Leveraging China's Healthcare Reform

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Hear from IMS’s Mandy Chui about China and why many of the big names in pharma are ill-prepared for the opportunities ahead; how conventional sales models no longer apply and which strategies may hold a key to a new world of success.

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Leveraging China's Healthcare Reform

  1. 1. 1 Leveraging China’s Healthcare Reform An audio interview with Mandy Chui, Practice Leader, PMA AUDIO INTERVIEW! Turn on your speakers.
  2. 2. Leveraging China’s Healthcare Reform IMS Expert: Mandy Chui Length: ~14:30 Mandy Chui To download an MP3 of this interview, click here. To download the PDF transcript, click here. Questions? Comments? Fill out the form at the end of this presentation.
  3. 3. 3 To download an MP3 of this interview, click here. To download the PDF transcript, click here. Questions? Comments? Fill out the form at the end of this presentation. Mandy, this is a challenge of incredible proportions. Could you help me put it into perspective by giving me some background on Chinese healthcare leading up to reform? Mandy Chui (MC): Yeah sure, during the last 20 years of the economic development in China, in fact the healthcare system has not been able to develop as fast as the growth in the economy, so a lot of the hospitals there are overcrowded and the government has reduced its funding into the whole system, so that many hospitals have to become more profit-driven, and many of the facilities are also inaccessible to the general public.
  4. 4. 4 To download an MP3 of this interview, click here. To download the PDF transcript, click here. Questions? Comments? Fill out the form at the end of this presentation. So the reforms have really been designed to fix problems created by the pre-existing system? MC: In one way this is true. China has been growing, really fast and also the population has been aging, a lot of the disease patterns are changing as well. And there is also rapid urbanization because a lot of people are moving from the rural areas and working in the cities. And with the lifestyle changes, a lot of the chronic diseases have also become more prominent such as diabetes or hypertension. So the government also needs to have the ability to treat patient populations affected by these diseases, which are becoming more prominent, so they have to set up an infrastructure that will be fitting to the changes to the demographics and epidemiology of China. Know more on IMS Health, click here
  5. 5. 5 To download an MP3 of this interview, click here. To download the PDF transcript, click here. Questions? Comments? Fill out the form at the end of this presentation. Now I understand that $125 billion will be invested in this over a period of 3 years. How exactly is this money going to be spent? MC: I would say close to 50% will be spent on providing the medical insurance coverage for the general public because the aim is to have everyone covered under different schemes by 2020 and with about 90% covered by 2011. Know more on IMS Health, click here
  6. 6. 6 To download an MP3 of this interview, click here. To download the PDF transcript, click here. Questions? Comments? Fill out the form at the end of this presentation. MC: The second part is regarding the healthcare delivery provision, so around maybe close to 47% of the money will be spent to build up the infrastructure, especially around the primary healthcare facilities such as the urban community health centers, the village clinics, the township centers, and also the county hospitals. And the last bit is really to try to strengthen the public health care services, such as prevention measures and reporting of infectious disease and education of people and vaccination, etc. Know more on IMS Health, click here
  7. 7. 7 To download an MP3 of this interview, click here. To download the PDF transcript, click here. Questions? Comments? Fill out the form at the end of this presentation. Now I understand there’s another very important element in the form of an Essential Drug List, or EDL. Could you tell us a little bit more about that? MC: There are certain drugs, about 200 western medicines, the government is going to have more compulsory usage or at least encourage those primary care institutions to use these drugs for their daily prescriptions. So these drugs are also going to be more frequently prescribed. Know more on IMS Health, click here
  8. 8. 8 To download an MP3 of this interview, click here. To download the PDF transcript, click here. Questions? Comments? Fill out the form at the end of this presentation. Will the EDL contain both traditional Chinese medicines and Western medicines? MC: Yes they do in the EDL altogether there are about 300 or so drugs and 200 something of them are Western medicine and about 102 are traditional Chinese medicines, so basically one third, two thirds in terms of the Chinese medicine versus the Western medicine. Know more on IMS Health, click here
  9. 9. 9 To download an MP3 of this interview, click here. To download the PDF transcript, click here. Questions? Comments? Fill out the form at the end of this presentation. And who are the key players in terms of Western medicines? MC: The key players are, in fact, mostly the generic local companies but the multinational companies, they do have a couple of drugs also included in the essential drugs list. These companies, for example, are Astra Zeneca, Pfizer, Novartis, and GSK. Know more on IMS Health, click here
