AsPac pharma market and government

There is a good article on the global and Asia Pacific pharma market yesterday by Dr. Tej Deol, The APAC pharma markets; connecting the dots by Jan-Willem Eleveld, Vice President Consulting & Services IMS Health. It's about a presentation by Mr. Eleveld, IMS' VP, last October this year.

Dr. Deol showed 10 slides from Mr. Eleveld's presentation. For this paper, I will use only 4 of them and give my own discussion about them. Readers can check Dr. Deol's paper at the link given above. To see larger image of the graphs and illustration below, just click on the image.

By 2014, the global pharma market is projected by the IMS to reach some US$ 1.2 trillion, from an estimated $850 billion this year. Look at the "Pharmerging" markets, projected to have $260 to $290 billion by 2014. The list of those "pharmerging" economies does not include the Philippines. Thailand, Indonesia and Vietnam though were included.

The Asia-Pacific region excluding Japan, is projected to have 17 percent of global pharma sales by 2014, up from only 8 percent in 2005 to 11 percent this year. Japan will keep its estimated 13 percent of global share up to 2014.

The generics market will keep its rapid growth, which is a good response to high consumer demand for generics, branded or non-branded. This sector has grown from $28 B in Q3 2006 to $55 B in Q2 2010, or a doubling of sales in just 4 years! The innovator drugs have also experienced growth, from $14 B in Q3 2006 to $23 B in Q2 2010.

In terms of annual growth rate, while the originals experienced 11 percent growth from 2006 to 2010, branded generics grew by 15 percent and unbranded generics grew by 19 percent over the same period. At this rate, even innovator companies will consider moving into generics manufacturing as well because of the huge business potential due to high consumer demand for cheaper generic drugs.

See the list of Asian countries with government-mandated price regulation, which is mere euphemism for what it really is -- price control. They include India, Vietnam, Indonesia, Philippines and China. The degree or mechanisms of price control differ among these countries though. Malaysia has no price control yet, but the possibility of the policy being imposed there remains. And Thailand has no price control policy, but it has imposed compulsory licensing (CL), which has a similar negative effect on innovator companies.

This chart shows a new trend in some Asian countries -- the movement from "self-pay" to "semi-reimbursed" markets. Wider government health insurance coverage is projected to make this possible.

Semi-reimbursed or fully-reimbursed markets do not mean that only the government will provide the universal health insurance. Private and non-profit health insurance corporations or organizations can also do the job. But in most if not all policy proposals being considered in the Philippines and other Asian countries, only bigger government is being considered.

Healthcare and health insurance should take a cue from the pharma sector. There is no government pharma company except in Thailand, but the competition among many private pharma companies -- innovators, branded generics, non-branded generics -- result in lower prices of drugs as more drugs at declining prices are being introduced. It is actually government taxation of medicines -- like import tax (5 percent) and value added tax (VAT, 12 percent) as in the case of the Philippines -- that contributes to expensive medicines.

Patents, politics and personalized medicines

(Note: This is my guest article today in Manila Times, 07 December 2010 00:00)

Patents, Politics and Personalized Medicines

BY BIENVENIDO “NONOY” OPLAS

Diseases evolve, patients’ expectation of getting cured evolve, and so treatments and medicines also evolve.

Nothing is stagnant, everyone and everything keep changing, from disease virus and bacteria to physicians and patients. The issue of patents on newly-developed medicines by big multinational pharmaceutical companies remains a ticklish and emotional issue up to this day. Certain groups simply think that developing new medicines which they expect to be effective disease killer and safe at the same time only cost a few thousand or a few million dollars.

Thus, these should be sold as cheaply as possible. Or if the drug inventors will resist, governments should confiscate their invention and make it “others’ invention” as well so that those who did not spend a fortune on expensive R&D can manufacture those drugs as cheaply as possible.

Here in the Philippines, despite the provision in the Cheaper Medicines Law (RA 9502) that allows the government to confiscate the patent of certain important drugs via compulsory licensing (CL), there is little or no reason to rush its implementation. Not because the Philippine government and its politicians suddenly realize the negative long-term effects of heavy intervention like drug price control and confiscation of patents of costly drugs R&D. But because there are very few patented drugs now in the market, and the patent life of the few patented ones that are left is short already.

What we have now is the mushrooming of many generic manufacturers and traders in the Philippines and other developing countries. And all of these companies are beneficiaries of previously patented drug molecules whose efficacy and safety were discovered by the innovator companies.

Still there are global moves to kill drug patents as often as possible. The operative slogans are “patient over patent” and “people over profit,” as if there is inherent contradiction between the two, and as if there is no contradiction between unproductive bureaucracies and the public.

