Award winning IMS consultant Amit Backliwal explains how the global pharmaceutical industry is looking increasingly towards Asia-Pacific, with its tremendous growth potential. This white paper explores the drivers of this potential and the opportunities and challenges that lie beyond 2010.

1. Perfecting Market Access:
Maintaining Momentum in the APAC Region
Amit Backliwal, Principal, IMS Management Consulting, Asia Pacific

2. The long-term economic decline has,
among other things, complicated attempts
to put strategic healthcare initiatives into
place. Declining consumer spending has
triggered changes in the ways patients go
about taking care of themselves—filling
fewer prescriptions, for example, and seeking less-costly medical alternatives. Finally,
lower GDP and escalating budget deficits
are impeding long-term planning that
might safely position healthcare as an affordable option not just for some, but for
many. MNCs hoping to grow and survive
have been forced to look elsewhere.
Emerging markets have captured the eye
and imagination of MNCs in recent years.
Indeed, IMS Health is now projecting that
the APAC region, led by China and including ASEAN, Australia, and India, will
grow to US $66 billion by 2013. Opportunity, it seems, really does lie east.
This isn’t new news. The top ten MNCs
might have dominated the scene between
2005 and 2009, but they have lately lost
traction to small- and mid-sized players
and locals.
But even these organisations have felt
increasing pressure as the APAC region
grows steadily more competitive, and as
local generics players take a larger piece of
the pie. In September 2006, 24% of the
region’s growth was fueled by the top ten
MNCs. Last year, that percentage stood
at 18%.
APAC MAT/Q/’09
Size: US$66.2 billion
Annual Growth: 15.8%
4-yr CAGR: 14%
Top 10 MNCs in APAC*
18%
AZ, US$ 2b
BAYER, US$ 1.3b
18%
NOVARTIS,
US$ 1.9b
WYETH, US$ 0.9b
14%
12%
ROCHE, US$ 1.4b
S~A, US$ 2.3b
10%
8%
PFIZER, US$ 2.8b
J&J, US$ 1.2b
6%
GSK, US$ 2.4b
4%
MERCK & CO,
US$ 1.1b
2%
0%
0%
5%
10%
15%
20%
Annual Growth
APAC market
growth rates
Source: IMS Health MIDAS MAT Sep 2009; APAC* here does not include Vietnam, Brunei and Sri Lanka
HOWEVER, MOST ARE STARTING TO SEE THEIR
CONTRIBUTION TO REGIONAL GROWTH FALL.
Growth is increasingly contributed by local generic players
Contribution to Regional Growth
95%
CONTRIBUTION TO GROWTH (%)
But with blockbuster drugs now eclipsed
by me-too products and generics, biotech innovations forestalled by scarce investment dollars, and patients and insurers growing increasingly ill-equipped to
keep pace with rising healthcare costs,
MNCs have found themselves assailed by
a number of factors.
TRADITIONALLY, TOP 10 MNCs HAVE SEEN STRONG GROWTH RATES IN APAC.
4-year CAGR (MAT Q3 2005- MAT Q3 2009)
The early giants of the pharmaceutical
industry rose to prominence in the west
and in Japan, in countries where patients
and their physicians demanded and by and
large could afford premium pharmaceutical products. Blockbuster products netting
US $1 billion in sales weren’t all that rare;
in fact, many stakeholders came to expect
them.
75%
69%
67%
7%
8%
71%
75%
55%
35%
15%
-5%
9%
24%
25%
MAT/9/06
MAT/9/07
TOP 10
21%
MAT/9/08
TOP 11-20
7%
18%
MAT/9/09
OTHERS (7329)
Source: IMS Health MIDAS MAT Sep 2009; APAC* here does not include Vietnam, Brunei and Sri Lanka
KEEPING PACE WITH A DYNAMIC REGION
Nevertheless, emerging markets—and
the opportunities they continue to represent—are here to stay, and they are changing daily. China, for its part, has taken an
aggressive lead—signaling a new era with
sweeping healthcare reforms that stand on
four well-defined pillars:
• Healthcare financing, with the corresponding increase in the breadth and
depth of coverage;
• Care delivery, which is focused on
strengthening primary care services, estab-
lishing a three-tier system for healthcare
delivery in rural areas, and fortifying urban
hospitals and community health centers
with a dual referral system;
• Drug supply, which is framed around
the Essential Drug List (EDL) and features
open tender purchases and retail prices set
by central and regional governments, and
which values innovation by giving price
benefits to first-to-market products; and
• Hospital reforms, which emphasize the
separation of ownership from management and which seek the gradual elimination of drug margins.

