Jan-Willem Eleveld of IMS explores the 17 pharmerging markets as defined by IMS, as well as the factors that have led to China’s ascension to become the world’s sole first-tier pharmerging market. Learn about the challenges present in this dynamic market and the imperatives for success in China.

1. China and the New Harbingers of Change
Jan-Willem Eleveld,Vice President,Consulting & Services,Asia Pacific

2. CHINA: THE SOLE FIRST-TIER COUNTRY
Clearly, China has surfaced as a dominant
market. According to the IMS Health
Market Prognosis of October 2009, Chi-
na’s CAGR09-13 is now projected at 23-
26%, a forecast predicated on a number of
factors.
To begin with, there’s the robust founda-
tional economy, with economists predict-
ing an 8% GDP growth over the next
five years. Demographics are also at play;
between 2010 and 2020, some 180 mil-
lion additional people will be added to the
ranks of those past the age of 50. Chronic
diseases, correspondingly, are on the rise—
with the number of diabetics rising to 40
million and the number of obese tripling
in the past eight years, among other con-
cerning conditions.
Sweeping healthcare reforms further drive
China’s rapid ascendancy. By 2011, 90%
of the population will be covered by in-
surance. At the same time, the Chinese
will have access to a far greater number
of healthcare centers, as China continues
its program to strengthen primary care and
rural healthcare services. Finally, China
has taken important steps to improve its
intellectual property protection policies so
as to encourage innovation and implement
better patent oversight.
By 2011, China will rank as the third larg-
est pharmaceutical market in the world,
after the United States and Japan and
ahead of Germany, France, Italy, and Spain.
By 2009, its hospital market had already
topped USD $25 billion, recording a 27%
year on growth. Its second and third tier
cities, meanwhile, are demonstrating even
faster rates of growth. And while generics
continue to dominate the market—taking
a 61.4% of the market share in 2009—
newly patented products are also leaving
their mark,increasingly gaining share from
a huge and rapidly growing absolute value
market.
What We Know
In late 2006, IMS named Brazil, Russia, India, China, Ko-
rea, Mexico, andTurkey to its first-ever list of seven “pharmerg-
ing markets.” These were countries growing at twice the world
market average. Countries in which each market was forecasted
to grow more than 7.5% CAGR06-11. Countries expected to
represent 12% of the world’s pharmaceutical market by 2011 and
to contribute some 20% of all global growth between 2006 and
2011. Ours was a bold assertion—a declaration made with the
full understanding that time presses forward and the future is never
quite what yesterday thought it might be.
Recently IMS revisited those pharmerging markets in light
of the global recession and other powerful developments. In
both Mexico and Brazil, governmental price pressures have
decelerated these formerly robust pharma markets. In Ko-
rea,we’re seeing higher-than-elsewhere GDP per capita. The
healthcare market in China, for its part, continues to accel-
erate, reflecting continued economic growth and increased
reforms funding. We take a close look at the phenomenon
in this paper.

3. THE NEXT WAVE OF PHARMERGING MARKETS
The new world has prompted us to re-
define the pharmerging markets —to
slot seventeen countries into three tiers.
China, with its $8 trillion GDP and pro-
jected $40 billion incremental pharma
market value growth (2008-2013), is the
sole occupant of the first tier. In the sec-
ond, we’ve placed Brazil, Russia, and In-
dia—countries with 2008 GDPs of be-
tween $2 and $4 billion and incremental
pharma market value growth (2008-2013)
of between $5 and $15 billion. The thir-
teen countries in the third tier—begin-
ning with Venezuela and ending with the
Ukraine—are all countries in which the
2008 GDP was less than $2 trillion and
the incremental market value growth from
2008-2013 is projected to be between $1
and $5 billion.
We haven’t just been looking at the mar-
ketplaces,of course. We’ve been looking at
how large pharmaceutical companies are
performing in these markets. Our analyses
revealed that the top 15 multinationals are
currently deriving just 9.4% of their sales
from pharmerging countries, despite the
fact that these markets account for 17% of
the overall world market.
