View
215
Download
0
Category
Preview:
Citation preview
8/17/2019 Asia Pacific Insight - IMS
1/24
© 2012 IMS Health Incorporated or its affiliates. All rights reserved.
IMS Asia-Pacific
InsightIssue 2 | 2012
INSIDE THIS ISSUEPursuing Growth in the Age of LoE
Global Cost Containment Measures in Asia-Pacific
China’s Consolidating Pharma Distribution Industry
The Changing Face of Pharma Sales Forces in India
http://www.imshealth.com/http://www.imsconsultinggroup.com/
8/17/2019 Asia Pacific Insight - IMS
2/242
WELCOME LETTER .............................................................................................................................. 3
PURSUING GROWTH IN THE AGE OF LOE .....................................................................................4The top 20 multinational pharmaceutical companies in Asia will see an average of $950 million in sales become at r isk
in the next 5 years due to the loss of exclusivity of their top brands. How can MNCs survive and thrive in this increasingly
genericized era?
THE IMPACT GLOBAL PHARMA COST CONTAINMENT MEASURES IN ASIA-PACIFIC.......... 10
Government cost containment methods in Asia-Pacific markets are as diverse as the cultures represented in the region,
so what global cost containment lessons will be leveraged in APAC? And what, in the end, are pharmaceutical companies
supposed to do about it?
THE CHANGING FACE OF PHARMA SALES FORCES IN INDIA .................................................. 14Sales force dynamics in India have changed drastically over the past 20 years, with overarching industry trends shaping
the optimal sales force structures. With new emerging trends on the rise, see how pharmacos in India are re-thinking
their go-to-market strategies.
FORGING NEW RELATIONSHIPS IN CHINA’S CONSOLIDATING DISTRIBUTION INDUSTRY ... 18The pharma distr ibution landscape is drastically changing in China, with thousands of independent distributors
consolidating into larger joint enterprises. How can pharmacos prepare for these changes?
IMS CONSULTING GROUP AT WORK IN ASIA ............................................................................. 22IMS Consulting Group is at work throughout Asia on projects of intr iguing scope and implications.
See the impressive reach of IMS Consulting Group capabilities across Asia and the world.
Contents
8/17/2019 Asia Pacific Insight - IMS
3/243
The worldwide pharmaceutical market is at a crossroads. At first glance
the fundamentals seem strong: pharmerging market growth, ageing globalpopulations, the growing prevalence of chronic disease, and personalized
medicine all seem poised to spell renewal for an industry that has faced
its share of recent turmoil. Take a deeper look, however, and apparent
threats abound—not just the widespread loss of exclusivity for originator
molecules, but cost containment initiatives at both the public and private
level that are forcing widespread changes in the way pharmaceutical
companies can and should develop and launch new medicines.
As this greater global drama unfolds, the Asia-Pacific region is mak-
ing for some of the most compelling theatre. The juxtaposition of ma-ture markets such as Australia, Japan, South Korea, and Singapore with some of the world’s most dynamic
pharmerging markets in China, India, and Indonesia underscores the need for tailored strategies across
geographies and reinforces the fact that there simply are no “one-size fits all” solutions. The rate of change
and degree of impact from global, regional, and local developments are, quite frankly, infinitely variable. The
companies that succeed will recognize the importance of treating every target market as its own distinct entity.
It is against this dynamic backdrop that I am pleased to bring you the second issue of IMS Asia-Pacific Insights.
In this edition, we address strategies for originator brands to maintain growth when facing loss of exclusivity,
outline the tools being adopted by Asian markets intent on containing pharmaceutical costs, explore the
strategies now being employed by thriving pharma companies, and identify key strategic imperatives in two of
Asia-Pacific’s most vibrant markets, China and India.
Taken together, the stories represent the in-depth industry expertise of IMS Health throughout the region,
powered by our superior information assets.
Success in today’s Asia-Pacific environment is by no means guaranteed, but ample opportunities prevail for those
companies that are well prepared. We at IMS look forward to working with you in the near future to identify
strategies, challenge assumptions, implement innovations, and measure success.
Dear Reader
Andy LiuPresident, Asia Pacific and ChinaIMS Health
8/17/2019 Asia Pacific Insight - IMS
4/244
8/17/2019 Asia Pacific Insight - IMS
5/245
It’s a pressing issue—and a demanding
one.
Already, says Anthony Morton-Small,
Senior Principal, IMS Consulting
Group, Asia-Pacific, off-patent and
unprotected products constitute the
lion’s share of leading MNC sales, with
continued sales erosion from protected
product sales inevitable in the coming years.
“The landscape has shifted so
significantly in the last several years
that today five of the top twenty
pharma companies in this region
derive just 10% to 30% of their total
portfolio sales from protected products,”
says Morton-Small. “Another six reap
less than half of their sales from their
brand portfolio. Innovator multinationalshave never faced a challenge of such
proportions. The risks are different,
the stakes much higher.”
“We’ve tracked the products at risk
from generic competition in key Asia
Pacific countries since 2005,” says
Amkidit Afable, an IMS Consulting
Group engagement manager in Asia-
Pacific. “The numbers really do tell
the story. Between 2006 and 2011alone, the value of products at risk has
grown from $2.6 billion to $5.1 bil-
lion.” (see figure 1)
ONE DOOR CLOSES, ANOTHER OPENS
But where one door closes, anotheroften opens, and such is the case for
companies operating in this increas-
ingly genericized era. There is, of
course, no single strategy that will
ease the path for MNCs. But those
that take the time to analyze the
various markets and respond to
particular pressures and trends will,
says Afable, rise above.
“The pace of generic penetration
varies greatly from geographic area
to geographic area,” he says. “Leading
companies are already recognizing the
value in post-patent strategies that are
highly market-savvy and -specific.”
Consider China and India, two of
the largest emerging pharmaceutical
markets in the APAC region.
“In both China and India, more
than two-thirds of pharma sales are
derived from generics,” says Small, “and
generic products gain rapid popularity
among both patients and physicians in
these countries.”
The situation is different in both South
Korea, an advanced economy with a
Pursuing Growth in the Age of LoE
The facts are startling and incontrovertible: Over the next five years, pharma-
ceutical products collectively expected to generate an estimated $21.3 billionin revenue are destined to go off patent, devastating branded sales in key APAC
markets. Among the top innovator multinational companies (MNCs) in the
region, four will see 30% of their overall portfolio value diminished by Loss of
Exclusivity (LoE). Ten more face related losses of between 10% and 30%. On
average, each of the top twenty MNCs in the APAC region look toward the
next five years as a time when some $950 million in sales will be at risk, thanks
to the LoE of their top brands.
C O N S T A N T
U S $ B N
% O
F P R I O R Y E A R ’ S S A L E S
2005
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
0
2
4
6
8
10
12
14
1.5
1.0
0.5
0.02006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: IMS Health MIDAS MAT JUNE 2011, RX-only; Markets included: Japan, India, Australia, New Zealand, Korea, Singapore, Hong Kong, China, Taiwan, Philippines
LoE Planning & Life Cycle Management
Value of products at risk 2005-2016
Over the next 5 years $21.3 billion in sales are at riskfrom generic competition in the key Asia Pacific countries
* 2015 APAC Sales ~ $195bn-$225bn
0.20.5 0.4 0.6
0.91.4
1.8
2.6
0.4
1.61.8
0.5
3.1
1.3
3.7
2.13.03.7
2.5
2.1
1.2
2.1
1.5
% of prior year ’s sales Special ist driven Primary care driven
0.4
Figure 1
http://www.imshealth.com/ims/Global/Asia%20Pacific/Content/Insights/LoE_in_APAC_2012Magazine.pdf
8/17/2019 Asia Pacific Insight - IMS
6/246
relatively large reimbursed market, and
the Philippines, an emerging economy
with a significant dependence on out-
of-pocket sales. In Taiwan, Singapore,
Australia, and New Zealand, mean-
while, generic sales account for just
a third of the pharma market, and in
Japan, that number is even smaller.
