Malaysia Pharma report May 2011
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Ipoh Hills, by Chong Hon Fatt
The Overlooked Emerging Market
ithout a doubt, Malaysia shares all the major attributes of an emerging market, from the potential to expand market penetration to the increasing purchasing power of the population. So the question is: Why have only two multinationals established manufacturing facilities in the country? Why was Malaysia not added to IMS Health’s 17 “pharmerging markets” last year? Essentially, why has Malaysia thus far not been a priority for global pharma companies? The orangutan in the room is that with a population of just 28 million, Malaysia has simply been easy to overlook. Malaysia is no China (1.3 billion), India (1.2 billion), Indonesia (243 million) or even Thailand (67 million). According to figures from the Pharmaceutical Association of Malaysia (PHAMA), the overall size of the market for prescription and OTC drugs is currently just US$ 1.63 billion. However, despite its size, Malaysia
presents strong growth opportunities. Factors such as rising income per capita, better medical diagnosis, increasing longevity, the growing preponderance of chronic diseases, and emerging consumer health consciousness are fueling a compound annual growth rate of 9.5% from 2009 to 2014. Christopher Rimolt, country manager of Eli Lilly says: “The government is targeting accelerated economic performance on the way to developed-nation
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status and wants to raise the average income per capita substantially through GDP growth … To me this represents a country where not just Eli Lilly, but the majority of pharmaceutical companies, will want to be present.” Pang Tse-Ming, managing director of Emerging Pharma (EP+), also sees great potential in this market, arguing, “Malaysia has a population of 28 million compared to Taiwan’s 24 million, yet the Taiwanese pharmaceutical market is six times the size of the
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Country Report Malaysian market. This serves as evidence for the significant growth potential of Malaysia.” Hitherto low market penetration has partly resulted Christopher Rimolt, from certain culCountry Manager, tural obstacles such Eli Lilly as faith in spiritual healers, or Bomohs, according to Wong Kin San, CEO of Lundbeck. Angel Choi, country manager of Pfizer, also highlighted that conservative social taboos concerning sex had inhibited the development of the market for drugs treating sexual dysfunction. The presence of a strong traditional medicine industry, including traditional Chinese medicine and Ayurveda, is a third barrier. Therefore through CSR and education programs there is significant scope for market development. Furthermore, economic growth is changing the lifestyle habits and epidemiological profile of the nation. Dr. David Quek, president of the Malaysian Medical Association, explains: “The big challenge now facing Malaysia is from noncommunicable diseases. With increasing development, Malaysia has perhaps imported some bad habits and lifestyle changes from the West.” Thirty percent of Malaysians are technically obese, while another 30% are overweight and 14.9% of the population has diabetes. Chronic diseases are therefore the new healthcare challenge for the country. With such pressing health needs, there is a necessity to overcome Malaysia’s geographical and infrastructural challenges to provide sufficient access to medicines. Rimolt praises the government for widening access to diabetes treatment, stating that “there are numerous initiatives to push treatments further down the healthcare system, all the way to the family physician in the kampongs (villages) of Sabah and Sarawak.” With 1.85 million diabetes sufferers in Malaysia, companies with a strong diabetes focus such as Novo Nordisk and Eli Lilly are posting double-digit S3 FOCUS REPORTS
Map of Malaysia
growth. The worrying expansion of Malaysia’s waistline is therefore presenting opportunities for innovator companies. Finally, the proposed “1Care” Malaysia reforms are due to transform the healthcare system, creating a unified NHS-style, single-payer-system instead of the current dual system. According to Professor Kenneth Lee, head of pharmacy at Monash University and specialist in pharmacoeconomics, the proposed reforms will change the dynamic from a system focused solely on price to one making Dato’ Sri Liow Tiong the value of treatment Lai, Malaysian paramount. These Minister of Health reforms, which the Minister of Health, Dato’ Sri Liow Tiong Lai says will occur over the next five years, should allow multinationals to revert to their standard business model, relying on innovative products rather than seeking other avenues of growth.
