Eisai Cuts Aricept Price, Joining Glaxo, Sanofi Race (Update1)
By Kanoko Matsuyama
April 15 (Bloomberg) -- When the pharmaceutical industry maps the world, here is what it sees: 87 percent of its $773 billion in revenue in 2008 came from the U.S., Europe, and Japan, and sales in those places are stagnant, according to IMS Health Inc., market research company.
So where is growth to be found? The answer is the rest of Asia, which is home to about 60 percent of the world’s people -- with rising rates of cancer, heart disease, diabetes, and stroke -- and spends only as much on medicine as Japan alone. The barrier, for millions of Asians, has always been the cost of pharmaceuticals.
Now, for the first time, Eisai Co., GlaxoSmithKline Plc and Sanofi-Aventis SA are slashing prices throughout Asia to spur demand. Yasushi Okada, Eisai’s head of operations in Asia, Oceania, and the Middle East, said his company will cut prices in at least six Asian countries on Aricept, the world’s best- selling Alzheimer’s medicine. While not specifying the size of the cuts Eisai will make, Okada said he expects sales volume to more than make up for price reductions.
“With the current prices, only a part of the wealthy people can afford to buy our products,” Okada said in an interview. “I want to increase the patient accessibility of the medicines in Asia.”
Eisai rose 15 yen, or 0.3 percent, to 3,385 yen as of 10:29 a.m. in Tokyo trading, and has climbed 15 percent in 12 months. Of 18 analysts who follow the company, eight have buy ratings, four recommend selling the shares and six express hold opinions, according to data compiled by Bloomberg.
Glaxo’s Example
The industry’s first pricing move came last year, when Glaxo said it would reduce most of its drug prices in emerging markets to less than two-thirds of the levels in Western countries, and charge 25 percent of Western prices in the 50 poorest nations.
The company now forecasts sales growth of as much as 10 percent in the Asia-Pacific region this year, after last year’s 9 percent increase, Christophe Weber, Glaxo’s regional director, said in an interview on Jan. 18.
In January, Sanofi said it will make price cuts in Southeast Asia that may help patients save as much as half of the cost of some drugs, such as the cancer treatment Taxotere. The changes aren’t likely to aid public health, said Shanthi Mendis, the Geneva-based World Health Organization’s coordinator of prevention for noncommunicable diseases.
“The price reduction of branded drugs will benefit a fraction of the people,” Mendis said in an interview.
Out-of-Pocket Costs
In 2005, about 2.5 billion people were living on the equivalent of $2 or less a day, according to a 2008 report from the Washington-based World Bank. Fifty to 90 percent of medicines must be paid for by patients themselves in low- and middle-income countries, according to a study published in the journal Lancet in December 2008.
With a combined $90.8 billion in drug sales, Asia, Africa, and Australia have growth potential. Seventeen economies, led by China, India, Russia, and Brazil, will together expand pharma spending by $90 billion in the five-year period that began in 2009, according to IMS, based in Norwalk, Connecticut.
China’s drug demand alone will grow $40 billion in the period, IMS said in a March 16 report on “pharmerging” economies. Those regions will account for more than 20 percent of global sales by 2013, up from 16 percent in 2008, said David Campbell, a London-based principal for IMS.
“We are seeing a shift in emphasis,” Campbell said in an interview. “These markets are becoming more important in driving revenue” for multinational drugmakers.
Going Generic
For drugmakers, the idea is to replace sales that will be lost in the U.S. as blockbusters go generic. From 2011 through 2016, patents will expire on 18 of the world’s 20 biggest medicines, according to Tim Anderson, an analyst at Sanford C. Bernstein & Co. in New York. Those products have $80 billion in annual sales.
Pressure from governments is helping prompt the companies to make medicines more affordable to Asians, said Phua Kai Hong, a professor at the Lee Kuan Yew School of Public Policy, at the National University of Singapore.
The Philippines, for instance, trimmed the prices of 22 medicines in February, after marking down 21 medicines by half in August. The first reductions came after passage of a law that gives the president power to cap retail prices.
To contact the reporter on this story: Kanoko Matsuyama in Tokyo at kmatsuyama2@bloomberg.net.
Last Updated: April 14, 2010 21:36 EDT
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