Pricing Pressures Intensify In Asia As Healthcare Budget Battles Rage On

HONG KONG - Pharmacies and hospitals in the Philippines had until Tuesday to halve prices of a range of drugs or face the wrath of regulators keen to lower drug prices.

The Sept. 15 deadline was a local issue but it underscored a rapidly growing trend across countries in the region - a push to lower drug prices.

In just about every case, the efforts to cut drug prices have pitted healthcare systems struggling for funds against pharmaceutical companies looking to develop new markets in Asia while facing higher research and development costs - not to mention stronger competition from cheaper generics.

The Philippines is the stage for the most recent struggle as drugstores and hospital pharmacies are forced to cut prices of 43 essential medicines or face stiff penalties.

"There will be another major round of inspections starting Sept. 15, this time on small and medium pharmaceutical outlets," Health Secretary Francisco Duque III told local media.

At the end of July, President Gloria Macapagal-Arroyo signed an order imposing price controls on five drugs used to treat high blood pressure, cancer and cholesterol. Among the drugs on the list was Pfizer's popular hypertension drug Norvasc (amlodipine). The government order was made despite a compromise offer by pharma companies to voluntarily reduce prices by Aug. 15.

An industry association suggested losses as a result of the new policy could be as high as $208 million.

Ultimatums Take Different Forms In Taiwan, South Korea

In different ways, other countries are taking similar steps. Taiwan, South Korea, and Thailand have all taken measures of one kind or another to lower drug prices. China is also looking to standardize drug prices as it moves to create a more uniform universal healthcare system.

In Taiwan, Big Pharma threatened to stage a protest less than two months ago as the Ministry of Health unilaterally lowered the prices published in the government's schedule. The issue is a particularly emotional one in Taiwan because big hospitals often negotiate directly with pharma companies and have the bargaining power to get prices much lower than the published ones and pocket the difference.

"For the past 14 years, prices have been very low," said Carol Cheng of the International Research-based Pharmaceutical Manufacturers Association of Taiwan, which coordinated efforts by the industry on the issue. "The government spends a very limited budget on healthcare. … If they don't [increase] the funds for the system, the system will collapse."

Health Minister Yang Chih-Liang, who took office in August, pledged to do something about the country's struggling healthcare system. His party has a majority in parliament, so raising fees should be relatively easy.

"If I don't impose a premium hike, I will be impeached by the Control Yuan," Yang told reporters in Taiwan. The Control Yuan is Taiwan's top oversight body (Also see "Taiwan's New Health Minister To Hike Fees For Healthcare System" - Scrip, 18 Aug, 2009.).

In Korea, the 11th largest pharmaceutical market in the world, the issue of drug pricing pitted a government struggling to deal with a global economic crisis against global pharma. In mid-2008, the government sought to reassess the drugs on the country's reimbursement list. The reassessment involved an economic assessment of drugs, comparing their efficacy against price. The project will take about five years to complete and will cover 16,000 different drugs in 49 groups.

In one example, the Health Insurance Review Agency evaluated seven categories of hyperlipidemia drugs, analyzing factors like mortality rates and reductions of cholesterol levels. Finding only limited differences, it moved to reduce prices to that of the lowest generic product.

In April, Korea's Ministry for Health, Welfare and Family Affairs started a program that allows regulators to cut the market price of drugs by 20 percent if the manufacturer offered kickbacks to doctors and hospitals (Also see "Korean Ministry Plan To Order Penalty-based Price Cuts On Pharmaceuticals Faces Resistance From Global And Local Players" - Scrip, 24 Jul, 2009.).

Glivec Price Cut Suspended In Korea

However, Seoul's Administrative Court recently ruled in favor of Novartis by suspending the Korean health ministry's plan to cut the price of the Swiss-based company's leukemia drug Glivec (imatinib) by 14 percent beginning Sept. 15.

The threatened price cut by the health ministry has been frozen until the court battle is played out between Novartis and the ministry over the justification for the price cut, the Seoul court said.

The Glivec price slash - hammered out in the ministry's pharmaceutical price adjustment committee - is lower than the 55-percent price cut demanded by patient groups and higher than the 0.4 percent cut offered by Norvatis (Also see "Seoul Court Overturns Health Ministry's 14-Percent Price Cut On Novartis' Glivec" - Scrip, 15 Sep, 2009.).

Thailand, meanwhile, riddled with HIV/AIDS, introduced compulsory licensing to override patents and lower prices of related medications.

China's Essential Drug List Yet Another Option

China, which is investing billions of dollars to develop universal healthcare, published the first part of its essential drug list in August which will be implemented in September in 30 percent of government-run low-tier hospitals and clinics (Also see "China Releases First Part Of Essential Drug List For Community Health Clinics And Rural Hospitals" - Scrip, 19 Aug, 2009.). The idea is that medicines on the list will be available across the country at prices set by the government.

In theory, getting a drug on the list should guarantee sales but there are also drawbacks.

Beatrijs Vanliedekerke, an industry analyst with PricewaterhouseCooopers, warns that companies should think long and hard about their long-term strategy for China. Being on the list could be a boon for manufacturers of inexpensive generic products but could negatively impact more expensive, patented products.

Helen Chen, director of Shanghai-based L.E.K. Consulting, concurred, noting that the short-term expansion will be from mostly basic generic drugs on the essential drugs list

"We believe that the overall health care reform process, including the essential drug list, will increase the overall pharmaceutical market. The volume growth will significantly outpace the value growth," she said in an earlier interview (Also see "China's Changing Drug Market In The Wake Of Essential Drugs List" - Scrip, 9 Sep, 2009.).

- Alfred Romann ([email protected])