different view on emerging markets - the big biologic...

Different View on Emerging Markets - The Big Biologic Opportunity

Tom Baker, Principal, IMS P&MA

March 3rd, 2011

March 3rd, 2011

29%22%

12%

7%

7%

6%

31%

53%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CO

NTRIB

UTIO

N T

O G

RO

WTH

(CO

NST U

S$)

US CanadaEU5 Rest of EuropeJapan S. KoreaPharmerging Tier 1-3 Rest of World

Contribution to global growth, Const US$ 2014 Market share, US$

2005-09 2010-14

IMS projects significant overall pharmaceutical market growth from emerging markets throughout the decade

EU5

14%

Pharmerging

Tiers 1-3

26%

Rest of the

world

6%

Canada

3%

United States

33%

S. Korea

2%

Japan

10%

Rest of

Europe

6%

Source: IMS Health Market Prognosis, Sep 2010

Most manufacturers have increased their exposure

to emerging markets

2 ▪ 2011 IMS US Market Access Conference ▪ Emerging Markets

In addition, the industry is increasingly focusing on biologics and other high cost therapeutics to drive growth

Source: IMS Health, MIDAS MAT 2010

0

20

40

60

80

100

120

140

160

2001 MAT 9-2010

GLO

BAL S

ALES U

S$ B

N

US EU5 Japan

Tier 1 EMs Tier 2 EMs Tier 3 EMs

ROW

Biologics Global Sales Growth

$136 B

$39 B

Rank Product Annual Sales

10’ (in billions)

1 Enbrel $6.1

2 Remicade $5.9

3 Humira $5.7

4 Avastin $5.5

5 Mabthera $5.0

6 Herceptin $4.1

7 Neulasta $3.8

8 Epogen $3.3

9 Copaxone $2.8

10 Lucentis $2.7

Note: sales are based on Q4_2009 to Q3_2010

Leading Biologics and High-Costs Therapies by Global Sales

Growth by 250%


However, the realization of the biologic opportunity has been very limited in emerging markets

Biologics Retail Products

Price

Reimbursement

$$$ $

• Fewer products are covered • Even covered, patient co-

pay is higher due to co-insurance or coverage caps

Accessibility

• More products are covered

• Patient co-pay portion is lower

• Only in fewer specialized/ advanced

hospitals in rich, urban areas

• Accessible in more primary care clinics

• Low • High Patient

Affordability


Using China as an example, the price of most biologics is well in excess of the average income – despite an “emerging middle class”

Pric

e p

er m

on

th (

Ex-M

, $

)

Monthly prices in China ($) – select biologic agents

Source: MIDAS data; Economist Intelligence Unit, IMS analysis

$ 566 $ 961

$ 1,864

$ 2,381 $ 2,717

$ 5,389

$ 627

Humira Avastin Herceptin Rebif Remicade PegIntron Monthly GDP per capita


As OOP rises as a share of expenditure, total per capita expenditure falls, reinforcing the importance of reimbursement

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0%

OOP as % of total healthcare expenditure

Per c

ap

ita t

ota

l exp

en

dit

ure o

n h

ealt

h (

PP

P)

Median: $645

Median:

33.2%

Source: World Health Organization WHOSIS database; IMS analysis


In some markets, however, reimbursement and OOP costs may also vary by disease or therapeutic area

*Insurance will only subsidize up to 100 RMB/month for Rx drug

Source: provincial government BMI website

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Beijing Shanghai Guangzhou Hangzhou Wuhan Xi'an Chengdu

Ou

t-o

f-p

ock

et

co

pa

ym

en

t

Hepatitis B Hypercholesteremia Diabetes

55% 55%

100%

25%

30%*

35%

100% 100% 100%

15%

Out-of-pocket Copayments for three different classes


In addition, limited clinic and hospital accessibility in emerging markets further constrains biologics access

0 10 20 30 40

Brazil

India

China

Turkey

Mexico

Poland

Germany

US

Accessibility Diagnosis Treatment

Source: World Health Organization, WHOSIS database

Physicians per 10,000 population Hospital beds per 10,000 population

0 25 50 75 100

Brazil

India

China

Turkey

Mexico

Poland

Germany

US


… are Emerging Markets ready for high cost biologics?

