with Alex Ho General Manager, IMS Health Taiwan
Alex Ho has more than 15 years of significant pharmaceutical industry expertise, spanning across sales, marketing and product management in multinational companies. These companies include Novartis, Janssen, L’Oreal, GSK and most recently with Abbott Taiwan prior to joining IMS Health Taiwan as the General Manager in August 2012.
Can you please begin by introducing yourself to our readers, and explaining what brought you to IMS?
I joined IMS in August of 2012. Before I took on this role, I worked for a number of pharmaceutical companies, and a cosmetics manufacturer: I started my career as a sales representative for Glaxo Wellcome, worked briefly at L’Oreal, then returned to pharmaceuticals with roles at Janssen, Novartis, and finally Abbott, where I was the business unit head for Humira and a number of specialty products. I have worked for the pharmaceutical industry for 15 years.
I was attracted to IMS for two reasons. The first was the opportunity to lead an affiliate as general manager, which had long been my ambition. I had developed a significant amount of commercial experience over the years, but wanted to broaden my skillset and try my hand at management. The second reason was the fact that working for IMS allows me to take a higher-level view of the market. I find it extremely interesting to study the market as a whole: policy change, environmental change, the strategies of various commercial players, the challenges that the industry associations face, and so on. My work for IMS has really helped me to enhance my understanding of the Taiwanese pharma market.
You have undoubtedly used IMS data and services as a 15-year veteran of the pharma industry. What did these experiences teach you about what the industry is looking from IMS?
You’re right: I’ve used IMS for over a decade, and I understand what customers need—because I’ve been one. When I joined this affiliate, I encouraged my team to understand those needs first. Clients view IMS as a leader, and we have a very significant role to play within their business.
In the past, our image was that of a pure data company. But IMS is more than that—we can provide not only data, but also insight and solutions. We actually offer three major services: secondary market research, primary market research, and high-level consulting. As I have worked with this organization, I have discovered that our consulting offer is very strong. As I came to this realization, my understanding of who IMS is has totally changed. I see that we can really do more for our clients.
Our consulting business is based in Singapore, because the expense associated with consulting projects means that it makes more sense to run the offer from a regional office. However, that does not mean we cannot provide consulting to our clients in Taiwan—it is simply a matter of enlisting the help and resources of our Singapore colleagues. We have enhanced our ties with those colleagues, in an effort to demonstrate our consulting excellence to local customers.
I strongly believe that once we can provide solid strategic advice to the industry here in Taiwan, they will recognize that we are more than a data company. As I mentioned, IMS offers three major services—and we should not neglect any of them. One of my priorities is to change our image in the market. We must position ourselves to be a total-solution provider, while increasingly customizing our offer based on specific customer requests.
How has the pharma market environment in Taiwan changed in the years since you first joined the industry?
In the past ten years, this industry has operated within an increasingly difficult environment. There are two major elements here: pricing challenges, and the difficulty of market access.
Taiwan is an almost fully reimbursed market, with the Bureau of National Health Insurance (BNHI) offering coverage to more than 99% of the population. Over the past 15 years, the premiums required by the NHI system have not grown very much. Approximately ten years ago, the BNHI experienced a deficit, and the bureau tried everything it could to control spending. One of their major tactics was to reduce drug prices—and they have employed this tactic continually ever since. There have been seven major rounds of price cuts, based on a mechanism called the Price-Volume Survey (PVS).
The seventh price cut came in December of 2011, and the industry experienced the full-year impact in 2012. According to IMS data, market growth contracted in 2012 by 0.9%, even 2.3% decline in hospital market which was more relevant to the NHI reimbursement —the first contraction in 20 years. In previous years, the market had been growing by anywhere from 1-16%, depending on the price cut cycles.
Typically, price cuts have reduced pan-market prices by 9-10%. Ideally, this impact would be offset by the introduction of new products. However, as I mentioned, getting products to the market has been quite difficult in Taiwan. In the past three to five years, growth from new product introduction has not been able to adequately cover the losses brought about by the PVS system.
The root cause of market difficulty is the BNHI. The bureau has not only cut the prices of existing products, but also delayed and heavily controlled the reimbursement of innovative drugs.
GSK’s Thomas Willemsen told us that even when new drugs are allowed onto the market, the BNHI is overly restrictive about the size of the patient population that is eligible to receive the product.
That is quite true. For the majority of medications—especially expensive medications—Taiwan has some of the most restrictive reimbursement criteria in the world.
We can take Humira as an example. The major indication for this product is rheumatoid arthritis. Globally, one of the parameters physicians use to evaluate disease activity in this area is something called the Disease Activity Score (DAS). In some countries, prescription of Humira is not limited by the DAS that the patient presents with; rather, prescription is at the discretion of the physician, who decides whether or not Humira can help the patient irrespective of DAS. In other countries, the DAS requirement approaches 3.2 on the relevant scale—in Taiwan, the requirement is 5.1!
