Gearing up for a Global Gravity Shift - Growth, Risk and Learning in the Asia Pharmaceutical Market

A Report by PricewaterhouseCoopers

Introduction:

The centre of gravity of the global pharmaceutical industry is shifting. Not only is Asia set to be the largest pharmaceutical market in the world but many Asian territories will be powerhouses of the industry. The shift started as economies grew and low cost manufacturing in the region expanded. Now, companies are, increasingly, also seeking to site research, development and clinical trial activity in Asian territories.

Multinational pharmaceutical companies are building up their presence in the region. In parallel, many Asian pharmaceutical companies are looking outward and extending their own international reach. Within the region, there is a plethora of domestic companies with the likelihood of substantial consolidation. The region is far from homogenous and each market has its own unique challenges and opportunities. The risk landscape is complex and, while there has been significant progress on many fronts, major concerns remain.

Against this background, PricewaterhouseCoopers has conducted 185 interviews with MNC and domestic pharmaceutical companies across nine territories. The report providers insight into how their companies are Gearing up for a global gravity shift and their views on the growth, risk, learning and outsourcing challenges that lie in front of them. The results highlight the way the industry is changing in the region and the issues that concern companies most. It also looks at the lessons companies have learned along the way and how the two seats of companies, domestics and MNCs, can learn from each other.

PricewaterhouseCoopers has a presence across the region and works with a range of companies, both domestics and MNCs, engaged in many different parts of the pharmaceutical industry. Throughout the report, we also take a look at some of the key dilemmas that companies are facing and how they can be resolved.

Key Highlights

The Shifting Global Centre of Gravity

The pharmaceutical industry in Asia is gearing up to be at the centre of the global market and most expect this shift to happen fast. Fifty five per cent of multinational companies (MNCs) and 62% of domestic companies in our survey believe the centre of gravity of the global pharmaceutical market will be in Asia rather than North America and Europe in the near future. China, India, and Singapore will be key countries.

Sights Set on Outward and Inward Expansion

Three-quarters of respondents from the region’s domestic pharmaceutical companies report that exporting outside their local market is a key goal with 65% seeing increased global market share as important to their companies. A third of MNCs have immediate 12months plans to further expand within the region through acquisitions or their own ‘greenfield’ sites.

The Region Receives a Mixed Risk Report

Both MNCs and domestic companies report progress towards risk reduction in the region. But this is tempered with continuing concerns over intellectual property rights (IPR), corruption and pricing. More than half of domestic companies are worried about unfair competition from generic brands and over three quarters of MNCs report worries about IPR and legal risk. Corruption is regarded as inescapable with 67% of companies saying that it is an endemic part of the landscape and they do not expect it to be eliminated soon.

Companies Seek to Step up Two-Way Learning

MNCs report that their learning curve in the region has been smoother than they had expected. Some anticipated problems were not such issues in reality. Some MNCs feel they still lack the knowledge, skills and insight to gain the most presence in the region. This finds echo with their domestic counterparts who list a number of lessons that they feel MNCs could learn from them, such as understanding the local business environment better and appreciating the professionalism of local companies. In return,

domestic companies also emphasise the gains they can get from MNCs.

Outsourcing Trends Reflect a Changing Business Model

The focus for outsourcing is extending beyond manufacturing, towards research and development (R&D), clinical trails and analytical services. These trends reflect increased capability in the region and a changing MNC business model. MNCs are increasingly focusing on sales and marketing at the centre with other activities outsourced. It is clear that outsourcing has a long way to run. A majority of companies thought that most of the industry still does not see outsourcing in a sufficiently dynamic way and is missing opportunities for shared development, learning and improvement.