Insights for Achieving High Performance

in Asia Pharmaceutical Market

Anne O’Riordan
Accenture Managing Director APAC Life Sciences
Business pages and pharmaceutical
industry conferences are filled with reports
about the industry’s potential in Asia. It is
clear that recent double digit growth rates
in the region will most likely continue1,
making it critical to global companies.
To succeed in Asia, company strategies
need to reflect the diversity of healthcare
policy and socio-economic maturity
present across the geography. This region
and the countries within it merit tailored
approaches to optimize performance and
address market complexities. Critical
inputs to synthesize include government
reimbursement policy and healthcare
objectives, consumer/patient preference
and market trends that impact product
choice and portfolio as well as practical
approaches to ensure distribution and
supply chain efficiency. This article
outlines Accenture’s perspective on how
companies should view the region’s
various markets, and recommends steps to
take to get the most out of investments.
“Emerging Markets” – perhaps the most prized market
by companies – with the billions of citizens of China
and India at its center. Each market has distinct
growth potential (see Figure 1 – Asian Sub-Market
Trends in Per Capita Expenditures for Drug Therapies)
and differing governmental health care policies and
reimbursement standards, as well as cultural biases
regarding the use of branded vs. generic drugs that
impact their growth potential.
In the case of China and India, two of the highest
growth markets in the world, many companies are
challenged to serve these huge countries well or even
adequately. One issue is geographic: many potential
customers live in mega-cities such as Beijing and
Shanghai in China, and Delhi and Mumbai in India,
which constitute sizable markets on their own. Yet
there are also a substantial percentage of citizens in
hard-to-reach rural locations. Companies are faced
with the logistical challenge of getting products to
citizens and need to develop sales and distribution
strategies and partnerships that reflect and respond to
these realities.
Once companies connect with consumers/patients they
will find that attitudes about the products themselves
differ among markets and demand tailored responses
and in many cases can be heavily influenced by
Government policies on healthcare reimbursement.
In emerging markets, for example, many of the rising
affluent will gravitate toward branded products.
Where reimbursement rates are low (e.g. in India 92%
of pharmaceutical purchases are not government
reimbursed), consumer/patient perception and choice
coupled with physician preference has a strong
influence on product sales. On the other in China,
Figure 1: Per Capita Spend vs Market Growth and Market Size
Per Capita Pharma Mkt
Country Spend 2008 2008 ($B)
India $7.2 $8.5
Vietnam $8.9 $0.8
Indonesia $11.8 $2.7
the government reimburses 48% of pharmaceutical
purchases, with this continuing to rise due to the
changes announced in 2009 in healthcare reform – the
government’s role in controlling drug lists will continue
to execute considerable control over buying decisions.
Furthermore, in China most sales are through large
hospitals or clinics while in India pharmaceuticals are
mainly purchased in pharmacies dotted throughout the
country. Identifying, targeting and servicing patients in
India is consequently more challenging than in China
where significant volume of purchases go through
large identifiable channels and a reimbursement policy
exists creating awareness among the population of
the range and availability of pharmaceutical product.
Both markets represent enormous opportunities for
pharmaceutical companies but require very different
strategies and infrastructure to take full advantage.
At the opposite end of the spectrum from China and
India stand Japan and other mature countries with
developed health care systems. These also represent
promising markets due to their grey-ing populations,
strong governmental support for health care, and
higher reimbursement rates for drug therapies,
including therapies for aging populations suffering
from Alzheimer’s and conditions such osteoporosis.
In this bloc of countries the biggest and most recent
change for pharmaceutical companies is the promotion
of generic substitution driven by governments’ seeking
to slow health care spending while ensuring access to
necessary, proven products and services. The migration
to generic therapies and the potential revenue they
represent is at the core of many acquisitions and joint
ventures, including Teva’s joint venture with Kowa1 and
Pfizer’s acquisition of a generic portfolio for Japan3.
CAGR $ Growth Forecast
CAGR 2003 - 08 2008 - 13(E) 2008 - 13(E)
13.7% 11-14% $6.8
25% 17-20% $1.0
10.9% 7-10% $1.4

