An Executive Country Review: South East Asia An ... - EC Reviews

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Stage Fright: The Risks and Benefits of Moving Forward The Southeast Asian pharmaceutical industry is at a crossroads: The transition from underdeveloped nations to developing and now emerging markets has brought with it many conundrums and many opportunities. The shape of the sector across the region is expected to drastically change, and today’s picture is evolving quickly. Every country of the region and its national industries faces challenges associated with its socioeconomic conditions and industrial history. But, the novelty is that a set of common threats and opportunities is surfacing across the region that should determine the near future of the sector as a collective, increasingly unified, and certainly more global group of actors competing across a larger market space. Started as a joint effort to promote economic cooperation and the welfare of the people in the region, ASEAN has increasingly evolved over the years into an economic forum doubled with instruments of economic action. At a 2003 meeting in Bali, it was stated that the objective is to set up an ASEAN economic community by 2020. Eleven key sectors, including the healthcare sector, were identified as priorities for the integration effort. This report was prepared by Executive Country Reviews. Authors are Gilles Valentin (gilles@ecreviews.com), Emmanuelle Berthemet (emma@ecreviews.com), Marco Parigi (marco@ecreviews.com), Amicie de Bodinat (amicie@ecreviews.com), and Yaz Yazicioglu (yaz@ecreviews.com). 86 Pharmaceutical Technology SEPTEMBER 2006 www.pharmtech.com
Sec. Roberto M. Pagdanganan, Chairman & President of PITC The first anticipated stepping stone will be the 2008 ASEAN Free Trade Agreement (AFTA), which will be held in January 2008. Covering a wide range of items, this agreement will unify a market space of more than 500 million people across 10 countries. It will affect the pharmaceutical industry by allowing companies to trade freely and register products across the region. Of course, the dream of a fully free market is still far away because some protection mechanisms will still be available to states that still wish to play by their own rules. But, provisions are to be strictly framed and will be more constraining than opening up to the free and fair trade. In the meantime, the industry is looking at unifying the norms and standards as well as facilitating registration procedures and the flow of goods, technical dossiers, and bioequivalence studies across the region. Labeling standards for pharmaceutical and medicinal products should be established by Dec. 31, 2006. By December 2008, an ASEAN common technical dossier (ACTD) is expected to be released. Approval and recognition across the region should then be a natural step. Currently, efforts are being made to formalize a postmarketing alert system for defective pharmaceutical and medicinal products and explore the feasibility of implement- The Philippines turn vision into reality Roberto Pagdanganan, Chairman the Philippine International Trading Corporation (PITC) faces several challenges as he deals with pharmaceutical-related issues. Amid political turmoil, his country has grown at a fast pace and continues to do well, yet 14 million people live in poverty, retail prices of medicines are among the highest in the world, and the major distributor is granted the privilege of a near monopoly. Because of a predominance of multinational companies, lower priced generic medicines are struggling to establish themselves (though a generic drugs law was passed in the 1980s). High drug prices are a major concern in the Philippines.The Department of Health and the Department of Trade reveals that five out of every nine medicines cost more in the Philippines than in Malaysia or Indonesia. Health Action International reports that Amoxil sells at a higher price in the Philippines than in the UK or Canada. On average, medicines in Manila are 16 to 18 times more expensive than those sold in India; and a price survey by PITC showed that several medicines produced by Pfizer in the Philippines are overpriced by as much as 730% compared with their selling price in Pakistan. Thus, consistently with the aims of the Medium Term Philippine Development Plan 2005–2010, the government entrusted PITC to set up a stateowned medicine distribution network named Botika ng Bayan (people’s drugstore). The Botika ng Bayan concept Through these outlets, which operate as a franchise where companies or entrepreneurs might apply for a license, Filipinos can buy 44 types of the most commonly-used medicines in the country at half the price.At the onset of the program, all the stores sell four types of drugs: antibiotics,antihypertension drugs, antiasthma drugs and antidiabetes drugs.BnB is turning into a profitable business, particularly for local governments executives, who use the money raised to finance other projects of public utility, such as schools, roads and hospitals.Marketing less-expensive generic drugs has encountered resistance from multinational companies.PITC, with its ambitious target of lowering the prices of essential medicines by 50% by 2010 and accrediting 3000 outlets by the same year, has been at the forefront of this confrontation since the beginning,and quite successfully so.After a protracted quarrel with Pfizer, which sued over an attempt to import samples of Norvasc before patent expiration, Pagdanganan brokered a deal with GlaxoSmithKline, which now regards BnB as an opportunity rather than as an obstacle.To show its commitment, the British major signed a memorandum of agreement with PITC to have its branded line of medicines available in all BnB outlets nationwide.Thus, the stage has been set to further expand cooperation with traditional rivals and to negotiate from a stronger position in the future.PITC also has explored parallel trade (i.e., exporting of a product, on sale in one country at a lower price to another) to generate profits. PITC focuses on traditional issues to support the following:(a) cross-country effect:parallel trade, through an implicit arbitrage, should promote price equalization across countries and favor market efficiency; b) destination country effect: higher price competition in destination countries tends to reduce overall drug prices; c) patient benefits:patient access to innovative medicines could improve because of lower direct and indirect costs; d) industry impact:it should spur the local industry,if not the international players to overall industry efficiency and, thus, cost effectiveness. Others such as Panos Kanavos, professor of healthcare policy at the London School of Economics, point out “there is no evidence of sustainable dynamic price competition in destination countries, with no corresponding indirect cost savings”and “the supposed benefits of this system need to be seriously reviewed”.The debate is expected to continue for a long time. PITC believes decreased production costs will lead to lower drug prices.It aims to assist local drug producers acquire raw materials at more convenient prices and exploit scale economies.“We would like to cooperate more closely with our local manufacturers; given the high brand-sensitiveness of the Filipino market, and we would like to help them further to develop the concept of branded generics,“ says Pagdanganan.Nevertheless, national manufacturers do not support implementing parallel trade and importing less expensive drugs.The government has been successful in bringing cheaper medicines.Trade department officials have said they would likely stop buying drugs from India and elsewhere if local manufacturers could offer the same quality and low prices.PITC, with its Botika ng Bayan, has triggered a small revolution in the Filipino pharmaceutical market.In pursuing the ambitious strategy Mr.Pagdanganan has mapped out, the final outcome will depend on his ability to get a larger number of national players on board. Pharmaceutical Technology SEPTEMBER 2006 87
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