3. In the Philippines and Thailand, meanwhile, cost cutting has emerged as the top
priority. In the former, the effort has included maximum retail price and voluntary price reductions: Under the Cheaper
Medicines Law, five molecules were put
under a maximum retail price, while leading brands from sixteen other molecules
voluntarily reduced prices. A secondary
price cut, also focused on voluntary reduction, was recently announced.
AFFLUENCE CONTINUES TO INCREASE IN APAC.
% of population that can afford expensive specialist care treatment is set to increase.
% of total disposable income accounted for by Decile 10
32%
26%
34%
In Thailand, an aging population and
changing lifestyles are likewise driving increasing pressure on chronic care—in cardiology, nervous system, oncology, respiratory, GU system and sex hormones—over
acute care. While the growth of anti-infectives is slowing, this does remain a significant area in value terms in this population of 65.42 million.
Beyond the evolving patient profile is the
evolving nature of the APAC consumer,
which grows ever-more affluent—more
capable of affording luxury products, expensive one-off items, and expensive specialist care.
23%
31%
30%
38%
39%
33%
33%
28%
21%
24%
27%
27%
China
India
34%
23%
30%
39%
33%
21%
27%
31%
31%
1990
2000
Indonesia
Malaysia
Philippines
2007
Singapore
Taiwan
Thailand
Vietnam
* Decile 10: (Surrogate marker) Percentage of households that can afford luxury products
and expensive one-off purchase
Source: World Income Distribution Report (Euromonitor)
NOT SURPRISINGLY, THE SPECIALIST CARE SECTOR IN THE
REGION IS OUTPERFORMING PRIMARY CARE IN GROWTH.
Primary Care CAGR vs. Specialty Care CAGR
25
Specialty Care CAGR (MAT/9/04 - MAT/9/09)
REMAINING OPPORTUNISTIC
Despite cost containment pressures and a
rising emphasis on generics, the dynamic
nature of the APAC region affords continuing opportunities. Consider the evolving
patient profile. At IMS, we’re seeing a definite shift from acute, communicable diseases to chronic ailments—a result of the
aging population and improved access to
diagnostic testing in the region. The use of
antineoplastics, for example, key in cancer
therapy along with cholesterol lowering,
hypertension, depression and other similar lifestyle and chronic drugs has jumped
multi-fold in the last 5 years.
34%
23%
In Thailand, the government has been
primarily focused on the governmental
hospital/Civil Servants Medical Benefits
Schemes front—putting pressure on hospitals to adopt generic substitutions where
such products are readily available. Again,
the initiatives have resulted in decreased
sales of original and expensive treatments
and a growing focus on the cheaper alternatives and generics that are in keeping
with constricted budgets.
32%
China
Bangladesh
20
Hong Kong
Indonesia
15
Korea
Australia
10
Taiwan
5
Thailand
India
Pakistan
Philippines
Malaysia
New Zealand
0
0
Australia
Indonesia
Philippines
Singapore
5
10
15
20
Primary Care CAGR (MAT/9/04 - MAT/9/09)
Bangladesh
Korea
Singapore
China
Malaysia
Taiwan
Hong Kong
New Zealand
Thailand
25
India
Pakistan
Source: IMS Health MIDAS Sep 2009. APAC data excludes Vietnam, Bangladesh, Brunei and Sri Lanka.
IMS Market Insights definitions used for ‘Primary care’ and ‘Specialty care’

4. This has precipitated the rise of the spe
cialist care sector,which is now outperform
ing primary care across the board.
a rising predilection for generic substitu
tion, while in the Philippines, attempts to
contain costs in both the public and private
sectors—through MRP and voluntary price
Finally, there are opportunities emerging reductions—have already resulted in a surge
from the evolving reimbursement landscape of generics growth at the expense of origi
of the APAC region, though not all changes nal products. The first such implementation
will be easy to navigate. The reimbursement of price reductions affected 12% of market
story is best told by focusing on clusters.
sales.
