Malaysia Pharmaceuticals & Healthcare Report - Q4 2012

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com
Q4 2012
malaYsia
pharmaceuticals & Healthcare Report

INCLUDES BMI'S FORECASTS
ISSN 1748-2038
Published by Business Monitor International Ltd.
MALAYSIA PHARMACEUTICALS & HEALTHCARE REPORT Q4 2012

INCLUDES 10-YEAR FORECASTS BY BMI
Part of BMIs Industry Report & Forecasts Series

Published by: Business Monitor International Copy deadline: August 2012
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Malaysia Pharmaceuticals & Healthcare Report Q4 2012
Business Monitor International Ltd
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CONTENTS
CONTENTS ........................................................................................................................................................ 3 Executive Summary ......................................................................................................................................... 7 SWOT Analysis ................................................................................................................................................. 9
Malaysia Pharmaceuticals And Healthcare Industry SWOT ................................................................................................................................. 9 Malaysia Political SWOT .................................................................................................................................................................................... 10 Malaysia Economic SWOT .................................................................................................................................................................................. 10 Malaysia Business Environment SWOT ............................................................................................................................................................... 12
Pharmaceutical Risk/Reward Ratings .......................................................................................................... 13

Table: Asia Pacific Pharmaceutical Risk/Reward Ratings, Q412 ........................................................................................................................ 13 Rewards ............................................................................................................................................................................................................... 14 Risks .................................................................................................................................................................................................................... 14
Malaysia Market Summary ......................................................................................................................... 16 Regulatory Regime ......................................................................................................................................... 18

Regulatory Developments .................................................................................................................................................................................... 18 Bioequivalence..................................................................................................................................................................................................... 19 Regional Collaboration ....................................................................................................................................................................................... 20 Pharmaceutical And Medical Advertising............................................................................................................................................................ 20 Labelling Requirements ....................................................................................................................................................................................... 21 Intellectual Property Regime ............................................................................................................................................................................... 22 Counterfeit Pharmaceuticals ............................................................................................................................................................................... 23 Compulsory Licensing ......................................................................................................................................................................................... 23 Free Trade Agreements........................................................................................................................................................................................ 24 Pricing And Reimbursement ................................................................................................................................................................................ 25
Industry Trends And Developments ............................................................................................................ 27

Epidemiology ....................................................................................................................................................................................................... 27 Non-Communicable Diseases .............................................................................................................................................................................. 28 Communicable Diseases ...................................................................................................................................................................................... 28 Healthcare Sector ................................................................................................................................................................................................ 29 Table: 2011 Entry Points Projects Summary ....................................................................................................................................................... 30 Health Insurance ................................................................................................................................................................................................. 31 Table: Main Features Of 1Care........................................................................................................................................................................... 31 Healthcare Sector Funding .................................................................................................................................................................................. 32 Table: Public Sector And Private Sector Healthcare Developments.................................................................................................................... 33 Medical Tourism .................................................................................................................................................................................................. 33 Biotechnology And Research ............................................................................................................................................................................... 35 Clinical Trials ...................................................................................................................................................................................................... 37 Clinical Trials Industry Developments................................................................................................................................................................. 38 Medical Devices................................................................................................................................................................................................... 38 Leading Medical Device Players ......................................................................................................................................................................... 39 Recent Medical Devices Industry Developments.................................................................................................................................................. 39
Industry Forecast Scenario ........................................................................................................................... 41

Overall Market Forecast...................................................................................................................................................................................... 41 Table: Pharmaceutical Sales Indicators 2008-2016 ............................................................................................................................................ 42
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Key Growth Factors Industry............................................................................................................................................................................ 43 Table: Healthcare Expenditure Indicators 2008-2016 ......................................................................................................................................... 44 Table: Healthcare Governmental Indicators 2008-2016 .................................................................................................................................... 44 Table: Healthcare Private Indicators 2008-2016 ................................................................................................................................................ 45 Key Growth Factors Macroeconomic ............................................................................................................................................................... 46 Prescription Drug Market Forecast..................................................................................................................................................................... 48 Table: Prescription Drug Sales Indicators 2008-2016 ........................................................................................................................................ 49 Patented Drug Market Forecast .......................................................................................................................................................................... 50 Table: Patented Drug Market Indicators 2008-2016 ........................................................................................................................................... 51 Generic Drug Market Forecast............................................................................................................................................................................ 52 Table: Generic Drug Sales Indicators 2008-2016 ............................................................................................................................................... 53 OTC Medicine Market Forecast .......................................................................................................................................................................... 54 Table: OTC Medicine Sales Indicators 2008-2016 .............................................................................................................................................. 55 Pharmaceutical Trade Forecast .......................................................................................................................................................................... 56 Table: Exports and Imports Indicators 2008-2016 .............................................................................................................................................. 57 Medical Device Market Forecast ......................................................................................................................................................................... 59 Table: Medical Devices Sales Indicators 2008-2016 ........................................................................................................................................... 60 Other Healthcare Data Forecasts........................................................................................................................................................................ 61 Key Risks To BMIs Forecast Scenario ................................................................................................................................................................ 62
Competitive Landscape ................................................................................................................................. 63

Domestic Pharmaceutical Industry ...................................................................................................................................................................... 63 Foreign Pharmaceutical Industry ............................................................................................................................................................................. 63 Table: Leading Malaysian Pharmaceutical And Healthcare Companies............................................................................................................. 64 Company Activities .............................................................................................................................................................................................. 64 Halal Medicine .................................................................................................................................................................................................... 65 Traditional Medicine ........................................................................................................................................................................................... 66 Pharmaceutical Distribution................................................................................................................................................................................ 67
Company Profiles ........................................................................................................................................... 68

Local Companies ...................................................................................................................................................................................................... 68 Pharmaniaga ....................................................................................................................................................................................................... 68 Prime Pharmaceutical ......................................................................................................................................................................................... 71 Bumimedic ........................................................................................................................................................................................................... 72 Hovid ................................................................................................................................................................................................................... 73 Chemical Company of Malaysia .......................................................................................................................................................................... 75 Kotra Pharma ...................................................................................................................................................................................................... 77 Multinational Companies.......................................................................................................................................................................................... 80 GlaxoSmithKline .................................................................................................................................................................................................. 80 Pfizer ................................................................................................................................................................................................................... 82 Novartis ............................................................................................................................................................................................................... 84 Merck & Co ......................................................................................................................................................................................................... 86 Sanofi ................................................................................................................................................................................................................... 88 Eli Lilly Malaysia ................................................................................................................................................................................................ 90 Ranbaxy Malaysia ............................................................................................................................................................................................... 91
Demographic Outlook .................................................................................................................................... 92

Table: Population By Age Group, 1990-2020 ('000) ........................................................................................................................................... 93 Table: Population By Age Group, 1990-2020 (% of total) ................................................................................................................................... 94 Table: Key Population Ratios, 1990-2020 ........................................................................................................................................................... 94 Table: Rural/Urban Population Split, 1990-2020 ................................................................................................................................................ 95
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Glossary .......................................................................................................................................................... 96 BMI Methodology ........................................................................................................................................... 98

