STATE OF THE ASIA-PACIFIC PHARMACEUTICAL INDUSTRY 2013:

EXECUTIVE SUMMARY

State of the Asia-Pacic Pharmaceutical Industry

The pharmaceutical industry in the Asia-Pacic region has recently been besieged by a number of high-prole challenges affecting public condence and challenging the industrys ability to remain competitive in the global marketplace. Leading multinational pharmaceutical companies have been singled out regarding the ethics of their business practices. These criticisms have been preceded by longstanding concerns in the region about the cost of and access to medicines (and health care, generally), including, but not limited to, practices related to physician engagement, affordable pricing and non-communicable disease (NCD) management. Nonetheless, foreign multinational pharmaceutical companies continue to look to the Asia-Pacic region for growth and development, as demonstrated by recent investments in research and development, as well as the manufacturing of products. However, this convergence of issues and opportunities poses critical questions about how the industry should respond to ever-increasing demands from stakeholders to remain trusted and responsible now and in the future. APCO Worldwide and its research consultancy, APCO Insight, developed the Return on Reputation (ROR) Indicator to better understand and address key stakeholders expectations in order to protect, enhance and track reputation over time, as well as quantify the impact of reputation on key outcomes for the industry and its individual companies. At the core of the research is a proprietary model that isolates the key drivers that dene the reputation of pharmaceutical companies. In mid-2013, APCO explored key stakeholders perceptions of the pharmaceutical industry in the Asia-Pacic region. The study is based on comprehensive quantitative research among health care opinion leaders, health care providers, policy leaders and payers. This groundbreaking study can be compared with studies in the United States and Europe along each of its key components: Key Drivers: The Reputation Model identies the most important drivers of reputation for the pharmaceutical industry and its major companies. Overall Score: The Reputation Index captures the industrys reputation in a single metric derived from the relative impact each driver has on overall reputation and the perceived performance on each of those drivers. Strengths and Weaknesses: The Reputation Matrix isolates specic reputation strengths and, more importantly, the opportunities that can help improve the industrys reputation. Outcomes: The ROR Indicator quantitatively measures the relationship between the reputation of the pharmaceutical industry and key outcomes, including consumer behavior, prescribing behavior, the litigation environment and nancial value.

To date, there has never been a study in the Asia-Pacic region of the pharmaceutical industrys reputation with this level of rigor and magnitude. The ROR Indicator, APCOs comprehensive reputation research offering, will go far in providing strategic support and guidance for pharmaceutical companies operating in the region.
Amy Wendholt, managing director, APCO Worldwide in Hong Kong

APCOs Return on Reputation Indicator provides companies with direction to support business strategies at the highest level all the way down to the tactics. To me, the most interesting information is learning what matters most to key stakeholders and then applying this knowledge to create strategic, targeted reputation programs. Through this process, APCO helped us enhance our organizations reputation on multiple levels.
Phyllis Piano, former vice president, corporate communications and philanthropy at a major biotechnology company

Return on Reputation Indicator

Reputation Outcomes
consumer behavior prescribing behavior litigation environment financial value

What impact does reputation have on patients behavior?

What impact does reputation have on prescribing behavior?

What impact does reputation have on leading stakeholders to give the industry the benefit of the doubt when a crisis emerges?

What impact does reputation have on shaping overall market/ shareholder value?

Based on a sophisticated statistical analysis, the ROR Indicator reveals that, in the Asia-Pacic region, reputation can: Lead to more patients asking their doctors about a companys medicine: For every one-point increase on the Reputation Index, it is estimated that an additional 3.2 million patients will ask their doctors about a companys medicine. Lead to more patients recommending a companys medicine: For every one-point increase on the Reputation Index, it is estimated that an additional 5.5 million patients will recommend a companys medicine. Increase the number of prescriptions physicians write for a companys medicine: For every one-point increase on the Reputation Index, it is predicted that a physician will write in a month, on average, an additional two prescriptions for branded medications. Gain the benet of the doubt when crises arise: The data suggests that a one-point increase in the Reputation Index could translate into more than 7 million additional people who are likely to support and defend the industry. Maximize shareholder value and increase market share: For the average pharmaceutical company, the data shows that a one-point increase in the Reputation Index can lead to an approximate 2 percent increase in product sales across the Asia-Pacic region.