Every country—and, often, territories
within countries—must be separately
analyzed, assessed, and approached.
“Numerous emerging APAC mar-
kets with relatively higher generic
penetration lag behind their peers in
pharmaceutical spend per capita, im-
plying significant growth opportuni-ties given their large population base,”
says Morton-Small. “India, China,
Indonesia, and the Philippines all
represent important opportunities for
post-LoE volume plays.”
In Korea, a fascinating dynamic is
playing out as traditional big phar-
ma companies battle against well-
entrenched local branded generic
players for considerable potentialpharma dollars. Australia and Japan,
finally, offer significant absolute sales
values (both at an overall and generic
level) as well as a high pharmaceutical
per capita spend.
GAINING GROUND IN THE POST-LOE ERASuccess in the post-LoE era will, says
Afable, hinge on the ability of the
companies to ask and answer the right
questions. “Companies need to beasking themselves what the likely
performance of their key assets will be
in the market,” he says. “They should
also be asking themselves what strate-
gies and tactics should be pursued to
maximize the value of threatened assets.”
Such questions, of course, lead to a more
granular analysis—a process that enables
companies to effectively segment—and
respond to—the APAC market.
“Baselines are geography-specific,”
says Morton-Small. “In western phar-
maceutical markets, branded products
typically experience rapid sales erosions
once they go off patent. That’s not the
case in the APAC region, where brand-
ed products have the ability to sustain
growth, even after the patent expires,
and where the life cycle of certain
innovator drugs can be extended.”
“We encourage our clients to take a
close look not just at the reimburse-
ment and macroeconomic conditions,
but at the relevant healthcare infrastruc-
ture, demographics, and channel demand,”
says Afable. “We help them address the
key questions: How can innate differ-
ences between reimbursed and self-paymarkets be leveraged? What impact will
the growth of the middle class have on
pharma sales in each country? How will
channel structures influence post-LoE
growth? What influence will the evolving
healthcare structures have on pharma sales?
A variety of external and internal drives
must be factored into the LoE strategy.
Risks must be balanced against potential
rewards.”
Sanofi-Aventis is one example of a com-
pany that proactively addressed the loss of
exclusivity of its platelet-lowering product,
Plavix (Clopidrogel), by launching a
second brand of Clopidrogel in Indonesia.
“Sanofi-Aventis made the decision to
market this second product separately
from Plavix—pricing it in a way that
the company hoped would maximize
uptake without undermining existing
Plavix sales,” says Morton-Small. The
ultimate impact of this defense against
the market-share erosion of Plavix post-
LoE continues to be evaluated. (see figure 2)
Sanofi-Aventis is not alone. In fact, several
organizations are considering new
approaches to protect the value and
volume of several key molecules across
various therapy classes in the APAC region.
The probability of second-brand strategysuccess increases when the following
components are put into place:
• A clear marketing and sales strategy
that disassociates the innovator brand
(i.e. Plavix) from the second brand to
avoid rapid cannibalization of the
core product;
• Sucient investment in building
brand equity among consumers;
• A rm understanding of the key
influencers in the market who could
help drive the shift from other platelet-
lowering brands to a company’s
second brand;
Source: IMS Health MIDAS data and analysis
Both volume and value growth significantly expanded post-LoE, which is reflective of a broader trend of several key molecules acrosstherapy classes in the APAC region ramping up in volume and value sales after LoE. Pharmaceutical companies who have a clear
strategy and strong capabilities to leverage such growth are likely to emerge as winners
Sanofi-Aventis recently launched a second brand of Clopidrogel to defend its market share against furthergeneric erosion in Indonesia
Representative
USD MnLoE LoE LoE
SU Mn
Clopidrogel value sales inIndonesia (2006-10)
Clopidrogel volume sales inIndonesia (2006-10)
2006 20062007 20072008 20082009 20092010 20100 0
2
4
6
8
10
12
14
16
18
2
4
6
8
10
35% 37%
6.7 3.9
48%55%
Others (10 cos)
Big Pharma BGx
Top 2 local BGx
Top 1 local BGx
Sanofi-Aventis (2nd Brand)
Sanofi-Aventis (Plavix)
12
14
16
18
20
22
24
26
28
6.7 3.98.8 4.8
8.84.8
12.27.3
18.112.4
26.7 17.6
0.60.6
0.6 0.5
1.31.1
1.11.1
1.10.92.7
2.34.9
3.90.4
0.4
13.6
6.1
4.0 4.0
10.35.6
10.15.2
4.33.7
4.3 1.9
Figure 2
8/17/2019 Asia Pacific Insight - IMS
7/247
• An optimal pricing strategy that
maximixed volume uptake without
negatively affecting the innovator
brand (i.e. Plavix) sales;
• A set of cost-eective resources that
helped push second brand sales; and
• A robust and eective second brand
launch campaign.
The Sanofi-Aventis second brand
campaign is but one option available
to multinational companies in the
post-patent era.
Companies can and should be look-
ing at a variety of value boosters. No
matter what alternatives companies
pursue—product enhancements, de-
fensive list price cuts, second brandstrategies, broad regional emerging
markets play, fortifying the company
with an adjunct generics division,
developing patient assistance pro-
grams, or pursuing new licensing or
merger/acquisition relationships—
several commonalities will define suc-
cess in the APAC region going for-
ward.
“Every company does its own analysis
and makes its own decisions based on its
existing infrastructure and long-term
goals,” says Morton-Small. “Still, we
see greatest success emerging from
those clients with strong marketing
and commercial capabilities, broad
investments in brand equity, a good
understanding of local markets and
stakeholder decision drivers, a firm
knowledge of pricing-volume trade-
offs, steady on-the-ground resourcemanagement, and healthy launch
readiness.”
CONSIDER THE LIFE CYCLETo all companies, Morton-Small
and Afable recommend that careful
asset-level evaluation and prioritization
be applied to every strategic option.
“Companies need to remember that
every decision that is made has a
potential impact on the many inter-locking components of the company,”
says Afable.
To help clients think through the
ramifications of various possibilities,
Segmenting the relevant LoE market appropriately helps a firm determine how to optimally allocateits assets across multiple geographic markets in the APAC region
Post-LoE perfomance by relevant segment
Effectively segmenting the APAC market based on LoEperformance allows a firm to develop tailor-made/cluster approaches to strategy development
Illustrative, Non-exhaustive
Reimbursement status
How do post-LoE
product performancediffer in reimbursed
versus semireimbursedversus out-of-pocket
markets?
How is post-LoE
product performanceinfluenced by broader
macroeconomic factors(i.e. GDP, population,
etc.)?
How does healthcare
infrastructuredevelopment influence
post- LoE performance,
especially indeveloping Asia?
How influential is
middle class growthon the performance of
post-LoE products?
Do channel structures
play an integral rolein driving post-LoE
growth?
Macroeconomic status
Healthcareinfrastructure
Middle class growth
Channeldemand
Figure 3
8/17/2019 Asia Pacific Insight - IMS
8/248
IMS Health has generated an in-depth
roadmap. What, for example, are theproduct performance teams supposed
to be thinking about three years ahead
of loss of exclusivity? What should
the manufacturing team be consider-
ing three years after patent loss? What
pricing and contracting considerations
should be assessed all along the way?
