HONG KONG – Home to large populations and steadily growing economies, Asia is poised to serve as an important growth region for pharmaceuticals for decades to come.

But unlike the comparatively uniform U.S. or EU markets, countries and regions around Asia reflect complex and unique local market and regulatory environments. Not only do drug companies need to deal with wildly varying requirements from market to market, they must also address numerous pricing issues.

"In Asian countries, GDP is growing, income is growing, expectations of patients are rising," said Steven Bradshaw, European director at global pharmaceutical market access consultancy Market Access Solutions. "In recent years, manufacturers have come up with some innovative pricing schemes to maintain the prices while expanding the market share."

A quick glance at a few different Asian markets illustrates why, as a region, Asia poses unique market challenges to companies accustomed to dealing with the American or European markets.

In Malaysia, drug prices have risen drastically due to the rise in raw material and labor costs. Prices are expected to continue to rise next year.

The prices of some drugs increased 20 percent to 50 percent this year alone, with most companies adjusting their prices twice over the last 12 months, according to the Malaysian Community Pharmacy Guild (MCPG).

MCPG president Wong Sie Sing said the annual drug price increase in the country is typically between 5 percent and 10 percent. But with the country's Goods and Services Tax (GST) scheme launching next April, there will most likely be additional hikes of 10 percent to 40 percent.

The Malaysian government announced Oct. 10 that 2,900 medical products are listed in the National Essential Medicines List (NEML) Fourth Edition and are classified as zero-rated (GST) items. Drugs that are not listed on the NEML are charged at a 6 percent GST rate.

MCPG submitted a letter to the Finance Ministry and Royal Customs Department of Malaysia in February requesting that all medicines defined under Poisons Act 1952, essential medical devices, and pharmacist professional services to be GST-free. But the government rejected the proposal.

"We had told the government that it will be a new tax if all the medicines are not listed under zero-rated GST as there is no tax for any registered medicines at the moment," said MCPG in a public note.

THE OTHER END OF THE SPECTRUM

Over in South Korea, low prices are a concern.

According to a study by Seoul's Sungkyunkwan University, the country's drug prices are lowest in the developed world. The average price of drugs launched in Korea is only 44 percent of the Organization for Economic Co-operation and Development average.

South Korea's low drug prices will continue to push prices down in other markets. It would be particularly difficult for international pharmaceutical companies if such a drug pricing trend were to take off in China, which is expected to be the world's second-largest drug market by 2017.

"South Korea's lack of new drugs simply reflects their system of low pricing and the risk of South Korean drug prices being used for international reference pricing by other countries, which would cause those countries to push down their prices," said Bradshaw in a note. "There is virtually no incentive for drug companies to add South Korea in their launch sequence, especially when doing so could jeopardize an entire global pricing plan."

"South Korea ought to consider its position carefully and keep pharma on [its] side, especially if they want patients to have access to newer and better medical technologies," Bradshaw added.

It is essential that a drug company has a strategic global price plan and is aware of changes in external reference pricing (ERP) rules, as a ripple effect can easily erode the global price if one country decides to reference a country where the public list price is low.

China is, of course, a major ERP concern.

China has a huge potential patient base, highly unmet medical needs and increasing disposable income in the upper tiers of society. It is a priority for many multinational drug companies.

"China has indicated that it might reference India, South Korea and the Philippines, making an investment higher risk if this were to happen, as the drug prices in India are typically only 10 percent of Western countries," Bradshaw said.

Bradshaw referred to the "Asia paradox" – a huge market with great and apparent potential but lack of regulatory transparency and sometimes local knowledge, which make those markets difficult to navigate. The end result is that most international drug companies need to work with local partners.

"Many Asian countries are home to manufacturers of second brands or branded generics and biosimilars, which are increasing in popularity, thanks to lower prices, which makes the market more competitive," Bradshaw told BioWorld Today.

Bradshaw said that in addition to much-needed transparency, more global collaboration is needed between international pharmaceutical companies and Asian markets.

"Biologics are expensive to manufacturers – it's impossible to bring the price down unless the company has local manufacturing facilities," said Bradshaw.

With biosimilars entering the market, the prices of the different types of biopharmaceuticals developed for older indications, such as rheumatoid arthritis, will gradually come down, said Bradshaw.

"If there's something new with new indications, the biologics' price will probably be high for a while until it starts to drop off," he said.