■ Eye on China

■ In the news
■ People to watch
■ Views from the region

the market partner

Issue 44 | March 2009
contents letter from the chief executive officer

Uncertainty in these troubled eco-

nomic times and plotting a future
demand creation investments
by delayering distribution.

3 In the news
Recent events and people
making news at Zuellig Pharma
Asia Pacific
course is forcing the pharma
industry to evaluate strategies,
and increasing focus on the faster-
Sophisticated IT systems provide
transparency. In addition, a rigor-
ous quality management system
growing emerging markets. In that has been rolled out across all
our region, many eyes are now Zuellig Pharma sites in the region
focused on China hoping that the offers superior and consistent

6 China distribution moves country’s energetic growth of the standards of operations.

Logistics services are advancing past few years can be sustained. Hospitals are also benefiting
but efficiency problems remain Even at reduced levels, forecasts from Zuellig Pharma China’s “last-
of economic growth still remain mile logistics”, giving them rapid
optimistic. In the pharmaceutical access to the products they need.
and healthcare sectors, the This makes it easier to manage

10 Buying into healthcare

China’s consumers are turning to
self-medication as income levels
prospects appear particularly
bright as the country gears up for
extensive healthcare reform and
inventory and also allows them to
concentrate on patient care.
In this issue, IMS offers further
and health awareness rise
socio-economic factors create new analysis of China’s pharmaceutical
opportunities for manufacturers. market outlook. The market has
doubled in value (ex-manufacturer

12 All clear
Zuellig Pharma China is pioneering
direct distribution solutions to
value) in the past five years,
according to IMS China hospital
audit data. It is expected to con-
streamline the pharmaceutical tinue its sharp upward surge as
supply chain urbanization, an ageing popula-
tion, increased government spend-
ing, and rising income levels build

17 Wider vision market momentum. OTC special-

Growth opportunities in the China ists Nicholas Hall & Company
market remain optimistic In Issue 44, we make China our also see growth in the consumer
focus, with a number of articles market as a middle class continues
looking at different aspects of the to emerge over the next decade.
rapidly evolving market. Our As the People to Watch column
Feature Story examines the phar- notes, Zuellig Pharma China has
maceutical landscape and the need expanded its senior management
for new distribution models to team to make the most of all these
boost transparency and efficiency. exciting opportunities. Zuellig
in house 18 Views from the region
Our country managers in Asia Transparency and visibility of all Pharma Asia Pacific’s executive
Pacific speak out on the issues areas of the China healthcare mar- management team has also adjust-
that concern them the most ket will be critical for healthcare ed its organizational structure to
companies to effectively target, advance future growth for the
evaluate, and manage business company overall.
23 & Company
investments as healthcare reform In other Zuellig Pharma news, I
Information about Zuellig Pharma
increases government investment am delighted to report the official
and opportunities. opening of our latest distribution
Zuellig Pharma China, a pio- center in Singapore, as featured in
Issue 44, March 2009. Entire contents © Copyright, 2009. Zuellig Pharma Asia Pacific. neering force in healthcare our In the News section. Further
All rights reserved. Reproduction in whole or part without express written permission is prohibited. product distribution for over 15 news on individual locations is
It is hereby expressly stated that neither Zuellig Pharma Asia Pacific nor any of its subsidiaries,
affiliates or their respective directors, employees or representatives makes any representations years, is again at the forefront of available in our regular round-up
or warranties, expressed or implied, with respect to any information or materials contained in this
publication. No liability whatsoever, whether in contract, tort or otherwise and including liability for
change. Unlike the unwieldy, from country managers around
negligent misstatement, is accepted by any member of Zuellig Pharma Asia Pacific for accuracy or multi-tiered wholesaler model the region.
completeness of any of the information provided or opinions expressed by or on behalf of Zuellig
Pharma Asia Pacific or for any errors, omissions or misstatements. that has traditionally dominated Wishing you a prosperous
The Market Partner is published by Zuellig Pharma Asia Pacific Corporate Office. distribution in the country, Zuellig Spring.
Editor: Mr. Joshua Leung, jleung@zuelligpharma.com Pharma China is leading the way
Design: Minick Jiao Design, Hong Kong, www.minickjiaodesign.com
in providing customized supply Eric Zwisler
Please address any comments to our office: Zuellig Pharma Asia Pacific, Corporate Office, 13th Floor chain solutions that support
Shui On Centre, 6-8 Harbour Road, Wanchai, Hong Kong, Tel: +852 2845 2677, Fax: +852 2877 5647
Chief Executive Officer
www.zuelligpharma.com/ip healthcare company in-market Zuellig Pharma Asia Pacific
 COMPANY DEVELOPMENTS
| in the news
Zuellig Pharma Vietnam donated a total of 2,592,000 tablets,
enough to treat more than 52 million
brings safe water to
flooded areas
In December, Zuellig Pharma Vietnam
liters of unsafe water.
With Zuellig Pharma Vietnam’s
effective distribution network to over
Avian Flu Update
helped to provide safe drinking water 60 provinces, the company was also Our initiatives to fight bird flu around the region
to flood-hit areas of the country. It did able to offer support to the Ministry
so by donating more than 2.5 million of Health in delivering the tablets.
Aquatabs tablets, worth 1.3 billion Aquatabs have been used by the Joint
Vietnamese dong, to Vietnam’s Food and Agriculture Organization/
Department of Preventive Medicine World Health Organization Expert
and Environmental Health under the Committee on Food Additives,
Ministry of Health. UNICEF, Médecins Sans Frontières,
Aquatabs were supplied to Hanoi, International Red Cross, other non-
Ninh Binh and Ha Tinh, where people governmental organizations and many
had been seriously affected by flood- defense forces since the mid-1980s.
ing, and other remote areas that lack

the market partner

clean water for daily use. The effer-
vescent tablets, produced in Ireland
and aligned with
Business continuity planning in Indonesia.
European GMP
standards, Business Continuity Planning (BCP) Indonesia through our value chain
are used to is running smoothly with team mem- process mapping methodology.
kill micro- bers engaged and supportive as During these discussions, BCP team
organisms programs expand beyond avian flu members organized and guided BCP
in water to in Zuellig Pharma’s office locations and scheduling. With Tony’s support,
avoid cholera, around the region. All offices have activities have been scheduled for
typhoid, completed general BCP, including the next three years. 2 |3
dysentery and one test procedure and an emer- As the BCP program has grown in
other water- Mr. Stefan Heitmann, General Manager, Zuellig gency fire scenario. sophistication, and now not only
Pharma Vietnam (right) and Dr. Nguyen Huy
borne diseases. Nga, Director of the Department of Preventive
Mr. Tony Xu, Business Continuity deals with avian flu, this column
Zuellig Pharma Medicine and Environmental Health. Management Manager, recently will change to Business Continuity
guided Thailand, China and Corner in future issues.

S$40 million DC opens in Singapore

Zuellig Pharma Singapore officially opened its cutting-edge S$40 million distribu-
tion center at Changi North Way on March 2. The 28,000-square-meter facility, located
in Changi International Logispark, doubles storage capacity. In addition, it houses Zuellig
Pharma’s Specialty Solutions Group (SSG), set up in September 2008 to provide customized,
end-to-end bio-logistic solutions for pharmaceutical products, clinical trials and niche markets.
Mr. Eric Zwisler, Chief
Executive Officer, Zuellig Pharma
Asia Pacific, said the company
was committed to Singapore and
confident about the pharmaceuti-
cal and healthcare product distribu-
tion market. Despite the current global
downturn, Mr. Zwisler pointed out that
healthcare and medical issues were
usually separate from business condi-
tions. “Generally, we expect the health-
care industry to do well through this
period or at least better than other
industries,” he said.
Senior Minister of State for Trade and Industry
Mr. S Iswaran officiated at the opening ceremony. From left to right: Mr. Eric Zwisler, CEO, Zuellig Pharma Asia Pacific, Mr. Kevin
Westley, Chairman of the Board, Interpharma Investments Ltd, Mr. S Iswaran,
Zuellig Pharma is the largest healthcare distributor in Senior Minister of State for Trade and Industry, Dr. Thomas Zuellig, Director, The
Singapore, with over 60% of market share. Zuellig Group, Dr. Daniel Zuellig, CEO, Zuellig Investments (Singapore) Pte Ltd.
in the news | COMPANY MOVE S

People to Watch
The new Market Partner talents who are responding to the demands of our
ever-expanding businesses

Both vice-presidents report to Ms. Elsie

Corporate Office
Lim, Chief Executive.
The executive management team has Mr. Edment Lam has been appointed
adjusted its organizational structure to Senior Director, Operations. In this
further advance the role, he will manage logistics
company’s growth and supply chain opera-
and future opportu- tions in China. Edment
nities. Mr. Rolf received a Bachelor of
Steffen has been International Business
appointed Managing Director, Management from the
Operations & Value Innovation. In this University of Lincolnshire &
role, he will focus on regional principal Humberside, UK, and a Master of
relationships, service value innovation, Business Administration from
IT, operations and the Specialty the University of Hull, UK. He
Solutions Group. Mr. Roland Bruhin speaks fluent English,
has become Managing Director, Mandarin, Teochew,
Business Operations, with line Shanghainese and Cantonese.
responsibility for managing and He joined Zuellig Pharma from
implementing the Cardinal Health, Singapore. He
company’s strategy has over 20 years’ experience in
and operational plans in supply chain management and has
all countries. Both report also worked with DSM Nutritional
to the Chief Executive Products Asia Pacific, Bayer Material
Officer, Zuellig Pharma Asia Pacific. Science Asia Pacific, and British
Petroleum Hong Kong. He reports to
Ms. Elsie Lim, Chief Executive.
Regional
tions for China, Korea, Indonesia, She reports to Mr. Roland Bruhin, Ms. Li Jun has become Senior
Ms. Jessie Tang and Bangladesh and India report directly to Managing Director, Business Director, Human Resources and
Mr. Mike Becker have the Managing Director, Business Operations. Administration. She will be responsible
taken up the two newly created posts Operations. To lead merger and acquisition for formulation of the company’s human
of Area Director. Jessie now oversees activities, Mr. Allen Lueth has become resources strategy. With over 30 years’
operations in Thailand, Vietnam, Vice-President, Finance experience she will direct recruitment,
China
Singapore and MDI in the Philippines and Strategy. He will also retention, training and development of
in addition to her existing responsibili- Zuellig Pharma China has made a continue to be responsi- Zuellig Pharma China staff.
ty for Malaysia and Brunei. Jessie number of senior appointments in line ble for general finance, Li Jun joined Zuellig
joined Zuellig Pharma in with its China development strategy. accounting, legal, financial Pharma China in 1997 as
1993 and has been Chief Ms. Elsie Lim has been appointed analysis and auditing. To build and Human Resources and
Executive of Zuellig Chief Executive China. Elsie joined the extend government relationships, Administration Manager and
Pharma Malaysia since China operations in 2000 Mr. David Gao has been appointed was promoted to Human Resources and
2000. Mike looks after and was promoted to Vice-President, Government Affairs. He Administration Director in 1998. She
operations in Taiwan and Hong Kong Chief Operating Officer in will also be an area expert received an MBA degree from Preston
as well as his current responsibility for 2004. She has been a in domestic rules and reg- University, US, in 2003. She reports to
Zuellig Pharma Corporation in the major force in the compa- ulations. David will work Ms. Elsie Lim, Chief Executive.
Philippines. They both report to Mr. ny’s growth and success in China and closely with principals Mr. Teng Jian has become Financial
Roland Bruhin, Managing Director, her experience and drive for results and develop formal com- Director – Principal Services, a role
Business Operations. Country opera- position her well to lead the company. munications with government bodies. encompassing purchasing activities and
 principal financial services. In addition, Ms. Lee Kim Har has been ues to be in charge of
Hong Kong
Teng Jian previously appointed Financial Controller. Kim Zuellig Pharma Taiwan in
worked for Grünenthal Ms. Stephanie Kwai has been appoint- was previously at DHL Express. In her addition to his new role.
China, most recently as ed Human Resources & Administration role at Zuellig Pharma Malaysia, she He reports to Mr. Roland
Director for Finance and Administration. Manager at Zuellig Pharma will oversee principal accounting and Bruhin, Managing Director,
He has also worked for Beiersdorf AG in Hong Kong. Stephanie has financial reporting/planning. She is a Business Operations.
Shanghai and in Germany. He has a a Master of Science in fellow of the Association of Chartered Zuellig Pharma Thailand welcomes
Bachelor degree in Tele-Communication Training and Human Certified Accountants and a member of Khun Kesaree Suriyawat who has
Engineering from Tong Ji University in Resource Management the Malaysian Institute of joined the company as Vice-President
Shanghai and a Master in Business from the University of Leicester. Prior to Accountants. Kim reports Human Resources. In this
Administration and Social and Economic joining Zuellig Pharma, she worked as to Ms. Law Kar Siang, role, she will head the
History from RWTH University in Human Resources Generalist at Director, Finance & Personnel and Human
Germany. He reports to Mr. Allen Lueth, Thomson Corporation for Hong Kong, Administration. Resources Department.
Vice-President, Finance and Strategy. Korea and Taiwan. She reports to Mr. Khun Kesaree has previously
Frederick Tsang, Chief Executive, worked in the automotive, fast-moving
Taiwan
Mr. Terence Tsang has been appointed Zuellig Pharma Hong Kong. consumer goods, and in-store media
Market Intelligence Director. Terence Mr. Hudson Chan has been promot- Zuellig Pharma Taiwan is pleased to and services industries. She has a

