Heathcare report | Pharma's new frontier

The healthcare sector has undeniably been one of the biggest stories in marketing over the past two years. At the height of the recession, as most other industries in the region floundered, business within the pharmaceutical industry continued at a brisk pace. So brisk, in fact, that the sector's regional growth rates continue to outstrip those of the general economy at around 12 per cent.

In particular, China, having just overtaken Japan as the region's biggest economy, has a market growing at 27 per cent this year and is forecast to continue to grow at an annual rate of over 20 per cent for the foreseeable future. It is set to replace Japan as the second largest  market by 2020.

According to Bob Douglas, global head of healthcare at Synovate, there are a number of drivers contributing to the success of the industry in Asia, including an ageing population in more mature markets, increasing affluence in developing ones and a general adoption of more 'Western' lifestyles that has contributed to an explosion of chronic illnesses. Douglas notes that Asia is home to four of the top five countries in terms of diabetes sufferers - China, India, Japan and Pakistan.

Additionally, China's government recently announced its intention to provide healthcare coverage for all its citizens within the next few years.

With these factors in mind, it is unsurprising that advertising and PR agencies alike have recently taken considerable steps to upgrade their healthcare offering. Healthcare is already the most important sector in China in terms of adspend, and accounts for the third largest share of spend in the region as a whole after FMCGs and entertainment, according to research by Nielsen.

While the industry has been hit hard by the expiry of 'blockbuster' drug patents in the West, it has yet to fully enter the post-blockbuster era in Asia. Sharn Bedi, managing director of DDB Health for the region, notes that although 12 of the top 35 branded prescription drugs lost patent protection in western markets last year, a number of those brands have yet to expire in Asia since many areas of therapy are still growing.

Building on this potential before the impact of expiry is felt will be critical to multinational pharmaceutical firms which, despite a recent tightening of intellectual property regulations in emerging regional markets, continue to face intense competition from local players and from generic drugs (products produced and distributed without patent protection).

This is especially true in Asia's 'pharmerging' markets, namely China and India, where therapeutic categories are considerably different to those elsewhere. In India, for instance, the focus remains on acute care, with antibiotics the most commonly prescribed category. Vaccines also have strong potential, and marketers for hepatitis B and C products are focusing on emerging markets. But while opportunities abound, so do challenges, particularly from a marketing point of view.

Douglas points out that regulatory practices are often "not as aligned" in Asia as in most western markets, while drug distribution in China, India and even highly developed markets like Japan tends to be highly fragmented and bureaucratic.

"In India, for example, there are over 230,000 pharmacists, plus numerous hospital institutions, NGOs and dispensing doctors, which makes understanding the distribution process very difficult. Pricing policies and market access are specific to each country and the healthcare infrastructure and level of public and private funding differ radically," he says.

Clearly, whether promoting an existing product or launching a new one, marketing practice for the healthcare sector in Asia is very different to that in the West. "The industry cannot simply apply existing business practices to these markets," says Douglas. "To be successful, it needs to recognise that each country has its own characteristics and needs to be treated individually."

A further important consideration for companies, according to Jan Willem Eleveld, vice-president of IMS Health Consulting in Asia, is the changing nature of industry stakeholders. Whereas in the past, marketing efforts were concentrated on physicians, Eleveld says that patients are now  playing a much more important role in the decision-making process. This has resulted in heightened activity around public health communications.

"The internet is creating informed patients who behave like consumers and can influence a doctor's prescription," agrees Amar Urhekar, EVP Japan and Asia-Pacific at McCann Healthcare Worldwide.

"There is significant interest from pharma companies in bringing the private, public and academic sectors together. Given product parity and price competitiveness, creation of market access, owning a diversified patient profile, developing and forging public-private partnerships to win patients' and governing bodies' trust are crucial in creating brand value and gaining share."

However, although patients have become particularly active online, the same cannot yet be said for the region's pharmaceutical firms, to an extent with the exception of Japan. "There is a lot of noise online, but pharma companies have not yet been able to monetise the space from a medical or marketing perspective," says Urhekar.

With patients in Asia often paying for treatment themselves, the need for clear communication becomes even more pronounced. Douglas notes that patients in India are required to pick up 90 per cent of the cost of drugs, while in China the figure is currently 60 per cent. Sensitivity to price means generic prescribing still accounts for the vast majority of sales - 85 per cent in China, for example, according to Synovate. However, observers agree that as the rate of new product launches decreases, the role of branded generics is likely to increase.

"Going forward, there will be a lot of focus from multinationals on branded generics," says Eleveld.

"This is unchartered territory as generics are typically local play. The main reason is the huge growth expectations. Launching a new brand might fit with the global portfolio, but it is not likely to make a lot of money in the short-term."

Douglas sees particular opportunity for branded generic products in the wake of recent health-related scandals in China given the "quality assurance" that brands provide.

Urhekar agrees that generics have their place due to the socio-economic benefits they offer, but believes that there is a need for strict guidelines to ensure quality is upheld. He proposes a brand rating system for generic brands based on criteria such as the number of years a particular brand or molecule has been marketed, its coverage and the number of prescriptions since it launched.

In contrast to the generic battle set to play out in the 'pharmerging markets', Eleveld notes that the focus in Korea and Taiwan, which are both reimbursed, remains on new product launches. "The name of the game here is to launch new products as quickly as possible, get the best  reimbursements and take share from competitors," he says. "Elsewhere, it's about taking a disproportionate share of growth."

Two other markets with very different profiles and challenges are Japan and Singapore. Still the second largest pharmaceutical market in the world, traditionally inward looking and with a notorious 'drug lag', Japan now represents a growth opportunity.

Urhekar points out that a number of blockbuster products that have been launched elsewhere in the last 10 years are now due to launch in Japan. Although the government continues to put pressure on drug prices and encourage generic prescriptions, it has identified the sector as a major potential revenue generator and pledged to give it increased attention. Spurred by factors such as a rapidly ageing population and recently relaxed over-the-counter (OTC) retail regulations, the market is expected to grow by three to six per cent over the next four years.

Singapore, meanwhile, is taking steps to transform itself into a regional healthcare hub. The domestic market is small, but Douglas notes that its strategic position gives it strong potential as a global healthcare research and development and manufacturing centre. The country is offering attractive incentives for biomedical investment, and more than 50 international pharma companies are now carrying out biomedical sciences R&D there, as well as manufacturing the latest innovative medicines and medical devices. The market's biomedical science sector is currently worth around US$16 billion.

Whatever the stage of development of the pharmaceutical business in Asia, the opportunities ultimately make working to overcome the challenges very worthwhile indeed.