2. Contents
Welcome Letter................................................................................................................................ 3
KEEPING PACE WITH THE BURGEONING ASIA-PACIFIC OTC MARKET........................................................................ 4
OTC drugs now stand in the spotlight. Nowhere is this more true than in Asia Pacific, where for the third consecutive
year OTC sales in the region (excluding Japan) significantly outpaced the global OTC market. See the opportunities
driving growth in this market.
Health technology assessments: The new face of Asia Pacific and the emerging role of pharma
companies in the future of healthcare.................................................................................................. 11
The need to control rising health care costs while meeting the demands of increasing numbers of patients has forced
national health authorities to respond with new cost containment measures. See how Asian markets are seeking involvement
from pharma companies in the development of the HTA process and how they can strengthen their collaborations with HTA
authorities.
UNDERSTANDING THE PARADOX OF ASIA’S PHARMA MARKET TO ENSURE GROWTH SUCCESS..................................... 15
Asia is a series of submarkets, grey areas, and paradoxes. As a result, there is the need to temper discussions of the
region’s growth potential with a recognition of the many challenges presented by its diverse market conditions. See why
companies need a well-built, strategic framework that properly identifies – and quantifies - opportunities and growth
levers in order to lay the foundation for an effective market-entry strategy.
PRICE-VOLUME STRATEGIES AND DIFFERENTIAL PRICING – STRATEGIC LEVERS FOR DRIVING GROWTH IN ASIA............. 21
Cohesive price-volume strategies can effectively drive awareness, accessibility, and affordability. Learn how to play, where
to play and what constitutes winning when it comes to price-volume strategies in Asia.
2
3. Welcome letter
Today at IMS Asia-Pacific, our teams are at work in dozens of countries
assessing trends, building strategic frameworks, identifying opportunities
and helping healthcare companies from all around the world succeed in this
dynamic environment. It is our privilege to be leading the conversation, and
to be on the cutting edge of what is new and innovative in a region that we
believe offers enormous opportunity.
Throughout 2012 we were enthused by trends suggesting that the pharmaceutical
market in Asia will likely reach USD $350 billion in 2016, comprising 30% of the
global pharmaceutical market and driving close to 50% of global, incremental
growth through 2016.
At the same time, we watched as over-the-counter (OTC) sales in the APAC region yet again significantly
outpaced global OTC growth, despite the declining rate in the global OTC trend for the past two years.
In fact, according to the September 2012 IMS OTC Global Analysis, MAT (Moving Annual Total), the APAC
region (excluding Japan) grew by 16% over 2011— a remarkable 14 percentage points higher than the global
OTC market growth rate.
Asia Pacific continues to be a region with significant opportunities for exploration. And so, when we sat
down to plan the 2013 issue of our annual IMS Asia-Pacific Insight Magazine, we looked for ways to illustrate
both the challenges and the opportunities ahead.
The stories you’ll find here explore the submarkets and hybrid conditions of the Asia-Pacific region and outline
the best approaches to building meaningful frameworks that address key issues in awareness, accessibility,
and affordability. They look at the price-volume strategies that are making a difference. They explore surging
OTC markets as well as the opportunity for pharmaceutical companies to play an integral role in the health
technology assessment tools that have become central to pharmaceutical planning throughout this region.
As always, our stories represent the in–depth industry expertise of IMS Health in collaboration with our
business partners and clients. We look forward to partnering with our healthcare industry colleagues in 2013
to continue to identify opportunities in the fast growing Asia-Pacific markets.
Sincerely,
Andy Liu
President,
Asia-Pacific and China
3
5. Keeping pace with the burgeoning
Asia-Pacific OTC market
In recent years, worldwide sales of over-the-counter (OTC) drugs—medicines sold
without the aid of a prescription or the governance of a physician—have surged. Selfdiagnosis and self–medication have created momentum, as has the greater availability
of healthcare information, thanks to media ranging from print to TV. Additionally,
OTC drugs typically carry fewer side effects and warnings than prescription medicines,
tend to be more affordable, and can help to manage acute symptoms such as pain and
cough—all of which have been key factors in the market’s growth.
Once a secondary line of business for many
multinational pharmaceutical companies,
OTC drugs now stand in the spotlight.
Nowhere is this more true than in Asia
Pacific, where for the third consecutive
year OTC sales in the region (excluding
Japan) have significantly outpaced
the global OTC market growth. In fact,
according to the September 2012 IMS OTC
Global Analysis, MAT (Moving Annual Total),
the market grew by 16% over 2011—a
remarkable 14 percentage points higher
than the global OTC market growth rate.
Furthermore, as of September 2012, OTC
sales in the Asia-Pacific region account for
21% of global OTC sales.
“OTC drugs are the talk of the industry here in
Asia Pacific,” confirms Katherine Te, Senior
Manager for Consumer Health, Asia Pacific.
“General pain relief products, expectorants,
skin treatments, adult multivitamins,
asthma products and anti-allergens, cold
and flu remedies, anti-diarrheals and
calcium supplements have all experienced
consistent double-digit growth since
2010; and many companies have been
reengineering their business models to
capitalize on the trend. They’re also
recognizing the opportunity inherent in
non-reimbursed markets, especially within
young healthcare infrastructures.”
While local companies have always
focused resources on this business space,
what’s new and game-changing is the
increasing number of multinational
companies (MNCs) such as GlaxoSmithKline,
OTC Market Trends (PAST 3 YEARS) IN % BASED ON USD
25
20
15
10
5
0
Global otc
Apac excl. japan
2010
9
22
global otc
2011
10
21
2012
2
16
apac excl. japan
FIGURE 1 Source: IMS OTC Global Analysis, MAT September 2012
Share of sales vs. share of growth in % based on USD
120
100
80
21
100
60
40
20
0
Apac excl. japan
rest of world
share of growth
100
0
share of sales
21
79
rest of world
apac excl. japan
FIGURE 2 Source: IMS OTC Global Analysis, September MAT 2012
5
6. Keeping pace with the burgeoning Asia-Pacific OTC market
Johnson & Johnson, Pfizer and Sanofi, who
are now actively exploring this market.
Leveraging both their own market
knowledge, and a general consumer
preference for well-known brands, these
firms are extremely well-positioned to
capture the opportunity here.
In these developed markets, the goal
should be to increase the depth of coverage
within existing channels (via greater share
of shelf or optimized inventory levels)
while simultaneously tapping a new user
base.
This can be done in the following ways:
Understanding the Market
Developed OTC Markets
An excellent way to gain insight into this
market is to look closely at developed
OTC markets—those markets in which
OTC advertising and self-medication are
established norms. Australia, Japan,
Singapore and the Philippines all fall
into this category and are distinguished
by the following characteristics:
• Self-medication is established as a norm
the consumer mindset, and is
in
reinforced by advertising messages.
•
Products are highly accessible and
consumers are clear in their preference
at point-of-sale.
In Australia, for example, access to OTC
products is quite liberal, with point-ofsale channels ranging from the traditional
pharmacy to supermarkets.
•
Communicate brand information to as
wide a base as possible, including
doctors and pharmacists in addition to
consumers.
•
Pay particular attention to geographical
differences and trends in distribution
and availability.
•
Build a distribution model that is able
to capitalize on expanded point-of-sale
opportunities and ensure constant
stability in stock levels.
•
Saturate traditional media before
experimenting with new media, unless
otherwise dictated by consumer/market
dynamics. The tendency to experiment
with new media too soon is a common
pitfall. It can wreak havoc on the overall
marketing mix, especially if the other core
elements such as channel-specific
messaging and product availability have
not yet been established.