the market partner

has over 16 years’ experience ed to Associate Operations Manager, announce that Mr. Samson Hsu has Bachelor majoring in microbiology from
in the pharmaceutical Principal Service. become Sales and Chulalongkorn University and a Master
industry, having undertak- Hudson reports to Marketing Division Key degree majoring in translation from
en a number of roles in Mr. Andrew Wong, Account Manager in Ramkamhaeng University.
sales, marketing and brand- Head of Operations. charge of the merchandis- Khun Somchai Phawanaphon has
ing management. He has worked for ing team. Samson joined joined Zuellig Pharma Thailand as
Edward Keller Ltd, Boehringer Mannheim the company in 1991 and has experi- Vice-President Information Technology
Malaysia
China, Knoll China/BASF Pharma, Sanofi- ence in drugstore, clinic and key Services. He previously spent 18 years
Aventis China, and IMS Healthcare. He Mr. Maikel Kuijpers has been appoint- account channels. He reports to Mr. at DHL APAC Information Services
will be responsible for in-market sales ed Chief Operating Officer at Zuellig Joseph Lai, Vice-President, Sales and in Singapore and Malaysia
4 |5
data collection and production, and will Pharma Malaysia. He will be responsi- Marketing. and DHL International
collaborate with principals and Zuellig ble for operations, IT, con- Ms. Shelley Kao has been appointed Thailand where he was
Pharma management to disseminate sumer healthcare and Hospital and Key Account (HP/KA) initially Country IT
business intelligence to relevant stake- collections. Maikel Receivables Manager. Shelley joins Manager and most recently
holders. He reports to Mr. Andi Umbricht, moved to Zuellig Pharma Zuellig Pharma Taiwan from UPS Project Director based in Malaysia.
Senior Director, Commercial Operations. Malaysia as Operations where she was Customer He has a Bachelor of Business
A new Specialty Services (ZPSS) divi- Director in 2004. Prior to this, he Solution Manager based Administration from Sukhothaitham-
sion has been created, combining the worked at Zuellig Pharma Philippines in Shanghai. Shelley mathiraj University and a Master of
company’s Logistics Services and Vaccine for 10 years. He has a degree in busi- was a Business Business Administration from
Business Unit. The division will be ness administration from the University Development Manager at Chulalongkorn University.
responsible for a portfolio encompassing of Eindhoven in the Netherlands. He Imation Taiwan from 1996 to 2002 and Khun Pucknalin Bulakul has been
solution-based clinical reach (CTM), med- reports to Ms. Jessie Tang, Chief Sales & Marketing Manager of 3M promoted to Vice-President Finance.
ical devices, vaccines, cold Executive, Zuellig Pharma Malaysia. Taiwan from 1984 to 1996. She earned Khun Pucknalin joined the
chain and other value-ori- Mr. Daryl Ong has become a Bachelor of Science in Pharmacy from company in 2006. She
ented services. Mr. James Operations Director. He will be Taipei Medical College, and has worked had previously worked
Lee has been appointed responsible for the entire for both consumer healthcare and for Ernst & Young and
General Manager, Specialty Operations division. In logistics industries for more than 24 Siemens Co., among others.
Services. James has worked in the third- his previous position he years. She reports to Ms Julie Chou, She has a Master degree in accounting
party logistics industry for more than 10 was Associate Director, Vice-President, Finance Division. from Thammasart University and is a
years. He reports to Ms. Elsie Lim, Chief Operations (Logistics) over- Certified Public Accountant.
Executive. Mr. Liu Shun Li becomes seeing all warehousing and logistics. The three Vice-Presidents all report
Thailand
Business Director, Specialty Services, Daryl will report to Mr. Maikel Kuijpers, to Mr. Yves Hermes, Chief Executive,
where he will drive vaccine services and Chief Operating Officer. Mr. Pang Kim Mr. Yves Hermes has become Chief Zuellig Pharma Thailand.
build synergies with principals, suppliers Sun takes on an expanded role in the Executive at Zuellig Pharma Thailand In addition, Khun
and Center for Disease Control bodies. post of Associate Director, Operations following the departure of Mr. Patrik Chutima Tokarnkul has
Shun Li has worked at Zuellig (Principal & Customer Bruhlmann to another company. Yves moved up from
Pharma for 16 years. He Services). This includes joined Zuellig Pharma in 2005 as Chief Accounting Manager to
reports to Mr. James Lee, the management of Executive Taiwan. Prior to joining Finance Manager. She
General Manager, Specialty Brunei operations. Pang Zuellig Pharma, Yves worked for SGS reports to Khun Pucknalin Bulakul,
Services. reports to Mr. Daryl Ong. Group for 11 years. He currently contin- Vice-President Finance.
China distribution moves
Logistics services are advancing but efficiency problems remain

China’s distribution system has advanced enor- oped economies. Costs ticked up to 18.4% in Ocean freight companies are
mously over the past few years in tandem with 2007, probably reflecting the impact of higher
continuous improvements made to national road labor and fuel costs. In theory, the higher the ratio preparing for a slowdown in
and rail networks, waterways, ports and airports. to GDP, the less efficient the logistics system.
Logistics services showed marked progress in High spending on logistics can be partially business amid slacker growth
2007-08, helped by China’s robust economic explained by China’s heavier reliance on manufac-
growth. Project completions in Beijing and turing than most developed countries. The coun- in Chinese exports. Overland
other Olympic venues ahead of the Olympic try’s unevenly developed transport sector,
Games in August 2008 also gave a lift to the insufficient trucking capacity, lack of container delivery companies have also
transport business. facilities and local protectionism are other factors.
Despite impressive improvements in infrastruc- In a 2007 survey, the US-China Business felt the margin squeeze, having
ture, China’s logistics industry remains grossly Council found that 83% of respondents had
inefficient. While the ratio of logistics costs to indicated there had been an improvement in to deal with higher costs and
GDP slipped between 2003 and 2006 (18.9% to distribution rights over the past year, up from
18.3%), the ratio was still double that of devel- 57% in 2006. This reflected the resolution of greater competition
some licensing issues. In previous surveys, dis-
tribution rights had led the list of concerns, but
the issue dropped to tenth in the 2007 survey
and was identified as a success story.
Nonetheless, freight distribution continues to
pose headaches. Goods may be moved around
the country, but the process is slow, dispropor-
tionately expensive and often difficult to man-
age. It typically involves many more operators
than in Europe or North America. The frag-
mented nature of the country’s distribution
system results in multiple transfers of goods,
giving rise to opportunities for theft and break-
age; lack of economies of scale among most
operators, making the introduction of new
technologies overly expensive; and limited
reach among operators, hampering the develop-

the market partner

ment of cross-country services.

Market development
The logistics market has expanded dramatically.
In 2007, it was valued at RMB75.22 trillion
(US$11 trillion), an increase of 26.2% on 2006.
(The market value refers to the total value of
products using logistics services.) However, dis- ■ More complex demands. Ongoing reloca- (FYP, 2006-10) give railway expansion much
tributing goods in China remains a challenging tion of businesses inland has encouraged dis- higher priority than previous FYPs. Beijing
business. This is especially so for foreign service- tribution companies to focus on second and announced further investment in rail infra-
6 |7
providers despite the lowering of entry barriers. third-tier cities. International logistics structure after the 2008 Olympics as part of
Although infrastructure facilities have improved providers are expanding their networks to an effort to boost sagging economic growth.
significantly, traffic bottlenecks remain. The match this move while domestic players con- Despite the impressive hardware, the nation-
uneven quality and availability of transport modes tinue to amalgamate. Supply chains are facing al distribution system remains backward. Many
across the country, and poor co-ordination more complex demands while having to deal highways are expensive to use, poorly main-
between local authorities are major obstacles to with bottlenecks and unpredictable costs. tained and unsafe. Transport management
building a seamless supply chain. Another troubling area is human resources. systems involving tracking of trucks and loads
New hurdles have now emerged. These Industry growth is hindered by a lack of are still underdeveloped. Good warehousing is
include: skilled and experienced staff. Wages continue expensive and in short supply, even in high-
■ Business slowdown. Corporate growth has to rise but service levels do not necessarily priority areas.
slowed dramatically in the wake of the global match them. Perhaps the most serious barrier to the
recession. Several Chinese airlines, for example, development of a national logistics industry is
cut revenue targets for 2008 and 2009 after Progress and problems local protectionism. Even in major Chinese
years of growth. China Southern Airlines, Moving goods around the country remains cities, non-local logistics firms are discriminat-
China’s largest airline, cut its freight volume problematic and expensive. The principal ed against while those looking to set up nation-
target by 8.5% for 2008 while chairman Liu reason for the high costs used to be poor al networks have to meet rules and regulations
Shaoyong warned of long and difficult times infrastructure. This is no longer true. The that often differ from province to province.
ahead driven by falling demand, volatile oil pace of expansion is slowing but construction Businesses have to cobble together multi-
prices and cut-throat competition. and upgrading continues. Many sub-regions, modal transport networks using small and inef-
Ocean freight companies are preparing for a such as the Yangtze River Delta, are ficient local distributors. Larger players such as
slowdown in business amid slacker growth in approaching a level of coverage similar the Sinotrans Group and YRC Worldwide of
Chinese exports. Overland delivery companies to the developed world. the US are quickly grabbing national market
have also felt the margin squeeze, having to A good national expressway system is only share but still have to deal with local issues.
deal with higher costs and greater competition. one of the factors required for the develop- Another problem is a lack of uniform ship-
Some, such as US company FedEx, were willing ment of national transport companies. Other ping standards. The result is constant packing
to take losses to win market share. Others, for transport systems also have to be efficient. and unpacking as shipments move across and
example, the IDS Group of Hong Kong, bene- China’s railway network, which has not out of the country. Even the wooden pallets
fited from a surge in dairy imports following improved as fast as roads, is getting more used to stack goods come in different sizes.
the discovery of melamine-tainted milk prod- attention from the government. Investment The government-backed China Federation of
ucts made on the mainland. commitments made in the 11th Five-Year Plan Logistics and Purchasing has developed stan-
dards based on International Organization for of bodies a company has to interact with mak-
Standardization (ISO) norms but these are dif- ing it difficult to put together a national distri-
Regulatory progress
ficult to enforce. The lack of uniformity across bution plan using third-party logistics firms.
the country in everything, from insurance and China’s World Trade Organization compli-
driving licenses to provincial regulations, Domestic industry consolidation ance record over the past four years has
remains a huge problem. The mainland’s traditional distribution system, been good. Most geographical barriers for
Corruption is also an issue. Bribery is not comprising three tiers of distribution agencies – foreign wholesalers have been removed
unusual throughout the supply chain. national, provincial and local – has experienced and, since December 2004, for foreign
Distributors sometimes sell counterfeit versions radical changes as companies realign their oper- retailers. By December 2005, the last
of goods they deliver. The use of a distributor ations and foreign competitors penetrate deeper restrictions were removed on international
established by staff members of the company but into the market. Many state-run distributors freight forwarders. Foreign-owned entities
whose ownership is disguised to make it appear have adopted new management styles while are allowed to engage in infrastructure con-
independent is not uncommon. others have sought foreign partners. struction. With the exception of the water
One bright spot is an ongoing effort to Foreign-trade corporations, set up by various transport sector, which still carries some
streamline fragmented oversight. In March state ministries after the launch of economic restrictions, foreign companies have much
2008, the old Ministry of Communications, reforms in 1978, have altered their organiza- more access.
responsible for road and water transport, the tional structure several times in line with Local branch offices of the Ministry of
Civil Aviation Administration of China and the changes in government administration and Commerce have the power to approve for-
Ministry of Construction’s urban traffic section market demand. A typical example is the China eign-invested commercial enterprise (FICE)
were merged into a super Ministry of National Electronics Import and Export Corp applications to expand their business
Transport, which also supervises a new State (CEIEC). In 1999, CEIEC, established in 1980 scope. However, foreign companies have to
Bureau of Civil Aviation and the State Postal as an exclusive importer and exporter of elec- seek state-level approval if their business
Bureau. Nevertheless, there are still a number tronic goods for the mainland, was absorbed by involves:
■ Sales conducted via television, tele-

