Market Access in Key Asian Markets – Day 1

Today was the first day of NextLevel Pharma’s “Market Access in Key Asian Markets” conference.  As I reflect on the day’s proceedings, one of the biggest challenges as a blogger is to find a common theme that unites the various issues that face multi-national pharmaceuticals, medical device and diagnostic companies who want to see into the Asia Pacific (APAC) region.  To me, the simplest way to consolidate all that was shared today is around this statement:  the APAC region (as is the world as a whole) is rapidly aging, a phenomenon being greeted by governments both developed and emerging, with the same challenge of how to cost effectively provide access to healthcare without bankrupting their respective economies.

Japan has this problem.  They are a developed economy.  They understand the econometrics better than most, but they don’t yet have a solution that unifies the needs of the individual, that of industry and that of government.  China has this problem.  They are an emerging economy.  They are quickly coming to understand the econometrics, but their early solutions are bad for parts of their existing system for delivering healthcare (hospitals and doctors in particular), particularly bad for industry, but potentially good for their people.  Vietnam has the same problem.  They are very much an emerging economy, well behind even China.  They aspire to universal coverage, but how they will pay for this and what it will mean for industry are not yet in focus in any way.

One of the presentations I quite enjoyed was from , the Commercial Director of GSK’s dermatological business unit.  I blogged about it over on my company blog as it has more of a direct application to FMCG companies, but it also offers some important insights to healthcare companies in APAC as well.  Specifically, Sameer offered six points.  First, unit pricing as perceived by the consumer is critical.  Don’t fall or hide behind channel or package pricing; what matters in the bottom of the pyramid segment of the market in particular is the unit price.  If you can do that in a “n” of 1, then do it.  It is part of understanding how highly rationalized healthcare purchasing decisions are, and how you have to meet them where they are.  A good example of this is in the analgesic space, where in emerging economies Christopher Milne of the Tufts Center for the Study of Drug Development offered that around 80% of the markets in emerging markets have insufficient access to this family of products.  Inadequate access would in part be made more easy if companies would be willing to repackage their products into smaller unit packs, an insight that companies like Unilever in the personal hygiene market have already illustrated.

Sameer’s second insight was to make sure you understood how you were going to get pricing compliance through your channel.  This takes some creativity as multinationals are many times used to highly structured distribution channels that are sensitive to price wars between competitors; consequently, they self-police in ways that similar verticals do not in emerging economies.  As a result of this, companies have to put in place compliance mechanisms that are more involved or proactive than they are used to.

Third, Sameer advised that companies challenge their thinking around cost of goods sold (COGS) and margin.  Specifically, he said that you should start out thinking Price – Profit = Cost versus the more traditional western mentality of Cost + Profit = Price.  Starting out with cost as your foundation can too easily lead your team to make assumptions about basic elements of design that should be questioned if you instead asked yourself out of the gate “how much can my consumer afford to pay for this product / service / technology?”

The last four insights (make sure consumer and patient insights are incorporated at every stage in the process, improve access through ease of payment, recruit at the low end and they will move up the brand continuum, and delight don’t dilute are all most relevant to FMCG companies in emerging markets; as such, I’ll be discussing them in more detail at my company blog versus this one).

All of these insights take place within a market that, as I referenced earlier, is wrestling with how to offer expanded services and healthcare opportunities to groups of people that in many cases have lived for decades (if not forever) with a complete dearth of available options.  With this in mind, the presentation of from Kinapse Life Sciences Consulting and Outsourcing, was extremely valuable.  From my point of view, Gavin’s presentation did the best job of summarizing the key challenges everyone in the room is wrestling with, whether they are focused on developed, emerging, or truly third world countries in the APAC region.

Gavin’s presentation identified three key themes the industry is facing.  First, the “need to extend basic healthcare to rural populations.”  From the point of view of payers (government, insurance providers, individuals), the question is one built around policy.  Specifically, as Gavin shared with the group, “how do you hope to increase access while controlling costs.”  When perceived by industry, this theme of expanding coverage requires companies to answer, “How you [plan to] manage the price/volume trade offs.”

He then shared with the group that the second key theme Kinapse sees is “demand shifting to developed world epidemiology.”  Payers perceive this challenge to be how to “allocate budgets fairly to basic healthcare versus chronic end of life care.”  Industry sees this as “how to generate and communicate evidence of innovative product value to payers [when they are] struggling to fund the basics.”  For industry in particular, knowing that in many cases domestic champions (China in particular comes to mind) will want to dominate the generic market, means that established multinationals have to compete higher up the food chain, always a challenge in any sort of market environment, but one doubly difficult when the payer community is, as Gavin pointed out, struggling to meet the most basic healthcare needs.

The last theme Gavin shared with the group was the development of medical tourism.   Much has been written about the phenomenon itself, but what I particularly enjoyed was his contribution that from a payer’s vantage point, “they can use this to subsidize domestic healthcare infrastructure.”  He sees medical tourism as offering not only an economic activity that is valuable for an economy in its own right, but also presenting national governments with the opportunity to craft innovative public/private partnerships where the ensuing built-out capacity can also serve the local population.  From the industry’s perspective, a vibrant medical tourism economy forces the question of “how to manage increased complexity within a single market?”  Or, to say it differently, how do you leverage medical tourism in a way that moves beyond the niche and gets into the broader population as a whole?

Beyond how Gavin captured these three themes, added a much-needed reminder that “there is no one Asia-Pacific … healthcare systems are in different states of evolution.”  As Dhinagar presented this, the continuum from self-pay to some coverage to universal coverage to a crossroads to a ) is well populated by various APAC countries.   What this means is that policies have to be elastic enough to meet the market where it is today, while also making room for where the market will need to move to as questions about coverage and who pays come increasingly into focus.  As we head into day two of the NextLevel Pharma conference tomorrow, it will be interesting to see how companies are managing this continuum specific to China.  More on that front later!