How We Generate Our Pharmaceutical Industry Forecasts ................................................................................................................................ 98 Pharmaceuticals Risk/Reward Ratings Methodology........................................................................................................................................... 99 Ratings Overview ................................................................................................................................................................................................. 99 Table: Pharmaceutical Business Environment Indicators ..................................................................................................................................100 Weighting............................................................................................................................................................................................................101 Table: Weighting Of Components .......................................................................................................................................................................101 Sources ...............................................................................................................................................................................................................101
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Executive Summary
BMI View: Malaysia may have one of the regions lowest per capita spend in terms of healthcare as a percentage of GDP 4.3% in 2011 but it boasts a growing private healthcare sector and is experiencing increased investment in public healthcare as existing facilities are modernised. Generic drugs are one key growth area, particularly as drug patents expire, and the governments intention to create a new regulatory body and implement the Medicine Device Act in October 2012 will improve the operating environment. Risks remain, however. Counterfeit and substandard drugs are commonplace, and pharmacists requests to charge a consultation fee will only encourage low-income patients to look for cheaper remedies for their ailments. Malaysias stance on intellectual property may deter investors, with media reports claiming that the government objects to a proposed increase in patent periods for drugs by foreign firms, which forms part of the Trans-Pacific Partnership Agreement. Headline Expenditure Projections Pharmaceuticals: MYR5.55bn (US$1.81bn) in 2011 to MYR6.2bn (US$1.93bn) in 2012; +10.2% in local currency and +6.2% in US dollars. Forecast down slightly from Q312 on account of new historical data. Healthcare: MYR36.35bn (US$11.88bn) in 2011 to MYR39.03bn (US$12.29bn) in 2012; +7.4% in local currency and +3.4% in US dollars. Forecast up slightly from Q312 on account of new historical data. Medical devices: MYR3.97bn (US$1.30bn) in 2011 to MYR4.30bn (US$1.36bn) in 2012; +8.5% in local currency and +4.5% in US dollars. Forecast up from Q212 on account of new historical data. Risk/Reward Rating: In our latest proprietary Pharmaceutical Risk/Reward Ratings (RRRs) matrix for Asia Pacific, Malaysia ranks an unchanged eighth out of the 18 countries surveyed regionally. Its composite score is also unchanged at 59.3 out of 100. Malaysia is an attractive market for international investors, though its longer-term rewards are dragged down by factors such as low per capita spending on pharmaceuticals. Key Trends And Developments The Malaysian Pharmaceutical Society presented a proposal to the Ministry of Health to charge customers a professional fee of MYR5. Private doctors fees are also expected to increase by 14%.
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In June 2012, Novartis signed a Memorandum of Understanding with the Ministry of Health to further enhance the countrys progress in the National Key Economic Area programme. Novartis set up a US$700mn fund to support domestic healthcare start-ups.
Local press reports in August 2012 indicated that the Malaysian government is not in favour of the Trans-Pacific Partnership Agreement, a free trade agreement that is intended to increase the patent period of drugs by foreign countries.
BMI Economic View: The latest data from Q212 show that real GDP posted a better-than-expected 5.4% year-on year (y-o-y) growth. While BMIs analysts have raised our full-year GDP forecasts for Malaysia accordingly, we note that May is typically a peak month in terms of activity, and questions whether this healthy growth can be sustained. Factors holding back Malaysias economy include its net exports and property sector. BMI Political View: Malaysias government is keen to boost international investment, with recent initiatives announced in July 2012 including a series of tax incentives to encourage foreign direct investment inflows. BMI welcomes the governments moves to create a new financial district in Kuala Lumpar, but in the long term, ethnic diversity continues to have a heavy influence on domestic politics, and this will affect political stability and, subsequently, investor consequence.
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SWOT Analysis
Malaysia Pharmaceuticals And Healthcare Industry SWOT
Strengths
Increasingly progressive government policy, aimed at attracting international investment. Improving local manufacturing standards, with a commitment to biotech development. Sizeable, and growing generic drugs market, given low patient purchasing power and lax patent laws. Manufacturing of halal medicines improving access to other global Islamic markets. Markedly behind South Korea, Singapore and Taiwan in terms of per-capita pharmaceutical expenditure and foreign direct investment. Lax patent law remains conspicuously below international standards, government rejection of Trans-Pacific Partnership Agreement could deter multinational firms. Strict government drug pricing policy heavily biased towards local drug producers. Market reliant on imports, particularly at the hi-tech end of the scale, placing pressure on government finances.
Weaknesses
Opportunities
Exports growing due to rising regional and global demand, as well as increasing trade links. ASEAN harmonisation encouraging the adoption of Western regulatory standards and the improvement of intra-regional trade. Potential membership of a multilateral trans-Pacific trade agreement. Investment in the biotech sector development supported by government initiatives. Malaysia becoming an attractive location for medical tourism. More transparent legislation and the attraction of foreign investment. Planned investment in the expansion of medical facilities. Government resistance to aligning domestic patent law fully with international standards, coupled with encouragement of parallel trade. Existence of a significant counterfeit drugs sector. Government seeking compulsory licences for patented drugs. From July 2012, pharmaceutical products not manufactured in PIC/S member countries will be required to obtain GMP certification prior to sale in Malaysia, which will disadvantage importers from less-regulated markets. Increasingly unclear economic and political situation negatively impacting investor sentiment.
Threats
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Malaysia Political SWOT
Strengths
Malaysia is an example of a successful democratic Islamic state. Despite murmurs of discontent among hard-line Muslims in some states, Malaysia is unlikely to abandon moderate Islam. Despite having two significant minority ethnicities, Chinese and Indians, Malaysia has not been rocked by any major racial unrest since 1969. This lends credence to the argument that its multiracial society is sustainable. The Malay half of the population holds a constitutionally enshrined special position in society, amounting to positive discrimination in jobs and wealth. Resentment is an obvious by-product, and the challenge is to produce enough prosperity to reduce tension. The controversial Internal Security Act, which allows for detention without trial, has been wielded by the government on several occasions with the avowed intention of quelling unrest. However, some detentions have been viewed as an attempt by the government to suppress the opposition. The relatively weak performance by the ruling Barisan Nasional in the 2008 general elections has paved the way for the stalled reformist agenda promised by former prime minister Abdullah Ahmad Badawi back in 2004 to gather pace. This would help open up the country's closed political system and improve transparency and accountability within key institutions. Prime Minister Najib Razak came to power in 2009 promising reforms and changes. His actions have thus far been deemed progressive, potentially paving the way for a significant overhaul of Malaysia's political and economic system. Although it is likely to remain non-violent, ethnic tension will continue to simmer as long as there remains a threat that the influence of hard-line Islam could revive. For now, however, the hardliners have lost much of their political clout. Despite a change of premier in April 2009, the Barisan Nasional coalition will remain under pressure from a stronger opposition. Failure to deal adequately with issues such as corruption, a slowing economy and the divisive affirmative action policy could see Anwar Ibrahim's opposition coalition force Barisan Nasional from power.
Weaknesses
Opportunities
Threats
Malaysia Economic SWOT
Strengths
During the past four decades, Malaysia has transformed itself from a commoditydependent economy into a major world source for electronics and computer parts. Malaysia is one of the world's largest producer of rubber, palm oil, pepper and tropical hardwoods, and is still a net exporter of crude oil. All this provides a solid platform for economic growth. Malaysia's relative insulation from global energy price shocks is being eroded. It is now likely that within the next few years Malaysia will become a net importer of oil. Malaysia's economic openness can be as much of a burden as a benefit, since it confers a high degree of vulnerability to global growth and capital flows. Oil-related taxes contribute more than 40% of the state's revenues. The lack of alternative income poses a threat to the government's ability to function and sustain economic development, potentially leading to economic stagnancy.
Weaknesses
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Opportunities
The opportunity for private sector-led growth will improve as the government continues divestment of state shareholdings in order to raise funds to narrow the budget deficit. Rising consumption levels over the coming years will provide new growth avenues in industries such as retail. Malaysia's majority Muslim population and the government's ongoing efforts to boost Islamic finance could see Malaysia become a major financial hub over the medium term. Wages are higher in Malaysia than in a number of its competitors, such as China and Vietnam, which could be a long-term hindrance to economic expansion. To maintain its competitive edge, Malaysia needs a steady stream of inward investment. Malaysia's dependence on migrant labour, particularly for low-skilled jobs, poses a threat to long-term economic stability. Oil-related taxes make up more than 40% of the state's revenues at a time when Malaysia is expected to become a net petroleum importer by as early as 2013. The over-reliance on oil poses a threat to the government's ability to fund and sustain economic development over the long term. The government's already-poor fiscal position is threatened by increasingly unsustainable subsidies on essential consumer goods (especially petrol) which could further strain its finances.
Threats
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Malaysia Business Environment SWOT
Strengths
Standards of corporate governance in Malaysia have greatly improved since the Asian financial crisis at the end of the 1990s more so, in fact, than in many neighbouring countries. Foreign companies, or at least foreign manufacturing companies, looking to do business in Malaysia will continue to be welcomed with open arms - with the government offering lavish tax breaks and concessions. State subsidisation of prices will remain a peripheral but persistent part of daily economic life in Malaysia. Doing business in Malaysia will always, to some extent, mean dealing with the politically well-connected. Big construction projects and big contracts for foreign construction firms are unlikely to be as much of a priority for Malaysia's government as they were under the administration of former prime minister Mahathir Mohamad. The opportunity to invest in Malaysian state assets could improve. The government, if it sticks to its word, will conduct its biggest ever divestment of state shareholdings. Malaysia is eager to compete globally in banking. It currently lacks a domestic champion; however, with 10 main institutions in the market, bank consolidation is a strong possibility. The opening of free trade agreement negotiations with the EU as well as the TransPacific Partnership may lead to an improvement to the country's business environment owing to freer markets, if talks succeed. The waterways and shipping lanes that surround Malaysia will continue to experience the threat of piracy and terrorism. Malaysia is at risk of losing out to China in the race for foreign investment. As Malaysian income level rises, it will need to seek investment opportunities in higher value-added industries.
Weaknesses
Opportunities
Threats
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Pharmaceutical Risk/Reward Ratings

Table: Asia Pacific Pharmaceutical Risk/Reward Ratings, Q412
Rewards Industry Rewards

