The pharmaceutical, medical device and diagnostics industries are very interested in the changing market access landscape in South and East Asia because of the vast commercial potential of this area. This region has a large proportion of the world’s population (~60%), a 2011 gross domestic product (GDP) growth that is almost triple the average of Europe and North America, and a huge opportunity for improvements in healthcare.
Market access requirements
Current market access requirements vary considerably among the countries in South and East Asia. Many of them – including China and India – do not have any formal comparative effectiveness or health economic criteria for national pricing and reimbursement submissions. Health economics generally plays a minor role in their decision-making.
South Korea, Taiwan and Thailand are the only Asian countries that currently require advanced health economic evidence in the form of cost-effectiveness analysis in national submissions. Even though health economic evidence is mandatory in these countries, however, a far greater emphasis is still placed on clinical effectiveness and clinician opinions. This may be due to a general skepticism regarding health economics, combined with a high level of trust in clinical experts. In fact, payers in this geographical region often elect key opinion leaders to negotiate directly with manufacturers on price, reimbursement or formulary listing.
Barriers to health economics
Although many of these governments have declared an interest in developing health economic expertise, it will be many years before this translates into the widespread use of health economics in decision-making. The region lacks qualified health economic experts and the infrastructure required to collect outcomes, cost and resource use data for health economic evaluations. Patient registries are in their infancy, and standardized unit costs rarely exist, making country-specific health economic evaluations extremely difficult.
However, there may be a more fundamental obstacle to the use of advanced health economic evaluation: the combination of international price referencing and wealth disparity in South and East Asia.
International price referencing is a means of price control often used to minimize or normalize prices. This approach compares the external willingness-to-pay (WTP) of other countries to that of the home country in order to determine price. Health economics, on the other hand, is used to allocate resources efficiently within a health system based on the home country’s WTP. As a result, these two concepts are inherently at odds with one another, unless the internal and external WTP is comparable.
Countries that use health economics and international price referencing generally reference countries with a similar WTP level – for example, Australia references New Zealand and the UK. However, this is unlikely to be the case for South and East Asia.
There is a trickle-down effect of prices from Europe and North America to some of the countries in Asia. More importantly though, some countries within the region are beginning to reference other countries with vastly different GDP per capita and, presumably, WTP. For example, China informally references Japan and South Korea, both of which have a GDP per capita four times that of China.
The World Health Organization (WHO) recommends the use of GDP to derive three categories of cost-effectiveness that have been adopted by the countries in South and East Asia requiring cost effectiveness analysis:
- Highly cost-effective (less than GDP per capita)
- Cost-effective (between one and three times GDP per capita)
- Not cost-effective (more than three times GDP per capita)
Because there is an almost 18-fold difference in GDP between the region’s richest nation (Singapore) and the poorest (Vietnam) in 2011, using a cost-effectiveness threshold of up to three times GDP per capita to determine reimbursed prices could produce as much as a 54-fold disparity in price across the region. Introducing advanced health economic evaluation in the form of strict cost-effectiveness thresholds could actually support extreme price disparity. Although prices might be optimal for individual countries, there could be significant consequences in the context of external price referencing. Manufacturers may choose not to launch in selected countries due to fear of referencing, or the creation of a black market for wholesalers willing to conduct arbitrage across countries.
All of these factors put health economics at an interesting crossroads in Asia. Positive signs of its development and impact include increasing number of health economic publications, growing membership in the International Society for Pharmacoeconomics and Outcomes Research (ISPOR), and numerous conference topics related to health economics.
However, general skepticism of health economics, a high level of trust in clinical experts, the lack of local health economic experts and infrastructure, and the combination of external referencing and the unique disparity in affordability between countries may limit its future role in decision-making in South and East Asia.
The impact of health economic evaluation in South and East Asia should be carefully considered prior to its implementation within countries. The potential impact on current decision-making mechanisms and the long-term consequences on price and access need to be further evaluated in the context of the unique market dynamics of this region.