Pricing & Reimbursement in Asia-Pacific

Publication Date	January 2006
Publisher	Scrip Reports
Product Type	Report
Pages
ISBN Number	not applicable
Product Code	SCR00022

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Summary

Generic drugs (generics) are now an established part of pharmaceutical markets and healthcare policies around the world. According to IMS Health data, they already account for 63% of all prescriptions dispensed in the US, the world's largest single pharmaceutical market.

The European Generic Medicines Association, the EGA, has predicted that, by the end of the decade, generics could account for 75% by volume of all pharmaceuticals sold in an expanded European Union (EU), with a total market value of €21 billion.

This forecast takes into account both new Member States such as Poland and the Czech Republic that have a strong heritage of generic production from previously nationalised pharmaceutical industries, as well as Western European countries, such as France, Spain or Portugal, in which ballooning healthcare costs have finally persuaded governments to take more aggressive action to encourage the use of generics.

Seen in value terms - and generics remain very much about lower prices - the advances are less dramatic. In the fiercely competitive US market, for example, IMS Health estimated generic penetration by value to be around 11% in 2005. In the UK, the country with the highest value share that year - about 24%, excluding discounts - branded and unbranded generics made up 64% of the overall market by volume.

There is clearly plenty of room for further expansion of the generics sector, albeit in an environment where low-cost generics manufacturers from countries such as China and Brazil are remorselessly dragging down prices and some important markets, such as Japan, are still lagging significantly in their efforts to stimulate sales of generics.

IMS Health is forecasting generics sales growth of 13-14% worldwide in 2007, compared with 5-6% for the pharmaceutical market as a whole. Such growth would increase the value of the global generics market to $60-65 billion.

Two key factors are particularly fuelling this growth: European governments' efforts to slow the rise of healthcare costs and the string of patent expiries on key pharmaceutical brands in the US and other major markets.

Prescription drugs with aggregate sales of $51 billion faced patent expiry in the five years to 2006, IMS Health notes; the figure for the period between 1996 and 2000 is only $17 billion.

Last year, products with combined sales totalling more than $18 billion lost their patent protection in seven key markets. The US market alone accounted for more than $14 billion of that total, according to IMS. This trend has continued in 2007, with more than $16 billion worth of marketed products expected to come up for grabs to generics manufacturers.

Releasing its top-line data for global pharmaceutical sales in 2005, IMS Health reported that sales of generics in the eight leading markets (the US, Canada, France, Germany, Italy, Spain, the UK and Japan) exceeded $55 billion.

Generics growth in the top seven markets (excluding Japan) was 13%, compared with 5% for original brands and 6% for pharmaceuticals overall.

The US market saw generic sales increase by 15%.

IMS is expecting double-digit sales growth in the generics sector for at least the next five years. That would make generics the largest segment of the pharmaceutical market in volume terms by the end of the decade. The forecast compound annual growth rate for the total pharmaceutical market over the same period is 5-8%.

This growth will come, however, from an industry in the throes of rapid transformation. The last few years have seen enormous upheavals in the operating environment for generic drug companies around the world.

These have included:

new and more stringent patent regimes in countries that have grown into powerhouses of generic development and supply, coupled with pressure through international trade channels for further consolidation of intellectual property rights (IPRs); legal and regulatory advances and reversals for the US generics industry, in a climate of brutal price competition, as well as multiple challenges to vulnerable brands and short-circuiting of market exclusivity by 'authorised' generics; a hard-fought review of pharmaceutical legislation in the EU that has both eased and stiffened conditions for generics manufacturers in Europe; a complex and contentious debate over approval pathways for generic versions of biotechnology products, that has produced a viable regulatory framework in the EU and a virtual stalemate in the US; and consolidation and diversification in the generics industry as pricing pressures and intensifying competition from low-cost markets take their toll.

