The IMS Market Prognosis 2002 report has forecasted a strong turnabout in the fortunes of both economies and pharmaceutical markets in Asia. IMS estimates that pharma market growth in the region will return to double-digit growth forecast for 2003 and 2004. The compound annual growth rate in US dollar terms for the combined ten markets is forecast to be 9.6% over the five-year period from 2001 to 2006, compared with just 3.0% in the previous five-year period.
Following several years of economic stagnation in the region, IMS forecasts a return to positive economic growth, which in turn will spur the Asian pharmaceutical market. By the year 2006, IMS forecasts the Asian market to top $30 billion in pharmaceutical sales, nearly double the $16 billion sales level reached in 1996.
In dollar terms, most Asian pharmaceutical markets have recovered from the crisis of 1997/98, with the exception of Indonesia, the Philippines and Thailand. IMS expects these three markets to fully recover over the next two years.
China Will Maintain Leading Market Share
Major assumptions in the IMS Market Prognosis forecast concern changes in foreign exchange rates. IMS believes that currency fluctuations will have a significant positive influence on several markets, notably Indonesia, South Korea, Singapore, Thailand and Taiwan, where the Economist Intelligence Unit forecast an appreciation of local currencies against the US dollar, which will boost market growth in dollar terms.
The stability of the currencies of China and Hong Kong means that their growth rates in local currencies and dollars will be the same or very similar, while depreciation of local currencies against the dollar will impact growth negatively in India, Malaysia and the Philippines. In local currency terms, only two markets - Indonesia and China - are expected to post double-digit growth.
- China accounted for almost 30% of the ten-market total in 2001, a share that will remain fairly stable over the next five years.
- South Korea and Indonesia will increase their market shares due, in part, to exchange rate developments, at the expense of countries such as India and Hong Kong.
- Indonesia''s recovering economy is expected to gradually enable some of the large untapped potential of its pharmaceutical market to be exploited and it is forecast to replace the Philippines as the fifth largest market of the ten by 2006.
- Taiwan will edge closer to third place as its pharmaceutical market benefits from an expanding economy at the same time as growth in India remains slow.
Volume to Emerge as Main Driver of Growth
Ethical market: During the prognosis period, 2001-2006, growth in most Asian pharmaceutical markets will be driven mainly by volume rather than price growth. Apart from the expanding economy, demographic and epidemiological trends, continuing strong demand for ''lifestyle'' products, as well as gradually expanding access to healthcare will boost demand for medicines while, at the same time, both public and private sector healthcare providers will place increasing emphasis on cost containment. Even the higher priced markets, such as Hong Kong and Singapore, will see price growth severely curtailed by intense competition in the marketplace as well as new methods of indirect cost control. This will affect both new product prices and the level of price increases on older medicines.
Retail market: The declining influence of price growth on overall pharmaceutical market growth is especially apparent in the retail pharmacy sector. In most Asian markets where separate retail pharmacy/drugstore audits are available, price growth outstripped volume growth as the main motor for pharmaceutical market growth during the period from 1996-2001. This reflects the ''boom'' before the 1997/98 economic crisis as well as price rises to offset currency depreciation and inflation after the onset of the crisis. During the forecast period, price growth will slow in nearly all of the retail pharmacy markets.
Hospital market: In the hospital sector, prescribing and purchasing policies will put downward pressure on prices - these will include increasing use of tenders and competitive bidding, mandatory use of generics, formulary restrictions, monitoring and control of prescribing, increased patient co-payment and use of diagnosis-related group reimbursement. In China, South Korea, Taiwan and Thailand, market growth in the hospital sector will be driven solely by volume growth: price growth will be minimal or negative. Although volume growth in China and Thailand''s hospital sectors will gradually be boosted by expansion of healthcare insurance coverage, this is likely to be at the expense of price growth.
Healthcare Reforms
Volatile economies, together with demographic and epidemiological pressures, have brought the healthcare financing systems in several countries throughout the Asia region to the point of collapse. Hong Kong''s Hospital Authority, which runs the public hospital sector, has gone into deficit for the first time. There are also financial deficits in the healthcare systems in South Korea and Taiwan, while China is in the process of restructuring the system of healthcare provision for government employees. Growing healthcare budget deficits and recognition that healthcare delivery cannot be expanded or improved without reform of healthcare financing systems have prompted moves in several countries towards new ways of funding health services. Approaches under consideration are largely related to various forms of state or private insurance:
- China is introducing a basic health insurance system for urban employees, under which medical costs will be shared among employers, employees and the state
- Hong Kong is considering a medical savings scheme plus ''top-up'' insurance
- Malaysia is expected to introduce a National Health Insurance Scheme based on corporate payroll taxes
- Thailand is considering the transformation of its recently introduced ''30 baht scheme'' into a National Insurance Scheme
- India has paved the way for private insurance programs.
Few of these schemes will, however, be in place within the next five years, mainly because of the difficulties in obtaining the necessary funding, aggravated by the recent economic downturn. Eventual introduction and expansion of health insurance programs, either state or private, will expand access to healthcare and boost demand for medicines. But at the same time, they are likely to focus attention on costs, particularly pharmaceutical expenditure.
(Source: IMS Health)