Vaccines: Big Players Push into Asia

Vaccines have become an important revenue driver for the pharmaceutical industry. Facing the patent cliff of their existing portfolio of drugs, and encouraged by the emergence of blockbuster vaccines, almost all major pharmaceutical companies have entered the fray over the past 10 years, leading to a consolidation of the industry which is now dominated by just five big players.

Increasingly, these companies realize the commercial opportunity for vaccine makers in emerging and developing countries. Large birth cohorts that dwarf those that have been seen in the developed western world, higher disease burden and rising public and private spending on health make Asia’s markets particularly attractive for the vaccine industry, according to Datamonitor.

Looking to Asia

The developed world has been the initial focus of vaccine makers due to established healthcare infrastructure and high price levels, but increasingly competitive and saturated markets have led vaccine developers to look elsewhere, such as Asia. “Here, governments are increasing their efforts to improve vaccination rates and to assure supply, while the growing middle classes are creating a significant private sector opportunity in many countries,” says Datamonitor senior healthcare analyst Hedwig Kresse.

It was found that a key argument for vaccine manufacturers to target Asia’s emerging markets is demography. China and India, the world’s two most populous countries, offer a vast market opportunity for vaccine makers due to their sheer population size, reflected in their large birth cohorts.

These are particularly relevant for vaccine makers as they guarantee a stable demand for infant vaccines. India’s birth cohort is almost six times as large as that of the US, and despite China’s one-childpolicy, there are still more than 18 million babies born every year. In combination with the large need even for basic vaccines, this translates into a promising commercial opportunity for vaccine makers, and a challenge for governments as the main payers.

As immunizations remain one of the key measures to reduce disease burden in countries with high prevalence rates for many infectious diseases, vaccine makers can hope for an increasing readiness of governments to introduce their vaccines and promote or even mandate their use.

Vaccines also have a commercial perspective in the emerging Asian private sector markets, with many people willing to pay out-of-pocket to protect their children from disease. The increasing wealth in India, China, Taiwan and South Korea is leading to a rapid growth of healthcare spending there. Benefiting from the economic upturn over the last decade, these countries are investing more money into healthcare.

While Taiwan and South Korea in particular have significantly increased their spending power and are closing in on the five major European countries (5EU: France, Germany, Italy, Spain and the UK), in terms of gross domestic product per capita, their total healthcare expenditure is still only approaching around 50 percent of the level seen in the 5EU. At the same time, the increasing income level has resulted in a sharp upturn in private sector healthcare spending in the four key Asian emerging markets. It accounts for more than 80 percent of all healthcare expenditure in India, with China, Taiwan and South Korea averaging around 50 percent.

Meeting Needs

Asian markets have varied and differentiated needs that require product offerings that are targeted to the respective country. In terms of disease coverage, there are several different opportunities for vaccine suppliers, ranging from the more basic roll-out of the World Health Organization’s Expanded Program on Immunization (EPI) vaccines to higher priced products such as recombinant hepatitis B- and conjugate Haemophilus influenzae type B vaccines.

In the private payer market, there is increasing demand for the provision of new, high-priced vaccines such as pneumococcal conjugate vaccines (such as Prevnar and Synflorix), human papillomavirus vaccine (such as Gardasil and Cervarix), rotavirus (such as Rotateq and Rotarix) and varicella (such as Varivax and Varilrix) vaccines.

There are some diseases that are endemic in Asia whose burden could be reduced by development and/or the introduction of routine immunizations. These include Japanese encephalitis, dengue fever, hand foot and mouth disease, and chikungunya. Using differential pricing, vaccines protecting from these diseases could be offered at a premium to travellers in the West.

In addition to the different needs in terms of epidemiology, regional vaccination coverage rates and recommendations vary widely across Asia’s main economies, as do the regulatory environments. Since these variations are significant and are not always transparent or publicized, local knowledge is key for optimum business success.

Key players such as GlaxoSmithKline, Sanofi-Pasteur and Novartis have all acquired smaller enterprises or entered into partnerships in key Asian markets. On-the-ground presence not only lowers the barriers when negotiating with local regulatory agencies and payers, but “can be crucially important for manufacturing vaccines in quantities and at price levels that meet the demands of the host country,” adds Kresse.

GlaxoSmithKline’s activities in China illustrate these efforts: originally established in 2001, the company expanded its local presence by entering into agreements with local player Sinovac to promote the latter’s flu vaccine in 2007 and forming a joint venture with Shenzhen Neptunus for the development and production of another flu vaccine in 2009. A second joint venture established in 2009, with Walvax Biotech, will produce and distribute children’s vaccines.