an Economist Intelligence Unit business Healthcare

South-East Asia
The New Emerging Healthcare Market Challenge
A report by The Economist Intelligence Unit
 South-East Asia: The New Emerging Healthcare Market Challenge

Contents

Foreword2

Executive Summary 3

The New Emerging Healthcare Market Challenge 4

Mega-trend 1: Expanding Healthcare Coverage: The Centrality of Cost Control 7

Mega-trend 2: The New Face of South-East Asia’s Patients 11

Mega-trend 3: Private Healthcare Infrastructure: Bridging the Gap 14

Mega-trend 4: Digital Healthcare: Enabling Alternative Healthcare Delivery Models 17

Mega-trend 5: Reshaping South-East Asia’s Healthcare Business Environment 19

What does it mean for your business? 21

About Clearstate 23

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 South-East Asia: The New Emerging Healthcare Market Challenge

Foreword

S eated in South-East Asia are emerging countries that will experience faster rates of healthcare
spending growth over the next five years than those in BRIC economies. Emerging healthcare
markets in Indonesia, Philippines and Vietnam are changing rapidly, as healthcare systems in these
markets expand their capabilities to deliver healthcare to large populations of undiagnosed and
untreated patients.
To capture opportunities found deep within emerging markets and its cities, a nuanced
understanding of the region – the complex matrix of healthcare systems, government policies,
epidemiological and socio-economic factors interacting and shaping the decisions of healthcare
professionals and patients delivering and using drugs and medical devices, is critical. Government
drives for universal health insurance coverage and healthcare infrastructure improvements will create
volume growth opportunities in the value segment for medtech companies. Meanwhile, the region’s
aging population and burgeoning middle-class, affluent income groups are widening divergences
between markets providing essential healthcare and higher-tiered private healthcare markets
delivering better and more innovative healthcare. Consequently, attractive entry points line the
demand spectrum from the lower-end value segment and high-end healthcare services.
What is next? For companies wanting to capture opportunities from these forward-looking trends,
finding a focus within geographies and market segments to tailor mid and long-term strategies will
help unlock the full potential of these markets.

Ivy Teh
Global Managing Director, EIU Healthcare Consulting
Managing Director, Clearstate
Ivy.teh@clearstate.com

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 South-East Asia: The New Emerging Healthcare Market Challenge

Executive Summary

C atalysed by demographic changes and health reforms, South-East Asia’s large under-
served populations will unleash enormous health care demand into the market, and present
pharmaceutical and medtech companies with the opportunity to realise top-line growth driven by 5
mega-trends in the coming years.
Expanding universal healthcare coverage
As the proportion of out-of-pocket healthcare spending is set to fall with expanding state healthcare
coverage, understanding how payers define value will be important so companies can tailor products
to meet the demands of cost-conscious payers.
The changing face of South-East Asia’s patients
As a new epidemiological and demographic landscape emerges, companies must understand how
patients in the region choose to prioritize health care spending and the type of services they seek.
Private healthcare infrastructure: Bridging the gap
Private health is expanding to secondary cities where incomes have risen faster than healthcare
provision. Competition for regional and international patients are shaping healthcare niches in each
country.
Digital healthcare: Enabling alternative healthcare delivery models
Wider use of technology in healthcare will enable alternative healthcare delivery models in South-East
Asia. For developing healthcare markets, technology will improve access to healthcare. For developed
healthcare markets, technology will offer more choices in the diagnosis, treatment and management
of personalized health.
Reshaping South-East Asia healthcare business environment
Intensifying international and regional economic integration initiatives in South-East Asia will
improve local market access conditions that will enable foreign healthcare companies to compete more
successfully for a share of the growing market.

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 South-East Asia: The New Emerging Healthcare Market Challenge

The new emerging healthcare market

challenge

A ltering landscapes in South-East Asia will unleash enormous healthcare demand from 9%
of the world’s population living in the region. An environmental scan reveals the biggest
opportunities for healthcare companies now lie in Indonesia, Philippines and Vietnam.

As BRIC healthcare markets slow, South-East Asia is surfacing as an attractive region. The Economist
Intelligence Unit anticipates compound annual growth rate of healthcare expenditure in Indonesia and
Philippines from 2016-20 – at 10.6% and 10.8%, which will exceed growth in the BRIC countries. In the
BRIC group, growth rates ranging 4.12% to 10.3% for each country are forecasted for the same period.
The numbers reflect rising and changing healthcare demands that are receiving increasing attention
from government payers and local healthcare consumers. At the same time, accelerating health and
regulatory reforms in the region promise better healthcare access for 630 million people across the ten
countries in South-East Asia. To reach this market however, a range of challenges common to emerging
healthcare demands need to be addressed – deciphering government health policies that impact
pricing and reimbursements, sustaining profits on local levels of affordability and delivering products
in underdeveloped healthcare systems.
Tapping into South-East Asia’s healthcare market requires understanding the vast economic,
sociodemographic and political differences in the ten countries that make up this region – from first
world Singapore to third world Myanmar to identify the best growth opportunities for businesses.
Figure 1: Analysis of major country groups in South-East Asia’s healthcare

6 mil
98 mil
GDP per capita

• Low GDP BN SG
• Poor healthcare infrastructure MY
Key TH
• Key healthcare concerns
Brunei BN - Basic public heath 450 mil
Cambodia KH ID
Indonesia ID PH

Laos LA
VN

Malaysia MY
Myanmar MN • High GDP growth • High GDP
• Moderate and fast growing • Well developed and mature
Philippines PH 77 mil population
healthcare infrastructure healthcare infrastructure
Singapore SG MM • Key healthcare concerns • Key healthcare concerns
KH
Thailand TH LA - Capabilities and infrastructure - Cost effectiveness and
outcomes
Vietnam VN

Healthcare
Emerging High Growth Developed development

Source: Clearstate analysis

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 South-East Asia: The New Emerging Healthcare Market Challenge

