Identifying Market Opportunities In Hepatitis C

BMI View: Hepatitis C will become a priority of healthcare systems globally, as the number of related deaths rise annually. Mass screenings in developed and emerging markets will create a large pool of patients requiring hepatitis C drugs, but propensity to pay will determine level of uptake. We see the greatest opportunity lies in the 'Asian Tigers' of Japan, Taiwan and South Korea owing to the favourable mix of disease prevalence and high incomes.

Given the scale of the global hepatitis C epidemic and the interest shown by multinational pharmaceutical companies in targeting the disease, we expect there to be a concerted effort amongst healthcare systems to diagnose and treat the disease. Hepatitis C is now increasing the global death toll from communicable diseases, and it is set to become a priority for key stakeholders.

We outline most attractive markets in the hepatitis C therapy area based on the cross-over between countries with high prevalence of hepatitis C virus (HCV) and relative wealth indicators. Multinational pharmaceutical companies must carefully examine the global landscape and choose which markets to launch their products to maximise potential revenues and profits.

Reaching Epidemic Levels
HCV National Prevalence Rates, (%)

Identifying Market Opportunities In Hepatitis C

BMI View: Hepatitis C will become a priority of healthcare systems globally, as the number of related deaths rise annually. Mass screenings in developed and emerging markets will create a large pool of patients requiring hepatitis C drugs, but propensity to pay will determine level of uptake. We see the greatest opportunity lies in the 'Asian Tigers' of Japan, Taiwan and South Korea owing to the favourable mix of disease prevalence and high incomes.

Given the scale of the global hepatitis C epidemic and the interest shown by multinational pharmaceutical companies in targeting the disease, we expect there to be a concerted effort amongst healthcare systems to diagnose and treat the disease. Hepatitis C is now increasing the global death toll from communicable diseases, and it is set to become a priority for key stakeholders.

We outline most attractive markets in the hepatitis C therapy area based on the cross-over between countries with high prevalence of hepatitis C virus (HCV) and relative wealth indicators. Multinational pharmaceutical companies must carefully examine the global landscape and choose which markets to launch their products to maximise potential revenues and profits.

We note that the most promising markets for HCV therapeutics outside of the US and traditional developed markets of Western Europe are in the Asia-Pacific region: Taiwan, South Korea and Japan. These three countries have a combination of large populations, a large number of HCV-infected individuals and high per-capita spending on healthcare and pharmaceuticals.

Asian Tigers Have Favourable Fundamentals
Country Population (millions) HCV prevalence (%) Healthcare spending per capita ($)
Japan 127.6 1.3 3652
Taiwan 23.3 3.1 1483
South Korea 50.0 1.1 1911
Source: WHO, BMI

These three markets also have attractive market fundamentals for the marketing and delivering of innovative drugs. Japan is a prolific spender on patented drugs and has an efficient healthcare system that delivers high quality of care to its citizens. HCV infections in Japan are overwhelmingly within the elderly population, a key voting bloc within the country's electorate. The Japanese government is currently engaging in a policy of quantitative easing and increasing its budgetary spending in order to stimulate economic growth; the funding of citizens' medical expenses has been one of the areas which has largely benefitted. Thus, out of all markets, Japan is best placed to absorb the high costs of the next generation of hepatitis C drugs. Cumulatively, these factors mark out Japan as the best opportunity, in terms of risk and reward, for launching an innovative drug. It is also for these reasons that Japan is the second highest ranked country in our proprietary Pharmaceutical Risk/Reward Ratings (RRR) system on a global level.

South Korea's government heavily subsidises its healthcare system, and private insurance is a large contributor to overall healthcare spending. However, it is less attractive compared to Japan owing to pricing controls and discounts that the healthcare system demands in return for reimbursement status. However, once reimbursement status is granted, demand is swift and unhindered from South Korean consumers. We expect South Korea's pharmaceutical market to post amongst the highest growth rates within developed markets, and as a result, South Korea ranks highly (11 th globally) in our RRR table.

Taiwan has a modern, efficient healthcare system capable of delivering high quality care to its citizens. The country has strong demand for prescription drugs, with hospitals increasingly becoming the primary access points for these medicines. However, Taiwan and South Korea are similar with regards to pricing policy; drug prices are adjusted regularly and price-volume agreements used as a means to gather discounts on high drug prices. Pharmaceutical sector growth in Taiwan is expected to be considerably higher relative to other developed markets, and the country scores high (17th) in our global RRR scores.