Therefore, it is critical to identify the real opportunities for biologics in Emerging Markets

0 20,000 40,000

Philippines

Czech

Thailand

Taiwan

Argentina

S. Africa

Indonesia

Venezuela

Mexico

Turkey

S. Korea

Russia

Brazil

India

China

Note: country list defined by IMS, based on data availability

Pharma Market Value - largely driven by retail products

$mil

Although retail products have been the growth engine in Emerging Markets...

… can these traditionally “large” Emerging Markets

deliver a high return for biologics?

… where are the real opportunities for biologics?

Due to limitations on sales data for many biologics in emerging markets, generating an accurate estimate of the size of the

biologics market in many EMs remains problematic


To address this, we developed an econometric model to predict biologics market size in emerging markets

Total expenditure on

health as % of GDP

Per capita expenditure on

health

OOP expenditure as

% of private

expenditure on health

Per capita health expenditure as % of

per capita GDP

Private expenditure on health as % of

total on health GDP growth rate

Gini coefficient % population living on < $2

Share of income captured by top 10% population

Biologic Sales

Predictive Econometric Model

Biologic market value in emerging markets


Our analysis identified three key drivers that are closely correlated to the sales of biologics in EMs

% population living on < $2 per day

Per capita government expenditure on health

Per capita total expenditure on health

Top 3 Drivers

• Low poverty level, often associated with a more urbanized setting,

reflects better infrastructure for biologic dispensing

• Government spending highlights the importance of reimbursement

for biologics

Implication on Biologics

• Level of spending highlights the ability to pay for high cost

products


The model also reveals a different pattern of biologic opportunities of emerging markets from retail products

0 20,000 40,000

Czech

Philippines

Thailand

Mexico

Turkey

Brazil

S. Korea

India

Russia

China

Venezuela

Indonesia

S. Africa

Argentina

Taiwan

Note: country list defined by IMS, based on data availability

Pharma Market Value - largely driven by retail products

$mil

0 500 1,000 1,500

Slovakia

Bulgaria

Venezuela

S. Korea

Argentina

China

Mexico

Russia

Turkey

Brazil

Taiwan

Thailand

Chile

Colombia

Hong Kong

Biologic Market Value

$mil

Not in top 15 Not in top 15


This shift in ranking highlighted the different level of attractiveness of biologic markets today

Highly Attractive Moderately Attractive Less Attractive

Ranking of biologic sales increases

(e.g., Latin America, Russia)

Ranking of biologic sales decreases but vol is large

(e.g., China)

Ranking of biologic sales significantly decreases

(e.g., India, Indonesia, Vietnam)


Highly attractive biologic markets present near-term opportunities for meaningful sales – and may represent more fertile ground than many mature markets, such as the UK

Highly Attractive

Market Characteristics

Urbaniza-tion Level

Gov Spending on HC

Patient Spending on HC

Reimbursement for Biologics

High High Med - High Positive

Manufacturer Strategies

Mature and near-term

win

• These markets reflect a decade or more of market development by Western manufacturers

• Formal reimbursement is generally the most desirable – and feasible – strategy

• However, price concessions and other supplementary

programs may be necessary to support access

Success Stories

• In Brazil, biologic sales have been increasing ~20% annually with western brands penetrating ~80% of the market

• High-cost products achieved access, including Glivec, Erbitux, Humira, Enbrel, Remicade, etc


The moderately attractive biologic markets represent the battlegrounds that require different strategies

Moderately Attractive


Urbaniza-tion Level

Gov Spending on HC



Med-High Low Low – Med Inconsistent


Battle

grounds

• Targeted reimbursement strategies to negotiate sub-national deals with economically-advanced cities or

provinces • Develop a strong brand identity to support private and

public strategies

• Province-by-province reimbursement strategy

Success Stories

• In China, Glivec increased market penetration and achieved regional reimbursement via Patient Assistance Program (GIPAP)

