Asia Pacific region offers considerable market opportunities. It is important to build successful regional as well as national strategies with a marketing thrust. Overall the pharmaceutical market size of Asian Pacific Region is around Rs 95 billion.
Japan, with its market share of around 56% leads Asian Pacific Market, followed by China with a little more than 24% market share. In the remaining part of Asia Pacific Region, Korea and India have more than 6% market share. The rest of the market is highly fragmented, as evidenced by a very low market share (in the range of 0.2 to 2.6%) of HongKong, Singapore, Malaysia, Thailand and Taiwan.
Five regional strategic challenges
This potential market, which is growing at a minimum 15% per annum, can be captured by building regional as well as national strategies.
There are certain strategic challenges that need to be assessed before we design Regional strategies.
1.There is a lack of harmonization of regulatory practices such as product registration and labeling requirements. The regulatory authorities of different countries in the region should speed up the harmonization process of regulatory practices. This will enable organizations to develop regional strategies.
2.Tariffs such as import duties and other levies require to be rationalized. These tariffs and levies need to be lowered as they hinder the progression of goods including medicines from one country to another country.
3.Although for the purpose of understanding business, we call this as a region, there are many languages and as a result of other demographics and psychographic profiles of customers each country has a different kind of perception towards corporates (multi-nationals and nationals), brands and needs of such medicines. In fact, perceptions of customers are highly fragmented and hence while developing a strategy for a region, this poses a formidable challenge.
4.Most crucial aspect in this region is pricing. Hence pricing policies development is essential. A system of differential pricing prevails in different countries in the region. This differential pricing disturbs smooth flow of medicines from one country to another country.
5.Pricing leads to another challenge of contiguity of geographical locations of each country in the entire region. This is almost similar to different states in India which are contiguous and do not have a uniform policy of taxation including Value Added Tax (VAT).
Market drivers:
In the globalised setting, markets undergo continuous change. It is, therefore, essential to develop a deep understanding of market dynamics. After identifying key playing fields, the growth drivers and barriers in capturing the market share will have to be assessed.
Market share drivers:
There are two basic market share drivers:
Is the penetration of the market through developing more usages or more users of a given product portfolio? A better market penetration can also be achieved through mergers and acquisitions of brands or companies. Besides allopathic brands, companies can opt for alternate therapies for the same indications and extend their penetration. As generics are moving beyond Prescriptions, those companies who have edge over generics in pricing and corporate image can substitute and compete with other generics to improve penetration levels. While looking at these options inlicensing of few brands can be another option.
One more alternative to gain a larger market share is to introduce semi blockbusters, involving much lesser cost of R&D into a specific geographical location in dire need for such a drug. These are different methods by which organizations can improve their market share, through a larger share of prescriptions and make an impactful influence on the particular market.
The second aspect of market share improvement is to improve coverage. The driver to improve coverage could be migrating from prescription to DTC and OTC. Similarly, the shift can be from one country to another country for better coverage.
Market growth drivers:
One third of the global population belongs to Asia Pacific region with varied demographics and psychographics. A number of growth drivers govern the Asia Pacific market:
1.Economies are growing
2.Liberalization is moving faster
3.Regulatory environment is improving
4.Governments are increasing their healthcare expenditure
5.Healthcare services and infrastructure in each country is improving
6.Lifestyles are changing giving rise to new medical needsOver and above, human capital is improving through education and information technology (IT) skills. Patients are shifting to self-medication. As a result OTC market will be on the rise.
Market intelligence surveys and feedback from medical representatives will provide the mapping of the customer's expectations. This can be linked to management information systems and identified core competencies of a company for incorporating the defined value into a product.
Voluntary efforts are being made by companies to make self-medication more responsible through patient education. All these are growth drivers for developing markets. From an organisational perspective companies are interested in increasing R&D spend, using advanced technologies and develop patents to protect intellectual property rights.
Shift in market dynamics:
Three types of shifts can be identified in market dynamics.
Industry shift: Big Pharma companies like Novartis and Aventis are moving ahead to compete in Generics markets. Large generic companies like Teva are working out alliances to share markets. Every pharma company wants not only to increase the scale of the market but also to climb up the value chain as fast as possible. There are some companies which are not that large but have dominance in specific therapeutic groups or countries. They get together and become Super Net companies. This is happening in both Generics and Branded business.
Patent shift; Patents are shifting technology to Biotech, preferring inlicensing and outlicensing routes. Brands tend to become commodities and generics emerge.
Geographical shift: In case of geographical shifts companies are outsourcing their requirements to a large extent for cost effectivity. Governments are playing major role in building healthcare infrastructure and improving delivery systems.
