Asia’s Shift Toward Outsourced Healthcare Services

Of all the cases of cancer diagnosed around the world last year, nearly half occurred in Asia, according to the World Health Organization’s International Agency for Research on Cancer, as did more than half of all cancerrelated deaths.

Cancer mortality is just one datapoint in the complex geography of healthcare needs. Still, it highlights why global biopharmaceuticals and device companies in Asia are committing enormous resources to serve healthcare systems seeking state-of-the-art solutions that are also affordable.

Today, many multinationals find they are struggling to identify, hire and retain human capital who will help them respond to Asia’s multifaceted market demands. What’s clear is that a go-it-alone strategy will not suffice. For most companies, success will hinge on building partnerships with organizations that can provide highquality outsourcing, training and advisory support.

Partnerships are especially important at a time when government policies are quickly evolving all across Asia. Demographic pressures are driving these changes—most importantly, aging populations with a growing need for advanced pharmaceutical products that command the highest prices, even as governments are desperately striving to rein in costs.

A quick review of recent changes in the pharmaceutical landscapes of Japan and China will show why sector-leading multinationals are deepening their reliance on outsourcing and how such partnerships can deliver the desired efficiencies.

The government of Japan has been charting economic policies with an eye to its aging population for many decades. But only recently, in 2016, did intersecting concerns about eldercare costs and high drug prices translate into action. That year, amidst public alarm about expensive cancer immunotherapies, Japan’s policymakers introduced a drug repricing rule that led to hefty price cuts on treatments for cancer, treatments for hepatitis C, blood thinners and other products. In a series of price reviews, the government halved the reimbursement price for Ono Pharmaceutical/Bristol-Myers Squibb’s Opdivo and took action on other high-priced treatments.

Japan’s Ministry of Health, Labor and Welfare (MHLW) is now walking a fine line between supporting and paying for leading-edge medicines. As part of this balancing act, the ministry is pulling the rug out from under products still under market exclusivity. If you’re second or third to market in an important new class of cancer treatment, your chances of getting premium pricing are slim.

Japan’s objective—conserving financial resources—may seem logical. But from a healthcare perspective, it doesn’t make sense to constrain physicians’ choices of which medicine to prescribe, given that patients respond differently to immunotherapies and other advanced treatments. What’s more, the government of Japan is eager to preserve its reputation as a haven for pharmaceutical innovation and leader in care delivery. Radical constriction of treatment options for patients will undercut that goal.

How can pharmaceutical strategic planners best respond when products that are still under market exclusivity suddenly undergo 30% to 50% price cuts? And how can this response simultaneously take stock of social and cultural shifts, such as changing physician preferences on how they interact with medical reps? Getting more for less amounts to a productivity puzzle—and it’s not easy to solve if you are a sparsely staffed Tokyobased subsidiary of a multinational pharmaceutical company. But by collaborating with a Contract Commercial Organization (CCO) that specializes in agile adaptation to landscape transformation, productivity hurdles may not seem so daunting.

The pharmaceutical field force in Japan relies on relationships and face-to-face interactions with physicians who traditionally have had a strong influence over which brand of drug is prescribed. Because of accelerated price cuts in mature portfolios, especially in primary channels, the economics of maintaining face-to-face relationships haven’t just turned ugly—they’re totally unsustainable. Communication must shift to more cost-effective digital channels. But companies are finding it hard to drive change. A CCO can help, thanks to deep expertise in multichannel marketing and the ability to combine digital and face-to-face interactions into a cost-effective hybrid model.

As in many advanced markets, reliance on medical science liaisons (MSLs) is growing quickly in Japan, and wider use of nonpromotional engagement channels will follow. In 2017-18, the number of MSLs increased by 23% in Japan. What companies need now is a cost-effective way to build MSL capacity by preparing science-background PhDs and PharmDs with comprehensive programs and continuation training. Leveraging their global experience and competency models, multinational outsourcing organizations such as Syneos Health® excel at combining recruitment, training and development of MSL teams.

