Pharmaceuticals Malaysia report 2011

MalaysiaPharma reportMay 2011

Country ReportSPONSORED SUPPLEMENT

S1 FOCUS REPORTS May 2011

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May 2011 FOCUS REPORTS S2

Country Report

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Without 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?

Malaysia:

More spotlights on pharmaceutical markets worldwide at

Ipoh Hills, by Chong Hon Fatt

The orangutan in the room is that with a population of just 28 million, Malay-sia 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 As-sociation of Malaysia (PHAMA), the overall size of the market for prescrip-tion 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 lon-gevity, the growing preponderance of chronic diseases, and emerging consumer health consciousness are fueling a com-pound annual growth rate of 9.5% from 2009 to 2014.

Christopher Rimolt, country man-ager of Eli Lilly says: “The government is targeting accelerated economic perfor-mance on the way to developed-nation

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 popula-tion of 28 million compared to Taiwan’s 24 million, yet the Taiwanese pharma-ceutical market is six times the size of the

The Overlooked Emerging Market



Malaysian market. This serves as evi-dence for the signifi-cant growth poten-tial of Malaysia.”

Hitherto low market penetration has partly resulted from certain cul-tural obstacles such as faith in spiritual

healers, or Bomohs, according to Wong Kin San, CEO of Lundbeck. Angel Choi, country manager of Pfizer, also high-lighted that conservative social taboos concerning sex had inhibited the devel-opment of the market for drugs treating sexual dysfunction. The presence of a strong traditional medicine industry, in-cluding traditional Chinese medicine and Ayurveda, is a third barrier. Therefore through CSR and education programs there is significant scope for market de-velopment.

Furthermore, economic growth is changing the lifestyle habits and epidemi-ological profile of the nation. Dr. David Quek, president of the Malaysian Medi-cal Association, explains: “The big chal-lenge now facing Malaysia is from non-communicable 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 geo-graphical and infrastructural challenges to provide sufficient access to medicines. Rimolt praises the government for widen-ing access to diabetes treatment, stating that “there are numerous initiatives to push treatments further down the health-care system, all the way to the family phy-sician 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 Nor-disk and Eli Lilly are posting double-digit

growth. The worrying expansion of Ma-laysia’s waistline is therefore presenting opportunities for innovator companies.

Finally, the proposed “1Care” Ma-laysia 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 Univer-sity and specialist in pharmacoeconomics, the proposed reforms will change the dy-namic from a system focused solely on price to one making the value of treatment paramount. These 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 VisionAccompanying the growth opportuni-ties 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 health-care 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 minis-try’s focus. The government is now ex-amining how to make Malaysia’s econ-omy more competitive, and this carries significant implications for the health sector in Malaysia.”

The Economic Transformation Pro-gram (ETP) launched in October 2010 placed healthcare and pharmaceuticals as one of the 12 National Key Economic Areas designed to ignite the fires in Ma-laysia’s economic engine.

The MOH has established six “Entry Point Projects” (EPP): health tourism, in-surance services, clinical trials, generics manufacturing, diagnostics services, and the creation of health metropolises. Tak-en together, these projects are designed to contribute US$ 11 billion to the national economy by 2020.

Just in terms of clinical trials, the gov-ernment 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 spon-sors a detailed picture of the experience of principal investigators, provide good advantages. Most importantly, however, Malaysia provides excellent ethnic diver-

Christopher Rimolt, Country Manager, Eli Lilly

Dato’ Sri Liow Tiong Lai, Malaysian Minister of Health

Map of Malaysia



Country Report

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sity for patient recruitment (50% Malay, 25% Chinese, 10% Indian, and 15% oth-er). Indeed, Lee says his company’s main selling point was “to connect research with people in Asia.” The MOH is further comple-menting these preexisting attri-butes with the expansion of its 17 Clinical Research Centers. Secondly, the Malaysian Health Tourism Council was founded in June 2009, and although witnessing a temporary fall in the number of medical tour-ists to Malaysia until mid-2010 due to the global recession, overall the in-dustry grew 25% in 2010. Minister Liow projects that the industry will grow 30% in 2011, eventually attracting 1.9 million medical tourists by 2020 and contributing US$ 1.342 to the GNI.