Developed healthcare markets

Singapore and Brunei are the region’s most mature healthcare market and also the two smallest
countries by population size in the region. Having established a strong healthcare system, Singapore
is test-bedding innovative healthcare delivery to solve key healthcare challenges like aging and the
management of chronic diseases. An initiative to establish ‘Superplatforms’ in healthcare clusters to
co-develop and experiment the use of new healthcare solutions and technology across the continuum
of care with industry partners was launched.
Maturing healthcare markets
In Malaysia and Thailand, the development of local healthcare systems has created more choices
for patients in the country. Dominant players in the market have emerged. In Thailand, the region’s
second-largest pharmaceutical market, locally produced pharmaceuticals account for some 75% of
the sales. In Malaysia, multinationals have secured local distribution channels to distribute drugs and
medical devices. Fragmentation in the market will further dissolve. Malaysia’s Ministry of Health is in
plans to spend US$356mn to facilitate sharing of data across hospitals and clinics to create greater
public and private healthcare integration, and more uniform care throughout the country.1 `The
Economist Intelligence Unit anticipates healthcare spending in Malaysia will grow at rates almost three
times that in Thailand – compound annual growth rate of healthcare expenditure in Malaysia from
2016-20 is forecasted at 8.9%, compared to Thailand’s 3.2%
South-East Asia’s high-growth powerhouse triad
Three powerhouses of healthcare market growth are found in South-East Asia’s most populous
countries – Indonesia, Philippines and Vietnam.
Each country boasts healthy annual GDP growth of 5-7% for the forecasted period of 2016 - 2020.
Economic growth will fund public health expenditure on infrastructure and expanding public health
insurance coverage. Private health expenditure also looks set to continue to grow. The size of the
middle and affluent class in each country is set to expand rapidly and boost household consumption.
Compared to 2016, there will be 41 times more households in Vietnam in 2020 with annual earnings
above US$50,000. By 2020, there will be more than 51.7 million households with annual earnings 1
Newsletter (March 2016),
above US$10,000 across the three powerhouses, significantly higher than the 27.1 million households US-ASEAN Business Council,
earning the same amount in 2016.2 2016
The biggest barrier – healthcare delivery is also being addressed. A planned increase of 100,000
hospital beds across Indonesia, Philippines and Vietnam, by 2020 will help close in on hospital bed
2
Economist Intelligence
Unit, 2016
capacity needed by the region. To address poorly distributed and overburdened healthcare facilities,
bigger government budgets have been allocated for healthcare infrastructure upgrades. The 2016 3
Press release on the
budget for Philippines’ Health Facilities Enhancement Program (HFEP) for both rural and urban Department of Health
facilities is more than double 2015’s budget. 28% of the HFEP budget— 7.7 bn Philippine pesos (USD budget in 2016, Senate of
the Philippines, 2015
165 mn), an amount larger than the entire HFEP budget in 2012, will be set aside for the acquisition of
new hospital equipment.3 A programme to develop Vietnam’s health facilities initiated in 2015 will see 4
‘Over US$1.3 billion to
US$1.3bn invested in purchasing medical equipment and building infrastructure.4 be invested into health
development project’, Nhân
Dân, 2015

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 South-East Asia: The New Emerging Healthcare Market Challenge

Untapped but emerging: Greenfield opportunities in South-East Asia

5
‘Disparities in health and
health care in Myanmar’,
Lancet, 2015
6
Global tuberculosis
report 2013, World Health
Organization, 2014
Myanmar’s eventual ascent to a high-growth healthcare market on our long-term outlook places it as
a market to watch. Myanmar has increased government spending on healthcare by more than 8 times
from 2011 to 2015 and aims to provide universal health coverage for its population by 20305. However,
growth opportunities are few and far between for companies to deliver healthcare in the premature
local healthcare system. Recent political changes – democratisation and the country’s re-engagement
with the West can unsettle Myanmar where the political clout of the army are remnants from 50 years
of military rule put to an end in the 2015 parliamentary election. Close study of the larger political and
economic landscape is essential for companies assessing local market opportunities.
Cambodia and Laos remain undeveloped healthcare markets with the few government efforts
around healthcare directed at providing basic care and tackling infectious diseases. Laos scaled up its
Maternal, Neonatal and Child Health package providing a mix of preventive care and treatments to a
larger population in 2011. In Cambodia where tuberculosis (TB) prevalence rates is among the world’s
highest,6 a national TB programme provides free treatment.
With insufficient government efforts to meet local healthcare demands, the private healthcare
sector in Cambodia and Laos is a key care provider. Out-of-pocket payments and contributions from
non-governmental organisations represent the largest share of healthcare spending.7 In Cambodia,
malaria treatment is largely delivered by the private sector despite anti-malarials available free of
charge at government facilities due to perceived poorer quality of the latter.8 Growing prevalence of
non-communicable diseases (NCDs) are still sufficiently addressed by governments. Diabetes care, for
instance, is not included in Cambodia’s basic healthcare package; and no clinical guidelines exist to
support the use of NCD treatments in Cambodia. Consequently, most NCDs are diagnosed and treated
in private healthcare facilities.9 Companies will have to figure a way to improve access to quality
treatment at local affordability levels.
In the following section, we review five mega-trends shaping South-East Asia’s healthcare landscape
and identify the opportunities present in the market for pharmaceutical and medtech companies.

7
World Health Organization,
2012

8
‘Determinants of price
setting decisions on anti-
malarial drugs at retail
shops in Cambodia’, Malaria
Journal, 2015

9
‘Access to Treatment for
Diabetes and Hypertension
in Rural Cambodia:
Performance of Existing
Social Health Protection
Schemes’, PLOS ONE, 2016

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 South-East Asia: The New Emerging Healthcare Market Challenge

Mega-trend 1: Expanding coverage:

The centrality of cost control

T he three most populous countries in South-East Asia are implementing Universal Health
Coverage. If target timelines are met, 80% of South-East Asia’s population – through
Universal Health coverage programmes in Indonesia, Philippines, Thailand and Vietnam, will
have access to basic healthcare by 2020. Payers’ realisation that cost control is key to successful
UHC implementation will generate enormous demand for generic drugs and low-priced
medical devices.

