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Market Potential For Asthma Drugs in South East Asia Market- Malaysia, Taiwan, Indonesia, Vietnam andPhilippines

Author: Udaya Gupta

Asthma is a chronic lung disease that inflames and narrows the airway which leads to respiratory disorderness.Approximately 7 to 10% of the world population is suffering from asthma. Prevalence of this non communicable diseaseis very high ever since 1970. As of 2010 there were 300 million people diagnosed from asthma and is expected to riseby 100 million by the end of the decade. According to WHO regions like South East Asian, African and USA have highasthma mortality rates compared to rest of rest of the countries. These mortality cases are likely to be high in countrieswhere accesses to essential medicines are low. This is due to the fact that pharmaceutical market in many countries isstill at nascent stage. Lacks of manufacturing facilities, technologies, high rely on imports are the common barriers forthis industry. Low per capita income of (80 – 200$USD) many countries made health care prohibitively expensive.Regions like south East Asia are far in reach of primary health care facilities (30% of suffers are being treated withtraditional medicines). Around 12 million people are being suffered from asthma. Strong appetite towards westernmedicines, moderately strong score of HDI (0.6 – 0.8) and high rely on imports of API (75% of raw materials areimported) had created enough room for investors to concentrate upon. Some of the countries which have huge potentialin terms of respiratory drug market are Malaysia, Taiwan, Indonesia, Vietnam and Philippines.

ASTHMA:The chronic inflammatory disease is associated with airway hyper responsive that leads to recurrent episodes of

wheezing, breathless, chest tightness and coughing, particularly at night or in the early morning. Irrespective of agegroup, asthma was observed among vast population. This chronic respiratory disease was observed mainly due toworking environments (occupational asthma), living standards (environmental asthma) or through genetic transfer(childhood asthma). It is the 3rd leading cause for hospitalization among children’s. 15 – 23% of asthma cases areobserved in adults due to working environments. According to WHO, countries with more western civilization havehigher prevalence rates of Asthma.

CAUSES AND RISK FACTORS:Atopic asthma is the most commonly prevailing problem, nearly 80 % of people who are suffering from asthma

have allergies to airborne pollutants such as tree, grass, and weed pollens, mold, animal dander, dust mites, andcockroach particles. Chemical compounds like Di Ethylhexyl Phthalates (DEPH) have strong risk associated symptomsof asthma. It can be transferred to next generations as a genetic disease. Over 100 genes have been associated withasthma in at least one genetic association study. 25 genes had been associated with asthma in 6 or more separatepopulation. Low birth weight, exposure to tobacco smoke before / after birth, family history of asthma or allergies andbeing raised in a low/ unhygienic environment are some of the major risk factors associated in developing childhoodasthma.

TREATMENT:There are two main types of asthma medications which reduce inflammation and mucus production in airways.

1). Anti-Inflammatories: Anti-inflammatory medications, such as inhaled steroids, reduce swelling and mucusproduction in the airways. 2). Bronchodilators: These medications relax the muscle bands that tighten around theairways.

INHALATION THERAPY:

Different inhaler devices suit different people. Inhaler devices can be divided into four main groups:

1). Pressurized metered dose inhalers (MDIs) 2). Breath-activated inhalers - MDIs and dry powder inhalers, 3). Inhalerswith spacer devices, 4). Nebulizers.

Depending upon age group different inhalers are prescribed like 1). Babies (Pressurized aerosol inhaler with spacer andmask nebulizer) 2). Children under 4 years old (Pressurized aerosol inhaler with spacer and mask nebulizer), 3). Children4-8 years old (Pressurized aerosol inhaler with spacer, Dry powder inhaler, Breath activated inhaler), 4).Children olderthan 8 years (Pressurized aerosol inhaler, Pressurized aerosol inhaler with spacer, Breath activator inhaler, Dry powderinhaler).

