Special Report: With Poor And Uninsured A Majority, Southeast Asia Sees Rise In Generics

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Four of the world’s most populous nations are in Southeast Asia and with roughly two-thirds of its population lacking access to medicines, the region holds promise for the cheaper generic drugs. Already, observers are taking note of how the region is changing the dynamics of the global business.

The structure of the generic drugs industry in Southeast Asia, like other parts of Asia, is “very different” from the rest of the world, Rhenu Bhuller, Asia Pacific vice-president for healthcare practice at research and consulting firm Frost & Sullivan, told Intellectual Property Watch in an interview.

“You do not see companies like Teva, Sandoz or Mylan, who are world leaders in generics, being the leaders in the local Asian markets,” Bhuller said.

Instead, he noted that home-grown companies such as the Philippines’ United Laboratories (Unilab) and Indonesia’s Kalbe Farma are the ones cornering the lion’s share of the domestic markets in the region.

The generics market in China is 90 percent controlled by local producers as a result of their strong connection with the local governments, in which a commission-based model is being followed, and they have a competitive edge over their foreign counterparts in the areas of marketing and distribution, said Bhuller.

And while this is also true in India, which is by far Asia’s single-country leader in generics production with its market now worth $26 billion and still growing, manufacturers there are also exporters.

In Southeast Asia, local generics manufacturers are strongly focused on their respective domestic markets. “The generic manufacturers are mainly producing for local consumption, although there are manufacturers in Malaysia for example that are exporting to other developing countries like Africa,” Bhuller said.

Two years ago, Frost & Sullivan published a study that looked into the status of the generic drugs industry in the region, covering Malaysia, the Philippines, Singapore and Thailand. The study found that the industry was “slowly gaining more attention from patients and governments” in the region, with sales seen to hit $10.82 billion by 2016 from $6.8 billion in 2009.

In the study, the research and consulting firm noted, among its other findings, that the generics market in the Philippines was “small”; that the Thai market was “not intense”; that the Malaysian market was the largest, accounting for 47.8 percent of the pharmaceuticals market; and that Singapore enjoyed an “efficient regulatory set-up and a stable macroeconomic environment,” resulting in “higher level of interest in generic drugs.”

Since then, and over a span of just less than two years, some things have changed. Frost & Sullivan now sees the Philippines and Indonesia as “strong-growth local markets,” and with Singapore no longer playing a large role in generics compared to its neighbours as it has shifted its efforts and research and development (R&D) on “new innovative therapies.”

“Indonesia, for example, has regulations in place that require foreign manufacturers to manufacture locally and there is a lot of interest to enter that market due to the population size and its economic growth,” Bhuller said. “We believe there will be more partnerships between Indonesian and foreign generic companies that will expand the products available in Indonesia.”

In most of Asia, branded generics – equivalent drugs sold by non-innovator or non-originator pharmaceutical companies and marketed under proprietary names – rule over the unbranded ones. Generics in general are either off-patent drugs or those using a slightly different formulation to avoid infringing existing patents.

Recent Developments

In September, the Indonesian government, in a move not welcomed by multinational innovators, issued Presidential Regulation No. 76/2012, a decree allowing domestic drugs manufacturers to produce generic versions of some HIV/AIDS and Hepatities B (HBV) medications that are still under patent.

According to the Jakarta Post, the decree covers highly active antiretroviral drugs such as efavirenz, abacavir, didanosine, a combination of lopinavir and ritonavir, and tenofovir.

This is said to be the third time, following similar decrees issued in 2004 and 2007, that Indonesia issued a set of compulsory licences, a mechanism allowed under the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Martin Khor of the intergovernmental South Centre said the use of compulsory licences to enable wider access to cheaper medicines to treat life-threatening diseases is picking up in the region.

“Starting with Malaysia in 2003, many Asian countries are now taking action to promote cheaper medicines through compulsory licensing, with Indonesia being the latest case,” Khor said in his column for Malaysian newspaper The Star.

Bhuller said most of the governments in the region are now under pressure to improve access to medicines, considering and subsequently implementing key policy reforms such as that of Indonesia to ease the plight of the “unreachable population.”

“Generally, it will be life-threatening diseases that the populations have no possible way of getting access to at the costs they are being sold at in the market or that the governments are unable to expand their budgets to pay for at current prices,” he said.

Competition, Collaboration

As competition heats up between domestic generics manufacturers and innovators, the latter have developed various strategies, other than filing patent infringement cases at courts, in order to guard their businesses. These include developing their own generics units or making strategic acquisitions.

“Generic companies have upped their game and are starting to differentiate themselves through quality and regulatory approvals/FDA standards,” Bhuller said.

In the Philippines, Unilab, which owns the generic brand RiteMed, can attest to the growing business and intensifying competition.

“It’s tough, but the locals are winning. We witness the rise of Unilab’s RiteMed and the pull out of Pfizer’s Parke Davis. Sanofi’s Winthrop and Novartis’ Sandoz are doing well. However, while competing, there is also collaboration,” Unilab senior vice-president for business development Jose Maria Ochave told Intellectual Property Watch in an interview.

One example of collaboration is that Sandoz is the one manufacturing some of RiteMed’s products, a fact confirmed by the Novartis generics unit.

“We are a supplier to RiteMed. Asia is an important market for Sandoz and in the first nine months of the year sales were up 21 percent, [but] we wouldn’t comment on competitors in the region or specific trends,” Neil Moorhouse, Sandoz global spokesperson, told Intellectual Property Watch.

Ochave said that in the Philippines, more than 60 percent of the medicines are generics and Unilab is capitalising on this growth by building a unibrand through RiteMed, instead of multiple product brands, to further reduce costs and to be able to offer lower-priced medicines.

Similar to other aggressive generics manufacturers, Unilab has been caught in legal battles with innovators. One is with Pfizer over the anti-cholesterol drug Atorvastatin Calcium. Unilab just won at the Court of Appeals, in which the court junked a petition to reverse a lower court decision denying injunction.

And with the region poised for bigger growth in generics, it is expected that more legal tussles, such as this, lie ahead.

Maricel Estavillo may be reached at maricelestavillo@gmail.com.

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