  10. 10. 10 To download an MP3 of this interview, click here. To download the PDF transcript, click here. Questions? Comments? Fill out the form at the end of this presentation. So the government will be controlling the products prescribed. Will the government be controlling the cost of EDL products as well? MC: Yes, certainly the government is going to set a ceiling price for these EDL drugs because they want these drugs to be more affordable to the general public. So in fact they have already issued the first ceiling price of this essential drug list at the end of October or November time. Know more on IMS Health, click here
  11. 11. 11 To download an MP3 of this interview, click here. To download the PDF transcript, click here. Questions? Comments? Fill out the form at the end of this presentation. And how exactly do they go about setting these prices? MC: They are just, of course, they will benchmark the different drugs looking at what is available in the market place and then try to reference like a basket of drugs and set a reference price. And basically what we have seen is that they are looking at the different kinds of generics, not necessarily the cheapest, but generally or certainly lower than, for example, some of the drugs that are already off-patent and sharing the same molecule so we have seen different examples. Know more on IMS Health, click here
  12. 12. 12 To download an MP3 of this interview, click here. To download the PDF transcript, click here. Questions? Comments? Fill out the form at the end of this presentation. What about producers of high-cost drugs? Where does this leave them? MC: For high-cost drugs, that typically are a more innovative treatment option, there is a separate list called a national drug reimbursement list, so most of the high price or newer generation of drugs will be included in this national reimbursement list. But for these innovative drugs, generally it will not be fully reimbursable. It will be having different degrees of copayment from the patients and, as you know, for China, there is a lot of variation by the different provinces depending on the funding of each province. So the list of drugs also has some variations by the provinces. Know more on IMS Health, click here
  13. 13. 13 To download an MP3 of this interview, click here. To download the PDF transcript, click here. Questions? Comments? Fill out the form at the end of this presentation. So the EDL may be quite a double-edged sword for pharmaceuticals companies. On the one hand, manufacturers can expand their coverage across the whole of China. But on the other hand, there’s significant downward pressure on pricing. MC: Yeah, this is true. At IMS Health, what we have observed is that the government is setting a ceiling price for the EDL so many of the companies if they have a drug that has already gone off patent, they will have to be benchmarked against generic drugs and the price will be much lower so that's why that it will be a lot of pressure to lower price if they want to win in the tender. Know more on IMS Health, click here
  14. 14. 14 To download an MP3 of this interview, click here. To download the PDF transcript, click here. Questions? Comments? Fill out the form at the end of this presentation. MC: But of course, on the other hand, there will be significant benefit in terms of volume increase to cover this large population. So the companies, they do need to weigh the benefits and the risks of playing in this EDL sector. Are all companies facing the same sorts of risks and benefits? I mean, will individual companies need to implement very different strategies, or will they all be more or less the same, except in terms of scale? Know more on IMS Health, click here
  15. 15. 15 To download an MP3 of this interview, click here. To download the PDF transcript, click here. Questions? Comments? Fill out the form at the end of this presentation. MC: At IMS Health, we frequently find in mature and emerging markets that companies need help to develop their individual strategies. It’s not just a matter of scale. It also depends on the company’s strategic intent and product portfolio and especially their near-term pipeline. If they want to grow the top line aggressively and want to become a top 5 player in the marketplace they definitely have to consider playing in both the premium segment and the mass segment. But for certain companies they want to become more like a niche innovation player or a focused therapeutic leader. Then they could choose to just play in just one sector of the market. They want to become like a specialized drug provider so they want to play more in the acute conditions or more specialized conditions, and the other way, they could just choose to play in the OTC sector. Know more on IMS Health, click here
  16. 16. 16 To download an MP3 of this interview, click here. To download the PDF transcript, click here. Questions? Comments? Fill out the form at the end of this presentation. And how do you see the reforms impacting OTC sales? MC: The reforms are certainly having impact on the OTC products because a lot of the products now are becoming available as EDL drugs and the government is going to pay for it and so it is fully reimbursable. The price is also lower because the government promises to have zero mark-up for these drugs. So a lot of the patients will be more incentivized to get these drugs from the healthcare facilities rather than from a retail pharmacy to get the drugs so we foresee there will be a lot of shift for these kind of drugs from the retail pharmacy back to the hospital setting so that's a minus point for the OTC area. But in the longer run as the consumers are getting richer and they also demand for more convenience and we will see OTC drugs being a very bright spot in the longer run. Know more on IMS Health, click here
