With a vast population, strong urban to rural movement and the commitment of many governments to provide a sound healthcare system, Asia is continuing to keep its promise as the rising star for the healthcare industry in the new millennium. Leading the way are China, South Korea and Taiwan as the most lucrative markets for healthcare companies, followed by traditional giant Japan and a technologically advanced India.
China
The mainland China is a land of opportunities for the pharmaceuticals manufacturers in the export of bulk drugs and traditional Chinese medicines. The introduction of product patents in China has increased the confidence of multinational pharmaceutical companies to launch specialised life-saving drugs in the country. In an unprecedented move, the top 10 multinational corporations have made China the focus of phase I clinical trials for products under development.
These companies have set up their research and development (R&D) and production centres, keeping in mind various competitive advantages such as lower cost of production and availability of skilled workforce.
The medical devices and equipment segment is expected to witness massive imports of technologically advanced medical equipment, catering mainly for the ageing population. This is due to the plans of the Chinese government to improve health infrastructure by increasing the total number of hospitals, clinics, community health centres and home healthcare centres in urban and rural areas.
Japan
The Japanese pharmaceuticals and drugs and medical devices and equipment industries are ranked second to the US. Increased demand for medicines, especially prescription goods, is due to the dispensing system followed by physicians and doctors in order to gain higher profit margins. The total production by the medical devices and equipment segment satisfies 75 per cent of the domestic demand. The health insurance coverage in Japan is 100 per cent since every person/citizen is covered under a health insurance plan where the cost of medicines and health services is covered.
India
The pharmaceuticals and drugs industry in India is gradually globalising due to the World Trade.
Organization (WTO) Agreement on Trade- Related (Aspects of) Intellectual Property Rights (TRIPS Agreement). Good opportunities exist in contract manufacturing activities in this segment.
The multinational companies manufacturing sophisticated and advanced medical devices such as ultrasound scanning machines and magnetic resonance imaging, etc., dominate the medical devices and equipment segment.The Indian companies manufacture low-end medical devices such as surgical gloves and syringes.
South Korea
The large market size of the pharmaceuticals and drugs industry in South Korea is partly attributed to the medical care practice where physicians and pharmacists take advantage of the dispensing system.
The multinational pharmaceutical companies appoint local partners to jointly manufacture and market pharmaceutical products in South Korea.
Taiwan
The growth of the pharmaceuticals and drugs market in Taiwan has been due to the generous reimbursement by the national health insurance programme.
The medical care network programme made healthcare services accessible to almost everyone in the country, with antibiotics and diabetic medicines being the best-selling products. The major contributors to the growth of the medical devices and equipment segment in Taiwan are surgical instruments, orthopaedic/prosthetic goods, disposable devices, diagnostic imaging, X-rays, disposable syringes, orthopaedic implants and medical furniture.
The key parameters affecting the healthcare industry in Asia are as follows:
- R&D;
- technology;
- prices;
- health insurance; and
- patents.
R&D
R&D is a very important parameter for the pharmaceuticals and drugs segment. Approximately 5 per cent of the revenue from pharmaceutical sales is allocated for research on new molecules and compounds by the Chinese pharmaceutical companies. In comparison with the R&D expenditure by the US and Japan, this is very low.
The Indian pharmaceutical companies are likely to concentrate on the R&D of new molecules and drugs. Huge export opportunities are expected for generic and over-the-counter (OTC) drugs for the manufacturers of pharmaceuticals and drugs in India.The expenditure on R&D is rising, albeit slowly, in Asia, with more foreign investment coming in.
Technology
Technology plays a very important role in the medical devices and equipment segment, which faces a high degree of obsolescence due to rapid changes in technology. The increasing number of hospitals and home healthcare facilities in Asia is creating the demand for technologically advanced medical equipment. Information about various health services, upcoming drugs, medical devices and contacts of various hospitals are also likely to be provided through the Internet, which could lead to increased awareness about new developments in the healthcare industry.
Prices
Prices are an important parameter for the healthcare industry, and prices of medicines in some parts of Asia (like the Philippines) are very high, whereas, in some other countries (like India), they are very low.
The finances of health service facilities completely depend on the sale of medicines and drugs.
Approximately 65 per cent of the finances of hospitals are generated from the sale of medicines and drugs.
Health Insurance
China and India have the greatest potential to become the largest markets for health insurance business. After becoming a signatory to the WTO, the Chinese government awarded licences to seven foreign companies to establish joint ventures and to conduct both life and non-life insurance business. The private insurance companies should increase the total coverage of the health insurance plan. The concept of managed healthcare is also expected to emerge in the near future.
Patents
The TRIPS Agreement is expected to affect the pharmaceuticals and drugs segment in China and India. In order to be globally competitive, the pharmaceutical companies in these countries have to invest in R&D. Many Chinese companies are trying to concentrate on the OTC drugs and bulk drugs markets, which are expected to drive the pharmaceuticals and drugs segment. A number of joint ventures in the pharmaceuticals and drugs segment have been established in the last two years.
Drivers of Growth
The drivers of growth in Asia can be summarised in three major parameters:
- personal healthcare expenditure
- health services
- population
Personal Healthcare Expenditure
The expenditure on medicines and health services constituted 6.4 per cent of the total living expenditure in 2001 - an increase of 1.4 per cent over 2000. The personal healthcare expenditure is likely to increase significantly due to various schemes and health insurance policies offered by private insurance companies between 2003 and 2006.
In addition, government healthcare expenditure is also on the rise, despite some measures to curb the cost of healthcare.
Health Services
The government plans to increase health service facilities such as clinics, hospitals, community centres and the home healthcare segment in Asia. These are projected to have a positive impact on the pharmaceuticals and drugs and medical devices and equipment segments. More employment opportunities are expected in the health services segment in the next five years.
Population
Asia's population was approximately 2.67 billion in 2002, of which a large section suffers from malignant tumours, heart diseases, metabolic diseases, respiratory diseases, digestive disorders and so on. The percentage of the ageing population in Asia is increasing. The healthcare industry has ample scope for developing new medicines and medical devices pertaining to the treatment and cure of these problems.
Upward Trends
In summary, trends in the Asian healthcare industry are as follows.
- The increase in the ageing population is expected to increase the demand for the pharmaceuticals and drugs and medical devices and equipment segments.
- These markets are expected increasingly to favour drugs that cater primarily for the ageing population.
- The increase in the ageing population in Asia is expected to increase imports of life-saving drugs and technologically advanced medical devices and equipment from foreign manufacturers of drugs and medical devices.
- The Asian medical devices and equipment segment manufactures low-end medical devices, which completely depend on imports of sophisticated medical devices from countries such as those
in the European Union, Germany, Switzerland, Ireland and the US.
- (The above report is a summarized version of a study by Frost & Sullivan)