
Source: IMS County Hospital AuditSource: IMS Analysis
Various
Mainly TCM
21.8%
20.5%
13.1%
12.4%
9.7%
8.4% 7.4%
7.5%
9.6%
5.1% 4.4% 5.0%
11.1%
3.7% 3.6%
2.5% 2.6%
9.6%
17.5% 17.2%
Hospital
Solutions
Digestive
and Metabolism
Blood & Blood-
forming Organs
Respiratory
System
Anti-
Infective
Central
Nervous System
Cardiovascular
Oncologic &
Immunology
Musculoskeletal
System
Market share in county hospital
Market share in urban hospital
Fig. 4: Distribution of market size of counties
2013EstimatedMarketSize**(RMB)
55%
# of Counties
<50 mil
0 400 1000200 800600 1200
201-500 mil
101-200 mil
50-100 mil
>500 mil
25%
13%
6%
1%
*Include county and county city; **More than 100 beds hospital market size;

21
Mandy Chui, Head of Thought Leadership and Pharma Insights, IMS Health China at mchui@cn.imshealth.com
and Hua Su, Principal, IMS Health China at hsu@cn.imshealth.com
Summary
China’s county hospital market presents significant and exciting opportunities for pharma companies who recognize that
they are approaching a critical saturation point in the large hospitals and large cities. Indeed, entering this market is quickly
becoming a“must win”rather than a“nice to have”if MNCs wish to maintain their leading position in the China pharma market.
But winning in this segment will undoubtedly requires a different, or at the very least a shifting business model.
Identifying the right portfolio, sales coverage and commercial model are critical success factors.
And while there is no formula for guaranteed success, those MNCs that are able to act quickly, prepare for change and
remain flexible, will be well-positioned to take leadership positions in the county hospital segment.
@IMSHealthAPAC
SpecialthankstoJordanLiu(SrConsultant,IMSHealthChina), Race Shen (Sr Manager, Product Management & CS,
IMS Health China) and Joey Wang(Manager, Product Management, IMS Health China) for their contribution to this article.

23
Across the globe, healthcare spending accounts for an ever-increasing portion
of countries’GDPs. This sector is therefore challenged to simultaneously manage
costs and improve patient outcomes. This is particularly true in hospitals,
as they often represent the largest component of national healthcare expenditure.
To manage costs better, many hospitals are taking a new look at their supply chain,
which can account for 35-40% of their overall costs. In fact, today it is usually the
second largest expense on the balance sheet after labor, and may even take the
top slot by 2020. An optimal supply chain management (SCM) system can improve
a hospital’s bottom line dramatically and create a competitive edge by improving
operational efficiency, reducing costs, and ultimately improving stakeholder
satisfaction. Such solutions are particularly relevant for countries such as India,
where intensifying competition, low margins and increasing pressure from payers
have created an urgent need for better cost-management strategies.
Achieving excellence by re-engineering
the hospital supply chain in India
Rising costs, rising expectations
Mature and developing markets alike share a common
challenge: the cost of healthcare is climbing rapidly.
In 2013, U.S. healthcare spending accounted for 18% of
the GDP, up 9% since 1980 and on track to reach 20% by
the end of the decade.1
In the Middle East and North Africa
region, healthcare spending as a portion of GDP has been
growing at an average annual rate of 15%.2
And in India,
4% of the GDP is spent on healthcare, with an astonishing
60% of expenditures coming out-of-pocket (among the
highest in the world).3
This escalating trend is the result of multiple factors, from
increasingly expensive technologies and drug development
initiatives, to rising insurance claims and reimbursement
burdens.
In any country, hospitals are at the core of the healthcare
system, and universally they are seeing costs skyrocket
and revenue growth slow down. At the same time, they
face growing pressure to meet patients’expectations
around cost and care.These trajectories collide at a crossroads
where simultaneously optimizing spending and visibly
improving operations is a matter of survival.
Thehospitalsupplychain…apossiblesolution?
Historically, hospitals considered supply chain management
(SCM) an operational function. It focuses on securing a
product or service for patient care, and by necessity
encompasses planning, procurement, contracting and
capital management. As a result, it is the one area of the
hospital where responsibilities for finances and care
delivery are inextricably linked. It is also the source of most
hospital costs: up to 40% of hospital costs can come from to
inventory and/or supply chain processes.
But when it comes to embracing SCM as a critical component
of managing a balance sheet, hospitals are a bit late to the
game. Across almost all other industries, world-class
companies have recognized how crucial SCM is to healthy
financial management and sustainable outcomes.
Companies such as Dell, Walmart and Toyota have, in fact,
developed world-renowned processes that have dramatically
reduced costs and increased profits, all while significantly
improving customer satisfaction and loyalty rates.
For these companies, SCM isn’t a minor operational
function — it is a critical strategic function that deserves,
and receives, immense focus from top management.
1.
http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS.
2.
http://kff.org/health-costs/issue-brief/snapshots-health-care-spending-in-the-united-states-selected-oecd-countries/
3.
http://forbesindia.com/article/world-watch/what-govts-spend-on-health-care/36443/1