For the millions who remain undiagnosed and untreated because finances put healthcare out of reach
for them, the recently launched Universal Health Coverage (UHC) insurance schemes promises to
improve healthcare access. To achieve and sustain UHC, payers will have to finance and deliver UHC by
reducing inefficiencies in healthcare delivery that is increasing costs for the government and finding
more cost-effective medicine and medical devices.
Low-income patients are the major beneficiaries of UHC healthcare access
The biggest gains from the implementation of a more robust UHC program in South-East Asia will be
felt by the lower income population. UHC’s primary goal is to provide basic healthcare access for the
broader population – made up mainly of the region’s lower income and rural population. Wealthier
patients who can afford healthcare costs will continue to seek out and pay for healthcare outside of the
UHC programme through out-of-pocket (OOP) payments or private insurance.
The fervour with which patients are utilising benefits covered under the UHC programme exposes
the level of unmet healthcare demand in the region. Since the rollout of UHC, patients have swamped
hospitals to be treated for diseases that they could not afford earlier. This has been observed in
the Philippines. When coverage for expensive treatments needed in catastrophic illnesses was first
introduced in Philippines’ UHC programme, its payer, PhilHealth, received annual claims up to a
hundred times the annual budget allocated. Previously forgone healthcare due to its unaffordability
is now treated through the scheme at lowered prices and at no cost to the poor. The cost of a coronary
artery bypass surgery is more than 300 times the monthly personal disposable income of an average
Filipino.10 PhilHealth absorbs costs of a coronary artery bypass surgery of up to P550,000 (US$11,800)
– almost 30% of its typical cost.11 For the poorest, PhilHealth picks up the entire medical bill under the
No Balance Billing policy.
Economist Intelligence
10

Sustaining the execution of UHC: A financial challenge at current utilisation levels Unit Data, Clearstate
Analysis
The impact of payment methods on provider behaviour is a major reason behind the inefficient
execution of UHC. This is expected to threaten the financial sustainability of UHC and delay its full 11
‘Z Package Cares for the
implementation. Heart’, Philippine Health
Insurance Corporation
(PhilHealth), 2015

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 South-East Asia: The New Emerging Healthcare Market Challenge

Figure 2: Universal Health Coverage in Indonesia, Philippines and Vietnam: At-a-glance

Indonesia
Scheme Healthy Indonesia Card (KIS)
programme, or commonly
referred to as Jaminan
Kesehatan Nasional (JKN)
Payer Social Security Management
Agency for the Health Sector
(BPJS)
Provider Public and private healthcare
providers
Payment method Primary healthcare providers
who participate in JKN receive covered under PhilHealth’s
capitation payments, where a
fixed amount is paid by BPJS
for each participant enrolled
in the scheme.
For hospital providers, BPJS
follows reimbursement rates
determined through the
Indonesia Case Based Groups
(INA-CBG) system by the
Health Ministry.
Impact of payment Poor provider participation in
method on provider UHC delivery.
behavior UHC below full utilisation
level.
Target timeline Full coverage by 2019
Expected timeline Full coverage by 2019
by Clearstate unlikely.
Source: Clearstate analysis
Philippines
National Health Insurance
Programme (NHIP)
Philippine Health Insurance
Corporation (PhilHealth)
Accredited healthcare
providers
Health insurance benefits
benefit package are
reimbursed on a case rate
payment system.
Risk of fraudulent claims.
UHC overutilised.
Full coverage by 2016
Full coverage by 2020
expected.
Vietnam
State healthcare insurance
scheme
Vietnamese Health Insurance
Agency (VSS)
Public and certified private
healthcare providers
Fee-for-service is the
dominant payment
mechanism at all healthcare
facilities.
Little incentives for providers
to control costs.
UHC overutilised.
To cover 80% of the
population by 2020
Target timeline challenging
due to weak and inefficient
enforcement.

In Indonesia, low capitation and reimbursement rates have resulted in a general reluctance of
private providers to participate in JKN – the country’s UHC scheme. An undersupply of healthcare
providers will limit healthcare access under the programme, running contrary to the fundamental goal
of UHC. The Indonesian Doctors Association highlighted that the current low capitation rate could
potentially cause primary care physicians in the country to operate in negative balance. For BPJS – the
payer of the JKN scheme, reimbursement and capitation rates are part of cost containment measures
against a growing payer deficit, but poor design and execution of payment methods are dampening the

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 South-East Asia: The New Emerging Healthcare Market Challenge