As complex as the process is, it can and
must be both determined and deliberate.
(see figure 4)
At the end of the day, loss of exclusivity
should inspire pharmaceutical compa-nies to think through the overarching
life cycle management of products—
to undertake a transparent yet rigorous
prioritization process that can ensure
a healthy future for the brands and
for the company. The benefits of such
planning are proven and clear, both from
a value perspective and from an organi-
zational one.
“We ask our clients facing loss of
exclusivity to think about four primarythings,” says Morton-Small. “How can
they optimize their portfolio? Should
they establish a competitive branded
generics operation? Should they be
exploring mergers and acquisitions?
How can they balance regional ambitions
with localized market strategies? It’s dy-
namic, it’s interwoven, it’s new. But there
are plenty of opportunities out there, and
we’re helping clients find them.”
Considerations for market participants
Optimize portfolio, pinpoint growthoppportunities and execute
Establish competitive branded generics arm
Explore M&A growth but treadcarefully
Balance regional ambitions withlocalized market growth strategies
Given key considerations, there are several growth avenues thatmarket participants may consider for post-LoE growth
Source: IMS Insights and analysis
• Ensure that the portfolio andcore capabilities are alignedto take advantage of growth -
keeping in mind that optimal portfolios and core capabilitiesneeded to succeed may differ from country to country.
• Establishing generic brands intherapy areas that are distinctand do not compete with the core
innovator product portfolio mayincrease the likelihood of success.
• There have been no documentedbig pan-Asian success for branded generic companies, although
several players have commandedhigh growth and market share intheir home markets, M&A opportu-nities may exist but risks abound.
• Establishing a balance with aregional / pan- Asian post-LoE growth strategy and geographic
market specific strategies will bekey to cornering post-LoE growth.
Years to Loss of Exclusivity
LoE Planning & Life Cycle Management
ProductPerformance
ProductStrategyOptions
What generic erosionshould I expect?
What are the parallelimport implications?
How are competitorseroding my product?
Pricing &
ContractingField Force/Promotion
Manufacturing
IP/Legal
Product Perfomance “What will happen?” LoE Strategies “What can we do?”
-5yrs -3yrs -1yrs +1yrs +3yrsLoE
What LCM options should bepursued? E.g., forms/combos, purity, peds
Should we invest in usetrials for OTC switch?
What’s our pricing strategypre LoE e.g., increases?
How should we optimize fieldforce promo near LoE?
How will manufacturing volumeschange post LoE?
How can we continue to closeany patient loopholes?
How can we enforce and monitorfor breach of patents?
What COGS reduction plans should weimplement to optimize profits?
Should we outsourcemanufacturing production?
What should we do withour excess field force?
Should we changeour messaging?
How much promotion shouldbe continued post LoE?
How and where should we readjustour promotion strategy?
What contracts shouldwe pursue?
Can we drive market accesswith impending LoE?
How should we drop price to optimizeshare? How are generic competitors pricing?
What regional/formulation specific products enhancementsshould we launch pre/post LoE?
Should wemonetize our
assets/out-license?
Should we license a2nd brand/
authorized generic? Are there additionalproduct enhancements
that should be pursued?
Do we requirea discontinuation
plan?
Critical decisions need to be made impacting many parts of the organization
Figure 4
8/17/2019 Asia Pacific Insight - IMS
9/249
8/17/2019 Asia Pacific Insight - IMS
10/2410
The Impact Global Pharma Cost
Containment Measures in Asia-Pacific
In Italy, France, Germany, the
United Kingdom, and elsewhere,
government agencies are rewardinginnovative, high-value products via
improved pricing opportunities, but are
requiring pharmaceutical companies
to demonstrate both the absolute
therapeutic benefit of the product as
well as the therapeutic benefit relative
to the existing standards of care.
Meanwhile, pay for performance
schemes are hitting their stride. In
Italy, for example, the emphasishas been on payment for response.
The United Kingdom, has negotiated
a number of arrangements that tie
final payments to actual outcomes, as
well as dose capping, in which the
pharmaceutical manufacturer covers
the costs of drug beyond the expected
treatment duration.
It’s all part and parcel of an effort to
curb the rising costs of healthcare— even as aging populations put new
pressure on national systems and even
as the costs of new treatments continue
to rise. And it’s not a phenomenon
limited to the developed markets, as
recent developments throughout Asia-
Pacific make clear.
In fact, in countries as diverse as
China, Australia, and Thailand, a range
of regulatory changes and cost contain-
ment measures are rapidly emerging.
China, for example, announced a tally
of healthcare expansion improvements
and regulatory reforms in 2009—all
of which are continually being aug-
mented as implementation progresses.In Australia, cost containment reached
a turning point in 2011 amidst wide-
spread criticism when the Pharma-
ceutical Benefits Scheme (PBS) de-
ferred reimbursement listing for 7 new
drug launches and required all new
reimbursement listing requests to be
reviewed by the cabinet for approval.
In Thailand cost-containment is now
so deeply embedded within its health-
care system that various stakeholdersranging from the Prime Minister, the
Controller General Department, the
Government Purchasing Organization,
and the Ministry of Public Health are
now all involved in the process.
“National health systems are caught
in a complex conundrum,” says Marc
Benoff, VP of Pricing and Market
Access, IMS Consulting Group.“They
are motivated by a desire to improvethe lives of patients through quality
service and treatment options, on the one
hand. On the other, they’re challenged
by escalating needs, expectations, and
costs, as healthcare expenditures as a
percentage of GDP continue to soar.”
Given that pharmaceutical expendi-
tures account for 17% of all health-
care spending globally, pharmaceutical
companies must not simply be aware
of the problem; they must actively
assert themselves as part of the solution.
To achieve that end, manufacturers
need to understand just what is shap-
ing national healthcare strategies. How,
for example, are various marketsviewing what is, as of this writing, the
more than 6,000 active products in the
global pharmaceutical pipeline? What
lessons are the markets leveraging from
early cost containment experiences.
And what, in the end, are pharmaceutical
companies supposed to do about it?
“The environment is complicated
and the risks are many,” says Benoff.
“Today’s healthcare landscape isshaped as much by scientific ingenuity
as it is by the ability of pharmaceutical
companies to effectively navigate, on a
country-by-country basis, everything
from reference pricing and spending
caps to generic substitution and
clinical value assessments.”
TAKING A CLOSER LOOK AT THEASIAN MARKETS: TRENDS AND TOOLS
It’s not just China, Australia, andThailand where we’re seeing a new
era of cost containment take root.
Throughout both mature markets—
which include Japan, Australia, South
Korea, Taiwan, Singapore,—and less
mature markets—Thailand, China,
the Philippines, Malaysia, Vietnam, and
Indonesia—pricing reforms and
legislation aimed at making health-
care more affordable have been put
forward. (See figure 1).
Countries intent on containing costs
have many tools at their disposal.
In the United States they call it “gold carding,” and already it’s in play among
a handful of healthcare payers who are offering providers the opportunity
to forego prior authorization in exchange for conformance to oncology
prescribing guidelines.
http://www.imshealth.com/ims/Global/Asia%20Pacific/Content/Insights/Cost_Containment_2012Magazine.pdf
8/17/2019 Asia Pacific Insight - IMS
11/2411
Prescribing and volume controls are,
of course, an early line of worldwide
defense. But budget controls, price
management, and the promotion of
innovation have lately emerged as
primary. As one might expect, the lessmature markets are mostly focused on
price-oriented controls such as man-
datory price cuts and international
price referencing. On the other hand,
the more mature markets tend to
take a more diverse approach, relying
on price controls, drug volume
controls, budget controls, as well
as game-changing approaches that
reward and promote true innovation.
