There will be an overall shift in the pharmaceutical industry from a very Western-centric model to a global one. Disease areas that were once considered niche are now given priority and the more prevalent disease therapeutic areas in the mature markets have taken a backseat. Vaccines, biologics, over-the-counter (OTC) products, and generics are the principal revenue generators in the emerging markets, say experts from Frost & Sullivan. While some experts say the United States and Europe continue to hold the greatest opportunities for research and development, there is increasing innovation from India and China that will also generate opportunity. These areas are expanding rapidly — China is predicted to become the third largest pharma market next year — and will drive new opportunities for many years to come. Frost & Sullivan experts say the Asia-Pacific area suffered a recession similar to the United States and Europe, but recovered significantly faster than its western counterparts. John Vann, executive VP, corporate development, at Chiltern, says Asia-Pacific will be the most influential market in the global pharmaceutical industry. “This is based on performance across so many industries; countries in the region are attuned and responsive to the opportunities," he says. “This influence will serve to strengthen competition, which I predict will be healthy for the industry globally." Ken Kramer, Ph.D., senior VP, medical director, Alpha & Omega Worldwide, part of The Core Nation, points to a recent report from IMS that predicts the global pharmaceutical market should grow between 5% and 7% in 2011 to $880 billion, up 4% to 5%. Almost 6% of that increase, about $50 billion, will be driven by robust growth in emerging markets such as China, which is expected to grow between 25% and 27%. China has been working to improve its healthcare system through incremental changes implemented over the past decade. The push for major change in the system, however, began in 2005, prompted by a State Council report that found great disparity in access to care throughout the country. The dramatic moves China took in 2008 demonstrate a commitment to providing and distributing healthcare resources more equitably, efficiently, and effectively. By 2011, an additional 900 million Chinese will enjoy a basic level of healthcare compared with 2004 coverage level. China continues to be a tier unto itself and is expected to drive $40 billion in market growth by 2013, says Jay Bolling, CEO and president of Roska Healthcare. “That said, each market carries its own challenges," he says. “The successful pharmaceutical company will be able to align its existing products with those high growth opportunities." But, Frost analysts say, weak intellectual property (IP) laws, escalating drug costs, and low reimbursement rates for drugs still plague the current healthcare system in China. “The globalization of clinical studies has been driven by several factors, including the need to access larger patient populations for the larger trials and the need to reduce the expense of conducting those trials," says Mark Goldberg, M.D., chief operating officer, Parexel International. Market Drivers Healthcare reform programs in emerging markets have dramatically improved the level of healthcare coverage in these countries. “Now that the big seven countries in the so-called ‘pharmerging’ markets have increased to 17, a recent IMS Health study predicted those countries will contribute 48% of annual market growth in 2013, up from 37% last year," Mr. Bolling says. “The most significant growth will most likely be in the therapeutic areas such as cardiovascular where sales in the developed markets have reached a plateau." Phil Deschamps, president and CEO of GSW Worldwide, says China certainly holds the lead position as the highest potential emerging market. “Presently this market is made up of locally made generic products and internationally manufactured ‘branded’ generics," he says. “Over the next five years, the government seems to be committed to moving on intellectual property rights to help the industry develop in the latter half of that time period. By then, pricing pressure will start to rise but the non-generic market should begin to take hold, which will create tremendous growth as medicine becomes available to an ever broadening middle class." Unlike other emerging markets, China has encouraged higher Western-level prices on many new patent-protected drugs, fostering technology transfer and strengthening long-term domestic producers, says Nick Colucci, president and CEO of Publicis Healthcare Communications Group (PHCG). “In India, a number of recent developments have helped foreign drug investors, including the establishment of intellectual property rights (IPR), a rising middle class, emerging rural markets, and improvements in medical infrastructure," he says. The BRIC-Plus Markets Experts from IBM Institute for Business Value say because of the rapid development of the Chinese pharmaceutical market, both local and multinational pharmaceutical companies have made efforts to expand their presence in the market, which has lead to increasing competition. Pharmaceutical companies in China are facing challenges in four main areas: • Sales complexity: Diversified procurement models in different regions magnify the complexities of sales and market access. • Increased challenges to growth: Steep competition and higher regulations on drug manufacturing and management make it more difficult to increase market share. • Downward pressure on pricing: Pressures on retail pricing and reforms to procurement processes will result in margin erosion. • Development of new markets: Healthcare reform will lead to new opportunities in rural markets. IMS experts say companies wishing to serve the Chinese