Pharmaceutical Market Outlook

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Disclaimer

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As with any attempt to estimate future events, the forecasts, projections, conclusions,
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Agenda

Global Macro Economic Environment

Global Pharma Market Overview
Global Market Outlook to 2020
NHI implementation & industry impact analogues
Impact of Universal Healthcare in Indonesia

Moving Forward

Agenda

Global Macro Economic Environment

Global Pharma Market Overview
Global Market Outlook to 2020
NHI implementation & industry impact analogues
Impact of Universal Healthcare in Indonesia

Moving Forward

2014 onwards, GDP growth in emerging economies is

slowing; while mature economies have reached stability
Contributions of Employment and Labor Productivity to GDP Growth, 2000-2016, in % (annual average)

Source: The Conference Board Total Economy Database, May 2016

Across emerging economies there has been a marked

downturn in TFP, a measure of efficiency of input utilization
Growth Contributions of Labor, Capital and Productivity, in %

Source: The Conference Board Global Economic Outlook 2016 (November 2015)

This is seen through sharp declines in emerging market

returns relative to developed markets
Sales & Net Income

Profit Margins

Emerging Market Returns Relative to Developed Markets

Source: FactSet Fundamentals, ASCI as of September 2015

As global returns converge and emerging economies volatility

increases; investment choices become less obvious
GDP Growth, average annual % change

**Europe includes European Union -28 as well as Switzerland , Iceland and Norway.
**Other mature economies are Australia, Canada, Iceland, Israel, Hong Kong, South Korea, New Zealand, Singapore, and Taiwan Province of China.
***Southeast Europe includes Albania, Bosnia and Herzegovina, Croatia, Macedonia, Serbia and Montenegro, and Turkey.
Source: The Conference Board Global Economic Outlook 2016 (November 2015)

Agenda

Global Macro Economic Environment

Global Pharma Market Overview
Global Market Outlook to 2020
NHI implementation & industry impact analogues
Impact of Universal Healthcare in Indonesia

Moving Forward

2015 Refresh of the Pharmerging markets

Brazil

Mexico

Bangladesh

India

Turkey

Argentina

Russia

Poland

Algeria

Saudi Arabia

Colombia

Indonesia

South Africa

Egypt

Chile

Philippines

Nigeria

Pakistan

Kazakhstan

21 countries

China

Pharmerging Definition
GDP per capita less than $30,000
>$1Bn US$ or LCUS$ in absolute
5yr growth (2014-2019)

Vietnam

Tier
definition

Tier 1

Tier 2

Tier 3

> 100Bn US$

sales in 2014

>15Bn US$ sales

in 2014

>1Bn US$ or LCUS$ in absolute 5yr

growth
(2014-2019)

New to Pharmerging
No longer
Pharmerging

Ukraine

Venezuela

Romania

Thailand

Globally, specialty and biologics products are driving growth

Specialty vs. traditional sales

Biologic vs. small molecule sales

2010-2015 US$

2010-2015 US$

893

748

30%

893

748

24%

20%

23%

77%

70%

80%

2010

2015

2010

Specialty
Traditional

76%

2015
Biologic
Small Molecule

10

75% of global growth comes from five TAs, with Hepatitis &
Oncology alone accounting for ~ 50% of growth
Global: Highest growth Therapy Areas
Absolute three year growth LCUS$ Bn (2013-2015)
0

Hepatitis

61%

Oncologics

54%

Antidiabetics

73%

Anticoagulants

52%

Autoimmune

69%

HIV

62%

Respiratory

69%

Mental Health

92%

23%

23%
6%

18.1

8.7
8.4

20%

6.7
4.1

75%

MS

Ocular Antineovasc.

8 10 12 14 16 18 20 22 24 26 28

3.3

26.9

Share of
global growth
2013-2015
28%
19%

9%
9%
7%
4%
3%

2.6

3%

2.5

2%

1.7

73% of
global
growth

US
EU5
Japan
Pharmerging
All Others

1%

Source: IMS Health MIDAS Q4 2015; Rx only; Respiratory combined with other Respiratory

11

Speciality care growth has driven by USA; traditional small

molecules are growing in Pharmerging markets

Total market Abs growth by region

17%

12%

Specialty

17%
11%
5%

10%

6%
17%

9%

25%

Specialty products
Abs growth by region

35%
37%

Share of
absolute
growth by
region
(LCUS$)