Each tool, says Benoff, comes with
its own set of benefits and hazards.
“We’ve seen Health Technology
Assessment (HTAs) incent industry to
invest in new and increasingly effective
treatments so that research and
development can remain focused on
true clinical improvements,” he says.
“At the same time, HTAs are resource
intensive—demanding significant
funding, tapping new technical
skills, and requiring the input of
government, clinical, and industry
stakeholders. It’s a trade-off, and
compromises must be made.”
Price cuts, conversely, are easy to im-
plement and relatively straightforward,
requiring little time and investment.
And yet, they too have their down-
sides, often negatively impacting the
entire healthcare industry—a scenariothat has recently emerged in the
Philippines following the 2008 intro-
duction of the Cheaper Medicines Act
and the announcement of maximum
retail prices.
“We’ve been keeping a careful eye
on the Philippines,” says Miemie
Strydom, a consultant with IMS
Consulting Group Asia-Pacific. “The
pervasive price cutting there has not just negatively impacted sales for
local and multinational pharmaceutical
companies and severely affected sales
for small and/or non-chain pharmacies.
The price cuts have also affected the
health of the people themselves. We
found that the volume of sales of
cheaper generic alternatives did not
significantly rise and that patients—
particularly poorer patients or those
requiring specialist care—simply couldnot access the medications they need-
ed, despite the major price reductions.
Beyond that, the Cheaper Medicines
Act discouraged foreign investment
and resulted in the withdrawal of small,
local multinational companies from
the market.”
An analysis of cost containment trends
in ASEAN suggests that history favors
the less complex set of tools, relative to
EU or even other Asia-Pacific markets.
(See figure 2).
In Asian emerging markets, the sheer size of the task ofimproving healtcare have expedited the rise in price pressures
Cost Containment Pressures most used in APAC
Level of Agressiveness
F r e q u e n c y
o f U s e
* An increased interest in the application of cost
effectiveness is currently observed and expected to gradually increase its use as markets mature
Most measures recently used
by healthcare authorities focus
directly on drug expenditure
High
Low
Low High
Co-payments ondrugs
Prescribingguidelines
Cost-effectivenessrequirementsReference price
systems
Physicianprescribing
budgetsSub-populationlimitations orrestrictions
Cost-effectivenessrequirements
Price Cuts
Noreimbursement
Price/volumecaps
Figure 2
Figure 1
Select recent key healthcare strategy changes in APAC
Source: IMS Market ExpertiseNHI - National Health Insurance; CSMBS - Civil Servant Medical Reimbursement Scheme;NLED - National Listing of Essential Drugs; PBS - Pharmaceutical Benefits Scheme
Increased focus on cost containment in the region haveled to significant increase in price pressures
China:• Price cuts (2011)• Increased price controls
S.Korea:• De-listing & price cuts (2011)• Reimbursement & pricing reforms (2009)
Taiwan:• Second generation NHI reforms (2010)• Biannual price cuts• Health insurance premiums up (2010)
Philippines:• Price cuts (2009 & 2010)• Cheaper Medicines Act (2008)
Thailand:• CSMBS budget cuts; stricter spending controls (2010 & 2011)• Hospital audits 2010 & 2011• NLED delistings
Australia:• Reimbursement forfits (2011)• New price reference groups (2009)• PBS price reductions
8/17/2019 Asia Pacific Insight - IMS
12/2412
“It’s abundantly clear that cost con-
tainment can only be effective when
introduced through a systematic and
coordinated effort,” says Strydom. “A
number of national health systems—
including Thailand, China, Japan, and
Taiwan—have recently put forward
a variety of capping provisions in an
effort to keep spending down.”
Taiwan, Japan, and Thailand have
introduced DRG-type (Diagnosis-
Related Group) reimbursement rates
to cap the spend on patients and treat-
ment, and talk of introducing the same
sort of measures has arisen in Indonesia.
At the hospital level, China and
Thailand are capping expensive druguse to limit the number of prescrip-
tions written and filled for expensive
drugs; Thailand has also instituted
capping programs for nine diseases
considered to have above-average
branded drug use.
Sometimes spending caps are levied
as part of an overall cost effectiveness
program. Sometimes they are used
to limit the amount of spend on thetreatment of each patient, or for all
patients, in a therapeutic area and in
Europe, we’ve seen these evolve as
far to even include payback schemes
as part of the cost-saving initiative.
Sometimes overspend in the public
health system can also subject
manufacturers to payback schemes.
Generic substitution, another popular
cost containment tool, helped growglobal generic drug spending to
US$234Bn in 2010 (27% of total
global pharma spend), up from $124Bn
in 2005 (20% of total global pharma
spend). By 2015 generic spending is
expected to grow to between $400-
430Bn, constituting 39% of total global
pharma spend. At its most aggressive,
generic substitution targets are set
by pharmacy associations and payers,
leaving patients who seek the brand
to pay for the privilege out of pocket.
In many places, pharmacists are legally
required to inform patients of the
availability of lower-cost substitutions.
It is no surprise, therefore, that across
many developed markets, generics
growth significantly outperforms
overall pharmaceutical market
growth—a trend that is expected to
continue. In fact, branded generics
manufacturers stand to gain the greatest
boost in sales as the region growsgiven strong market aliation and
patient trust in high-quality generics
manufactured by well established, local
generic players. (See figure 4).
Other cost containment tools that
have gained in popularity in developed
countries—clinical recommendations
designed to help manage both the
quality and costs of care, for example,
and ‘Pay-for-Performance’ schemes
that actually tie payments to results—
have not yet found fertile ground
within developing countries. “Such
complex measures have a far hardertime gaining a foothold in the
developing countries,” says Strydom.
(See figure 5). “It’s not just the complexity
of these initiatives that limits their
introduction, but the fact that these
Recently, with growing budget pressures,markets are looking at new systemic approaches
Budget Control
PriceManagement
PromoteInnovation
Spending capsGeneric substitution
DecentralizationPrescribing control
Reference pricingParallel trade
Price cuts
Clinical guidelinesClinical value assessment
Pay for performance
Strategy Specific objectives
Budgetcontrol
Manage healthcare expenditure byimplementing tighter controls onthe pharmaceutical budget.
Pricemgmt
Limit total drug expenditure bydirectly managing product prices
Promoteinnovation
Encourage efficent use of financialresources by promoting higherquality of care
Figure 3
80,000 50%% Mkt Sales from OriginalsOriginalsBranded GxUnbranded Gx
MAT Q1 07 MAT Q1 08 MAT Q1 09 MAT Q1 10 MAT Q1 11
Total Market CAGR Growth:“Branded Gx” - Other brands“Originals” - Original brands and licensed brands“Unbranded Gx” - Unbranded and patent n/aSource: IMS MIDAS Q1 2011. All APAC generics/branded figures exclude India and Vietnam
45%
40%40% 38%
42%44%
T O T A L S A L E S ( U S $ M
U S D / M N F )
% o
f t o t a l M a r k e t S a l e s f r o m
O r g i n a l s
35%
30%
25%
20%
15%
10%
5%
0%
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
Increasing consumer demand for more affordable drugs hasdriven rapid growth of high quality generics across APAC
Sales Breakdown by Originator Status - APAC
17,204
14,027
7,965 9,87012,721 15,958
19,173
16,886
20,160
23,645
26,87319,518
21,886
24,184
26,165 11%
16%
21%
21%
SegmentCAGRMATQ1 2006-MATQ1 2011
36%
Figure 4
8/17/2019 Asia Pacific Insight - IMS
13/2413
countries have to first address basic
needs and infrastructure pressures
before they can implement more
sophisticated schemes.”