population will need to understand how the incidence of disease varies by rural area, how to reach out to the tens of thousands of village clinics and township health centers, and how to choose the best commercial model to engage with the various stakeholders in the system. Branded generics, which have a strong position in the Chinese market, are apt to thrive in the newly opened community health centers and rural markets. Multinational players are already seizing the opportunity to enter the branded generics business, which is largely controlled by domestic marketers. In general, off-patent drugs will be under pricing pressure, and those on the essential drug list (EDL) will be hardest hit as the government works to limit or remove profit margins along the supply chain. The tradeoff, though, will come with the increased volume that accompanies a spot on the EDL, IMS executives say. Max Jackson, CEO, EMEA and APAC, Sudler & Hennessey, says China’s current market potential offered by a large population needs to be tempered by the ability to pay for innovative medicines, reducing the actual market potential from just over a billion people to between 80 million and 100 million. “But the growth rate and speed of change in the market are unmatched globally," he says. “Beyond the domestic market, the continued relocation of regional headquarters to Shanghai will only increase the significance of China. BRIC markets continue to show the greatest sales opportunities, purely from a scale and market opportunity perspective. But the potential of other markets, such as Turkey and certain Middle Eastern markets, should not be ignored. Many companies are taking a BRIC-plus approach to cover this potential." Dr. Kramer says Africa and South America will be responsible for significant growth in the global vaccines market. “In the past decade, new vaccines for human papillomavirus, meningococcal meningitis, pertussis, and rotavirus have been approved," he says. “These vaccines are now making their way to underserved regions of the globe. The uptake of these vaccines will be responsible for a significant portion of worldwide pharmaceutical sales over the next five years." Other experts agree on the potential of the African market, especially for unmet medical needs. “There is great potential in the developing world where there are many unmet medical needs," says Robert McNally, Ph.D., president and CEO of GeoVax Inc. “This applies very specifically in the HIV and AIDS vaccine market, where there is a desperate need for help in the developing world, especially in India and sub-Saharan Africa. Clearly, for the number of people at risk and/or infected with HIV, two-thirds of HIV vaccine product would be used in sub-Saharan Africa." When considering an emerging market, decisions should not be driven exclusively by market attractiveness, Mr. Colucci says. “Jordan, while less attractive because of prescription spending, is the most politically stable, with a highly educated medical profession and high acceptance of pharma messages," he says. “It may just be the springboard for expanding sales within the Middle East." F PharmaVOICE welcomes comments about this article. E-mail us at [email protected]. Global Trends Global Market Drivers n Increased use of specialty pharmaceutical products n Expansion of emerging country markets n Biopharmaceutical expansion and blockbuster revenue performance n Population factors: age shift, better understanding of patient subsets Global Market Restraints n Intense competition from generics n Maturation of developed countries to slow/low growth at the macro level n Biosimilar emergence on the global stage n Increased scrutiny and impact from payers and health technology economic assessments Source: Frost & Sullivan. For more information, visit frost.com. Nick Colucci Publicis Healthcare Communications Group “Unlike other emerging markets, China has encouraged higher Western-level prices on many new patent-protected drugs, fostering technology transfer and strengthening long-term domestic producers." Dr. Robert McNally GeoVax “In the global pharmaceutical industry, there is great potential in the developing world where there are many unmet medical needs." John Vann Chiltern “Based on performance across so many industries, countries in Asia-Pacific are attuned and responsive to the opportunities." Dr. Mark Goldberg Parexel “The globalization of clinical studies has been driven by several factors, including the need to access larger patient populations for the larger trials and the need to reduce the expense of conducting those trials." Phil Deschamps GSW Worldwide “Since most of the worldwide growth is going to come from major manufacturers, the U.S. base of business is going to influence how the other markets around the world grow." John Blakeley is Executive VP, ERT, a global provider of technology and services to the pharmaceutical, biotechnology, and medical-device industries. For more information, visit ert.com. “China and India are the most important and influential future markets. They are both largely underdeveloped markets, and I believe the whole life-sciences R&D industry will be looking toward these countries both in terms of drug development and sales. COPD in China, for example, is already the single largest market in the world, and the level of diagnosed patients is low compared with the population. Going forward both China and India will continue to be very important." Mark Gianforcaro is Chief Marketing Officer, i3, a global pharmaceutical services company that provides integrated strategies and solutions throughout the product lifecycle. For more information, visit i3global.com. “By 2020, China is targeting an investment of 2.5% of GDP into pharma R&D, putting it into the range of the United States in terms of R&D