phone, mail order, the internet, vending

machines or similar means.
■ The sale or distribution of basic raw

materials for industrial use, such as iron

ore, steel, fuel, rubber or precious metals.
■ The sale or distribution of various spec-

ified products, among them publications,

refined oil, cars, sugar, cotton and pharma-
ceuticals.
The latest circular has resulted in speedi-
er processing of applications for establish-
ing FICEs. The regulatory environment has
relaxed to the point where companies may
distribute products they do not manufac-
ture, while consulting companies may be
able to expand their business scope. For the
distribution of products not manufactured
by a production foreign investment enter-
prise (FIE), lawyers at Pricewaterhouse
Coopers say the enterprise may expand its
business scope for trading and distribution

© The Economist Intelligence Unit Limited 2009

Transport costs in China, 2007 Source: Li & Fung Research Centre
activities – meeting the relevant business
Rmb bn Annual growth % Share of total % scope for FICE – to sell the products.
Road 1,562.3 17.9 63.2 Under the current regulatory framework,
consulting FIEs in China may upgrade to
Railway 252.1 11.3 10.2
FICE status by expanding their business
Water 340.3 23.4 13.7 scope to cover trading and distribution
Air 27.0 26.8 1.0 activities such as wholesale and retail
Pipeline 24.8 63.2 1.0 trade. Foreign-invested trading companies
located in free trade zones may also
Freight forwarding 264.3 11.2 10.6
upgrade to FICE status, subject to approval
and other means
from local authorities.
Total 2,470.8 17.6 100.0
China Electronics Corp, a large conglomerate Foreign investment rules easing Distribution Business Scope of Foreign-
set up by the state in 1989 with an aim of Multinationals are increasingly engaged in invested Non-commercial Enterprises”.
developing into a vertically integrated multina- tackling the problems created by distribution. However, officials still prefer that compa-
tional player in electronics. Some of its local Retailers, wholesalers and providers of ware- nies establish new distribution operations
subsidiaries have formed partnerships with for- house and storage facilities have been allowed rather than expand existing manufacturing
eign firms, including US firms Microsoft and to set up wholly foreign-owned enterprises ones. There are restrictions on the distribu-
American JAZZ Corp. China Electronics Corp since the end of 2004 and wholly foreign- tion of specific products such as copyright-
became the country’s largest conglomerate owned freight forwarders since December intensive materials. These include books, and
when it bought electronics giant China Great 2005. audio and video products. Local protection-
Wall Computer Group at the end of 2005. The relaxation of regulations governing the ism also remains a major barrier to expan-
Sinochem Corp is another example, with the activities of foreign companies has con- sion, for example, requirements that trucking
foreign-trade corporation changing into a tributed significantly to the industry’s expan- companies have offices in each province
petrochemical conglomerate operating a verti- sion. The introduction of foreign-invested where they do business in order to issue local
cally integrated business, including oilfield commercial enterprise (FICE) rules in 2004 tax receipts.
exploration and production, downstream pro- allowed foreign companies to establish whole- The emergence of major home-grown
cessing, logistics and financial services. sale and retail businesses without geographic logistics firms and the entry of experienced
Sinosteel Corp, a reincarnation of the former restriction. Further modification of the rules foreign players are boosting outsourced

the market partner

China Metallurgical Import and Export Corp, has allowed local rather than central commer- logistics services. However, third-party logis-
tics (3PL) remains a relatively new industry
in China, with only 15% of domestic compa-
Proportion of freight carried by major transport modes in China (%) Source: China Statistical Yearbook
nies outsourcing their logistics functions,
Railways Highways Waterways Civil Aviation according to various estimates. The China
2007 23.5 11.2 63.4 0.1 International Freight Forwarders Association
2006 24.7 11.0 62.5 0.1 estimates that around 10,000 enterprises,
including foreign firms, are engaged in
2005 25.6 10.8 61.9 0.1
freight forwarding, most of them small.
2004 27.8 11.3 59.7 0.1 8 |9
The market share of 3PL companies in
2003 32.0 13.2 53.3 0.1 China is believed to be around 20%, much
2002 30.9 13.4 54.3 0.1 lower than the 57% in the US or the 80% in
2001 30.8 13.3 54.5 0.1 Japan. According to the China Federation of
Logistics and Purchasing, the market share of
2000 31.1 13.8 53.6 0.1
China’s top 10 logistics providers is a com-
bined 13%. In general, Chinese companies
has an expanded business scope that includes cial authorities to grant approval on most still prefer to do their distribution in-house
equipment leasing, packaging storage and FICE applications, resulting in speedier han- or use small domestic operators.
transportation, port and wharf services, and dling of applications. Ongoing improvements Multinational companies have been quicker
overseas engineering projects. allow companies to move their products more than domestic companies to outsource, with
China’s WTO accession agreements incor- easily across the country. nine out of 10 outsourcing part of their logis-
porate a number of efforts to override local Through the Closer Economic Partnership tics needs to 3PL firms. In the automotive sec-
protectionism. The rules have allowed foreign Arrangement between Hong Kong and tor, for example, TNT of the Netherlands and
logistics providers to gradually expand their Mainland China, distribution rights for regis- APL Logistics, a US-based unit of Singapore’s
activities across China but complaints remain.
There are still reports of goods being detained
until “fees” are paid, particularly in poorer,
tered companies have steadily improved. By
2008, foreign companies had full ownership
rights over retail chains of up to 30 stores while
Hong Kong registered companies could own
Neptune Orient Lines, have set up logistics
joint ventures with local car makers. mp .
inland provinces.
To further promote reform and growth of chains of up to 50 stores and 65% of larger ones. This article was excerpted from the Economist
Intelligence Unit publication China Hand. Queries may
the domestic distribution and logistics industry, In 2007, the Ministry of Commerce updated
be sent to David Line, senior editor at the Economist
the State Council published a number of pro- some of its regulations, putting emphasis on Intelligence Unit, at davidline@eiu.com. The Economist
posals in 2005 under “Opinions Concerning the development of the service industry and Intelligence Unit is the world leader in global business
Promoting the Development of the more investment in areas such as logistics, intelligence. It is the business-to-business arm of The
Economist Group, which publishes The Economist newspa-
Distribution Industry”. The proposals call for logistics services and infrastructure building.
per. The Economist Intelligence Unit provides geopoliti-
the formation of larger-scale, more efficient All these industries fall within the list of cal, economic and business analysis on more than 200
enterprises through debt reorganization and “encouraged foreign investment industries”. countries, as well as strategic intelligence on key indus-
staff reduction. The proposals underline the The new rules follow a move in December tries and management practices. With over 300 full-time
professionals in 40 offices around the world, supported
direction the government wants the sector to 2005 giving local authorities the right to
by a global network of more than 650 contributors, the
take to break down regional protectionism and approve FICEs and the April 2005 “Notice on Economist Intelligence Unit is widely known for its
establish nationwide companies. Relevant Issues Concerning Expanding the unparalleled coverage of major and emerging markets.
 OTC trends | COUNTRY INSIGHT

Buying into healthcare

China’s consumers are turning to self-medication as income levels and health awareness rise
By Nicola Jay ■ nicola.jay@nicholashall.com

Changing attitudes
The next decade will see the emergence of
the middle class in China and by 2025 the
country is predicted to be the world’s third-
largest consumer market. China is a classic
emerging market, with rising income levels
and increasing awareness of health issues
(such as lifestyle-related diseases) driving
consumer healthcare.
Some sectors are feeling the benefit of
changing Chinese attitudes more than others.
Treatments to prevent lifestyle or age-related
problems, for example, cardiovasculars, are
on the rise while digestive remedies are being
spurred by the increasing uptake of Western
diets. Consumers are also more willing to
medicate for once-taboo ailments, driving
segments such as vaginal yeast infections and
hemorrhoid preparations. Emergency contra-
ception has been boosted by high-profile
government campaigns.
Smoking control is set to be the next driver
of OTC growth following the State Food
and Drug Administration’s (SFDA)
December 2008 approval of OTC nicotine
patches in 5mg, 10mg and 15mg doses and
nicotine gum in 2mg and 4mg doses for sale

