`
`Assessing Optimum Pricing in the Indian
`Market
`
`Sangita Salunke, Sanofi, India
`
`and Gauri Pathak, Kantar Health, India
`
`Exhibit 1136
`IPR2017-00807
`ARGENTUM
`
`000001
`
`
`
`Assessing Optimum Pricing in
`the Indian Market
`
`EphMRA 2011 Pharmaceutical Market Research Conference
`
`Sangita Salunke, Deputy Director, Market Research, Sanofi Group- India
`Gauri Pathak, General Manager India, Kantar Health
`
`000002
`
`
`
`Agenda for the Presentation
`
`•
`
`Introduction to India and its healthcare market
`
`• Emerging trends in Indian healthcare and opportunities for
`pharmaceutical companies
`
`• The pricing dilemma for pharmaceutical companies (global
`prices or local prices)
`
`• How market research can help
`
`
`3
`
`000003
`
`
`
`India…a Land of Diversity and Contrast
`
`4
`
`000004
`
`
`
`India…a Land of Diversity and Contrast
`
`Large, resilient economy,
`GDP Growth of 8.7% for 2010
`
`81.5% Hindus
`12.2% Muslims
`2% Sikh, Christians
`
`> 60% of 1 Billion population
`– working age group
`
`Literacy rate 65%
`14 official languages
`Life expectancy 69 years
`
`Stable government with broad
`consensus on economic
`reform and inclusive growth
`
`Geographical Size
`six times France
`33% of USA
`
`Forex reserves covering
`external debt Inflation &
`interest rates stable
`
`29 states & 6 Union Territories
`Urban vs. Rural population:
`30% : 70%
`
`Source: CIA Factbook, Reserve Bank of India, Secondary reports, Ministry of Health
`
`5
`
`000005
`
`
`
`Strong fundamentals driving growth….
`
`•
`
`•
`
`Economic & demographic factors
`– GDP on sustainable growth path..projected to be 3rd largest economy by 2030
`– Significant demographic advantage
`– Largest population in the 15-54 yrs age group..favouring markedly higher consumption
`growth
`Epidemiological factors
`– Disease Population: Rising prevalence of chronic lifestyle diseases like Diabetes (51 Mn),
`Hypertension (250 Mn), CVD (35 Mn)
`– High prevalence of Cancer and Infectious diseases
`– Increasing Awareness
`•
`• Rising affordability
`– Steady rise in income levels
`– Increased insurance coverage
`Enhanced accessability
`– Growth in medical infrastructure
`– Non traditional models like Tier II/Rural
`– Improved spending on HC by Govt
`• Rising acceptability
`– Shaping of patient funnel
`– Improved acceptance of vaccines & biologics
`– Increase in self medication
`
`Source: CIA Factbook, Reserve Bank of India, Secondary reports, Ministry of Health
`
`
`•
`
`6
`
`000006
`
`
`
`How do these parameters compare to the US…..
`
`Population
`Life expectancy at birth
`Population rise by 2030
`
`GDP
`Healthcare budget (2008)
`HC Expenditure as a % of GDP
`
`Access to medicine
`Out of Pocket expenses % of total
`
`Physicians per 10,000 people
`Hospitals per 10,000 people
`
`US
`307 mio
`78 yrs
`
`21%
`
`INDIA
`1.16 bio
`68 yrs
`
`31%
`
`Largest economy;
`$2.4 trillion
`
`11th largest economy;
`$3.7 billion
`
`16%
`
`60%
`
`15%
`
`27
`
`31
`
`4%
`
`35%
`
`80%
`
`6
`
`9
`
`India, setting the pace for growth & stability but continues to face the
`challenges of vast unmet needs
`
`Source: CIA Factbook, Reserve Bank of India, Secondary reports, Ministry of Health
`
`7
`
`000007
`
`
`
`Indian Pharma Market also witnessing sustained
`acceleration
`
`The Indian Pharma market estimated to grow at a CAGR% of 14% till 2020
`
`CAGR
`~ 17%
`
`CAGR
`~ 14.5%
`
`CAGR
`~ 10%
`