CATEGORY growth OF TOP OTC MARKETS
Growth in % 2012 vs 2011
ch-in-sk-id-au
rest of apac
Selected 5 Markets
4
Rest of APAC
18
Other OTC
1
Other OTC
35
VMS-Others
15
VMS-Others
Pain Relief-Gen Systemic
14
Pain Relief-Gen Systemic
Expectorants
12
0
10
7
5
Other Skin Treatment
16
Other Skin Treatment
9
0
Multivitamin-Adult
20
30
40
FIGURE 3 Source: OTC Global Analysis, September MAT 2012
6
16
APAC Market excl. Japan
16
APAC Market excl. Japan
0
5
10
15
20
Developing OTC Markets
The landscape, however, is significantly
different in developing OTC markets,
where both consumer habits and the trade
regulatory environment are still worksin-progress. Here, self-medication exists
but it is heavily constrained by advertising
regulations and government reimbursement
practices. Interestingly, governments are
becoming increasingly aware of the
variable rates of education among their
populations and so they have committed
to putting more regulatory safeguards
into place to protect their citizens against
misleading messaging.
India, China, Vietnam, Indonesia,
Thailand, Malaysia and South Korea all fit
this profile. Each is further characterized
by big populations, increasingly savvy
consumer awareness, greater purchasing
power, new product introductions and
wider accessibility to products in
pharmacies and drugstores.
In South Korea in particular, changes in
government regulations related to the
sales channels, not to mention an increased
desire by pharmaceutical companies to
invest in OTC, have begun to exert a
significant influence on consumer behaviors
and local market growth.
Another significant characteristic of
developing OTC markets is the prevalence,
and preference, for traditional medicines
over western medicines. Some local
companies have been quick to address this
dynamic by launching products that use
familiar, traditional ingredients in a more
modern delivery mechanism, such as herbal
supplement pills to treat common pains
or coughs. In the Philippines for example,
the cough brand ASCOF® is derived from
the herb Vitex Negundo, or Lagundi, which
is a local cure-all remedy. ASCOF® was
ultimately able to secure leading a position
in the cough category by capitalizing on its
popularity as a natural home remedy.
7. to focus on providing quality of life through
balanced nutrition; in Asia, however, the
same brand might best be positioned as one
capable of improving performance or giving
more energy in pursuit of a better
quality of life. And so flexibility and
ingenuity are key in purposefully adapting
global strategies to local conditions.
Growth Opportunities for different market models
Maximize share
of wallet
via new packs
Expand scope
via new line
extensions
Increase
access via new
channels
Established
OTC markets
Increase depth
of coverage
within existing
channels
Create new
market space
via thought
leadership
Adapt and
localize best in
class strategies
Developing
OTC markets
FIGURE 4 Source: IMS analysis
Within the Asia-Pacific region, the top 5
OTC markets —China, India, South Korea,
Indonesia and Australia— are growing
collectively at 18% as of MAT September
2012. In these markets, the top 10 OTC
categories have grown by double digits vs
last year. The rest of the Asia-Pacific region
also represents attractive opportunities,
collectively growing at a rate of 9%, still
above the global growth rates.
Gaining Supremacy in the OTC Market
Potential success factors across the
Asia-Pacific OTC market differ not just from
country to country, but also from category
to category. The decision to enter a specific
category should thus be tempered by the
local environment, as some categories
perform better in one country compared
to another. Even aesthetic adjustments
are necessary; brand messaging can certainly
determine a product’s success, and packaging
can play an essential role in consumer trials
and continued preference. Adapting global
positioning to fit local nuances is, therefore,
a prerequisite for OTC companies hoping to
make the most of the OTC drug trend across
this diverse region.
In theory, many elements of a successful
strategy may seem obvious, and as
such they are often taken for granted.
Paying attention to each of these strategic
initiatives, however, is absolutely critical
to cultivating a meaningful and profitable
presence:
• Effective brand-awareness campaigns.
•
Variation of pack size, so that
consumers can be introduced to a product
through trial-sized portions.
•
Smart utilization of all media—TV, print,
radio, and digital—to engage consumers.
• Dominant shelf presence and availability
coupled with promotional efforts aimed at
both trade partners and consumers.
• Smart
pipeline management that
continually reinvigorates brands with new
flavor variants and/or similar product
extensions.
• Effective communications with physicians
and pharmacists, who play a key role
in securing brand value, especially for new
products.
Indeed there is no one-size-fits-all strategy,
no single formula for success, and the subtle
differences are often the most essential
ones. Consider the branding of vitamins. In
Europe and the Americas, positioning tends
Successfully tapping into developed OTC
markets in particular also requires a certain
level of creativity in expansion strategies
and the willingness to look at new
distribution channels to secure greater
access and awareness. “We’re talking
about supermarkets, convenience stores,
health-food stores, gyms, and innovative
co-promotion deals” explains Te. “And
we’re talking about tactics that may have a
longer payback horizon but will eventually
help sustain the brand image and stave off
market-share erosion by new players.”
With the rising popularity of social media,
OTC companies are also encouraged to
explore an alternative medium to reach their
target audience in a more cost-effective
way compared to traditional media.
Medicines ranging from cough suppressants
to vitamin supplements can utilize social
media to engage their customers and gain
valuable insights on what drives their
purchasing behavior. Xenical®, for example,
offers a forum on Facebook to connect
with both existing and potential users. They
have also used this medium effectively to
announce promotional efforts and gain
feedback about consumer preferences
and concerns. However as mentioned,
such a move must be carefully
aligned with the rest of the brand
communications strategy, and should follow
a saturation of traditional media, where
return can be more accurately forecasted.
Finally, OTC companies in developed OTC
industries in Asia-Pacific markets should
also consider driving preference among
existing customers through the introduction
of new, conveniently sized packs, designed
to encourage out-of-pocket product trials.
7
8. Keeping pace with the burgeoning Asia-Pacific OTC market
Consider Strepsils®, a line of throat lozenges,
which are marketed in packs of just two in
the Philippines and are therefore ideally
suited for individual, as-needed purchases.
However, though smaller pack sizes are
often a smart choice, consumer expectations
—and willingness to experiment— vary
by country and pack sizes should differ
accordingly.
OTC as a sustainable growth area
There’s no doubt that the OTC market will
continue to thrive within the Asia-Pacific
region. As has been demonstrated in other
parts of the world, as consumers become
more educated they are increasingly
motivated to find answers and treatments
for themselves, and are highly aware of cost
and convenience benefits.
8
It is important to remember, however,
that OTC portfolios in Asia Pacific cannot
—and should not— be managed as
traditional pharma products. This is a dynamic
market based on seasonal and often
acute ailments; consumer behavior varies on
a weekly or even daily basis as immediate
needs change. Access and availability
are also key drivers of success, as the
product must be available during that narrow
window of time when the consumer is
in need. And ultimately companies must
constantly benchmark their brand’s success
against both internal and external measures
so that they can continue to adapt and grow.
“The OTC market is poised to enter into a
dynamic growth era” concludes Te. “The
opportunity to profit from this segment has
never been clearer.”
9. With the right spark of
insight, a bright future
in the Consumer Health
market is at your fingertips
The Consumer Health market isn’t just on the rise – it is
one of the fastest growing markets in the pharmaceutical
sector.
As this market expands, timely and reliable marketing
intelligence is mission-critical in evaluating product
performance, anticipating competitive threats and validating
strategic plans.