Parallel trade is increasing as patients are keen to gain the price advantage, ignoring geographical boundaries of the market. As the economies are becoming borderless, the issue of localisation vis-à-vis internationalisation of business becomes a major factor in deciding the geographical shift.
Growth barriers:
The roadblocks in the development of pharmaceutical market can be classified into several groups:
i.Health related factors like health infrastructure, regulatory policy.
ii.Economic factors like purchasing power, pricing, R&D funding.
iii.Market related factors like competition, parallel trade.
All these factors operate concurrently and influence significantly the size and growth of the pharmaceu-tical market.
Evolving competitive framework:
In Asia Pacific region, the competitive framework for pharmaceutical business is evolving. Interplay of the following forces is shaping this competitive framework:
#.New Technology (e.g. Biotech, generics, Proteomics, Stemcell Research)
#.Emerging Diseases (Continuation of age-old infectious diseases, reemergence of TB and Malaria due to drug resistance and new diseases like HIV AIDS, Diabetes, Alzcimeir etc)
#. Demanding stakeholders: While investors and shareholders want higher returns, governments, consumers and NGO's are pressing for lower prices.
#.Governance Laws While trade is being liberalised and stock markets may be booming, competition laws and stock exchange will be strengthened.
Growth strategies for Asia- Pacific markets:
While deciding the growth strategy, risks and resources will have to be evaluated. It will have to be ensured that a company has the requisite capabilities to match the risks it intends to undertake in developing the strategy. The company then will have to develop entrepreneurial management of the strategy. Every market offers certain opportunities, although they differ from country to country and region to region. The company will have to relate its strategic capability to this window of opportunity and carve out a strategic position in the market. This blend of both the approaches, entrepreneurial in terms of identifying the opportunity and managerial in terms of relating strategic capability to the opportunity, will fetch good returns. The following figure well illustrates as to how strategic initiatives can be incorporated into the corporate agenda of a business unit.
Strategic marketing challenge
Any marketing strategy has to be customer centric. While the focus on customer is important in all industries, it acquires a special significance in pharmaceutical business, which contains three segments- the doctor, the pharmacist/retailer and the patient. Each has a distinct role and contribution in marketing as also specific expectations in terms of value. The doctor looks into scientific evidence of therapeutic benefit. The patient expects good returns in relation to price, convenience of drug design and delivery and quicker health benefit. The pharmacist will be more concerned about availability from distribution and packaging in terms of safety and presentation.
All these perspectives have to built in the product and a brand image has to be developed. Having defined the value, continuous efforts have to be undertaken to scale up the value. Upgrading clinical trials and packaging to international standards should from a core of value development process.
Consequently an appropriate message to reflect value addition will have to designed in various promotional materials. The positioning of the product so as to represent its competitive value will be crucial in the marketing strategy.
In delivery of the product to reflect and retain value perception, the logistics of distribution and after sale service play an instrumental role. Issues relating to credit processing, trade discounts, replacements of returned goods and other trade related issues should be smoothened. In the final analysis customer relationship management forms the main plank of an effective marketing strategy. Moreover as the market becomes mature, value will have to rediscovered and redefined so that the products and the customer continues to buy the product. Examples of such brand loyalty abound in the market place particularly in categories of pain relievers, vitamins, cough syrups etc.
Sustainable competitive advantage
After building and delivering the value to the customer, the real challenge relates to sustain the competitive advantage through an organizational strategy. In addition to tangible assets in the form of capital and technology, every organization has intangible assets and resources. These comprise primarily of:
(i).Strategic Assets (in form of licenses from international collaborators, Specialty Products etc)
(ii).Reputational Assets (Company Image, strong brands, good marketing practices by adherence to voluntary codes)
(iii).Human Resources (Quality of human capital, leadership and talent management, innovative skills and Execution Excellences)
(iv).Organizational culture: Vision and values of an organization Creating and accentuating intangible resources is central in sustaining competitive advantage. While tangible resources are useful in leveraging value addition in products, marketing results will be delivered by people. An imaginative combination of both the resources can lead to various forms of marketing like
1).Resource based marketing
2).Product push marketing
3).Customer led marketing
In a global setting, markets are volatile and fast changing. On the one hand competition is becoming more intensive. On the other hand, collaboration through alliances adds to a competitive edge. Ultimately entrepreneurial marketing will score over traditional resource based marketing. In fact, marketing models will have to be customized in relation to a region or a nation. For the purpose, marketing transformation models will have to be developed. Interlink has developed a few such models which are being implemented in India.
(This article is based on the presentation by Dr. R. B. Smarta, Managing Director of Interlink Marketing Consultancy Pvt. Ltd., at Asia Pacific Pharma Business Management Summit at Singapore on 8th and 9th September 2005)