20/20 Vision Accompanying the growth opportunities of the market is a concerted drive by the Malaysian government to promote the healthcare industry as an economic driver. Gone are the days when healthcare was considered purely in terms of service provision; the key performance
indicators for the Ministry of Health (MOH) are now seen in an economic light. Minister Liow explains: “There has been a paradigm shift in the ministry’s focus. The government is now examining how to make Malaysia’s economy more competitive, and this carries significant implications for the health sector in Malaysia.” The Economic Transformation Program (ETP) launched in October 2010 placed healthcare and pharmaceuticals as one of the 12 National Key Economic Areas designed to ignite the fires in Malaysia’s economic engine. The MOH has established six “Entry Point Projects” (EPP): health tourism, insurance services, clinical trials, generics manufacturing, diagnostics services, and the creation of health metropolises. Taken together, these projects are designed to contribute US$ 11 billion to the national economy by 2020. Just in terms of clinical trials, the government is targeting a ten-fold increase by 2020, to 1,000 trials per year—something Lee Toong Chow, managing director of CRO, Info Kinetics, feels is well within the country’s capabilities. Malaysia’s low-cost facilities; English-speaking staff; and the National Medical Register, giving sponsors a detailed picture of the experience of principal investigators, provide good advantages. Most importantly, however, Malaysia provides excellent ethnic diver-
Country Report sity for patient recruitment (50% Malay, ics industry fueled by the patent loss of 25% Chinese, 10% Indian, and 15% oth- at least 15 blockbuster drugs over the er). Indeed, Lee says his company’s main next two to three years. Generics currently account for 33% of the selling point was “to connect domestic market in value terms research with people in Asia.” and 60% to 70% in volume— The MOH is further compleand this share could grow. Howmenting these preexisting attriever, the main growth will come butes with the expansion of its from exports, and the Malay17 Clinical Research Centers. sian trade promotion agency, Secondly, the Malaysian Health MATRADE, is now aggressively Tourism Council was founded in June 2009, and although Roshidah Abdullah, promoting Malaysian pharmaDirector, Finance & witnessing a temporary fall in Corporate Services, ceutical products in the ASEAN Economic Community and in the number of medical tour- Pharmaniaga Middle Eastern and North Afriists to Malaysia until mid-2010 due to the global recession, overall the in- can countries. The key differentiators for dustry grew 25% in 2010. Minister Liow Malaysian generics in the international projects that the industry will grow 30% markets will be their branded nature and in 2011, eventually attracting 1.9 million Halal certification. In fact, with the globmedical tourists by 2020 and contributing al Muslim population approaching 1.57 billion, providing a US$2.3 trillion marUS$ 1.342 to the GNI. Ultimately, the largest GDP contribu- ket (excluding Islamic banking), there tor will derive from the domestic gener- is great potential in providing pharma-
ceuticals which conform to Halal food regulations. Overall, the government is targeting 22% year-on-year growth in the Malaysian pharma industry to contribute US$ 5.4 billion to GDP by 2020.
Generics Ambitions The generics space is a growing area of convergence between multinationals and local companies. Rather than accruing assets in a relatively small market, several multinationals are now opting to contract out manufacturing to local companies, and such opportunities abound
Wouldn’t it be wonderful if you could be assured breakthrough medicines would continue to be sought? If you could count on having reliable answers for those times when your health is a concern? If you always had the best information to help you take care of yourself? We think that would be wonderful, too. And we’re working to make it happen. Your good health is our passion.
MG36735-2/7 PRINTED IN USA ©2010, Lilly USA, LLC. ALL RIGHTS RESERVED.
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The Elusive Single-Point-of-Entry: With Malaysia’s local manufacturers and Big Pharma increasingly looking to trade in the ASEAN Economic Community, the success of regional regulatory harmonization is not insignificant. Disparities in regulatory frameworks continue to create obstacles for both international Cheah Chor Eng, and regional companies entering Malaysia Country Head, the region’s markets. Cheah Chor Invida Malaysia Eng, country manager of Invida Malaysia, says that “while there are multilateral steps being taken by the ASEAN leaders towards regional harmonization ... this desired state is still a number of years off.” However, with Asia leading the global economic growth, the time to invest is now. Local Malaysian manufacturers pay a penalty when entering the more capricious regulatory environments of their neighbors. the Malaysian Organisation of Pharmaceutical Industries (MOPI) confirmed that that the “protectionist standpoint of other ASEAN members” dramatically reduced the size of this export market to
the AEC. Multinationals have also faced a number of sales compliance issues when navigating these diverse regulatory systems. Within ASEAN, only Singapore and Malaysia seem fully engaged in the harmonization process, having Sinclair Pharma’s CEO Chris signed a Mutual Recognition Agreement (MRA) Spooner (left) and Invida Group’s CEO John Graham after signing a for their GMP production long-term collaboration agreement facilities. The MOH is where Invida would be Sinclair’s energetically collaborat- exclusive partner in Asia Pacific ing with the Pharmaceutical Products Working Group of the AEC to improve trade conditions and harmonize procedures. In the meantime, marketing and distribution companies such as Invida will continue to be seen as what Cheah calls a “gateway to Asia Pacific for companies looking to grow their footprint in the region.”
With 3,500 employees across 13 markets, Invida is the leading specialty pharmaceutical company focused on the commercialization of important healthcare brands in Asia Pacific.
