TecTura lIFe scIeNce INsIGHTs

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THE AsiAn PHArmAcEuTicAl indusTry OuTlOOk 2012

Given its traditional resourcefulness and determination, it is beyond doubt that Asia is a key driving force of the current global pharmaceutical industry. In recent years, healthcare demands among the regions populations have increased and its low operating costs continue to attract pharmaceutical companies. And, it is emerging as a powerhouse of pharmaceutical Research & Development (R&D) facilitated by the availability of a vast patient population, quality data, lower costs and skilled manpower. The Asia-Pacific is the third largest pharmaceutical market in the world after North America and Europe, with many leading Asian pharmaceutical companies becoming successful due to their ability to retain their cost advantage. Mature markets such as Japan experience slower growth rates that are driven mainly by developments in the field of biotech solutions. While emerging markets such as China and India, the leaders in the emerging Asian pharmaceutical industries, are enjoying a situation in which foreign pharmaceutical companies want to invest in and outsource to cut costs and tap the availability of skilled professionals. Both countries show strong growth and are moving towards a trend of higher quality requirements. Reshaping the pharmaceutical industrys quality standards is continued to be one of the top priority in China with their new tougher Good Manufacturing Processes (GMP) standards for medical products to meet international standards and requirements. Indian Pharma companies are looking to increasing their R&D budgets and capabilities particularly new drug formulation for quality assurance and compliance. In South East Asia region, the pharmaceutical trends and developments vary from one market to another i.e. different speed. Despite the negative impact of the global recession, the eight markets of the region i.e. Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam have a pharmaceutical market value of $23.1 billion in 2009, and are expected to continue to grow. South Korea is the fourth largest in the Asia Pacific region. Other advanced markets such as Taiwan and Singapore are both relatively small, with growth limited by the size of these island nations. These three countries have a high percentage of population over 65, a growing incidence of lifestyle diseases and large health expenditures, which present many opportunities for pharmaceutical companies. However, their governments are increasingly employing protectionist measures that deter foreign companies. The biologic sectors in these markets are witnessing rapid growth due to advanced technology capabilities, extensive R&D operations and strong government support. Indonesia, Thailand and the Philippines are fairly large emergent pharmaceutical markets, with large populations and steadily growing economies. Malaysia and Vietnam are small pharmaceutical markets typified by rapid economic growth, increasing foreign investment and support from national government. These five markets have significant

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OTC sectors and rapidly expanding generic sectors, and present previously untapped populations for potential foreign pharmaceutical companies.

HigHligHTs frOm THE EigHT mArkETs

Indonesia
The Indonesian pharmaceutical market is projected to grow at a high single-digit CAGR in US dollar terms during the forecast period, and it will be the sixth largest pharmaceutical market in the Asia Pacific region by 2016. Inexpensive production and labor, and increasing foreign investments are strengthening the Indonesian Pharma market, despite its volatile socio-political system. Environmentally, Indonesia is particularly prone to natural disasters, as the recent earthquakes, tsunamis and volcanic eruptions have illustrated. Indonesias economy is projected to
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become the sixth largest in the Asia Pacific region by 2016, but if the rupiah continues to devaluate against the dollar it could affect the Indonesian pharmaceutical market in US dollar terms. Legally, Indonesia remains on the United States Trade Representatives (USTRs) Special 301 Priority Watch List in 2011, due to the prevalence of counterfeit pharmaceuticals. Demographically, the population will be the third largest in the Asia Pacific region by 2016. The Indonesian Pharmaceutical Manufacturers Association (GP Farmasi) announced that 20 of its members had increased the price of certain drugs by up to 10.0%, at the start of the 2011. Members of GP Farmasi have raised their drug prices in response to rising inflation, a decision by regional authorities to increase the minimum wage and an import tax imposed on raw materials for drug manufacturing. In February 2011, the Ministry of Health announced that it would review the prices of generic drugs, in

light of the fact that the increase in tax on raw materials has prompted pharmaceutical companies to raise the prices of branded drugs. Many pharmaceutical companies have stated that, in their view, the prices of generic drugs are unreasonably low. Due to the sheer size of the population, Indonesia cannot simply be dismissed. There are around 240 domestic pharmaceutical manufacturers in Indonesia, with the vast majority located in Java. However, despite the country possessing huge manufacturing capabilities, the complete lack of R&D in domestic companies could affect the market, especially if IPR regulations were tightened. Although multinationals will be unhappy at the legislation requiring all drugs in the Indonesian market to have been manufactured in Indonesia, it could potentially reduce costs in the long term for both the manufacturer and the consumer. Despite concerns over counterfeiting and low efficacy of generic products, Intellectual Property

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Rights (IPR) protection and manufacturing standards are improving with effective national regulations, foreign investment and joint-ventures with multinational companies.