So, do you have what you need to maximize your
business potential in the Consumer Health market?
For more information, please contact us at:
IMS Consumer Health Analysis provides the insights
necessary to understand critical market dynamics and
efficiently identify opportunities for growth – on a national,
regional and even local scale.
TM
And now, it is available in Malaysia, Thailand, Philippines
and South Korea.
Contact us now for a live web demonstration!
apac.info@imshealth.com
www.imshealth.com/cha/apac
9
11. Health Technology Assessments:
The new face of Asia Pacific and the emerging role
of pharma companies in the future of healthcare
In 1999—more than a decade after Canadian lawmakers introduced legislation designed
to help evaluate the safety and efficiency of healthcare treatments, and seven
full years after Australia introduced its own formal guidelines for pharmaceutical
reimbursement—the National Institute for Health and Clinical Excellence (NICE)
was unveiled in England and Wales. As an advisory body, NICE was created “to
reduce variation in the availability and quality of NHS treatments and care” and
to “help resolve uncertainty about which medicines, treatments, procedures and
devices represent the best quality care for patients and the best value for the NHS.”
It would soon become one of the most widely discussed health technology assessment
(HTA) programs in the world.
The need to control rising healthcare costs
while meeting the demands of increasing
numbers of patients has forced national
health authorities around the world to
respond with new cost containment
measures. Much like their western
counterparts, Asia-Pacific countries have
faced significant challenges arising from
the costs of caring for aging populations,
which are on the rise. In addition, the
growing prevalence of non-communicable
diseases, such as cancer and diabetes,
has placed a strain on both government
budgets and infrastructures. Difficult
questions have arisen; how, for example,
might authorities venture beyond simple,
existing tools and put forward complex tools
such as risk-sharing schemes and HTAs?
HTAs have found advocates in the more
mature Asia-Pacific countries and have set
the pace for important change. In South
Korea, it was the economic crisis of 2007/09
that forced the government to create
a national evidence-based healthcare
policy. Taiwan, too, has adopted new HTA
measures, and as recently as January of
2012, Thailand published HTA guidelines
that were inspired, in large part, by
the work of NICE and similar European
regulatory bodies. Today Japan and China
are joining suit, declaring their intent to
develop and implement pharmacoeconomic
assessments.
Without question, passivity is not an
option for those in the pharmaceutical
industry. Indeed, now is the time for
the industry to engage with payers and
governments in asking the questions
that will positively shape the HTA
environment: What priorities will take
precedence in the respective countries?
Will transparency trump choice? Will cost
edge out quality? Will patients have a
voice? Will they have sufficient options?
And how can, and should, pharmaceutical
companies proactively plan for a
changing health environment?
“There’s a healthy, ongoing debate,” says
Joe Caputo, HEOR Regional Principal,
Asia-Pacific. “The practical issues are many,
but there’s a very real opportunity to
become a valued stakeholder as such
processes
are
implemented
across
Asia Pacific.”
One of the most profound dilemmas
facing regional and national health
authorities in Asia-Pacific countries is the
basic lack of technical expertise, with
many regional authorities needing to
look to countries and organizations
with already-developed processes, such
as NICE, for guidance on design and
implementation of their HTA processes.
In Thailand, for example, colleagues from
the Health Intervention and Technology
Assessment Program (HiTAP) asked NICE
for support in evaluating the performance
of their organization. NICE obliged,
offering senior Thai academics and
colleagues a chance to review key
publications, reports and data. NICE
has played a similarly essential role on
behalf of the Taiwanese Bureau of National
Health Insurance and the Center for Drug
Evaluation, which benefited from insights
into the NICE approach for assessing
diagnostics and devices and for engaging
with constituents. NICE has additionally
supported members of the Taipei HTA
division of the Center for Drug Evaluation
and the Bureau of National Health
Insurance (BNHI) and offered insights to
the China National Health Development
Research Center (CNHDRC) which has not
yet implemented a process but is eager
for technical support.
Participating in the conversation
Pharma companies must, of course, do
more than just watch and wait. Caputo
urges his clients to seek direct
involvement in the development of the
HTA process, especially in those places
where the processes and rules are not
entirely finalized. Such conversations
can be had either alone or in concert with
industry groups such as the Pharmaceutical
11
12. HTA: The New Face of Asia-Pacific and the Emerging Role of Pharma Companies in the Future of Healthcare
Better data. Better outcomes.
In the meantime, pharma companies can
sponsor and/or fund the development of
new registries and databases that can
represent a win-win for the industry and
healthcare providers; data can be used
by industry experts and policy makers
alike to better understand the burden of
illness and the impact of treatments on
patient outcomes. It can also be used to
help plan better healthcare provisions for
patients. “Everyone benefits from a
greater understanding of the impact of
disease,” agrees Caputo.
Research and Manufacturers of America
(PhRMA) organization (which issued an
opinion statement in 2012 with regard
to HTA in Japan) or the Pharmaceutical
Research and Manufacturers Association of
Thailand (PReMA). “We’ve seen a number of
doors open” says Caputo, citing an invitation
extended to PReMA members by those
developing HTA guidelines in Thailand
as one among many recent examples.
One of the ongoing conversations revolves
around the training, or the funding of
training, for HTA experts, which is essential
to the successful implementation of any
HTA system. Another critical dialogue
involves the prioritization of technologies
for evaluation. In Thailand, HiTAP currently
issues a survey to stakeholders to determine
which technologies should be evaluated.
Since the ultimate plan is to produce a
set of criteria that will determine which
technologies are evaluated, such initiatives
are important steps toward participating
in the conversation and being heard.
Gathering the right evidence
Then there’s the challenge surrounding
the lack of local data. HTAs simply do
not work as effectively in the absence
of local data, and so clinical data on
the local population is needed,
12
particularly in populations in which genetic
differences may result in different levels
of treatment efficacy. Other necessary
information includes data describing
healthcare resources’ uses and costs.
Without such data, countries cannot
accurately evaluate the cost-effectiveness
of different treatment options relative to the
current standard of care. Consequently they
cannot develop guidelines and standards
that are reliable, or ultimately helpful.
But finding that ‘real-world evidence’ is,
even today, tricky. “Local databases are
rare, and even when they do exist they
tend not to be readily available,” admits
Caputo. “Invariably the databases are
limited in scope, restricted to a particular
locality or condition, or offer only a
subset of relevant information, such as
diagnosis but no test results.”
Furthermore, since data is not traditionally
collected for research purposes it lacks
consistent coding, making it all but
impossible to combine the data in ways
that would yield an accurate, big-picture
view of the scenario. It’s a reality that
reflects the relatively early stage of HTA
programs across the region. Certainly
with time greater investments in data
will need to become a top priority.
Unfortunately, efficacy data and preference
scores from Asian populations are generally
not available in most cases. Traditionally,
therefore, the responsible party—be it
the government, a research institute, or a
pharmaceutical company—has tended to
rely on foreign data. However, this isn’t
always the best solution. “It is simply not
safe to use foreign outcomes-related data
without modifications, such as possible
variations in genetics among races
and medical practice patterns among
countries,” explains Caputo.
Pharma companies, therefore, can play a
big role here in researching and generating
such data in conjunction with
academic groups and broader stakeholders.
The ultimate goal should be the
refinement of the data used to conduct
health technology assessments and,
ultimately, to make decisions.
Additionally, pharma companies can play a
key role in educating doctors, pharmacists,
hospital management, patients, and payers.