These trends present both opportunities and challenges. Opportunities take come from diversification and vertical integration into ingredient manufacture, over-the-counter (OTC) products, more sophisticated branded generics, niche drugs, biosimilars or even research-based proprietary medicines - and offer relief from an undifferentiated market for commodity generics in which prices are driven lower and lower. Consolidation and partnerships open the door to economies of scale and leverage of expertise in non-infringing processes, marketing strategies, value-added formulations and biotechnology.

On the other hand, the challenges faced by generics players are numerous:

how to retain price advantages and profit margins for biosimilars, whose development and approval requirements align them more with 'me-toos' than traditional generics; how to ensure that new incentives, such as the 'Bolar' provisions and data exclusivity trade-off in the EU's pharmaceutical review, are implemented to the industry's best advantage; and how to fend off the growing influx of low-cost generics from burgeoning markets such as India, China and Brazil.

This report traces these and other key legal, regulatory and business developments of recent years and offers some pointers to the generics industry of the future.

It begins by discussing the political, economic and ethical debate at the hub of the generics market: how to ensure access to needed medicines while balancing the competing interests of research-based and generics manufacturers.

It ends by looking at an environment in which the fundamentals for robust generics growth are in place, but one in which the generics industry faces the prospect of increasing polarisation - both drawing closer to, and posing a more urgent threat to the research-based manufacturers that are its main adversary, its lifeblood and, perhaps increasingly, its proprietor.

In the future, we could see, rather than a generics industry, a number of parallel or interlocking industries under the broad umbrella of generics. It is clear, for example, that the business model for the manufacture of biosimilars will be quite radically different from the one that has supported a thriving commodity generics sector.

Against such a background, it seems likely that the generics industry of the future will be less homogeneous, less stable and more flexible, offering a range of options tailored to customer needs in the pharmaceutical sector.

Whatever form they take, though, generics will remain essential to the healthcare equation and a defining feature of the pharmaceutical industry worldwide.

