More Ways to Win by 2020

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More Ways to Win by 2020
An audio interview with IMS Health’s Murray Aitken and Sameer Savkur
AUDIO INTERVIEW!
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More Ways to Win by 2020
IMS Experts: Murray Aitken & Sameer Savkur
Length: ~14 minutes
To download an MP3 of this interview, click here.
To download the PDF transcript, click here.
Questions? Comments? Fill out the form at the end of this presentation.
Murray Aitken Sameer Savkur

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So Murray, perhaps we can start with you to get a global
perspective of the pharmaceutical industry over the next
ten years. It’s quite a positive outlook I believe.
Murray Aitken (MA): It is Andrew. There are many ways for
CEOs of pharmaceutical companies to win in the next ten
years, particularly for companies that maintain a focus on
innovation and cater to present unmet needs.

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And this is in spite of predicted slower growth in the
industry overall? Some analysts are predicting a decline
over the next ten years due to two significant periods of
patent expiry. Add in the cost containment practices
some pharmas are adopting, and the industry is
predicted to drop to a value of $500 billion from its more
than $800 billion value today.
MA: That’s one way to look at things, but it’s only half the
picture.
Know more on IMS Health, click here

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Ah, I see. So what is the other half?
MA: It’s true that we expect to see lower growth in the next
five years than there has been in past decades, but that will
pick up in the latter half of this decade. And we should be
factoring in pharmerging market growth in countries including
China, Brazil, Russia and India. These markets will account
for about 50% of the global market growth over the next five
years and their potential for growth is substantial. This
provides yet another axis on which to play to win.

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Yes, it is an exciting time for emerging markets. Past
investment in research should also yield returns in the
next decade I presume. Research is, after all, ongoing.
MA: Yes. It is easy to get distracted with the losses to come
from patent expiries in the coming decade, but there are
plenty of new drugs and innovations in the pipeline that will
drive growth in the second half of the decade. Our forecast is
high single-digit market growth reaching $1 trillion by 2020.

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I see. So there are plenty of reasons to be optimistic
then, given the full picture.
MA: Absolutely. There will be many ways to win over the next
decade – perhaps more than there has been previously, so
you are right, it really is an exciting time to be in the pharma
industry.

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So what should CEOs be considering now as they plan for
the next decade?
MA: Well the fundamentals that are in our favour include a
growing population, a large ageing segment, and more chronic
disease. As a result there will certainly be opportunities in
certain disease areas. Oncology, diabetes, asthma, vascular
disease, hypertension, antibacterials and psychosis will still top
the list in 2020, with hyperlipidemia and GERD, or acid reflux
disease, moving out of the top ten to be replaced by Pain and
HIV. Technology will provide additional solutions, there will be a
more educated specialist market segment, and emerging
markets, as we’ve mentioned, will be a key player as they will
require existing and new drugs.

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I suppose the challenge is for CEOs to make the right
decision about what to focus on based on their business
model?
MA: That’s right. There is no ‘one size fits all’ answer here.
CEOs have to pick a strategy that is clear in its aspirations
and mission and ensure they have a business model that
supports proper execution.

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So to the analysts who claim there is no shareholder
value over the next ten years and predict a negative ROI,
you are saying the opportunities are out there for
companies that make the right decisions.
MA: Absolutely. Look, as with any changing market dynamic,
you have to move with the changes and plan where to play
and how to play. Are CEOs balancing their plays across today
and tomorrow?

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What do you mean by that?
MA: Well firstly, they need to decide where to play in the
market. Are they focusing on today’s growth segments at the
expense of emerging opportunities, for example.
Are their strategies short-sighted you mean?
MA: Exactly. And talking of sight, are they blindly pursuing
specialist driven medicines, biologics and generics without a
clear path to winning?

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With such a diverse market, there are so many choices,
and yet that could ultimately be their downfall I
suppose.
MA: If they make the wrong choice, yes. But the
opportunities are there. It’s a question of adjusting your
strategy and portfolio to fit the changing demands. For
example, rather than diversify as they may be doing today,
they may need to rethink their Go-to-Market strategy and
focus on growth in one niche area.
Sameer Savkur (SS): Also, if I may, the market is telling us
is to adjust expectations. CEOs should be lowering their top-
line growth aspirations and placing greater emphasis on
profitability over growth.

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MA: Yes, that’s right Sameer. Gone are the days of the
blockbuster model. That’s in the past. Science has become
more complex and disease specific.
SS: And emerging markets such as India affect the balance of
play.
MA: Yes, absolutely. While focus in the past has been on the
more established markets of the US, Japan and Europe, CEOs
should be looking to take advantage of the opportunities
derived from playing across more markets. Emerging markets
present great opportunities for branded generics, but there
are significant opportunities for innovative products in the
long term in these markets as well. CEOs have to decide to
play in generics or pursue slow but growing innovation
opportunities.