4%
4%
11%

31%

2006-2010

RoW
Pharmerging

8%

41%

Japan
EU5

2006-2010

20%

Traditional

2011-2015

41%

34%

58%

2011-2015

11%

58%

6% 3%

US

Traditional products
Abs growth by region

3%
37%

28%
-1%

2006-2010

2011-2015

Source: IMS Health MIDAS Q4 2015; IMS The Institute for Healthcare Informatics; Market prognosis March 2016; Sept
2015 forecasts used for all countries outside of top 52

12

Few Pharmerging countries have embraced specialty care

products
Specialty vs. traditional market share (US$ Bn)
Pharmerging

30%

425

554

643

18%

23%

33%

82%

77%

67%

2005

2010

2015

54
9%

118
12%

165
13%

Specialty drivers
Oncology makes up
roughly 40% of all
specialty sales in
pharmerging

91%

88%

87%

2005

2010

2015

Specialty
Traditional

The top three specialty

drugs in Turkey are
Herceptin, Avastin and
Lucentis
7

Pharmerging: specialty share of market 2015

26%

24%

21%
20%

15%

14% 13% 12% 12% 12%

10%

7%

5%

4%

India

Philippines

Indonesia

Vietnam

Brazil

Mexico

S. Africa

China

Poland

Russia

Turkey

0%

Kazakhstan

Specialty share of market (%)

Share of sales (%)

Top 8: US, EU5, Japan, Canada

Some locally branded

drug copies are within
the top selling
specialty drugs

Source: IMS Health MIDAS MAT Q4 2015; Excludes countries with no hospital panels: Algeria, Argentina, Bangladesh,
Chile, Colombia, Egypt, Pakistan, Saudi; Contains Brazil and Mexico non-retail panels

13

Agenda

Global Macro Economic Environment

Global Pharma Market Overview
Global Market Outlook to 2020
NHI implementation & industry impact analogues
Impact of Universal Healthcare in Indonesia

Moving Forward

14

Over the next 5 years we expect a top line growth of 4-7%

CAGR
Pharmerging growth declines to single digits
Developed Markets
CAGR 2016-2020

Global Sales and Market Growth

1.600

Japan

1.400

10%

Germany

6%-9%
(-1)%-2%

3%-6%

1.200

8%

1.000
800

6%

600

Growth

Sales (Bn LCUS$)

US

12%

4%

400
2%

200
0

UK*

4%-7%

Italy

2%-5%

France

(-2)%-1%

Spain

2%-5%

Canada

3%-6%

Developed

4%-7%

Pharmerging Markets
CAGR 2016-20 LCUS$
China

5%-8%

Brazil

7%-10%

India

10%-13%

Russia

6%-9%

Turkey

12%-15%

Mexico

2%-5%

Pharmerging
LCUS$

6%-9%

Pharmerging
US$

4%-7%

0%
2015

2016

Global sales

2017

2018

Developed growth

2019

2020
At par with region CAGR

Pharmerging growth

Lower than region CAGR

*Subject to clawback

Higher than region CAGR

Source: IMS Market Prognosis March 2016; at ex-manufacturer price levels, not including rebates and discounts. Contains
Audited + Unaudited data; Sept 2015 forecasts used for all countries outside of top 52

15

US will account for 55% of global growth 2016-2020

Region Contribution to Global Growth

2011 - 2015

2020 Region Market Share

2016 - 2020
RoW

Absolute growth contribution in LCUS$

11%

6%

9%
8%

12%

Rest of World

8%

8%

Pharmerging
T3 & T4
US

7%

Pharmerging T3 & T4
13%

19%

1%
8%

BRI

BRI
44%

6%

China

4%
8%

Japan
China

11%

EU5
55%
41%

Canada
6%

US

Japan
13%

EU5

2%

Canada

Source: IMS Market Prognosis March 2016; at ex-manufacturer price levels, not including rebates and discounts. Contains
Audited + Unaudited data; Sept 2015 forecasts used for all countries outside of top 52

16

Specialty therapies continue to drive growth in Developed

Markets; Traditional therapies will expand in Pharmerging
Markets
Spending by Therapy area, 2019
Developed

Pharmerging

Sales in
CAGR
2019 (US$) 2015-2019

Sales in
CAGR
2019 (US$) 2015-2019

Oncologics

$80-90Bn

7-10%

Antibiotics

$19-22Bn

2-5%

Diabetes

$74-84Bn

12-15%

Pain

$19-22Bn

5-8%

Autoimmune

$52-62Bn

11-14%

Hypertension

$13-16Bn

4-7%

Pain

$33-39Bn

(-2)-1%

$11-14Bn

9-12%

Viral Hepatitis

$28-33Bn

9-12%

$11-14Bn

9-12%

Respiratory

$28-33Bn

(-1)-2%

$10-12Bn

11-14%

$9-11Bn

6-9%

$7-9Bn

13-16%

Oncologics
Diabetes
Antiulcerants
Dermatology

Anticoagulants

$25-28Bn

(-6)-(-3)%

Cholesterol
Dermatology

$24-27Bn

6-9%

HIV Antivirals

$21-24Bn

4-7%

Anticoagulants

$7-7Bn

4-7%

Mental Health

$21-24Bn

1-4%

Mental Health

$5-7Bn

7-10%

Specialty

Other Cardio.