WHAT DOES IT ALL MEAN FOR MNCS?Multinational pharma companies
seeking to set down or strengthen
roots in the Asia-Pacific markets are
clearly in need of guideposts.
”Our clients have questions,” says
Benoff. “They want to know what is
working right now, and what will work
five years from now. What resources
can they put into place? What trends
will become fixed and most pressing?”
The answer, says Strydom, is complex.
“We are advising our clients to prepare
for greater shifts toward more
systematic and integrated cost
containment approaches ranging
from prescribing control and budget
restrictions to price management and
innovation,” she says.
“Multinational pharma companiescan’t just sit on the sidelines and wait
for the forces to play out,” says Benoff.
“There are very real opportunities to
step in and work with payers to help
shape long-term development plans
that can promote favorable operating
environments. There are opportunities
as well for multinational companies to
assert their knowledge and expertise
in the region and to become a valued
resource to healthcare stakeholders.”
Consider the recent concerns
expressed by a public healthcare
representative—a regulatory advisor—
who overtly recognizes the importance
of incorporating cost effectiveness into
reimbursement decisions, but who has
been thwarted by a lack of internal
know-how. “We just do not have the
technical expertise to implement this
overnight and even if we did, which
disease areas and patients should take
priority?” she asked. “Right now the
best we can do to is to make quality
treatment a priority. Only then can we
shift our focus to compliance and the
standardization of clinical care.”
There are real opportunities to build
bridges in this environment—to
offer the technical expertise thatregulators and health ocials are
seeking. “Multinational companies
with a strong local presence have the
chance to make a real difference—to
strengthen the health of a country as
well as their own position within it,”
says Benoff. “We’ve seen companies
step in and work with payers in ways
that shape the future of healthcare
strategies. We’ve watched real partner-
ships emerge between manufacturersand healthcare authorities—partner-
ships that include risk-sharing agree-
ments, price/volume agreements, and
pay-for-performance schemes. “
There are also very real opportunities
for multinational pharmaceutical com-
panies to align their local and regional
strategies with the national health-
care strategies by streamlining their
businesses, expanding their generics
and branded generics presence, and
adapting their commercial models to
better serve key accounts.
Finally, it’s imperative that
multinational pharma companies at
work in developing nations share
what they have learned from their
experiences in developed countries.
“The companies that are getting
ahead have found ways to bring theirknowledge to the ASEAN countries,”
says Benoff. “These are companies
like those that have invested in
specialty training for nurses requiring
IV infusion treatments in oncology
and rheumatoid arthritis care
environments. Companies that bring
partnering solutions to governments
in need. Companies that take an
active role in industry organizations—
forging ties with peer companies tohelp create the r ight kind of changes.
“Everyone benefits when real
solutions are put forth, and it’s
incumbent upon these pharma
companies to see themselves not just
as organizations with products to sell,
but as organizations with important
lessons to share.”
8/17/2019 Asia Pacific Insight - IMS
14/2414
8/17/2019 Asia Pacific Insight - IMS
15/2415
In less than half a century, India has gone from a country in which patented pharmaceutical
products were essentially non-existent to a free-market economy in which patent
applications from both domestic and international pharma companies are on the rise.
The Changing Face of Pharma
Sales Forces in India
Much of the shift can be credited to
the 1995 passage of a formal patent
structure, which precipitated the
annual launch of between 650 and 700
pharmaceutical products up through
2000—and utterly changed the way
pharma companies went about doing
their business in India. Conservative
sales models were eschewed for
aggressive, innovative ones. R&D
efforts were magnified. Companies
grew at an astonishing rate—and sales
forces multiplied. (See figure 1).
The new millennium ushered in even
more change. In fact, so aggressive was
the portfolio expansion across India thatthe average number of newly launched
brands stood at more than 2,500 per
year between 2000 and 2005.
It’s no surprise, of course, that pharma
companies continued to expand—
amplifying and restructuring sales forces
so that they might better serve both their
products and broader geographical areas.
By the late 2000s, sales forces had been
extended to rural markets and, in a bid
to further increase revenue, innovators
began to proactively co-promote their
patented products and to engage in out-
licensing arrangements. When companies
ultimately faced saturation in India’s
top-tier cities, newer, more ecient
commercial models and sales force
structures went into effect—including
task forces, therapy experts, key account
manager structures, and contracted salesoperations.
“The pace of change in India has been
nothing short of remarkable,” says
Amardeep Udeshi, an engagement
manager for IMS Consulting Group. “The
trajectory of the branded pharmaceutical
market in India has forced companies to
adapt quickly and to intelligently anticipate
the future.”
“The aggressive expansion of sales forces
has not hurt most companies’ ability to
maintain their bottomline,” says Mohit
Bahri, a consultant within IMS Consulting
Group. (See figure 2). “In fact, our financial
assessments demonstrate that sales force
expansions have historically borne
meaningful fruit, and we anticipate the
same to hold true going forward.”
Today, with the industry boasting an
annual turnover of Rs 600 Bn and a
CAGR in excess of 15%, more change is
clearly on the horizon. In a recent survey
Figure 1
http://www.imshealth.com/ims/Global/Asia%20Pacific/Content/Insights/India_2012Magazine.pdf
8/17/2019 Asia Pacific Insight - IMS
16/2416
conducted by IMS Consulting Group
in conjunction with the Organization
of Pharmaceutical Producers in India
(OPPI), it is clear that the sales force
strategies and hence structures of India’s
successful pharmaceutical organizations
are once again on the verge of change.
“Sales models are being reinvented and
redesigned all across the India pharmamarket landscape,” says Udeshi.
“Streamlining operations and adapting
sales forces are initiatives that remain
uppermost in the minds of those work-
ing within the fourteen organizations
that we used for our study.”
EMERGING TRENDS IN THEHEALTHCARE SYSTEMAccording to Udeshi, six key health-
care trends are likely to influence theway pharma companies adapt their
sales models over the course of the next
decade. “We’re going to see new stake-
holders and promotional channels
arise,” he says. “These are trends that no
company can afford to ignore.”
First, says Udeshi, it’s clear that patients
will become increasingly strong stake-
holders as the years unfold, thanks
to greater education, awareness, and
income, not to mention a growing
national focus on healthy lifestyles.
“Patients are commanding what they want
at the price they want it, where they want
it and from whom,” says Udeshi. “The
demand is high for preventive treatment,
not just curative care.” The vaccine market,
notes Udeshi, has become a true a case in
point, with companies like GSK and MSD
primarily targeting the end-user to elevate
prescription levels and use. MNCs have
also been actively engaging customers byproviding disease management services
to retail patients, by offering counseling,
physiotherapy sessions, and diagnostic tests,
and by creating a series of patient-oriented
outreach programs; Chiron Panacea, as one
example, reaches out to its patients through
an SMS reminder service. Amplifying
the strategic role of the patient in India’s
healthcare system is the rise of check-up
packages, media campaigns, and govern-
ment initiatives in rural regions.
A second key trend relates to the prolifer-
ation of new healthcare delivery channels.