Linking HTA and research findings with
policy and practice is imperative for the
successful implementation of any HTA
system. Pharma companies therefore can
have a voice in promoting the role and
use of HTAs and can help communicate
recommendations to relevant stakeholders
and ultimately help strengthen their own
collaborations with HTA authorities.
13. Finally, there’s the never-small matter of
transparency. What is the rationale for
the decisions that are being made? What
is the degree of the decision-maker’s
influence? Critics have been outspoken
in their concern over cases in which
manufacturers are invited or permitted
to submit pharmacoeconomic data, but
never told how the data is actually used.
When the sweeping price cuts that are
announced on a regular basis by health
ministers are added into the mix, it
is no wonder that the industry has
been left feeling rattled and uneasy.
Pharma companies can play a positive
role in this regard by ensuring that the
data submitted to HTA bodies is of the
highest caliber, and by demonstrating
that pharma companies can be considered
a trusted stakeholder.
Concluding thoughts
Despite the obvious challenges, it is
still abundantly clear that the time for
HTA has arrived in the Asia-Pacific region.
Implemented correctly, it will stand not only
as a key component of cost containment, but
also as a pivotal enabler for the efficient use
of resources as governments look to provide
broader access to affordable healthcare.
And it’s not just the broader policy
discussion at stake. It’s the details
and the technicalities that matter.
Influencing the acceptable costeffectiveness threshold may, for example,
be just as important as the timing of the
evaluation. “Pharma companies can’t just
sit around and wait,” concludes Caputo.
“They should be actively looking for
opportunities to enter the debate—
preferably prior to the development and
implementation of HTA processes. They
should be going to the table armed
with as much information as possible,
determined to proactively influence the
discussion.”
Once the process is implemented, the
emphasis must then turn to quality and
presenting best available evidence to
promote or defend products in market.
This is where pharma companies have a
central role to play in generating the best
possible evidence in order to succeed.
13
15. Understanding the paradox of Asia’s
pharma market to ensure success
At first glance, Asia appears to be an assured avenue of growth for pharmaceutical
manufacturers. According to IMS Market Prognosis 2012, the pharmaceutical market
in Asia is expected to reach $350 billion USD in 2016, comprising 30% of the global
pharmaceutical market ($1.2 trillion USD) and driving close to 50% of global,
incremental growth through 2016. Meanwhile, the McKinsey Global Institute
CityScope 2.0 report suggests that, by 2025, 310 of the world’s top 600 cities
(as measured by income) will be located in Asia, with 250 alone in China.
Indeed, with strong economic growth
coupled with greater access and demand
for healthcare, the prospects for pharma
manufacturers in Asia look overwhelmingly
positive. Below the surface however,
many manufacturers bear witness to the
grey areas and paradoxes that make Asia a
difficult market to understand and operate in.
Grey Areas and Paradoxes
At first glance the statistic is confounding:
according to a 2011 census report from
the Indian government, just 47% of all
Indian households had working toilets that
year—an alarming condition for a country
on the rise, with a large and rapidly
growing middle class. But that number is
even more startling when compared to the
fact that 59% of all households reported,
in the same census, having mobile phones.
Mobile phones eclipsing toilets? The
interesting question then is, why?
Projected Contribution of Asia to Global Pharma Value Sales (USD, bn)
Billions
“When you consider the impact of increased
urbanization on potential access to
increasingly sophisticated healthcare
infrastructures and resources, the
opportunities for pharmaceutical firms are
obvious,” confirms Dr. Srikanth Rajagopal,
Principal at IMS Consulting Group.
“Demographic and epidemiologic factors
such as urbanization, aging population
and the growing prevalence of chronic
diseases combined with strong GDP
growth and increasing budgetary spend on
healthcare means that Asia is now firmly
‘in focus’ for pharmaceutical firms.”
$1,400
$1,200
$1,000
$800
$600
$400
$200
$0
2011
North America
2012
2013
Western Europe
2014
Rest of world
2015
Japan
2016
Asia w/o Japan
FIGURE 1 Source: IMS Market Prognosis 2012 and IMSCG analysis
The success of Nokia, a leader in the
mobile phone market in India, points
to a possible answer. Having conducted
in-depth on-the-ground research into
India’s market, the manufacturer
understood the following about its
consumers and their needs: a large
proportion of India’s population remains
illiterate; there is irregular power supply;
disposable income, while rising, remains
low; conditions are dusty and harsh;
and priorities for key functionalities are
different across users. Thus, families in
rural towns and villages would likely be
receptive to a low-cost mobile phone with
features such as dust proof casing, long
battery life, torch-lighting effects, AM/
FM radio, and multiple address books (for
sharing among family members).
Nokia’s example is an important reminder
of knowing—truly knowing—the market
one hopes to enter. General assumptions
about Asia are, in the end, simply not
useful. Markets are unique, and marketpenetration strategies must be as well.
“The pharma market in Asia is exceptionally
heterogeneous and seldom black and
white,” says Anthony Morton-Small, Senior
Principal of IMS Consulting Group in
Asia-Pacific. “In fact, this market is a
series of submarkets, grey areas and
paradoxes. Asia’s governing priorities,
affordability levels and healthcare systems
vary tremendously. Success hinges on
a deep understanding of particulars.
What does reimbursement look like,
market by market?
What is the
15
16. Understanding the paradox of Asia’s Pharma Market to ensure success
Grey Areas and Paradoxes in Asia
Developed Markets
Characteristics
Emerging Markets
“Paradoxical” Characteristics
Developed Markets
Characteristics
Diagnosed/Treated
Under-diagnosed/treated
Un-diagnosed/treated
Primary care access
Limited or no access
Secondary care access
Rx
Patented
Innovative
New brand launch
OTX
Government-supported
patent challenges
Off-patent
Incremental
innovation
Established
Mature brand launch
Organic
Universal coverage
OTC
Partnering
Evolving mixed
coverage
Loss of Exclusivity
In-organic
Private coverage
Reimbursed
Semi-reimbursed
Out of Pocket
Original Brands
Premium priced
branded generics
Generic
Barrier Type:
Awareness
Accessibility
Affordability
FIGURE 2 Source: IMSCG analysis
standing of innovators versus generics?
What are the patterns and reach of
distribution? What is the propensity to
self-medicate? What levels of affordability
exist? The differences, whether they be
subtle or obvious, all matter.”
As a result, market conditions in Asia are
difficult to categorize and understand,
often encompassing a number of
traditional
and
developed-market
definitions (see Figure 2). In terms of
patent protection, for example, a
large portion of Asia’s market is comprised
of branded generics—products with
reputable brand names that are priced
higher than generics, but less than
original products. Products facing patent
disputes are also common, leading some
MNCs to forego the launch of a potential
blockbuster (e.g. Pfizer’s Lipitor® in India)
to avoid the hassle and cost of legal
proceedings. Within this environment of
intellectual property protection, niche
markets of incremental innovation such as
biosimilars have thrived and are already
firmly established in China, Korea and India.
In response, many MNCs have adopted
innovative and adaptive strategies unique
to Asia. For example, instead of a
reduced focus on mature brands within
16
their portfolio, some MNCs have
“reinvented” their mature brands by
launching them at market-specific prices
within targeted Asian markets. To further
expand access, MNCs have also relied on
structured partnerships with local
manufacturers, refusing to be limited
by strictly organic or in-organic growth
options. This breadth of opportunities also
applies to channel selection, where some
MNCs have focused on the OTX channel
(OTC products promoted to doctors).
Doing so allows for “two shots on goal,”
capitalizing on potential sales through
doctors, as well as via the retail channel.