Given this reality of constant political threats, innovator drug companies have various options. One is to quit being a drug innovator and become an average generic manufacturer, or move to inventing new shampoo, new skin whiteners, new breast enlargers and other personal care products that are not subject to politics and envy.

Two is to continue drug innovation, but limit the sale of newly patented and more revolutionary drugs to countries that respect private property rights. Patients from the Philippines and other developing countries that are likely to declare price control or CL will not have access to such drugs, they will have to buy those from Hong Kong, Singapore, Japan, US and other countries that respect private property rights.

And three, continue innovation for personalized medicines. The latter is a new approach utilizing biomarkers to evaluate compounds in the drug discovery process for various patients. The new development is that all of the biopharmaceutical research companies that were surveyed in the US by the Tufts Center for the Study of Drug Development at Tufts University, are now investing in personalized medicines. See their press release here.

The implication here is that in the treatment of a particular disease, say prostate cancer or hypertension, there will be many new medicines that will be developed that are tailored to certain patients and which will not be applicable to other patients suffering from the same disease. Thus, for every 1,000 patients who suffer hypertension, there will not be one or two or five different drugs against hypertension, but probably 30 to 50 different drugs.

If there are 30 to 50 newly patented, newly developed drugs against hypertension alone, and there are 30 to 50 newly patented drugs against prostate cancer alone, which of them will be issued price control or CL by an intervention-itchy government? The top five most popular drugs, or top 10, or all of them?

As political intervention evolve, health innovation also evolve. And pretty soon, governments will only succeed in discouraging medicine innovation for new diseases that afflict the poor.

To prevent this from happening, governments should rein in their itchiness for endless intervention. And more innovator companies will sprout, to cater to various patients with various health needs and various and buying capacities. And public health will be served better.
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Nonoy Oplas heads a free market think tank in Manila, Minimal Government Thinkers Inc. He blogs on health, climate, taxes, trade, politics and many other topics at http://funwithgovernment.blogspot.com

Fiscal irresponsibility 1: Ireland (part 2)

A more appropriate title of this paper would be "Fiscal, corporate and personal irresponsibility: Ireland". But for continuity purposes, I titled it as such to provide a sequel to my earlier posting, Fiscal irresponsibility 1: Ireland last November 25, 2010.

Dr. Constantin Gurdjiev's article yesterday, Debt, debt, debt... for Irish taxpayers, provided really good data. The author separated household or personal debt, with non-financial corporate debt, financial sector debt, and government/Exchequer debt, and it is very useful. Click this table for larger image. Please note also that the "Debt per taxpayer, Euro millions" should refer only to Euros, not million Euros, because these are expressed on a per capita basis. The author recognized the mistake, a minor one.

Of the total debt in 2010 of Euro 495.507 billion, 33.3% were from the Exchequer, 29.3% from households, 22.1% from non-financial corporations, and 20.4% from financial intermediaries like banks. And each taxpayer -- not all citizens -- in Ireland has a composite debt of Euro 471,147!!!

Household debt are directly personal debt. Government debt are indirectly personal debt as taxpayers will ultimately pay for those government debt. Corporate debt, both financial and non-financial, can be considered also as indirect personal debt as corporations do not pay debt, people do. Corporations and banks are just legal entities, but it is the owners and shareholders who pay the debt in the form of lower, if not zero or negative shares; employees who pay the debt in the form of lower pay or non-payment of pay and bonuses later on when the corporations declare bankruptcy; and clients of those corporations who pay the debt in the form of higher prices of goods and services.

Of course some people are net lenders, not net debtors. These are the people who put their money and savings in the banks, the banks lent out the money to others in the form of housing loan, car loan, credit card debt, etc.

But if corporate debt are not included, only the household and government debt, the per taxpayer debt this year is only Euro 280,648, not Euro 471,000+.

Households, corporations and government living off on debt is not right. Only the rule of law -- that those debts will have to be paid somehow, sometime -- could be the saving grace of Ireland and other debt-ridden countries. But somehow, sometime in the near future, there will be a breakdown of the rule of law. Not all lenders will be paid and not all debtors can pay. And that is where other social and economic problems will surface.

In the recent US financial and housing crisis, I do not remember reading anyone from the collapsed banks like Lehman Brothers, ever went to jail. What happened to the rule of law in America?

What's wrong with Economics, part 2

(Notes: This is a sequel to my original blog entry, What's wrong with Economics last July 18, 2009. This is also my article last weekend at thelobbyist.biz. The flowchart and picture of Adam Smith below are from wikipedia, the chart of Big Governments is from The Economist.)