“We’re watching the hospital segment as-
sume a key role in the Indian healthcare
sector,” says Bahri. “Private and corporate
hospitals have grown at a 15-20% on a
year-on-year basis, and we expect this
trend to continue well into the next five
years.” Investment by private equity firms
into the burgeoning hospitals space bears
testimony to this trend. Penetration in
Tier II cities coupled with medical tour-
ism is expected to further boost growth
of corporate hospitals, while the impend-
ing expansion in the corporate hospital
system will likely result in a structure in
which players not only require a hospital
sales force, but also a team of key account
managers who are trained to handle
relationships with purchase managers,
administrative staff, and nurses.
The mandated prescribing of generics
by government hospitals in the future is
another key pressure point in the system—
a trend that is expected to strongly impact
the sales of branded drugs—not now or in
the next five years, perhaps, but absolutely
in the long run. The mandated rise of
generics in the west has already led to theemergence of new sales models aimed at
generics promotion. Pharma companies in
India may at one point need to collaborate
with government bodies like pricing
authorities and approval committees as
this trend gains momentum.
Another key area of shift and opportu-
nity revolves around the surging OTC
sector and the role that the media are
now playing in driving brand promo-tion and reaching out to mass audiences.
This has certainly been the case for
Revital, Volini, Gelusil, Digene, I-Pill,
Pediasure, Otrivin and Crocin, which
have built new channels including media
promotion or in-store branding.
“OTC implies reaching out to patients
and consumers without doctor interven-
tion and therefore necessitates a strong
direct focus on the development of newdistribution models, pricing, and
consumer targeting,” says Udeshi.
“Healthcare FMCG companies like GSK
Consumer Health, Novartis and Abbott
are bringing dedicated medical detailing
field forces to doctors and nutritionists to
promote their brands as well. We expect
many more companies to go this route
over the next ten years—which means, of
course, that pharmacos will need to adopt
new approaches to their own customers.
Likewise, the rise of the organized retail
pharmacy chains signals new pressures
Aggressive expansion of sales forces has nothurt most companies’ profitability trends
Figure 2
Ranbaxy DRL
O p e r a t i n g P r o fi t %
CIPLA
Glenmark Sun Pharma
Indian Companies
2006 2007 2008 2009 2010
40%
35%
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
MNCs
Novartis Merck Pfizer
Astra
% Operating Profit = Operating Profit/ Operating IncomeSource: www.money.rediff.com
Abbott Aventis
0%
2006 2007 2008 2009 2010
5%
10%
15%
20%
25%
30%
35%
40%
O p e r a t i n g P r o fi t %
8/17/2019 Asia Pacific Insight - IMS
17/2417
and opportunities for pharma companies
working in India. “Pharmacy chains like
Apollo, Guardian, and 98.4 are forcing
pharma players to think differently about
the growing power of newer distribution
channels,” says Udeshi. ”By many estimates,
organized retail pharmacy chains already
account for nearly 5% of pharma sales in
India, and that share is dramatically increas-
ing. These chains simply cannot be ignored
any longer. Pharma companies may need
to think about how to engage with these
chains to deliver more and more services
to their patients.”
The final emergent, if futuristic trend
that must be monitored and reflected inthe commercialization models of India
pharma companies is the increasing
power of health insurance companies to
determine which drugs will or will not be
included on re-imbursement lists.
”We expect the total population covered
under health insurance to increase from
2.3% in 2007 to 20% by 2015,” says Bahri.
“The possible emergence of a drug re-
imbursement list by Indian insurancecompanies cannot be ruled out, and this
may eventually lead to the dictation of
business terms by insurance companies to
pharma players. Companies like ICICI
Lombard are already eyeing disease specific
insurance, while companies like Sanofi-
Aventis are partnering with insurance
companies to insure their Arava patients,
should casualties result during product use.”
ADAPTING NEW COMMERCIAL MODELSEmergent trends in healthcare delivery areclearly forcing pharmaceutical companies
to once again re-think their go-to-market
strategies (See figure 3). To ask whether their
current sales models are either sustainable
or optimal. To consider innovative means
of adapting to the new environment.
”Leading companies recognize that
adapting current sales models to future
pressures and opportunities is the key
to survival,” says Udeshi. “Key account
management, hospital task forces, chan-
nel management, therapy specialists, and
media promotion, among other things,
are already being incorporated by inno-
vative, forward-leaning companies. So are
dedicated teams for rural markets. While
it’s far too early to predict the success of
these models, each clearly points toward
a targeted approach to new stakeholders,and each evolves the commercial model
from mere touch points with customers
to actual engagement with patients.”
“Pharma sales structures will slowly
move toward a more scientific dialogue
between the sales force and the doctor,”
a pharmaceutical executive at a leading
pharmaco noted during our conversa-
tion. “This will require highly trained
sales forces that are committed to engag-ing with doctors more effectively.”
The ability to manage patients together
will clearly emerge as a success factor in
the coming years. “Delinking the role of
sales force from stockist management will
help sales teams improve their exclusive
focus on customers,” says Udeshi.
“Engaging multiple stakeholders through
multi-channel promotion and touch-points
will be crucial. Segmenting customers fromthe current Potential-Support Model to
more evolved models like Behavioral
Segmentation will provide the
cutting edge, while e-detailing, e-seminars,
e-doctor meetings, and online awareness
campaigns will drive patients into the
healthcare system. Thus, KPIs for the sales
forces may evolve as well.”
Harvesting newer touch points with
patients will be part and parcel of the new
environment, and this won’t just affect the
sales model; it will also impact portfolio
choices. One executive in the IMS study
made special note of this, suggesting, “Key
account management will have increasing
importance for those MNCs with pipelines
of patented products, and strategic partner-
ing initiative will also impact sales models.”
In the meantime, the Indian pharmaindustry will need to develop sales force
competencies and enable sales force ex-
cellence (SFE) strategies to take center
stage, a process that will require system-
wide support and careful implementation.
Going forward IMS forecasts the increas-
ing importance of SFE teams, whose role
will evolve from supporting sales teams
to developing and managing entire sales
strategies and their implementation. That
will not only include reporting, but alsomulti-level training, periodic reviews of
sales force structure, size, detailing, and
customer targeting, and much more.
“Our work within the India pharma
market—and the conversations we are
having—suggest that companies don’t
just understand the importance of
enhancing sales force competencies and
excellence,” says Udeshi. “They are also
taking the first steps toward advancingtheir own sales forces within this dynamic
pharma ecosystem. It’s an exciting time to
be doing business in India.”
Smaller fieldforces:
removal ofmirrored field forces
Account basedselling: managing
groups of prescribersbased on % effort andnot reach & frequency
Key Account Mgt: relationship rep cancall in specialized
personnel as needed
Right sizing:each rep seeing30-40 doctors
more often
The Sales
Model ofToday
The Sales
Model ofThe Future
Prescriber Knowledge
Opportunity - Accessibility - Responsiveness
Therapy focused - Team based - OutsourcingSpecialist - Key Account Mgt.New bonus and compensation models
Patient Flow - Local Guidelines/BodiesInfluence to Diagnose & Prescribe
Organizational Models
Portfolio Treatment Pathways & Influence
Figure 3Emerging trends are driving companies to re-think their go-to-market strategies
8/17/2019 Asia Pacific Insight - IMS
18/2418
8/17/2019 Asia Pacific Insight - IMS
19/2419
Slightly more than a year ago, in August 2010, China’s Ministry of Commerce
unveiled a draft plan designed to help effect a major restructuring of the
country’s drug distribution system. The goal, according to the plan’s authors,
was to reduce what until recently had been some 16,500 pharmaceutical
wholesalers and 140,000 retailers to no more than two multi-regional large
distribution companies and less than two-dozen regional large distributors.