Finally, the healthcare system and patient
characteristics in Asia also present a
number of paradoxes. In terms of healthcare
coverage, countries such as Thailand and
Singapore are not strictly reimbursed or
out-of-pocket. Rather, both countries
combine aspects of private, out-of-pocket
systems with subsidized, reimbursed
systems, each catering to different
socio-economic and market segments.
Certainly as a whole, countries in Asia have
increased their investment in expanding
healthcare coverage for their populations.
Nonetheless, many in rural areas continue
to have little to no access to healthcare—
leading to a uniquely high proportion of
patients who are “under-diagnosed,” and
as yet untreated. In many of these cases,
the symptoms of a particular disease
are treated while the root cause remains
undiagnosed.
Such grey areas and paradoxes in Asia
demonstrate the need to temper discussions
of the region’s growth potential with a
recognition of the many challenges
presented by its diverse market conditions.
It also demonstrates the need and
importance of a well-built, strategic
framework that properly identifies
opportunities and growth levers, and lays
the foundation for an effective marketentry strategy. “At IMS Health,” says
Morton-Small, “we believe that any
strategic framework in Asia must seek
to understand the market through the
lens of Awareness, Accessibility and
Affordability.
“Smart, strategic frameworks that consider
the marketing foundations of awareness,
access, and affordability lead not just to a
more accurate understanding, but also to
more actionable insights,” he continues.
“They assist players in identifying and
assessing the actual levers of growth in
Asia’s markets. And they can prove
effective across a wide spectrum of
markets when informed by case studies
across therapy areas as well as countries,
and when applied in an intelligent way.”
Awareness
Consider awareness. In 2010, Sanofi launched
in India what soon became a classic patient
education campaign targeted at diabetes.
They called it “Take Control.” They focused
on helping patients “understand the
complications associated with avoiding or
delaying treatment as well as the need to
control the disease by maintaining their
HbA1c levels under 7.” The campaign
worked so well that, just one year later,
Sanofi unveiled “I am a Champ,” a
campaign celebrating the improved health
awareness of diabetes patients.
17. The 3As - Awareness, Accessibility and Affordability Framework
2
Accessibility
Channel/distribution
Patents
Infrastructure
1
Awareness
3
Alignment
Detection
Diagnosis
Treatment
Affordability
Reimbursement
Socio-economics
Insurance coverage
FIGURE 3 Source: IMSCG analysis
Sanofi is not, of course, the only
pharmaceutical company advocating for
greater patient awareness about disease
states in Asia. GlaxoSmithKline (GSK),
too, is a leader in this field, consistently
reinvesting 20% of its profits in the
under-developed countries of Nepal,
Bangladesh, and Myanmar with projects
designed to strengthen local healthcare
infrastructures through both health
education and prevention services.
In Asia, this initiative has resulted in a
partnership with the non-governmental
organization (NGO) “Care International UK.”
Accessibility
Importantly, Sanofi and GSK have both
coupled their awareness campaigns with
initiatives designed to build access.
For Sanofi, this has taken the form of a
so-called Prayas strategy, which combines
physician education with the provision of
medicines at more affordable prices for
those living in rural India. The first ten
drugs introduced in the Prayas program
were for infections, pain, and gastric
disturbance—all conditions treated by
primary-care physicians.
GSK, meanwhile, has gone beyond
traditional price cuts to enter into
partnerships with NGOs specifically
designed to improve accessibility. It’s
a program near and dear to the heart of
Andrew Witty, GSK’s CEO, who has said, “In
2010 we created a Developing Countries
and Market Access operating unit
dedicated to increasing patient access
to GSK medicines and vaccines while
expanding our presence and helping us to
build a sustainable business in developing
countries.”
In fact, GSK leads all pharma MNCs in
providing access to medicines in
developing nations, according to the
Access to Medicines Index 2012, which is
based on assessments of activities such
as drug donation, patent policy, pricing
and research. GSK is closely followed by
Johnson & Johnson, Sanofi-Aventis, Merck
& Co. and then the specialized, mid-sized
manufacturers Gilead Sciences and Novo
Nordisk.
“We’re seeing MNC pharmaceutical
companies take steps to make their
products more accessible to the different
population segments in Asian countries,”
explains
Dr.
Srikanth
Rajagopal.
“These companies recognize the substantial
variation in the quality of healthcare
infrastructures across top-tier metropolises,
lower-tier cities and towns, and
provincial or rural areas. They segment their
opportunity based on these variations,
carefully prioritize target markets and then
collaborate with local channel partners
to effectively distribute and make their
products accessible. And significantly,
they are looking to localize their
value proposition to enable accessibility.
A prime example is the generation of
localized clinical evidence, which drives
faster regulatory approval, physician
uptake and enables MNCs to differentiate
themselves from local manufacturers,
who largely depend on difficult-to-replicate
relationship selling.“
While gaining access in Asia is relatively
new territory for global pharma companies,
there are many possible routes to success.
Patient assistance programs offer a viable
approach, as Novartis discovered in
Thailand with its patient assistance
program for Glivec®. So do partnerships
with local organizations that are
already plugged into effective distribution
channels. Campaigns that simultaneously
target awareness and access (those that
include diagnostic testing, for example)
can be key, as can research and
development initiatives focused on orphan
diseases that may not have a large market
elsewhere but could open doors in Asia’s
emerging markets.
Success can also come in the form of
carefully launched second brands or
branded generics, which are popular in
Asia, thanks to their lower prices and
favorable reputations. As mentioned
earlier, branded generic manufacturers
tend to be well-equipped to capitalize on
loss of exclusivity situations and to gain
the market share once held by originator
products. In addition, due to their wide
and well-established network, partnerships
with local, branded generic manufacturers
provide MNCs with a sound alternative to
lengthy patent struggles and a defensive
strategy against cheaper, generic
alternatives. This is especially true
in many of Asia’s self-pay markets
17
18. Understanding the paradox of Asia’s Pharma Market to ensure success
local manufacturing and distribution
capabilities.”
Asia Sales by Patent Protection Status (2011) – Value Sales
APJ Sales Breakdown by Country*
4%
23%
31%
45%
74%
69%
54%
68%
65%
50%
22%
41%
28%
7%
3%
6%
5%
5%
JP
AU
TW
KR
TH
SG
Reimbursed Markets
74%
56%
96%
55%
30%
4%
Originals
41%
62%
57%
24%
100%
19%
31%
19%
7%
MY
CN
Branded Generics
15%
VN
4%
7%
PH
INDO
IND
Unbranded Generics
Semi-Reimbursed
Self-Pay Markets
General trend observed: Reimbursed markets are largely originator dominated
FIGURE 4 Source: IMS MIDAS and IMSCG analysis
(e.g. Philippines, Indonesia, and India),
where branded generics often comprise
the majority of market share.
crucial decision point for those who need
the products as well as those in a position
to prescribe them.
Affordability
“We’re seeing many global pharma
companies adopt local pricing strategies
that intelligently reflect the affordability
of local populations,” says Dr. Rajagopal.
“But we’re also seeing a number of
smart approaches to improving the
affordability of products by establishing
Finally, consider affordability and the
willingness to pay. Price matters
everywhere, but it matters even more in
Asia, where inflation rates, GDP growth
rates, rising patient incomes, and elevated
expectations combine to make cost a
Price cuts (both those targeted at specific
markets and those designed for entire
populations), patient discount cards,
“second brands” (priced competitively
with generic manufacturers), and incomebased patient discounts have all been
put to good use in Asia by global pharma
manufacturers.
