Healthcare and Pharma Brands across APAC Nations

© 2013 IMS Health Incorporated or its affiliates. All rights reserved.

IMS Asia-Pacific

INSIDE THIS ISSUE• Keeping pace with the burgeoning Asia-Pacific oTc market

• HTA: The new face of Asia Pacific and the emerging role of pharma companies in the future of healthcare

• Understanding the paradox of Asia’s pharma market to ensure growth success

• Price-volume strategies and differential pricing – strategic levers for driving growth by increasing affordability in Asia

InsightIssue 3 | 2013

2

WelcoMe letter ............................................................................................................................... 3

KEEPING PACE WITH THE BURGEONING ASIA-PACIFIC OTC MARKET ....................................................................... 4OTC 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 ................................................................................................. 11The 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 .................................... 15Asia 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............. 21Cohesive 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.

Contents

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 liuPresident, Asia-Pacific and china

4

5

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. Self-diagnosis 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.

Keeping pace with the burgeoning Asia-Pacific OTC market

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,

GlOBAl OTC

OTC MARKET TRENdS (PAST 3 yEARS) IN % BASEd ON USd

20100

5

10

15

20

25

2011 20129 10 222 21 16APAC EXCl. JAPAN

GlOBAl OTC APAC EXCl. JAPAN

FIGURE 1 Source: IMS OTC Global Analysis, MAT September 2012

FIGURE 2 Source: IMS OTC Global Analysis, September MAT 2012

SHARE OF SAlES VS. SHARE OF GROWTH IN % BASEd ON USd

SHARE OF SAlES21 10079 0

SHARE OF GROWTH

120

100

80

60

40

20

0

APAC EXCl. JAPAN

REST OF WORld

REST OF WORld APAC EXCl. JAPAN

21100

6

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.

UNdERSTANdING THE MARKET

Developed OTC MarketsAn 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 in the consumer mindset, and is 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-of-sale channels ranging from the traditional pharmacy to supermarkets.

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:

• 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.

Developing OTC MarketsThe landscape, however, is significantly different in developing OTC markets, where both consumer habits and the trade regulatory environment are still works- in-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.

FIGURE 3 Source: OTC Global Analysis, September MAT 2012

REST OF APAC

0 105 15 20

0

5

9

7

1

4

16APAC Market excl. Japan

Rest of APAC

Other OTC

VMS-Others

Pain Relief-Gen Systemic

Other Skin Treatment

Multivitamin-Adult

CH-IN-SK-Id-AU

18

35

16

12

0 2010 30 40

15

14

16APAC Market excl. Japan

Selected 5 Markets

Other OTC

VMS-Others

Pain Relief-Gen Systemic

Expectorants

Other Skin Treatment

CATEGORy GROWTH OF TOP OTC MARKETSGROWTH IN % 2012 VS 2011

KeePIng PAce WItH tHe burgeonIng ASIA-PAcIfIc otc MArKet

7

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 MARKETPotential 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

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.

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.

FIGURE 4 Source: IMS analysis

GROWTH OPPORTUNITIES FOR dIFFERENT MARKET MOdElS

developing OTC markets

Increase depth of coverage

within existing channels

Create new market space via thought leadership

Adapt and localize best in class strategies

Established OTC markets

Increase access via new

channels

Maximize share of wallet

via new packs

Expand scope via new line extensions

8

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 AREAThere’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.

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.”

KeePIng PAce WItH tHe burgeonIng ASIA-PAcIfIc otc MArKet

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?

IMS Consumer Health AnalysisTM provides the insights necessary to understand critical market dynamics and efficiently identify opportunities for growth – on a national, regional and even local scale.

And now, it is available in Malaysia, Thailand, Philippines and South Korea.

Contact us now for a live web demonstration! www.imshealth.com/cha/apac

[email protected]

For more information, please contact us at:

10

11

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.

Health Technology Assessments: The new face of Asia Pacific and the emerging role of pharma companies in the future of healthcare

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 CONVERSATIONPharma 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

12

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,

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.

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.

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.

HtA: tHe neW fAce of ASIA-PAcIfIc And tHe eMergIng role of PHArMA coMPAnIeS In tHe future of HeAltHcAre

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 THOUGHTSdespite 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 cost- effectiveness 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.

14

15

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.

Understanding the paradox of Asia’s pharma market to ensure success

“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.”

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 PARAdOXESAt 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?

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 market-penetration 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

FIGURE 1 Source: IMS Market Prognosis 2012 and IMSCG analysis

2011$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

Billi

ons

2012 2013 2014 2015 2016

North America Western Europe Rest of world Japan Asia w/o Japan

PROJECTEd CONTRIBUTION OF ASIA TO GlOBAl PHARMA VAlUE SAlES (USd, BN)

16

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

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 market-entry 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.”