China’s universal healthcare

reform plan is attracting strong
reactions. The aim is to cover
90% of the population within
two years and to achieve
universal healthcare for China’s
1.3 billion population by 2020,
with all revenue raised by public
hospitals returning to the state
In the past, consumers would One academic described the plan as ambigu- (urban and rural) were willing to self-medicate.
ous and said that by attempting to address
go to a hospital when suffering every aspect of the healthcare system it had ■ Opportunity cost matters: 76% of urban
no focus. The normally reticent state media residents and 69% of rural residents selected
from minor ailments. This is also joined in, with a famous television pre- convenience over cost as their main reason for
senter saying the plan was full of “empty” self-medication.
now changing as more and words. Even state news agency Xinhua com- Dr. Zhenyu Guo, chairman of Kunming
mented that the 13,000-word document was Dihon Pharmaceutical Co Ltd, was another
more educated Chinese people hard to understand. speaker to address the changing behavior of
Chinese consumers in his presentation on the
turn to self-medication and buy Consumer behavior self-medication market. In the past, con-
At the World Self-Medication Industry meet- sumers lacked sufficient self-medication
OTCs from drugstores ing in Beijing in November 2008, Dr. Gordon knowledge and would go to a hospital when

in pharmacies only. The switch was driven

by TSKF/ GlaxoSmithKline, Johnson &

the market partner

Johnson and Novartis, which have been
actively promoting OTC nicotine replace-
ment therapy (NRT) in China through
various activities, including sponsoring an
SFDA conference on switch in 2008.
Industry sources predict that all three multi-
national players will launch consumer NRTs
in 2009. A number of small local companies
also have licenses for NRT products and they
may compete on price if not on profile. 10 | 11
These factors suggest that consumers are
open to self-medication and it is up to the
government to respond to demand and work
with the changing consumer. As part of a
nationwide healthcare shake-up, the SFDA
is to come back under direct control of the
Ministry of Health for the first time since
1998. This move is part of reforms that are
creating so-called “super ministries”. The
premise is such ministries will be able to
govern more efficiently and help to ensure
harmonization in the implementation of Liu, professor and executive director of the suffering from minor ailments, he reported.
laws and practices across China’s provinces. Health Economics and Management Institute, This is now changing as more and more edu-
Since subsidies for medical costs were Peking University Guanghua School of cated Chinese people turn to self-medication
scrapped in 1992, no proper insurance Management, discussed the results of the and buy OTCs from drugstores rather than
system has replaced them, leaving many in Chinese Residents’ Health Status Survey he go to hospital.
healthcare poverty. The government is now conducted earlier in the year. The study cov- Changes are also occurring within the med-
working to reform the system and implement ered 12,691 people in Beijing, Xian, Chengdu ical system, with government moves to reduce
a broad network of basic universal services. and Kunming, with 5,161 classed as urban national public healthcare spending. This means
However, China’s universal healthcare and 7,530 as rural. It investigated the self- hospitals will have to move away from their
reform plan is attracting strong reactions. medication status of Chinese residents in three reliance on medicine sales income. However,
Drafted in consultation with organizations particular areas – knowledge, attitude and little change in China’s healthcare market has
including the World Health Organization, behavior. Dr Liu’s conclusions included: yet occurred in rural areas, which remain much
World Bank, and consultants McKinsey & less developed than urban. Rural areas account
Co, the aim is to cover 90% of the popula-
tion within two years and to achieve univer-
sal healthcare for China’s 1.3 billion
■ The health status gap between urban and
rural residents in China is narrowing.
However, urban consumers still have a much
for over 60% of the country’s population but
only 10% of drug consumption. mp .
population by 2020. All revenue raised by higher awareness of non-prescription drugs.
Nicola Jay is Editor, Insight Asia, at Nicholas Hall &
public hospitals would return to the state and Company. Contact: nicola.jay@nicholashall.com
pricing standards set for medical services. ■ For minor ailments, 75% of those surveyed and +44 1703 220216 (tel); +44 1703 430787 (fax).
 F E A T U R E S T O R Y

ALL CLEARThe China healthcare market is on the move, with Zuellig Pharma China
pioneering direct distribution solutions to streamline the pharmaceutical supply chain
By Elsie Lim, Chief Executive, Zuellig Pharma China ■ elim@zuelligpharma.com

s the economic meltdown continues and the world shivers at the need for change. These factors are opening up fresh opportunities

A the prospect of icy business conditions in the year ahead, for distribution partnerships that deliver in terms of business results as

the market partner

China stands as a ray of warm hope in many eyes. Growth well as products.
forecasts for the country hover in the range of 6%-8% in 2009.
Although such predictions are lower than recent years, they appear rel- Multi-tiered distribution
atively robust amid a global recession. In the country’s pharmaceutical Previously in China, suppliers built brands and used direct sales teams
sector, the outlook is one of change, reform and opportunity for man- to interest major hospitals and pharmacies. Distributors and whole-
ufacturers to improve their top and bottom line. salers moved products to customers and collected payments. Analysis
now suggests this approach needs re-thinking . Economic conditions
Market landscape demand that suppliers receive greater return on sales and marketing
China is already among the 10 largest pharma- costs. At the same time, major hospitals and
ceutical drug sales markets worldwide, and pre- pharmacies have acquired purchasing power,
12 | 13
dicted to grow to the largest by 2025, driven in requiring top service to ensure customer sat-
part by large-scale urbanization. An aging pop- isfaction. A growing business among smaller
ulation and rising incomes are other important customers is adding to the mix. Such changes
growth factors. However, China’s pharmaceuti- can make outsourcing to distributors who
cal market offers tough challenges. The current provide such services a more efficient option
landscape is characterized by: than running an in-house team.
Historically, distribution in China has oper-
■ widespread presence of generics ated along different lines compared with the
■ low affordability international wholesale industry. A trading
■ government price controls and cuts mindset, high margins, lack of IT and hard-
■ a complex regulatory environment ware, and no customer service provision are
■ little medical insurance coverage in rural common. Multi-tier distribution structures
areas where the majority of the and a lack of standardization in working prac-
population lives tices in different parts of the country further
■ a horizon poised for great change. complicate the picture.
In 2000, the country had more than 16,000
Multinationals have a strong presence but profits have been limited due wholesalers. Since then consolidation, falling margins and the introduc-
to competition from thousands of generic producers and non-opti- tion of a Good Supply Practice (GSP) certification requirement have
mized distribution costs. Thus hospital pharmacy sales have dominated seen figures drop to an estimated 7,000-8,000. Yet the three top whole-
the market to date, with multinationals looking to major hospitals in salers account for just 15% of distributor channel sales. In the US, the
first-tier cities as their main targets. Smaller players providing advanced largest wholesalers account for more than 95% of distributor volum.
and niche products have also found room in the market.
In January 2009, the State Council passed the country’s long-expect- Model in need of a revamp
ed medical reform plan. The policy calls for US$123 billion to be The predominant distribution model for multinational companies is
spent by 2011 to set up a universal healthcare system. The new system shown in Figure 1. Such a cumbersome, opaque structure impacts on
includes the establishment of a national essential drug system and efficiency and effectiveness. Key issues include credit and liquidity
reform of public hospitals, including funding mechanisms. problems which can slow supply to the second level, margin squeeze
The evolving social and healthcare landscape is putting pressure on resulting in the return of basic supply issues to the second level and
traditional business models. Pharmaceutical companies’ drive for cost- poor operations at the first level providing little capability to react fast
efficiency amid a challenging global market environment is adding to to developing situations. Keeping track of stock and sales data are
 Through direct distribution and other relationships, the company
Figure 1 Main distribution models used by MNCs
reaches over 30,000 hospitals, including community hospitals, and
85,000 pharmacies. Zuellig Pharma China has a national hub in
Shanghai, with local direct distribution in Beijing, Shenyang, Wuhan,
Chongqing, and extension to other provinces planned.
Services cover prescription over numerous categories and therapies
(Figure 3), OTC, import logistics, and specialty distribution, with spe-
cially built, state-of-the-art cold chain facilities and management
located in Guangzhou. National exclusive, regional cluster and local
direct distribution are available to address principals’ different needs
and product categories, with dedicated account management teams
developing customized solutions for both the wide-ranging portfolios
and volume requirements of multinationals and niche product suppli-
ers. Clinical trial and drug study logistics are also provided.
Mr. Eric Zwisler, Chief Executive Officer, Zuellig Pharma Asia
Pacific and former Chief Executive, Zuellig Pharma China, said:
“With healthcare reform set to open up new opportunities and extend
the market beyond major cities, we are seeking to delayer distribution
other major difficulties given the number of distribution layers that in China. This will enable principals to get closer to end customers,
products need to pass through before reaching the end customer. speed the time to market and optimize distribution costs.”
As market conditions change, this complex wholesaler model is coming
under further pressure. Additional challenges include the capacity to deal Figure 3 Distributing products over numerous categories and therapies
with expanding markets and channels; the need to extend coverage to
third and fourth tier cities calling for wider geographical operations; the Medical
ability to respond to higher regulatory hurdles and a constantly changing devices & Cardiovascular
diagnostics
environment; how to secure accurate, timely and complete market infor- Equipment BPH
mation; and increasing logistics costs, among others.

Vaccines Respiratory
Simplifying the chain
Zuellig Pharma China, established in 1993 and a pioneer from its ear-
liest days as the first licensed foreign distributor in the country, is now Dermo-
Anti-infective
leading the way forward with a strategic approach that leverages its cosmetic

extensive capabilities in logistics, including national and local direct

distribution, to simplify the distribution channel. The company is the
Gastro-
largest pharmaceutical importer in China, with full import and distri- Anti-histaminic
intestinal
bution rights. It was the first foreign distributor to join the top 10 dis-
tributors and wholesalers in the country. Oncology CNS
With more than 15 years’ experience in China, Zuellig Pharma has
Anti-fungal Immunology
developed extensive coverage across 400 cities though all channels.

Figure 2 Designing an efficient distribution network example

Development platform
A distributor plays a different role in the supply chain from a wholesaler,
acting as an extended arm of the principal in the market. A distributor’s
success is therefore tied in to a principal’s success, with interests aligned
to a principal’s sales and marketing plan and motivation to drive channel
and price control in line with the principal’s strategy.
“China is a push not a pull market,” Mr. Quoc Phong Chau,
Business Development Director, Zuellig Pharma China, said. “While
the principal creates demand, it is the distributor who actively drives
supply so that goods flow down to the end customer. As a market part-
ner, the distributor invests time in getting to know and understand a
principal’s products and positioning to assist this drive.” Advantages
include greater inventory control, shorter time to collect accounts
receivable and a diminished risk of returns.
In line with this, the Zuellig Pharma China platform takes into
account the challenges of moving into low-tier cities, rural markets
 Regulatory players