24
Achieving excellence by re-engineering the hospital supply chain in India
Hospitals have the opportunity to achieve similar results.
With large amounts of cash tied up in inventory, and
supplies acting as the closest link to both staff and patient
experiences, an improved SCM system would not only
help release much-needed capital, it would also invariably
support better relationships with internal and external
stakeholders.
And so hospitals must now must begin building this
function and investing the resources, time and money
to upgrade their supply chain systems and processes.
However, according to Shamik Chokshi, Supply Chain
Specialist at IMS Health India, due to the diverse nature of
hospitals and the complexities present in different regional
infrastructures, there is no one-size-fits-all approach.
“To be sustainable and successful, hospitals must take a
customized approach,”he explains.“Organizations need to
look at their unique root causes of supply chain issues
and develop targeted, relevant and actionable solutions.”
Making the case in India
For India, managing hospitals' costs is a very public issue. Here,
hospital margins hover around 8-12% (compared to 30-35% in
best-in-class hospitals elsewhere), and insurance coverage is
incredibly low — only 9-11% of Indians are currently insured.
As a result, any increases in hospital costs are passed either
directly to patients, who are burdened with paying those
expenses out of pocket, or to the hospital's bottom line.
Revolutionizing SCM represents a unique opportunity to
address these challenges. But to succeed the process must
take a multi-pronged approach, addressing and innovating
in four critical areas: Planning, procurement and contracting,
working capital/inventory management, and warehouse
management.
Planning
Good inventory and procurement planning is vital to ensuring
that clinicians have the drugs and tools they need at the right
place and the right time. Ideally, procurement planners and
clinicians develop plans collaboratively, with each side
understanding the necessary processes and desired outcomes.
Such collaboration can increase on-time deliveries, decrease
order errors and significantly help to lower costs, especially for
oral drugs and surgical consumables.
Fig. 1: What SCM industry experts believe
Source: Industry week 2007
66%70%
50%
30%
10%
60%
40%
20%
0%
Reduction in
operating
costs
Top business objectives achieved
Improvment
in timely
delivery
Reduction
in inventory
Improvment
in availability
% of respondents
52%
41%
39%
48%
45%
39%
29%
Top improvement initiatives
% of respondents
Develop lean supply chains,
eliminating waste and
unnecessary steps
Identify operational
improvement programs --
obtaining visibility into supply
chain information by replacing
manual processes with automation
Leverage economies of scale
across multiple operating units
Improve trading partner
integration by migrating
from legacy systems to
sophisticated IT tools
Action

25
Currently in most Indian hospitals, however, supply planning
is considered the purview of nurses, rather than top
management. Furthermore, as physicians and other
clinicians prefer to have a certain level of autonomy in choice,
management teams often encounter high resistance to any
significant change in the planning process, regardless of
cost necessity. As a result, there is often an overall lack of
coordinated planning.
Procurement and contracting
Procurement and contracting activities are common sources
of unnecessarily high costs in India, and a close analysis of
purchasing and vendor selection processes can often yield
significant savings. Common issues include:
• Multiple suppliers, resulting in a lack of bargaining
power at the time of rate negotiations
• Lack of visibility into vendor contracts and other levers
that could improve cash flow
As a result, hospitals typically stock multiple brands and
work with multiple vendor sources. It is in this area that
industries outside healthcare can provide relevant,
successful contracting models that could be replicated
within hospitals.
Working capital/inventory management
Closely related to procurement strategies – and at the
hub of most supply chains – is how hospitals manage their
inventory, their biggest source of working capital. Optimizing
the inventory mix and ensuring that inventory policies are
designed based on a strategic review of multiple parameters
like SKU volume and demand variability can ensure that
SKUs are not over- or under-stocked across the hospital.
While Indian hospitals have certainly embraced technology
in inventory management, unfortunately the focus has
been limited to data capture. Only a small group of hospitals
have actually been able to convert this data into insights for
strategic decision making. As a result, many supply orders are
still based on“gut feel”and experience, which often leads to
either large amounts of excess inventory or stock outs.
Warehouse management
Thinking through where and how inventory is stored can
be a key component in optimizing the overall flow and
operational efficiency of the hospital, alleviating a number
of unnecessary costs. Eliminating duplicate storage areas
can not only inject speed and flexibility into the clinical
staff’s routine, it can also help eliminate unnecessary,
duplicative stock.
Fig. 2: 3 key performance areas driving better outcomes
Cost
Quality
Time
Ensure quality delivery to satisfy both internal and external stakeholders:
- Internal: Clinicians, nurses
- External: Patients, relatives, vendors
Ensure timely service delivery
by developing lean processes
Ensure delivery at optimal cost by managing inventory
and stocking locations