spending. Increasingly, disease patterns and prevalence in China resemble those in the West." Andrin Oswald is Head of Novartis Vaccines and Diagnostics, a division of Novartis, focused on the development of preventive treatments. For more information, visit novartisvaccines.com. “In emerging markets where vaccination rates are still low compared with the United States or Europe, we are seeing a rapid increase in demand. This is not surprising given that more than 80% of all babies are born in these regions. And parents, as well as governments, who can afford it want to protect their children. From a regulatory point of view, as in other industries, we see the growing influence of China, a country that is less and less willing to accept the existing standards from the West. But we also see new markets that are not limited to geographical boundaries, but are following global trends. Two important examples are increasing demand for travel vaccines and vaccines for the elderly." Sanjeev Wadhwa is Partner, Director Life Sciences R&D, CSC Life Sciences Practice, a provider of solutions that improve the way physicians deliver services, governments manage public health, experts conduct breakthrough medical research, and institutions provide coverage. For more information, visit csc.com. “India and China hold the largest promise in terms of R&D for the following reasons: they have large pools of patients who can be signed on for a lifelong protocol; they are extending their leverage from current clinical data management and CRO outsourcing capabilities to clinical research BPO; biosimilars and generics are already a core competency in these markets; and fully integrated pharmaceutical networks are being created to launch a new interface with researchers across the world, especially to leverage research talent out of India and China to focus on several disease areas." Max Jackson Sudler & Hennessey “Without a doubt China will be the most influential market in the next few years; the growth rate and speed of change in that market are unmatched globally." Jay Bolling. CEO and President, Roska Healthcare Advertising, a full-service advertising agency with expertise in engaging prospects through communications that integrate data and insight-driven marketing and advertising solutions. For more information, visit roskahealthcare.com. Nick Colucci. President and CEO, Publicis Healthcare Communications Group, a healthcare communications agency network with 40 offices around the globe. For more information, visit publicishealthcare.com. Phil Deschamps. President and CEO, GSW Worldwide, a provider of a comprehensive and wide array of services, including advertising, public relations, digital and closed-loop marketing, strategic insight, branding, communications planning, predictive modeling, market access strategies, media, and market research. For more information, visit gsw-w.com. Mark A. Goldberg, m.D. Chief Operating Officer, Parexel International Corp., a global bio/pharmaceutical services organization, providing a broad range of knowledge-based contract research, consulting, and medical communications services to the worldwide pharmaceutical, biotechnology, and medical- device industries. For more information, visit parexel.com. Max Jackson. CEO, EMEA & APAC, Sudler & Hennessey, a global healthcare marketing and communications organization. For more information, visit sudler.com. Ken Kramer, Ph.D. Senior VP, Medical Director, Alpha & Omega Worldwide, part of The Core Nation, a medical communications company. For more information, visit thecorenation.com. Robert T. McNally, Ph.D. President and CEO, GeoVax, a biotechnology company developing human vaccines for diseases caused by HIV-1 and other infectious agents. For more information, visit geovax.com. John M. Vann. Executive VP, Corporate Development, Chiltern, a full-service, global contract research organization with extensive experience in the management of Phase I-IV clinical trials across a broad range of therapeutic areas and contract staffing solutions. For more information, visit chiltern.com. Global R&D Global development strategies can bring significant cost and time efficiencies to the entire clinica trial process, while also providing strong clinical data for faster regulatory approval of new therapies in growing markets. The globalization of clinical studies has been driven by several factors, including the need to access larger patient populations for the larger Phase III, Phase IV, or safety trials, and the need to reduce the expense of conducting those trials by taking advantage of high-quality, lower-cost clinical resources available outside North America and Western Europe," says Mark Goldberg, M.D., chief operating officer at Parexel International. Jay Bolling, CEO and president of Roska Healthcare, cautions that moving to a country that has a lower cost structure is not the answer. “The most successful R&D in the emerging markets will be based on the talent available onsite," he says. “While outsourcing repetitive functions may be a cost-effective business strategy, the process of scientific discovery will always require great talent that is embedded onsite at the parent company to achieve the best outcomes." Dr. Goldberg says another driver is the increasing importance of serving new markets in emerging regions, such as Latin America and the Asia-Pacific region, and particular countries within these regions such as Brazil and India, as well as China and South Korea. He says the Asia-Pacific region in particular comprises some of the world’s fastest-growing pharmaceutical markets. “While located within the emerging Asia-Pacific region, Japan continues to maintain its position as the second largest pharmaceutical market globally and is among the most mature markets within the Asia-Pacific