Japan South Korea Australia China Singapore Taiwan Hong Kong Malaysia India New Zealand Indonesia Vietnam Thailand Philippines Sri Lanka Pakistan Bangladesh Cambodia Regional Average 80 63 50 67 40 53 47 50 60 27 53 50 47 43 37 40 37 33 49
Risks Rewards
76 64 59 63 50 55 53 53 56 41 53 49 47 47 38 42 38 34 51
Country Rewards
63 67 87 50 80 60 70 60 43 83 50 47 47 57 43 47 43 37 57
Industry Risks
80 70 72 67 80 70 67 70 53 60 40 40 37 43 40 33 40 30 55
Country Risks
77 69 84 56 79 65 79 69 50 87 46 45 58 45 48 40 36 36 60
Risks
79 70 77 63 80 68 72 70 52 71 42 42 45 44 43 36 38 32 57
Pharma RRR
77,0 66,4 66,2 62,5 61,9 60,2 60,2 59,3 54,4 52,9 48,4 46,3 46,1 45,7 40,2 39,5 38,3 33,5 53,3
Regional Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Scores out of 100, with 100 highest. Source: BMI
In BMIs RRR matrix for Q412, Malaysia is again placed eighth out of the 18 markets surveyed in the region. Key attractions of the Malaysian pharmaceutical market over the longer term are the governments encouragement of the biotechnology sector and the countrys economic development, which will improve consumer purchasing power with regard to pharmaceuticals. On the other hand, per capita pharmaceutical consumption is quite low, especially due to the high out-of-pocket payment levels, and this is set to worsen as price increases are proposed both in terms of specialist doctors fees and the prospect of pharmacists charging for consultations. The component parts of Malaysias RRR are:
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Rewards
Industry and country rewards scores are weighted and combined to form the overall rewards score. Malaysia score was unchanged at 53 this quarter, two percentage points ahead of the regional average of 51.
Industry Rewards Malaysias pharmaceutical market receives a score of 50 a figure that has remained unchanged this quarter. Malaysias relatively low per capita consumption of pharmaceuticals, due to the low- to middle-income status of the Malaysian economy, together with the high share of out of pocket payments that makes demand for pharmaceuticals very income sensitive. And if proposals for pharmacists to charge customers MYR5 per consultation are approved by the Ministry of Health, BMI will consider a
Risk/Reward Ratings By Subsector Score Q412
Source: BMI
downward revision to this score. Positive factors contributing to the score include a growing population and demand for innovative drugs as well as for improvements to the healthcare industry in general. Malaysia does remain vulnerable to one-off threats, however, such as natural disasters. Country Rewards Malaysia again scores 60 for this indicator, a score that sits above the regional average of 57. The score reflects a low proportion of pensionable population in comparison to its Asian peers, and well as a vast number of rural dwellers. On a positive note, Malaysian population is fast growing, which should uphold the development of its pharmaceutical market. While the growth of medical tourism is another reward boosting this score, as it encourages a strong private healthcare sector.
Risks
Pharmaceutical market and country risks are weighted and combined to form the score for risks to potential returns. Malaysias score of 70 is considerably above the regional average (57). The country is considered as posing some risks to multinationals, although presenting a respectable long-term prospect in the Asian region.
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Industry Risks Malaysias score remains at 70 for market risk, which refers to a subjective assessment of the countrys IP laws, policy and reimbursement regimes, as well as to the speed and efficiency of the approvals process. However, despite the positive prospect of harmonisation with the Association of Southeast Asian Nations (ASEAN), BMI will consider downgrading this score if it is confirmed that the Malaysian government does not adher to the patent extension terms of the Trans-Pacific Partnership Agreement, as it may deter multinationals from launching innovative medicines in the country. The counterfeit drug industry is also a negative factor affecting this score. Country Risks The figure for Malaysias country risk (69) is supported by a relatively high level of policy continuity, but is weighted down by corruption, cumbersome bureaucracy and a patchy legal framework. Beyond major cities, where tourism and private investment is more commonplace, many parts of the country suffer from insufficient investments in healthcare. Overall, however, Malaysias score remains considerably above the regional average of 60, which serves to increase its attractiveness as an investment destination.
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Malaysia Market Summary

The Malaysian pharmaceutical market is relatively underdeveloped by international standards. The market is based on a strong domestic generic drugs sector and imports of branded and patented medicines. BMI calculates that pharmaceutical spending represented 0.65% of GDP in 2011, which is low even by regional standards. BMI forecasts that the Malaysian drug market, valued at around MYR5.55bn (US$1.81bn) in 2011, will post a CAGR of 9.4% in local currency terms between 2011 and 2016. Boosted by conWith considerable encouragement from the government, the generic drug sector will expand in volume terms, although its value gains against the patented drug market will be smaller, due to its low prices. Imports (of patented and high-tech drugs primarily) will continue to dominate the Malaysian market, with multinationals taking a lions share. The encouragement of the generic drug sector will provide new opportunities for the local industry, which will increasingly need to boost its competitiveness in the face of regional harmonisation and free trade agreements (FTAs) with major trading
Source: IMS Health Asia, AC Nielsen, domestic companies, local press, BMI
Pharmaceutical Market By Sub-Sector (US$bn) 2011
partners. Concerns regarding counterfeit drugs remain however, creating a window of opportunity for high-quality generic drug manufacturers as the government introduces more stringent regulations. The vast majority of local producers concentrate on generic and over-the-counter (OTC) medicines, with output mainly intended for domestic consumption. The domestic manufacturers association, the Malaysian Organisation of Pharmaceutical Industries (MOPI), claims that local manufacturers can produce 80% of the drugs on the Malaysian National Essential Drugs List (NEDL). In the meantime, exports have also been boosted by rising regional and global demand as well as increased trade links with other major markets, although the market will remain import-dependent. Leading domestic producers include Asia Pharmaceutical Products and Pharmaniaga, with the latter increasingly targeting overseas markets. From an industry perspective, the Malaysian drug manufacturing and clinical trial industry will continue to develop as an increasingly attractive option for international firms, such as Sanofi Pasteur which turned to Malaysia to conduct Phase III clinical trials for its dengue vaccine, as the country has a large pool of
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highly trained but inexpensive research professionals. The government has been making concerted efforts to reinforce this trend, focusing on the development of the pharmaceutical and biotech hub around the capital Kuala Lumpur. Malaysia is a member of the PIC/S, which is intended to ensure mutual confidence in manufacturing standards.
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Regulatory Regime
The government introduced Malaysias current legal framework governing the quality of pharmaceuticals, registration of drugs, licencing of manufacturers, importers, wholesalers and retailers in the 1950s. The main regulatory authority in Malaysia is the Drug Control Authority (DCA), under the auspices of the Ministry of Health. Drug registration processes used to be lengthy, at up to two years. However, the approval period for the registration of pharmaceutical products with single ingredients was shortened from six months to 60 days in 2011, as part of the governments efforts to encourage growth in the pharmaceutical industry. The main responsibility of the DCA is to ensure the safety, quality and efficacy of pharmaceuticals in Malaysia. DCA-approved locally-made drugs are also accepted in OECD countries, illustrating the quality of generic medicines produced in Malaysia. According to the DCA, any drug in a pharmaceutical dosage form for human or animal use must be registered with the agency before they can be manufactured, imported, distributed or sold in the country. The regulation does not apply to diagnostic agents and test kits for laboratory use; non-medicated medical and contraceptive devices; non-medicated bandages and surgical dressings; and instruments, apparatus, syringes, needles, sutures and catheters. All local pharmaceutical manufacturers must be licensed by the DCA.
Regulatory Developments
In June 2012, the Ministry of Health announced its intention to set up a new regulatory body as part of an upcoming pharmacy bill, to monitor and regulate the sale and use of pharmaceuticals. The new body will have the power to issue guidelines on generic drugs and drug pricing mechanisms and will consolidate the functions of the Pharmacy Board, the DCA and the Medicines Advertisement Board, whose functions currently overlap. In order to ensure imported medicines comply with safety and quality standards in Malaysia, pharmaceutical products not manufactured in PIC/S member countries were required to obtain GMP certification from July 2012 prior to sale in the country. Citing India as an example, Minister of Health Liow Tiong Lai said products from that country will have to be inspected as it is a non-PIC/S country, unless a PIC/S authority has already inspected and approved the manufacturing facility in India. Despite the pending GMP requirements on imported productions to Malaysia, BMI cautions that this may not be implemented properly in reality. Currently, pharmaceuticals in Malaysia are regulated under the Drug and Cosmetics Regulations 1984 (revised 2005). For imported products, companies must file a CPP
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from the pharmaceutical authority in the country of origin. If a CPP is not available, a GMP certificate or manufacturing licence is generally acceptable, along with a CPP from the country of the product owner or a CPP from country of release. However, Liows announcement of mandatory GMP certification implies implementation of the Drug and Cosmetics Regulations has not been entirely effective in keeping nonCPP licensed products away from Malaysia. Nevertheless, we note that while the introduction of a mandatory GMP certification for imported medicines may seem like a threat to smaller foreign pharmaceutical players initially due to higher operation costs, it will be extremely beneficial for companies looking to introduce drugs in multiple countries. More importantly, ASEAN members have already fully or partially executed the ASEAN pharmaceutical regulatory harmonisation programme, providing opportunities for companies looking to the region for expansion. A topic that has come under discussion in Malaysia in recent years (following the passing of the Malaysia National Medicine Policy in October 2006) is the separation of prescribing and dispensing in Malaysia, in line with broader regional trends. BMI strongly welcomes this separation of roles as there is a clear conflict of interest, but acknowledges that it may not be possible in remote parts of the country. In Malaysia, general practitioners frequently have a separate business at their clinics that allows them to sell the medicine they prescribe. This is seen as convenient because patients, who are commonly old and sometimes physically impaired, do not have to travel to another location to receive their pharmaceuticals, but critics claim that dispensing activities distracts doctors from their core purpose diagnosing disease and prescribing treatment. Some even claim that GPs purely prescribe and then dispense branded drugs over generic alternatives, in order to enjoy higher margins. Supporters of the prescribing/dispensing split concede that changes will take a long time to implement, with the number of pharmacists and private community pharmacies currently not considered to be adequate to allow for a smooth transition. Any change may be followed by a rise in consultation fees as has recently happened in South Korea in order to compensate doctors for the loss of income.
Bioequivalence
The Malaysian government is looking to raise quality and technical standards in the local pharmaceutical industry by tightening bioequivalence rules. The government is expected to implement new regulations in 2012, under which all generic drugs submitted for approval in the country will have to present bioequivalence to a selected branded comparator product. According to Liow Tiong Lai, the regulations will bring the local pharmaceutical industry in line with international standards. BMI expects that the government will include such regulations in the remit of the new regulatory body when it is established.
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Regional Collaboration
The idea of ASEAN pharmaceutical regulatory harmonisation was first proposed by Malaysia in 1992. The ASEAN subsequently established a Pharmaceutical Product Working Group (PPWG) in 1999 to develop harmonised pharmaceutical regulations and an ASEAN common technical dossier (CTD) for member states. The aim of the harmonisation process is to eliminate technical barriers to trade without compromising drug quality, safety and efficacy. Brunei, Indonesia, Malaysia, Singapore, the Philippines, Thailand and Vietnam have fully implemented the ACTD. Cambodia and Laos have implemented the dossier partially, while there has been no meaningful update from Myanmar. The ACTD is very similar to the International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH-CTD), given that the PPWG has adopted several guidelines from the ICH. However, the ACTD is simpler as it only has four modules, instead of five. As in the case of the ASEAN, pharmaceutical harmonisation is part of the regions ongoing efforts to promote economic integration. In 2007, the AEC blueprint was adopted as guidance towards the establishment of the economic community by 2015. The key goals of the AEC are to become a single market and production base, a highly competitive economic region, a region of equitable economic development and a region fully integrated into the global economy. Healthcare is listed as one of ASEANs 12 priority integration sectors. Under the plan, key aims in relation to healthcare include: Promoting investment in primary healthcare infrastructure. Developing strategies for ASEAN to strengthen the capacity and competitiveness in healthrelated products and services (including pharmaceutical sector). Promoting the application of biotechnology and R&D. The exchange of information and experiences on drug price control to access essential drugs. Exchanging experiences on public health policy formulation and management.
Pharmaceutical And Medical Advertising