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15600 16000 16800 19000

10000 10200 1100014000

0

5000

10000

15000

20000

2008 2009 2011 2015(expected)asthma drug market

12.5 14.4

29.8

6.6 7.513.4

0.5 0.7 0.90

10

20

30

40

2010 2011 2016MDIs DPIs Nebulizers

LITERATURE REVIEW:

Globalization had created potential opportunities for companies to explore new markets, understand consumerbehaviors and localize products. An emergent market provides huge potential opportunity for business to grow.Multinational companies need to decide whether to enter or not and then decide the entry mode in to the country. Entrymode decisions are analyzed in the context of transactional cost, it is observed that MNC’s entry mode is depended onminimization of transaction cost. (Sarkar and cavusgil, 1996; Rindfleisch and Heide, 1997; Meyer,2001; Nakos andbrouthers,2002; Herrmann and Datta, 2002; Meyer, 2004 and Decker, 2006).

It is also observed that companies measure potential financial reward if they enter the emerging markets. Theyinvest in the country if only the risk associated with can be properly compensated with financial return or reward oninvestment. The return on investment is depended on resource markup, size of the investment and risk associated withthe return on investment (Anthony 2010).

Consumer involvement in purchase of non prescription medicines seems to decrease with increase ineducational and income level. According to a study conducted by Prasanna gore (1994) educated people feel they havealready high awareness about nonprescription drugs and their ability to understand label instructions. With respective toincome, consumers with low income may assign importance on every purchase and hence become more involved inpurchasing of nonprescription drug than people with high income levels.

According to Pieter Dylst and Steven simonies (2011) market share of generic drugs will have effect on pricing.The research lead to conclusion that price reductions appears to vary across the countries according to market share ofgeneric medicines. High generic market share countries have larger pressure on pricing than low generic market sharecountries. In order to stipulate price competition many marketers introduce demand side policies that creating incentivesfor physicians, pharmacists and patients.

Chantal M.Morel (2011) observed that their does not exist relation between pricing strategy of pharmaceuticalproducts and country GDP. But it was determined by number of health care polices. Even though pricing differs indeveloped and under developed there doesn’t exists any pattern with respective to GDP. If countries are forced to followpatent rights in agreement to trade related aspects of intellectual property rights developing countries could have evendifficulty in accessing branded drugs because of delaying in generic drugs to enter the market which lead manufacturersof branded drugs to follow pricing strategies that can be more of skimming. Human development index (HDI) also ancompetitive tools in analyzing the consumer markets. HDI gives us an composite score of life expectancy, education andincome index of a country. It states that more the HDI index more prospers is the country to invest. The HDI foremerging countries lies in the range of 0.4 to 0.6.

INHALATION MARKET:According to world health statistics non communicable diseases accounts for majority of deaths as of April

2011. According to WHO reports almost 90% of COPD deaths occur in low and middle income countries. The overallasthma and COPD market is estimated to be at $ 29 billion as of 2011. Asthma market was valued at $ 17 billion in2011 and is projected to reach $ 18 billion in 2014 growing at a CAGR of 1.2 %.

Global market for asthma and COPD drugs 2008-2015 (US $mn). Global market for pulmonary drug delivery Inhalers2010 – 2016 (US$mn)

The global pulmonary drug delivery technologies market which is around $22.5 billion by 2011 is projected at $ 44billion by 2016 growing at a compound annual growth rate of 14.3%.The market for metered dose inhalers (MDIs) was$12.5 billion in 2010 and will reach $14.4 billion by the end of 2011. BCC forecasts this market will grow to $29.8billion by 2016 at a CAGR of 15.7%. The market for dry powder inhalers (DPIs) was $6.6 billion in 2010. This market isexpected to increase to $7.5 billion in 2011 and reach $13.4 billion by 2016 at a CAGR of 12.3%.