Content

Chapter 1 Overview
Chapter 2 Australia
- 2.1 Summary
- 2.2 Introduction
- 2.3 History of The Pharmaceutical Benefits Scheme
- 2.4 The Reimbursement Process
- 2.4.1 Pharmaceutical Benefits Advisory Committee (Pbac) and
- Sub-Committees
- 2.4.2 Economics Sub-Committee (Esc) of The Pbac
- 2.4.3 Economic Analysis
- 2.4.3.1 Cost Minimisation Analysis
- 2.4.3.2 Cost Effectiveness Analysis
- 2.4.3.3 Cost Utility Analysis
- 2.4.3.4 Cost Benefit Analysis
- 2.4.4 Drug Utilisation Sub-Committee (Dusc) of The Pbac
- 2.5 Pharmaceutical Benefits Pricing Authority (Pbpa)
- 2.5.1 Issues Considered in Determining Prices
- 2.5.2 Pricing Methods Used by The Pbpa
- 2.5.2.1 Cost plus Method
- 2.5.2.2 Reference Pricing
- 2.5.2.3 Weighted Average Monthly Treatment Costs (Wamtc)
- 2.5.2.4 Risk Share Arrangements
- 2.5.3 Reviewing Products Listed on The Pbs
- 2.5.3.1 Therapeutic Relativity Sheets
- 2.5.3.2 Pricing of New Strengths of Existing Items
- 2.5.4 Highly Specialised Drugs
- 2.6 Cost of The Pbs
- 2.7 Australian Government Attempts to Reduce Pbs Costs
- 2.7.1 Co-Payments
- 2.7.2 The Brand Premium Policy
- 2.7.3 The Therapeutic Group Premium Policy
- 2.7.4 Price Volume Agreements
- 2.7.5 Quality Use of Medicines (Qum) Initiative
- 2.7.6 Future Challenges for The Australian Government
- 2.8 References
Chapter 3 China
- 3.1 The Chinese Healthcare System
- 3.1.1 Introduction
- 3.1.2 The 1999 Reforms
- 3.1.2.1 Reform Objectives
- 3.1.2.2 Funding and Administration
- 3.1.2.3 Reinforcing Management of Healthcare Funds
- 3.1.2.4 Special Population Groups
- 3.1.3 The Management of Medical Services
- 3.1.3.1 The Range and Standard of Services Covered
- 3.1.3.2 Designated Medical Institutions and Drugstores
- 3.1.3.3 Local Government Responsibility to Move Health
- Reforms Forward
- 3.1.3.4 Separate Management of Drugs and
- Treatments
- 3.1.4 Drug Formulary Guidelines
- 3.1.5 Guidelines for Urban Healthcare Reform
- 3.1.5.1 Implementation of A Industry-Wide System for
- Healthcare Administration
- 3.1.5.2 Changes to The Classification of Medical
- Institutions
- 3.1.5.3 Division of Responsibilities between Community
- Healthcare Service Organisations, Comprehensive
- Hospitals and Special Hospitals
- 3.1.5.4 Improving Prevention
- 3.1.6 An Evaluation of The Present State of Medicare Reform
- 3.1.6.1 The Main Problems Facing The Chinese
- Government
- Inequity in Healthcare
- The Widening Hospital Funding Gap
- Rapid Rises in Drug Spending
- 3.1.6.2 Other Issues with The Present Healthcare
- System
- The Personal Account
- Limited Coverage
- 3.1.6.3 Proposed Reforms of The Present Healthcare
- System
- to Establish A Uniform System for All
- to Provide Public Health Programmes and Various
- Levels of Health Insurance
- to Separate Drugstores and Hospitals
- The Transition Process
- Feasibility Studies
- 3.2 China's Drug Pricing System
- 3.2.1 Basic Drug Pricing Policy
- 3.2.2 Special Pricing System
- 3.2.3 Centralised Drug Purchasing
- 3.2.4 Recent Pricing Trends
- 3.2.4.1 China Drug Reference Pricing System
- 3.2.4.2 Otc Drug Pricing
- 3.2.5 Pricing System Is Still Evolving
Chapter 4 Hong Kong
- 4.1 Hong Kong's Health System
- 4.2 Introduction of A Standard Drug Formulary
- 4.2.1 Advice from The World Health Organization and
- International Practice
- 4.2.2 Guiding Policy, Values and Review Mechanism
- 4.2.3 Content of The Drug Formulary
- 4.2.4 Drugs outside The Drug Formulary
- 4.2.5 Safety Net for Non-Formulary Drugs