Advertising of all registered drugs is permitted in Malaysia, and is regulated by the Medicines Advertisement Board. Its functions will almost certainly be incorporated under the countrys new regulatory body, which the government plans to create according to press reports in Q212. In 2011, the Ministry of Health reported that it issued 204 warning letters and 42 cases were referred for investigation 41 of which led to manufacturers being fined for misleading advertising. Between January 2012 and
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May 2012, the Ministry of Health stated that it has issued 197 warning letters, and has taken 24 cases to court. In May 2005, the Malaysian Medical Association implemented a guideline permitting doctors and hospitals to advertise their medical services. While the guideline has a number of restrictions, doctors and hospitals are able to advertise their medical specialities and any new or technologically advanced medical equipment. However, the advertisements are limited in their claims, prohibiting medical providers from exaggerating their abilities, asserting their achievements or overselling a product. The government allows private healthcare providers to promote their services through all media, Health Minister Dato Sri Liow Tiong Lai said in September 2010, with further liberalisation of advertising guidelines enacted in late 2011 in a bid to promote medical tourism in the country. Lai said the decision was taken to keep the country in line with the changes in the wider healthcare environment and to ensure the country maintains its competitiveness to attract medical tourists. However, he warned that the Ministry of Health would monitor advertisements and violation of the law would be punished.
Labelling Requirements
Under Regulation 12(1) of the Poison Regulation 1952, where any poison (prescription and nonprescription medicines) is sold or supplied as a dispensed medicine, or as an ingredient in a dispensed medicine, the container of such medicine shall be labelled, in a conspicuous and distinct manner, with: the name and address of the supplier or seller; the name of the patient or purchaser; the name of the medicine; adequate directions for the use of such medicine; the date of delivery of such medicine; and where such medicine is sold or supplied. At present, Malaysian private clinics and pharmacies are not required to comply with standard labelling regulations. In practice, this means most medicines, which are usually taken out of standard packs and repacked, do not come with appropriate usage and indication information. In October 2005, the Ministry of Health stated that all registered medicines be labelled with a Meditag a hologram security patch. The Meditag scheme was introduced in early 2005 in an effort to combat the prevalence of unregistered copy drugs, counterfeits and other healthcare products in the domestic pharmaceutical market. All products registered with the Malaysia DCA, including traditional medicines and health supplements, are required to bear the Meditag device, with cosmetics and OTC external care items such as anti-bacterial, oral care or anti-acne products exempt. Under the guidelines, anyone who fails to abide by this law will be subject to a fine, imprisonment or both. First-time offenders will be fined up to MYR25,000 (US$6,632) and/or jailed for up to three years. Any corporate entity failing to abide by this law will also be charged a fine of MYR50,000 (US$13,264) for first-time offenders, or MYR100,000 (US$26,529) for subsequent offenders. The Meditag scheme
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will involve the participation of enforcement officers, who will conduct visual scans of the symbols and markings on the Meditag device, as well as verify the manufacturers serial number. In May 2012, Health Minister Liow Tiong Lai announced that medical devices would also receive greater protection from counterfeit and substandard copies, with the introduction of the Medical Device Act in October 2012. Medical device manufacturers are not obliged to register their products they can volunteer to do so under the Medical Devices Establishments system but BMI believes that the voluntary nature of this scheme leaves scope for counterfeiters.
Intellectual Property Regime