Taiwan’s reimbursement system is heavily balanced towards patients with severe disease activity, because our financing cannot support the entirety of the patient population. Reimbursement criteria are inherently designed to limit patient eligibility.
How are generics companies faring in this market?
In 2012, the Top 10 multinational companies in Taiwan suffered from inactive growth. Only three managed to grow their business, and the other seven declined. However, among the Top 10 local suppliers—generics companies—only one experienced decline. The rest grew their businesses. IMS believes that one of the reasons for this phenomenon is replacement. These companies have won significant hospital tenders as more and more multinational innovators have lost patents on key products. Multinational generics companies are also doing relatively well in this market, but we should note that government policy favors local manufacturers.
The Taiwan Food & Drug Administration (TFDA) is working to promote PIC/S GMP standards. By the end of 2014, all local pharma companies—and their multinational counterparts, as well—need to demonstrate PIC/S GMP certification in order to market products in this country. Companies that reach this standard will receive incentives: for instance, the right to sell their product at the same price at most as the originator. A number of companies have already been able to increase their prices because they have passed the relevant inspection.
Even though generics companies faced the same price cuts in 2011 that innovators did, the majority grew their businesses in 2012.
Will the overall market return to growth this year?
We believe that it will. We anticipate growth of 6-10% this year, based on our conversations with key pharma GMs.
Do you believe that the Second Generation National Health Insurance Act is positive for your clients?
Some of the provisions are positive, but some of them are not. On the positive side, we can consider the fact that this Act should generate more income for the BNHI, because it calls for an increase in premiums. If the system can resolve its deficit issues, the benefit will be passed on to the industry.
On the other hand, Second Generation NHI has introduced a number of mechanisms that we believe will have a negative impact on the market. For instance, the BNHI has invited patients to join the Pharmaceutical Benefit and Reimbursement Scheme (PBRS) committee, which is responsible for reimbursement decisions. Patients’ attitudes are totally different from those of payers—so we anticipate longer reimbursement negotiations. The majority of our multinational clients feel that this new scheme will further delay product launches.
Will the market continue to experience continuous price cuts?
Policy is becoming more and more clear in this sense. For instance, in the second half of 2013, the BNHI will issue a price cut for off-patent products. Currently, there is no consensus about the price cut mechanism between BNHI and the International Research-Based Pharmaceutical Manufacturers Association (IRPMA), but I believe an impending meeting will produce a resolution. We believe that the final consensus will be to use the same mechanism as before—PVS—but this time, PVS will not be conducted for all products, but rather for off-patent products only.
What can you tell us about the Drug Expenditure Target (DET)?
DET was launched in January of 2013. Currently, the BNHI plans to give DET a two-year pilot run. In 2013, the drug expenditure growth rate has been set at 4.528%, based on a 2012 baseline. The bureau will not conduct a DET price cut, or engage in DET price regulation, in 2013. Officials will wait until next year. In the first quarter of 2014, drug spending for 2013 will be evident, and the bureau will evaluate whether spending has exceeded the target or not. If spending does exceed DET, then prices will be reduced for certain products. Off-patent products that will undergo a price cut this year will be excluded, so that they do not experience a double cut.
What about the so-called ‘Article 46’?
Article 46 deals with the direction of price cuts for off-patent products. Perhaps it is a cultural idiosyncrasy, but it seems that legislation in Taiwan is often unclear—and Article 46 is a good example. It stipulates that all products that lose patent protection must reduce their price to a certain “reasonable level” within the ensuing five years.
Currently, the real argument between the IRPMA and the BNHI regards the cut-off date for the article to come into effect. Pharma companies believe that because it was introduced in January 2013, it should only affect products that lose patent after that date. The BNHI, on the other hand, would like to take a retrospective approach, and include off-patent products from the past five years in the eligibility pool for price cuts.
The market doesn’t seem to be very predictable!
That’s our own belief as well. One month ago, we had an in-depth discussion with the IRPMA, and suggested that the association work to persuade the government to implement more predictable mechanisms.
Despite this unpredictability, do you have some expectations about how the market could grow in 2014 and beyond?
According to our forecasting, from 2014-2017, the market should grow at a rate of 4-5% per annum. The major driver will be the DET growth target that I mentioned — ex: 4.528% in 2013. This figure actually matches the growth target for the global healthcare budget as well.
What is your final message to our readers?
I think that Taiwan is a fairly mature market and the current growth drivers are oncology, hematology, anti-virus, and anti-diabetic products all of which continue to be strategically focused on. But there is still room for new developments. For instance, biologic and bio-similar agents are getting more and more attention under the spotlight.
Given the increasingly close relationship between Taiwan and China, many experts expect an increasing influx of Chinese patients into Taiwan. This could be a lucrative business opportunity for healthcare companies in this market.
Another evolution that I think is worth noting is the growth of the self-care, or OTC, market—this segment is very underdeveloped in Taiwan, and has a lot of room to expand.
If I could provide some advice to outsiders looking into this market, these are two phenomena I would watch out for!