- 4.2.6 off-Label Prescribing
- 4.2.7 Hkma Feedback
- 4.3 The Future of Hong Kong's Health System
- 4.3.1 Future Healthcare Model
- 4.3.2 Positioning of The Public and Private Sectors
Chapter 5 Indonesia
- 5.1 The Pharmaceutical Market
- 5.1.1 General Market Characteristics
- 5.1.2 Market Volume and Structure
- 5.2 Health Situation
- 5.2.1 Health System
- 5.2.2 Health Policy
- 5.2.3 Decentralisation
- 5.3 Generics
- 5.4 Drug Pricing
- 5.4.1 Price of List of Essential Drugs
- 5.4.2 Measures to Control High Price
- 5.4.3 No Price Rises in 2006
- 5.5 Intellectual Property Protection and Counterfeit Drugs
- 5.5.1 Parallel Imports
- 5.5.2 Counterfeit Drugs
- 5.6 Market Prospects
Chapter 6 Japan
- 6.1 Structure of Japan's Drug Pricing and Reimbursement System
- 6.1.1 What Is The Nhi Drug Pricing System?
- 6.1.2 Securing A Listing on The Nhi Price List
- 6.1.3 How Are The Drugs Placed on The Nhi List?
- 6.1.4 How Often Is The Nhi List Updated?
- 6.1.5 How Many Drugs Are Listed?
- 6.1.6 How Are Drug Prices Calculated?
- 6.1.6.1 New Drugs
- The Similar Efficacy Comparison Method
- Cost Accounting Method
- 6.1.7 Revision of The Nhi Drug Price
- 6.1.7.1 Listed Drugs
- The Drug Price Survey
- Price Revision
- 6.1.8 What Is The Recalculation of The Nhi Drug Price?
- 6.1.8.1 Already Listed Drugs
- 6.1.9 The Foreign Price Adjustment?
- 6.1.10 The Inter-Specification Adjustment
- 6.1.11 Generic Drug Prices
- 6.1.12 Problems with The Nhi Drug Pricing System
- 6.1.12.1 Drug Price Discrepancy
- Chuikyo Reform
- 6.1.13 Recent Problems
- 6.1.14 Nhi Drug Price Reform Plan for Fiscal 2006
- 6.1.14.1 Revision of Pricing for Listed Drugs
- Price Adjustment Zone Method
- Price Revision following Generic Entry
- Recalculation Method
- Nhi Drug Price Survey
- Others
- 6.1.14.2 Revision of Pricing for New Products
- Similar Efficacy Comparison Method
- Cost Accounting Method
- Foreign Average Price Adjustments
- Pricing Ratios between Specifications
- Premiums
- 6.1.15 The Pharmaceutical Industry Response
- 6.1.15.1 Phrma Proposals for Reform
- Comparator Method
- Cost-Calculation Method
- Application of Premiums
- Foreign Price Adjustment
- Price Revisions
- Pricing of Biologics
- Coverage of All Appropriate Uses
- Preventative Medicine
- 6.1.15.2 Jpma Proposals for Reform
- 6.1.15.3 Efpia Proposals for Reform
- New Drugs
- Listed Drugs
- Notification Price System
- Improvements to The Current Nhi Drug Pricing
- System
- 6.1.16 Industry Proposals for The Nhi Drug Pricing System
- 6.1.17 Challenging The New System
- 6.1.17.1 Reform Undermining Industry Stability
- Jpma Dissatisfied with Mhlw Plan
Chapter 7 Malaysia
- 7.1 The Malaysian Healthcare System
- 7.2 The Malaysian Pharmaceutical Market
- 7.3 Public Sector Drug Distribution System
- 7.4 Drug Distribution Concessions
- 7.4.1 Present Pharmaceutical Situation
- 7.5 Drug Pricing
- 7.6 Drug Registration
- 7.7 Government Policy on Healthcare Costs and Expected Changes in
- The near Future
- 7.8 References
Chapter 8 New Zealand
- 8.1 A Twin Agency Entry to New Zealand
- 8.1.1 Medsafe
- 8.1.2 Pharmac
- 8.1.3 Restricting Drug Expenditure
- 8.1.4 Campaign for Liberalisation
- 8.1.5 Tendency towards Radical Reform
- 8.1.6 Limiting Patient Choice
- 8.1.7 Pharmac Not The Only Stumbling Block
- 8.2 Pharmacological and Therapeutics Advisory Committee
- 8.2.1 Consumer Focus
- 8.3 Pharmac in Numbers
- 8.4 The Current Picture in Review
- 8.4.1 United Future's Healthcare Policy
- 8.4.2 The Greens' Healthcare Policy