Commentators on China’s market reforms tend to highlight improvements in the clinical research environment. They point to recent moves by the National Medical Products Administration (NMPA, formerly the China Food and Drug Administration), including a 60-day automatic trial approval process. This and tax incentives that pressure Chinese biotechs to seek approval in global markets from Day One when developing a new molecule are without a doubt transforming China’s R&D environment.

However, when developing strategies around these regulatory changes, multinational organizations must not lose sight of China’s underlying intent. Fundamentally, the NMPA seeks healthcare parity with advanced Western countries, which means expanding local access to the most effective medicines regardless of where they were developed.

This is why China has dismantled barriers to using data from trials conducted outside its borders. By focusing on intent rather than research policy minutiae, multinationals will see that the reforms have big commercial implications. Depending on the size and breadth of the organization, the most important question may be how to prepare for multiple, concurrent product launches. This may take priority over how many trials it can get off the ground, or how quickly.

In 2017, China launched 21 new compounds, more than the previous three years combined. As of last year, there were another 48 products China wanted multinational pharmaceuticals to bring to market, and it was offering conditional approval that would clear the way for accelerated launch. NMPA is saying, in effect: No need to run the trial—registration will suffice. That leaves multinationals with a heavy lift, to be sure—but it’s not in R&D. They must put together commercial teams that can manage every stage in the product launch.

Regional headquarters of even the largest pharmaceuticals simply aren’t built to manage simultaneous launches of multiple key products. But a global CCO partner knows the whole playbook—from advice on registry process and market segment analysis to evidence generation, KOL mapping and engagement, assembling medical affairs teams, Real World Evidence and post-marketing surveillance.

Once a drug company wins marketing approval, it faces a variety of pricing hurdles. In a formula that trades volume for price, the central government is putting pressure on brand owners to submit the lowest-possible bid for business that may include all hospital systems in a major urban center such as Beijing, Shanghai or Guangzhou. The reward is massive volume, albeit at a very low price. But often it’s a winner-take-all contest in which few foreign multinationals are victorious. New volume purchasing guidance means, in the rosiest scenario, reduced drug pricing, and in the worse cases, losing the tender altogether.

Here, the crux is the new tendering process China implemented in Q4 2018. For 31 drugs across 11 cities, generic drugs have been tendered to the lowest bidders by the governments. Big pharma bid on all these drugs, but received a minuscule number of contracts, while prices have declined by 50% on average.

In September, China expanded its bulk-buying program from 11 cities to almost the entire country. The list of drugs affected by the program includes Western multinationals’ offpatent blockbuster drugs, some of which are already facing competition from generics produced locally.

The program fundamentally changes the ball game for multinational players. In the simplest terms, when a drug doesn’t make the volume government tender, HCPs cannot prescribe it. That’s why many manufacturers are shifting their focus to products in oncology, rare disease, immunology and other categories that won’t immediately be threatened by the new emphasis on generics and price.

While demographics driving regulatory reform and innovation may differ across Asia, success for Western multinationals in these markets will always hinge on correct understanding of government intent and the changing rules of the road.

In Japan, drug pricing reform is the response to a looming crisis where an aging population will cost the government more, with consumers shouldering greater out-of-pocket costs as well. Pharmaceuticals must adopt plans that support the country’s economic, societal and reputational ambitions.

China is not so different. Beijing’s goals have less to do with matching the West’s clinical trial prowess than raising healthcare standards for the greatest number of people by increasing access to effective medicines. With reduced investment dollars across the portfolio, foreign multinationals must look for more cost-effective ways to launch and promote products. It’s the only way to ride the tailwinds of improved access under regulatory reforms favoring R&D.

Navigating the push-and-pull of complex government-led agendas is not something a biopharmaceutical or device company should or needs to face on its own. By grooming broad, collaborative, outsourcing-optimized business networks, multinational companies will find they have all the resources they need.