supply of providers delivering UHC. Indonesia will have to seek out better cost-containment strategies
and incentivise providers to participate in UHC delivery.
Even when providers participate in the program, it does not guarantee the efficient utilization of
UHC by patients. Providers will prioritise treating wealthier patients outside of the UHC programme
over patients if it means better profit margins. In addition, an oversupply of unnecessary healthcare
from fraudulent claims from physicians and hospitals threatens the financial health of the programme.
Bogus claims and artificially raised prices above the true cost of care place pressure on payers.
PhilHealth has launched investigations into anomalously large volume of health procedures suspected
to be fraudulent claims filed by healthcare providers in Philippines.
Evidently, financial sustainability is the biggest challenge that looms over UHC rollout for
Philippines and Vietnam where design of payment methods encourages the tendency toward inefficient
utilisation. The same challenge awaits Indonesia despite low utilisation of JKN. Already, the ability to
finance JKN is being tested. The payer, BPJS, incurred a deficit of Rp 1.93trn (US$148mn) the first year
JKN was launched. The World Bank estimates that the full implementation of JKN will cost US$13-16bn
each year when utilisation rates are improved by the easing of supply-side constraints.
Cost-conscious payers: Rise of the value segment
A country’s ability to finance UHC is critical for the expansion of population coverage and the
expansion of benefits covered under the programme, such as the extension of coverage to innovative
drugs or complex surgical procedures. It is about balancing budgets – keeping healthcare costs at
levels below total premiums contributed by governments and the population to avoid bankrupting
the programme. Two options for payers are implied: control costs or finance additional premiums. The
latter has proven to be an unsustainable option in the case of financing Indonesia’s JKN – the world’s
largest healthcare insurance launched. Even with premiums raised by 17-34% in April 2016 – two years
after JKN was launched, growing deficits are expected. BPJS is projected to incur a deficit of Rp 6trn
(US$456mn) in 2016. Payers will need to employ an increasing sophisticated suite of cost-control
measures with cost-effective drugs and medical devices instead.
The urgency for governments to contain healthcare costs are shifting expenditures and demand
toward the value segment in medical devices and generic drugs. Opportunities to penetrate the value
segment are however limited for foreign pharmaceutical companies that face stiff competition from
domestic drug manufacturers. In Indonesia, branded generics are delisted from the reimbursement
list once an unbranded generic product is available which effectively shuts multinationals out of JKN-
covered public hospitals. Five years after Thailand implemented UHC, generic drugs produced by state-
owned companies replaced use of branded generics and generics produced by other foreign firms in
12
‘Impact of universal
health insurance coverage
some areas.12 The law mandates that public hospitals purchase 80% of their drugs from the Government
in Thailand on sales and
Pharmaceutical Organisation. Government produced drugs receive preferential status from hospital market share of medicines
purchasers despite costing more than alternatives in the market.13 The situation is replicating in for non-communicable
Vietnam with a recent push by the central government for the majority of public tenders for drugs to be diseases: an interrupted
time series study’, BMJ
locally manufactured.
Open, 2012

13
Ibid

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 South-East Asia: The New Emerging Healthcare Market Challenge

Purchase of basic medical devices rather than devices with high-end technology will complement
the coverage of essential care under UHC. For medtech companies, broad access into local markets
will be necessary to grow and sustain revenues through a high sales volume of low-priced products.
Rural expansion of healthcare facilities – hospitals, clinics, and satellite laboratories will present an
opportunity for medtech companies to supply basic medical equipment.
Countries that are able to manage healthcare costs well will open possibilities for them to improve
patient access beyond essential healthcare. A surplus in PhilHealth’s funds has inspired interest in
reimbursement for innovative drugs for an upcoming reform of the national formulary. So far, the
government has found additional funding sources for increasing coverage by channelling tax revenues
from tobacco and alcohol into PhilHealth. This has resulted in bigger budgets for PhilHealth to cover a
spectrum of care: the Department of Health, which PhilHealth is attached to, have seen their budgets
in 2015 increase 63% over 2013’s budget. In 2015, the Senate approved a bill to include the treatment
of rare diseases under the UHC scheme.

Key implications for healthcare companies:

 For foreign medtech companies, broad access into emerging markets is necessary to grow and sustain
revenues through a high sales volume of low-priced products. Small and mobile products along with
innovative business models will allow medtech companies to better serve larger populations with growing
incomes.
 For foreign pharmaceutical companies, low price of reimbursed drugs will likely moderate any sales volume
growth from UHC. Pharmaceutical companies are improving drug affordability by forming partnerships
with local financing agencies and collaborating with private payers to target mid-to-high income markets.

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 South-East Asia: The New Emerging Healthcare Market Challenge

Mega-trend 2:
The new face of South-East Asia’s patients

T wo dominant groups of consumers in the healthcare market– the aged and the middle-affluent
income groups are reshaping healthcare demand and creating new growth segments in the
prevention and care of non-communicable disease areas.

South-East Asia is undergoing a demographic and consequently, epidemiological transition. The size of
the middle and affluent class in each country is set to grow rapidly and boost household consumption.
Better living standards have reduced infectious diseases that historically plague these countries, but it
breeds a new host of non-communicable diseases (NCDs) – diabetes, cancer and heart disease. People
who are living better are also living longer for the onset of age-related diseases to happen. By 2020,
Indonesia14 will join the ranks of Singapore and Vietnam as an aging country – with more than 10% of
the population being older than 60 years old. At the same time, urban and sedentary lifestyles where
richer foods feature increasingly in local diets are increasing the prevalence of obesity – the precursor
to NCD.
Dual disease burden on the rise
South-East Asia is going to face a dual burden of growing prevalence of NCDs while still experiencing a
high incidence of infectious diseases.
Unlike developed healthcare markets, the awareness and diagnosis rate of NCDs in South-East Asia
are low. The International Diabetes Federation estimates that more than 12 million cases of diabetes
remain undiagnosed in adults in South East Asia – that is more than the number of diabetic cases in
Indonesia, a country with the highest number of diabetic cases in the region. To tap into the growing
NCD segment, pharmaceutical and medtech companies will have to take on a more active role in
helping the developing healthcare markets in South-East Asia adapt to the emergence of NCDs.

case study: Industry-government collaboration to
tackle Vietnam’s diabetes problem
Further to the opening of their office in 2011, Novo Nordisk Vietnam
formed a partnership with the Vietnamese Ministry of Health to
fund and launch the Vietnam National Diabetes Plan. The issues
identified include a large number of undiagnosed patients due to poor
awareness and limited diabetes care infrastructure and physicians.
Novo Nordisk then collaborated with Steno Diabetes Centre to
run a “train-the-trainer” program for endocrinologists. Centres
of Excellence in Diabetes at 8 hospitals, and implemented Diacare
Asia Study across 52 hospitals were also set up to better understand
Vietnamese patients’ mindset and behaviour in view of formulating
customized proposal to MOH for improving diabetes care in Vietnam.
The program is expected to improve diabetes management in
Vietnam.

