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The Untapped Potential of ASEAN: The key growth factors

In part 2 of the ASEAN series, Marc Yates, Director of Emerging Markets at pharma market research specialist Research Partnership, shares insights from his experience of working in BRIC and beyond.
In this column, I continue to explore the opportunities for pharma in ASEAN, one of the world’s largest and fastest-growing economic territories.

In last month’s column we looked at the attractiveness of ASEAN as a potential growth region, but also one with wide disparity in terms of wealth, healthcare coverage and political and economic stability. We looked in more detail at the key markets of ASEAN6 comprising Singapore, Malaysia, Thailand, Indonesia, Vietnam and the Philippines.  Now let’s take a look at some other factors particular to this region, such as drug needs, the role of traditional Chinese medicine, the importance of the pharmacist as a key stakeholder and the growing impact of medical tourism on the region.

The rise of non-communicable diseases

First of all, let’s look at which drug types are relevant within these ASEAN markets.

Rapid economic development in the region has had both positive and negative effects. In terms of disease profile, non-communicable diseases are the number one killers in ASEAN, claiming an estimated 7.9 million lives every year.  Socio-economic development within the region has adversely affected the proportion of people affected with disorders associated with affluence such as obesity, diabetes, hypertension and cardiovascular diseases. These diseases are typically associated with more highly developed regions, which confirm that emerging-market lifestyles are beginning to mimic those of more Westernized markets in urban areas. In Indonesia, Vietnam and the Philippines, they have to deal with a ‘dual disease burden’, as their healthcare systems cope with the increasing prevalence of diseases of affluence alongside infectious diseases yet to be fully eradicated.This development presents pharmaceutical companies with an opportunity to market their global products in an extended market, but, considering the diverse cultural and healthcare infrastructure across the countries, also necessitates a change in their go-to-market strategies and operating models.

With per capita expenditure on healthcare typically increasing with age, the age distribution of the respective markets can be key. Some ASEAN6 markets, such as Vietnam, Indonesia and the Philippines, are characterized by very young populations, while other markets such as Singapore and Thailand already have an aging population and a high old-age dependency ratio.  Singapore has one of the lowest birth rates in the world, whereas Indonesia and the Philippines have a very high birth rate. The younger markets with high birth rates offer opportunities for paediatrics and vaccines products, whilst the more mature markets present opportunities for specialized drugs for diseases which are common among the elderly. High cost drugs may stand a better chance in wealthier nations such as Singapore, where affordability, access, healthcare infrastructure and private health insurance coverage are the highest in ASEAN. Indonesia is also a potential market because of the sheer size of its population and the growing number of affluent people in the capital and large metropolises.

Secondly, let’s consider the importance of traditional Chinese medicine. 

Traditional and herbal medicine is an integral part of Southeast Asian culture, and as such it must often be considered as both a potential competitor and a complimentary treatment to ‘Western’ pharmaceuticals.  In countries such as Malaysia and Singapore, historical Chinese influence and migration mean that Traditional Chinese Medicine (TCM) is well established.  TCM clinics and departments can be found in major public hospitals in Singapore, for instance, and in Indonesia Jamu - a predominantly herbal medicine made from natural materials - is also sold in large cities with around 75% of the 200 million Indonesians consuming various types of jamu products on a regular basis in order to prevent or treat diseases. Most people who use traditional medicine consider these kind of therapies to be ‘‘natural’’ and thus ‘‘safe’’; however, many of these therapies, like other medical treatments, have the potential to be directly or indirectly harmful. Despite this, TCMs must be considered within the competitive set for many product types, as they are so engrained in ASEAN culture.

The role of the pharmacis

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In this region, we also need to consider the role of the pharmacist in healthcare delivery.

Traditionally, the role of a pharmacist is focused on dispensing pharmaceuticals, with little contact with patients beyond this. A pharmacist, as a drug expert, is rarely seen to engage with patients or provide consultation and feedback to physicians. However, in ASEAN this role is fast evolving, due to the increasingly challenging healthcare environment.

In Malaysia and Singapore, prescribing and dispensing are handled by physicians and patients largely fund their own treatment. While the separation of prescription and dispensing is legislated in other ASEAN markets, community pharmacies are neither formally integrated with the public health system nor reimbursed for their services by the government.

In countries such as Vietnam, it is common to seek medical advice from a pharmacy rather than a doctor due to limited government healthcare funding and limited public healthcare services.  The distinction between ethical (POM) and over the counter (OTC) drugs is also unclear in markets such as Vietnam, Thailand and the Philippines, where ethical drugs can often be purchased without prescriptions, despite government efforts to regulate such practices. Hence, a pharmacist may carry increased influence in the sale of a particular drug. Despite a national government program in Vietnam to implement Good Pharmacy Practice (GPP), an international standard for implementing quality patient care, the size and lack of resources for implementing and enforcing the regulations has proved challenging.

The growth of medical tourism

Finally, ASEAN’s growing market for medical tourism is providing a new dimension to the region’s pharmaceutical industry. Low costs, quality treatment, and shorter waiting times are driving the region’s pharma sector to new heights. Medical tourism is going through a transitional phase and has immense future growth and development potential. In the last 10 years, Malaysia’s revenue from the healthcare tourism sector increased tenfold.

ASEAN nations are increasingly linked by the flow of people to high quality healthcare service hubs within the region, as the private sector in the region’s more affluent countries captialiseon their comparative advantage.  In countries where the healthcare infrastructure is more developed (such as Singapore, Malaysia and Thailand), there is an increased push to promote the region as a medical R&D hub and medical tourism hotspot. For example, Thailand welcomed nearly two million foreign patients in 2012, with medical tourism accounting for almost 0.4% of its GDP and seeing year on year increases. Singapore and Malaysia are also positioning themselves as destinations for high quality healthcare aimed at tourists both globally and within the region, notably the emerging Indonesian middle classes. In contrast, the Philippines’ primary contribution to regional healthcare is its export of human resources for healthcare to generate income back home. Pharma marketers should consider the impact of medical tourism on their launch strategies in this region.

Multi-local strategy

So in conclusion, despite deepening integration, ASEAN remains highly fragmented, especially in terms of its healthcare provision. Because the region is so diverse, pharma companies are forced to adopt a multi-local strategy across the region, tailoring their strategy to individual markets. In order to maximize the opportunities in these markets, pharma executives have begun to realign the distribution of management power – moving away from headquarters toward regional management - a measure that will help to increase the empowerment of regions and ensure local market focus.

In the future, it may be that regional diversity within ASEAN will gradually decrease with the ASEAN Economic Community (AEC). The AEC has a goal of delivering regional economic integration by 2015 with the characteristics of a single market and production base, a highly competitive economic region, a region of equitable economic development, and a region fully integrated into the global economy. Whether that is achievable or realistic remains to be seen. Whatever the future, it remains clear that ASEAN is a region currently undergoing immense change and it’s essential that pharma has a strong understanding of each nation’s unique healthcare environment if planning to exploit the opportunities there.

We are one of the largest independent healthcare market research and consulting agencies in the world. Trusted partner to the global pharmaceutical industry, we use our expertise and experience to deliver intelligent, tailor-made solutions. We provide strategic recommendations that go beyond research, helping our clients to answer their fundamental business challenges. Find out more at http://bit.ly/1HJ5mow

8th July 2014

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