Despite a major revision of patent law in 2001, and subsequent amendments in 2003, patent protection continues to be the cause of friction between the government and international drug manufacturers. While the government revised the period of protection for pharmaceuticals (increasing it to 20 years) following pressure from the international pharmaceutical community, it also implemented legal provisions that have come under heavy criticism from the industry. These include: The stipulation that the limited manufacturing, use and sale of a generic drug before the expiry of the originals patent should no longer be considered patent infringement; Provisions allowing the licensing and production of medicines by the government under certain conditions, without the patent holders consent. The 2003 amendment attempted to make registering a patent easier and less expensive. Under this system, international patent applications may be made in any one of the countries of the Patent Co-operation Treaty, an initiative by the World Intellectual Property Organization (WIPO). More recently, local press reported that the Malaysian government is not in favour of the patent extension aspects of the TransPacific Partnership Agreement, as the health minister is cited as stating that this agreement, if implemented, will make healthcare more expensive. The Malaysian governments key concern is that foreign firms patent extensions would start from their Malaysian launch, not from their original launch. The Office of the US Trade Representative (USTR) has been listing Malaysia as a watch list country since 2003 in its Special 301 Report on Intellectual Property Protection, a status backed by the Pharmaceutical Research and Manufacturers of America (PhRMA), the research-based US drug industry association. The bodies criticised Malaysia on a number of points, including the level of counterfeiting taking place in the country (despite the introduction of holograms on pharmaceutical packaging), the difficulty in applying process patents, the lack of data exclusivity (which has not been aligned with the WTOs TRIPS agreement) and the overall poor standard of regulatory enforcement.
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Additionally, the PhRMA has criticised the lack of patent linkage as part the registration process, which has led to instances of generic products being launched while original patents are still in effect. On a positive note, in 2006, Malaysia created a specialised IP court, which is designed to more effectively handle civil and criminal copyright cases. However, the government is still criticised for its apparent regulatory bias in favour of local manufacturers through procurement preferences and regulations only allowing local agents to participate in tenders, as well as through proposals including the promotion of national self-reliance for the products on the NEDL. In contrast, NEDL listings for innovative pharmaceuticals can take up to five years to be achieved following approval.
Counterfeit Pharmaceuticals
PhRMA has proposed the implementation of stronger criminal penalties for infringers. The association is calling for closer cooperation between the US and Malaysian governments, which should involve the tightening of the current legal framework covering counterfeit medicines. Nevertheless, despite the fact that the country has no legislation that specifically targets online counterfeiting, the authorities have reportedly been successful in reducing online sales of fake medicines through a dedicated unit. In a related development, in April 2012 the pharmaceutical services division of the MoH and Singapores Health Sciences Authority signed a memorandum of understanding (MoU). The MoU will help the countries to reduce costs and save time by sharing resources and pharmaceutical regulatory information, while also strengthening enforcement and help to reduce trade in illegal medicines. Despite the introduction of holograms on pharmaceutical packaging, the level of counterfeit trade in Malaysia remains significant due to issues such as lax enforcement. A small but notable proportion of drugs on the market are counterfeit although estimates vary as to what market share they represent, from low single digit percentages to up to 10%. The Federation of Chinese Physicians and Medicine Dealers Association has urged the Malaysian people to be vigilant against counterfeit Chinese medicines in the market. The president of the association, Ting Ka Hua, suggested that people check the hologram on the packaging of any medicines purchased. The counterfeit products are mainly cough syrups, as well as drugs for the treatment of rheumatism.
Compulsory Licensing
In May 2007, during FTA negotiations with the US, Malaysia stated that it was seeking the right to issue compulsory licences on patented drugs. While Malaysia is legally within its rights, as permitted by WTO rules, the country was discouraged to do so by the US.
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Malaysia has already issued compulsory licences on a set of drugs, although some dispute this. In 2004, the country issued a compulsory licence to Indian drugmaker Cipla for a supply of anti-retrovirals (ARVs) in the management of HIV/AIDS. The medicines involved were US-based Bristol-Myers Squibbs didanosine and UK firm GlaxoSmithKline (GSK)s zidovudine and lamivudine + zidovudine. This action has pushed prices down significantly. Previously at MYR1,200 (US$351) per month, the average cost for patients fell dramatically to MYR200 (US$58) and then to MYR150 (US$44). Given that the average monthly wage in Malaysia is approximately US$1,000, compulsory licences have made ARVs affordable to the vast majority of the population.
Free Trade Agreements

Malaysia and the US appear suspended FTA negotiations in early 2009 but, the possibility of Malaysia joining an alternative, multilateral trans-Pacific trade deal remains open. The proponents of a trade deal maintain that a FTA would generate jobs for Malaysians and attract more clinical research to the country, encouraged by the enhanced intellectual property environment. However, consumer and trade activists are deeply concerned that the pact will deprive citizens of access to cheap generic drugs, particularly medicines for HIV/AIDS, as well as resulting in higher prices. In August 2012, local press reports claimed that the government was against aspects of the Trans-Pacific Partnership Agreement, which would permit the extension of foreign manufacturers drug patents, which, if confirmed, will hinder relations with the US further. Other deals signed by Malaysia in recent years include the July 2006 FTA with Japan. Malaysia became the third country after Singapore and Mexico to conclude an FTA with Japan, which will allow the two countries to scrap tariffs on most industrial goods, improve investment conditions and respect IP rights. The ASEAN-Australia-New Zealand FTA (AANZFTA) was signed in 2008, envisaging a regional common market by 2015. A proposed EU-Malaysia FTA entered the discussion phase centred around intellectual property rights in May 2011. Prices of medicines are expected to increase as, under the proposed agreement, pharmaceutical companies patent rights would be extended from the present 15 years to 20 years. The country is also seeking to increase its co-operation with the Middle East, and especially Oman, which is Malaysias third-largest trading partner among the members of the Gulf Co-operation Council (GCC), providing healthcare and hospital management expertise, among other services. Going forward, the recent global financial crisis provided an impetus for an increase in Malaysia-China trade, as consumers from developed countries such as the US and the eurozone cut back on spending, turning Malaysian exports towards regional economies to sell their output. Indeed, the fact that Malaysia was proactive in pushing for the signing in November 2004 of a ASEAN-China Free Trade Agreement
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(FTA) the country was one of the six ASEAN nations to have had their MFN rates on Chinese goods reduced to 0% by 2010 signifies the level of confidence and commitment the Malaysian government has in forging stronger trade relations with China. In tandem, the same trade rules apply to China, enabling more than 9,000 types of Malaysian goods to be duty-free, serving as a boon to Malaysias export sector. Furthermore, we believe the signing of the ASEAN-China Investment Agreement in June 2009 the third and last instalment encompassing the three-part ASEAN-China FTA will cement the trend, as a common investment area will reduce market risk and uncertainty for Chinese investors to commit their funds to Malaysia.
Pricing And Reimbursement

Pricing regulations are different for the public and private sectors in Malaysia, but the division is becoming increasingly blurred. Parallel imports have been legalised in a bid to cut costs in the public sector, undermining revenues on branded products. The practice is angering the multinational sector, with foreign players critical of the governments biased approach to regulatory and enforcement issues. The new regulatory body proposed by the Ministry of Health in mid-2012 will have the power to issue drug pricing mechanisms. No timeline on the creation of this regulatory body has been publicised. In July 2012, the secretary general of the coalition party Democratic Action Party part of the ruling coalition Lim Guan Eng, claimed that the Ministry of Health must allow medical device and pharmaceutical product manufacturers to sell their products directly, rather than through a wholesaler, to the public health sector directly to reduce costs. In the public sector, prices on an essential drugs list (in operation since 1983) are set by the Ministry of Health following negotiations with its main wholesaler, Pharmaniaga Logistics (formerly Remedi Pharmaceuticals). This subsidiary of leading drug company Pharmaniaga, is responsible for around 75% of medicines purchased by public healthcare institutions. The strict policy results in public prices being set below market prices, which is necessary, given that the government is responsible for around 60% of reimbursement amounts. The NEDL is based on the essential drug list. Presently, the NEDL used in both the private and public sectors contains around 360 chemical entities and 600 preparations, which cover treatments in primary, secondary and tertiary settings. The supplementary list contains a further 257 entities and 391 preparations, and covers special treatments in tertiary healthcare facilities. The updated NEDL was published in 2008. Drugs outside the NEDLs remit are priced freely. Out-of-pocket spending on drugs accounts for around 25% of the total, with private insurance covering some 15%. According to reports in New Strait Times, around 15% of the population has private
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insurance. All foreign workers are required to purchase hospital insurance, which is expected to bring in some MYR200mn in revenue per annum.
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Industry Trends And Developments