14
‘Number of elderly people
to hit 80m’, The Jakarta
Post, 2016

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15
Vietnam aging population
poses challenges for
healthcare system, Thanh
Nien News, 2014
16
Action Plan for Successful
Ageing, Ministry of Health,
2016
12
South-East Asia: The New Emerging Healthcare Market Challenge
Early Early Mid
2011 2012 2013 2013 2013 2014 onwards
Established MoU with National Launched Start training of Continue training of
representative Vietnam MOH media Diacare Asia endocrinologists endocrinologists
office in Ho Chi campaign Study in and complete
Minh City Vietnam Diacare Asia patient
study
Signed agreement to
implement Vietnam Steno Diabetes
National Diabetes Launched Rolled out Centre started
Program: “Train the media study across 52 training of
trainer” program, campaign in
hospitals endocrinologists
public education collaboration
nationwide to in both Ho Chi
program with O2 TV in
understand Minh city and
Vietnam psychological Hanoi
effects of
Diagnosis of NCDs will receive increasing focus as awareness to prevent high healthcare costs
diabetes
required to treat late stages of the disease grows. The proportion of deaths caused by NCDs in
Source: Novo Nordisk
Indonesia and Vietnam are now higher than the world’s average rate of 70%. In 2015, PhilHealth
expanded preventive and diagnostic services covered under the Primary Care Benefit Package (TSeKaP)
to tackle growing NCDs. Growth in the use of medical equipment to detect heart disease, predominant
cancer types in local populations and complications from chronic illness will grow.
Urban populations in South-East Asia continue to be afflicted by infectious diseases. The
concentration of people in urban cities escalates the transmission of infectious disease. Vector-borne
diseases are common in South-East Asia regions prone to flooding and typhoons. These infectious
diseases afflict both rural and urban areas alike. In Philippines’ capital city, Manila, and its population
of 1.6 million people is vulnerable to floods and water-borne diseases that come with it. Disease-
carrying mosquitoes are also well-adapted to urban areas. City-state Singapore is seeing increasing
dengue infections from the Aedes mosquito. The spike is also happening in the rest of South-East Asia,
prompting countries to look into new innovative ways to control dengue. The world’s first dengue
vaccine developed by Sanofi Pasteur is an option being explored by Singapore and Malaysia.
Aging and longevity in South-East Asia: Shifting focus from treatment to prevention
South-East Asians are living longer for the onset of age-related diseases to take place, increasing
individual healthcare consumption of drugs and hospital procedures over a lifetime. Per capita
health expenditures of older persons are estimated to be 3-5 times higher than that of the younger
population. Old people account for 10 percent of Vietnam’s population, but they make up more than 50
percent of the country’s annual healthcare spend.15 Heavily burdened payers will need to find ways to
reduce healthcare costs associated with an aging population.
Preventive approaches to managing care for an aging population will be crucial. Infrequent
health check-ups delay the diagnosis of serious medical conditions until they have become hard and
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 South-East Asia: The New Emerging Healthcare Market Challenge

expensive to treat. Rapidly aging Singapore launched a S$3bn (US$2.2bn) national aging plan that
will fund preventive health initiatives. By 2020, the plan will see through an increase of nursing home
capacity by at least 70%, and a doubling of the number of community hospital beds.16
For developing countries, meeting the new challenge of an aging population will require these
countries to find the right infrastructure and resources to support the needs of a growing elderly
population. Vietnam jumped into its aging phase in 2011 – six years ahead of the General Statistics
Office’s forecasted year. With too few geriatric hospitals and wards in Vietnam, the government has
placed emphasis on bolstering its current network of elderly healthcare facilities. Upgrades to the
National Geriatric Hospital in Vietnam’s capital, Hanoi, was completed in 2015. The government
plans to build a new provincial branch of the National Geriatric Hospital and develop geriatric health
services in provincial general hospitals.17
Growing middle-income and affluent South East-Asians: Elective healthcare services
Growing disposable incomes and purchasing power open up new lifestyle choices for the middle-
income and affluent populations. Spending on elective healthcare services that are medically
unnecessary like fertility treatments, cosmetic surgeries and vision correction procedures are
becoming increasingly popular for this self-pay group. Where health was once a subject of concern only
after the onset of disease, their new attitude integrates healthcare into lifestyles.

Key implications for healthcare companies:

 Physician and patient education are crucial to create awareness and manage focused diagnosis and
treatment of NCDs.
 Companies are using innovative ways to work closely with governments or NGOs to tackle infectious
diseases in urban cities.
 Preventive approaches to managing care for an aging population will create demand, driving companies to
move from being mere technology providers to healthcare provision partners for the elderly.
 Health gets integrated in lifestyles of South-East Asia’s middle-income and affluent populations. The
growing middle-classes will desire products and services on par with their rich-country counterparts,
which will be reflected in rising demand for high-end and wellness products.