This may mean that pricing in India is
only 10% of the price of that same product
in the US or Europe (as is the case with
a number of GSK products in India).
Sometimes it means that global companies
pursue price points that are different in
top urban cities from those in outlying
cities (as is especially the case in China).
Always it means that the strategies and
tactics have been tailor made for the
market at hand.
However, lowering the price is not always
the right strategic play in Asia. An
informed understanding of affordability in
a market —considering both willingness
and ability to pay— may suggest that the
current price can be maintained, or even
increased, while still expanding access
and retaining market share. In Thailand,
for example, Pfizer adopted a unique
approach of launching a cheaper,
second brand of Lipitor® (Xarator),
while maintaining Lipitor’s existing
price. As a result, Pfizer was able to
maintain value share post-loss of
exclusivity, targeting different patient
populations with two different brands.
Final Thoughts
Clearly, raising awareness, accessibility,
and affordability levels are levers for
driving success for global pharma companies
engaging with the Asian market—not just
singularly, but together.
“You can’t let any one of these factors
go unaddressed,” affirms Morton-Small.
“Leave one unaddressed, and you risk a
18
19. High
Nascent
Aspiring
Established
Country 3
Medium
Assessing a market through the lens
of awareness, accessibility and affordability
enables the identification of countries
with similar in-market conditions, growth
drivers and barriers. A recommended
next step would be clustering markets
and developing synergistic strategies
appropriate for each market cluster.
Cross-country identification of drivers and barriers
Assessment of opportunity (market size)
misaligned approach to specific markets,
resulting in not only potential failure to
capitalize on growth opportunity but also
potential backlash from key stakeholders.
Bayer, for example, faced legal and
commercial challenges associated with the
pricing of Nexavar® significantly beyond
the reach of most cancer patients and their
families in India.”
Nascent
Aspiring
Established
Country 2
Country 4
Country 1
Low
Aspiring
Established
Low
For example, an analysis of awareness,
accessibility and affordability levels in Asia
points to a common growth denominator
of an Aspiring middle class in China,
Indonesia and India – as compared to
an Established middle class in Thailand,
or a Nascent middle class in Pakistan,
Bangladesh and Myanmar. As each
cluster of markets (Nascent, Aspiring and
Established) share similar drivers and
barriers,
strategies
targeting
the
respective drivers and/or barriers would
Nascent
Medium
High
Assessment of average Awareness, Accesibility and Affordability levels
FIGURE 5 Source: IMSCG analysis
likely work across countries belonging to
the same cluster (Figure 5).
At the top of the agenda of many MNCs
is the need to overcome the affordability
barrier with appropriately targeted
strategies. On page 21 of this magazine, we
explore both the strategic considerations
(e.g. timing, competitive intensity, risk,
option selection) and the implementation
considerations of price-volume strategies
(e.g. price optimization, deployment
enablers, etc.) in order to address
affordability barriers in a country, or
cluster of countries sharing similar
in-market conditions.
19
21. Price-volume strategies and differential
pricing – strategic levers for driving
growth in Asia
The most pressing question facing pharmaceutical manufacturers in Asia is not whether
there is growth potential, but rather how to capture growth opportunities. More
specifically, how can pharmaceutical companies best leverage their portfolio and
capabilities to benefit from Asia’s strong growth trajectory? As we have seen in
a previous article, “Understanding the paradox of Asia’s pharma market to ensure
success,” grasping a market’s awareness, accessibility, and affordability levels while
also identifying the respective drivers and barriers are critical first steps.
Of particular interest for many MNCs in
Asia, however, is the need to address
opportunities and barriers related
to affordability, often resulting in
under-treatment and under-compliance
among patient groups. Clearly, there are
significant volume, value and market share
gains that can be realized when a full
understanding of the challenges across the
patient journey is used to drive the ultimate
strategy.
Of course, given the heterogeneity of
Asia’s pharmaceutical markets, the rapidly
evolving nature of its healthcare systems,
as well as the self-medicating and self-pay
tendencies of Asian patient populations,
choosing an optimal strategy to address
affordability is anything but straightforward.
“Pharmaceutical markets in Asia are difficult
to understand, let alone operate in,” says
Anthony Morton-Small, Senior Principal at
IMS Consulting Group. “For example,
1
Strategies for specific markets/ points during the patient journey
Awareness
Origination
Steps in the Patient Journey
However, the ability to link these market
factors to patient behaviors and tendencies
is an important next step in building
strategies that proactively respond to key
market trends (Figure 1). For example,
programs that work toward increasing
awareness and accessibility are most often
employed in markets who struggle with
high levels of underpresenting and underdiagnosed populations. For these markets,
the top priority for any strategic plan is
to open doors to treatments that have
historically been closed or non-existent.
Awareness/Presentation
Accessibility
Affordability
Strategies to
increase
awareness
Strategies
to expand
accessibility
Diagnosis
Referral
Treatment
Fulfillment
Strategies to
increase
affordability
Adherence
volume strategies)
(e.g. price-
FIGURE 1 Source: IMSCG Analysis
despite pockets of reimbursement, Asia is
still predominantly self-pay by definition.
When you factor in issues such as lower
levels of GDP per capita, widespread income
inequality/Gini coefficient, and the fact that
many households rely on pooled finances to
pay for a family member’s healthcare,
building an optimal pricing strategy
becomes a complicated project.”
Indeed, a recent Reuters report noted that
many leading MNCs, including Bayer,
Abbott, Roche, and Johnson & Johnson,
have cited tiered or differential pricing as
a key factor behind their current success
in emerging markets. In that same report,
Roche CFO Alan Hippe notes that that the
Swiss company “expects strong growth in
emerging markets over the coming years …
largely because of the company’s successful
use of tiered pricing and innovative drug
access models.” 1
According to Morton-Small, strategies that
effectively address the affordability barriers
of a market are often referred to as ‘pricevolume strategies.’ “Price-volume strategies
involve optimizing pricing to match the
affordability levels and price elasticity of a
target market,” explains Morton-Small. “The
goal is revenue optimization, or yielding
a disproportionate gain in sales volume
http://newsandinsight.thomsonreuters.com (“Analysis big pharma emerging mkts tactics shift as growth slows”)
21
22. Price-Volume Strategies and Differential Pricing – Strategic Levers for Driving Growth in Asia
by taking advantage of peaks in demand
among patients otherwise unable or
unwilling to pay for treatment, and pricing
accordingly.”
A Range of Options. A Multitude of
Opportunities
Price-volume strategies may take a number
of forms, with the primary distinction being
selective price adjustments, which are
available to specific market segments,
and non-selective or “across-the-board”
adjustments, which are available to
the entire market (Figures 2 & 3).
While across-the-board strategies (such
as GlaxoSmithKline’s blanket price cuts to
products in Indonesia, the Philippines, and
Vietnam) may be the easiest to implement,
list price reductions are irreversible and
referenceable, and often require global
approval. More subtle options, though, do
exist, says Dr. Srikanth Rajagopal, Principal
at IMS Consulting Group.
“We’ve seen pharmaceutical companies
succeed through innovative measures such
as patient discount cards, patient access
programs, and differential pricing that takes
into account the affordability levels of
target populations,” he explains. “We’ve also
seen companies launch cheaper, alternative
forms of their product, offer ‘buy-one-getone-free’ discounts to encourage patient
compliance, or discount a smaller pack of
the product to lower the entry barrier.