Epidemiology
Cancer, hypertension and circulatory problems account for most deaths and cases of hospitalisation in Malaysia. Heart disease is the number one killer. In July 2010, local press reported that four in every ten adults in Malaysia suffer from high blood pressure. Up to 60% of all cases of coronary disease are treated in public facilities, indicating the high cost to the government.
Diseases including heart problems resulting from unhealthy lifestyle (such as smoking and unhealthy eating) are increasing in prevalence. According to a WHO study published in the scientific journal The Lancet, the results of a global study published in July 2012 showed that 61.4% of Malaysians aged over 15 are not physically inactive, ie they do not do moderate exercise five time a week. Obesity is a growing concern in Malaysia, to the degree that the Ministry of Health announced in July 2012 that it plans to employ more dieticians in public hospitals.
Burden Of Disease Projection 2005-2030
f = forecast. DALYs = disability-adjusted life years. Source: BMI's Burden of Disease Database (BoDD).
According to BMIs Burden of Disease Database (BoDD), Malaysia will experience the greatest improvement in disease burden, after Singapore, in the region over the next 20 years. By 2030, a projected 106.4 disability-adjusted life years (DALYs) per 1,000 people will be lost to all disease and injuries. The growing economy of Malaysia will result in increased wealth in the longer term, which will be spent by the state on high-tech hospitals and clinics, while personal spending will be directed to goods such as OTCs. On a similarly positive note, Malaysia has managed to significantly reduce child mortality since 1990, according to data from the Institute for Health Metrics and Evaluation at the University of Washington. The study put Malaysia in 29th place in its global rankings for mortality for children under five in 2010, giving the country a 5.1 mortality rate per 1,000 births. The institute estimates a total of 2,852 under-five deaths in 2010 in Malaysia. This is a significant improvement on the countrys 1990 ranking of 42nd, when Malaysia had an under-five child mortality rate of 16.43.
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Non-Communicable Diseases
In June 2012, the Ministry of Health claimed that more than 17mn people in Malaysia lives with a noncommunicable disease, and that an even higher number of people have a disease that has not yet been diagnosed. The government estimates that 2.6mn people have diabetes, 5.8mn have hypertension, 6.2mn have high cholesterol and 2.5mn are obese. Malaysias Deputy Prime Minister, Muhyiddin Yassin, has said that one of the main factors behind the countrys rising cost for healthcare is the high sugar intake, with the government considering cutting sugar subsidies. The country has the highest percentage of diabetic patients in South East Asia, placing a disproportionate burden on the healthcare system. According to the International Diabetes Federations Diabetes Atlas, approximately 11.7% of the population had diabetes in 2011, the highest proportion in the region, and this will increase to 13.3% in 2030, slightly below Singapores 15.5% in the same year. Muhyiddin said the government will save more than MYR567mn (US$187mn) if the sugar subsidies were cut as there will be a lower level of sugar-related diseases such as obesity and diabetes. The control of diabetes in the country is largely dependent on public education, with associations such as Persatuan Diabetes Malaysia (Malaysian Diabetes Association) and the National Diabetes Institute educating the public through their diabetes awareness programmes. In addition, the government has listed several insulin and other anti-diabetic agents on its National Essential Drug List, ensuring volume sales for manufacturers that are able to list metformin and a number of other drugs. In January 2012, under the Sihat 1 Malaysia programme that aims to promote healthy living, Healthy Life Software collaborated with the government to provide a healthcare package that includes a total of 118 screenings (eg for diabetes, hepatitis B, tumour markers) to enable early interventions. Malaysian patients spend about MYR700mn (US$219.4mn) a year on kidney dialysis, according to Health Director-General Hasan Abdul Rahman. He said 15% of the population, or 4.1mn people, are at risk of suffering from chronic kidney disease. He said the incidence of the disease could be prevented through proper care and early detection. The government will spend around MYR3mn (US$0.9mn) on training to doctors on new guidelines in 2012.
Communicable Diseases
Over the past decade, Malaysia has stepped up efforts to prevent and contain infectious disease outbreaks. As a result, Malaysia is now largely free of diseases such as polio, which was eradicated in 1992. In late 2009, researchers from the University Malaysia Sarawak successfully isolated a new fifth cause of malaria, in a study funded by the Wellcome Trust. The malaria parasite P. knowlesi, which had previously been linked only to monkeys, has been shown to be widespread among humans in the country. Kudat in Sabah was selected in early 2012 as the research area for a study on P. knowlesi. The five-year
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research programme will be conducted with financial assistance of MYR14.62mn (US$4.76mn) from the British government. The number of dengue cases reported in Malaysia increased by 13% y-o-y to 12,518 in the first seven months of 2012. The rise in dengue cases has put Malaysia on alert and the government has declared the disease a serious threat. The disease killed 25 people in January-July 2012, compared to 19 in the same period in 2011. According to most WHO recent figures, Malaysia has around 75,000 HIV-positive patients. The countrys HIV/AIDS prevalence is the fifth highest in the region. The government has implemented public health programmes targeting a decrease in HIV infections by providing contraceptives and educating commercial sex workers on dangers of unprotected sex. The United Nations UNICEF programme has been providing care for HIV orphans in Malaysia. Malaysia was largely on target to achieve the UN Millennium Development Goals on curbing the spread of HIV/AIDS by 2010, by implementing needle-exchange services and similar harm-reduction measures. Through to 2013, HIVreduction programmes are expected to receive a further US$88mn in funding. In July 2012, Health Minister Liow Tiong Lai said that Malaysians, particularly those born before 1989, need to go for hepatitis screening, as cases of hepatitis B and C doubled in number in 2011, rising to 1,250 and 1,047 respectively (compared to 640 and 724 in 2010).
Healthcare Sector
Malaysia is one of the most ethnically diverse Asian countries. It comprises ethnic Malays (the majority) and 30% Chinese immigrants, with the remainder including Indians, Pakistanis and Tamils. Adequate healthcare provision for all demographic characteristics is complex. Malaysia has about 3,500 clinics, 138 government hospitals and many other healthcare-related facilities such as medical institutions, medical colleges, laboratories and 1Malaysia Clinics, where patients pay MYR1 (US$0.34) for a consultation, while foreigners pay MYR15 (US$5.04). The country has been investing heavily in healthcare infrastructure but many facilities still suffer staff shortages. The 1Malaysia Clinics programme was launched in early 2010. Nevertheless, following Malaysias achievements in the 2011 Healthcare NKEA programme, the government has outlined 11 targets for the 2012 Healthcare NKEA. Key targets include corporatisation of the Clinical Research Malaysia amendment to the Patent Act, establishing a Medical Device Authority and expansion of hospitals and ambulatory centres. According to Minister of Health, the six EPPs initiated in 2011 have exceeded the targets set last year by 124%, generating MYR3.1bn (US$1.01bn) in investment and creating 18,059 jobs. Under EPP 1 for the
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provision of mandatory private healthcare insurance for foreign workers, the country set a target of 1,205,000 workers but exceeded it by 16.8% to cover 1,407,919 workers. BMI believes the systematic execution of these EPPs will successfully transform the pharmaceutical and healthcare sectors in the country. We highlight that the country is more likely to achieve success in its healthcare goals than in its objectives for the pharmaceutical sector given that the domestic industry has to compete with multinational pharmaceutical companies such as Pfizer, Roche and Novartis; international generic drug players such as Ranbaxy, Cipla and Teva; and countries with established biotechnology sectors such as South Korea, Taiwan and neighbouring Singapore. In contrast, achieving its healthcare goals is dependent mainly on the governments commitment. BMI notes that the country failed to achieve its target for EPP 3, which is more influenced by external demands.
Table: 2011 Entry Points Projects Summary
Key Performance Indicator EPP 1 EPP 2 EPP 3 EPP 4 EPP 5 Foreign workers with private health insurance coverage Number of researches conducted Export growth of pharmaceutical products Revenue generated from medical tourism Survey on radiology services in Ministry of Health hospitals Pilot project on outsourcing radiology services EPP 6 Construction of Health Metropolis to being in Q411
Target (FY2011) 1,205,000 260 15% (MYR610mn, US$199mn) MYR431mn (US$141mn) All 39 hospitals Extended to September 30 2011 Q411
Actual (year to date) 1,407,919 321 12% (MYR594mn, US$194mn) MYR436mn (US$142mn) as of November 2011 39 95% completed 95%
Source: Malaysia Economic Transformation Programme Annual Report 2011
Currently, there are around 50 such centres in Malaysia, which are open during weekends and public holidays, as well as between 10am and 10pm. The programme primarily aims to reduce overcrowding in town-based public hospitals, although one such facility was opened in a rural area (in Jeli) in order to improve access to medical services. The government is investing MYR10mn in assessing the scheme before expanding it further. However, the programme has been criticised by the Malaysian Medical Association (MAA) because it is not staffed by doctors, but rather by medical assistants (MAs) instead and those with serious conditions are referred to hospitals.
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Malaysias Sabah state is planning to implement its One School One Clinic strategy in a bid to offer better healthcare to the rural community. Under the new strategy, announced in mid-2011, up to 800 mini-clinics will be established in schools in remote parts of the state.
Health Insurance
Table: Main Features Of 1Care
Primary health care (PHC)
Aim: Promote preventive care and early intervention. Each individual will be registered with a PHC provider who is a family doctor and dentist. The PHC provider will only refer patients with serious conditions to hospitals, thereby reducing over-reliance on hospitals.
Social health insurance (SHI)
Aim: A pooled single fund to promote social solidarity and unity. There will be a predetermined Benefits Package scheme introduced which comprises of SHI, funds from general taxes and minimal co-payments. SHI will be contributed by employer, employee and government The government will further contribute (via taxes collected) to other MoH activities, and the PHC portion of SHI, resulting in higher spending by the government (2.85%)
Source: MoH
The vast majority of the population is covered by public healthcare insurance, which is particularly important for the rural poor. Low-cost government services are financed by taxes and other public revenues. A new healthcare reform, known as the 1Care for 1Malaysia programme, was first proposed by the government in 2009 to provide universal and quality healthcare for citizens. In order to have total coverage, a national social health insurance will be set up run by a not-for-profit body, the National Healthcare Financing Authority, under the Ministry of Health. In late 2010, the Federation of Malaysian Consumers Associations (Fomca) urged the countrys government to immediately implement the National Healthcare Financing Scheme in order to ensure affordable medical services for the public. The request followed more than 50 complaints that the association received regarding excessive payments made by the public for medical services at hospitals. However, the 1Care proposal was largely unwelcomed by the public as they fear there will be an increase in tax contributions without a proportional increase in healthcare provision. Additionally, as the government has been elusive about the details in the proposal it is unlikely that the public will strongly support the change. The government has still not decided whether to use the Employees Provident Fund (EPF) system, the hybrid system or the taxation system, with the blueprint reportedly to be ready by 2014.
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Medical practitioners and consumers came together in December 2011 to form the Citizens Healthcare Coalition (CMC) and started the Tak Nak 1Care (Say No To 1Care) campaign on Facebook, YouTube and Twitter. According to one CHC member, employees (excluding government servants, pensioners and businesses) will have to contribute 10% of their monthly income to the SHI, essentially making people pay for the less advantaged. The CHC also took issue with apparent limited healthcare benefits, such as free visits to GPs being limited to six times a year, with one ailment allowed to be addressed per visit, and patients being assigned to specific GP, taking away choice. However, BMI also believes the government has done a poor job at addressing the speculation. Health officials told the Malaysian Pharmaceutical Society during a seminar in January 2012 that the 1Care plan is in phase three of a five-phase implementation. Dr Noardin Saleh, the MoHs health policy and planning deputy director, said: The 1Care transformation proposals are now in the final stages. Subsequently, on February 8 2012, Minister of Health Lio Tiong Lai said the healthcare system revamp is still in its infancy, while no proposals about 1Care (preliminary or not) have been listed on the MoHs website. The increasing prosperity has encouraged the development of the private medical insurance market. Malaysia boasts more than 250 large private medical facilities, many of which are privatised public institutions, as well as around 2,000 private clinics. In May 2006, new regulations introduced mandatory registration of all private medical and dental clinics. Legislation also stipulates that private clinics must provide minimum basic outpatient emergency care for the occasional patient who may need it. There are changes ahead in this sector, however, as the Ministry of Health announced in July 2012 that it is likely to permit private doctors to raise their fees by 14%, if proposals are approved in parliament.
Healthcare Sector Funding