region," he says. “Japan is attractive for inclusion in global studies not only for its market potential but also for its high-quality data, advanced technologies, and large pool of well-trained professionals. Biopharmaceutical companies are seeking greater opportunities to include China in their global development strategies and obtain market registration in China." Ken Kramer, Ph.D., senior VP, medical director, Alpha & Omega Worldwide, a part of The Core Nation, agrees Asia provides R&D with opportunities to make significant strides. “Taking advantage of a more homogenous population compared with Europe or North America, Asia could provide patient pools for clinical trials with fewer confounding variables," he says. “For example, the largest increase in the prevalence of Alzheimer’s disease (AD) will occur in Asia, where 48% of the world’s Alzheimer’s cases currently reside. The number of people with Alzheimer’s disease is expected to grow in Asia to almost 63 million by 2050, which will represent 59% of the world’s AD cases. Despite the large number of patients in need, access to them for clinical studies will remain a challenge." John Vann, executive VP, corporate development at Chiltern, says Latin America will also be important for R&D. “While there is tremendous emphasis on growth in Asia-Pacific, the scientific and technological expansion in Brazil and Argentina tells me that the region is on the move in R&D," he says. The pharmaceutical markets in Latin America are worth $50 billion and growing fast, according to a recent report by Espicom Business Intelligence. Governments are using their bargaining power to negotiate and centralize drug purchases in an effort to contain costs. Overall, public drug expenditure in the region will continue to rise. Private pharmacy sales are surging, as countries such as Brazil, Mexico, and Venezuela have higher disposable incomes, according to Espicom. Innovative drug prices have risen, but governments have started to control them, either directly or indirectly. Contrary to what has happened in developed markets, generics consumption in Latin America is low, with the exception of Brazil. Local protectionism, very low prices, and high production capabilities have helped the country to develop a sizeable bioequivalent generics market. F PharmaVOICE welcomes comments about this article. E-mail us at [email protected]. John Vann Chiltern "While there is tremendous emphasis on growth in Asia-Pacific, the scientific and technological expansion in Brazil and Argentina tells me that the region is on the move in R&D." Over the past decade, the number of physicians participating in clinical research has continued to decrease in the United States and countries in Western Europe while participation increased at double-digit rates in Asia, Latin America, and Central/Eastern Europe. In partnership with the Academy of Pharmaceutical Physicians and Investigators, the Association of Clinical Research Organizations (ACRO) conducted a survey of investigators, non-investigators, and former investigators in the United States and Western Europe to uncover factors deterring physician participation in clinical research and to determine opportunities for improved involvement. The survey found that 70% of all respondents in both the United States and Western Europe believe that the current regulatory environment makes clinical trials difficult to manage. Based on the research findings, ACRO has made several policy recommendations that could boost physician participation in clinical research, including: n Harmonize regulations governing clinical research across global markets, including expansion of industry standards to cover academic and federally funded research. n Address current, former, and non- investigators’ concerns and misconceptions about liability issues surrounding clinical research. n Balance and standardize approach around conflict of interest and financial disclosure issues. n Expand and improve online access to information about clinical research opportunities for current and potential investigators. n Guarantee health insurance for clinical trial participants to increase enrollment of eligible subjects. Argentina n Approval of generics law — patients choose between branded and generic drugs n Marketing strategy focused on patients, moving away from physicians n Emerging market with huge potential for R&D outsourcing Brazil n Latin American hub for direct investment and exports to neighboring nations n Government policies favor generics use — branded drugs’ revenues are low n Recognized potential for CRO and CMO growth — still in development phase Central and Eastern Europe n High unmet needs for cardiovascular and respiratory disease treatments n Increasing private healthcare expenditure — copayments on the rise n Markets are dependent on parallel imports for innovative medicines n Russia, Poland, Czech, and Hungary demonstrating healthy R&D climate n Turkey: Ability to produce active ingredients and finished products China n API manufacturing hub n Increasing competency in R&D outsourcing n Anti-infectives and cardiovascular drugs – fastest growing markets n Improved IP laws — potentially attractive climate for foreign direct investment India n Highly skilled labor and low costs — attractive market for partnerships (CRO, CMO) (active pharmaceutical ingredients) n Pharmaceutical companies with global presence n US FDA approved labs — preferred destination for R&D outsourcing n Weak IP protection — a concern Korea n Innovative capability and well-developed industry Singapore n US-Singapore Free Trade Agreement– Asia-Pacific manufacturing hub n Highly competent facilities for clinical trials and drug development n Favorable investment policies — Asia-Pacific headquarters of major foreign pharmaceutical companies