Economics has a very simple definition: “the study of proper allocation of limited resources given unlimited wants.” This is the basic definition that university students learn when they taken Econ 11 or Elementary Economics. And yet as students and their professors tackle higher economics subjects, the approach of the course tend to diverge from the earlier definition.

Last July 18, 2009, I posted in my blog, “What’s wrong with Economics?”:

The problem with many economists working with government and even in multilateral institutions like the WB, ADB, IMF, UN, etc., is that politicians and political expediency of poverty – including self-imposed poverty due to laziness and personal irresponsibility – have ruled their lives and thinking. Fiscal resources are in the red every year, but the politicians say "find ways to borrow, find ways to further hike taxes and fees", and the economists obey them, sometimes blindly, sometimes with full agreement.

So, what's wrong or what went wrong with economics? Nothing.

What's wrong with economists? They sometimes behave like politicians throwing away subsidies, expensive welfare programs and various political favors.

A friend shared with me this brief note about economists in the US:

Excerpted from Disappearing Jobs; High Paying Careers with No Future.

Economist: The Federal government is the largest employer of economists in the country. More than half — 53 percent — of all economists in the U.S. work for declining government sectors, so Uncle Sam's not hiring a lot of economists just now.

So there. If governments will shrink, more economists will be unemployed, at least in the US. Though in many other rich countries like Europe and Canada, their bureaucracies are peppered with economists. I also observe that economists in general are the number two central planners around the world. Number one is reserved of course, to politicians. That's why economists are highly favored in central planning agencies – the UN, WB, IMF, ADB, the Fed, ECB and other central banks in various governments.

Even in the man-made warming scam, economists figure prominently. Examples are Lord Stern of UK who authored the "Stern Report" which the UK government followed almost thoroughly its recommendations. Then Rajendra Pachauri, the UN IPCC Chairman. People think that the IPCC is a “scientific body” when it is in fact a government and political body. That is why politician Al Gore and economist Pachauri are the top personalities of the man-made warming hysteria.

So, answering the title of this article, “What’s wrong with Economics?” The quick answer is, Nothing. Economics is a discipline that simply studies "proper allocation of limited resources given unlimited wants."

So why did modern economics – as practiced by known economists – go into the policy of endless borrowing, endless taxation, endless welfarism and subsidies, knowing that resources (money from taxpayers especially) are limited, while those who seek welfare and subsidy, those who seek corporate bail-outs, those who seek rackets in governments, and even those who simply want to steal in government, are unlimited?

The quick answer would be the central planning mentality of many – but not all – economists.

Weekend fun 3: Al Gore cartoons (A)

Al Gore has become more famous globally not as former US Vice President, but as the number one "crusader to save the planet" along with the UN IPCC. Their winning the 2007 Nobel Peace Prize award was a testament to such global recognition.

But Al Gore is a politician, not a scientist, and that puts some question marks on him and his "science". The IPCC, his main buddy for the crusade, is also not a scientific body but a governent and political body, that is why it is called the "InterGOVERNMENTAL Panel on Climate Change".

Pictures here, above and below, are some cartoons and parodies about the man. These are taken from various sources in the web, not one of which originally created by me as I'm no artist nor a photoshop expert. The picture was possibly used, and added the fire to reflect endless "warming planet" warnings from his mouth.

As a global crusader to "save the planet", he is also pictured as an observer from the outer space who has seen the future. He flies to planet Earth to give the warning of "unequivocal warming" ahead of the planet's human residents. The White House is a good background as most environmental regulations that needed to "fight global warming" would need government coercion to be implemented.

Ahh, the famous "rising of the ocean up to 20 feet" by the end of the century warning in his movie fiction, "An Inconvenient Truth". The IPCC made the same alarm and warning, but at a more modest scale of only 0.59 meters or about 2 feet, projected rise in global sea levels as a result of the projected melting of ice in Greenland, Antarctica and the Arctic. NYC should be submerged except the tall buildings, and the man flies as a bat to give the warning.

The theologian of "Humans, repent! You are destroying the planet created by God!" The cartoonists and photoshop geeks are indeed very creative in inventing this kind of humor. I'm sure the Vatican nor the Archbishop of the Philippines will not be jealous with this picture of the man. Many of the religious leaders, Catholic or otherwise, are among the believers of AGW and  hence, are advocates of more environmental regulations.

How to "fight man-made warming"? What else but through man-made financial inventions like "carbon offsets". Polluting firms will be required to significantly reduce their emission, or they can buy "excess carbon" from other firms like solar farms, wind farms, carbon sequestration farms, etc. And guess who owns the banks and carbon trading companies that will do the offsetting job?