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SOUTH EAST ASIAN MARKET SCENARIO:Globalization and liberalization policies in practice had created huge opportunities for trade and investment

across world nations. With easing the trade norms and investment policies many countries have witnessed robustdevelopments in the fields of technology, infrastructure, increased share of exports and imports and creating employmentopportunities across all sectors of economy. Pharmaceutical industry holds a distinct image admits many successfulindustries. The demand for pharmaceutical drugs has created growing opportunities among Asian countries. Especiallycountries like Malaysia, Indonesia, Philippines, Vietnam and Taiwan etc are showing development scores in this arena.Rise in need of sophisticated technology, growing number of causalities and less exposed markets have created potentialinvestment opportunities in these countries. Indonesia, Taiwan and Philippines are fairly emergent pharmaceuticalmarkets with huge demand and wide accessibility of pharmaceutical drugs. Despite grievances over intellectual propertyrights and strong presence of counterfeiting drugs, manufacturing standards are improving with the entry of foreignmanufacturers through FDI’s and strategic alliances with domestic players. Asthma is one of the leading mortalitycausing disease across south East Asia. Around 15 million people were being diagnosed and nearly 0.5 million peopledies every year due to lack of proper treatment

Asthma statistics among South East Asian countries:

Country Disease (Rank) Population in mn Market size Total no. ofdeaths

Asthma as % of totaldeaths

Indonesia Asthma (21) 245 2.6 million 14,624 1.03

Philippines Asthma (10) 101 6 million 10,471 2.48Vietnam Asthma (11) 91 1 million 8,084 1.50

Malaysia Asthma (22) 28 1.4 million 988 0.97

The share of respiratory drug market is very low when compared to total market size across all countries. Indonesia andTaiwan are the major market in South East Asia where as Malaysia has the lowest share of respiratory market withrespective to total pharmaceutical industry size. The highest asthma prevalence cases are registered in Philippinesfollowed by Indonesia and Malaysia.

Indonesia (221,4400)

Malaysia(91,2430)

Philippines (336,2800)

Taiwan (446,4400)

Vietnam(115,2050)

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0 100 200 300 400 500

Phar

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Repiratory market size $ millions

Respiratory market Vs total market

Irrespective of large pharma market and reasonably established domestic market Indonesia recorded maximum numberof mortality cases due to Asthma. It is the 21st leading mortality disease with 2.6 million populations being diagnosedevery year. Asthma accounts for nearly 14,600 deaths at a rate of 8/100,000 population and high prevalence cases areobserved in males aged 15 and above.

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38%

24%

38%

Pharmaceuticalmarket -Indonesia

Patented drugsGeneric drugsOTC medicines

KEY INDICATORS:

Indicators Indonesia Philippines Malaysia Vietnam

Economic Indicators (2011)

GDP (US $ billion nominal) 822.63 202 247 118% Real Growth 6.6 6.4 5.2 5.8Population million 245 101 28 91% Inflation 4.2 5.4 2.10 13.50Pharmaceutical market (US $ mn) 4400 2800 2430 2050

Respiratory market (US$ mn) 221 336 91 115Human development index 0.62 0.64 0.76 0.59

Health Financing (2008)Total health expenditure as % of GDP 2.3 3.7 3.2 7.2

General govt expenditure on health as % total health care exp 54.4 34.7 44.1 38.5

Private expenditure on health as % of total health care exp 45.6 65.3 55.9 61.5

Out-of-pocket expenditure as % of private expenditure onhealth

70.3 82.5 73.2 90.2

Per capita(US$) health expenditure 51 68 353 76

Health Systems (2008)Hospital beds (per 10,000 population) 6 5 18 29

Physician density (per 100,000 population) 30 30 90 120

Nursing density (per 100,000 population) 200 600 270 100

INDONESIA:The Republic of Indonesia (RI), is the world’s largest archipelago and fourth most populous country in the

world. Indonesia accompanies 240 million people across half of its 17,508 islands located in south eastern region. Withlarge manpower in hand country there is always huge scope for development in terms of foreign direct investment.Indonesian government has geared up its reforms to transform the economy from a primary producer to a value addedexporter as well as knowledge based economy.