Ultimately, the largest GDP contribu-tor will derive from the domestic gener-

ics industry fueled by the patent loss of at least 15 blockbuster drugs over the next two to three years. Generics cur-

rently account for 33% of the domestic market in value terms and 60% to 70% in volume—and this share could grow. How-ever, the main growth will come from exports, and the Malay-sian trade promotion agency, MATRADE, is now aggressively promoting Malaysian pharma-ceutical products in the ASEAN Economic Community and in Middle Eastern and North Afri-

can countries. The key differentiators for Malaysian generics in the international markets will be their branded nature and Halal certification. In fact, with the glob-al Muslim population approaching 1.57 billion, providing a US$2.3 trillion mar-ket (excluding Islamic banking), there 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 con-tribute 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, sev-eral multinationals are now opting to contract out manufacturing to local com-panies, and such opportunities abound

Roshidah Abdullah, Director, Finance & Corporate Services, Pharmaniaga

Pharmaniaga’s facilities



The Elusive Single-Point-of-Entry:With Malaysia’s local manufacturers and Big Pharma increasingly look-ing to trade in the ASEAN Economic Community, the success of regional regulatory harmonization is not insignificant. Disparities in regula-tory frameworks continue to create obstacles for both international and regional companies entering the region’s markets. Cheah Chor 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 Phar-maceutical 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 num-ber of sales compliance issues when navigating these diverse regula-tory systems. Within ASEAN, only Singapore and Malaysia seem fully engaged in the harmo-nization process, having signed a Mutual Recog-nition Agreement (MRA) for their GMP production facilities. The MOH is energetically collaborat-ing with the Pharmaceu-tical 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.”

thanks to Malaysia’s strong GMP regula-tions 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 biotech-nology 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 ge-nerics 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 multi-nationals helped to catapult the company into a different league compared to the other domestic players and was a key fac-tor in our [Pharmaniaga’s] differentiation.”

Pharmaniaga is now looking to ex-pand its generics arm to become a major

With 3,500 employees across 13 markets, Invida is the leading specialty pharmaceutical company focused on the commercialization

of important healthcare brands in Asia Paci�c.

www.invida.com

Cheah Chor Eng, Malaysia Country Head, Invida Malaysia Sinclair Pharma’s CEO Chris

Spooner (left) and Invida Group’s CEO John Graham after signing a long-term collaboration agreement where Invida would be Sinclair’s exclusive partner in Asia Pacific



Country Report

focus for the company’s long-term growth strategy. Ma-laysian companies have been a little sluggish in interna-tionalizing their operations, but Pharmaniaga is at the forefront of a new wave seeking ex-port-driven growth. Pharmaniaga’s dos-sier exchange with multinationals and rebranding as a supergenerics com-pany are essential to its expansion within the region. Roshidah explains that in Myanmar the company initially pursued the wrong strategy when it engaged in a price war with companies from Bangladesh and India. The company has changed tack and now intends to play on the brand con-sciousness of Southeast Asian nations to differentiate them-selves. Its confident assurance is that “in the next five years you will see Pharmaniaga not just as a leader in Malaysia but assuming leadership posi-tions in Thailand, Myanmar, and Vietnam,” she says.

An 18th hole Victory or lost in the forest?It is all well and good that the government is using health-care as a mechanism helping to catapult the nation out of the “middle-income trap” towards becoming a high-income society. However, for the upgrading of the value-offering from its generics in-dustry and the expansion of clinical trials, Malaysia needs the presence of innovator multinationals.

Unfortunately, the gov-ernment’s promotion of the generics industry has raised

eyebrows among the CEOs of innovator companies. Leon-ard Shatar of the Malaysian Organization of Pharma-ceutical Industries (MOPI), confirms, “The Ministry of

Health has an active generics policy driven primarily by the rising cost of healthcare.” Cost -conta inment measures invariably impact most heavily on the pharmaceuti-cal industry and to limit Malaysia’s US$

1.3 billion public drugs bill. The government procures drugs on an open-tender ba-sis, favoring cheaper generics. Unlike its neighbor, Singa-pore, Malaysia is a substan-tial reimbursement market, with government purchases accounting for 35% of the overall market.

There is also the percep-tion of a generics first, in-tellectual property second attitude in Malaysia’s regula-tory system among some of the multinationals. Eu Keng Huat, president of PHAMA, says that at times his com-pany, Merck, was even fight-ing for government tenders with companies possessing invalid patents. However, Fui K. Soong, executive director of the American-Malaysian Chamber of Commerce, says that the current government is increasingly responsive to the concerns of multina-tionals and a far cry from the intransigence of previous administrations.

An alternative market en-try strategy for small- and medium-sized pharma com-panies would be to entrust sales to a marketing company like EP+, which is pioneering

an innovative new category of medical marketing, fash-ioning itself as the “leading medical edutaintment special-ist.” Its philosophy is to make marketing events more fun by offering interesting activities such as gallery walks, cook-ing 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 becom-ing increasingly stringent,” particularly considering the eventual health reforms.

the loGicAl next stepMalaysia has taken a long time to find its feet in the pharmaceutical and health-care industry, but has now chosen six sectors to contrib-

ute to the country’s develop-ment. Despite the small size of the market and question marks over patent protec-tion, 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 re-quire US$ 9.3 billion from 2011 to 2020 to fund growth, with the majority of invest-ment sought in the private sector. Much still depends on foreign investment, and the next few years should prove just how clear-sighted Malay-sia’s 20/20 vision truly is.

Pang Tse-Ming, Managing Director, EP+

email: [email protected]

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Pharmaceuticals Malaysia report 2011