Another card to "fight man-made warming" via global carbon credits. The scammers make lots of money through various forms of financial instruments and/or billions of dollars of climate loans to "fight man-made climate change." Meanwhile, look at the expiration date here: "Valid thru DOOMSDAY", hahaha.

But wait, the world is not showing any fever. It is chilling actually recently. Europe and North America are now freezing in record severe winter starting last month. UK for instance was covered with snow, from head to toe, 100 percent, at least 2x this year. Satellite picture as of December 2, 2010.

But if one will believe the UK Met and/or the BBC in their climate stories and projections, these things are not supposed to be happening because there should be more drought and less ice and snow.

Ahh, this is the new picture of the man. Preaching to fight global warming -- in snow and freezing temperature.

Hoorraayyy to the man and the thousands of climate warriors in Cancun, Mexico, this week until next week.

On Government business regulations

I posted my paper, "Spanish problem: the Euro or the State?" to the facebook wall of my Filipino friend working in Spain, Eddie Vega, to get his comments. His comments below are purely his personal opinions, nothing to do with his official work there. Ed wrote,

AS far as what I am reading here, no one is blaming the "euro" for their problems. So this is where you won't find a Spanish economist siding with your rival Paul Krugman, so that should be good for you. It was because Spanish construction and real estate experienced a boom which in great part was also speculative money. Then in one moment, a lot of Spaniards suddenly became poorer as their properties suddenly devalued.

I'm glad to know this. As I posted in that blog article, I'm no fan of Paul Krugman, and it seems that most Spaniards don't believe him either, at least on his analysis of blaming the Euro for Spain's economic problems.

Then Ed asked if I really advocate zero government intervention in our lives. As I posted a few times in this blog, I do not advocate absolute zero govt intervention. Most libertarians and free market advocates don't advocate it also. If a capitalist will not pay his workers their salaries, government should come in to penalize the former. Because it constitutes robbery, the capitalist is depriving the workers of what is rightfully their dues.

My advocacy for zero government intervention applies only to basic business matters like the supply and demand of various goods and services. And when people would like to put up a shop, a business, to create jobs, there should be zero or minimal government intervention there.

Ed also asked, "About your theory on government intervention, are there a lot of those advocating that government should intervene in these business decisions?"

Yes, there are tens of thousands of them who support heavy intervention in business -- them from the BIR, DOF, DTI, SEC, and various other departments depending on what sector an entrepreneur is venturing. Like FDA and DOH if one is putting up a drugstore, LTO/LTFRB if one is going to public land transportation (bus, jeepney, taxi), DENR if one is going to forestry, mining, operating a zoo, and so on.

Then there are tens of thousands more in local government units, people who demand that you can not start a business unless you get a barangay (village) clearance, municipal or city fire department clearance, health and sanitation permit, building permit, electrical permit, Mayor's permit, etc.

Then there are people outside of government -- the militant NGOs, media, academics, who support more government regulation and taxation of business.

Ed added, "Wait, there is a point to having regulations too. If it is completely unfettered, you never know what kind of scam some unscrupulous people would be trying to pull on the public. What is needed is fair and honest application of these rules, of course."

Well, let them put up a scam, so long as they know the hard consequences if they do so. It's fear of the consequences, fear of the law, that will act as a self-regulating mechanism. No need for prior investigations and regulations, or keep those prior investigations to the barest minimum.

My banker friend told me a few years ago that in Hong Kong, if you register a business, the government there will say, "Submit these papers completely today, and start your busness tomorrow!" No inspections. But if someone complains about your business and it is proven that you violated certain laws, that's where your headaches will start. The government will come hard on you. And it puts fear on would-be scammers.

I don't know if this practice or policy is still being pursued up to now. But it makes a lot of sense. It encourages entrepreneurship and job creation.

Welfarism 10: Spanish Problem, the Euro or the State?

Spain is being watched now by many people if it will also follow Greece and Ireland's debt crisis, which will necessitate large-scale bail-outs. A friend posted in one of my discussion yahoogroups, an article by NYT columnist Paul Krugram, "The Spanish Prisoner" on November 28, 2010. In that article, Krugram wrote,

Why is Spain in so much trouble? In a word, it’s the euro.

Spain was among the most enthusiastic adopters of the euro back in 1999, when the currency was introduced. And for a while things seemed to go swimmingly: European funds poured into Spain, powering private-sector spending, and the Spanish economy experienced rapid growth.

...During the boom, prices and wages rose more rapidly in Spain than in the rest of Europe, helping to feed a large trade deficit. And when the bubble burst, Spanish industry was left with costs that made it uncompetitive with other nations.