The Malaysian government allocates only 5% of the national budget to healthcare. In July 2010, the amount stood at MYR13.1bn (US$4.1bn), down from MYR13.8bn (US$4.3bn) in 2009. The Malaysian Medical Association stated that the country spends only MYR1,280 (US$400) per patient in healthcare. In Malaysias budget for 2011, one of the key aims was to expand public health services. To ensure access to quality healthcare, the government allocated MYR15.2bn (US$5.1bn) to construct new hospitals, increase the number of medical professionals and obtain medical equipment supply. An additional 25 1Malaysia Clinics will also be added to the current 51 clinics. In the 2012 budget, the government outlined the following programmes, although we note that the transformation of the public healthcare sector will not be as fast as in the private sector: MYR15bn (US$4.8bn) will be allocated to operating expenditure and MYR1.8bn (US$574mn) for development expenditure.
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Hospitals will be upgraded and constructed, including the upgrade of 81 rural health clinics and 50 new 1Malaysia Clinics.
Hospital Kuala Lumpur will be upgraded to be the countrys premier hospital.
Table: Public Sector And Private Sector Healthcare Developments
Public Sector
Private Sector July 2012: BP Healthcare Group established its first ENT and gastroscopy speciality centre in Kuala Lumpur. July 2012: Healthcare provider IHH Healthcare Berhan may acquire more hospitals in areas with unmet demand, revealing plans to increase the number of hospital beds by 17% by 2017.
May 2012: Susil said that the government is aware of the shortage of medical professionals in government hospitals and clinics. He added that private wings will be established in government hospitals to help slow down the brain drain to private sector. April 2012: MYR5 (US$1.60) administration fee for government hospitals and clinics will be scrapped from May.
May 2012: According to the Business Times, the country could see at least 17 new private hospitals by 2015.
March 2012: Universiti Teknologi Malaysia is partnering KPJ Healthcare to build a research-based hospital at its main campus in Skudai. The partners will cooperate on advanced medical machines and research and development for new medical innovations. February 2012: The Normah Medical Specialist Centre in has secured Joint Commission International accreditation for the delivery of its healthcare services, making it the first private hospital in Borneo to be awarded the accreditation.
December 2011: The Malacca state government has pledged to make a fresh delivery of drugs at public hospitals, which are experiencing a shortage of medicine for almost a month. State Health, Project Rehabilitation, Suburban Development and NGO Committee chairman Seet Har Cheow said that the drugs have already been sent to the hospitals. Cheow said the shortages would be addressed by December 8. He claimed that the shortage was encountered due to several inevitable factors. October 2011: The government has allocated MYR300mn (US$95.7mn) to upgrade the 141-year-old Hospital Kuala Lumpur into the premier hospital in the country with stateof-the-art equipment.
January 2012: Allianze University College of Medical Sciences will build two hospitals in Penang by 2015. The construction of the two hospitals is estimated to involve investment of MYR2bn (US$0.63bn)
Source: BMI research
Medical Tourism
Medical tourism is becoming increasingly important to both Malaysias travel and healthcare industries. Malaysia received a total of 392,956 healthcare travellers in 2010, generating over US$100mn in revenue. Revenue from medical tourism in Malaysia has grown by 30% a year for the three years up to 2012, according to Health Minister Liow Tiong Lai. The Star reported that the number of medical travellers has
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increased by more than 30% over the same period. Malaysia received approximately MYR511.2mn (US$165.7mn) from foreign patients in 2011, compared with MYR378.9mn (US$122.81mn) in 2010 and considerably above the government target of MYR430mn. Over the past decade, medical tourism has grown to become second largest foreign exchange earner for the country. To facilitate this trade, the government set up the Health-care Travel Council, which promotes private hospitals for medical tourism. Tax breaks have also been introduced for hospitals running medical tourism programmes, while incentives have been provided to help hospitals to expand their facilities. The hospitals now receive 100% tax exemptions for the construction of new hospitals and for the expansion, modernisation and renovation of existing ones. As a testament to the effectiveness of such incentives, in February 2012, Malaysia-based KPJ Healthcare said its 2011 revenue from medical tourism reached MYR45mn (US$14.7mn), accounting for approximately 10% of the countrys medical tourism market. KPJ is also partnering Universiti Teknologi to build a research-based hospital at its main campus in Skudai. The partners will cooperate on advanced medical machines and R&D for new medical innovations, with KPJ targeting medical tourismrelated revenue to contribute to 25% of its total by 2020. At the end of 2011, Malaysian private healthcare providers were asked to improve their services and facilities to counter stiff competition from foreign investors. This comes as the country is prepared to liberalise its private-healthcare services during 2012. The liberalisation drive will permit up to 100% foreign equity participation in selected sub-sectors, allowing the healthcare industry to become borderless and enable Malaysia to compete globally. Liow said the government had been taking measures for the transformation of the Malaysian healthcare tourism industry and promote itself beyond Indonesia to target China, Australia, the Middle East and the UK. At the same time, the government further liberalised advertising rules in order to enable the country to compete with neighbours and in turn emerge as one of the healthcare hubs in the region. The countrys share in the healthcare market is very small as compared with Singapore and Thailand, which have registered significant growth every year. The health minister mentioned that the ministry is set to open call centres in China and Indonesia in 2012 for attracting medical tourists. The advantages of the Malaysian medical tourism industry include low-costs, a well-developed infrastructure and high medical standards. For example, an angioplasty that can cost US$57,000 in the US, and US$13,000 in Thailand, costs just US$11,000 in Malaysia. Meanwhile, a knee replacement which costs US$40,000 in the US and US$13,000 in Singapore, comes in at just US$8,000 in Malaysia. This value offering has helped institutions such as the Pantai Medical Centre (PMC), which now runs nine hospitals in the country. According to PMC, the majority of foreign patient come from Indonesia, with other also arriving from the Middle East and Europe.
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Since March 2012, the number of medical tourists from Singapore has increased as Singapore residents were allowed to utilise savings held in the national medical savings scheme (Medisave) for overseas hospitalisation and day surgeries at two hospitals in Johor (Regency) and Malacca (Mahkota Medical Center). The Singapores Ministry of Health (MOH) added that the scheme will be initiated with two providers Health Management International (HMI), which runs the two Malaysian hospitals, and Parkway Holdings.
Biotechnology And Research

