The Pan Asian Overview: Snapshot of Incidence and Market Revenue

Diabetes affects at least 140 million people worldwide, and Pan Asia has the highest prevalence. In 2000, this region was believed to have at least 96.0 million diabetics and by 2010, the number of diabetes patients is expected to reach 139.0 million. India topped the highest number of diabetic patients with 24 million cases, followed by China with 22 million diabetics. Despite the high incidence rate however, diagnosis rates are relatively low; it is estimated that in this region, only 50 percent of the estimated number of diabetic patients are undergoing treatment, that is, about 46 million patients. In this entity, approximately 10 percent of the total diabetes cases belong to the Type 1 category while 90 percent belong to Type 2 category. While the incidence of Type 1 diabetes is predicted to remain stable, Type 2 diabetes is expected to increase due to the increasing influence of western lifestyles and rapid urbanization in this region.

In terms of market revenue for 2002, Frost & Sullivan predicts the total Pan Asian diabetes medication market to reach up to $1.77 billion, with the growth rate predicted at 10.3 percent. There are two main product lines in diabetes medication, namely insulin and oral anti diabetics (OAD). The insulin market accounts for 32 percent of these revenues while OAD make up the remaining 68 percent. Most countries in this region posted growth rates between 15 percent and 20 percent (with the exception of Japan as it recorded a low growth rate of only 3 percent due to market saturation). The high overall growth rate was due to flourishing markets in the other nations. By 2007, the market revenue for diabetes medication in Pan Asia is forecasted to reach $2.85 billion, with the compounded annual growth rate (CAGR) from 2001 to 2007 registered at 10.1 percent.

Chart 1

Revenue forecasts for the Pan Asian diabetes medication market from 1997 to 2007.

THE DIABETES DABBLERS

The key market players in the Pan Asia diabetes medication are mainly the multinationals. In Australia, Hong Kong, Malaysia, and Singapore, multinational companies such as Novo Nordisk, Servier, and MSD dominates the market while the local companies are mainly generic manufacturers. In Japan, South Korea, Taiwan, China, and India, both these multinationals and local companies such as Takada Chemical, Yamanouchi and YSP are equally dominant industry participants, especially in the OAD market segment. In fact in Japan, India, and South Korea, local companies have a higher market share than their multinational counterparts. Market leaders in Asia however are Novo Nordisk and Takeda. Other new entrants are GlaxoSmithKline and Novartis. These two companies are infact the innovators of the new OAD (Oral Anti Diabetics) segment. GlaxoSmithKline introduced Avandia (rosiglitazone) to Pan Asia countries in early 1999, while Novartis introduced Starlix (nateglinide) for type 2 diabetes

Chart 2

Total Diabetes Medications Market: Market Share by Companies (Pan Asia), 2002

DIZZYING INNOVATIONS

It is pertinent to highlight that the diabetes medication market had actually been stagnant for at least three decades! The new advances in knowledge, medication and technology however in diabetes management, approximately since 1995, is quite dizzying really. The only kinds of medication available before was insulin and classes of drugs known as sulfonylureas and the biguanides but since then new classes of medications have been introduced to the market to lower blood sugar including a newer generation of sulfonylureas, coupled with major advances in insulin treatments.

In the insulin market segment for eg, the first analogue insulin, (Humalog) introduced by Eli Lilly in 1998, had resulted in increased revenues in countries such as Australia, India, Malaysia, and Singapore. Humalog is a shorting acting insulin class which claimed to more effective than the regular human insulin, in that it provided better glycemic control, especially at mealtimes. Additionally, it was also observed that there was an increasing trend of adopting early insulin therapy among Type 2 diabetics. The concept of “early” insulization among Type 2 diabetics is believed to prevent late complications in diabetes and hopefully prolong the survival period for patients. Obviously this is another niche sector that the insulin manufacturers should focus on very closely.

