The regional market value will increase from just under $94.5 billion to $118.2 billion as a result. Four of the 12 markets will grow at double-digit rates, and increases are forecast at a CAGR of 8% or more in eight countries, but compound annual growth of less than 2% in Japan which will continue to dominate the regional sales total, will depress aggregate growth rates.
Total market forecast - sales at actual prices
Source: IMS Market Prognosis Australasia 2004-2008
Elements of growth
Prices in all of the 12 markets are under increasing pressure as a result of direct government controls, market forces and, in some countries, a combination of both these factors. Average prices are also being affected by low patient purchasing power and public sector cost-containment strategies which are driving demand for cheap generics and copy products, limiting sales of more expensive multinational brands. Consequently, growth forecast for the region in the period to 2008 will be driven primarily by volume increases.
IMS expects prices to fall in four of the 12 markets, including Japan, where substantial price cuts are expected in 2004, 2006 and 2008 as part of the government's biennial price revisions. Government-imposed price cuts will also be a major factor behind declines in Taiwan and China. Hospital tendering will act as a further constraint on prices in China, while South Korea is expected to cut reimbursed drug prices on an annual basis as the government attempts to address the deficit run up by the national health insurance programme.
Healthcare environment
The quality and breadth of healthcare provision in the 12 countries varies markedly, from the sophisticated models that provide universal coverage in Japan and Australia to the rudimentary systems operated in the Philippines and Indonesia, where many patients lack access to basic healthcare resources. National spending on healthcare is equivalent to approximately 8.5% of GDP (gross domestic product) in both Japan and Australia, but does not exceed 6% of GDP in any of the other ten countries - and is equivalent to less than 4% in Indonesia, the Philippines and Singapore.
With the exception of Japan and Australia, private health cover will remain the preserve of a small minority in most countries across the region, where government policy will be focused on improving or expanding public health insurance systems. Taiwan and South Korea have both achieved near-universal coverage through the recent introduction of national health insurance systems, but funding the respective schemes has already emerged as a major problem and further reform may be necessary. Plans for the introduction of national health insurance schemes have also been tabled in Indonesia and Malaysia.
Healthcare policy in more developed markets will be dominated by efforts to stem the growing cost of universal provision, while governments in most developing countries will be preoccupied with broadening the quality and coverage of existing systems. Notwithstanding these contrasts, healthcare funding and cost-containment issues will be high on the agenda of all governments in the region.
Economic environment
Most of the 12 countries covered will see their economies expand by 4-5% per annum during the forecast period. Growth will be fuelled by a combination of export trade and domestic demand. Moderate growth of the global economy and the adoption of more conservative fiscal policies will prevent a repeat of the boom-bust scenario witnessed in south-east Asia during the 1990s.
IMS believes China and India will be the main drivers of economic growth: real GDP growth is forecast at 7-8% a year in both countries, cementing their respective positions as the region's second and third largest economies behind Japan. Disparities in GDP per capita will remain widespread, however, with a massive gap between figures for the region's richest countries and those such as India, the Philippines and Indonesia, where GDP per capita will remain below $1,000 throughout the forecast period.
GDP per capita
Intellectual property
A key issue for multinational firms in developing countries is intellectual property - or more usually the lack of it. IMP Australasia's findings suggest that levels of IP protection available in the region will improve gradually during the forecast period – largely as a result of obligations imposed by membership of the World Trade Organisation. Failure to implement legislation effectively will affect the degree to which the environment facing the research-based industry improves, however.
Twenty-year product patents are now available in most other countries, and will be introduced in India in 2005. Research-based manufacturers operating there are concerned that the market may be flooded with copies in the run-up to the establishment of stronger patent protection - and are lobbying for the introduction of data exclusivity provisions in an effort to limit the potential impact of such a trend.
Singapore's bilateral trade agreement with the US has paved the way for the introduction of five-year data exclusivity there, while similar provisions are expected in Thailand during the forecast period. Elsewhere, multinationals will continue to lobby for the introduction of data exclusivity in Malaysia and Taiwan.
New IP protection in the Australasian region could lead to a paradigm shift in the activities of both local and global pharmaceutical manufacturers - something IMS will continue to monitor in the future.
This article was prepared by Carlo Ciapparelli, Manager Country/Market Forecasting. For more information on IMS Market Prognosis Australasia, or any of the other reports, please contact Cristina Cucinotta via e-mail or call +44 207 393 5254.