Finally, we’ve seen companies target
multiple segments of the population by
launching a second brand ahead of imminent
loss of exclusivity, while maintaining the
price of the originator. In short, lowering price
may not be the only, the most effective,
lever in addressing the affordability barriers
of Asia’s individual markets.“
Companies wanting to make the best use
of existing tools will no doubt recognize
that some strategies—being the first to
lower a price in cash, self-pay markets, for
example—are inherently proactive, whereas
others, such as dropping a price in reaction
to a competitor’s price cut or governmental
22
Example of price-volume strategies
Price-Volume Strategies
Non-selective
pricing
1
Blanket price cut/discount
Examples
a
Upfront price discount
b First-dollar patient discount program
By product
distinction
By perceived value
Payer-specific discount
Discount in exchange for favorable reimbursement
3
Income-based patient discount
(Patient Assistance Program)
Patient assistance programs for high cost biologics
4
Volume-based patient discount
Patient discount program with graduated discount
Form-specific discount
Launch of an alternative form
(e.g. metered dose inhaler) at a discount
6
Strength-specific discount
Discounting maintenance strength to encourage adherence
7
By identifiable
patient segment
2
5
Selective
pricing
Pack specific discount
Discounting smaller pack to reduce entry barrier
8
Second brand
Launch second brand pre-LoE
FIGURE 2 Source: IMSCG Analysis
CASE STUDY OF GSK’s SERETIDE AND NOVARTIS’ GLIVEC
Company
GSK
Novartis
Country
Indonesia
Thailand
Product
Seretide
Glivec
Therapy Area
Asthma/COPD
Oncology
Price-Volume Strategy
Blanket Price Cuts &
Strength-Specific Discount
Patient Assistance Program
Selective /
Non-Selective
Non-Selective
Selective
Proactive/ Re-active
Proactive
Reactive
(compulsory license pressure)
Target Population
All
UC
Description of
Price Adjustment
30-60% discount (larger
discounts for higher dose
products)
Glivec provided free for all
patients under Thailand’s
Univeral Coverage plan (UC)
FIGURE 3 Source: IMSCG Analysis
mandate, are reactive. While proactive and
reactive price cuts both improve market
accessibility to low/middle income
segments, proactive price cuts provide
manufacturers with a first-to-act
advantage, as well as greater control over
the discounted amount.
23. Price-Volume Return on Investment (ROI) Framework
• Low
affordability barrier
or reimbursed market
• Cheaper
While sacrificing value sales initially to
generate volume is a risk, an expanded
patient and physician base can be a
worthwhile
reward
and
long-term
investment. Consider Novartis’s approach to
the Glivec® International Patient Assistance
Program (GIPAP) that was launched in
Thailand in 2003 for patients with chronic
myeloid leukemia. Faced with the threat
of compulsory licensure from the Thai
High potential for
market expansion
and share gain
from competition
Neither expands
market access
nor gain
competitor share
Little opportunity
for market expansion;
success depends
on share gain
Low
alternatives available
• Low
High
Ability to gain competitor share
price sensitivity
• High
• Significant
product
differentiation
in clinical benefits
price sensitivity
• Competition
based price
not clinical benefits
FIGURE 4 Source: IMSCG Analysis
IMPACT OF SELECTIVE AND NON-SELECTIVE PRICE CUTS
$0.9
Price Cut
$14.0
6.0
5.0
$0.8
$0.7
4.0
$0.6
3.0
$0.5
$0.4
2.0
$0.3
$0.2
1.0
$0.1
$0.0
0.0
2010
2011
Seretide (Volume)
Seretide (Value)
2012
Symbicort (Volume)
Symbicort (Value)
USD, Millions
Seretide (GSK) and Symbicort (AZ)
in Indonesia
Standard Units, Millions
$1.0
Selective Price Strategy
Glivec (Novartis) in Thailand
400
350
$12.0
PAP for UC
300
$10.0
250
$8.0
200
$6.0
Standard Units, Thousands
Non-Selective Price Strategy
USD, Millions
“Simply put,” says Dr. Rajagopal, “the
ultimate success of a price-volume strategy
depends on its ability to expand the
market and/or gain competitor market
share. Of course, a strategy only generates
profit if the subsequent gain in sales volume
offsets the loss in value due to the reduced
price.”
Market expansion
is the primary
source of
value growth
High
cheaper alternatives
Low
• Limited
Moving from Theory to Action
Price-volume strategies drive growth by
helping manufacturers expand the market,
gain competitor share, or a combination of
the two (Figure 4). Volume growth via
market expansion occurs when, through a
price adjustment, a product is made available
to customers who previously could not
afford it, or were historically unwilling to
pay. Price adjustments may also be used
to either increase or defend market share
(price-volume strategies are often used to
limit the decline in market share of a mature
product or product facing loss of exclusivity).
Sources of Growth Potential
• Significant affordability
barrier in self-pay market
Ability to expand market
“All of these are viable solutions, but none
can be implemented without a thorough
understanding of the prevailing market
conditions,” affirms Su Yong Chung,
Senior Principal at IMS Consulting Group.
“It all comes down to adopting the most
appropriate
strategy
to
increase
affordability—a process that must bridge
the gap between market understanding and
the available strategic options while
considering the manufacturer’s specific
portfolio and internal capabilities.
For instance, in specialty care areas
such as oncology, strategies that provide
sources of funding for patients may be more
effective than simply lowering the price.”
150
$4.0
100
$2.0
50
$0.0
0
2007
2008
2009
Gilvec (Value)
2010
2011
Gilvec (Volume)
FIGURE 5 Source: IMS MIDAS, Q1’07-Q2’12- Standard Units; USD value at constant exchange rate
government, Novartis reached a compromise
by adjusting GIPAP to cover all patients
under Thailand’s Universal Coverage
program (over 70% of the population).
As a result, Novartis generated good will
and strengthened its relationships with
physicians,
ultimately
expanding
accessibility without lowering the list price
(Figure 5).
23
24. Price-Volume Strategies and Differential Pricing – Strategic Levers for Driving Growth in Asia
Differential pricing, or pricing based
on the affordability levels of a market,
is another often-utilized price-volume
strategy in Asia. Sanofi Aventis’
management of Altace®/ramipril (a blood
pressure medication) is a prime example.
As the first to launch the drug in that
country, Sanofi chose to sacrifice initial
value gain by adopting a price point
close to 10% of its U.S. price.
The result? Sanofi ultimately captured
24
General Risks
Price Related Risks
Price Referencing
Risks from Pricing LOW
Parallel Trade
These include formal / informal
referencing & legal vs. illegal parallel trade
Counterfeiting
Indirect Risks from Pricing HIGH
Patent Protection
Public Relations
These may be partly motivated by
pricing differentials but other factors
may also be at play
FIGURE 6 Source: IMSCG Analysis IMS MIDAS
Examples of Success Variables in Asia
Success Variables*
Acute/Chronic
Market Specific
Similar results were achieved in Indonesia
in 2010 for Seretide®, GSK’s asthma and
chronic obstructive pulmonary disease
(COPD) inhaled medication (Figure 5). Prior
to across-the-board price cuts, which
ranged from 30-60% (reducing the range of
price points for different Seretide packs to a
single, everyday low price), the value sales
of Seretide and AstraZeneca’s Symbicort®,
a similar product, were tracking identically.
The price cuts for Seretide initially saw its
value sales drop and Symbicort’s increase.
However, over the course of the next two
years, Seretide enjoyed over 50% volume
growth, generating enough of a profit to
offset the initial value loss. In fact, by the
second year, Seretide overtook Symbicort in
value share and continues to lead in terms
of both value and volume sales.