17
‘Vietnam to become
super-aged country by
2050’, Nhân Dân, 2015

© The Economist Intelligence Unit Limited 2016 13


18
Embassy of the Socialist
Republic of Vietnam in the
United States, 2015
19
‘Experts call for
government to develop
service industry’, The
Jakarta Post, 2016
20
’40,000 Vietnamese
seek treatment abroad’,
International Medical Travel
Journal, 2015
21
‘Vietnam attracts
Cambodian medical
tourists’, International
Medical Travel Journal, 2015
14
South-East Asia: The New Emerging Healthcare Market Challenge
Mega-trend 3: Private healthcare
infrastructure: Bridging the gap
L ocal healthcare capacities and capabilities gets a boost from increasing private investments.
Maturing healthcare infrastructure will create medical hubs within the region to support the
delivery of essential and innovative healthcare to local and foreign patients.
To cope with rising and changing healthcare needs, various governments are taking steps to improve
capacities and capabilities of local healthcare systems by incentivising private providers to enter the
market. Vietnam, for instance, introduced incentives to attract foreign investors with a 10% exemption
of corporate income tax over first four years of a project in the health sector, and 50% subsequent tax
break in following five to nine years.18 Private healthcare providers are now narrowing the gap between
healthcare demand and access.
Maximising the adoption of innovative treatments and diagnostic tests in lower-
tiered cities
Private healthcare is expanding beyond large cities into secondary cities where incomes have risen
faster than healthcare provision. Large private hospital groups like Indonesia’s Siloam Hospitals and
Mitra Keluarga are expanding their development plans away from big cities to provincial capital cities
in Surabaya and Semarang with rising affluence levels.
Countries like Indonesia and Vietnam are trying to curb medical tourism outflows from the country
by building up local healthcare capabilities to retain local patients. It is estimated that as many as
600,000 Indonesians19 and 40,000 Vietnamese20 travel overseas for medical treatment in a year.
Outbound medical tourism is ebbing. Wealthy patients in South-East Asia that make up a large share of
medical tourism in the region are now travelling more discriminately and seeking only more complex
medical treatment outside of the country. For Indonesian patients, basic medical procedures are
done increasingly in local hospitals that now offer acceptable and even comparable quality levels of
care, at much lower costs. As healthcare capabilities strengthen, new options for medical travel in
the region are emerging. South-East Asia’s medical travellers are increasingly opting for these new
low-cost destinations – Cambodian medical tourists are turning away from higher-cost medical care in
Singapore to more affordable options in Vietnam.21
Companies that choose to enter and expand in these South-East Asian countries must be ready
to help develop local healthcare systems to deliver medicine and tests effectively and efficiently to
patients throughout the country.
International medical tourism: Attracting patients
International medical travel is taking flight – with South-East Asia becoming one of the world’s regions
with the largest inflows of international patients. The availability of lower-cost quality healthcare is the
key driver of medical tourism in the region. Healthcare in Thailand is available at half the cost of similar
© The Economist Intelligence Unit Limited 2016
 South-East Asia: The New Emerging Healthcare Market Challenge

care in the US. Estimates place revenues from medical tourism in Thailand, the world’s top medical travel
destination, at US$3bn. The region’s well-established medical travel hubs – Singapore and Thailand,
are facing increasing competition from emerging healthcare destinations in South Korea and India.
Providers in Cambodia, Indonesia and Vietnam are also eyeing a piece of the medical travel market.
Bali – Indonesia’s prime tourist destination will see a new hospital equipped with world-class facilities,
including an integrated cancer treatment centre open in 2017.22 Vietnam’s local conglomerate Vingroup
will increase its network of private hospitals 10-fold by 2020 from a single hospital it owned in 2015
to provide care for medical tourists and affluent local patients alike.23 With growing alternatives in the
region for quality healthcare services catered to foreign patients, the volume of healthcare services and
the size of South-East Asia private healthcare market is expected to grow from incoming foreign patients.
To maintain its appeal to regional and international medical tourists, private healthcare providers
in Singapore and Thailand have to provide increasingly innovative or complex procedures that deliver
better clinical outcomes than their South-East Asian neighbours. Clinics and hospitals are offering
stem-cell therapies – weak regulatory structures governing stem cell therapies have allowed for
the practice of stem-cell therapies unapproved as treatments in the US. Thailand’s Bumrungrad
International Hospital which serves more than a quarter of all foreign patients the country receives
each year, provides stem-cell therapies to treat a range of diseases.
Increased competition for the share of international medical travel seeking lower-cost care out of
their home country is driving countries to find their niche among healthcare service offerings. This has
resulted in the surge of specialist clinics that offer all the clinical expertise and equipment of larger
hospitals delivered in more intimate settings. Local clinics and healthcare facilities are investing in
high-tech equipment to match quality levels of healthcare services in more advanced US and European
healthcare facilities.
Figure 3: Medical niches in South-East Asia, by country

Medical Niches Top Patient Origin

Indonesia,
Malaysia Singapore,
Middle East
Cardiac surgery
22
‘Australia supports Bali
Indonesia, new hospital’, The Jakarta
Singapore Philippines, Post, 2016
Australia
Cardiac surgery Neurosurgery Liver Transplant Cancer
23
News release from
Middle East, Vinmec, 2015
Indochina – Myanmar,
Thailand Cambodia, Laos and 24
Medical tourism and
Vietnam, US, UK policy implications
Cosmetic surgery Sex change surgery Stem-cell therapy
for health systems: a
conceptual framework
Vietnam Cambodia from a comparative study
In-vitro of Thailand, Singapore and
fertillisation Kidney transplant
Malaysia, Globalization and
Source: International Medical Travel Journal, Patient Beyond Borders, Globalization and Health24 Health, 2011

© The Economist Intelligence Unit Limited 2016 15

 South-East Asia: The New Emerging Healthcare Market Challenge

Heavy promotion efforts by the government is also raising the region’s profile as a destination for
medical tourists. Since 2013, Thailand has eased visa restrictions for medical tourists from the Middle
East – one of the top sources of medical tourists to the country. In a bid to attract medical tourists from
Myanmar, Malaysia opened its first medical travel representative office in Myanmar in 2015. The office
offers end-to-end services, from the recommendation of doctors to assistance after hospitalisation,
to help facilitate medical travel.25 With increased interest in medical travel to the region, numerous
private referral agents to connect providers and patients across borders has emerged. Web portal,
BookDoc – endorsed by Malaysia’s Ministry of Tourism, facilitates medical travel to Malaysia, Singapore
and Thailand by enabling potential patients to choose between medical destinations with greater
ease. Other portals facilitating medical travel in the region include Singapore’s DocDoc and Thailand’s
Medical Departures.