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India is a rapidly developing economy, obviously.
Sameer, what can we expect in terms of growth in the
pharma market there over the next ten years?
SS: Well, today’s market is worth about $10.5 billion. We’ve
seen a 15.4% growth rate over the last five years and that
has been driven by strong economic growth. GDP growth of
8% has enabled an increase in the pharma industry and we
expect to see value double to $20 billion by 2014.

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So what factors will influence this dramatic growth?
SS: Well GDP growth of around 7% to 9% will continue to
increase private spending. India is largely a self-paid market
with government spending only accounting for 25%. That
broad trend will continue, but we are also seeing increasing
penetration of private insurance, which will fuel growth
further. And of course, government spending is set to
increase as the government develops the rural market.

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Why the focus on the rural market?
SS: There is the need to improve access to healthcare in rural
areas. At present rural areas account for 70% of the
population, yet only 40% of spending.
I see. What is being done to address this?
SS: Several things. Firstly government initiatives have been
rolled out recently to improve health care access in rural
areas. Some examples of these are the National Rural Health
Mission and the Rashtriya Swasthya Bima Yojana. Secondly,
the government has also offered tax exemptions for setting
up hospitals in non-urban areas.

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What impact has these incentives had?
SS: It has attracted a lot of interest and private investment in
this sector, and is driving the hospital business. The robust
GDP forecast coupled with the increased spending power of
the non-urban / rural population is being leveraged by
Pharma companies looking to grow their business.

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Can you give some examples?
SS: Certainly. We are seeing quite a few big Pharma
companies expanding their field forces to cover non-urban /
rural areas in a bid to exploit this untapped potential. All
these initiatives are bound to improve rural healthcare access
in the coming years.

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So things are definitely moving in the right direction. I
want to go back now to something Murray mentioned
earlier about chronic disease being a key growth trend in
the next ten years. Is that the case in India?
SS: Most definitely. We have already seen a huge shift over
the last ten years from acute disease to chronic disease. The
ratio in 2000 was 80:20 and by 2015 we expect it to be
70:30. With chronic disease, patients stay on medications
longer, and that is a positive trend for the pharma industry.

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India is a largely branded generics market. Is that set to
continue into the future?
SS: Yes it is. Branded generics presently make up 98% of the
market with patented products making up the remaining 2%.
By 2015 we do expect patented product penetration to
increase to 6%, so that will have an impact on how
multinationals look at the India market. Added to that, the
pricing landscape is changing.

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Oh really. How so?
SS: Obviously branded generics are priced low for mass
consumption while patented products command a higher
premium, up to 200-300% of the generic equivalents.
At these prices, is India seen as a lucrative market for
investment?
SS: Definitely. India is likely to be the third-largest economy
by 2030. Also factor in the rise in the middle class increasing
people’s ability to pay, given the changing dynamic in
spending I mentioned earlier. Companies definitely see India
as a place to be and tend to adopt one of three strategies.

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What strategies would these be?
SS: Either they acquire companies - we’ve seen 4 or 5
important acquisitions recently including Abbott-Piramal and
Diachii-Ranbaxy - or they partner with local Indian companies
especially from a contract manufacturing perspective. For
example we’ve seen GSK tie up with Dr Reddy. Innovations
and branded generics are both key drivers for growth, and we
will see that in India in the long term, so CEOs should be
considering India in their strategies even beyond 2020.

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Are MNCs investing in the India pharma market directly?
SS: Yes that is also happening especially in innovations of
new molecules, where MNC companies have been successful
in India. However, the third strategy, and I would say that
the biggest trend we will see in India is the focus on improved
healthcare delivery. India is a large country where 70% of the
population has a challenge accessing medicines and
healthcare. A key growth area will be in innovations to
improve the delivery system, and we expect to see lucrative
partnerships established to address this.

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MA: Yes that’s an interesting point, and really what I was
making earlier. Innovations will really be the key driver for
growth in the pharma industry not just in India but globally
over the next ten years and beyond.
It seems there are many opportunities to win over the
next decade then.
MA: Absolutely. It’s a question of knowing what you need to
focus on, be it innovations, disease areas, or delivery and
realising that there are indeed more ways to win in the
market now than there ever has been before. It’s a very
exciting time.
SS: Yes it is.

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Thank you for listening!
• To download an MP3 of this interview, click here.
• To download the PDF transcript, click here.
• Questions? Comments?
− Fill out the form at the bottom of this slide, or
− Visit www.imshealth.com or email info.sg@sg.imshealth.com.

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