Reputation Model
The foundation of APCOs ROR Indicator is a robust model that measures the extent to which all stakeholders believe the industry, and the individual pharmaceutical companies, are meeting their unique and specic expectations. The model is based on more than a decade of extensive primary research in the sector and identies 30 drivers that dene the reputation of the pharmaceutical industry in the Asia-Pacic region. Correlations between the factors show there are six broad dimensions of reputation: Product Integrity, Stakeholder Engagement, Innovation, Access, Ethical Business Practices and Health Promotion. UNIQUE CHARACTERISTICS OF THE ASIA-PACIFIC REPUTATION MODEL Product Integrity: Expectations for Product Integrity move beyond safety and efcacy to encompass the full product prolefrom ingredient sourcing to how it is manufactured and, ultimately, ensuring both product and process are available and in accordance with all laws and regulations in each market. Stakeholder Engagement: Building meaningful, cooperative relationships across key health care stakeholders, ranging from health care providers to policy leaders, to achieve public health priorities is integral to the reputation of companies operating in the Asia-Pacic region. Innovation: Expectations go beyond cutting-edge research and deep pipelines to also include aspects throughout the product lifecycle, such as discovery, post-market surveillance and value analytics. Additionally, expectations emerge that seek strengthening of Asia-Pacic-based R&D capabilities. Access: This factor encompasses a variety of attributes relating to fair and affordable pricing, transparency in health care costs and assistance in gaining access to medicines (free or discounted). A notable distinction from the U.S. models focus on value, compared to an emphasis on affordability in Asia-Pacic.
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Ethical Business Practices: Relates to integrity in business operations and conduct, including support of the local economy through job creation. The Asia-Pacic expectations are explicitly inward facing, addressing only internal systems, whereas the U.S. model captures both internal and external factors (i.e., marketing to physicians and executive outreach). Health Promotion: In Asia-Pacic markets, supply integrity (keeping counterfeit medicines from entering the market) correlates with other Health Promotion factors more closely than others focused on product safety and efcacy. Comparative analysis is possible between APCOs ROR Indicator studies in Asia-Pacic, the United States and Europe. While the models reect regional distinctions, there is consistency in the methodological approach, as well as discrete attributes, which allows for global insight. Additionally, year-to-year tracking of the validated models will reect changing evaluations of the pharmaceutical industry in each region and stakeholder group.

Reputation Index
The Reputation Index is a highly reliable measure of reputation for the Asia-Pacic pharmaceutical industry and its individual companies that ranges from 0 to 100. The index takes into account how the industry (or individual company) is rated along each of the 30 reputation drivers in the Reputation Model by each market and audience and the relative impact each factor plays in dening reputation.

Across the Asia-Pacic region, the industry receives a Reputation Index score of 65.0, well above the scale midpoint. Interestingly, compared to other regions, the Asia-Pacic Pharmaceutical Reputation Index is signicantly higher than in the United States (61.3) and across Europe (60.7). The Reputation Index is computed separately for each market and stakeholder audience. By market, the industrys Reputation Index is the lowest in Japan at 59.6 and highest in China at 73.0 (a result of Chinese respondents tendency to offer higher ratings more generally). By audience, the industrys Reputation Index is the lowest among health care providers at 63.7 and highest among policy leaders and payers at 70.9, which is supported by ideal alignment with expectations.

The value of the Reputation Index is that it provides a statistically valid measure of reputation overall and by each market and audience that can be tracked over time to determine the effectiveness of various initiatives and communication efforts.

Reputation Matrix

The Reputation Matrix maps each of the 30 reputation drivers by their relative impact and performance on a macro level, representing the Asia-Pacic region as a whole, including all ve markets and three stakeholder audiences. Ideal alignment with expectations is dened by high perceived performance on drivers that matter most, while weaker performance is seen on least impactful drivers. An efcient reputation management strategy aims to align drivers along this diagonal line in the matrix from bottom left to top right. Notably, the matrix for the pharmaceutical industry in the Asia-Pacic region reveals opportunities to enhance already strong alignment and lead to overall reputation improvement.