State Food & Drug Administration

■ Product registration & control

■ Licensing from industry point

of view

Ministry of Public Health

■ Primary hospital administration

National Development and

Reform Commission
■ Price control for retail and
“authorized margin” in the
distribution channel, mainly for
Rx but also for OTC

the market partner

Societal Insurance Administration

Ministry of Commerce
■ Commercial regulation &
industry policy

State Administration of Industry

& Commerce
■ Business registration &
investigation
14 | 15
Tax Authority

As hospitals and their services to the general population evolve, so are Zuellig Pharma China’s
distribution models. With this evolution, many healthcare products, particularly medical devices,
need a unique distribution model
and the community hospital channel in the new healthcare reform era, A regional quality management system operating across all Zuellig
as well as major city growth. Remote distribution centers offer logistic Pharma sites provides pan-Asia operation consistency, including rigorous
services and direct access to community hospitals; and the company is quality control, product integrity and business continuity planning.
continuing to invest, improving economies of scale through mergers Redressing is in compliance with GMP.
and acquisitions. While seeking to maximize the percentage of prod- In addition, Zuellig Pharma China’s delayered distribution strategy
ucts going directly to hospitals and pharmacies, Zuellig Pharma China combined with sophisticated IT systems brings greater transparency to
also works with a group of carefully selected wholesalers, depending the supply chain. In line with Zuellig Pharma Asia Pacific’s regional
on the therapeutic class with which products will be sold and which approach, Zuellig Pharma China has information systems specifically
defined targeted customers will be reached. focused on serving the distribution needs of the pharmaceutical and
healthcare product industry. As a result, principals can keep track of
Customized solutions which products are going where down to the final customer level.
This flexibility allows the company to build customized distribution Meanwhile, the availability of timely information on sales, marketing
solutions for principals that boost efficiency by identifying and strategy and inventory creates the opportunity for a pro-active response
implementing the shortest channel route. “The platform we have to market conditions.
developed is highly adaptable, allowing us to serve the different needs
of principals and rapidly respond to any changes in the China health- Empowering hospitals
care business environment,” Mr. Chau said. “Our comprehensive As hospitals and their services to the general population evolve, so are
portfolio ranging from pharmaceutical distribution to vaccines and Zuellig Pharma China’s distribution models. With this evolution, many
clinical trial logistics means we can match the extensive portfolios of healthcare products, particularly medical devices, need a unique distribu-
leading multinationals and also provide the services required by tion model. Hospital surgeries are frequently complex and need special-
smaller, specialized suppliers.” ized tools for a specific sequence in an operation. As operations are not
 always executed exactly to plan, the need for tools or
Supplying solutions devices only becomes apparent in surgery. Zuellig
Pharma China provides flexibility to hospitals by
Zuellig Pharma China’s dedicated focus on facility in Guangzhou. All warehouses oper- having everything needed for a particular operation
pharmaceutical and healthcare product dis- ate under the same standardized proce- at the time. The company works closely with hospi-
tribution offers added value know-how, dures, with back-up alarm systems and tals to prepare for their needs and provide what
logistics and infrastructure support to sup- specially trained personnel. Quarterly tem- Zuellig Pharma China calls “last mile logistics” to
pliers seeking to build their presence in the perature mapping is carried out to identify hospitals. This helps hospitals manage their invento-
China market. The company operates at cold and hot spots while 24-hour tempera- ry with fewer overheads and allows them to concen-
national, regional and local level to provide a ture tracking provides monitoring on a con- trate on saving lives and patient care.
full range of distribution solutions to stream- tinuous basis. Manual tracking is carried out Zuellig Pharma China has been engaging local
line supply chain management. Business six times a day. Inbound quality assurance hospitals to increase transparency in their forecast-
models are tailored to the demands of each includes temperature measurement and ing and internal product flows by helping to source,
of the sectors below, with further customiza- data collection, depending on a principal’s customize and maintain an internal reporting, ana-
tion available depending on individual prin- requirements, while outbound checks lytic and business intelligence system. This system
cipal requirements. involve packaging protection and cold chain has enabled hospitals to look at their raw data in a
labeling checks. Trucks are equipped with new way. By drilling by ward, doctor, and even prod-
Pharmaceutical GPS systems for long-haul trips for constant uct level, hospitals are able to see their sales on a
Zuellig Pharma China’s flexible operating surveillance and timely delivery. daily basis with up-to-date information. With
platform offers both local direct distribution enhanced analytics, hospitals have been able to drive
and delayered wholesaler distribution mod- OTC efficiency and superior service for their patients
els to provide greater efficiency, cost reduc- One of the beneficiaries of urban growth and while remaining cost friendly. In helping hospitals
tions, and higher transparency and rising incomes in China is likely to be OTCs, with consolidating their data, Zuellig Pharma China
traceability of sales and inventory. Six local with retail pharmacies already establishing has been able to understand the customer better and
direct distribution companies cover hospi- themselves as a key source of future expan- in turn serve their needs.
tals. Parts of foreign and private clinics are sion in some parts of the country. At Zuellig Other initiatives for hospitals are also underway,
also covered to meet principals’ require- Pharma China, a specific team has been set such as implementing internal ordering systems and
ments. The company has the capability to up to handle OTC business with 60 retail spe- looking at consulting with their operational teams.
handle a comprehensive range of product cialists and coverage of 85,000 retail pharma-
categories and therapies (see Figure 3). cy outlets. Direct distribution to retail is Strategic outlook
available, with value-added support includ- China is on its way to implementing healthcare
Vaccines ing product launch planning, retail targeting reform throughout the entire system. While details
Among the challenges of vaccine distribu- support, and management of key account are not entirely clear for many of its amendments,
tion in China are the lack of infrastructure support. Zuellig Pharma is positioned for this change, seek-
outside the largest cities and lack of trans- ing closer relationships with its customers (hospi-
parency of the whole Center for Disease Diagnostics and medical devices tals, retail pharmacies and clinics) and working as a
Control (CDC) distribution network. Zuellig Logistical services are available for all prod- market partner with manufacturers and suppliers.
Pharma addresses both these concerns ucts including import, local direct distribu- As the fundamental shift in healthcare management
through a distribution model that is flexible tion (hospital and OTC) and regional begins in China, Zuellig Pharma China’s direct
and expanding the number of direct suppli- distribution. A specific medical device team relationship with both parties will help to move the
ers. Zuellig Pharma is enforcing step-by- is provided in the field to handle distribution industry forward.
step the delayering model used over the to dealers, hospitals and retail pharmacies, “Supply chain management in China needs to be
years for pharmaceuticals to vaccines. data and accounts receivable collection. viewed as strategic”, Mr. Zwisler said. “Given the
Import procedures can be handled and importance of the China market to the global health-
warehousing facilities with cold-chain Clinical trial logistics care market, principals must be able to effectively
expertise are available in different locations. Zuellig Pharma China’s “Clinical Reach address a changing business environment to capital-
A dedicated vaccine team operates in the Solution” offers a range of services, including ize on the opportunities that are unfolding.
field handling distribution to CDC, including but not limited to: consultation on importa- “A distribution partner who can provide flexible,
orders and returns management; data col- tion and customs clearance, registration and comprehensive solutions that are tailored to the
lection; accounts receivable collection; and the regulatory process; storage and inventory needs of individual principals and cut through sup-

.
non-standard promotion services. management in a protected and temperature- ply chain complexity is the kind of solution
controlled warehouse; order management provider to meet these needs, today and in the
Cold-chain management and dispatch; specialized cold-chain manage- future,” he said. mp

Zuellig Pharma China provides reliable, cut- ment based on -20°C, 2-8°C and 15-25°C; and
ting-edge cold chain and storage manage- clinical supplies returns, supplies destruction
ment capabilities, including a custom-built with supervision and report.
 H E A LT H C A R E O U T L O O K
| market watch

Wider vision
Growth opportunities in the China market remain optimistic

nificant effect on many aspects of market devel-

opment and operation.
The key challenge is predicting the degree
and consistency of execution of these reforms.
IMS has been developing scenario models with
quantifiable key trigger points and milestones to
help clients understand how radical the new
market may become and hence how business

the market partner

operations should adapt.
What can be seen today is that to maintain
high growth, multinationals are looking to drive
forward in two dimensions: to expand westward;
and to achieve deeper penetration in existing
cities, with an increasing contribution to sales
being made by smaller hospitals and community
health centers.
A handful of major cities currently represent a
significant proportion of sales in China. Beijing, 16 | 17
Shanghai, Guangzhou, Hangzhou and Nanjing
comprise 26% of the total China market and
40% of total multinational sales in the country.
IMS research in 2008 found the top 24 cities
represented about 55% of the total China
China offers exciting prospects for the pharma- the current economic turmoil, a rise in dispos- market and 70% of sales contribution for
ceutical industry in terms of both size and able income linked to urbanization, an ageing multinationals.
growth. The country has witnessed the highest population and the increasing prevalence of The current concentration is in the east of
growth rate among all large pharmaceutical chronic and lifestyle-related diseases. the country. However, this picture is likely to
markets in the past five years. It more than The far-reaching government healthcare change as pharmaceutical companies drive west-
doubled in value from US$11 billion in 2004 to reforms are a complicating but nonetheless ward and distribution evolves. In the wake of
US$23 billion in 2008 (ex-manufacturer value), highly important factor in market growth. When such moves, percentage of sales contribution
with the sector expected to continue its upward fully implemented, these reforms will have a sig- from the five major cities is set to decline.
trend to US$56 billion by 2013, according to Retail’s contribution to sales rose from 13%
Chart source: IMS China Hospital Audit, data as of MAT 2008 Q2.

IMS China hospital audit data (see chart). The China pharmaceutical market size (US$ bn) and growth to 18% in 2007 and 2008 respectively, while
compound annual growth rate from 2004-08 growth in smaller hospitals’ (less than 100 beds)
60
was 20% and is forecast to remain strong at sales ratio for western drugs increased from 6%
55 56
19% from 2008-13. CAGR: 19% to 8% in 2007 and 2008 respectively. While
50
US$ bn (Ex-manufacturer value)

Such a stellar outlook is projected to see (08-13) change in the concentration on city contribution
45
China among the leading countries in the is currently limited, such trends are expected to
world’s top 10 pharmaceutical markets in 2013
for ethical and OTC drugs at ex-factory level
(excluding traditional Chinese medicine). It
40
35
30
25
CAGR: 20%
(04-08)
37
continue. The healthcare reforms are highly
likely to accelerate change on the supply side. mp .
would place China behind the US in first posi-
20 In line with such evolution, IMS is expanding its detailed
tion, with an estimated market size of US$372 23
15 sub-city (“brick”) data to 22 cities. It is launching retail Rx
billion, and Japan in second at US$80 billion. 15 data for 22 cities and developing a smaller hospital audit (100
10
The country is expected to just edge ahead 11 or less beds). For further information on IMS services or the
5 China healthcare reforms, please contact: David Twinberrow,
of France.
0 General Manager, Business Lines, Shanghai, tel: 86 6362 011;
Key forces behind such growth in China or Wang Danhui, Product and Portfolio Strategy Principal,
2004 2006 2008 2010 2013
include a sustained GDP growth rate, even in Beijing, tel: 86 010 65886988 439.
views from the region

A round-up of reports from our offices around the region outlining the news and
China
events that are shaping their businesses and redefining the healthcare industry
Export, property
slowdown impacts
growth