- 8.4.3 The New Zealand First Party's Healthcare Policy
- 8.4.4 Opposition Views
- 8.5 What Can Pharmac Do?
- 8.5.1 Possible Pharmac Concessions
- 8.5.2 Joint Agency Threat
- 8.6 Pharmac's Arguments in A Nutshell
Chapter 9 Singapore
- 9.1 Singapore's Heathcare System
- 9.2 Singapore's Pharmaceutical Market
- 9.3 Parallel Import
- 9.3.1 The Situation in Singapore
- 9.3.2 Amendments to The Patent Act
- 9.3.3 Patent Term Extension
- 9.3.4 "bolar" Provision
- 9.3.5 Compulsory Licences and Government Use
- 9.3.6 Summary
- 9.4 Reimbursement and Drug Listing
- 9.4.1 Standard Drug List
- 9.4.2 Regulating Prescription Drugs
- 9.4.3 Generic Drugs
- 9.5 Consolidation of Drug Laws
Chapter 10 South Korea
- 10.1 Healthcare Coverage
- 10.1.1 Evolution
- 10.2 Medical Care Institutions
- 10.2.1 Referral System
- 10.2.2 Co-Payment
- 10.2.2.1 Diagnosis Related Groups
- 10.2.2.2 Drug Utilisation Review
- 10.3 Health Insurance Review Agency
- 10.4 Pharmaceutical Pricing and Reimbursement
- 10.4.1 Triennial Re-Pricing
- 10.4.2 Actual Transaction Price (Atp)
- 10.4.3 Reference or "appropriate Standard" Pricing
- 10.4.4 Lowest Transaction Price (Ltp)
- 10.4.5 Low-Priced but Essential Drugs
- 10.4.6 Generic Substitution
- 10.4.7 Reimbursement for Non-Prescription Drugs
- 10.4.8 Evaluation of Appropriate Drug Use
- 10.5 Expected Changes
- 10.5.1 Positive System
- 10.5.2 Generic Price Cut
- 10.5.3 Price - Volume Control
- 10.6 References
Chapter 11 Taiwan
- 11.1 Taiwan's Pharmaceutical Market
- 11.2 Public Health
- 11.3 Price Control
- 11.3.1 Favourable Policy for Generic Products
- 11.3.2 Growing Market
- 11.3.3 Revised Reimbursement Plan
- 11.3.4 Black Hole
- 11.3.5 Reference Pricing
- 11.3.6 Unfair Price Determination Process for New Drugs
- Table of Contents Pricing & Reimbursement in Asia Pacific, 2006
- Informa UK Ltd, April 2006 6 Www.Scripreports.Com
- Photocopying & Distribution of This Document Is Illegal
- 11.3.7 Global Budget
- 11.3.8 Other Measures to Manage Health-Spending Increases
- 11.3.9 Conclusion
- 11.4 Future Methods
Chapter 12 Thailand
- 12.1 Basic Market Characteristics and Infrastructure
- 12.1.1 Population, Physicians and Hospitals
- 12.1.2 Market Size and Distribution Channels
- 12.2 Reimbursement Schemes, Healthcare Systems and Payers
- 12.2.1 Universal Coverage of The National Health Security
- Scheme
- 12.2.2 Social Security Scheme (Sss)
- 12.2.3 Civil Servants Medical Benefit Scheme (Csmbs)
- 12.2.4 Other Schemes
- 12.3 Drug Reimbursement Lists
- 12.3.1 National List of Essential Drugs
- 12.3.2 Hospital Formulary
- 12.4 National List of Essential Drugs
- 12.4.1 Nature of The List
- 12.4.2 Responsible Agencies
- The Working Group on Essential Drug Selection
- The Working Group on Co-Ordination of Selection
- Other Groups
- 12.4.3 Ethics of The Sub-Committee and Working Group
- Members
- 12.4.4 Parties Eligible for The Submission of Proposals to The
- Nled
- 12.4.5 Principles and Philosophy of The Nled
- 12.4.6 Information and Data Required for Submission
- 12.4.6.1 Preliminary Information
- for Compounds Already on The Current Nled
- for Compounds Not on The Current Nled
- 12.4.6.2 Information on The Product, Patent Situation,
- Sales Volumes and Prices
- General Information
- Information on Patent Situation
- Information on Sales Volume
- Information on Prices
- 12.4.6.3 Information on Proposed Texts and Drugs
- Selected as Comparators
- Text
- Comparator
- 12.4.6.4 Information on Standard Treatment Guidelines