Interestingly, the Seretide price adjustment
appears to have expanded the entire market
for combination inhalers in Indonesia.
PRICE-VOLUME RISK CONSIDERATIONS
Specialty/Primary
Competitive Intensity
Strategy Specific
Whereas the GIPAP in Thailand addressed
affordability barriers without adjusting
price, GlaxoSmithKline (GSK) took a different
approach to managing Augmentin®, a
mature antibiotic, in Indonesia and
the Philippines. In response to generic
competition, impending government price
cuts, and decreased sales in the
Philippines, GSK cut the price for the
Augmentin range by up to 50% in 2008.
Early results were promising; within a year,
Augmentin revenue had rebounded to
pre-price cut levels. By the third year,
GSK had expanded the overall amoxicillin
market, while continuing to see an increase
in Augmentin’s value share.
Description
Is the product for an acute symptom
or for a chronic condition?
Is the product a’ specialty care
(high cost) or primary care
(low cost) product?
Is the product in a highly
competitive TA?
Selective/
Non-Selective
Is the pricing strategy targeted
for a particular segment across
all segments?
Proactive / Reactive
Is the pricing strategy a result
of pricing pressure, a proactive
means of increasing access?
*Note: Representative, not exhaustive
FIGURE 7 Source: IMSCG Analysis
an impressive 40% in value share for the
highly genericized molecule.
Nonetheless, pharmaceutical companies
hoping to expand accessibility in emerging
markets will not always be able to achieve
their goal solely by adjusting price.
This was the case with Xeloda®, an oral
chemotherapy treatment marketed by Roche
in the Chinese market. “Even at treatment
costs that were less than half of those in
the US, Xeloda was still priced above the
reach of most of the middle-income
segment in China,” observes Amkidit
Afable, IMSCG’s Pricing and Market Access
expert in Asia.
25. Clearly, says Afable, a one-size-fits-all
approach does not work in Asia. “Pricevolume strategies provide the opportunity
to align a product with each market’s
specific affordability levels, and to
subsequently drive accessibility and improve
market share,” he says. “It’s a careful
balancing act. And it can be risky, resulting
in companies either adopting conservative
strategies or actively managing the risks
associated with innovative strategies during
the deployment stage.”
If the relative price of a product is too low,
manufacturers run the risk of international
reference pricing (IRP), both formal and
informal, as well as legal and illegal
parallel trade. If a product is priced too
high, manufacturers may be exposed to
counterfeiting, government-led patent
disputes (compulsory licensing), or negative
public perceptions (Figure 6). Given both
the risks and the potential upside associated
with each price-volume strategy, the next
question is: what strategy provides the
highest potential for success?
Choosing the Right Strategy
The challenge facing pharmaceutical
manufacturers is a familiar conundrum:
while the optimal strategy can often only
be identified in hindsight, proactively
matching a strategy to prevailing market
conditions is not as straightforward. To
hedge against such uncertainty, a diligent
review of case studies can provide critical
benchmarks and strategic frameworks and
uncover unique success variables (Figure 7).
“Assessing numerous price-volume strategy
case studies across Asia has allowed us to
test hypotheses and identify some of the
patterns and variables that affect success,”
says Chung. “For example, blanket price
cuts may work well for acute-care antibiotics
in the Philippines, but not for chronic,
diabetic medication in the same country.
Similarly, highly competitive markets may
be sensitive to blanket price cuts, but not
patient discount cards.”
Framework for identifying the optimal Price-Volume Strategy
Country 2
Country 1
Strategic Options:
Situation 1
Situation 2
Country 4
Country 3
Situation 3
Situation 4
Situation 5
List price cut
Rebate
Discount
(i.e. Discount cards)
2nd Brand /
co-marketing
Performance-based
Financial-based
Others
Go
Wait & Watch
FIGURE 8 Source: IMSCG Analysis
Deployment considerations for GSK’s Price Cut in Indonesia
Product
• Augmentin
• Zinnat
• Zantac
• Seretide
• Avodart
• Lamictal
• Actifed
• Tykerb
Patient Journey
Patient Journey
• Treatment
• Awareness
• Accessibility
• Affordability
• Fulfillment
• Adherance
• Geographic Coverage
• Payer-Specific
Discount
• Awareness/
Presentation
• Referral
Deployment Considerations*
• Blanket Price Cut
• Origination
• Diagnosis
P-V Strategy*
• Distribution Network
• Income-based
Patient Discount
• Volume-based
Patient Discount
• Form-Specific
Discount
• Second Brand
• Sales Force Sizing
• Segmentation and Targeting
• Marketing Campaigns
• KPI/Performance Metrics
• Initiative Roll-Out
• Pricing Risks
*Note: Representative, not exhaustive
FIGURE 9 Source: IMSCG Analysis and Market Research, IMS MIDAS
Identifying these variables through
case studies and primary research is a
necessary step in isolating the situations
and market conditions that respond best
to a particular price-volume strategy.
As with the development of all growth
strategies, past learnings are most useful
when paired with a deep understanding
of the current drivers and barriers unique
to a market (Figure 8).
“The availability of case studies and
current assessments has proven crucial
to evaluating strategies across market
situations and determining clear go or
no-go decisions,” confirms Rajagopal.
“Such an approach does not guarantee
success, but it does provide critical and
reliable guidance for selecting a strategy
and predicting its likely results.”
25
26. Price-Volume Strategies and Differential Pricing – Strategic Levers for Driving Growth in Asia
Making it Real
Finally, while specific implementation
concerns are unique for each strategy,
deployment plans should consider industry
best practices, potential capability gaps,
and key risks that require mitigation.
“The importance of reviewing deployment
considerations early-on in the process
cannot be understated,” says Rajagopal.
“To succeed, price-volume strategies
require a concerted effort from all parts of
the business and a close alignment with
the overall brand strategy. For example, a
successful patient discount card program
requires data-tracking capabilities, as well
as a coherent marketing message, while
blanket price cuts are unlikely to succeed
without sufficient sales force coverage to
capitalize on higher affordability levels.
These are capabilities that must be in
place prior to the launch of an initiative;
not doing so limits its real potential.”
26
The success of GSK’s price cuts in Indonesia
is a prime example (Figures 3 & 9).
While lowering the price for a number
of its products undoubtedly increased
affordability levels, the coordinated
augmentation of sales force and distribution
capabilities were critical companion
strategies. In fact, in preparation for the
price cuts, GSK astutely increased its sales
force headcount and geographical coverage
in Indonesia by over 50%.
A properly formulated and implemented
price-volume strategy can have a
significant impact on both the longand short-term success of the business.
“The right price-volume strategy has the
potential to defend against generic entry,
reinvigorate a mature brand, steal
competitor share, and expand accessibility
in previously untapped segments of
the population,“ says Morton-Small.
“Applying and implementing intelligent
strategies should leverage market
landscape insights, pilot experience, and
analog case studies that help identify
patterns and success variables by
geography, situation, and brand/
therapy area. Ultimately, success requires
not just an accurate understanding of
the market and the right framework,
but also a diligent and thoughtful
implementation plan that addresses
both current challenges and future
opportunities.”
IMS has a strong track record of advising
clients on pricing and market access
decisions in Asia Pacific. To learn more,
please contact us at the IMS Consulting
Group.
28. True collaboration
can lead to
breathtaking results
Imagine what would be possible for your business if you
could access the leading advisor to pharmaceutical and
biotech leaders around the world.
IMS Consulting Group offers end-to-end management
consulting for the issues that matter most in healthcare,
including:
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Around the world and across healthcare, we understand
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