UNDERSTANDING THE RESIDUAL CHALLENGES
As the sole first-tier pharmerging country
benefiting from numerous reforms and a
growing healthcare infrastructure, China
has become a central area of interest and
activity for multinationals from all around
the world.
Still, those who venture into China, must
take into account a number of emerging
issues and residual challenges. Despite the
headway that has been made, both acces-
sibility and affordability continue on as
top concerns. There are, for example, just
3.8 health professionals and 3.1 beds for
100 people in China, resulting in waiting
times of close to two hours for every six
minutes a patient has in contact with an
actual physician. The situation is particu-
larly difficult in the rural areas,where 54%
of China’s population receives just 22.5%
of the health spend.
New services and new technologies have
resulted, not surprisingly, in escalating
costs. Out-of-pocket expenditures are
now 18 times more expensive than they
were two decades ago—an important sta-
tistic given that 45% of total health ex-
penditure is a personal contribution. A
full 35% of urban households and 43% of
rural households find it frankly difficult to
afford treatment.
The government’s ambitious healthcare
reform plan, a three-year investment ini-
tiative of RMB850 billion announced in
2008, is designed to address the twin chal-
lenges of affordability and accessibility.
The plan stands on five platforms: basic
medical insurance that will cover 90% of
the population by 2011; an essential drug
system that will go into place by 2011; a
strengthened primary healthcare service
that will overhaul existing resources, oper-
ational mechanisms, and financial systems;
an equitable public health system that will
What We Think
Tier 1 1 China 8 40B+
Tier 2 2 Brazil 2-4 5-15B
3 Russia
4 India
Tier 3 5 Venezuela* 12 Thailand <2 1-5B
6 Poland 13 Indonesia
7 Argentina 14 Romania
8 Turkey 15 Egypt
9 Mexico 16 Pakistan
10 Vietnam 17 Ukraine
11 S. Africa
Tier 1 Countries 2008 GDP1
Incremental pharma
($Trillion) market value growth2
from 2008-13 ($ Billion)
Source: 1
IMF GDP PPP in 2008; 2
IMS Market Prognosis Oct 2009, * For Venezuela, pharma value added is 5B+ but mainly attributed to
unusual inflation and currency changes. Countries in the table are arranged in descending order of incremental market value growth
Top 20 Global corp China market performance
Sanofi-Aventis
Pfizer/Wyeth
AZ
BI
Takeda
Teva
Abbott/
Solvay
GSK
J&J Lilly BMS
Otsuka
Daiichi
Novartis
MSD/SP
Eisai
Novo
Nordisk
Bayer
%CAGR2004-9(China)
% 2009 Revenue from China US Corp
European corp
Japanese corp
China CAGR 04-09 (20.93%)
China share of world market (3.08%)
Source: IMS Data, June 2009
60%
50%
40%
30%
20%
10%
0%
0.0% 0.5% 1.0% 2.0% 3.0%1.5% 2.5% 3.5%
Size of bubble =
2009 China sales

4. improve capabilities to manage public health
issues; and a public hospital reform program
that,following some early piloting of reforms,
will be rolled out more extensively beginning
in 2011.
Complex and well-considered, China’s re-
form framework is designed to ensure that
major gaps are addressed and that major issues
are owned by the appropriate governmental
departments,as illustrated in the chart.
Pharmacos must also, of course, keep their
eye on the National Drug Reimbursement
List, though being on the list is not the sole
determinant of a drug’s journey throughout
the Chinese healthcare system. Other fac-
tors—the product’s targeted disease area, the
threat of generics, the patient co-payment
level, the competitive threat, the PDRL list-
ing prior to the NDRL, the price cut, the
investment and execution from the company,
and the product’s clinical efficacy—all influ-
ence a product’s potential uptake within the
market. Thus, pharmacos must prioritize
their investments according to the strategic
focus and size of the potential gain from the
NDRL.