Improved eciencies and economies of scale were forecast. The elimination
of secondary distribution markets was likewise anticipated.
Forging New Relationships in China’s
Consolidating Distribution Industry
While not the first time such lofty
goals were elevated, a series of
mergers and acquisitions among
China’s distribution companies
began to reshape the landscape
even before this plan was finalized.
In January 2011, for example,
Shanghai Pharmaceutical finalized its
acquisition of China Health System,Ltd, following a series of smaller
acquisitions of other distributors
across the nation. Sinopharm, likewise,
carried out a series of deals that have
considerably broadened its national
sales network.
The reshaping of the pharma
distribution landscape throughout
China has widespread implications
for multinational (MNC) pharmaand medical device companies. Still
in its earliest stages, the trend is also
raising numerous questions. “Our
clients are watching the situation
closely,” says Matthew Guagenty,
Managing Principal, IMS Consulting
Group, China. “They want to know
what to expect in the short- and middle
term, and what they can do to prepare
for the coming changes.”
Of course, the partnerships and
alliances of tomorrow will be forged
on a case-by-case basis. Still, a
recent IMS Consulting Group study
provides a sound framework through
which pharmaceutical and medical
device companies can approach these
evolving, strategic partnerships.
“Our in-depth conversations with
32 individuals from across the broad
MNC spectrum make it abundantlyclear that distributors are now seen
as strategic partners that can—and
indeed should—be complement-
ing pharmaceutical companies,” says
Guagenty. “Distr ibutors have the
capacity to support MNCs in manag-
ing pricing and market access. They
can maintain strong relationships with
hospitals and secure product listings.
They can create a logistics and
storage infrastructure equipped tomore deeply penetrate the country.
The ongoing phenomenon of
distribution consolidation is, in many
ways, a force for good—a means of
reducing the number of distribution
tiers, improving services, and redirect-
ing investments into as of yet unmet
needs.”
It is widely believed that consolida-
tion of the distribution system willpave the way for lower logistics and
storage costs. Experts within IMS
Consulting Group believe this trend
will enhance the ability of MNCs to
reach patients beyond the largest cities
and into the third-tier markets, long
an objective of many. The rationale
is two-fold: 1) consolidation within
the distribution industry will extend
networks to truly create national-
level reach, and 2) as costs come
out and inevitable margin pressuresincrease, the cost effectiveness of
doing business in these distant
markets becomes more realistic.
And yet, it is important to note that
such consolidation will not happen
overnight. In fact, most believe it
will take significant time—perhaps as
much as ten years—for the anticipated
benefits to actually accrue.
“It’s true that the top three distributors
have aggressively pursued M&A
activity in response to governmental
pressures,” notes Guagenty. “But
for the most part, those acquisitions
remain unintegrated. The acquired
entities are continuing to operate
as before—and sometimes without
eciencies due to the lack of
management attention.”
Medical device companies face
slightly different environmental
pressures than pharma MNCs. “The
http://www.imshealth.com/ims/Global/Asia%20Pacific/Content/Insights/China_2012Magazine.pdf
8/17/2019 Asia Pacific Insight - IMS
20/2420
policy reform framework for the
medical device industry is simply not
as evolved as that of the pharmacy
MNCs,” says Guagenty. “We’ve found
that the primary focus of health
policy reform in China today is on
increasing access and affordability;
medical devices, for their part, have
not yet become a high priority, given
their relatively smaller contribution
to the overall cost of healthcare in
China.”
The bottom line is that there is no
external push or incentive driving
consolidation in the medical devices
distr ibution space. In the short-to medium- term, medical device
distribution will remain dealer driven.
Still, says Guagenty, those included
in the IMS Consulting Group survey
believe that consolidation in medical
devices distribution is inevitable in
the long run and will result in several
benefits to both manufacturers and
the healthcare industry as a whole.
GETTING A HANDLE ON THE NEAR- TOMIDDLE-TERM DISTRIBUTION SCENEThe first thing MNCs and medical
device company executives need to
understand is just how profound an
impact distributors have on the sale
of medical products in China. “In
distinct contrast to developed
countries, large distributors in China
play a direct role in selling products,”
says Guagenty. “They take on a greaterrisk —assuming the credit risks of
Tier 2 level and below distributors,
provincial tendering, hospital listing,
and the like. They therefore command
a significant premium compared to
the global distribution industry.”
Given the government’s focus on
reducing overall distribution margins
to control healthcare costs, these
premium margins are bound to come
under pressure. “We see distributors
adapting their business model to
offset this pressure,” says Guagenty,
citing expansion into ‘fee for service’
value-added offerings such as
contract sales and marketing that
complement MNC capabilities and
thereby form separate revenue streams
that don’t necessarily qualify as
‘distribution margins.’
Over the medium term, pharma
MNCs must better understand the
intentions of larger distributors that
maintain and distribute their own
in-house pharmaceuticals (branded
and unbranded generics and in-
licensed products). MNCs will also
want to work with distributors to
focus on facilitating greater marketaccess and expansion as well as
creating new services that
complement such traditional pharma
strengths as sales, marketing, and
maybe even localized R&D and
clinical efforts.
MNCs should also be looking to
distributors to improve current
offerings—in terms of both services
and pricing structures. Logistics costsand lead times are significantly higher
in China, when compared to global
standards. At the same time, distr ibu-
tors are commanding a proportion of
price irrespective of their inherent
cost structures.
Medical device distribution, for
its part, is expected, as has been
noted, to remain fragmented in the
medium term. Hence, medical devicecompanies will have less leverage—less
ability to persuade distributors to
clearly separate their core distr ibution
offerings from value-added services
that are not of immediate relevance
in medical devices. Over the medium
term we expect the change to be slow
in medical device distribution. There
simply isn’t a significant catalyst for
change.
Medical device companies should,
however, continue to push
for differentiated services that
cater to their differentiated business
environment and stakeholders. “The
truth is that, particularly in high-end
medical device distribution, there has
been a lack of attention on behalf of
distributors in China,” says Guagenty.
“Frankly, there has also been a
general lack of the kind of talent that
is needed to fulfill some of the
complex roles required by MNC
device companies. In many cases these
are complex devices, being used in the
operating-room environment, where
surgeons need to be working with
product experts from the company
or its partner to ensure a successful
and satisfactory result.” Ultimately the‘talent gap’ will require new innovation
on the part of value-added service
suppliers as well as those MNCs
that hope to be successful in China.
Examples of this include unique
collaborations across the pharma
and medical device spectrum and
agent/distributor models that are not
exclusive one-to-one arrangements,
but one-to-many.
GEARING UP FOR CHANGEClearly, we’re talking about new
kinds of partnerships here—about the
benefits that can and must be realized
in this new era of consolidated
distribution. Simply entering into
“agreements of convenience” is not
enough anymore, especially as MNCs
and medical device companies move
on past the Tier 1 and 2 (the largest
200+) cities of China.
“We’ve identified four stages in the
evolution of strategic partnerships
between distributors and MNCs/
medical device companies,” says
Guagenty. “There are, to begin with,
those agreements of convenience,
in which both parties are tactically
required to work together and seek a
short-term benefit. The second stage
involves the actual development of a
partnership—a relationship in which
both parties work toward mutual
benefits. In the third stage, both
8/17/2019 Asia Pacific Insight - IMS
21/2421
parties define a common strategic
vision, articulating and holding to a
true win-win partnership model that
is supported by significant investments
from both parties. Finally there is
what we call the mature strategic
alliance, which is grounded in a clear
and complementary set of capabilities.”