Malaysia
The Malaysian pharmaceutical market is projected that the market to grow at a healthy CAGR in the forecast period. However, it will remain as the fifth smallest pharmaceutical market in the Asia Pacific region in size terms by 2016. The market is small and relies heavily on the import of medicaments. There are around 250 Malaysian pharmaceutical manufacturers licensed by the Drug Control Authority, and over two-thirds of these are traditional medicine manufacturers. There is little multinational manufacturing activity in the country due to strict regulations, although these may be relaxed in the future. Ranbaxy and GSK are the only examples of large global multinational companies that have manufacturing operations

in the country. Malaysia is heavily dependent on the imports of retail medicaments, which represent over threequarters of total imports. As most pharmaceutical manufacturing is for local consumption, the balance of pharmaceutical trade will remain considerably negative, and the deficit is likely to increase in the forecast period.

half. The immediate term will be the most volatile, as the government battles with the international pharmaceutical industry for ground in the market, which up until recently experienced a free-market policy with no price regulations in place. The Philippines is heavily reliant on imports of finished medicaments, and exports little in way of pharmaceuticals, therefore the deficit in the balance of trade is likely to increase during the forecast period. The Philippines OTC sector is dominated by three Filipino pharmaceutical companies that control over half of this sector. The Philippines generic sector is being actively backed by the government and is led by UniLab.

Philippines
Philippines pharmaceutical market projected a high singledigit CAGR in US dollars terms in the period 2011 to 2016, and it will be the ninth largest pharmaceutical market in the Asia Pacific region by 2016. The Philippines has some of the highest drug prices in the world. The controversial Cheaper Medicine Act has impacted the Philippines pharmaceutical market in a number of areas, including IP laws, competition and drug price control mechanisms. Since the Acts implementation, a considerable number of drugs have seen price reductions by up to a

Singapore
Singaporean pharmaceutical market projected a high singledigit CAGR that is slightly below average for the Asia Pacific region, with impressive economic indicators being tempered by the limited

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population size. It will be the second smallest pharmaceutical market in the Asia Pacific region cove. The volume of trade in pharmaceutical products flowing in and out of Singapore is disproportionately large compared with the size of the country. The country acts as a key trading hub to connect South East Asia and the Western world and is a major re-exporter of pharmaceuticals. The country exports more pharmaceuticals than any other of the Asian Tiger economies by a significant distance, although the majority of this total is from re-exported goods. The balance of pharmaceutical trade remains positive. Raw materials and retail medicaments each account for about half of the trade surplus.

pharmaceutical market by paving the way for elimination of tariffs on EU pharmaceutical exports to the country. The volume and value of EU pharmaceutical exports are expected to increase with the implementation of EU-Korea FTA, posing a potential threat to US pharmaceutical exporters. The EU-Korea FTA also stipulates that South Korean authorities will be required to align their practices with international standards through an improved regulatory environment. In particular, the EU-Korea FTA will aim to ensure the strengthening of transparency in drug pricing decisions.

Taiwan
IPR in Taiwan is improving, although there still remain concerns over patent linkage and data protection of pharmaceuticals. In January 2009, the USTR removed Taiwan from its Special 301 Watch List of countries, attributing the move to the countrys progress on protection and enforcement of IPR. However, in the USTRs

latest Special 301 Report for 2011, the USA remains concerned with the policies of Taiwan, on issues related to innovation in the pharmaceutical sector and other aspects of healthcare goods and services. In June 2010, the American Chamber of Commerce in Taipeis latest White Paper stated that Taiwan lacks an effective patent linkage system. Attempts are being made to improve the compatibility of Taiwanese IP with other countries, and in June 2010 Taiwan signed an IP agreement with China which will mean that IP will be recognized as valid in both countries, even if it is filed only in one.