Similarly, Novo Nordisk had introduced a short acting analogue insulin in Japan, Australia, India, and other markets in this region, to compete with Eli Lilly. Another new player in the block, Aventis is expected to compete in the analogue insulin market, with its latest long acting analogue insulin. This is the first insulin of its kind, as the long acting feature allows consistent gylcemic control for 24 hours, which is ideal for diabetic patients with nocturnal hypoglycemia complications. This is anticipated to path a lucrative pathway for manufacturers to tap into the Type 2 diabetic market, as comparable to the regular insulin.

In the OAD (oral antidiabetics) segment, market leader Takeda formed an alliance with Novo Nordisk to distribute Novonorm (the first insulin sentisizer) in Japan in the third quarter of 2001. As Takada has long dominated the Japanese OAD market, this alliance actually allowed Novo Nordisk a strategic opportunity to tap into the Japanese OAD market. The most exciting trend in the Pan Asian OAD market was when, a new class of treatment known as the glitazones was introduced in 1999 to offer even better glycemic control for Type 2 diabetics. Here the compounds work on improving insulin resistance; another concept that is closely related to prevent late complications of diabetes. This marked the birth of Avandia by Glaxo SmithKline. GSK successfully launched Avandia in most parts of Pan Asia like China, India, South Korea, Singapore, Malaysia and Taiwan and gained significant market share within two years. Another market player, Novartis introduced Starlix, another type of insulin sentisizer., which is already available in Singapore and the Philippines. Starlix is chemically different from other compounds as it can normalize mealtime glucose spikes. Due to its fast and short acting feature, it has minimal chances of causing hypoglycemia, which is one of the constant problems reported by many Type 2 diabetics at mealtimes. Frost & Sullivan strongly believes that the Pan Asia diabetes medication market will continue pressuring manufacturers to offer new products in an effort to gain market share. Hence, the total market is expected to grow rapidly.

DIABETIC OR DYNAMIC PROFITS FOR THE INNOVATORS ?

These new launches infact did spur market growth in the Pan Asia region. New innovations definitely were and are promising but the real challenge however is whether the manufacturers would be able to compete and ensure profits and a lucrative ROI. All in all, there are a couple of factors that will pose as major hurdles in the Pan Asian markets

One frustrating hurdle is that there is still a preference for the older drug generations (such as the glibenclamide, and the metformins) in the Pan Asia market due to several factors. One reasons forwarded on why physicians still prescribe this class of drugs is the fact that the older products are much lower in cost and also have had a long established proven clinical data. This has indeed made changing physicians’ mindset quite a challenge. In this aspect, manufacturers need to aggressively and continuously provide new clinical findings of new drugs to turn over this perception. Additionally, continuous medical education for the physicians need to be emphasized to influence the prescriptions patterns of the physician so that they understand issues such as benefits of early insulin therapy, insulin resistance etc.

Another influential negative impact on market revenues would be the rapid mushrooming of generic products. Generic manufacturers are gaining market recognition especially in older OAD products such as, sulphonylureas, biguamides, etc. Since late 1997, the generic market share has increased significantly. This is due to the low purchasing power triggered by the financial crisis in this region resulting in popularizing generic substitutes. In 2002, most generic companies recorded at least a 30 percent growth rate. The market share of the older generations of generics has increased significantly between 10 percent and 20 percent. This may reduce market attractiveness and restrain growth for the branded drugs.

Additionally Frost & Sullivan also noted that in most national health insurance-reimbursed markets such as Australia, South Korea, Japan and Taiwan, the governments have recently embarked on newer measures to remain profitable. Initially, most of them had undertaken huge reimbursement expenses because at least 90 percent of their respective population were being heavily subsidized in health bills. In the diabetes medication expenses, especially the OAD products, sulphonylureas and metformin are preferred over newer agents due to affordability reasons. In Taiwan, the policy makers are constantly revamping their annual strategy for tighter drug purchase control to ensure profitability. Their latest measure is by imposing the requirements for pharmaceutical companies to implement an annual revision on the drug prices if their respective drugs were to remain in the reimbursement listing. Then, in July 2002, they fixed an annual drug spending budget allocated to each hospital, which meant that hospitals are now in charge of their own drug spending.