Challenges continue as GDP decreased

from 13% in 2007 to 9% in 2008. This
is due mainly to the export and proper-
ty slowdown. Q4 2008 saw growth of
6.8%, the weakest since 2001. On a
brighter note, inflation cooled to its
lowest level in three years, with con-
sumer prices increasing just 1% in
January. However, producer prices fell
3.3%, the largest decline in seven
years. Trade shipments in January
decreased by 14% from the previous
year, with the hardest hit areas in the
south, more specifically Shenzhen.
December shipments fell 2.8%, accord-
ing to a February report by Bloomberg.
With over 20 million unemployed,
focused spending by the government
to provide a stimulus to the financial
have a budget deficit of HK$96.9 billion The funding increase will definitely sector has become more urgent.
Hong Kong (US$12.4 billion) over the next five be welcomed by the pharmaceutical Lending has surged with the US$585
financial years, but hopes to balance industry. In 2008, sales growth for billion stimulus package coming to
Government makes the books by 2013-14. pharmaceutical products in the govern- fruition in state-owned banks. The
employment a priority The measure that will have the most ment hospital sector was a mere 3.6% China Securities Journal reported in
impact on the pharmaceutical industry versus growth of 11.2% for the total January an estimated US$175.5 billion
is an increase in the recurrent subven- pharmaceutical market. A rise in the in new loans. Analysts hope the down-
Hong Kong has not escaped the world- tion for the Hospital Authority. The sub- use of generics and the restricted use turn has bottomed out and recovery is
wide turmoil resulting from the worst vention will rise over the next three of new products helped to account for beginning. Slowing inflation has
global economic crisis since the Great years by about HK$870 million (US$110 this. With the funding boost, it is enabled the central bank to cut inter-
Depression, with the city already sliding million) a year. In 2011-12, it will be hoped that more innovative pharma- est rates further, with the one-year
into recession. Financial Secretary Mr. approximately HK$2.6 billion (US$0.33 ceutical products will be included in lending rate at 5.31% after a total of
John Tsang delivered his budget speech billion) higher than at present. An extra the Hospital Authority’s drug formulary. 2.16 percentage point reductions in
at the end of February, predicting that HK$840 million (US$108 million) has The Food and Health Bureau is cur- 2008.
Hong Kong could face at least two been set aside for the next three years rently preparing for the second stage On January 21, the State Council
tough years before the economy begins to strengthen primary care services and of healthcare reform consultation. A passed the highly anticipated medical
to show signs of recovery. Mr. Tsang support to chronic patients, to promote Working Group on Primary Care has reform plan. The plan calls for spend-
forecast a 2.5% increase in GDP in public-private partnership and to devel- been set up to put forward specific ing up to US$123 billion by 2011 to
2008, lower than the trend growth rate op a territory-wide electronic health proposals on primary care. Healthcare provide universal healthcare. The
over the past 10 years; a 2% to 3% de- record system. expenditure will be increased to 17% reform plan, in development since
crease in GDP for 2009; and an annual It is expected that support for chron- of recurrent expenditures by 2012. 2006, intends to address issues in
average growth rate of 3% to 5% for ic patients at public hospitals, such as When the supplementary financing increasing medical fees, lack of acces-
2010-13. The inflation rate for 2008 was services for kidney, cancer, mental and arrangements are finalized, HK$50 sibility, and low medical insurance
4.3% and is expected to be 1.6% in heart patients will be enhanced. The billion (US$6.4 billion) will be drawn coverage. The plan has five major
2009. Unemployment may increase public-private partnership will be fos- from the fiscal reserves to implement components to cater to these needs.
from 4.6% in 2008 to 8% in 2009. tered in areas such as renal dialysis. the reform. It is due to:
The government will be giving top The Hospital Authority will create more Frederick Tsang ■ Provide increased coverage for both

priority to creating and preserving jobs. than 1,000 permanent jobs in 2009 and ftsang@zuelligpharma.com rural and urban populations through
Revenue concessions, such as a waiver nursing schools are being reopened to either the basic medical insurance sys-
of salaries tax and rates, and a freeze offer 550 training places. In addition, ✱ Fast Fact tem or the new rural cooperative med-
on government fees and charges, will the Hospital Authority will look into the The Hospital Authority’s recurrent ical system. Each person under either
be introduced to stimulate the econo- possibility of providing patients with subvention will be increased over the system will receive a subsidy of
my. As a result, the government will more expensive drugs free of charge. next three years. RMB120.
 views from the region
■ Establish a national essential drug ally perceived as a strong stimulus the Health Ministry has announced
system. All essential drugs will be
included in the national drug reim-
package which will partially soften the
contraction of the economy. Exports
Singapore plans to speed up recruitment for
jobs for those who may be
bursement list for basic medical insur- plunged a record 42% in December as Downturn expected retrenched. The ministry is now look-
ance programs. demand for IT products has been to continue in 2009 ing to fill 4,500 positions in the public
■ Improve the primary medical service severely affected by the global finan- health sector over the next two years
system, concentrating on county level cial crisis. The final figure for GDP and another 1,700 later. These range
hospitals, township clinics and commu- growth in 2008 is expected to be from jobs for healthcare professionals
nity health centers. below 2%, a significant drop compared In the midst of deepening crises in the such as nurses and pharmacists, to
■ Promote fair access to basic public with previous forecasts, reflecting a world’s major financial markets, administrative positions for counter
health services by developing and Taiwanese economy in worse shape Singapore’s economy continued to staff and telephone operators. To aid
implementing national basic public than anticipated. Many analysts deteriorate in Q4 2008. Preliminary those interested in a mid-career
health service programs. believe GDP will contract in 2009 at indicators point toward a contraction switch to the healthcare sector, the
■ Implement a pilot program this year around -2% and that growth will only of real GDP by 3.7%, following a ministry and Workforce Development
to reform public hospitals by increas- resume from 2010. Taiwan’s unemploy- decline of 0.2% in the preceding quar- Agency have announced plans to sub-
ing operational efficiency and service ment rate climbed sharply in the last ter. For 2008 as a whole, the economy sidize training to enable 250 people
standards. Funding mechanisms for four months of 2008 and reached 4.6% is estimated to have grown by only with no prior experience to become

the market partner

hospitals will be included in the pilot. in February, with expectations for 2009 1.2% compared with a recent forecast nurses or allied health professionals.
Beijing has already initiated a averaging 6%, much above govern- of 3% for the year and 7.7% in 2007. The number of scholarships for allied
mandatory policy for residents covered ment’s latest forecasts of 4.5%. Projecting forward, the Ministry of health programs has doubled to 250
under the basic medical insurance, Inflation dropped significantly to 1.2% Trade and Industry (MTI) expects the this year. The Health Ministry has
who must first seek a referral diagno- in December and may well turn to economic downturn to continue in taken further steps to assist patients
sis from community medical institu- deflation in 2009. 2009. The weaker outlook for the during the recession, with the budget
tions to be eligible for reimbursement. Taiwan has become the 17th econo- Singapore economy compared with for Medifund extended to $74 million,
Shanghai has also implemented a zero my to ban smoking indoors in public earlier forecasts reflects two factors: almost 50% more than last year.
markup policy for prices of basic drugs facilities. The Department of Health is global economic activity has declined Medifund is a national health pro-
dispensed through 232 Community also lobbying the Legislative Yuan to faster and deeper; and the spillover gram that provides subsidies to
18 | 19
Health Service Centers (CHCs). This pass a bill to increase the health tax effects on key sectors of the economy needy Singaporeans aged 65 and up
came into force in some CHCs at the on tobacco products from the current will be stronger. Taking these factors for treatment of minor ailments at pri-
end of December and is scheduled to NT$10 to NT$20 per pack. It is estimat- into account, MTI has revised vate general practitioner clinics. The
be rolled out to the entire city by the ed this could raise NT$11 billion for Singapore’s economic growth forecast program will expand to cover more
end of 2009. National Health Insurance and partially to between -5.0% and -2.0%. chronic diseases this year.
Elsie Lim cover its current deficit. Singapore’s medical tourism indus- Ng Yong Tjoon
elim@zuelligpharma.com The National Health Conference, try has not escaped the global finan- ytng@zuelligpharma.com
organized by the Department of Health cial turmoil, with a drop in foreign
✱ Fast Fact on December 31, produced some con- patients seeking medical services. ✱ Fast Fact
The State Council has passed the troversial conclusions, especially on One of the largest private healthcare The government is boosting health-
long-awaited medical reform plan. generic product pricing. The recom- providers reported a reduction of 5% care recruitment and training to
mendation was to give the same price to 7% in foreign patients in Q4 2008, counter effects of the recession.
to drugs with the same ingredients especially those from neighboring
Taiwan and same quality, effectively leveling countries. The medical tourism indus-
prices of original off-patent drugs with try attracted over 571,000 medical Malaysia
Stimulus package
seeks to ease
generics.
The sixth Price Volume Survey initi-
tourists last year and was worth more
than $1.7 billion in 2007. Despite the
& Brunei
economic contraction ated by the Bureau of National Health gloom, long-term confidence in the Malaysia GDP growth
Insurance and its corresponding price industry remains. ParkwayHealth, the revised down
The alleged money laundering, bribe cuts on drugs are expected to be com- largest private healthcare provider, is
and embezzlement case involving pleted and implemented by September proceeding with plans to build a 350- With financial markets under stress