  17. 17. 17 To download an MP3 of this interview, click here. To download the PDF transcript, click here. Questions? Comments? Fill out the form at the end of this presentation. With so many changes in the market place, how do companies prepare themselves to succeed? MC: At IMS Health, we have observed that there are many different companies that are at a different stage of their planning. You know some companies are already looking at what are the best strategies to cope with these changes. There are companies that still wait and see, to fully understand what the government healthcare reforms will mean to them. They are in the process of also doing their planning and changing their way of addressing the market because they are still very used to this premium segment of just increasing the sales force, but their cost structure and their capabilities are not very fit to this mass segment and to compete with the local companies. Know more on IMS Health, click here
  18. 18. 18 To download an MP3 of this interview, click here. To download the PDF transcript, click here. Questions? Comments? Fill out the form at the end of this presentation. But entering the Chinese market would actually entail a huge increase in the sales force, wouldn’t it? MC: Well, of course sales reps are always a very important and critical part of the pharmaceutical business in China. But now with the opening up of this new segment there are different stakeholders and the way of purchasing is going to be different. There will be more of an essential purchasing system and you need to develop some kind of engagement platform with each province in order to influence them or the whole decision- making process. So it will be extremely important to have a key account management team to undertake this kind of work. Know more on IMS Health, click here
  19. 19. 19 To download an MP3 of this interview, click here. To download the PDF transcript, click here. Questions? Comments? Fill out the form at the end of this presentation. So what kind of strategic options are there for big pharma? MC: At IMS Health, we have been helping clients develop strategies in China and many other emerging markets. Many of the pharmaceutical companies are looking at different options and they are also looking at other markets where they could learn the experience from and we see this for the big pharma, they have options to form strategic alliances with the local companies. Know more on IMS Health, click here
  20. 20. 20 To download an MP3 of this interview, click here. To download the PDF transcript, click here. Questions? Comments? Fill out the form at the end of this presentation. MC: At the moment in time, local companies are getting stronger and stronger and they are also interested in the overseas market. They are very interested to look at cooperation opportunities with multinational companies; they are gearing up themselves to become GMP-compliant or to get approval from the FDA, and to be able to supply their finished products as OEM suppliers to the big pharma, so they’re very interested to be a very integral part of big pharma’s global platform. At the same time, the MNCs, if they work together with the local companies, they can gain access to the mass population and the distribution network from the local companies. So that will be a very great opportunity for them to work together. Know more on IMS Health, click here
  21. 21. 21 To download an MP3 of this interview, click here. To download the PDF transcript, click here. Questions? Comments? Fill out the form at the end of this presentation. So there are advantages by forging relationships with local companies. Are there other parties worth talking to? MC: In China now, with the opening up of the rural areas with the community health centers, the government is also looking at different ways to supply the drugs and make them available to the general public. And if the companies can work together with some of the NGOs or other organizations to make drugs more affordable and available to these people, the government will certainly welcome these different initiatives. Know more on IMS Health, click here
  22. 22. 22 To download an MP3 of this interview, click here. To download the PDF transcript, click here. Questions? Comments? Fill out the form at the end of this presentation. But to what extent can they welcome new initiatives, though? I mean, aren’t the mechanisms that dictate the supply of drugs on the EDL set in stone? MC: The government, they formed just a guiding principle essentially around these different drug lists or how these drugs have to be procured or supplied. But each individual local government they do say exactly how this has to be implemented. So companies, in fact, they could influence some of the different mechanisms or policies of how it is implemented and it is very important for them to engage with the local stakeholders to influence the decisions later on. Know more on IMS Health, click here
  23. 23. 23 To download an MP3 of this interview, click here. To download the PDF transcript, click here. Questions? Comments? Fill out the form at the end of this presentation. Well, I’m afraid we’re almost out of time here, Mandy. Thank you so much for sharing your insights into China’s healthcare reform. It’s a very exciting time for the health industry. And even more exciting for the people of China, of course. MC: Thank you very much, Andrew. It’s also a pleasure for me to talk to you as well. And at IMS Health, we continue to consult with our clients to improve their commercial and growth strategies in mature and emerging markets such as China. Know more on IMS Health, click here
  24. 24. 24 Thank you for listening! • To download an MP3 of this interview, click here. • To download the PDF transcript, click here. • Questions? Comments? − Fill out the form at the bottom of this slide, or − Visit www.imshealth.com or email info.sg@sg.imshealth.com.

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