Such partnerships must be built against
a backdrop that will remain but vaguely
articulated for many years to come.
On one hand, the largest distributors
are actively seeking mergers and
acquisitions that create truly national
players. The largest of these are State
Owned Entities (SOEs) that havesubstantial access to the capital
required to continue such activity
and further the consolidation of the
distribution industry.
On the other hand, while reach is
valuable, it is clear that the pharma
industry is also seeking and in fact
requires greater levels of partnership
to enhance their ability to do business.
Technology-based solutions andcapability enhancements on behalf
of distributors will be key to making
meaningful lasting change going
forward. Similarly, MNCs will have to
look beyond “exclusive” relationships,
instead seeking maximum leverage
across offerings and capabilities.
“This harkens back to days when the
automotive industry partnered with
its suppliers to drive innovation and
cost saving adaptations while sacrific-
ing some of its demands for proprietary
relationships in doing so,” says Guagenty.
Finally, it’s essential to remember that
MNC medical device players in China
have not seen any material changes,
yet alone benefits. The white space
for engagement and improvement is
significant, but it will be challenging,
as has been noted. Medical devicecompanies depend on local, highly
skilled resources who can engage with
physicians regarding the technically
sophisticated equipment.
Similarly, the agency model in medical
device companies, whereby a
company’s products are not only
distributed but also marketed in a
certain ‘captive’ area, introduces
nuanced complexities into themanufacturer/distributor relationship.
“We would argue that medical device
companies require closer cooperation
than do traditional pharma companies,
given the ‘last mile’ dependencies on
these agents,” says Guagenty. “Think
of McDonald’s without motivated
franchisees crossed with the
complexity of selling SAP to a
corporate customer. MNCs are
looking for partners that can fairly
represent their goods and associated
value propositions with their ultimate
consumers, while driving consistency
and commercial operational
excellence into their business for
the long term.”
No one expects the road to be short
or easy. IMS Consulting Group does,however, expect that it will be
interesting—and well worth the
investment of time required by both
pharma MNCs and medical device
companies as they prepare them-
selves for this new era. Greater access
to more physicians and patients is at
stake. So are improved eciencies.
And so, perhaps, is a better ultimate
relationship with governmental
agencies whose search for morecost-effective business models and
opportunities will not dim any time
soon.
8/17/2019 Asia Pacific Insight - IMS
22/2422
IMS Consulting Group at Work in Asia
IMS Health is at work all throughout Asia on projects of
intriguing scope and implications. Among those engagementsrecently on our desks are the following.
8/17/2019 Asia Pacific Insight - IMS
23/2423
THE ACQUISITION QUESTIONA multinational company considering an acquisition of a large Indian company sought the assistance of IMS Health
to evaluate the candidate company and to assess the value it might generate upon acquisition.
In a matter of 8-10 working days, IMS Health provided an insightful analysis into the candidate’s performance and
identified additional value generation opportunities. We built a proposed acquisition strategy that reflected our
in-depth knowledge of the Indian pharma market and the candidate company and converted all of these inputs intoa highly flexible valuation model. But for IMS’ inputs, such an evidence-based analysis would have been impossible,
particularly within the tight timelines.
IN PURSUIT OF GROWTHIMS Health was asked to help the client understand the opportunities for inorganic growth in Indonesia and pinpoint
where value creation was possible given Indonesia’s market characteristics.
Through measured examination and analysis of Indonesia’s strong-potential healthcare market, IMS identified
opportunities for the acquisition of a company focused on branded generics, thereby laying the groundwork for
a more localized portfolio. IMS’s strong on-ground relationships with key players in the market, paired with the
application of globally tested learnings, set us apart as we delivered the answers the client needed.
OPTIMIZING A CORPORATE STRUCTUREIMS Health delivered an in-depth analysis as well as a series of country-specific recommendations to a multinational
company seeking a new commercial model to serve its growth within four Asia-Pacific and EMEA markets.
Combining a variety of interviews and facilitated workshops with deep analyses of product performances within
selected markets, IMS Health was able to identify the ideal size and structure of the sales force and additional roles.
Comprehensive, well-structured, and evidence-based, the project ultimately established a regional and global governance
system that ensures quality and consistent delivery across all markets.
INTEGRATING SALES TEAMS IN THE WAKE OF AN ACQUISITIONIn the wake of a client’s major acquisition, IMS Health was commissioned to help the multinational company
seamlessly and effectively integrate its respective sales forces in markets across Asia-Pacific.
IMS Health first analyzed options for sales force structure and size for the combined sales force.
Final recommendations were based on analyses of product performance and promotional response. Ultimately, the
territory structure was re-configured to align with the recommended sales force structure, and members of the sales
team were deployed across the respective territories.
PROVIDING A COMMERCIAL OPERATING PERFORMANCE DIAGNOSTICWhen a merger and subsequent reduction in a client’s sales force size began to negatively impact sales, IMS Health
stepped into diagnose the cause of the sales decline and to identify the key drivers of sales force productivity.
Competitive intelligence, IMS’ internal knowledge and best practice information, and a comprehensive sales force
effectiveness framework all provided the client with a thorough and insightful assessment of its current performance and
yielded essential new information to support the business case for sales force improvement.
ACHIEVING SALES EXCELLENCEBelieving that First Line Sales Managers (FLSM) could play a pivotal role in transforming a company’s commercial
capabilities from good to great, a multinational company engaged IMS Health to improve FLSM capabilities.
IMS Health began its performance gap analysis with a series of interviews culminating in a leadership workshop that proved
pivotal to developing the baseline FLSM excellence framework. Next, IMS Health developed the definition for FLSMcompetency (as well as performance assessment measures) that will be utilized across Asia-Pacific and Japan. The IMS Health
repository of best practices in sales force effectiveness proved key to providing the client with a comprehensive foundation.
For more information on IMS Consulting Group, please contact info.sg@sg.imshealth.com
8/17/2019 Asia Pacific Insight - IMS
24/24
IMS Consulting Group is the world’s leading,specialized advisor on critical business issuesin life sciences.
With a global presence and local expertise in Asia-Pacific, we
know the pulse of the market. From pricing and market
access and marketing issues to product, portfolio and
geographic investment decisions – our Asia-Pacific consulting
teams offer insights that drive results, backed by the strongest
evidence and analytics from IMS Health.
For a taste of our expertise, view the IMS Asia-Pacific Insight
platform, featuring in-depth online audio interviews and
whitepapers from IMS Consulting Group Asia-Pacific
experts. See for yourself today at:
www.imshealth.com/viewpoints/apac.
SHARE YOUR THOUGHTS!
Take some time to explore our
Insights and share your thoughts
at info.sg@sg.imshealth.com.
info.sg@sg.imshealth.com
+65 6227 3006
www.imshealth.com/viewpoints/apac
Our insights are yourcompetitive advantage.
http://www.imshealth.com/viewpoints/apacmailto:info.sg%40sg.imshealth.com?subject=mailto:info.sg%40sg.imshealth.com?subject=http://www.imshealth.com/viewpoints/apachttp://www.imsconsultinggroup.com/http://www.imshealth.com/http://www.imshealth.com/viewpoints/apachttp://www.imshealth.com/viewpoints/apacmailto:info.sg%40sg.imshealth.com?subject=mailto:info.sg%40sg.imshealth.com?subject=Recommended