The Outlook for Pharmaceuticals in North East Asia

Summary

Detailed analysis of four pharma markets which present immense potential for pharmaceutical manufacturers

Japan, China, South Korea and Taiwan are ranked among the biggest pharmaceutical markets in the world. In 2008, the countries covered in this report represented a pharmaceutical market value estimated at US$108.7 billion.

Diverse markets, diverse opportunities
Geographically located in north east Asia, these four countries are currently undergoing different phases of development, both in overall terms and more pertinently, in the growth of the respective pharmaceutical markets.

Japan, South Korea and Taiwan for example represent highly developed pharmaceutical markets with advanced healthcare systems & high levels of spending, both in the private and public sector, and this has inevitably placed a strain on the respective governments, who have in recent years tried to temper escalating spending by introducing various cost containment strategies, including periodical changes to reimbursement prices and the encouragement of generic substitution.

Despite these measures, spending has continued to rise, key factors being the ageing demographic and the high standards of healthcare the population has grown to expect. While governments hope to control health costs, the trend suggests health spending will continue to rise in the long run.

China's big opportunity
China's healthcare provision is somewhat lacking when compared to the other three countries, but it remains one of the fastest growing countries in the world, expanding at a rate of 9.1% in 2008. This growth rate, along with the other countries, will be impacted by the global economic downturn, but compared to some other industries, the healthcare sector will not be as adversely affected.

The Chinese pharmaceutical market has shown impressive growth in recent years, in tandem with the country's rapid economic expansion. The influx of foreign multinationals in has offered continued investment, and production plants and R&D facilities are being expanded all the time. Improvements in regulatory practices are making the ability to sell imported products quicker and easier, while the lowering of tariffs on imported goods and an increase in transparency of legislation has made a notoriously hard-to-penetrate market a more attractive proposition for overseas companies. Positive moves, but concerns remaim in key areas such as IP protection.

CHINA

China has the world's largest population. In 2006, it was officially estimated at 1,314.5 million.

The Chinese government plans to expand the health insurance programme to cover all rural residents. Urban health insurance is already well established and the government plans to cover all urban dwellers, including the unemployed and children, by 2010.
The market is heavily reliant on locally-produced generics or copy products. Intellectual property provision is theoretically strong; China became a WTO member in 2001. However, enforcement remains a major issue, with courts tending to favour local producers.
The regulatory system has been notoriously difficult to negotiate successfully. In an attempt to remedy this, revisions to the registration process have recently been implemented.

China is increasingly being seen as a place to conduct R&D and clinical trials for pharmaceuticals. It has a large population, low costs and an advanced research sector.

JAPAN

Japan has the second largest economy in the world, behind only the USA, is the second highest spender on healthcare. A rapidly ageing population has burdened the healthcare system both in terms of funding and facilities and is of great concern for the Japanese government.

Not one Japanese producer is featured in the top ten global pharmaceutical manufacturers. In a bid to perform more competitively on the world stage, some of the biggest Japanese companies have merged.

In April 2008, the government implemented a new generic substitution system. Pharmacists will now be allowed to substitute generic drugs if doctors do not specify a brand name to be dispensed. This is part of the government's plans to raise the market share of generics in volume terms to 30% by 2012.

TAIWAN

For 2008, the Taiwan pharmaceutical market was estimated at US$5 billion, at consumer prices. This is equal to 19% of total health expenditure and spending at US$219 per capita. At manufacturer's prices, the pharmaceutical market (not including traditional Chinese medicine) was valued at around US$2.6 billion in 2007. Domestically produced drugs accounted for 59.1% of this.

Provision of healthcare is generally in the private sector. There is considered to be widespread overuse of services such as outpatient consultations and drug prescriptions. The government is looking at reducing this, and interestingly, lowered prices of over 5,000 reimbursable drugs in late-2006, and 5,700 drug prices in September 2007; moves that are unlikely to reduce the volume of prescriptions, especially with lower patient co-payments, but will instead affect industry margins, especially that of patented drug manufacturers.
Over 70% of the Taiwanese market has been controlled by overseas multinationals since 2001. Over 100 generic drug manufacturers currently operate in Taiwan.

SOUTH KOREA

The pharmaceutical market is estimated to be worth US$12 billion, with per capita expenditure equal to US$244 in 2008. The market is expected to grow at an average rate of around 5% per annum in the medium term, bringing it to US$15.6 billion by 2014, equal to US$312 per capita.

South Korea ranks as one of the world's leading economies, with a population approaching 50 million and overall GDP estimated at US$862.2 million in 2008, placing it among the top 15 in the world.

South Korea's regulatory environment for pharmaceuticals has always been a difficult one. Problems range from poor protection of data and lack of transparency in the review of drug prices.

The local manufacturing sector is dominated by branded generics. However, manufacturers of these drugs are likely to see profit margins eroding with reduced competitiveness against patented drugs brought on by the FTA with the United States.

Contents

• For Every Market (Sent Quarterly)
  • Market Outlook
    • Current market size
    • Unique 5-Year market projections to 2012
    • Market outlook
    • Comment & rating, covering 8 key areas such as use of generic drugs, intellectual property, pricing and the health systems
    • Market structure
    • Statistical data on imports and exports
    • Market developments, covering recent and impending developments with respect to key issues such as regulation, health facilities, funding and
    • government policy
    • Key national data projections
• For Every Market (Sent Annually)
  • Background Data
    • Population data, including growth trends and age structure
    • Demographic indicators detailing principal causes of death and morbidity
  • Healthcare System
    • Organisation & administration
    • Health expenditure
    • Expenditure by source of funding and type
    • Hospital services
    • Hospital data such as beds by type, region, specialty, patient admissions and surgical procedures
    • Outpatient care
    • Medical personnel
    • Data on healthcare professionals covering such areas as doctors by specialty, nursing staff and dentists
  • Accessing The Pharma Market
    • Regulatory environment
    • Distribution guide and trade fair information
    • Domestic production