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thanks to Malaysia’s strong GMP regulations based on their PIC/S membership. Malaysia’s geographical position at the heart of Asia’s emerging markets, as well as cheap labor and land costs, make the country a good prospect for outsourcing. Notable partnerships last year include: Sanofi-Aventis and Hovid Bhd; Biocon Ltd contracting to Malaysia’s biotechnology park BioXcell; and Malaysian company Inno Bio Ventures contract manufacturing clinical-grade material for Indian company Avesthagen—Malaysia’s first biotech manufacturing contract. Within this picture, Pharmaniaga is one of the heavyweights of the local generics industry, producing 200 products for international companies seeking entry into the Malaysian market. Pharmaniaga has a 15-year relationship with Pfizer, and Roshidah Abdullah, CFO of Pharmaniaga, recognizes that “collaboration with multinationals helped to catapult the company into a different league compared to the other domestic players and was a key factor in our [Pharmaniaga’s] differentiation.” Pharmaniaga is now looking to expand its generics arm to become a major
Country Report focus for the company’s long- eyebrows among the CEOs of term growth strategy. Ma- innovator companies. Leonlaysian companies have been ard Shatar of the Malaysian a little sluggish in interna- Organization of Pharmationalizing their operations, ceutical Industries (MOPI), but Pharmaniaga is at the confirms, “The Ministry of Health has an active forefront of a new generics policy driven wave seeking exprimarily by the rising port-driven growth. cost of healthcare.” Pharmaniaga’s dosCost-containment sier exchange with measures invariably multinationals and impact most heavily rebranding as a Pang Tse-Ming, on the pharmaceutisupergenerics comManaging Director, cal industry and to pany are essential EP+ limit Malaysia’s US$ to its expansion within the region. Roshidah 1.3 billion public drugs bill. explains that in Myanmar The government procures the company initially pursued drugs on an open-tender bathe wrong strategy when it sis, favoring cheaper generics. engaged in a price war with Unlike its neighbor, Singacompanies from Bangladesh pore, Malaysia is a substanand India. The company has tial reimbursement market, changed tack and now intends with government purchases to play on the brand con- accounting for 35% of the sciousness of Southeast Asian overall market. There is also the percepnations to differentiate themselves. Its confident assurance tion of a generics first, inis that “in the next five years tellectual property second you will see Pharmaniaga not attitude in Malaysia’s regulajust as a leader in Malaysia tory system among some of but assuming leadership posi- the multinationals. Eu Keng tions in Thailand, Myanmar, Huat, president of PHAMA, says that at times his comand Vietnam,” she says. pany, Merck, was even fightAn 18th hole victory or ing for government tenders with companies possessing lost in the forest? It is all well and good that the invalid patents. However, Fui government is using health- K. Soong, executive director care as a mechanism helping of the American-Malaysian to catapult the nation out of Chamber of Commerce, says the “middle-income trap” that the current government towards becoming a high- is increasingly responsive income society. However, for to the concerns of multinathe upgrading of the value- tionals and a far cry from offering from its generics in- the intransigence of previous dustry and the expansion of administrations. An alternative market enclinical trials, Malaysia needs the presence of innovator try strategy for small- and medium-sized pharma commultinationals. Unfortunately, the gov- panies would be to entrust ernment’s promotion of the sales to a marketing company generics industry has raised like EP+, which is pioneering
an innovative new category of medical marketing, fashioning itself as the “leading medical edutaintment specialist.” Its philosophy is to make marketing events more fun by offering interesting activities such as gallery walks, cooking classes, and wine tastings following medical lectures. Pang argues, “Now is the time for them [pharma companies] to enter this market because product registration is becoming increasingly stringent,” particularly considering the eventual health reforms.
The Logical Next Step Malaysia has taken a long time to find its feet in the pharmaceutical and healthcare industry, but has now chosen six sectors to contrib-
ute to the country’s development. Despite the small size of the market and question marks over patent protection, Malaysia’s profile as an emerging market should mark it out as a strong prospect for innovator multinationals. Sustained growth in the 17 pharmerging markets is not guaranteed, and Malaysia is therefore a logical next step— the 18th pharmerging market. According to Minister Liow, the healthcare sector will require US$ 9.3 billion from 2011 to 2020 to fund growth, with the majority of investment sought in the private sector. Much still depends on foreign investment, and the next few years should prove just how clear-sighted Malaysia’s 20/20 vision truly is.
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Ministry of Health Malaysia
Malaysian Healthcare Industry : Engine of Economic Growth An upcoming global manufacturer of pharmaceuticals from GMP facilities A future nexus for international medical diagnosis Paving the way for future innovation through medical metropolises Offering a tropical paradise for top-level, cost-competitive healthcare travel A clinical trials hub for the industry utilising Malaysia's ethnic diversity and world-class medical institutions Expanding health insurance to cover all foreign workers
Ministry of Health Malaysia Block E1, E6 & E10, Complex E, Precinct 1, Federal Government Administrative Centre, 62590 Putrajaya, Malaysia. Tel: +60 3 8883 3888 / Fax: +60 3 8888 6187 / www.moh.gov.my / E-mail: firstname.lastname@example.org