Thailand
Thailands pharmaceutical market is estimated to grow at a high single-digit CAGR in US dollar terms between 2011 and 2016. Thailand will have the eighth largest pharmaceutical market in the Asia Pacific region in 2016. In per capita terms, Thailand is projected to have the eighth highest rate in the Asia Pacific region by 2016.

South Korea
South Korea is the fourth largest in the Asia Pacific region. The implementation of the EU-Korea Free Trade Agreement (FTA) will provide EU companies with better access to the South Korean
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The market is growing despite relying heavily on imports. The balance of pharmaceutical trade remains considerably negative, with retail medicaments accounting for nearly three-quarters of the total deficit. Between 2005 and 2009, the deficit in the balance of trade rose by a high doubledigit CAGR. The Thai generic sector is growing, especially in the public sector, where the government has encouraged its use over patented drugs in order to cut costs. Greater Pharma has recently launched its first generic inhaler drug for the treatment of osteoporosis, making it the first company in Southeast Asia to successfully manufacture a generic version of this drug.

positive for Vietnams pharmaceutical market growth, despite concerns over IPR. Despite Vietnam remaining on the USTR Special 301 Watch List in 2011, the USA is encouraged by the governments attempts to improve IPR protection and its enforcement; particularly of note are recent amendments to the IP Law. Vietnam has a large and young population, which will be the eighth largest population in the Asia Pacific region by 2016. The elderly population is rising, though slowly, and will remain one of the lowest proportions in the Asia Pacific region. Rising drug consumption and government investment make Vietnam an attractive pharmaceutical market. Drug consumption in per capita terms is expected to increase by 70.0% in 2014. Local drug production met around half of the nations needs in 2010. The government has announced that improving the domestic pharmaceutical industry is the health sectors highest priority over the next few years, in order to meet 70.0% of the

nations drug demand by 2015. A plan to develop and restructure Vietnams pharmaceutical industry is underway, which includes boosting the production of essential drugs in order to cut prices, stabilize the market and reduce the countrys dependence on foreign pharmaceutical imports. Other targets include increasing investment in scientific research & technological application and expanding co-operation with foreign pharmaceutical companies. The Drug Administration of Vietnam (DAV) has warned that drug prices could rise slightly in 2011 due to volatile raw material prices and the VND-US$ exchange rate. In July 2011, the Vietnam Pharmaceutical Companies Association (VNPCA) reported that prices of both imported and domestic drugs rose during the month. The VNPCA forecasts higher sales prices for both imported and domestic drugs in 2011, due to higher input costs and rising world prices. To review the local pharmaceutical market and

Vietnam
The Economist Intelligence Unit projects Vietnams GDP to be one of the smallest in the Asia Pacific region by 2016, ranked 15th. In terms of GDP per capita, Vietnam will rank 14th in the Asia Pacific region. The macro environment is
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prevent large drug price increases, the DAV has announced several measures such as increasing the inspection of drug price quotations by pharmaceutical companies through health workgroups and will promptly publish the results, supervise the enforcement of state regulations on drug price management and exercise sanctions on violators etc.

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BioSpectrum Asia Edition, Trend and Analysis Booz&co, 2012 Healthcare (Pharmaceutical) Industry Perspective Deloitte Report 2010, The progression of the pharmaceutical marketing and sales model Datamonitor, The Pharmaceutical Company Outlook to 2012 Espicom Business Intelligence, The Outlook for Pharmaceuticals in South East Asia and other countries. Mergent Report April 2011, Asia Pacific Pharmaceuticals Sectors Industry Analysis Pharmaceutical Drug Manufacturers, Articles Pharma Focus Asia, Research Insights, Articles and Industry Reports PharmaTech Talk PharmaTech.com, Report from Asia Pharmiweb.com, The Future of Pharma is Asia ReportLinker, The Outlook for Pharmaceuticals in South East Asia to 2013

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2012 Tectura Corporation. All rights reserved. Tectura is a registered trademark of Tectura Corporation. All other company, brand, and product names are marks of their respective holders. This article is for informational purposes only. TECTURA MAKES NO WARRANTIES, EXPRESS OR IMPLIED, IN THIS SUMMARY.