In Japan, the National Health Insurance reduced the drug reimbursement scheme by 7 percent in 2000 and encouraged co-payments by patients. This resulted in greater sales of cheaper products and physicians were encouraged to prescribe older products. Similarly the Australia national insurance council has plans to switch to cheaper drugs in order to cut expenses. The council has plans to shift physicians’ prescriptions to generic brands, and at the same time would implement co-payments by patients.

These policies and price control measures have reduced companies’ continued interest and indulgence in this market. The resulting crisis is that new products are facing extreme difficulties in penetrating the market due to its high prices. For now, this factor only poses a moderate impact on the market, as most governments have only begun implementing and fine-tuning their healthcare policies. But in the long run, this may pose quite a formidable threat to market development.

Last but not least, cost is a major factor. As manufacturers spend enormous R&D dollars in innovations, timing for ROI is critical. Many of them had market these new innovations few times higher than the classic drugs. For example, Avandia is known to be priced at 4 times the price of Daonil (a popular sulphonylyrea) in many Asian markets. Many physicians hence are hesitant to expand their prescriptions volume and in some cases, even refused to prescribe! In many markets, new innovations were only used as a second or third option when older drugs fail in alleviating the pain and torment of the diabetics. Manufacturers should seriously concentrate on shifting the mindset of the physicians.

NEW HORIZONS FOR DIABETES

What lies ahead in the Pan Asia diabetes medication market? With the promising biotechnology achievements, multinationals are racing to offer better treatment options, if not, a cure to diabetes. The long awaited changes in drug delivery methods are finally happening in the insulin market. One of the biggest restrictions in many insulin markets is due to its injection form. In fact this has prevented insulin to realize its fullest commercial potential in the far larger market segment; the Type 2 diabetes. In years to come, non-injectable insulin will open up the lucrative Type 2 diabetes market for insulin manufacturers. Leading the race now is another multinational, Pfizer, which had formed a joint venture with Inhale Therapeutic Systems and Avnet to product inhalable insulin products. The product is expected to be introduced to Pan Asia within a couple of years which will surely revolutionize the industry, promising tremendous growth. Existing manufacturers such as Novo Nordisk and Eli Lilly are equally pressured to develop various insulin delivery options including oral route to maintain their market positions. In the OAD segment, we predict that more new improved insulin sentisizers would enter the market, offering a better option to the Type 2 diabetics.

Other exciting advances are also happening. One is called the Islet Cell Transplant which is a new technique has shown promise in people with Type 1 Diabetes. Called the 'Edmonton' technique, the transplants have resulted in seven patients becoming insulin free for up to 14 months after treatment. Clinical trials are now underway to see if the insulin reversal can be successful.

The Edmonton technique uses islet cells (cells from the pancreas) from two or more donor pancreases. The cells are transplanted into a person with diabetes and then special medications are given to prevent rejection of the new cells. One difficulty with the transplants is that even though a person may become free of the need to take insulin, the medications to prevent rejection of new tissue must be taken for a lifetime. These medications have side effects.

The decoding of the human genome of course is a monumental achievement and offers tremendous hope for diabetics. Scientists have identified a gene called SHIP2 that seemingly regulates insulin. Other studies are being conducted as possible gene therapy for diabetic retinopathy.

Another eureka in the world of diabetes medication is the creation of a drug, a peptide that actually can stop the destruction of pancreatic beta cells in humans. This possibly could prevent type 1 diabetes in people at high risk and help slow the progress of diabetes for those already diagnosed with it. Additional research, promising data, successful clinical studies..all in all the future of diabetes treatment indeed looks very promising for sufferers and obviously offers lucrative revenues for the innovators and manufacturers.

For any queries please email jgovan@frost.com

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