China $18.0 $24.0 21.6% 20-23% $39.6

Philippines $21.9 $1.9 10.1% 6-9% $0.9

Not One Market, But Many
Thailand $42.3 $2.9 13.5% 10-13% $2.1
Looking at Asia from the outside may mask the
Malaysia $44.3 $1.2 15.4%
diversity of markets in the region. In our practice, we
see the 40+ countries in Asia as falling into three Singapore $121.6 $0.6 15.8%
large but distinct types of markets: (1) “Mature Taiwan $150.3 $3.5 3.8%
Pharmaceutical Markets” represented by countries
S-Korea $218.4 $10.6 10.9% 7-10% $5.4
like Japan, South Korea and Australia, (2) “Maturing
Australia $450.9 $9.6 7.9%
Markets” comprised of southeast Asian countries
such as Thailand, Indonesia and Vietnam, and (3) Japan $627.1 $80.1 2.7% (2)–0% -$3.9
Between the ends of the spectrum are countries such
as Indonesia and Vietnam which have definite growth
potential given their sizable populations (Indonesia
has over 220 million people, and Vietnam nearly 90
million), but also have less standardized and predictable
health care policies and less developed health care
delivery infrastructure. However, companies looking at
Asia should seek to understand the underlying political
and health care trends and preferences in this group in
order to make the best, most informed decisions about
Asian investment strategies.
Pragmatic Strategies to Seize the Asian
Opportunity
To be successful in Asia, pharmaceutical companies
need to acknowledge that each market has unique
characteristics as shown above, commit to conducting
the analysis necessary to serve patients and providers
well, and develop growth strategies that have several
levers, including acquisitions, joint ventures, and
partnerships designed to serve unique markets well.
In addition, companies also need to be clear and
focused with respect to their market positioning
strategy – a well articulated focus versus a try “some
of everything” strategy, is much more likely to succeed.
Understanding and serving patients, particularly new
or hard to reach patients, requires innovation and
determination, as well as developing credible data
about critical business issues. In our experience,
companies should think broadly and deeply about
each market as an individual market, and take a hard
look at core data, for example, growth in per capita
expenditures on pharmaceuticals, to see what is
driving them and how this informs the market entry
strategy. In addition, companies need a firm grasp
on whether and how each government is shaping
healthcare spending and reimbursements, and be
realistic about whether those policies can be influenced
and reconciled with company price/cost strategies.
Assuming profits will follow population growth without
Figure 2: Globalization of Pharmaceutical Companies
a solid business case can be disappointing and lead to
unproductive investments.
Companies can use different methods to understand
and reach these new markets. Roche recently moved
its Asia headquarters from Australia to Shanghai4 and
several companies including Novartis have opened
R&D facilities in China5 to cement their presence.
Developing true understanding of the market is a
process. Sanofi-Aventis’ "Prayas" initiative is a good
example of how to do it. The program pairs rural
doctors across India with specialists from semi-urban
areas to share the latest medical knowledge and
clinical experience. It is a win-win for the company,
providers, and patients6.
Licensing has long been a strategy for pharmaceutical
companies to enter new markets as recent activities in
Asia confirm: Abbott has licensed generic drugs from
India's Aurobindo Pharma and Pfizer is taking the same
tack with Strides Arcolab7. GlaxoSmithKline is teaming
with Aspen and Strides Arcolab to bring 1,200 generic
products to market8. Once a company has established
an effective sales and distribution capability, adding
product to the portfolio can drive incremental revenue
and profit by fully leveraging the infrastructure
available.
Mergers and acquisitions or joint ventures, however,
are also an obvious ways of gaining a foothold in Asia
and there has been increased activity in this area in
Asia in the last few years (see Figure 2 – Globalization
of Pharmaceutical Companies). These range from
intra-Asian deals like Abbott’s recent acquisition of
fast-growing Piramal in India which made Abbott the
largest pharmaceutical company in India (with 7%
market share9) to several intra-Chinese transactions
and west-into-east deals including Sanofi-Aventis’
partnership with Nichi-Iko Pharmaceutical10.
As these markets mature companies need to remain
vigilant but flexible to weather occasional setbacks. For
example, Pfizer was required by Chinese antimonopoly
regulations to divest its small swine-vaccine business
to a Chinese subsidiary of Harbin as a condition of
gaining approval for the Wyeth merger11. Companies
should expect governments and medical communities
in emerging countries to play more active roles as
cross-border mergers impact more citizens. We advise
companies to do their due diligence and homework to
understand the market on a micro-segment level. We
also try to help companies develop and execute product
strategies that create balanced portfolios of high-end,
patent-protected products and lower cost generics
to withstand business cycles and capitalize on the
socio-economic cycles in the region. Finally, designing
and building the infrastructure to reach and educate
doctors and other providers remains a challenge, but
one worth meeting to capitalize on the opportunities
in Asia. There is no doubt that the challenge and
opportunity of bringing the right pharmaceutical
products to the burgeoning populations of Asia
combine to present one of the most exciting avenues
for growth for global pharmaceutical organizations
as well as a clear advance for patients who will gain
access to higher quality medical solutions. Prudence,
data-based strategies, the right product mix and the
right partnerships to optimize market access are all
critical for short and long term success.
1. IMS Health Market Prognosis 2009; MIDAS MAT Sep 2009;
AMCHAM Pharmaceutical Committee Meeting • Dec 2009.
2. FiercePharma newsletter dated March 29, 2010, Teva Outgrows
Big Pharma in IMS Ranking.
3. FiercePharma newsletter dated December 1, 2009, Pfizer Japan
staffs up for brand, generic launches.
4. ShanghaiDaily.com, City lures Roche as base for HQ, posted
January 19, 2010.
5. Novartis news release dated November 2, 2009, Novartis an-
nounces USD 1 billion investment to build largest pharmaceutical
R&D institute in China.
6. PharmAsia News interview (part 2 of 2): Sanofi-Aventis India
Managing Director Shailesh Ayyangar On Building Infrastructure To
Bring Affordable Drugs To Patients In Rural Markets.
7. PharmAsia News, May 16, 2010, Pfizer Delves Deeper In Generics
Partnership With Strides Arcolab.
8. thepharmaletter, dated July 28. 2008, GSK sets out strategic
priorities; deal with Aspen/Strides Arcolab
9. PharmAsia News, dated May 21, 2010, Abbott's Piramal Acquisi-
tion Is $3.72 Billion Push In Emerging Markets With Established
Products.
10. FiercePharma newsletter dated May 28, 2010, Sanofi, Nichi-iko
announce Japanese joint venture
11. Reported in PharmAsia News, June 1, 2010, and referenced in
Pfizer, Wyeth Japan Subsidiaries Merge To Become Second-largest
Pharma, June 02, 2010.

Target Acquirer Date Value Notes

About Accenture
Accenture is a global management consulting, technology services
PiramalHealthcare Limited AbbottLaboratories May-10 $3.7B (India) Generics
and outsourcing company, with more than 181,000 people serving
Dong-A Pharmaceutical GlaxoSmithKline plc May-10 $110m (10%) (S-Korea clients in more than 120 countries. Combining unparalleled experi-
ratiopharmGmbH Teva Pharmaceutical Industries Ltd. Mar-10 $4.9B (GY) Generics ence, comprehensive capabilities across all industries and business
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