26
Better business and healthcare outcomes
Improvements in SCM can have a direct impact on a
hospital’s core business objectives – improving EBITA and
operational efficiency. But it doesn’t stop there. According
to Mr. Chokshi,“We’ve seen that the effects of an agile
SCM can actually reach across the hospital’s value chain,
producing better outcomes not only on the balance sheet,
but also in human resources, investor relations and patient
experiences”(see Fig. 2).
Amit Mookim, Country Principal, IMS Health South Asia,
agrees, cautioning that managing costs and ensuring
excellence in healthcare outcomes is a balancing act.
“If current practices and processes are not improved,
medical supplies will surpass labor as the biggest expense
for the hospital ecosystem,”he maintains.“But we can never
sacrifice quality for cost, especially if the higher-cost item is
associated with better outcomes.”
Financial impact
The financial impact of addressing procurement and
operational issues cannot be overstated. Across the
organization, a strategic approach to the supply chain
can affect both expenses and revenue, driving an overall
improvement in EBITDA:
Reducing inventory and pilferage expenses
Optimizing the utilization of space, freeing up areas to
be used for additional revenue-generating activities
Anticipating future supply needs and reducing
unplanned expenses
Stakeholder impact
The potential operational benefits of investing in better
SCM can be felt across a number of stakeholders, from
internal staff to external partners and patients.
Developing lean processes through standardization and
automation helps reduce repetitive tasks and creates
replicable, sustainable systems that are easy for staff to
understand and follow
Understanding real-time needs and rationalizing vendor
selections ultimately yields better, more reliable
relationships with suppliers
Improving inventory management reduces the risk of
expired items reaching patients, improving the overall
level of care
Furthermore, well-managed supply chains ultimately use
staff more efficiently, ensuring that departments are given
the opportunity to collaborate, rather than compete, with
each other. Nurses, for example, often find themselves
involved in materials management, where subjective
judgments can be at odds with doctors’demands.
Separating and formalizing the SCM function helps give
internal stakeholders – particularly the clinical staff –
a better experience of working in a cohesive, well-run
organization where each function focuses on its
primary areas of responsibility.
Finally, but perhaps most critically, rising levels of education,
awareness and choice are causing patients to look for – and
expect – best-in-class service from providers. Reductions
in stock-outs, quick turnaround times for receiving care,
and more satisfied clinicians are all key patient-facing
improvements that contribute to a better, differentiated
customer experience.
Achieving excellence by re-engineering the hospital supply chain in India
A Case Study
A 120-bed, multi-specialty hospital in Mumbai was
facing significant challenges with its procurement and
supply chain management process. Without a proper and
efficient system in place, medical stock levels were not
aligned with demand, leading to frequent complaints
of stock-outs and increased manual intervention from
nurses and clinicians.
By using IMS Health’s“3D”(Diagnostic, Design & Deploy)
model, critical insights were uncovered into spending,
inventory levels and end-user behavior. These insights in
turn informed recommendations for realizing significant
bottom-line savings without impacting service delivery.
They also helped to reduce working capital requirements
significantly, and the IMS Health team was able to set up
robust processes to ensure sustenance of initiatives.
Impact:
~25-30% improvement
in working capital
~ 10-12% reduction
in spend base

Summary
Addressing the rising cost of healthcare is a mandate felt across the industry, on both a macroscopic policy level and,
as discussed here, on a more microscopic institutional level. Learning from other industries such as FMCG, retail and
automotive, updating and streamlining the supply chain can have far-reaching benefits for stakeholders across the
hospital value chain.
Such an undertaking, however, is not small. Establishing a transformative supply chain involves setting up a holistic
governance system, implementing robust processes, and leveraging integrated IT systems.“For providers, Supply
Chain Management can no longer be conducted in silos,”concludes Mr. Chokshi.“It’s time that hospitals treat this as a
strategic function just as other industries do.”
Therefore, both in India and across the world, hospitals that are eager to transform their SCM will have to embark on a
capabilities building mission, ensuring that workers have strategic SCM skill sets, creating a strong governance model,
integrating processes, and ensuring availability and robustness of data to perform analytics.
To continue the conversation, please contact:
Shamik Chokshi, Senior Consultant, IMS Health India at schokshi@in.imshealth.com
@IMSHealthAPAC

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2015 IMS Asia-Pacific Insight Magazine