PHARMACEUTICAL INDUSTRY:The health care sector in Indonesia is still at the nascent stage, where a significant proportion of the population

does not have access to adequate healthcare which remained pharmaceuticals prohibitively expensive for many.According to WHO only 1/3rd of population has accessibility to basic health care facility. Nevertheless, the demand fordrugs will rise over the years, due to increased appetite for modern medicines, population growth and healthcare serviceimprovements, as well as developing macro economic conditions.

Indonesia has over 232 pharmaceutical manufacturers, distributors and traditionalchemical manufacturers, including 32 multinationals worth US$ 4.4 billion growing at arate of 14% y-o-y(2011). Despite the overhaul of Indonesia’s regulatory system, itspharmaceutical sector remained in a plight situation. Inadequate patent laws, uncertaingovernment pricing policy and inadequate infrastructure are largely to blame. Many of themultinationals have located their manufacturing plants, while others import throughdistributors.

Country has relatively low share of generic drugs. Patented drugs have a total of38% market share followed by generic drugs with 24%. The country has huge marketpotential of 2.6 million. Wide availability of counterfeit drugs and selling through illegalmeans makes pharma market at stagnant position. With increase in appetite towardswestern medicines and preference for branded drugs had given enough room for newcomers to explore the market.

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COUNTRY SWOT ANALYSIS: (From Investor Perspective)

References:1. Euro monitor International Ltd. (2012), World Consumer Income and Expenditure Patterns, vol, 60-61 Britton

Street, EC1M 5UX.2. Indonesia. Ministry of industry republic of Indonesia (2011). Industry facts and figures. Indonesia. Government

printing office.3. Business Monitor (Q3, 2010). Author: Indonesia pharmaceuticals and healthcare report includes 10 years

forecasts to 2019. ISSN 1748-1945.London: Business Monitor International.4. International union against tuberculosis and lung disease (2011).ISAAC: The global asthma report 2011. Paris,

France: ISAAC.5. World Health Organization (2011). Author: global surveillance, prevention and control of chronic respiratory

diseases a comprehensive approach. Switzerland: WHO.6. American lung association (2010). Author: State of lung disease in diverse communities. USA: American Lung

Association.7. Astrazeneca (2010). Author: How does health connects us all? Astrazeneca annual report and form20-f

information 2010.USA: AstraZeneca8. World health organization.(2011). Author: Non-communicable disease country profile 2011. France: WHO9. Indonesia. Ministry of industry republic of Indonesia (2011). Industry facts and figures. Indonesia. Government

printing office.10. IMAP (2011). Author: Pharmaceuticals and biotech industry global report 2011. USA. IMAP.11. Business Monitor (Q3, 2010). Author: Indonesia pharmaceuticals and healthcare report includes 10 years

forecasts to 2019. ISSN 1748-1945.London: Business Monitor International.12. The World Bank (March, 2009). Author: Indonesia health care sector review.USA: The World Bank.

Strengths: Policy in dismantling monopoly andliberalization regulation policies.

Pharmaceutical industry has been recordingdouble digit growth rate over the years

Wide distribution network of 11,000+pharmacies.

Well established local industry, with domesticmarket accounts for 70% of production.

Opportunity: Privatization of state owned enterprises

Relied on API imports. 90% of API’s are beingimported into the country

Removal of pharmaceutical industry fromnegative investment list.

Trade liberalization among association ofASEAN countries.

Threats: High currency fluctuations lead Indonesia asAsia’s one of the riskier destination. China poses potential threat for FDI. Policy regulations of 75 % cap of investmentand should need local partners for manufacturing goods.

Weakness: Low annual disposable income $5,000-$15,000of 60% of the population.

No private insurance and No reimbursementpolicy.

Illegal trade of pharmaceutical drugs.

Excessive bureaucracy, unqualified humanresource and poor infrastructure created unhealthyenvironment for investments.

Poor manufacturing facilities.