On the whole, Product Integrity, Stakeholder Engagement and Innovation factors account for the largest proportion of reputation across the Asia-Pacic region. However, how well the industry performs on each of these discrete reputation drivers varies by market and stakeholder audience. The matrix provides a roadmap for prioritizing key industry initiatives and communication efforts, as well as a quantitative view on the extent to which these efforts actually move the needle on reputation.

Summary of Strengths and Opportunities to Improve Reputation

Product Integrity: Threshold Expectations Encompassing The Full Product Profile
The industrys value proposition is defined, in large part, by its commitment to Product Integrity expectations, despite anecdotal concerns about its commitment to Product Safety, Product Quality and good Manufacturing practices. Product Integrity, which also includes expectations related to Product Transparency, Compliance, Environmental Responsibility and Reliability, is a high-impact reputation driver and core reputation strength consistently across all stakeholder groups and markets. Research Transparency, defined by ensuring research is open to review by the scientific community and other independent third parties and accurately and transparently reports results of research and clinical trials, is a critical area for the industry to address. In light of recent exponential growth in clinical trial studies across the region, as well as other high-profile transparency issues, expectations are heightened for responsible behavior. Research Partnerships, defined as participating in public-private partnerships to fund research and development of new treatments and actively supports and contributes to the development of [markets] domestic research capabilities, also presents an opportunity for the industry to focus its attention. In meeting growing demands to increase productivity, accelerate timelines and introduce efficiencies to research, pharmaceutical companies operating in the region are increasingly looking for new partners to help bring products to market. Meeting expectations for Research Partnerships may include public and private partnerships or support of regional R&D capabilities, such as financial investments, infrastructure development or other collaboration.

Bold Advancements and Sustainable Innovation: Core Assets to Protect and Leverage
As pressure on the industrys development pipelines continues to grow, the need for strategic innovation investments is intensifying. Throughout the Asia-Pacific region, Innovation is identified as a core industry assetled by strengths in Bold Advancements, the what of innovation, and Sustainable Innovation, the how. Bold Advancements is the second leading driver of industry reputation and a core strength. Stakeholders expectations go beyond a desire for wholly new, life-saving medicines to also include personalized medicinea symbol of hope for future, high-value therapies. Sustainable Innovation is defined by a number of forward-looking expectations that seek to find efficient and sustainable ways to develop the medicines of tomorrow. In addition to maintaining a robust pipeline of potential new medicines and conducting cutting-edge and pioneering research, the industrys scientists are seen as essential to its Sustainable Innovation story. The industry receives particularly high marks for employing some of the worlds leading scientists with a wide range of expertise and experience. Sustainable Innovation is viewed as a strength with relatively lower impact than Bold Advancements.

Health Promotion: Expectation to Deliver Solutions to Public Health Challenges

The global socio-economic impact of non-communicable diseases (NCDs) is staggering and a top concern in the Asia-Pacific region specifically. As such, Chronic Disease Management and Disease Awareness are top opportunities for the industry to shape its reputation: average performance and impact offers the chance to educate and lead. Opinion leaders, health care providers and policy leaders all expect the industry to play a prominent role in helping those in the region better address and manage NCDs. Stakeholders expect the industry to demonstrate how it leads the way in helping patients effectively manage chronic conditions and partnering with the public health community to share information/data to promote disease prevention, raise awareness of serious disease and emphasize long-term health outcomes. Additionally, there are heightened expectations for pharmaceutical companies to establish long-term partnerships to fight diseases prevalent in each market.

Research Transparency and Research Partnerships: Heightened Expectations, Commitment Not Well-Known
Research Transparency and Research Partnerships offer the greatest opportunities for reputation enhancement, as performance around the matrix midpoint suggests commitment is not well-known.

Drug Adherence is identified as a high-impact strength in three of the five markets in the study (China, Australia and Japan); though, it is viewed as a vulnerability in India and is less important in Korea.