Key implications for healthcare companies:

 Expansion of private healthcare in lower tiered cities: Companies are launching innovative products and
training to facilitate physicians’ responsibilities. For example, some companies offer consolidation of
services for radiology labs.
 Private hospitals are under pressure to gain access to more patients but also run hospital profitability:
margin expansion is possible through medicine or equipment procurement consolidation, shared services,
and medical integration.
 International medical travel enlarges South-East Asia private healthcare market: Countries in the
region have carved out medical niches to attract foreign patients. Growth in specialist clinics to serve
international patients by giving them support to provide higher level of care at lower rates.

25
Press release, Malaysia
Healthcare Travel Council,
2015

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 South-East Asia: The New Emerging Healthcare Market Challenge

Mega-trend 4: Digital healthcare: Enabling

alternative healthcare delivery models

W ider use of technology will enable alternative healthcare delivery models in South-East
Asia. For developing healthcare markets, technology will improve access to healthcare. For
developed healthcare markets, technology will offer more choices in the diagnosis, treatment and
management of health.

A newfound ubiquity of smart mobile devices among healthcare facilities and patients, and the
expansion of broadband coverage to rural areas are connecting physicians, patients and companies
along the care pathway to improve access to healthcare. Mobile devices are being made more
affordable for a larger proportion of the population. The Indonesia Broadband Plan will fill network-
coverage gaps in last-mile rural locations in the country by 2020.
By 2020, Clearstate expects significant growth in the use of technology in healthcare – a large
proportion of population and clinics will be utilizing connected devices and mobile apps to manage and
deliver care.
Developing markets: Improving healthcare access
Technology is helping to connect patients in lower tiered cities and rural areas with healthcare
professionals separated by large distances. In Philippines, some 70% of doctors are located in
urban areas. Remote delivery of healthcare through virtual clinics where patients receive medical
consultations via a mobile app or a telephone will minimise foregone health care in rural populations
due to unaffordability of long-distance travel. Mobile apps Dokita and Dokter Gratis enable patients in
Indonesia to chat and consult with physicians throughout the country. Remote screening services such
as teleradiology services offered by Tele Diang – an application that allows radiologists in Thailand
view scans and send interpretations of the scans.

case study: Harnessing technology to connect
top physicians with patients in remote parts of
Indonesia
In Indonesia, many areas outside of Jakarta lack access to
healthcare technologies, particularly in Puskesmas (community/
primary care) clinics. With this in mind, Universitas Indonesia (UI)
and GE Healthcare developed a telemedicine program to connect top
physicians to the most deprived patients. The program will involve
virtually connecting obstetrics and gynaecologists at UI to primary
Source: GE Healthcare
health providers outside of Jakarta, and equipping clinics with a
newly launched portable ultrasound system called VScan Access,
which is designed to be used in developing nations – small and
sturdy, with an easy-to-use interface.
Launched in August 2015, the program is expected to reach
several thousand patients in the next three years till 2018. Not only
will the program help to reduce maternal and neonatal mortality, it
can also help to train healthcare professionals in remote areas.

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 South-East Asia: The New Emerging Healthcare Market Challenge

Adoption of technology is happening fast, allowing countries to leapfrog the development process.
A mobile app for maternity care – maymay, was launched in Myanmar in 2014 – the same year telco
networks were launched in the country; and it already drives 1,500 telemedicine consultations
each month. Developing healthcare systems are harnessing technology to improve diagnostic and
therapeutic capabilities available within rural locations and deliver a wider range of healthcare
services to patients. Telehealth solutions are used as a cost-effective way for providing education and
training to healthcare professionals located in rural healthcare facilities.
Smart healthcare: Enhancing choices and delivery
Middle class consumers in South-East Asia are leveraging social media and mobile apps to access new
ways to maintain and take charge of their health. Consumers will reward trusted service providers that
can help them achieve this. Individuals will be co-creators of their health decisions, spending more
of their discretionary dollars on tools that help them live well. Care delivery, following the move from
inpatient to outpatient services, will inch closer to the home via retail businesses, remote monitoring
and mobile devices.
Smart healthcare projects are increasingly initiated by governments, startups and companies.
Smart health is a key component of Singapore’s Smart Nation initiative. HealthHub, an online portal
for Singaporeans combines patient health records and interactive learning platforms to improve health
literacy was launched by the Ministry of Health in 2015. As smart health receives attention from private
funders and government alike, public-private collaborations for smart health solutions are growing.
After collaborations with Motorola to test healthcare mobile apps, Singapore’s Infocomm Development
Authority continues its call for industry collaborations to develop new care models that leverages
technology.

Key implications for healthcare companies:

 Understand how digitalisation impacts different countries and market segments.
 Use technology to enhance interactions with both clinicians and patients: training and awareness for
clinicians especially in secondary markets. Raising awareness and educating patients across the countries
using methods that resonate, e.g. through mobile apps designed for specific uses – for instance, helping a
mother manage care of a baby by monitoring key illnesses and track growth using a mobile app or website.

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 South-East Asia: The New Emerging Healthcare Market Challenge

Mega-trend 5: Reshaping South-East Asia’s

business environment

I ntensifying international and regional economic integration initiatives in South-East Asia

will improve local market access conditions that will enable foreign healthcare companies to
compete more successfully for a share of the growing market.