Traditional
17

Agenda

Global Macro Economic Environment

Global Pharma Market Overview
Global Market Outlook to 2020
NHI implementation & industry impact analogues
Impact of Universal Healthcare in Indonesia

Moving Forward

18

An examination of NHI implementation across various

countries indicates three distinct phases
1

2
Setup

Increasing
Consumption

Specialization

Volatility

3
Scale Up

Reform

Sharp Increase in chronic and catastrophic care spend

Overconsumption in healthcare sector

Increase in separation of activities across value chain

Attempts to bring in efficiencies through scale to compensate for
lower price points

Industry operating under rapidly changing circumstances

Highly dependent on macroeconomic circumstance

19

An examination of NHI implementation across various

countries suggests there are three distinct stages
1

2
Setup

3
Scale up

Reform

Consolidation

Emergence of winners and losers leading to consolidation both for

providers as well as Pharma

Globalization

Domestic industry has scale to regionalize/ globalize

International companies tend to buy into the market

Stability

Reimbursement policies evolve

Sources of funding healthcare evolve to include copayment
Budget impact analysis become standard

20

An examination of NHI implementation across various

countries suggests there are three distinct stages
1

2
Setup

Special Purpose
Vehicles

Improving Standards

Value based
reimbursement

3
Scale Up

Reform

Increase in special purpose vehicles to deal with advanced

healthcare issues including aging, rehabilitation

Increasing requirement for manufacturing and healthcare

services
Emergence of national information reporting standards
Emergence of health technology assessments
Risk sharing arrangements for newer products
Increase in supporting industries including outcomes research

21

In 1995 Taiwan established a single NHI system and by 2003,

NHI had 99% coverage of the population
BNHI Income and Expenditure Gap & Increasing Trend

Gap between income and expenditure

100 Million (NTD)

GMP Standards
established
Pricing Mechanisms for
Pharmaceutical

1996

1997

1998

1999

2000

Drugs approved under PIC/S

GMP & FDA/EMEA are eligible
for higher reimbursement
pricing

Encourage Pay for

performance

Price Volume Survey

Reimbursement Cap

HTA (Health Technology

Assessments)
Balance billing
Reference pricing
New generation of health
insurance

Increase in premium &

copayment
Pharmaceutical Volume
Caps
Global Budgets

2001

2002

2003

2004

2005

2006

2007

2008*

2009*

Source: http://www.doh.gov.tw/CHT2006/DM

22

As a result the industry has been through the three stages and
is now undergoing further reform
BNHI Income and Expenditure Gap & Increasing Trend

Gap between income and expenditure

100 Million (NTD)

Consolidation amongst
domestic cos
Decline in field force
numbers

Introduction of Risk Sharing

arrangements for biologics/
high value products

Push for specialized

reimbursement vehicles

Push for expansion of

specialized treatment
beyond limited specialty

Push for Introduction of

budget impact studies
from Pharma Cos

Regulator model transition to collaborative working model base on common understanding of mutual challenges
1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008*

2009*

Source: http://www.doh.gov.tw/CHT2006/DM

23

In terms of pharmaceutical usage, theres been a steady shift

in spend towards patented products in Taiwan

100%
90%
80%
70%

60%
50%
40%
30%
20%
10%
0%
Q3 2004

Q3 2005

Q3 2006

Q3 2007

Q3 2008

NEVER PROTECTED

Q3 2009

Q3 2010

NO LONGER PROTECTED

Q3 2011

Q3 2012

PROT UNKNOWN

Q3 2013

Q3 2014

Q3 2015

PROTECTED

24

Agenda

Global Macro Economic Environment

Global Pharma Market Overview
Global Market Outlook to 2020
NHI implementation & industry impact analogues
Impact of Universal Healthcare in Indonesia

Moving Forward

25

Indonesia is now in the midst of undergoing universal health

coverage
49

251

Self-employed

Total population

Planned BPJS coverage (2014 population base)

51

18
20

108
Jamkesda

31

Jamkesmas

76

Poor /
Near poor

Expansion phase (2016 2019)