Stakeholder Engagement: Room for Improvement by Collaborating for Public Health Solutions
Although the impact of Stakeholder Engagement in driving reputation tends to be modest, performance is often lacking. Misalignment is notable among opinion leaders and in India. Stakeholder Engagement is wide-ranging in scope, spanning from the industrys relationship with health care providers to its collaboration with public officials and other thought leaders. Provider Engagement is an impactful strength in most markets, although results suggest clarification is needed around its commitment to ethical marketing efforts toward physicians. However, among opinion leaders, Provider Engagement is a key vulnerability. As the industry cements its role as a trusted partner in helping solve critical public health challenges, it better meets the expectations of its stakeholders. Government Cooperation and Advocacy, on the other hand, are consistent vulnerabilitiesparticularly among opinion leaders and health care providers, and in India, Australia and Korea. This is a possible consequence of efforts across these markets to streamline their regulatory structures in alignment with international standards of practice. The industry receives lower marks for preventing conflicts of interest with government officials and cooperating and sharing information with government payment agencies. Also, concerns about the industrys use of political influence threaten reputation, suggesting the industrys collaborative efforts with regulators and payers are not being recognized. The industry receives positive ratings for advocating for public policy that works toward the goal of improving public health, which supports the notion that the industrys cooperation and partnership with regulators and payers can help mitigate negative perceptions about its political influence while emphasizing its role as a public health advocate. Executive Engagement exerts less impact on overall reputation than other Stakeholder Engagement factors, with the notable exception of Japan, where it is a high-impact weakness.
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Executive Engagement is defined by having executives who are visibly involved and interacting with the community and who function as part of the solution to the industrys challenges by acting as thought leaders on key health care issues.

Ethical Business Practices: Outshined by Other Industry Expectations

Ethical Business Practices factors, defined by expectations related to Financial Strength, Employee Investment, Job Creation and Governance, comprise a lower proportion of overall reputation and are usually weaknesses, with some notable exceptions. Ethical Business Practices exert strong impact among policy leaders and payers, especially Employee Investment and Financial Strength, which are key assets, while Governance and Job Creation lag in performance.

Access: Persistent Industry Weakness, Though Not Leading Impact

Access and pricing issues are not limited to the developed world. Asia-Pacific markets, too, struggle with ongoing pricing pressures that are forcing cost containment measures to control the rising costs of pharmaceuticals. In the past few years, India, China, Japan, Korea and Australia have all instituted pricing reforms aimed at making medicines more affordable through strategies such as price cuts, co-payments, price and volume caps, as well as prescribing controls. Affordability and Pricing Transparency are perennial challenges facing the pharmaceutical industry and are among the industrys weakest performing drivers. Pricing Transparencydefined by openness in drug pricing, describing how the cost of medicines is determined and demonstrating how medicines keep costs downis consistently a performance weakness though it tends to have a moderate impact on reputation. Affordability receives modestly better ratings, but is still below the performance midpoint. Patient Assistance and Philanthropy are among the least impactful reputation drivers, but performance is lacking. Offers free or discounted medicines to lower-income patients registers as the single lowest rated attribute in the study, with particularly low scores among health care providers.

Market-Level Summaries
A closer look at the ndings on a market-by-market level reveals interesting and important distinctions, as well as key commonalities. Alignment of drivers is quite strong in China, yielding a leading Reputation Index score, whereas in Australia reputation drivers are converged near the matrix center indicating a lack of clarity regarding the industrys value proposition. Performance ratings tend to be lower in Japan, coupled with some notable performance weaknesses, which lead to a lower overall Reputation Index score. Across markets examined in the Asia-Pacic region, Product Integrity and Innovation rise up as core assets of the industry, though alignment of discrete factors is unique in each market. Health Promotion also emerges as a strength; however, less so in India where, instead, Ethical Business Practices (especially Employee Investment) is identied as an asset. On the other hand, opportunities to improve perceptions of the industry are generally related to expectations for Stakeholder Engagement, Access and Ethical Business Practices. However, discrete opportunities vary considerably by market.