`Indian pharma predicted to be the 3rd largest market in terms of incremental growth
`
`Bn Euro
`
`Source: McKinsey ; Edelweiss
`
`8
`
`60
`
`50
`
`40
`
`30
`
`20
`
`10
`
`0
`
`8.7
`
`2009
`
`48.5
`
`38.1
`
`24.2
`
`Pessimistic
`(2020)
`
`Base case
`(2020)
`
`Optimistic
`(2020)
`
`000008
`
`
`
`Indian Pharma Market: A snapshot
`
`Indian Pharma
`Market
`
`•Highly fragmented market
`• Value: 8000 M€
`• 35,000 brands; 4000 New Introductions launched every year
`
`Market evolution
`
`•CAGR%: 15% (06-10)
`•Mainly driven by volumes of existing brands and new Introductions
`
`Key players &
`Therapies
`
`•Domestic Indian pharma companies (IPC) enjoy 80% of the market share
`•Cardio, Gastro, Diabeto therapy areas are buoying the growth of the industry
`
`Sectors
`
`•Dispersion of population across Tier I & Tier II
`•All geographical sectors expected to grow in double digits
`
`
`Generics
`
`•Branded generics with aggressive competitive pricing in every category
`•Lead time between launch of original and entry of generics very low
`
`Source: SSA,+H’SA, IMS-India, Dec 10
`
`9
`
`000009
`
`
`
`Pricing decision is one of the most critical
`decisions …
`
`10
`
`000010
`
`
`
`The average cost of therapy (COT) in India is
`comparatively much lower than most parts of the world
`
`CVD is a disease marked by high prevalence in India
`
`The average cost of therapy of antihypertensive therapy is € 1.75 per month
`
`Source: SSA,+H’SA, IMS-India, Dec 10; Global Midas data , IMS
`
`11
`
`Cardace 5mg
`
`Average Monthly cost
`of therapy: 1.75 Euro
`
`Diovan 50mg
`
`0
`
`2
`
`4
`
`6
`
`8
`
`10
`
`12
`
`14
`
`16
`
`18
`
`Monthly cost of therapy
`
`8
`
`7
`
`6
`
`5
`
`4
`
`3
`
`2
`
`1
`
`0
`
`Val in M Euro
`
`000011
`
`
`
`Branded generics driven by doctors’ prescriptions
`have a significant share in this market
`
`Market segments
`
`Leading domestic players competing
`
`aggressively on price
`
`% Percent
`
`OTC
`Generic-
`generics
`
`8-10
`7-8
`
`Brand/Branded
`generics
`
`82-85
`
`Ethical
`Rx
`
`Price in Euro
`
`12
`
`Molecule:Rosuvastatin
`
`~ 51%
`
`~ 35%
`
`0.3
`
`0.25
`
`0.2
`
`0.15
`
`0.1
`
`0.05
`
`0
`
`0.26
`
`0.16
`
`0.13
`
`Originator's price point
`
`Avg price
`
`Price point of leading
`competitor
`
`000012
`
`
`
`Despite this, various innovative drugs are being
`launched in India shortly after the global launch
`
`•
`
`•
`
`•
`
`In the past, launch from parent’s portfolio in India was a matter of
`speculation,
`
`In recent times India has witnessed many aggressive launches of
`latest products from parent’s portfolio shortly after global launch
`Eg: Arixtra (GSK), Alimta (Lilly), Januvia (MSD)
`–
`
`
`Expansion of portfolio is seen as a starting point towards an ‘India
`specific strategy’ since
`Huge patient population which poses a high potential and market
`–
`opportunity
`Indian Pharma Market is 4th largest country in terms of volumes in the
`world
`Highly bouyant market for acute as well as chronic therapies
`
`–
`
`–
`
`13
`
`000013
`
`
`
`Hence, one of the key Q is:
`What price is the right price?
`
`Scenario A:
`
`Global brand launch is after generics or generic expected immediately after
`global launch
`
`
`
`
`
`• Competitor generic brands already launched & promoted
`• Price point more or less defined by generics
`• Hence global brand needs to establish differential among lesser priced generics
`
`Pricing dilemma:
`
`What price can my brand command, not necessarily the lowest price?