AWARENESSConsider 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.

underStAndIng tHe PArAdox of ASIA’S PHArMA MArKet to enSure SucceSS

FIGURE 2 Source: IMSCG analysis

Barrier Type:

GREy AREAS ANd PARAdOXES IN ASIA

developed MarketsCharacteristics

Original Brands Premium priced branded generics Generic

Organic Partnering In-organic

Universal coverage Private coverage

Diagnosed/Treated Under-diagnosed/treated Un-diagnosed/treated

Primary care access Limited or no access Secondary care access

Awareness Accessibility Affordability

Reimbursed Semi-reimbursed Out of Pocket

Rx OTX OTC

New brand launch Mature brand launch Loss of Exclusivity

Innovative EstablishedIncremental innovation

Evolving mixed coverage

Patented Government-supported patent challenges Off-patent

developed MarketsCharacteristics

Emerging Markets“Paradoxical” Characteristics

17

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.” ACCESSIBIlITyImportantly, 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


AlignmentAwarenessdetectiondiagnosisTreatment

1

AccessibilityChannel/distribution

PatentsInfrastructure

2

ReimbursementSocio-economics

Insurance coverage

Affordability

3

THE 3As - AWARENESS, ACCESSIBIlITy ANd AFFORdABIlITy FRAMEWORK

18

(e.g. Philippines, Indonesia, and India), where branded generics often comprise the majority of market share.

AFFORdABIlITyFinally, 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

crucial decision point for those who need the products as well as those in a position to prescribe them.

“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

local manufacturing and distribution capabilities.” 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 income-based 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 THOUGHTSClearly, 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

underStAndIng tHe PArAdox of ASIA’S PHArMA MArKet to enSure SucceSS

FIGURE 4 Source: IMS MIdAS and IMSCG analysis

JP

Reimbursed Markets

APJ Sales Breakdown by Country*

General trend observed: Reimbursed markets are largely originator dominated

Semi-Reimbursed Self-Pay Markets

AU TW KR TH SG MY CN IND

100%

Originals Branded Generics Unbranded Generics

74% 69% 68%

45%

54%65% 62%

23%

4%

22%24%

28%

50%41%

30%31%

57% 96%

7% 6% 5% 5% 7%19%

INDO

19%

74%

7%

VN

31%

56%

15%4% 3%

PH

41%

55%

4%

ASIA SAlES By PATENT PROTECTION STATUS (2011) – VAlUE SAlES

19

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.”

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.

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

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.


CROSS-COUNTRy IdENTIFICATION OF dRIVERS ANd BARRIERS

Asse

ssm

ent

of o

ppor

tuni

ty (

mar

ket

size

)

Assessment of average Awareness, Accesibility and Affordability levels

low

Nascent Aspiring Established



low

Medium

Med

ium

High

Country 4

Country 2

Country 1

Country 3H

igh

20

21

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 under-diagnosed 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.

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 straight-forward.

“Pharmaceutical markets in Asia are difficult to understand, let alone operate in,” says Anthony Morton-Small, Senior Principal at IMS Consulting Group. “For example,

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 ‘price-volume 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

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.

Price-volume strategies and differential pricing – strategic levers for driving growth in Asia

Awareness Accessibility Affordability

Origination

Awareness/Presentation

Diagnosis

Referral

Treatment

Fulfillment

Adherence

STRATEGIES FOR SPECIFIC MARKETS/ POINTS dURING THE PATIENT JOURNEy

Strategies to increase

awarenessStrategies to expand

accessibility

Strategies to increase

affordability(e.g. price-

volume strategies)

Steps in the Patient Journey

FIGURE 1 Source: IMSCG Analysis

1 http://newsandinsight.thomsonreuters.com (“Analysis big pharma emerging mkts tactics shift as growth slows”)

22

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 OPPORTUNITIESPrice-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-get-one-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

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.

PrIce-VoluMe StrAtegIeS And dIfferentIAl PrIcIng – StrAtegIc leVerS for drIVIng groWtH In ASIA


EXAMPlE OF PRICE-VOlUME STRATEGIES

Non-selective pricing

Selective pricing

By identifiable patient segment

By productdistinction

By perceived value

Blanket price cut/discount

Price-Volume Strategies

Upfront price discount

Examples

First-dollar patient discount program

launch second brand pre-loE

Payer-specific discount discount in exchange for favorable reimbursement

Patient assistance programs for high cost biologics

Patient discount program with graduated discount

launch of an alternative form(e.g. metered dose inhaler) at a discount

discounting maintenance strength to encourage adherence

discounting smaller pack to reduce entry barrier

Volume-based patient discount

Pack specific discount

Income-based patient discount(Patient Assistance Program)

Strength-specific discount

Form-specific discount

Second brand

1 a

b

2

3

4

5

6

7

8

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)

CASE STUdy OF GSK’S SERETIdE ANd NOVARTIS’ GlIVEC


23

“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.”

MOVING FROM THEORy TO ACTIONPrice-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).

“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.”

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

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).


