Asia Pacific Insight - IMS

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© 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/


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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


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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


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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

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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


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• 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


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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


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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.

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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


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


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.”


14/2414


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


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 %


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


18/2418


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


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


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.


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.


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 [email protected]


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 [email protected].

[email protected]

+65 6227 3006

www.imshealth.com/viewpoints/apac

Our insights are yourcompetitive advantage.
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Asia Pacific Insight - IMS