The document discusses market access challenges and opportunities for pharmaceutical companies in the Asia Pacific region. It notes that while the top 10 pharmaceutical companies dominated growth between 2005-2009, their contribution to regional growth has fallen as local generic players take a larger share. The summary discusses three key points: 1) Government policies across Asia Pacific are increasingly focused on cost containment and promoting generic drug substitution, placing pressure on innovative drug companies. 2) However, opportunities remain due to an aging population, rising incomes, and a shift to chronic diseases. The specialist care sector is outperforming primary care in growth. 3) Companies are pursuing strategies like authorized generics, value-based pricing, and risk-sharing agreements to improve market

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

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

3. In the Philippines and Thailand, mean- AFFLUENCE CONTINUES TO INCREASE IN APAC.
while, cost cutting has emerged as the top
% of population that can afford expensive specialist care treatment is set to increase.
priority. In the former, the effort has in-
cluded maximum retail price and volun- % of total disposable income accounted for by Decile 10
tary price reductions: Under the Cheaper
Medicines Law, five molecules were put
under a maximum retail price, while lead-
32%
ing brands from sixteen other molecules 26% 32%
34%
voluntarily reduced prices. A secondary 34% 34%
23%
price cut, also focused on voluntary reduc- 23% 23%
30%
tion, was recently announced. 31% 30%
39%
38% 39%
In Thailand, the government has been 33% 33%
33%
primarily focused on the governmental 28% 21%
21%
27%
hospital/Civil Servants Medical Benefits 24% 27%
Schemes front—putting pressure on hos- 27% 31% 31%
1990 2000 2007
pitals to adopt generic substitutions where
China India Indonesia Malaysia Philippines Singapore Taiwan Thailand Vietnam
such products are readily available. Again,
the initiatives have resulted in decreased * Decile 10: (Surrogate marker) Percentage of households that can afford luxury products
and expensive one-off purchase
sales of original and expensive treatments Source: World Income Distribution Report (Euromonitor)
and a growing focus on the cheaper alter-
natives and generics that are in keeping
with constricted budgets.
REMAINING OPPORTUNISTIC
Despite cost containment pressures and a
rising emphasis on generics, the dynamic NOT SURPRISINGLY, THE SPECIALIST CARE SECTOR IN THE
nature of the APAC region affords contin- REGION IS OUTPERFORMING PRIMARY CARE IN GROWTH.
uing opportunities. Consider the evolving
patient profile. At IMS, we’re seeing a def- Primary Care CAGR vs. Specialty Care CAGR
inite shift from acute, communicable dis-
eases to chronic ailments—a result of the 25
China
aging population and improved access to
Specialty Care CAGR (MAT/9/04 - MAT/9/09)
Bangladesh
diagnostic testing in the region. The use of 20
Hong Kong
Thailand
antineoplastics, for example, key in cancer Indonesia
India
Pakistan
therapy along with cholesterol lowering, 15 Korea
Australia Philippines
hypertension, depression and other simi- Taiwan Malaysia
10 Singapore
lar lifestyle and chronic drugs has jumped
multi-fold in the last 5 years. New Zealand
5
In Thailand, an aging population and
0
changing lifestyles are likewise driving in- 0 5 10 15 20 25
creasing pressure on chronic care—in car- Primary Care CAGR (MAT/9/04 - MAT/9/09)
diology, nervous system, oncology, respira- Australia Bangladesh China Hong Kong India
Indonesia Korea Malaysia New Zealand Pakistan
tory, GU system and sex hormones—over Philippines Singapore Taiwan Thailand
acute care. While the growth of anti-in-
fectives is slowing, this does remain a sig- 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’
nificant area in value terms in this popula-
tion 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, ex-
pensive one-off items, and expensive spe-
cialist care.

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

5. 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
/ Italian Medicines Agency), and Bayer was 2nd Brand Strategy: Indonesia
no longer required to grant the 50% dis- “X” MOLECULE MARKET - MARKET TREND IN VALUE OF TOP 5 PRODUCTS
160,000
count.
Millions
140,000
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 Value in Rp
market access, Janssen-Cilag pursued its 80,000
own version of a performance risk-sharing 60,000
agreement, in which patients showing a ORIGINAL
full or partial response to the drug after a 40,000
AUTHORISED GENERIC
maximum of four treatment cycles would 20,000
OTHER GENERIC
OTHER GENERIC
be kept on the drug, with the treatment OTHER GENERIC
funded by the National Health Service. 0
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:

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