Hig

hlo

w

PRICE-VOlUME RETURN ON INVESTMENT (ROI) FRAMEWORK

Highlow

Sources of Growth Potential

Abili

ty t

o ex

pand

mar

ket

Ability to gain competitor share

• Significant affordability barrier in self-pay market

• limited cheaper alternatives

• low affordability barrier or reimbursed market

• Cheaper alternatives available

• low price sensitivity

• Significant product differentiation in clinical benefits

• High price sensitivity

• Competition based price not clinical benefits

Market expansion is the primary

source of value growth

Neither expands market access

nor gain competitor share

High potential for market expansion and share gain

from competition

little opportunity for market expansion;

success dependson share gain

FIGURE 5 Source: IMS MIdAS, Q1’07-Q2’12- Standard Units; USd value at constant exchange rate

IMPACT OF SElECTIVE ANd NON-SElECTIVE PRICE CUTS

Seretide (GSK) and Symbicort (AZ)in Indonesia

Seretide (Volume)

Seretide (Value)

Symbicort (Volume)

Symbicort (Value)

$1.0

$0.9

$0.8

$0.7

5.0

3.0

1.0

0.0

6.0

4.0

2.0

$0.6

$0.5

$0.4

$0.3

$0.2

$0.1

$0.02010 2011 2012

USD,

Mill

ions

Price Cut

Stan

dard

Uni

ts, M

illio

ns

Non-Selective Price Strategy

Glivec (Novartis) in Thailand

Gilvec (Volume)Gilvec (Value)

$14.0

$12.0

$10.0

$8.0

$6.0

$4.0

$2.0

$0.0 0

50

100

150

200

250

300

350

400

2007 2008 2009 2010 2011

PAP for UC

Stan

dard

Uni

ts, T

hous

ands

USD,

Mill

ions

Selective Price Strategy

24

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.

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. 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

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.


FIGURE 6 Source: IMSCG Analysis IMS MIdAS

Risks from Pricing lOW

Indirect Risks from Pricing HIGH

General Risks Price Related Risks

These include formal / informal referencing & legal vs. illegal parallel trade

These may be partly motivated bypricing differentials but other factors

may also be at play

Price Referencing

Parallel Trade

Counterfeiting

Patent Protection

Public Relations

PRICE-VOlUME RISK CONSIdERATIONS

Success Variables* Description

Mar

ket

Spec

ific

Stra

tegy

Spe

cific

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?

Is the pricing strategy targeted for a particular segment across all segments?

Is the pricing strategy a result of pricing pressure, a proactive means of increasing access?

Acute/Chronic

Specialty/Primary

Competitive Intensity

Selective/Non-Selective

Proactive / Reactive


EXAMPlES OF SUCCESS VARIABlES IN ASIA

*Note: Representative, not exhaustive

25

Clearly, says Afable, a one-size-fits-all approach does not work in Asia. “Price- volume 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 STRATEGyThe 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.”

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.”

FRAMEWORK FOR IdENTIFyING THE OPTIMAl PRICE-VOlUME STRATEGy

Country 4Country 3Country 2Country 1

Strategic Options:

List price cut

Rebate

2nd Brand /co-marketing

Discount (i.e. Discount cards)

Performance-based

Financial-based

Others

Situation 1 Situation 3Situation 2 Situation 4 Situation 5

Wait & WatchGo


FIGURE 9 Source: IMSCG Analysis and Market Research, IMS MIdAS

• Augmentin

• Zinnat

• Zantac

• Seretide

• Avodart

• Lamictal

• Actifed

• Tykerb

Product Patient Journey Patient Journey P-V Strategy* Deployment considerations*

• Geographic Coverage

• Distribution Network

• Sales Force Sizing

• Segmentation and Targeting

• Marketing Campaigns

• KPI/Performance Metrics

• Initiative Roll-Out

• Pricing Risks

• Origination

• Awareness/ Presentation

• Diagnosis

• Referral

• Treatment

• Fulfillment

• Adherance

• Blanket Price Cut

• Payer-Specific Discount

• Income-based Patient Discount

• Volume-based Patient Discount

• Form-Specific Discount

• Second Brand

• Awareness

• Accessibility

• Affordability

dEPlOyMENT CONSIdERATIONS FOR GSK’S PRICE CUT IN INdONESIA

*Note: Representative, not exhaustive

26

MAKING IT REAlFinally, 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.”

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 long- and 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.


27

True collaboration can lead to breathtaking resultsImagine 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:

• Therapy area and brand strategy • launch excellence • Competitive intelligence • Pricing and market access studies • Strategy and portfolio analysis • Commercial model design and optimization

Around the world and across healthcare, we understand that the right insights can spark the brightest ideas.

IMS Health. Igniting possibilities.

[email protected]

+65 6227 3006

www.imshealth.com/viewpoints/apac

DOWNLOAD THE IMS ASIA-PACIFIC INSIGHTMOBILE APP ON YOUR IPAD NOW!

TM

Documents

Healthcare and Pharma Brands across APAC Nations