`
`
`
`
`
`14
`
`000014
`
`
`
`Scenario A: Global brand could be premium priced and
`still gain significant share
`
`Rosuvastatin
`(Top brands)
`Rosuvas
`Rozavel
`Crestor
`Roseday
`Novastat
`
`Razel
`Rozucor
`
`Rozat
`
`Rosulip
`
`Arvast
`
`Price
`Index
`1.4
`1.1
`2.2
`0.65
`1.1
`
`1.1
`1.1
`
`0.7
`
`1.0
`
`1.2
`
`Value
`Share%
`30%
`13%
`10%
`7%
`6%
`
`6%
`6%
`
`5%
`
`3%
`
`3%
`
`Example: Crestor
`
`Crestor is approximately 2 times more
`expensive than other branded generic but
`not outpriced
`
`Launched 6 years after generics in a
`cluttered generic market,
`
`Crestor still enjoys 10% share and is no 3
`brand
`
`Source: SSA,+H’SA, IMS-India, Dec 10
`
`15
`
`000015
`
`
`
`The 2nd scenario could be…..
`
`Scenario B:
`
`Global brand is an innovative/patented first in class drug with no generic threat
`• No branded generic competition
`• Price point to be decided by originator
`• Key decision:
`• To target more value share
`• OR Maximize number of patients who could benefit from the drug
`
`Pricing dilemma:
`
` What value can my brand command?
`
`
`
`Global brands being launched at India specific price : which is 20% of the global price
`
`16
`
`000016
`
`
`
`Scenario B: Innovative Global Brands have adopted
`an ‘India-specific pricing’ to secure higher volumes
`
`Monthly avg cost of oral antidiabetic therapy : € 2.24
`
`Januvia: Launched at 1/5th the global price in India
`
`Januvia’s Monthly Cost is still 10 times more than average Cost of therapy
`
`Januvia today is already the 3rd largest oral antidiabetic brand in India
`
`Price per tab in €
`
`Global
`price
`
`Indian
`Price
`
`Glycomet GP- ranked 1st
`
`Amaryl ranked 2nd
`
`Januvia- ranked 3rd
`
`Source: IMS-India, Secondary sources
`
`17
`
`4
`
`3.5
`
`3
`
`2.5
`
`2
`
`1.5
`
`1
`
`0.5
`
`0
`
`3.8
`
`0.76
`
`Januvia from MSD
`
`Amaryl
`
`Monthly cost of
`therapy € 2.24
`
`Januvia
`
`0
`
`5
`
`10
`
`15
`
`20
`
`25
`
`Monthly Cost of therapy (Euro)
`
`14
`
`12
`
`10
`
`8
`
`6
`
`4
`
`2
`
`0
`
`Val in MEuro
`
`000017
`
`
`
`Hence, one of the key Q is:
`
`
`
` What price is the right price?
`
`000018
`
`
`
`Typical Pricing Research in India: Approach and
`Methodology
`
`• CASE:
`
`
`– A multinational pharmaceutical company wants to launch their global brand
`in a market where Branded generics already exist or wanting to consider
`India specific pricing to get volume share
`– This company is looking at an India-specific price , but at the same time has
`pressures to NOT go below a certain price point
`– As seen with nearly all pharmaceutical pricing researches in India, the
`standard method of pricing are used:
`• Price Sensitivity Meter (PSM)/ van Westendorp
`– Here, we would either
`• Keep an open-ended pricing approach (ideal but “fear” of going below
`the “pressure price point”!
`• Give a band of price (6 to 8 price points) – doctor has to choose
`between these prices
`
`19
`
`000019
`
`
`
`Typical Pricing Research in India: Outcome
`
`•
`
`€6
`Low
`
`
`
`Physicians’ expectations
`
`
`
`Driven by :
`
`- Prevailing low market prices due to fierce
`
`price competition
`- Significant presence of generic options
`
`
`
`
`
`
`
`The typical result of such a pricing research is
`– You get the optimal price as the one that is existing in the market (generic price)
`– The optimal price point is close to the lowest price point tested
`– Patient shares decline significantly as price increases
`
`
`
`
`Price band
`
`€ 10
`High
`
`Accepted Price Point
`
`Global price
`
`Driven by :
`-Acceptable price and volume share
`
`
`
`
`
` Client Chooses A Price Point Which Is Higher Than The Physician
`Expectation But Lower Than Global!