Economic liberalisation initiatives in South-East Asia will have a profound impact on market access and
the local business environment for foreign healthcare companies in the coming years. 2015 marked key
milestones for South-East Asia in international and regional economic integration with the finalization
of several trade agreements including the Association of South-East Asian Nations (ASEAN) Economic
Community (AEC) and Trans-Pacific Partnership (TPP). The implementation of agreements set out in the
AEC and TPP will improve the ease of accessing local markets in South-East Asia for foreign healthcare
companies. While uniform implementation of the agreements across South-East Asia for the countries
involved will not happen until 2018, companies will need to start preparing for the new competitive
landscape.
Smoother regulatory paths ahead for pharmaceutical and medical devices are expected out of the
AEC. The ASEAN Common Technical Requirement (ACTR) and the ASEAN Common Technical Dossier
(ACTD) have been developed to bring submission of application dossiers for marketing authorisations
under a single product registration process in South-East Asia. The ASEAN Medical Device Directive
(AMDD) signed in 2014 will simplify the framework for medical device registration in the region.
However, no actual timeline has been set for implementation.
AEC and TPP are expected to counteract nationalistic policies that prioritise domestic firms to create
more competitive domestic markets. Competitive healthcare markets will bring foreign healthcare
companies more opportunities to secure inclusion in reimbursement lists and public tenders. For the
four countries in South-East Asia – Vietnam, Malaysia, Singapore and Brunei, that have signed the
TPP, the agreement will entail fairer competition between local and foreign firms, introducing greater
international competition into public procurement. Vietnam, a member of TPP, will have to lift national
regulations on pricing and reimbursement policies that favour locally manufactured products. ASEAN
member countries will also have to come to an agreement on how to tackle the issue of fair competition
and large state-owned enterprises (SOEs) such as Thailand’s Government Pharmaceutical Organisation
which enjoys a large share of the domestic market. AEC and TPP implies greater competition in the
domestic market that domestic companies will have to come to face with.
Implementation of trade agreements that are expected to improve market access for foreign
companies will take place gradually, and unevenly across the countries involved. Ratification of TPP
is expected to happen for Vietnam only by 2017, compared to a relatively quick ratification by Brunei,
Singapore and Malaysia by 2016. ASEAN’s agenda now is to implement outstanding initiatives from
the AEC Blueprint by end-2016, and countries like Vietnam and Myanmar will have to play catch-up for
more uniform levels of integration into the AEC intended to happen by 2018.
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 South-East Asia: The New Emerging Healthcare Market Challenge

Key implications for healthcare companies:

 The relevance of AEC and TPP will weigh in on companies when policies are implemented in the next few
years.
 When TPP is ratified, foreign healthcare companies with the ability to compete on price and quality will be
able to benefit in healthcare markets.
 It is unclear how and when countries with a protectionist slant will implement the necessary reforms for
AEC and TPP to be in effect.

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 South-East Asia: The New Emerging Healthcare Market Challenge

What do the mega-trends mean for your

business?

E conomic and healthcare reforms that have triggered big waves of change in the healthcare
market need to be met with reform in the commercial models of pharma and medtech
companies operating in South-East Asia.

1. Formulating a tailored strategy relevant to local markets

A realistic and thorough understanding of macro-developments in the political, economic,
demographic landscape is central to a well-formulated business strategy. Deciphering the impact
of macro-developments on forward-looking trends in South-East Asia’s healthcare markets will
ground genuine growth projections and predict market shifts to locate best opportunities for your
business to enter and expand in South-East Asia with more certainty.
 What macro-developments will have the biggest impact on my business?
 How can my business capitalize on these evolving macro-development and emerging trends?
2. Rethinking how to serve diverse segments of healthcare consumers in South-East Asia
Macro-developments are reshaping the purchasing behaviour of providers, patients and clinicians.
A rethink of your customer and product segments in a new framework is needed to increase the fit
and efficiency of your brand’s targeting and positioning efforts.
How should I address the needs of healthcare providers participating in the delivery of UHC
 
programs? How can my company collaborate with local hospitals and distributors to maximize
reach?
How do I adapt my products and services to address the needs of private healthcare providers
 
expanding in lower-tiered cities? What specialty clinics will demand my focus on?
How can I appeal to the middle-income and affluent group of healthcare consumers in South-East
 
Asia? Do I have the right means to provide health information to create awareness and educate
consumers?
 Should I focus on nursing homes and care centers to provide retirement care for a wealthier elderly
group?
3. Tailoring your local access model
Market access is the key challenge in all emerging markets. Each country within South-East Asia
needs its own access model. Building mutually beneficial relationships with local governments is
indispensable for success and helps companies to invest ahead of the markets. Deep understanding
of the motivations and interactions between payers, providers and patients that take place in the
unique markets of South-East Asia is crucial for finding success within the market.

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 South-East Asia: The New Emerging Healthcare Market Challenge

 How can my business formulate a comprehensive market-based go-to-market strategy?

 What stakeholder engagement model is most effective for the market access goals of my business?
 What type of close collaborations e.g. partnerships can I form with governments?
4. Localising your portfolio and sales strategy
To maximise growth, finding the right mix of products in your portfolio is critical in response to
healthcare providers that have to deal with an increasingly complex mix of patients resulting from
a dual disease burden, different demands of UHC patients and wealthier local patients seeking care
outside UHC at the same facility. Companies must create a local footprint in its most important
markets, and that could require establishing R&D and manufacturing capabilities.
Should I establish local operations e.g. R&D to develop specific products for South-East Asia’s
 
market?
 How should I build up a local sales force to achieve sales excellence?

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 South-East Asia: The New Emerging Healthcare Market Challenge

About Clearstate
Clearstate, a business of the Economist Intelligence Unit, is a research consultancy specialising in the
domains of healthcare and life sciences, advising on growth strategies in emerging economies.
Clearstate is the go-to research and consulting partner for clients seeking greenfield growth
opportunities in fast-expanding emerging economies. By leveraging The Economist Intelligence
Unit’s depth of country expertise, we offer visibility and credible forecasts on the direction of opaque
healthcare environments in emerging economies as well as realistic forecasts of market growth.
We have a strong reputation among our clients for the depth of our industry knowledge, our
collaborative approach and our innovative solutioning. We are recognised for consistently listening
and working in partnership with our clients to deliver comprehensive and granular answers beyond the
obvious.

About the authors

Shaoming Chen, Associate, Asia Pacific
shaoming.chen@clearstate.com

Chee Hew, Senior Principal, Asia Pacific

chee.hew@clearstate.com

Melissa Lim, Manager, Thought Leadership

melissa.lim@clearstate.com

© The Economist Intelligence Unit Limited 2016 23

Cover image - © OPgrapher/Shutterstock
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