Askes
TNI/POLRI

Jamsostek

Private
insurance

Privately
employed

The middle class

population
Primary Care

Secondary Care

Reimbursed by Capitation linked to number of

registrations in puskesmas/clinic

Reimbursed by INACBG, a variation of DRG

Public as well as private providers

Specialized vehicles

Oncology reimbursed through fee for service

Source: BPJS, IMS internal analysis

26

We see all the expected signs from the Setup Phase of

universal healthcare coverage implementation
1

2
Setup

Increasing
Consumption

Specialization

Volatility

3
Scale Up

Reform

Sharp Increase in chronic and catastrophic care spend

Overconsumption in healthcare sector

Increase in separation of activities across value chain

Attempts to bring in efficiencies through scale to compensate for
lower price points

Industry operating under rapidly changing circumstances

Highly dependent on macroeconomic circumstance

27

We have seen seeing strong increase in volume

consumption
Public Hospitals
Oncology
(Average Dosage Units)

Q3
2013

Q4
2013

Q1
2014

Q2
2014

Q3
2014

Q4
2014

Q1
2015

Q2
2015

Q3
2015

Public Hospitals
Hypertension
(Average Dosage Units)

Q4
2015

Q1
2016

Q2
2016

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016

Branded Gx

Unbranded Gx

Branded Gx

Unbranded Gx

Originator

Total

Originator

Total

28

particularly in chronic diseases

Annual growth Post-BPJS

Oncology
35%

30%

25%

Diabetes
Asthma /
COPD

20%

Hematology

15%

Dyslipidemia

Intravenous
Solution

Cardiac
Disease

10%

5%

Analgesics
Annual growth Pre-BPJS

0%
0%
-5%

-10%

5%

10%
Inflammatory
Disease

15%
GI Disease

20%

25%

30%

35%

Antibiotics

29

The Pharma market for example has seen tremendous

volatility
TOTAL MARKET MAT VALUES (BIO IDR)

TOTAL VALUE SHARE

70.000

16%

DOMESTIC
FREE SALES;
31,9%

14%

13,2%

60.000

50.000
9,9%

ETHICAL
62.4%

10%
40.000

8,1%

MNC FREE
SALES; 5,7%

8%
62.839

30.000

DOMESTIC
ETHICAL
BRANDED;
29,0%

DOMESTIC
UNBRANDED
GENERIC;
11,0%

64.279

57.162
52.868

MNC
UNBRANDED
GENERIC;
0,3%

FREE
SALES
37.6%

12%

MAT Value (Bio IDR)

MNC ETHICAL
BRANDED;
22,1%

6%

46.686
20.000
4%
2,3%
10.000

2%

0%
MAT 2Q12MAT 2Q13MAT 2Q14MAT 2Q15MAT 2Q16

Value growth (in %)

MAT 2Q16 vs MAT 2Q15

TOTAL

MNC

DOM

TOTAL

2.3%

5.3%

1.2%

ETHICAL

4.8%

7.4%

3.4%

ETHICAL BRANDED

3.5%

7.4%

0.7%

UNBRANDED GENERIC

11.4%

13.3%

11.4%

-1.5%

-2.2%

-1.4%

OTC

30

Agenda

Global Macro Economic Environment

Global Pharma Market Overview
Global Market Outlook to 2020
NHI implementation & industry impact analogues
Impact of Universal Healthcare in Indonesia

Moving Forward

31

From hereon, there are numerous possibilities for evolution

of the healthcare system in Indonesia

Slow Progress to
Scale Up > 10 yrs

Setup Stage

Volatile environment leading to weak

investments
Possibility of Lost Decade in terms of
healthcare as a pillar of economic growth

Routine Progress to
Scale Up ~ 5 yrs

Follows a classic path to stability

Other countries provide pathway for scale up
Clearly established path to stability

Rapid Progress to
Scale Up < 5 yrs

Would be an opportunity to accelerate based

on cross country learnings
Allows industry to continue on

32

To progress to a rapid scale up there are a few critical

areas which need to be addressed
1

Regulator-Industry
interaction Platforms
2

Expansion in
source of funding
3

Use of
Information
Technology

Establishment of multiple touchpoints between Industry , Payor & Regulator to

explore policy possibilities

Establishment of Co-Payment mechanisms

Implementation of COB
Possible Sin Tax to support healthcare spend

Increase in healthcare information collection

Development of analytics capabilities in public sector

Infrastructure
Scale up

Increase Provider participation for NHI

Expand provider base

Academic
Participation

Increase in information available for academic analysis to expand think tanks

33