Perfecting Pharmaceutical Market Access in Asia-Pacific

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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.

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Perfecting Pharmaceutical Market Access in Asia-Pacific

  1. 1. Perfecting Market Access: Maintaining Momentum in the APAC Region Amit Backliwal, Principal, IMS Management Consulting, Asia Pacific
  2. 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. 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. 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. 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. 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 market intelligence products and services that are 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. Additional information is available at: http://www.imshealth.com SINGAPORE Regional Office 10 Hoe Chiang Road #23-01/02 Keppel Towers Singapore 089315 Tel: 65-6227 3006 Email: info.sg@sg.imshealth.com WWW.IMSHEALTH.COM

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