Now what? If Spain still had its own currency, like the United States — or like Britain, which shares some of the same characteristics — it could have let that currency fall, making its industry competitive again. But with Spain on the euro, that option isn’t available. Instead, Spain must achieve “internal devaluation”: it must cut wages and prices until its costs are back in line with its neighbors.

And internal devaluation is an ugly affair. For one thing, it’s slow: it normally take years of high unemployment to push wages down. Beyond that, falling wages mean falling incomes, while debt stays the same. So internal devaluation worsens the private sector’s debt problems.

This article is one more reason why I'm no fan of Paul Krugman.

He says the main culprit of Spain's woes is the Euro. That if Spain has its own currency, say a Spanish peso or a Krugman dollar, then it would be easy for Spain to get out of its current economic problems because a big state can manipulate the local currency -- devalue or revalue, depreciate or appreciate -- and wages and prices will follow.

Why would wages and prices need government manipulation of the currency so that they will adjust upwards or downwards? Aren't wages and prices a function of supply and demand?

Demand for labor is high relative to supply, wages will rise. Supply of labor is high relative to demand, say there is an influx of foreign workers, legal or illegal, wages will decline. Why can't Spain's wages follow that simply and spontaneous adjustment of the cost of labor?

Prices. Supply of paella and tapas increases relative to demand, their price will decline. Their supply cannot cope with sudden increase in demand, say there is a big fiesta or big celebration -- like Fernando Alonso winning again the F1 championship, or Alberto Contador winning the Tour de France, or Rafael Nadal winning the Wimbledon or the US or French Open -- the price of paella and tapas will increase.

So now Krugman is saying that Spain will need the big State's manipulation of its local currency -- assuming it has its own aside from the Euro -- so that the price of tapas and paella will move up or down?

Krugman misses the point. It is big State and its heavy intervention -- rigid labor laws and heavy protection of workers "against capitalist exploitation", that disallows the labor market to spontaneously adjust to high unemployment and artificial high wages.

If I am an entrepreneur, or simply a profit-hungry capitalist, and I have 3 employees for my restaurant, my customers are increasing but still I won't hire a 4th or 5th worker, even if national unemployment rate is close to 21 percent. It's too costly to add additional worker, the marginal cost is much higher than the marginal revenue (MC > MR) as there are lots of mandatory contributions, obligatory social security payments by employers. I'd rather keep the 3 workers and give them higher pay for higher productivity, more bonuses for longer working hours, or I'd rather work as the 4th worker myself and cut my siesta and partying with friends.

Perhaps if I become richer this way, I can hire a nanny for my children and that's one job creation already. Or I can keep high personal or company savings -- for the rainy days. The point is that I will not hire extra worker as much as possible, thanks to heavy state regulation of the labor market and over-protection against "capitalist exploitation."

About capitalist exploitation, a favorite topic by statists and socialists that's why they push for ever stricter labor regulations, for more mandatory social security payments, who is the exploited one -- the employed worker or the jobless?
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See also:
Welfarism 4: Italy's Fiscal Woes, Kid Glove to Criminals, May 29, 2006
Welfarism 5: Germany's Tax Hikes, June 28, 2006
Welfarism 6: Obama and US Entitlement, November 11, 2008
Welfarism 8: Send All Monthly Salary to UK Govt First, September 21, 2010

Cancun capitalism vs. Bolivian socialism

The socialist President of Bolivia, Evo Morales -- after Hugo Chavez of Venezuela, Fidel Castro of Cuba, in this picture -- "has fingered capitalism as the root of many of the problems facing the world and has urged his fellow leaders to explore alternatives, such as a declaration of rights for the earth as a means of tackling climate change." See the news report here, Bolivia assails rich, carbon market at Cancun talks.

The Bolivian Ambassador to the UN also attacked the rich countries for their failure to live up to the Kyoto Protocol agreements.

It is funny how socialist leaders can attack capitalism casually. They will go to Cancun and stay at the luxrious capitalist hotel, the Moon Palace Hotel. They fly to Mexico on capitalist airlines, ride cars or trains produced by capitalism, use laptops and internet access produced by capitalism. Is there any international hotel or international airline or global car company that is owned or operated by a socialist government or socialist NGO?

Good contrast here of a luxurious car produced by some capitalist car companies, and communist demonstrators waving red flags. Or are those flag-waving demonstrators aspiring to be the capitalist-owners of the luxury car company?

Meanwhile, the whole of Mexico is projected to have between -2 to -4 C temperature colder than normal, from November 30 to December 8 this year. Data from http://wxmaps.org/pix/temp3.html H/t to Steven Goddard's Konference Kools Kancun Klimate.