• China became the second-largest market after the US for Xeloda after lengthy yet successful negotiation for access in select regions


The less attractive biologic markets present limited opportunities today and may require significant investment to grow the market in the long run

Less Attractive


Urbaniza-tion Level

Gov Spending on HC



Low Low Low Negative


Near-term return not

warranted

• Despite often large populations, near-term opportunities have been limited due to poor reimbursement and low

affordability relative to per capita incomes • Skimming represents the most common strategy • Markets require significant investment to achieve long-

term returns

Success Stories

• Limited opportunities exist for high cost western brands yet biosimilars or local brands often achieved significant sales


© 2011 Tarun Khanna

Winning in Emerging Markets

IMS 2011 Market Access

Conference New York

March 3, 2011

Tarun Khanna

HBS


Transaction Facilitator

Credibility Enhancer

Information Analyzer

Aggregator

Adjudicator


Is that really Decaf?


http://origin.9news.com/money/consumer/article.aspx?storyid=80273

http://origin.9news.com/money/consumer/article.aspx?storyid=80273


For current 16 global biologic performers, most launched in Brazil after

2003; all have secured reimbursement over time

Launch time Product

1992 Neupogen

1997 Rebif

1999 Herceptin

1999 MabThera

2001 Glivec

2001 PegIntron

2001 Remicade

2003 Enbrel

2004 Humira

2005 Baraclude

2005 Xolair

2006 Nexavar

2006 Sutent

2007 Avastin

2007 Erbitux

2007 Orencia

Timeline: Cumulative availability of 16

select biologics in Brazil

16

13

11

98

77

44

99 07 03 04 05 00 06 01 02

These high-cost

products achieved

reimbursement under

CEAF or APACs*

*CEAF is the high cost medicines list managed by the national health insurance plan;

APAC (Authorization for High Complexity Treatments) operates similarly as DRG in the US



Brazil China Costa Rica

Research Charity Press &

Institute Foundation Public Opinion



29

Health care in Brazil

Core Actors

1. Ministry of Health

2. CENEPI – coordination of national epidemiological surveillance

system and collection of data on incidence of various diseases

Peripheral Actors

1. Fiocruz – production of vaccines, research, education, field services

2. Anvisa - sanitary surveillance

3. Hemobras – production of blood components

4. INTO – treatment of patients with orthopedic trauma

5. ANS – health insurance regulation

6. INCA – treatment of cancer patients



30

Ministry of Health

CENEPI

Fiocruz

Anvisa

ANS

Hemobras

INTO

INCA

VETO-POINTS CORE

Genzyme

Exchange resources

(transfer of employees)

Exchange information on disease incidence

PERIPHERY OF INFLUENCE

Genzyme in Brazil



31

Health care in China

Core Actors

1. State food and drug administration (SFDA) - registration of

drugs and medical devices

2. Ministry of health - pricing of medical services

3. Development and reform commission – Tendering drugs and

medical devices

4. Human resource and social/labor security agency (HRSLA) –

preparing catalogue of drugs eligible for government

reimbursement.

Peripheral Actors

1. Chinese Charity federation (CCF) - government endorsed

‘NGO’ affiliated to ministry of civil affairs

2. State run hospitals 31 ▪ 2011 IMS US Market Access Conference ▪ Emerging Markets


32

Food & Drug Authority

Ministry of Health

HR & Social/ Labor security agency

Dev. & Reform Commission

Chinese Charity Foundation

Hospitals

Genzyme in China


VETO-POINTS CORE



34

Ministry of Health

National Ombudsman

Constitutional Court

Genzyme in Costa Rica


VETO-POINTS CORE

Committee of doctors in Children’s hospital

Genzyme



Courtesy: Juan Alcacer, HBS



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Winning in Emerging Markets

• Mapping the institutional voids provides a template

for understanding the role that an organization has

played, and the evolving roles it will play going

forward.

• Entrepreneurs have an opportunity to shape the

institutional context, preferably in conjunction with

the state.


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