former president Chen Shui-bian and his 1, 2009 at the latest, in line with the bed hospital due to be completed by and global output and trade plummet-
family is perceived as a test for Legislative Yuan Health Committee’s 2011. The government has also ing, Malaysia will not be spared the
Taiwanese democracy and its judicial binding resolution passed in pledged to invest $4 billion in health- fallout. About 80% of its exports go to
system, as fears of political interference December. care infrastructure over the next five 10 countries which are currently suf-
in due process for the trial are mounting. Yves Hermes years. This will include the redevelop- fering an economic slowdown. Despite
It is expected to last several months. yhermes@zuelligpharma.com ment of older hospitals, medical cen- the assurance of the central bank,
President Ma Ying-jeou and his ters and a new hospital in the west, as Bank Negara Malaysia (BNM), that the
administration’s tax cuts, shopping ✱ Fast Fact well as expediting the construction of local financial system will remain
vouchers and extra spending on infra- The sixth Price Volume Survey is due a new public hospital. strong, the government has revised
structure, totaling close to NT$500 to be implemented by September As part of the government’s effort to GDP growth for 2009 downward from
billion (4.1% of 2009 GDP), are gener- 2009 at the latest. buffer the full impact of the recession, 5.4% to 3.5% and unveiled a RM7
views from the region
billion (US$1.94 billion) stimulus pack- ing issues for the government are to amid prospects of major layoffs and foreign companies have started
age to drive growth, spur domestic reduce reliance on oil, the increasing projections of a slowdown in GDP investing, with Singapore-based
spending and generate more activity in burden of subsidy provision and food growth to 4% to 5% maximum in 2009, Novartis Institute for Tropical
segments of the economy. insecurity. Brunei has a self-sufficiency down from around 6.2% in 2008. Diseases creating a research partner-
With a slew of negative data, includ- rate of 3% for rice. The remainder is Easing inflation concerns and a rela- ship with two of Indonesia’s hospi-
ing contraction in exports, industrial mostly imported from Thailand. tively stable rupiah are likely to allow tals. Despite some regulatory and
production and concerns over job Brunei also faces the challenge of the central bank to implement further intellectual property rights shortcom-
stability, BNM slashed its benchmark increasing healthcare costs and needs monetary easing to encourage con- ings, Indonesia has potential for clini-
overnight policy rate in January by a doctors to play a greater role in bring- sumption. The currency has strength- cal research given its low cost and
record 75 basis point from 3.25% to ing down costs through prevention, ened over 10% against the US dollar epidemiological profile.
2.5% in an aggressive move to further wellness, early detection and treat- since last year’s low in mid-November While Indonesia has overhauled its
lower borrowing costs. Many took this ment. The Ministry of Health approved while other financial proxies, such as regulatory system, the pharmaceuti-
as a sign that the economy may be the establishment of the Brunei the stock and bond markets, have also cal sector is still in a difficult position.
getting to a delicate stage. Medical Association as a representa- risen substantially during this period Inadequate patent laws, uncertain
The bleak global outlook will have tive body to take on these tasks. In with noticeable foreign capital inflows. government pricing policy and strong
an impact on the pharmaceutical working to ensure services are readily In the third week of January, govern- domestic capacity are largely to
industry. However, international con- available and accessible, the ministry ment banks decided to reduce credit blame. As a result, foreign presence is
sultants Frost & Sullivan reported sev- is also evaluating the building of a interest rates. This was a response to low, though regional harmonization
eral factors which will serve the new hospital, establishing a cancer the reduction of Bank Indonesia’s and an improvement in business con-
Malaysian pharmaceutical industry center, and a renal transplant service. benchmark interest rate at the begin- ditions will stimulate growth. Some
well. These include the increase in var- Jessie Tang ning of the month. The decision to multinationals have local plants,
ious death-related illness, for example jtang@zuelligpharma.com reduce credit interest rates is a com- while others import through distribu-
heart disease and cancer, that will mitment from banks to continually tors. A new decree banning registra-
drive demand for specialist drugs and ✱ Fast Fact align their credit interest rates with tion of pharmaceuticals by principals
treatments; the rising young middle- The newly established Brunei Medical the bank capability and the condition without manufacturing facilities has
class who have increased healthcare Association will help doctors to reduce in the market. been issued. Thirteen multinational
expectations; an ageing population; Brunei’s healthcare costs. Bank Indonesia also noted that the companies have been affected and
and medical tourism. fall in oil and other commodity prices must take necessary action within the
The pharmaceutical market in that is helping to ease inflationary given transition period.
Malaysia was valued at RM3.5 billion Indonesia pressures was likely to follow through Industry Minister Fahmi Idris said in
(US$972 million) in 2008, and is into 2009, and indicated that annual October 2008 that he was considering
President maintains
estimated to grow to RM3.8 billion inflation next year could fall to the removing pharmaceuticals from the
popularity in run-up to
(US$1.05 billion) in 2009. According lower-end of its 6.5% to 7.5% inflation negative investment list. Inclusion
elections
to the Pharmaceutical Association of projection. With slower growth and means that foreign entities can only
Malaysia (PhAMA) Turnover Survey, large-scale layoffs on the horizon, provide up to three-quarters of the
the overall pharmaceutical sector grew President Susilo Bambang Yudhoyono most analysts now expect Bank funds invested in a pharmaceutical
9.77% in 2008 compared with the enjoyed a good start to 2009, with his Indonesia to join central banks concern. It must be noted that the
previous corresponding period. best poll results in two years and a around the world and move more politician gave no timeframe for the
Participating multinational corpora- growing lead over main rival Megawati aggressively, with monetary easing transition. Unsurprisingly, the plan
tions reported total sales of RM2.40 Soekarnoputri. Timely fuel price cuts over the coming months in an effort has the support of the International
billion (US$667 million). For Zuellig and plans for a major stimulus have to reduce borrowing costs and boost Pharmaceutical Manufacturers Group
Pharma Malaysia’s principals, total boosted his popularity as voters focus domestic consumption. and the Pharmaceutical Companies
sales reported were RM2.43 billion on the parliamentary elections in April Indonesia currently has over 200 Association.
(US$675 million) in 2008 while overall and the first round of the presidential pharmaceutical manufacturers. In February, increasingly higher pre-
annual market growth was 9.33%. In elections in July. President Yudhoyono’s Leading foreign players are estimated cipitation became visible in the capi-
terms of ethical growth, PhAMA post- Partai Demokrat (PD), bolstered by his to account for around half of the mar- tal Jakarta. Some easily inundated
ed good growth of 9.2% for 2008 popularity as well as an effective cam- ket share in value terms, although areas started to experience mild to
while Zuellig Pharma’s principals saw paign, has also moved ahead of its many are critical of the numerous bar- high-level flooding. APL took precau-
ethical sales increase by 8.8%. two main competitors, Ms. Megawati’s riers to entry and government bias tionary action, with its water rescue
At Zuellig Pharma Malaysia, we are PDIP and Golkar. toward generic products. Some con- team carrying out all necessary
proud to welcome Abbott Laboratories. Bank Indonesia lowered its bench- solidation is likely in the face of preparations.
The company came on board in mark interest rate by 25bp to 9.25% in increased competition, pricing pres- Santiago Garcia
February. December and further reduced the sures and regional harmonization ini- santiago.garcia@aplcare.com
In Brunei, 2008 brought several pos- rate to 8.75% in January. The 50bp tiatives, with the government outlining
itive developments, with the Sultanate rate cut and the launch of a US$3.5 to plans to merge a number of state- ✱ Fast Fact
buffered against the current economic US$5 billion government stimulus owned producers. Indigenous R&D Novartis Institute for Tropical
turmoil due to strong global crude oil package underscores the increased efforts are hampered by the lack of Diseases has established a research
prices. Oil and gas make up 90% of focus on supporting the economy. This finance and widespread counterfeit- partnership with two Indonesian
Brunei’s export revenues. More press- includes boosting domestic demand ing. However, in recent months some hospitals.
 distribution principal. We have also oil prices stabilize and commodity (US$1.09) to 11,500 dong (US$0.66)
added further clinical trial principals. prices, especially food and raw materi- per liter, as well as lower food and
Korea Tom Vanmolkot als, remain soft. foodstuff prices.
Gloomy outlook as tvanmolkot@zuelligpharma.com In 2008, the Philippine pharmaceuti- Several analysts have reduced their
exports plunge cal market grew 10% in value, and now forecasts substantially for both infla-
✱ Fast Fact totals US$2.27 billion. Ethical products tion and GDP growth. Vietnam’s econo-
The credit crunch is taking its toll on grew 11.6% driven by the double-digit my relies heavily on exports (“Exports
the pharmaceutical market. growth of the antihypertensive, dia- of goods and services are equivalent
The ongoing credit crisis has hit Korea betes and respiratory therapeutic to over 80% of GDP [in nominal
severely, with the economy shrinking areas. The OTC market expanded 5.4%, terms].” Source: EIU country report,
by 5.6% in Q4, its worst performance driven by cough and cold preparations December 2008.) Hence, the slowdown
in a decade. Korean exports in Q4 fell Philippines (13.9%) and analgesics (9.3%) but off- in Europe and the US will have a
by close to 12% from the previous Economy loses steam set by a weak vitamins market (3.7%). strong effect on GDP growth in 2009.
three-month period, the largest amid global recession Branded products, which account for This is of major concern since a large
decline in almost 30 years. In January, 95% of the market, grew 9.8% and number of Vietnamese are employed
the situation worsened with exports unbranded products grew 14.6%. by export-driven industries, including
plunging 32.8%. More recent data The Philippine economy (GDP) grew Drugstores, which account for the furniture, garment, seafood, and