IMPERATIVES FOR SUCCESS
Having maintained an active presence in
China for the past many years, IMS strongly
believes that the critical success in this rap-
idly evolving market is local adaptability. It’s
about picking the right portfolio, building
the right commercial model,setting the right
pricing and market access strategies, and
getting the right people to execute the right
things well—all ideals, we recognize, but all
imperative.
Successful pharmacos in China excel at
building the right structure and capabilities.
They match local demand with their own
value propositions. They build the right sales
and distribution models to strike the right
balance between depth and breadth. They
recognize that it all begins with aligning the
portfolio with high-growth opportunities.
Our advice,therefore,is straightforward. Act
fast, because the competition is intensifying.
Take the time to understand the market re-
alities, and recognize that they are changing
rapidly. Differentiate your self with a clear
and distinct value proposition. Tailor your
portfolio, clinical development, and com-
mercial models to local needs. Execute your
strategy and tactics under the leadership of a
talented,and knowledgeable.
What We Can Offer
At IMS, we’ve not just been monitoring
China for years; we’ve been applying our
unique evidence-based consulting approach
and therapy area depth to emerging client
opportunities.
Our current research focuses on critical areas
for the pharmaceutical industry: new com-
mercial models, launch readiness, pharmerg-
ing markets, and the value of medicines. As
the only major professional consultancy ex-
clusively dedicated to the pharmaceutical and
healthcare industry, we offer proven expertise
in commercial strategy as well as leading-edge
methodologies and approaches designed to
solve the most complex business issues.We’re
at work, every day, improving decision sup-
port, reducing pperational costs, and increas-
ing flexibility.We use best practice approaches;
enable faster and better insights through use
of more granular data;and drive global quality,
consistency and standardization.
Our Consulting & Services teams include
thought leaders with expertise in industry
issues, business processes, and therapies. We
interpret information, analyze risks, and un-
cover opportunities.And, we deliver essential
services that enable our clients to use our of-
ferings effectively and confidently.
Our thought leaders, meanwhile, offer deep
insights into the healthcare environment and
the implications for the pharmaceutical in-
dustry, globally, regionally, and locally. Pres-
ently, our Thought Leadership team is help-
ing to position IMS as the leading provider
of market insights for the pharmaceutical and
healthcare industries—and as clients’ partner
of choice. We are the organization widely
recognized, in other words, for its reliable
brand:IMS.Intelligence.Applied.
For more information, please contact Jan-
Willem Eleveld,VP of Consulting & Services
in Asia-Pacific (jweleveld@sg.imshealth.com)
or write us at info.sg@sg.imshealth.com
IMS HEALTH® SINGAPORE • Regional Office • 10 Hoe Chiang Road • #23-01/02 KeppelTowers • Singapore 089315
Tel:65-6227 3006 • info.sg@sg.imshealth.com • www.imshealth.com/pharmerging
Primary
Target
Secondary
Target
Key focus
Relevant
Gov’t Dept.
• Increase insurance
coverage
• Lower drug
price
• Build a primary
care services
sector
• Ensure to meet
basic medication
needs
• Change profit-driven
operation model of
current public hospitals• Reduce out of
pocket pay by
patients
• Widen patient
access to
different kinds
of mediations
• Improve efficiency
of healthcare
system
• Reduce basic drug
prices
• Optimize healthcare
resources & improve
the management
Affordability Affordability Affordability
Affordability AffordabilityAccessibility Accessibility Accessibility
Accessibility Accessibility
1
Medical
Insurance
2
Drug Price
Control
3
Primary
care Dev.
4
Essential
Drug
5
Public Hosp.
Reform
MoHRSS
MoH
NDRC
NDRC
MoH
MoHRSS
MoH
MoHRSS
NDRC
MoH
NDRC
MoHRSS
MoH
NDRC
MoHRSS