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INSIGHT
September 2014 Issue 100
Asia Pacific
Pharma & Healthcare
BMIs monthly market intelligence, trend analysis and forecasts for the pharmaceuticals & healthcare industry across Asia Pacific
ISSN: 1750-7588
Australia Contents
Growth Global
AbbVie Deal For Shire Faces Little Interference........................................................ 2
BMI View: Governments will increasingly impose price controls on Consolidation In Pharma Distribution To Continue.................................................... 3
pharmaceuticals. Previously, drugmakers charged what the market Lucentis In The Spotlight Again.............................................................................. 4
would bear in both developed and emerging markets. High prices were AbbVie Acquires Shire............................................................................................ 5
accepted by patients and national health services because it was hard Asia
to equate monetary cost with clinical benefit. With the advent of health AEC Offers Opportunities But Full Integration Unlikely.............................................. 6
economics, coupled with increasing budget deficits, there will be more India
caps on medicine expenditure, especially on essential drugs. Pharma Growth Potential Limited By Pricing Controls............................................... 7
China
Negative Growth Growth Endangered By Anti-Corruption Campaign................................................... 8
Australia Total PBS Expenditure,AUDbn Pakistan
Healthcare Sector Plagued By Inefficiencies............................................................ 9
Vietnam
Medicine Price Rises Return To Normal...................................................................10
Access To Healthcare Improves Under New Insurance Law......................................11
Source: PBS
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Global Asia Pharma & Healthcare
2 www.pharmaceuticalsinsight.com
Global Asia Pharma & Healthcare
www.pharmaceuticalsinsight.com 3
Global Asia Pharma & Healthcare
Ireland, Italy, Netherlands, Norway, Portugal, Slovenia, Sweden treatment for age-related macular degeneration (AMD), a leading
and the UK. The company has a portfolio of 2,200 pharmacies of cause of blindness among the elderly.
its own and 4,100 participants in brand partnership schemes. With France is following Italy's lead and in early July 2014 the govern-
around 130 wholesale branches, Celesio supplies 65,000 pharmacies ment announced that it had introduced an amendment to its social
and hospitals every day with up to 130,000 pharmaceutical products. security budget bill that would allow doctors to prescribe Avastin
The services benefit a patient pool of about 15mn per day. over Lucentis. According to lawmakers, this could generate savings
of at least EUR200mn (USD273mn) as Avastin (EUR30 (USD40)
Bargaining Power: McKesson's acquisition of Celesio will result per dose) costs 30 times less than Lucentis (EUR900 (USD1,228)
in purchasing efficiencies and will boost its bargaining power per dose). French lawmakers are due to vote on the social security
with drugmakers such as Novartis and Teva. The deal catapults budget in mid-July 2014.
McKesson's generic sourcing ability to align with that of the CVS
Caremark and Cardinal Health joint venture, and before that the Avastin Sales > Lucentis Sales
Avastin & Lucentis Sales, USDbn (2013)
Walgreens/Alliance Boots/AmerisourceBergen strategic partner-
ships. Generic drugs are comparatively lower priced but offer higher
gross margins than branded drugs, for both wholesalers and retailers.
With leading players collaborating with each other, the lower num-
ber of buyers in the industry can put pressure on gross margins of
generic manufacturers, forcing them to lower the prices even further.
McKesson: Challenges
Europe: The deal will expose McKesson to Europe and the region's
economic crisis. European governments have implemented measures
to reduce healthcare spending and constrain overall government
expenditure putting enormous pressure on drug prices and reim-
bursement levels on medicines across the region.
Germany: In recent years Celesio has come under increasing pres- Source: Roche, Novartis, BMI
4 www.pharmaceuticalsinsight.com
Global Asia Pharma & Healthcare
which in turn prompted the PCTs to reverse their policy and recom- is developing treatments for symptomatic conditions treated by
mend only Lucentis for wet AMD, avoiding Avastin. specialist physicians in other targeted therapeutic areas. Shire has
Deal Welcomed By Investors
Outlook Relative Share Performance Of AbbVie, Shire And The S&P Index
France, Italy, the US and the UK's focus on the price of therapeutics
that treat a specific disease highlights the price pressure faced by
dugmakers operating in Europe and the US. While we do not see
developed state governments widely clamping down on the use of
existing therapies (it would prove difficult to switch patients from
one drug to another), we note that increasingly companies will have
to provide more evidence that their new drug provides added value
compared to those already on the market and will have to negotiate
the prices of drugs based on strict cost-effectiveness criteria.
www.pharmaceuticalsinsight.com 5
Asia Asia Pharma & Healthcare
AEC Offers Opportunities But 9.5%, higher than the CAGR for the Asia Pacific pharmaceutical
market (7.0%). Similarly, ASEAN healthcare expenditure will grow
Full Integration Unlikely at a higher CAGR of 10.9%, while the CAGR for the Asia Pacific
healthcare market is forecast to be 8.1%.