the market partner

shows the economic slowdown has 4.6% in 2008, down from the 7.2% lion’s share of channel sales in this pre- handicrafts, among others.
accelerated. This gloomy picture puts growth in the prior year. Export volume scription market, increased 11%, and The government has adopted vari-
more pressure on the government to flattened, reflecting depressed hospitals grew 5%. ous measures to support local com-
expand its stimulus plans, and for the demand as the major world economies During 2008, local companies grew panies, including a stimulus package
central bank to take additional mone- experienced a recession. Investment in 14% and multinational companies and lower interest rates. The State
tary-easing steps. The Bank of Korea plant and equipment slowed sharply (MNCs) by 8%. MNCs began to exe- Bank of Vietnam dropped its rate from
has lowered the benchmark interest as most companies put expansion cute more innovative market expansion a peak of 14% in June 2008 to half
rate to 2% and the government is plans on hold due to short-term programs, clever pricing strategies, that in January 2009. The implemen-
scrambling to provide stimulus pack- business uncertainties. effective patient compliance and usage tation of the personal income tax law
ages, including tax cuts and expanded The few bright spots in the economy programs, and better channel manage- has been postponed to help ailing 20 | 21
fiscal spending. were private construction, which ment programs, in order to protect companies as well as employees,
The credit crunch has taken its toll remained on an upswing, growing by their brands. although it remains to be seen
on the pharmaceutical market. 11.4%, and business process outsourc- Mike Becker whether it will be implemented in
Wholesalers in Korea are highly ing (BPO) and information technology- mbecker@zuelligpharma.com coming months.
dependent on short-term uncollateral- enabled services (for example, call The dong was devalued by 3% in
ized loans for cash flow and several centers), which sustained growth of ✱ Fast Fact December, with a further devaluation
have been forced to declare bankrupt- 35%. BPOs provided a boost to the Multinationals look to innovative possible in 2009. Companies in
cy when loans were not renewed. office space segment of property market expansion programs to safe- Vietnam are also concerned about the
Limited access to capital has also development. Government pump- guard brands. availability of US dollars via commer-
forced wholesalers to reduce invento- priming also commenced in the cial banks to settle import bills, main-
ry levels. second half of 2008. ly due to the slowdown of exports.
The Ministry of Health, Welfare and As the global challenges become Stefan Heitmann
Family Affairs continues to enforce more formidable, domestic growth
Vietnam sheitmann@zuelligpharma.com
policies to control expenditure. It has sources will likely be less effective in Inflation eases as gas
announced that the drug price reduc- counterbalancing the external shocks prices fall ✱ Fast Fact
tion planned for this year is being and in propping up the economy. Slowdown in Europe and US expect-
reexamined to take into account the Hence, Philippine GDP is forecast to ed to have strong effect on GDP
current economic downturn. Minister grow between 2% and 3% in 2009. The After ever-increasing inflation rates for growth in 2009.
Jeon Jae Hee has also expressed only major difference in policy thrust most of 2008, the year ended with a
strong interest in a transparent drug from 2008 is the relaxation of monetary strong reduction of month-on-month
distribution system, and the ministry policy in an effort to lower the cost of rates, bringing the annual average to Thailand
has implemented the revised borrowing to stimulate corporate and just below 20%. In January 2009,
Pharmaceutical Act enforcement regu- consumer spending. rates dropped further to 17.5% com- Government passes
lation. This focuses on punishing both After a brief strengthening in the pared with January 2008, with only a by-election test
provider (wholesaler/manufacturer) early part of 2009, the peso-dollar small increase compared with
and receiver (pharmacists/doctors) for exchange rate is likely to resume its December 2008. This is notable since
illegal rebates or incentives of any depreciation until the end of the year, Tet (Vietnamese New Year) fell in The end of 2008 saw the election of
kind. The punishment may take the reflecting adverse market reaction to January this year. Tet is usually accom- a new Prime Minister, Mr. Abhisit
form of fines or license suspension. the deepening recession in the world’s panied by large price increases. The Vejjajiva, an Oxford-educated opposi-
Previously, the provider was punished. major economies. The exchange rate drop in inflation rates has been driven tion leader, ending a seven-year
At Zuellig Pharma Korea we are should average P48-48.5:$1 in 2009. by lower gasoline prices, which dominance of electoral politics by
pleased to welcome Allergan as a Inflation should fall below 7%, as world dropped from a peak of 19,000 dong parties loyal to former Prime Minister
views from the region
Mr. Thaksin Shinawatra. By-elections Mumbai, including the historic Taj surizing the government not to showed growth of 19.4% for the first
in January saw the government suc- Mahal Hotel and the prestigious approve me-too versions of their half of financial year 2008-09,
cessfully pass its first stability test. Oberoi/Trident Hotels complex. With medicines by Indian companies. December saw a 10% decline in the
The results lifted the government’s evidence indicating the attacks origi- While the Health Ministry has yet to country’s total export earnings over
majority to 48 seats in the 480-seat nated in Pakistan, tension has make a call, a parliamentary standing the same time the previous year –
parliament. The cabinet quickly increased between India and Pakistan. committee on commerce has told the although much of this drop is seen
approved a supplementary budget of Tension is likely to remain high for government not to change the cur- as reflecting fewer working days in
US$3.2 billion (equal to 1.2% of 2008 most of 2009 while Pakistan address- rent practice of approving cheaper the month due to the Eid festival and
GDP), bringing the overall economic es India’s demand to arrest and pun- Indian versions of multinational national election. The ready-made
stimulus package to US$8.2 billion. ish the suspected instigators of the company drugs. garment sector is nervous, and
Q4 2008 saw GDP growth slow Mumbai attack. There has also been a Mike Hampton frozen foods, particularly shrimp, are
down dramatically and almost stop. backlash against politicians for their mhampton@zuelligpharma.com facing downward price pressure.
This was partly due to the occupation perceived inability to protect people. Leather exports were 28% below
of Thailand’s main airports which con- Senior politicians at national and ✱ Fast Fact the export target for the six months
tributed to a sharp fall in the tourism state levels have been held account- Data exclusivity continues to be a ending December. Concerns over
sector, a major contributor to able and forced to resign. hot subject between government, overseas foreign worker (OFW)
Thailand’s GDP. GDP is expected to Despite the attacks and increased multinational companies and local remittances have yet to be realized.
contract in Q1 2009, putting Thailand tension with Pakistan, India is still on generic manufacturers. The January inflow was a record
in a technical recession. The govern- track for stable general elections in US$865 million, contributing to the
ment and Bank of Thailand projec- May. Of the four major states holding July 2008-January 2009 growth rate
tions for 2009 GDP growth are now elections recently, Delhi, Madhya Bangladesh of 29.4% over the same time the
close to 2%. Most local analysts pre- Pradesh and Chhattisgarh were previous year.
Country continues to
dict little growth until late 2009. retained by the party in power. The The pharmaceutical industry in
ride out economic
Exports plunged 17.7% in November incumbent Congress-led national Bangladesh had another strong year,
storm
2008, the biggest drop since the Asian coalition also seems likely to be recording double-digit growth in
crisis 11 years ago and unemployment returned although a change to a 2008. IMS reported that sales
is expected to rise to between 4% to Bharatiya Janata Party-led coalition A national election was held on exceeded US$580 million, although
5%. The Central Bank announced a government is not expected to have December 29 resulting in a landslide local estimates suggest sales over
rate cut in January, taking the bank significant impact on the economy win for the Awami League-led Grand US$700 million for the year, with
policy rate to 2% as inflation pres- and business environment. Alliance and bringing a return to a growth driven predominantly by local
sures ease. While still reeling from the global democratic form of government. The manufacturers. The base of manufac-
On the healthcare front, Mr. Wittaya financial crisis, India has been shaken election was held in a peaceful ture for export was further diversi-
Kaewparadai has been appointed by the Satyam Computer Services atmosphere, achieving a voter fied with a number of local
Minister of Public Health. The introduc- scandal. The founder and former turnout of more than 80%, with 25% manufacturers receiving internation-
tion of the product liability law on chairman of Satyam, the fourth voting for the first time. Both local al accreditation which will see them
February 20 generated much concern largest Indian computer services and international observers pro- exporting to developed markets in
among manufacturers. Unlike many company, B. Ramalinga Raju Satyam nounced the election free and fair, the future in addition to the predomi-
countries around the world, the onus is admitted he inflated the company’s countering the allegations of the los- nantly least developed countries
on the manufacturer or supplier to cash balances and profits to cover up ing Bangladesh Nationalist Party (LDC) markets they serve today.
prove that their product is not defective. the diversion of funds to two real (BNP) that the results were rigged. Zuellig Pharma Bangladesh
Yves Hermes estate firms owned by his family The BNP previously held power and Limited celebrated its second year
yhermes@zuelligpharma.com members. appears to have been punished by of operations in February. The year
The issue of data exclusivity voters for the perceived economic saw the expansion of the Tejgaon
✱ Fast Fact remains a hot topic between the gov- mismanagement and rampant corrup- Distribution Center, the implementa-
The introduction of product liability ernment, local generic manufacturers tion which characterized their time in tion of an outsourced disaster
legislation has caused concern and multinational manufacturers. In power. Sheikh Hasina commenced recovery plan site together with
among manufacturers. India, the drug regulator approves her second term as Prime Minister Thakral Information Systems Limited,
cheaper local drugs if the second with a clear mandate to enact elec- the preparation of a business contin-
applicant can show it is chemically toral promises to reduce the price of gency plan with particular focus on
equivalent to an already approved essentials, wind back oil and gas avian influenza, and a number of
India drug. Marketing approval relies on the price increases, continue anti-corrup- operational and quality infrastruc-
fact that the same chemical was tion measures, and implement much- ture upgrades to branches.
Tension with Pakistan
approved earlier by itself or another needed infrastructure projects to Brett Marshall
likely to remain high
regulator with no clinical trials support the economic development bmarshall@zuelligpharma.com
required. Multinationals take the view of the country.
that India should provide an effective Bangladesh continues to weather ✱ Fast Fact
Mumbai, and India, were thrown into period of exclusivity for clinical the global economic storm. However, The pharmaceutical industry
turmoil in November by terrorist dossiers that are independent of concerns are beginning to be raised. enjoyed strong double-digit growth
attacks on various sites in South patent protection and have been pres- While exports of US$7.76 billion in 2008.
Corporate Country offices
Zuellig Pharma Zuellig Pharma
Asia Pacific Bangladesh Singapore For information about Zuellig Pharma
1303, Shui On Centre Mr. Brett Marshall Mr. YT Ng Asia Pacific or any of its business entities,
No. 6-8 Harbour Road General Manager General Manager please contact the Corporate Office:
Wanchai, Hong Kong Zuellig Pharma Bangladesh Ltd. Zuellig Pharma Pte. Ltd.
Tel: +852 2845 2677 Tel: +880 (2) 988 4454 Tel: +65 6546 8188 Zuellig Pharma Asia Pacific
Fax: +852 2877 5647 bmarshall@zuelligpharma.com ytng@zuelligpharma.com 1303 Shui On Centre
No. 6-8 Harbour Road
China Wanchai, Hong Kong
Contacts Taiwan
Tel: +852 2845 2677
Mr. Eric Zwisler Ms. Elsie Lim Mr. Yves Hermes
Fax: +852 2877 5647
Chief Executive Officer Chief Executive General Manager
Email: help@zuelligpharma.com
Zuellig Pharma Asia Pacific Zuellig Pharma China Zuellig Pharma, Inc.
ezwisler@zuelligpharma.com Tel: +86 (21) 5306 0001 Tel: +886 (2) 2570 0064
elim@zuelligpharma.com yhermes@zuelligpharma.com
Mr. Rolf Steffen
Managing Director, Operations & Hong Kong & Macau Thailand
Value Innovation Mr. Yves Hermes
Mr. Frederick Tsang
Zuellig Pharma Chief Executive
Chief Executive
rsteffen@zuelligpharma.com Zuellig Pharma Ltd.
Zuellig Pharma Ltd.
Tel: +852 2856 3632 Tel: +66 (2) 656 9800
Mr. Roland Bruhin yhermes@zuelligpharma.com
ftsang@zuelligpharma.com
Managing Director, Business Operations
Zuellig Pharma
India Vietnam & Cambodia
rbruhin@zuelligpharma.com
Mr. Mike Hampton Mr. Stefan Heitmann
General Manager General Manager
Ms. Elaine J. Cheung
Zuellig Pharma (India) Private Ltd. Zuellig Pharma Vietnam Ltd.
Chief Financial Officer
Tel: +91 22 6707 8826 Tel: +84 (8) 910 2650
Zuellig Pharma Asia Pacific
mhampton@zuelligpharma.com sheitmann@zuelligpharma.com
echeung@zuelligpharma.com

Mr. Douglas Stanton Indonesia

Chief Human Resources Officer Mr. Santiago Garcia
Zuellig Pharma Asia Pacific President Director
dstanton@zuelligpharma.com P.T. Anugerah Pharmindo Lestari
Tel: +62(21) 345 6008
Mr. Michael Becker santiago.garcia@aplcare.com
Area Director
Zuellig Pharma Korea
mbecker@zuelligpharma.com Mr. Tom Vanmolkot
President
Ms. Jessie Tang Zuellig Pharma Korea Ltd.
Area Director Tel: +82 (2) 2006 0600
Zuellig Pharma tvanmolkot@zuelligpharma.com
jtang@zuelligpharma.com
Malaysia & Brunei
Mr. Joe Davies Ms. Jessie Tang
Regional Logistics Manager Chief Executive
Zuellig Pharma Zuellig Pharma Sdn. Bhd.
Tel: +63 (2) 752 6458 Tel: +60 (3) 7985 6688
jdavies@zuelligpharma.com jtang@zuelligpharma.com

Mr. Giuseppe Leo

Chief Executive,
Philippines
Specialty Solutions Group, Mr. Michael Becker
Zuellig Pharma President & Chief Executive
gleo@zuelligpharma.com Zuellig Pharma Corporation
Tel: +63 (2) 845 7252
Mr. Joshua Leung mbecker@zuelligpharma.com
Editor, The Market Partner
Zuellig Pharma Asia Pacific Mr. Chris Eberle
jleung@zuelligpharma.com General Manager
Metro Drug Inc.
Tel: +63 (2) 837 8661
ceberle@metrodrug.com
The Market Partner: company background

Zuellig Pharma Asia Pacific Affiliated Companies

With a history of more than 60 years in Asia, Zuellig zip-online® is our regional
Pharma has forged a reputation as the leading provider of principal information
distribution solutions for the pharmaceutical industry in the platform offering timely
region. Our cutting-edge services cover end-to-end supply sales and inventory Pharma Industries has a PharmaLink is a leading
chain management, including inventory management, ware- information, best practices long-established history in pharmaceutical and health-
housing, distribution and customer order management, in analysis and reporting, providing contract manu- care marketing specialist in
among others. Taking advantage of our extensive expertise, and diverse forms of facturing services to the the Asia Pacific region. The
pioneering technological innovations and state-of-the-art benchmarking. Asian pharmaceutical company is a wholly owned
facilities allows manufacturers to focus on their own core healthcare industry through subsidiary of Asia Pacific
expertise. A scalable infrastructure supports the marketing its operations in Thailand Pharmaceutical Holdings,
drives of our principals and our collection services reduce and the Philippines. With a joint venture between
country risks for individual principals. AsiaRx® is our exclusive a client base of over 50 Interpharma Investments
We provide the largest direct account coverage in all regional Internet-based multinational companies, Ltd, Quintiles Transnational
healthcare channels in Asia Pacific, employing over 1,000 pharmaceutical marketplace and over 1,200 formula- Corp and Temasek
sales representatives to support the activities of our princi- that connects customers tions currently in produc- Holdings (Private) Limited.
pals in the trade channel. Advanced information technology and principals in innovative tion, the Philippines plant
tools, such as zip-online, an innovative sales and inventory ways. For principals, it is a of Pharma Industries is
tool, give principals full transparency for all transactions. new connection to cus- the largest, most advanced
Our world-class facilities operate in strict accordance with tomer behavior, integrated contract manufacturing
rigorous quality management standards, setting industry with other channels and facility in Asia. The group’s
benchmarks of excellence. We continuously refine and offering complete supply Thai operations are certi-
implement the latest technological advances in our on-going chain information. For cus- fied to the same top GMP
drive to offer the best services to our principals and clients. tomers, it saves them time standards, providing manu-
and money, and gives them facturing services to over 30
the control necessary to run research-based companies
their businesses better. from around the globe.

The Specialty Solutions Group (SSG) is a pioneering

regional consultancy and bio-logistic services division of
Zuellig Pharma. Strategically based in Singapore, SSG
leverages Zuellig Pharma’s cutting-edge Regional
Distribution Center and pan-Asia coverage
to provide customized, added-value bio-logistics for
pharmaceutical, clinical trial, medical device, diagnostic
and other healthcare-related companies.

For more information about Zuellig Pharma,

please contact: jleung@zuelligpharma.com