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In 2000, sales in the combined
pharmaceutical markets of the ten major Asian countries
(except Japan) reached $20.4 billion at ex-manufacturer
price levels. By 2005, according to IMS HEALTH's Pharma
Prognosis Asia (PPA)
the combined market is
predicted to grow to $29.4 billion, an increase of 44% on
the 2000 figure
US and European-owned multinationals
dominate the combined audited market sectors of the ten
Asian countries covered in PPA (China, India, South Korea,
Taiwan, Indonesia, Philippines, Thailand, Hong Kong, Malaysia
and Singapore), with the newly-merged
GlaxoSmithKline (GSK)
, holding an unsurpassed 4.6%
of the market in 2000. Pfizer’s
recent acquisition of Warner-Lambert
has contributed to its elevation in the ranks and it holds
the second largest share at 2.6%, well below GSK, and followed
closely by Novartis and Aventis. Japanese companies are
notable by their absence. Together the leading ten companies
held just 22% of the total audited market in 2000. This
indicates the fragmentary nature of the Asian pharmaceutical
market - in Europe for instance, the top ten companies accounted
for 45% of the market in 2000, with the leading company,
also GSK, holding 7.2%, according to IMS HEALTH's World
Review 2001.
Source: IMS HEALTH Pharma Prognosis
Asia, 2001-2005
The fragmentation of the Asian
market is even more evident when looking at the individual
country markets, where local companies have a prominent
presence. According to PPA, this is particularly true of
India, South Korea and Indonesia. Although GSK held the
largest share of the Indian market in 2000, only one other
multinational
featured in the top ten companies (Aventis), with Indian
companies dominating this intensely competitive and over-crowded
market.
In South Korea, the dominance
of the local industry has been fostered by the requirement
for foreign companies to set up joint ventures with a local
partner. Three such joint ventures ranked among the ten
leading companies in 2000. According to PPA, however, the
relaxation of this requirement, together with an increase
in original brand sales, is expected to increase the multinationals’
market penetration from the 30% level achieved in 2000.
Meanwhile, Indonesia’s domestic
industry has benefited from the shift from multinational
brands to cheaper copies and generics as a result of the
economic environment. PPA predicts that the multinationals
will find it difficult to recover market share, as consumers
continue to prefer cheaper products.
In China, the leading market
in the region and, given its huge population, the one with
the greatest potential, the pharmaceutical industry would
appear to be ripe for consolidation. In the Chinese hospital
sector, for instance, the leading player holds less than
2% of the market. The Chinese government favours the creation
of local pharmaceutical 'giants' and, in fact, some local
M&A activity has occurred. Nonetheless, PPA believes
that such an elite group of local companies is unlikely
to emerge within the next five years. This is due mainly
to the burden of bureaucracy and a high level of provincial
protectionism. As one multinational
company executive
interviewed for PPA commented, "There is zero synergy to
be had for a merger in China. If you buy a company in another
province, you cannot move production from one company to
another. You're not allowed to...the only thing you can
do is to close that company down completely and move everything
over to yours." Despite such difficulties, PPA predicts
that, over time, China's biggest local manufacturers will
increasingly feature at the top end of the country's sales
rankings, and local producer numbers will decline significantly.
According to PPA, many local
companies, in China and elsewhere in the region, will be
forced out of business due to the imposition of Good Manufacturing
Practice (GMP) requirements to meet World Trade Organisation
(WTO) and Association of South East Asian Nations (ASEAN)
trade and harmonisation criteria. To participate in export
trade, local companies will be required to invest in upgrading
their manufacturing facilities to comply with international
GMPs. PPA comments that membership of the WTO will enhance
China’s international standing, and its connections
with Hong Kong and Taiwan will assist in the country’s
gradual economic transformation into a competitive market
economy. This is likely to encourage further consolidation
of the local industry in the longer term.
In the ten Asian markets as a
whole in 2000, pharmaceutical sales growth slowed to 6.2%,
after the strong rebound in 1999 that followed the 1998
economic crisis. According to PPA, the impact of the slowdown
in the US on the economies of the Asia region will further
decelerate growth in 2001 but, thereafter, stable growth
is projected to 2005. This will be helped by currency exchange
rate developments, but growth levels will be lower than
pre-crisis levels, in single-digit figures.
Source: IMS HEALTH Pharma Prognosis
Asia, 2001-2005
In Hong Kong, although growth
is projected to see an upturn from the low compound annual
growth rate (CAGR) in 1995-2000, much of this will stem
from demand for lifestyle products and underlying growth
will remain subdued. In contrast, Indonesia’s continued
gradual recovery from the recession, which has been the
slowest in the region so far, will contribute to a relatively
high growth in the forecast period, if the political environment
stabilises. PPA believes that increased consumption levels
will drive sales in Malaysia and, to a lesser extent, Thailand.
In fact, PPA predicts that the key factor for growth in
all of the Asian pharmaceutical markets during the next
five years will be sales volume, as prices come under increasing
pressure from government controls and market factors. Even
in markets that enjoy higher than average prices in the
region, such as Singapore and Hong Kong, price growth will
slow during the prognosis period compared with the previous
five years.
By 2005, PPA predicts that China
will have increased its share of the Asian pharmaceutical
market and will account for around 34% of the combined PPA
region's pharmaceutical market. India, with 16% of the market,
is expected to push South Korea (15%) into third place,
despite India's share actually declining, because of exchange
rate pressures, from almost 18% in 2000. The forecast slowdown
in South Korea's growth is due to expected policy changes
and pricing pressures.
Favourable exchange rates, on
the other hand, will contribute to Taiwan’s market
growth, which is forecast to see the largest increase in
its share of total sales by 2005, strengthening its position
as the fourth largest market in the region, with a 14% share.
No other market will account for more than 10% of the overall
PPA market.
Source: IMS HEALTH
Pharma Prognosis Asia, 2001-200
Find a comprehensive
and independent guide to the Asian markets at: Pharma
Prognosis
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