`
`
`
`20
`
`000020
`
`
`
`21
`
`Pricing for Product X: Background
`
`•
`
`•
`
`Sanofi Aventis planned to launch Product X an innovative drug.However no patent
`protection hence need to be prepared for two pricing scenario
`– Launch and continue to have an exclusivity for its innovative drug
`– Adopt different pricing strategy if low priced generics launched
`
`
`Pricing research conducted to arrive at multiple price points so that pricing strategy
`could be adopted as per the Scenario and the price points provide
`– Substantial support from doctors and patients
`– Revenues would be maximized
`
` •
`
`Sanofi Aventis was open to an India-specific pricing for their brand and mutually agreed
`with Kantar Health to use PSM and Discrete choice modeling (DCM) methodology - a
`trade-off technique used to understand customer decision making
`
`• Discrete choice modeling methodology being relatively new to the Indian pharma, two
`methods of pricing research used to understand
`1. Price Sensitivity Meter AND
`2. Discrete Choice Modeling
`
`000021
`
`
`
`Discrete Choice Modeling: Implementation and
`Challenges
`
`•
`
`• Use of new and advance methodology have its own set of challenges
`
`• DCM is generally an online exercise, where a software display various scenarios
`
`Software program helps validate the accuracy of the responses and the online
`nature of the method aids the data entry and coding process
`
`• Due to infrastructural and compliance issues, this research was carried out
`using the traditional pen-and-paper method
`
`And the challenges were manifold –
`– Additional component of prescription share made administration of the instrument
`complex
`– Multiple level logic checks had to be adhered to
`– Rigorous quality checks and data-monitoring required
`– DCM exercise added to the length of the questionnaire
`– Physicians had to be visited up to three times to complete the interview
`
`•
`
`22
`
`000022
`
`
`
`Pricing for Product X: PSM vs. DCM
`
`•
`
`•
`
`The first method of pricing used for this research was PSM and the optimal price
`point for daily cost of therapy (DCT) was INR 33/ EUR 0.5
`The average DCT for the therapy area is INR 8/ EUR 0.1
`
`Optimal price
`point (OPP)
`Rs. 33
`
`Price in INR
`
`Proportion of doctors
`
`Conversion rate used: 1 EUR = 64.1017 INR
`
`23
`
`100%
`
`90%
`
`80%
`
`70%
`
`60%
`
`50%
`
`40%
`
`30%
`
`20%
`
`10%
`
`0%
`Less than
`30
`
`Good Bargain
`
`Expensive
`
`Too expensive
`
`Too cheap
`
`Upto Rs 30
`
`31 to 45
`
`46 to 60
`
`61 to 75
`
`76 to 90
`
`91 to 105
`
`106 to 120 121 to 135
`
`136 to 150 151 to 165
`
`166 to 180
`
`000023
`
`
`
`Pricing for Product X: PSM vs. DCM
`
`•
`
`The second method of pricing used for this research was DCM and the optimal
`price point for DCT was INR 94/ EUR 1.5
`
`300,000,000
`
`Optimal price: INR 93.64
`
`Thus DCM gave value based
`pricing rather than lowest pricing
`
`
`
`Key learning: It is prudent to
`understand that the ‘best price’
`or ‘right price’ is not
`
`necessarily the ‘lowest price’
`
`24
`
`250,000,000
`
`200,000,000
`
`150,000,000
`
`100,000,000
`
`Revenue
`
`50,000,000
`
`0
`28.50
`
`128.50
`78.50
`Price to patient (DCT) in INR
`
`178.50
`
`000024
`
`
`
`Key Learning
`
`•
`
`Pricing decision is one of the most crucial decisions for products in India since
`– Large pool of diagnosed patients hence huge volume opportunity
`– Predominantly out of pocket market (80% population not insured)
`– Strong branded generic market with aggressive pricing
`– Average cost of therapy lower than most parts of the world
`
`• Need to taking pricing decision based on existing market scenarios and adapt pricing
`strategy as the scenario changes
`
`Scenario A: Global brand launch is after generics or generic launch immediately after global alunch
`
`
`– Objective is to know what price my brand can command vs branded generic
`– In such cases techniques like PSM are more suitable to understand best price
`– This best price could also be adopted as the market situation changes
`Scenario B: Global brand is an innovative/patented first in class drug
`
`
`– Objective What value can my innovative brand command?
`– Techniques like DCM are more suitable to understand the best value proposition given the
`innovative drug’s benefits to patients
`
`• We have done pricing study using both techniques which will help us decide the pricing
`strategy as the market scenario changes as generic are expected in this market soon
`
`25
`
`000025
`
`
`
`000026
`
`
`