BMI View: We maintain that full integration under the ASEAN
conomic Community will not happen in 2015 given the disparities Higher Growth
ASEAN Pharmaceutical (top) &
in resources across the region. Political uncertainty due to up- Healthcare Expenditure (bottom), USDbn
coming elections in the Philippines, Indonesia, and Myanmar will
also hinder the AEC's realisation. Nevertheless, ongoing progress
towards integration will provide strong growth opportunities for
pharmaceutical and healthcare firms.
6 www.pharmaceuticalsinsight.com
India Asia Pharma & Healthcare
to fully implement the various harmonisation guidelines[1]. significantly lower than average growth of 15.7% in 2012. Firms
With regards to the pharmaceutical sector, the issue of harmo- such as GlaxoSmithKline and Novartis have consistently attributed
nisation is particularly important. In 1999, ASEAN established poor sales performance in India to the DPCO[1,2].
the Pharmaceutical Product Working Group to develop harmo-
nised pharmaceutical regulations and a common technical dossier DPCO Limiting Growth
India Pharmaceutical Market, INR crore
(CTD) and ASEAN Common Technical Requirements (ACTR) for
member states. Countries that have implemented these regulations
either in full or partially include Singapore, Malaysia, Thailand,
Philippines and Indonesia. Full implementation of these require-
ments across the region will enable multinational pharmaceutical
firms to access the markets more quickly and at a lower cost due
to reduced technical barriers.
However, in reality, full implementation of these regulations
will be challenging especially in the less developed Myanmar,
Cambodia and Laos due to the lack of experienced personnel
and other resources. Moreover, while technical barriers are being
lifted, other impediments still exist. The swift approval of a drug
does not necessarily mean that the product will reach the market in
a timely manner. Firms that wish to operate in Thailand, Indonesia
and Malaysia will still have to compete with the local pharmaceuti- Source: AIOCD Pharmasofttech AWACS
www.pharmaceuticalsinsight.com 7
China Asia Pharma & Healthcare
USD61.37, limited government health expenditure severely limits a covert sex tape scandal has once more brought GlaxoSmithKline
patient access to medical services. (GSK) into the spotlight. We note that in Q114, GSK continued to
be negatively affected by the corruption scandal in China, with the
Lessons From China firm's pharmaceutical and vaccines sales in China falling by 20%.
We continue to highlight China as offering a good case study for Although the revenue decline in China is showing signs of stabilis-
India's progression towards universal healthcare. The countries share ing, the corruption case has yet to reach its conclusion for GSK, and
similar issues in terms of providing healthcare to large populations, the firm may see more losses from its Chinese business.
slowing economic growth and changing epidemiological profiles.
The affordable supply of essential drugs has also been an issue in Below Global Average Level
China Healthcare Expenditure Outlook
China. Due to strong growth opportunities in the sale of essential
drugs, many pharmaceuticals firms submitted tenders to be suppli-
ers. This led to price wars, and the supply of essential drugs is no
longer as profitable as before. In some cases, low prices have caused
companies to stop producing these drugs, leading to a supply short-
age of some essential drugs.
To address this problem, in April 2014 eight departments of
the Chinese government, namely the National Health and Family
Planning Commission (NHFPC), National Development Reform
Commission (NDRC), China Food and Drug Administration
(CFDA), Ministry of Finance (MOF), Ministry of Industry and
Information Technology (MIIT), Ministry of Human Resources
and Social Security (MHRSS), and the Ministry of Commerce and
State Administration of Traditional Chinese Medicine (SATCM),
released a statement allowing pharmaceutical firms to set their own f = BMI forecast. Source: WHO, BMI.
