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Frost & Sullivan: Leaner Healthcare Expenditure To Drive Generics In Australia's Pharmaceutical Market

Monday, July 12, 2010 Drug News J E 4
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SINGAPORE, July 11 The pharmaceutical market in Asia Pacific has the potential to occupy 28.5% of the total global market share and USD 260billion revenue by end of 2012 following a forecast by Simranjit Singh, Director, Frost & Sullivan.

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Charting a solid 12.9% CAGR throughout 2009 - 2012, the Asia Pacific pharmaceutical market is looking at the next wave in evolution. Long term usage of multiple and specialized drugs, ever increasing ageing population, shorter life expectancy, early chronic disease diagnosis and major drug patent expiries are key contributing factors leading governments to favor production and prescription of generics.

Global expiring drugs patent such as Actos® for Type II diabetes and Atacand® will soon face the end of its 5 year protection mark and from there on, it's fair game for anyone planning to produce alternatives for such medication. This will become one of the biggest driving factors for Asia Pacific's local governments to support the generics market.

Whilst other countries in Asia Pacific focus on growing its generics manufacturing capabilities, Australia's high entry cost and stringent regulations discourages new players from entering the market with the intention of mass volume generics production. However, Australia presents a lucrative market for the marketing and distribution of new generic drugs as the government looks to generics as a form of cost reduction, and opportunities open up as patents expire.

Singh comments that the Australian healthcare market will continue to grow at a CAGR of 6.2% to reach approximately USD 16billion by 2012. The pharmaceuticals sector alone is expected to grow at CAGR of 4.7% to hit USD 10billion revenue by 2012. Growth will be largely driven by increasing demand for lifestyle disease drugs in an ageing population eg. cancer, cardiovascular, diabetes, the uptake of new, expensive drugs and strong government support for generics.

Obesity remains as one of the primary cause for lifestyle diseases such as diabetes, cardiovascular diseases, hypertension, etc. Approximately 32% or 7million of Australians are reported to be obese and the numbers are growing exponentially. Each year, the Australian government spends close to USD 1.3billion of taxpayers' contribution in drug subsidies and awareness campaigns in an effort to circumvent obesity in the nation.

"In 2009, expenditure towards obesity management amounted to almost 18% of the overall reported USD 8.7billion Australian pharmaceutical revenue in 2009," says Singh.

Due to such extensive expenditure in managing obesity and other diseases, the Australian government has decided to undergo expenditure cutbacks and policy reforms on its national Pharmaceutical Benefit Scheme (PBS) that subsidizes close to USD 6.5billion on over 80% of drugs in Australia.

Beside the reduction in PBS subsidy, the Australian government also supports the trading of generic drugs, given that the cost of purchase is far lower than its branded equivalent. Together with the subsidy reduction and government support for generics, many physicians will soon prefer to prescribe mostly generics to their patients.

The decision by the Australian government to encourage the industry shift towards prescribing generics will increase PBS savings by approximately USD 1.73billion in subsidy rates yearly.

The generics market in Australia is worth an estimated USD 830million in 2010 with growth expected at 7% CAGR per annum. There are huge opportunities for the generics market to grow further by tapping into the diabetes, oncology, neurological and cardiovascular disease markets.

Diabetes treatment in Australia is expected to be the fastest growing market with expenditure on pharmaceuticals growing at an average of 13.9% per annum. The market earning is expected to reach revenues close to USD 950million by end 2010 and with more room for growth every year.

The cardiovascular disease treatment market is worth approximately USD 3.15billion in 2010 with an expected growth rate of 2.9% per annum. The growth rate combined with the matured value of this market signifies the largest increase in terms of dollar value.

Treatment for neurological conditions and nervous system complications is another area of rapid growth for Australia with an estimated market worth of USD 644million in 2010, growing at 13.4% per annum

The oncology market is strongly supported by the Australia government in research, diagnosis and treatment. Australia's antineoplastic & immunomodulating agents market is expected to achieve USD 1.10billion in 2010 with expenditure growing 8.1% per year.

Heavy research & development activity into biologics and ability to afford high cost treatments is also expected to lead to strong growth in the biologics market.

"There is huge growth potential in Australia, but Australia is a saturated market with low unmet needs. Pharmaceutical companies must focus on producing higher-end complex generics rather than achieving a mass volume production model in order to thrive," concludes Singh.

About Frost & Sullivan

Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth and achieve best-in-class positions in growth, innovation and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best-practice models to drive the generation, evaluation, and implementation of powerful growth strategies. Frost & Sullivan leverages over 45 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from 40 offices on six continents. To join our Growth Partnership, please visit http://www.frost.com.

MEDIA CONTACT: Donna Jeremiah Corporate Communications - Asia Pacific P: +603 6204 5832 F: +603 6201 7402 E: djeremiah@frost.com Nicklaus Au Corporate Communications - Asia Pacific P: +603 6204 5836 F: +603 6201 7402 E: nicklaus.au@frost.com

SOURCE Frost & Sullivan
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