Australia, South Korea andTaiwan represent
the reimbursed markets, where both private
and public sector services and drug costs are
reimbursed by the country’s national health
insurance scheme and where decision-mak
ing responsibility is shifting to generics and
third-party payers (via employer insurance
packages).
Thailand, China, Malaysia and Singapore
represent the semi-reimbursed markets,
where services, especially those relating to
certain public sector treatments and certain
drugs in the Essential Drug List, are covered
by public expenses. Here, the protectionist
stance of the government often enables local
companies to flout patent protection laws.
Finally, there are India, Indonesia and the
Philippines—the self-pay markets—where
patients predominately pay for medical
services and drugs out-of-pocket, although
some segments of the population (includ
ing government employees) do attain reim
bursement. In these self-pay markets, phy
sicians remain highly share-of-voice driven
and price sensitive. Patients, for their part,
remain brand conscious, choosing from
pharmaceutical alternatives based on their
understanding of brand quality and trusting
a “good” brand to deliver good results. This
consciousness drives uptake.
Throughout the region, a pro-generics
stance is being adopted by numerous -in
dividual governments, with all the obvious
implications for MNCs.
In Australia, for example, we are seeing re
peated efforts to curb spending on the Phar
maceutical Benefits Scheme, a widespread
preference for generics on the part of phar
macists, generics serving as first-line treat
ment in a number of therapeutic areas, and
a consequent surge in unbranded generics.
In Thailand, government efforts to control
costs have resulted in a hospital market with
LOOKING PAST 2010
We’ve entered a new decade, and things
aren’t about to get easier. We project in
creased pressure on costs and pricing as
the years unfold, and a world increasingly
dominated by generics.
At the same time, we believe that gov
ernments, physicians, and patients will
increasingly demand proof of a product’s
And yet,despite all the emerging reimburse value, increasingly look to the benefits of
ment policies and actions, market access-re personalized healthcare, and expect more
mains a key issue for patients throughout from new product distr ibution models.
the APAC region. While disposable income
Specialty products are here to stay. So are
has, as we have noted, risen overall, in some emerging markets. And MNCs can expect
selected Asian markets less than 40% have to be challenged by a rising corps of local
disposable income above US $2,000, creat generics companies who are positioning
ing a large unmet demand for cheaper-al themselves to have a measurable impact on
ternatives.
high-growth therapy areas.
At IMS,we have seen just how critical an af
fordable “threshold” price can be to MNCs
seeking to market their products. In the
Philippines, for example, the launch of lowpriced generics led the omeprazole market
to a five-fold growth in just three years.
But lower price is not the only strategy that
can play a role in building market access
for MNCs. Authorized generics have also
proven to be an effective growth factor in
countries like Indonesia, where MNCs are
effectively leveraging partnerships to build
awareness for and adoption of authorized
generics.
Going forward, innovator companies seek
ing to drive access in reimbursed markets
will be forced to focus on the value of
medicine—and to demonstrate such value
conclusively. They will need to follow in
the footsteps of their peers, who have faced
challenges head on.
Bayer’s approach to growing Nexavar, its
oral multiple kinase inhibitor for the treat
ment of patients with unresectable hepa
tocellular carcinoma, is a case in point.
There, Bayer faced Italian authorities who
were refusing to reimburse the product for
a broad range of patients. B ayer’s response?
To enter into performance risk-sharing
agreements that yielded a 50% discount
LARGE UNMET DEMAND EXISTS FOR CHEAPER ALTERNATIVES.
In Phillipines, patient affordability reaches new levels when the “threshold” price is met
Omeprazole Price- Volume Interplay: Philippines
3500
0%
Sudden increase in affordability triggers
volume expansion
3000
-20%
Vol. in SU 2500
(‘000)
% Loss
of Value
of
-40% Original
Product
2000
1500
1000
-60%
500
-80%
0
Q103
Q104
Q105
Omeprazole Volume
Q106
Q107
Q108
Q109
Price Drop
• Launch of low priced generics have led to the Omeprazole market having a five fold growth in three years.
• The threshold price for explosive volume growth is between 50% to 60% below the price of originator
Source: IMS Health Mar 2009

5. Millions
to hospitals for the first two months of STRATEGIES LIKE AUTHORISED GENERICS HAVE ALSO BEEN
therapy. Those patients who positively and
demonstrably responded to the treatment USED BY COMPANIES TO DRIVE MARKET ACCESS
after two months received reimbursement Using the channels effectively through partnerships in Indonesia
by the AIFA (Agenzia Italiana del Farmaco
2nd Brand Strategy: Indonesia
/ Italian Medicines Agency), and Bayer was
“X” MOLECULE MARKET - MARKET TREND IN VALUE OF TOP 5 PRODUCTS
no longer required to grant the 50% dis
160,000
count.