Global Hepatitis C Distribution

The prevalence of HCV within countries and regions is contrasting and unrelated to development or levels of income; Italy and Pakistan have prevalence rates in excess of 3% of their population, whereas Turkey has a prevalence rate (0.8%) that is aligned with Western countries.

Reaching Epidemic Levels
HCV National Prevalence Rates, (%)

The highest concentration of hepatitis C infections occurs in Egypt, where almost 15% of the population is believed to have been infected. Other countries with high prevalence rates include Romania (3.2%), Thailand (2.4%), Russia (2.1%) and Puerto Rico (2.3%). The incidence rates in Egypt, Italy and Japan are due to cross-contamination during historic vaccination programmes prior to the introduction of disposable needles, blood screening and the discovery of the hepatitis C virus. While stringent checks are now performed on blood donors and disposable needles are the norm, the nature of HCV transmission and the ability of the virus to lay dormant for many years has produced a largely undiagnosed population of infected individuals who are asymptomatic.

Hepatitis C: A Latent Epidemic

Hepatitis C virus (HCV) infections have reached epidemic proportions globally; the World Health Organisation (WHO) estimates that almost 170mn people globally were chronically infected with HCV. Global prevalence is disparate within regions and the understanding of why some countries have higher prevalence rates is little understood. The sheer number of HCV carriers presents a reservoir from which the virus can persist and spread.

The disease is spread primarily through infected needles, blood transfusions with infected individuals and potentially through sexual transmission. Although the number of infections globally is large, the disease is largely undiagnosed. This is due to acute symptoms taking years or even decades to present, by which time liver function may be irreparably or severely impaired. Indeed, within the US, almost 75% of the estimated 3.2mn people with presenting HCV symptoms are 'baby boomers', born in the period of 1940-1950. Most 'baby boomers' contracted the virus before the 80's when proper blood screening controls were implemented or due to intravenous drug use. The HCV epidemic has become particularly concerning, as it is responsible for almost 15,000 deaths annually amongst the baby boomer generation. Comparatively, AIDS-related deaths were 13,000 over the same period.

With many developed countries instituting screening programmes and developed countries following suit, the climate for the uptake of hepatitis C drugs is set to improve as the number of patients requiring treatment is set to dramatically increase. However, pharmaceutical companies and healthcare systems will likely clash over pricing of the next generation, curative hepatitis C drugs. In the US, where the insurance system happily absorbs the cost of innovative drugs, there has been a backlash amongst some private healthcare insurers and patient groups over the cost of treatments such as Gilead's Sovaldi (sofosbuvir). Companies will need to employ differential pricing, cost-effectiveness studies and convince payers of the value-add of these new drugs in order to truly maximise the opportunity that is set to present over the coming years.

HCV Prevalence And Healthcare Spending
Country 2012 HCV Prevalence (%, All Genotypes) Healthcare Spending Per Capita, USD
Denmark 0.3 6603
Netherlands 0.3 5991
Germany 0.4 4728
Austria 0.6 5240
France 0.6 5004
Hungary 0.6 959
Sweden 0.6 5586
Finland 0.7 4248
Ireland 0.7 4334
Norway 0.7 8850
Belgium 0.8 4861
Canada 0.8 5642
Switzerland 0.8 8866
Turkey 0.8 761
United Kingdom 0.8 3661
Chile 0.9 1221
Colombia 1 474
Mexico 1 669
Venezuela 1 686
South Korea 1.1 1911
Australia 1.2 5917
United States 1.2 9305
Japan 1.3 3652
Syrian Arab Republic 1.3 56
Greece 1.4 1592
Peru 1.4 337
Portugal 1.4 2019
Brazil 1.5 1014
Czech Republic 1.5 1255
Spain 1.5 2777
Vietnam 1.5 119
Argentina 1.6 888
China 1.6 372
India 1.6 57
Israel 1.6 2636
Slovakia 1.6 1566
South Africa 1.6 594
Saudi Arabia 1.7 914
Poland 1.8 912
Russian Federation 2.1 911
Puerto Rico 2.3 2118
Thailand 2.4 240
Taiwan 3.1 1483
Romania 3.2 507
Italy 3.5 3323
Pakistan 3.5 31
Egypt 15.2 150
Source: WHO, BMI
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