Economic recovery drives growth in Asian markets
The Jakarta Post, Jakarta
Most Asian pharmaceutical markets have fully recovered from the economic crisis of 1997/1998, despite many suffering from the renewed economic downturn in 2001/2002.
The exceptions are Indonesia, the Philippines and Thailand, where at the end of 2001 the market value in U.S. dollar terms had not regained its 1996 value, according to the latest Asian market prognosis report issued by global health market research provider IMS Health.
The report posted in www.IMS-Global.com estimates that all three markets would fully recover over the next two years.
The trend is quite promising, according to the report which covers 10 Asian markets comprising China, Hong Kong, India, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Taiwan and Thailand.
As the economies and currencies in many countries strengthen, so will pharmaceutical market growth, with an increase of 7.3 percent expected in 2002 and a return to double-digit growth forecasts for 2003 and 2004.
The compound annual growth rate in U.S. dollar terms for the combined ten markets is forecast to be 9.6 percent over the five- year period from 2001 to 2006, compared with just 3 percent in the previous five-year period, reflecting the impact of the economic crisis of 1997/98. By 2006, the value of the combined 10 markets is forecast to reach $30.8 billion.
At year-end 2001, according to IMS Health, the Asian pharmaceutical market showed a value of $19.5 billion at ex- manufacturer prices.
Following the recent slowdown in the world economy, market growth in the 10 leading Asian markets registered just 3.6 percent in 2001 in U.S. dollar terms, dipping almost to the level of growth seen in 1997 when the region began to be hit by the economic crisis.
Currency fluctuations will have a significant positive influence on several markets, notably Indonesia, South Korea, Singapore, Thailand and Taiwan, where the Economist Intelligence Unit forecast an appreciation of local currencies against the U.S. dollar, which will boost market growth in dollar terms.
The stability of the currencies of China and Hong Kong means that their growth rates in local currencies and dollars will be the same or very similar, while depreciation of local currencies against the dollar will impact growth negatively in India, Malaysia and the Philippines. In local currency terms, only two markets - Indonesia and China - are expected to post double-digit growth.
- China accounted for almost 30 percent of the ten-market total in 2001, a share that will remain fairly stable over the next five years. - South Korea and Indonesia will increase their market shares due, in part, to exchange rate developments, at the expense of countries such as India and Hong Kong. - Indonesia's recovering economy is expected to gradually enable some of the large untapped potential of its pharmaceutical market to be exploited and it is forecast to replace the Philippines as the fifth largest market of the ten by 2006. - Taiwan will edge closer to third place as its pharmaceutical market benefits from an expanding economy at the same time as growth in India remains slow.
Ethical market: During the prognosis period, 2001-2006, growth in most Asian pharmaceutical markets will be driven mainly by volume rather than price growth, IMS Health said in its report.
Apart from the expanding economy, demographic and epidemiological trends, continuing strong demand for 'lifestyle' products, as well as gradually expanding access to healthcare will boost demand for medicines while, at the same time, both public and private sector healthcare providers will place an increasing emphasis on cost containment.
Even the higher priced markets, such as Hong Kong and Singapore, will see price growth severely curtailed by intense competition in the marketplace as well as new methods of indirect cost control. This will affect both new product prices and the level of price increases on older medicines.
Retail market: The declining influence of price growth on overall pharmaceutical market growth is especially apparent in the retail pharmacy sector.
In most Asian markets where separate retail pharmacy/drugstore audits are available, price growth outstripped volume growth as the main motor for pharmaceutical market growth during the period from 1996-2001. This reflects the 'boom' before the 1997/98 economic crisis as well as price rises to offset currency depreciation and inflation after the onset of the crisis. During the forecast period, price growth will slow in nearly all of the retail pharmacy markets.
Hospital market: In the hospital sector, prescribing and purchasing policies will put downward pressure on prices - these will include increasing use of tenders and competitive bidding, mandatory use of generics, formulary restrictions, monitoring and control of prescribing, increased patient co-payment and use of diagnosis-related group reimbursement.
In China, South Korea, Taiwan and Thailand, market growth in the hospital sector will be driven solely by volume growth: price growth will be minimal or negative. Although volume growth in China and Thailand's hospital sectors will gradually be boosted by expansion of healthcare insurance coverage, this is likely to be at the expense of price growth.