140,000
Value in Rp
In much the same vein, Janssen-Cilag
120,000
found its multiple myeloma product, Vel
cade, blocked by reimbursement authori
100,000
ties in the United Kingdom. To drive
80,000
market access, Janssen-Cilag pursued its
own version of a performance risk-sharing
60,000
agreement, in which patients showing a
ORIGINAL
40,000
AUTHORISED GENERIC
full or partial response to the drug after a
OTHER GENERIC
maximum of four treatment cycles would
20,000
OTHER GENERIC
be kept on the drug, with the treatment
OTHER GENERIC
0
funded by the N ational H ealth Service.
MAT 1Q05
MAT 1Q06
MAT 1Q07
MAT 1Q08
MAT 1Q09
Those patients who showed minimal or no
response to the product would be removed Source: IMS Health Consulting
from therapy, with all Janssen-Cilag footing
the treatment bills.
economic pressures—everything from the Product & Portfolio Strategy, Commercial
relevance of patients as key stakeholders to Effectiveness, Pricing and Market Access
Sanofi-Aventis faced similar trials in the relevance of economics on market ac and Primary Market Research.
Canada with its oncology product Taxo
cess. No single strategy will ensure growth
tere, when provincial formulary authori
in the years to come.
We can help you gain and sustain your
ties expressed concern over the product’s
competitive edge by choosing the right in
efficacy and cost. But Sanofi-Aventis be
The desire to grow and to survive will re
vestment strategies, strengthening portfo
lieved in its product and proffered an ef quire MNCs to be structured in a way that
lios, optimizing product launches, and sales
ficacy guarantee during which patients enables them to act quickly on meaningful force structure and deployment.
were tested following six months of treat information and to take an integrated ap
ment for agreed-upon responder levels. If proach to the three Cs: consumers,custom
For more information, please contact Amit
the hoped-for level of progression was not ers, and channels. It will mean that MNCs
Backliwal (abackliwal@sg.imshealth.com)
reached, Sanofi-Aventis would reimburse will have to recognize, once and for all, that or write us at info.sg@sg.imshealth.com
regional players for the cost of the drug. If, the traditional business model—so reliant
however, progression levels were achieved, on increasing the field cost and on layering
Taxotere would be admitted onto the re
on promotional investments—is no longer
imbursed formulary.
working, no longer relevant. The critical
juncture has been reached. The game has
The coming decade will also be defined by changed. New capabilities—multichannel
the outcome of efforts to reform health marketing, mega brand excellence, and ac
care in the United States. The goals, of
count management—are essential.
course, are straightforward: to expand cov
erage and access, to improve quality and Our purpose at IMS Health is to help
efficiency, and to increase affordability via MNCs navigate this new environment—
cost reductions. The conflicts and chal
to bring our expertise to companies that
lenges are, on the other hand, nearly im
recognize that the time is now to set fresh
measurable, requiring legislators to enact thinking and new initiatives into motion.
a terrific balance among issues spanning We are the only major professional consul
from Medicare price reform, health infor
tancy exclusively focused on the pharma
mation technologies, and comparative-ef ceutical and healthcare industry. The core
fectiveness studies to consumer promotion of our business lies in commercial strategy.
restrictions, biosimilar encroachments, re- We have leading-edge methodologies and
importation, and uninsured coverage.
approaches to solve the most complex
Beyond all of this, MNCs will be shaped
business issues and offer our clients proven
by both new and existing stakeholders and value through four distinct practice areas:

6. ABOUT IMS
IMS HEALTH®
Operating in more than 100 countries, IMS Health is
the world’s leading provider of market intelligence to
the pharmaceutical and healthcare industries.With
$2.3 billion in 2008 revenue and more than 50 years
of industry experience, IMS offers leading-edge
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integral to clients’ day-to-day operations, including
product and portfolio management capabilities;
commercial effectiveness innovations; managed care
and consumer health offerings; and consulting and
services solutions that improve productivity and the
delivery of quality healthcare worldwide.
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