Policy leaders and payers register the highest Reputation Index scores of the pharmaceutical industry in Australia, followed by opinion leaders and health care providers. Australias matrix reveals opportunities to improve industry reputation, as a distinct cluster of drivers at the matrix center suggests a lack of clarity. As with other markets, Product Integrity is a threshold expectation and strength. Overall, Innovation is an asset despite a vulnerability in Research Partnerships and midline performance on Research Transparency. Health Promotion is also a reputation strength, led by Drug Adherence, although average or weak performance is seen in Chronic Disease Management and Disease Awareness.

Policy leaders and payers register the highest Reputation Index scores of the pharmaceutical industry in China, followed by health care providers and opinion leaders. Product Integrity drivers are critical to dening the industrys reputation in China with notable assets related to Manufacturing, Product Safety and Compliance. Bold Advancements and Sustainable Innovation are perceived as core to the industrys value proposition across all audiences. However, stakeholders seek a clearer articulation of the industrys Research Transparency commitment. Health Promotion is also an opportunity for better alignmentespecially around Chronic Disease Managementa high-impact driver where the industry receives weaker ratings. Notably, Chinese health care providers consider Health Promotion drivers particularly important in dening the industrys reputation.

Health care providers register the highest Reputation Index scores of the pharmaceutical industry in India, followed by opinion leaders, policy leaders and payers. Much like the rest of the Asia-Pacic markets surveyed, Product Integrity is a core asset, especially Manufacturing and Product Quality. Only in India does Stakeholder Engagement emerge as a high-impact vulnerability, with Advocacy and Government Cooperation drivers posing a particular challenge. On the other hand, Innovation exerts relatively less impact in shaping views of the industry in Indianotwithstanding key strengths in Bold Advancements and Sustainable Innovation. Also a notable performance strength is in Employee Investment, which is the single leading driver of reputation in India.

Policy leaders and payers register the highest Reputation Index scores of the pharmaceutical industry in Korea, followed by health care providers and opinion leaders. Overall, alignment with expectations is strong in Korea. Product Integrity is a threshold expectation and strength. Innovation drivers are also leading impact expectations although opportunities for improvement exist related to midline performance on Research Transparency vulnerability on Research Partnerships. Commitment to Health Promotion can be claried related to lukewarm performance on Chronic Disease Management and Disease Awareness. There is distinctively low impact related to Ethical Business Practices in Korea.

Policy leaders and payers register the highest Reputation Index scores of the pharmaceutical industry in Japan, followed by opinion leaders and health care providers. In Japan, there is a tendency to offer lower performance ratings overall, which is reected in a lower Reputation Index score than other markets, despite relatively strong alignment with expectations. Product Integrity drivers are core strengths in Japan. Health Promotion drivers are also key assets, especially Chronic Disease Management and Drug Adherence. Japans Innovation strength is bolstered by Bold Advancements, but an opportunity for improvement exists in Comparative Effectiveness Research. Distinctive in Japan, Access tends to exert more impact than in other markets.

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About the Study

APCO Worldwide and its research consultancy APCO Insight developed the ROR Indicator, a robust measurement tool that takes an integrated approach to reputation management. The ROR Indicator study for the Asia-Pacic pharmaceutical industry is based on a quantitative survey that offers a holistic view of reputation across key markets and stakeholders. The complete ndings for the pharmaceutical industry, as well as an interactive display of the data, can be viewed at www.rorindicator.com. Detailed, company-specic ndings from the latest tracking phase of this groundbreaking research model are now available to member companies. In the most recent study, 12 of the top pharmaceutical companies were evaluatedand, for many companies, comparative data to the United States is also available. Members receive a complete report of company-specic ndings, including an in-depth view of the companys reputation ratings relative to the industry; a quantitative assessment of the key reputation strengths and opportunities for protecting and enhancing reputation across each market and among each audience; and the impact of reputation on key business outcomes.

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To nd out more about the ROR Indicator study or how your company can become a member and receive a custom report on company-specic ndings, please contact: Amy Wendholt managing director, Hong Kong 1903 Cambridge House, TaiKoo Place 979 Kings Road Hong Kong tel: +852.2866.2313 awendholt@apcoworldwide.com Chrystine Zacherau director, health care research 700 12th Street, N.W. Suite 800 Washington, D.C. 20005 tel: +1.202.778.1000 czacherau@apcoworldwide.com

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