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Asia-Pacific Health Industries Newsletter Summary (Issue 15, December 2015)

Core Content

This issue of the Asia-Pacific Health Industries Newsletter, published by PwC, focuses on the latest developments in the pharmaceutical and healthcare sectors across the Asia-Pacific region. It highlights key areas such as Base Erosion and Profit Shifting (BEPS), regulatory changes, pricing pressures, M&A activities, taxation reforms, and healthcare innovations. The newsletter aims to provide insights and analysis to help businesses in the health industry make informed decisions.

Main Topics and Key Information

1. BEPS in Asia

• Overview: The OECD and G20 have launched the BEPS project to address tax avoidance and profit shifting. The newsletter examines the impact of BEPS on pharmaceutical companies in Singapore, Australia, Japan, and China.
• Key Developments:
  • Singapore:
    • New TP documentation requirements.
    • Tax incentives for R&D and innovation.
    • Withholding tax benefits for royalties.
  • Australia:
    • Enacted new BEPS-inspired rules, including the Multinational Anti-Avoidance Law (MAAL), Tax Transparency Measures, and Anti-hybrid measures.
    • New rules effective from 1 January 2016.
  • Japan:
    • Amendments to dividend exclusion rules for fiscal years starting from April 2016.
    • Implementation of Country-by-Country (CbC) reporting and three-tiered TP documentation.
    • Review of CFC and TP rules to align with OECD guidance.
  • China:
    • Introduction of three-tiered TP documentation.
    • Reform of CFC and interest deduction rules.
    • Principles of localisation of BEPS measures:
      • Combining BEPS recommendations with China's specific needs.
      • Balancing tax protection with economic development.
      • Strengthening tax administration and compliance.

2. Biennial Pharma Survey Report (Australia)

• Overview: Conducted by PwC in collaboration with Medicines Australia, the report provides insights into the current challenges and strategies of Australian pharmaceutical companies.
• Key Findings:
  • Regulatory processes have not improved, and pricing pressures have increased.
  • Companies are using risk sharing agreements to manage costs and access.
  • Biosimilars face lack of clarity in naming and reimbursement.
  • Trust issues exist between originators and the government.
  • Increased focus on compliance and tax transparency.

3. Regulatory Developments (Japan)

• Pharmacovigilance (PV) Operating Model:
  • Need for a robust and global PV model to ensure consistency in drug safety data.
  • Shift from passive to proactive PV management.
  • PV governance becomes a key management imperative for Japanese pharmaceutical companies expanding in Asia.
  • Increased workload for PV staff due to more complex regulatory requirements.

4. Pricing Developments

• Australia:
  • PASPA (Pharmaceutical Benefits Scheme Access and Sustainability Package) introduced changes to pricing and disclosure rules.
  • Price changes increased from three to five times per year.
  • One-off 5% price reduction for F1 formulary medicines after five years of listing, effective 1 April 2016.
  • Indexation freeze on Community Service Order (CSO) for the duration of the agreement.
  • Removal of certain OTC medicines from the PBS.
• India:
  • NPPA controls prices of essential medicines and caps prices of 18 new drugs for diabetes and hypertension.
  • AMRIT programme provides 50-60% lower prices for over 200 cancer drugs, 186 cardiovascular medicines, and 148 cardiac implants in central government hospitals.
  • Regulatory oversight to prevent price manipulation and ensure supply stability.

5. M&A Activities (Taiwan)

• Overview: Taiwanese tech companies are expanding into the healthcare market, focusing on medtech M&A.
• Key Points:
  • Growth in healthcare innovation and technology integration.
  • Strategic acquisitions and partnerships to enhance capabilities in the healthcare sector.

6. Taxation Developments

• Taiwan and China:
  • Cross-Strait Tax Agreement signed to avoid double taxation.
  • Updated APA guidance in response to BEPS recommendations.
  • Tax transparency measures in Australia affecting multinational companies.

7. Healthcare Developments (India)

• Patient Experience:
  • Increasing focus on consumer feedback to improve quality of care.
  • Hospitals and clinics are prioritizing patient-centric approaches.
• Online Prescription Sales:
  • E-commerce growth has led to concerns over drug quality and safety.
  • AIOCD supports regulation to prevent the entry of low-quality, unbranded, and spurious products.
  • Potential economic impact on the 800,000 chemists and their families.

PwC Observations

• BEPS Impact: Pharma companies in the Asia-Pacific region must adapt to new tax rules and reporting requirements to avoid penalties and ensure compliance.
• Australia: The PASPA and 6-CPA will continue to exert pressure on pricing and revenue for originator and generic companies.
• Japan: PV compliance is a major business risk, and companies must develop robust global PV models.
• India: The AMRIT programme and NPPA price controls are expected to reduce costs for critical illness treatments and improve affordability.
• Global Trends: Tax transparency, regulatory alignment, and digital transformation are key areas of focus for the pharmaceutical and healthcare industries.

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