- 12.4.6.5 Information on Efficacy
- Research Papers on The Compound vs Placebo
- Research Papers on The Compound vs Comparator
- Research Papers, Bibliography, Abstracts and Full
- Papers
- 12.4.6.6 Information on Administration Restrictions and
- Frequency
- Comparative Data on Daily Administration
- Restrictions and Frequency
- Pharmacokinetic Advantages
- 12.4.6.7 Information on Safety
- Table of Contents Pricing & Reimbursement in Asia Pacific, 2006
- Informa UK Ltd, April 2006 7 Www.Scripreports.Com
- Photocopying & Distribution of This Document Is Illegal
- Safety Problems in Other Countries
- Safety Concerns
- 12.4.6.8 Information on Cost Effectiveness
- Preliminary Information
- Health Economic Studies
- Cost of Treatment vs Comparator
- 12.4.6.9 Summaries of The Reasons and Data of The
- Submission
- for Compounds Already on The Nled
- for Compounds Not on The Nled
- 12.4.7 Selection Criteria
- Clear Indications
- Evidence
- Registration, Combination Drugs and Supply
- Sources
- 12.4.8 Selection Process
- Transparency
- Evidence-Based Approach
- Passage of The Selection
- 12.4.9 Isafe and Emci
- Isafe
- Emci
- 12.5 Hospital Drug Formularies
- 12.6 Cost Containment Measures
- 12.7 Future Trends
- 12.7.1 Integration of Uc, Sss and Csmbs
- 12.7.2 The Csmbs
- 12.7.3 Extension of Sss Coverage
- 12.8 Comments and Conclusion
Chapter 13 Vietnam
- 13.1 Introduction
- 13.2 Health Insurance
- 13.3 Pharmaceutical Market
- 13.4 Drug Pricing
- 13.4.1 Drug Prices Have Increased Greatly in Recent Years
- 13.4.2 Reasons for High Drug Prices
- 13.4.3 Government Tightens Price Control on Foreign Firms
- 13.4.4 Reserve of Essential Drugs
- 13.5 Import Drugs
- 13.6 Domestic Manufacturing
- 13.7 Plan for The Future of The Pharmaceutical Industry
- 13.8 Conclusion
- Table 2.1 Highest Cost Items on The Pbs, 2004-2005
- Table 2.2 Most Prescribed Items on The Pbs, 2004-2005
- Table 2.3 Top 10 Suppliers by Total Cost, 2004-2005
- Table 2.4 Top 10 Suppliers by Market Share, 2004-2005
- Table 3.1 Division of Healthcare Expenditure in China
- Table 3.2 Calculated Reference Price for Different Dosage Forms
- Table 3.3 Calculated Reference Price for Strength, Volume (Weight) and
- Package Number
- Table 5.1 Total Pharmaceutical Sales in Indonesia, 1999-2003
- Table 5.2 Market Development by Product Type, 1998-2002
- Table 6.1 Revisions of The Nhi Drug Price and Medical Fees
- Table 7.1 Organization of Application for Drug Registration
- Table 8.1 Top 20 Most Prescribed Medications, 2005
- Table 8.2 Changes Made to The Pharmaceutical Schedule, 1994-2005
- Table 10.1 Healthcare Coverage According to Coverage Type, 2001-05
- Table 10.2 The Number of Medical Care Institutions and The Rate of
- Expenses, 2004
- Table 10.3 Total Medication Cost, 2001-05
- Table 10.4 Co-Payment Rate for Outpatients
- Table 10.5 Drg Disease Groups
- Table 10.6 Comparative Korean Reimbursement Price (%)
- Table 10.7 Comparison of The Price Calculation Methods for The Actual
- Transaction Price and The Lowest Transaction Price
- Table 10.8 Changes to The Reimbursement Status of Non-Prescription Drugs Figure 2.1 Steps for Listing A Drug on The Pbs
- Figure 2.2 Total Cost of The Pbs: 1997-1998 to 2004-2005
- Figure 8.1 Process for Listing A New Pharmaceutical on The Pharmaceutical Schedule
- Figure 8.2 Expenditure by Therapeutic Group
- Figure 10.1 The Mechanism of Korean Health Insurance System
- Figure 10.2 Process of An Application for Nhi Price