prices for essential drugs in short supply, so that they can profit at a
'reasonable' rate[3]. We highlight, however, that such a policy would We note that since June 2013, when anonymous allegations
not be possible in India given the low government health spending. emerged that a GSK employee in China was part of widespread
Consequently, BMI believes that government policies will bribery activities, the Chinese government has uncovered further
continue to limit the growth potential of India's pharmaceutical corruption in the pharmaceutical sector. Since then, it has investi-
market. Between 2013 and 2023, pharmaceutical sales will grow at gated over 60 drugmakers alongside the drug pricing investigation.
a local compound annual growth rate of 11.0% (10.9% in US dol- However, as of Q114, GSK was the only multinational to have
lar terms). By 2023, pharmaceutical sales will reach INR2,556.3bn been hit hard, with other major drugmakers continuing to enjoy
(USD43.4bn). double-digit growth in China.
[1] Business Monitor International Industry Trend Analysis Low Public Spending In Healthcare
BRIC Countries Healthcare Spending As % Of GDP (2012)
Domestic Pharmaceutical Firms Continue To Outperform June
17 2014.
[2] Business Monitor International Industry Trend Analysis Phar-
maceutical Industry Sees Evidence Of Recovery February 24 2014.
[3] Business Monitor International Industry Trend Analysis Free
Pricing Of Drugs To Benefit Domestic Pharmaceutical Firms April
22 2014.
China
Growth Endangered By
Anti-Corruption Campaign
BMI View: A more 'rational' use of pharmaceuticals through Source: WHO, BMI
8 www.pharmaceuticalsinsight.com
Pakistan Asia Pharma & Healthcare
Inefficiencies
ward pressure on China's pharmaceutical growth potential. We will
look to revise our expenditure forecasts should there be more certain
evidence indicating significant medicine price cuts in China. BMI BMI View: While Pakistan boasts a substantial population of 182mn
believes that low public healthcare expenditure and the lack of people, annual per capita expenditure on healthcare is very modest
regulatory enforcement are fundamental factors that are hindering at just USD31. Despite expected economic progress, the majority
the government in its aim to more effectively improve the nation's of the population will continue to suffer from inadequate access to
healthcare standard and widen patient access to medicines. medicines and healthcare provision. Pakistan's drug registration
We note that China's healthcare spending has historically been process has been plagued by delays, affecting the population's access
significantly below the global average level in terms of healthcare to drugs and limiting revenue-earning opportunities for drugmak-
expenditure as percentage of GDP. In contrast to other BRIC coun- ers. In addition to this and further obstructing drugmaker revenue
tries, the Chinese government has not invested sufficient funding streams, there are serious inefficiencies in the public selection,
into the healthcare sector, but instead allowed patients to shoulder procurement and distribution of medicines.
most of the burden. It is not surprising that the poorly funded public
Poor Provision & Access
healthcare system requires additional resources from bribery and Pakistan Per Capita Healthcare & Pharmaecutical Spending
illegal rebates to support its operations.
Furthermore, the prevalence of petty corruption is relatively com-
mon and tolerated in China, as what is considered corrupt intent by
Western standards is often entrenched in a culture where it is expected
that the value of a personal relationship is demonstrated through gift
giving. It will therefore be very hard for the Chinese authorities to
eradicate the practice through an anti-corruption campaign. In fact,
addressing corruption in society has been in use as a domestic policy
by the authorities since ancient times, in order to consolidate control
throughout the vast country, remove political rivals, promote allies
and restore public trust in the central government.
President Xi's anti-corruption campaign is more forceful than
those implemented by his predecessors. However, the practice is
not under legal supervision. It has no aim to establish democracy or
addressing the bureaucratic structural issues. President Xi neverthe- Source: BMI, WHO
www.pharmaceuticalsinsight.com 9
Vietnam Asia Pharma & Healthcare
Pharmaceuticals are indispensable to health systems. By comple- [1] Pakistan's health system: performance and prospects after the
menting other types of healthcare services they can reduce morbidity 18th Constitutional Amendment, The Lancet, Volume 381, Issue
and mortality rates and enhance quality of life. Yet the ability of 9884, Pages 2,193-2,206, June 22 2013
pharmaceuticals to save lives, reduce suffering and improve health [2] Rational Prescription & Use: A Snapshot Of The Evidence From
depends on their being of good quality, safe, available, affordable Pakistan And Emerging Concerns. Int J Pharm Pharm Sci, Vol 5,
and properly used. Suppl 1, 131-135
10 www.pharmaceuticalsinsight.com
Vietnam Asia Pharma & Healthcare
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