Pharmaceutical Commerce - July/August 2017 - 10
A conversation with
As multinational pharma companies look to expand their
business globally, one of the attractive markets is Southeast
Asia-essentially, the region between India and China. This
region is modernizing rapidly: the middle class is on track
to double to nearly 400 million by 2020, from 2015's figure.
The healthcare industry growth rate in Southeast Asia is 8.3%
annually through 2021, according to Roland Berger Strategy
Consultants; the market for prescription drugs was $9.5
billion in 2016.
DKSH, headquartered in Zurich, Switzerland, and with a regional HQ in Bangkok, Thailand, is a leading trading company and distributor
of healthcare products in Asia.* The company traces its roots back to three Swiss entrepreneurs who set up operations in the region in the
mid-1800s. After having had strong business ties, the Diethelm and Keller families decided on a merger in 2000, followed by Siber Hegner.
This eventually created DKSH. Roughly half of DKSH's business is in healthcare-prescription drugs, medical devices and OTC products
(2016 healthcare sales: CHF 5.5 billion (US dollars 5.7 billion), up 11.3% at constant exchange rate). By its history and through integration
with business conditions in Southeast Asia, DKSH has pioneered a form of business it calls "Market Expansion Services." Market Expansion
Services include all the traditional mechanisms of drug distribution-import/export management, warehousing and logistics, order-to-cash
and the like; but in its core it is assisting in regulatory approvals; market research; sales and promotion; and post-sale follow-on services.
Relative to North American or European drug distribution, DKSH offers what it calls "capillary distribution": the last-mile deliveries to its
customers-hospitals, clinics, pharmacies, retail outlets and specialty channels-in major cities, as well as geographically remote locations.
Pharmaceutical Commerce sat down with Bijay Singh, newly appointed head of the Healthcare Business Unit, to talk about the Asian market
and DKSH's role in healthcare distribution. Here's what he had to say.
*Specifically: Cambodia, China, Hong Kong, South Korea, Laos, Macau, Malaysia, Myanmar, Singapore, Taiwan, Thailand and Vietnam. The company also does some business
elsewhere, operating in 36 countries from 780 business locations, with 750 in Asia. Total staff is 30,320. DKSH is publicly held and listed on the SIX Swiss Exchange.
Relative to conventional
distribution of pharmaceuticals
in the US-from manufacturer
to wholesaler to retail pharmacy and/
or hospital, with some growing impact
of direct-to-consumer deliveries-
how do healthcare/pharmaceutical
markets function in Southeast Asia?
What are the main differences, and
the main points of commonality?
A key point is volume and growth: The
Association of Southeast Asian Nations
(ASEAN) region alone comprises 625
million inhabitants, double that of the USA.
Per a 2015 report by Nielsen, the ASEAN
middle class is expected to grow from 200
million to 400 million people by 2020.
With higher disposable income comes an
increased expectation of access to high-
quality healthcare. These Southeast Asian
patients and consumers place high trust
in branded generics. Incidents in the past
around non-branded generics and fear of
counterfeits have not yet worn off.
The Southeast Asian healthcare market is
characterized by its high amount of out-ofpocket expenses. Particularly in Southeast
Asian markets, reimbursement is much
lower than in the USA and other western
markets. There are pockets of government
and privately insured individuals, but many
Southeast Asian markets lack universal
coverage systems like those in Taiwan,
South Korea or Western markets.
The high dependence on out-of-pocket
expenses in Southeast Asia results in a
low adoption of high-priced treatments,
compared to reasonably well-financed
reimbursed markets. While the middle class
10 Visit our website at www.PharmaceuticalCommerce.com July | August 2017
is growing quickly, many treatments are
simply not yet affordable for many patients.
With an annual growth rate of 9.1%
between 2016 and 2021 in Asian markets,
pharmaceutical companies in Southeast
As i a s t i l l en j oy h i g h g row t h i n t h e
region and probably some of the highest
Meanwhile, governments in several
Southeast Asian countries are faced with
a challenge: how to contain the increasing
healthcare costs. In markets such as
Vietnam, we see a trend towards reference
pricing and generic substitution for large
therapeutic categories. This, in turn, leads
to price pressure and the need for pharma
companies in Asia to prioritize; in terms of
markets, channels and products.
Commercial outsourcing to companies
like DKSH is a proven way for companies
to expand market or channel coverage, and
drive sales growth of products. This can
range from product registration and launch
to renewing growth of mature products.
The natural reflex of most
multinational pharma companies is
to open a marketing and distribution
operation in each of the countries they
want to do business in, and undoubtedly,
many companies have already done
so. Is there an inherent advantage to
the outsourced services DKSH offers,
relative to these internal efforts?
There are several benefits to outsourcing
(part of) the product portfolio to DKSH.
First and foremost, commercial outsourcing
allows pharma companies to focus on
their core competencies, such as research