In regional terms, Malaysia has a small biotechnology sector, dominated by around 35 small and mediumsized companies. A number of larger players have developed strong R&D sectors within the overall corporation structure. Most of the activity is recorded in specialist biotechnology (dealing in tissue culture, diagnostics, vaccines, clinical testing and blood bank collection), bio-pharmaceuticals and suppliers to the biotech industry. The government has a three-phase biotechnology policy: Phase I (2005-2010): focus on capacity building and the establishment of BiotechCorp; establishment of advisory and implementation councils; education and training of workers; development of a legal and intellectual property framework; key areas of focus: creation of jobs in agricultural, healthcare, industrial biotechnology and bioinformatics. Phase II (2010-2015): emphasis on biotech business aspects: drug discovery, new product development, technology acquisition and licensing. Phase III (2016-2020): dependent on the results of the first two phrases, it aims to bring local biotech companies to international status. In 2009, the chief executive officer of the Malaysian Biotechnology Corporation (BiotechCorp) stated that the Malaysian biotech industry is expected to contribute 5% to the countrys GDP by 2020, up from 1% in 2009, to generate 280,000 jobs. He also added that the industry has a total investment of MYR1.37bn (US$402mn), which is approximately 1% of the GDP. BiotechCorp is establishing a MYR318mn (US$100mn) Bio-Technology Venture Fund to boost the countrys biotechnology industry. By 2015, it hopes to make MYR9bn (US$2.8bn) in investments in the countrys biotech industry, up from the approximately MYR3bn (US$0.9bn) it has already secured. In H211, Bio X Cell invested MYR450mn (US$141mn) in the infrastructure and construction in a biotech park in Nusajaya, Iskandar Malaysia. The firm expects key components of the park to be completed by Q312. The biotechnology sector receives grants from the National Council for Scientific Research and Development (NCSRD) under the Ministry of Science, Technology and Environment (MOSTE), with
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further incentives provided by the Inland Revenue Board and the Malaysian Industrial Development Authority (MIDA), venture capitals and banks. One of the more prominent funds in the field is the Malaysian Life Sciences Capital Fund, which was created as a joint project between the governmentowned venture capital firm, Malaysian Technology Development Corp (MTDC), and US Burill & Co, in 2005. The Malaysian Chapter of the Federation of Asian Biotech Associations (FABA) was launched in August 2006. FABA aims to encourage biotechnology investment from private sector corporations, as well as to improve the relationship between public and private biotechnology spheres. To this end, the government offers a number of financial incentives, such as a 100% group tax relief or deduction on qualifying investments in biotechnology, a 10-year tax-exempt pioneer status, exemption of import duties on approved equipment and materials, and double tax deductions on qualifying expenses and R&D investments. Moreover, the Malaysian stock Exchange (MESDAQ) offers benefits in terms of venture capital consideration to biotech companies, given their higher risk profiles. In an attempt to make Malaysia more attractive for foreign investors, the government unveiled a national policy in mid-2005, which earmarked biotechnology as the next engine of growth. Despite government aspirations of attracting US$10bn in foreign and local investment to the biotechnology industry over a 10year period, the Bio-Valley Project has proved to be a dismal failure, with only three companies signing up to establish production facilities by the end of 2005. Nevertheless, the government is undeterred in its focus on the development of biotechnology. Authorities created the BioNexus Malaysia programme, which will eventually encompass a network of centres of excellence comprising existing institutions around the country, presently has three components: a centre of excellence for agricultural biotechnology will be part of the Malaysian Agriculture Research and Development Institute (Mardi) and Universiti Putra Malaysia; a centre of excellence for genomics and molecular biology will be based at the Universiti Kebangsaan Malaysia; and a centre of excellence for pharmaceuticals and nutraceuticals will be built at the BioValley site. Malaysias natural biodiversity is providing a further draw for R&D investment. In May 2011, Fanny Rousin of Frances National Center for Scientific Research (CNRS) identified meiogynine A, isolated from Meiogyne Cylindrocarpa, which could potentially treat cancer. Malaysia has a regulatory framework to protect its natural resources from biopiracy. In 2005, the government drafted the Access and Benefit Sharing Bill (ABS Bill) to ensure the fair sharing of benefits from Malaysias genetic resources. The bill requires all parties involved in bioprospecting to obtain permits.
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Clinical Trials
Despite some IP and regulatory shortcomings not least the governments reluctance to agree to the Trans-Pacific Patent Agreement the environment for novel pharmaceutical products in Malaysia is relatively favourable. The fact that the government is willing to fund innovative medicines has also stimulated the development of locally based clinical research by multinational companies. Additionally, local clinical trials conducted both in private and public hospitals are low-cost. Late-stage or phase III studies which usually enrol several thousand patients across the globe are the most common trial in Malaysia. According to clinicaltrials.gov, some 138 studies were recruiting volunteers in August 2012, out of some 507 total trials registered.
Further growth of the sector will be dependent on the governments willingness to ensure that bioequivalence data cover all therapeutic areas, as well as ensure a more balanced regulatory environment that would not discriminate between local and foreign producers. The network of clinical trial centres (CRCs) enables the Ministry of Health to provide a one-stop conduit for clinical research organisations (CROs) to test drugs and devices. This results in reduced costs due to operational efficiencies being realised at every step of the process. In fact, in July 2011, the Malaysian government launched Clinical Research
Clinical Trial Registrations 2006-2009
Sourced by date of initial registration. Source: ClinicalTrials.gov, BMI
Malaysia (CRM) in a bid to attract clinical trials to the country. CRM will be operated as a non-profit government site management organisation for providing access to 23 CRCs and independent CRCs, built in private hospitals and medical universities in the country. Pharmaceutical industry sponsors and contract research organisations can use CRM as a single point of information and referral system for a network of 341 hospitals and hundreds of clinical sites across Malaysia. Additionally, CRM will provide potential investigators, legal services and training. There are some drawbacks that prevent CROs from fully exploiting the potential in Malaysia. A common internal view is that the country gets overlooked as potential investors either go to the large population
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centres of India and China, or opt for technological hubs, such as Singapore and Hong Kong. Other reasons are negative perceptions surrounding bureaucracy, delayed timelines and long registration times. In fact, contrary to popular conceptions, it only takes six weeks for an investigation to receive approval from the authorities. Moreover, procedural delays should not be that common, as good clinical practice (GCP) is very much the applied standard. True, a comparatively large amount of paperwork is involved, but this is fairly standard, and is arguably of benefit to one or more involved parties. That Sanofi Pasteurs dengue vaccine Phase III clinical trials which offered proof of efficacy according to the firm in July 2012 were partly trialled in Malaysia is good news for the sector. Indeed, Sanofi aims to boost bilateral collaboration with the government in the healthcare sector.
Clinical Trials Industry Developments

In July 2012, Sanofi announced plans to expand its presence in Malaysia, a country that is included in its global clinical trials for a dengue vaccine. In March 2012, Malaysian Biotechnology Corporation and Quintiles agreed a memorandum of collaboration to support Malaysias biotechnology industry. In June 2011, Indian stem cell-based medicinal products manufacturer Stempeutics Research obtained approval from the Malaysian Regulatory Authority to undertake clinical trials for its investigational new drug (IND) for osteoarthritis and cerebral stroke in the country, reported Express Healthcare Management. In the same month, Malaysian biotechnology company Sentinext Therapeutics reported its readiness to conduct clinical trials of a vaccine for the prevention of infections caused by enterovirus 71 (EV71). The first phase of the trials is scheduled to start in 2012.
Medical Devices
Under current regulations, medical device manufacturers are not obliged by law to register their products; voluntary registration was introduced in late 2005, but the abundance of substandard and counterfeit devices on the market has led to government to introduce obligatory registration. This is expected to form part of the Medical Device Act that the government will implement in October 2012 The market is dominated by imports (at around 90%), especially at the hi-tech end of the scale, although there is room for contract manufacturing as local demand increase in the face of demographic, economic and healthcare technology improvements. Malaysia is active in exports of low-end devices. Malaysia exports a number of items, with a focus on surgical and examination gloves, catheters (the country manufactures 80% of the total global supply of rubber-based catheters) and condoms, which
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accounted for 85% of exports in 2005. The domestic industry is also active in the production of needles, medical and surgical instruments and appliances, and orthopaedic appliances.
Leading Medical Device Players

Malaysia has around 300 small and medium-size manufacturers of medical devices, according to the countrys Medical Devices Association (MDA). The majority of these are involved in low-tech production, including gloves, needles, dialysers and contact lenses. Nevertheless, the 2006-2020 Third Industrial Master Plan envisages local companies getting involved in the value-added manufacturing, of products such as in vitro devices and electro-medical equipment. One of the more prominent local medical device manufacturers is Ambu, which is active in the cardiology and neurology segments. Other more prominent local players include WRP Asia Pacific and Supermax Corp. Established in 1991, Malaysias Top Glove is the worlds largest producer of rubber gloves. Its 20 factories churn out nearly 15bn pairs of gloves annually and export goods to 185 countries. The slowdown in the world economy is unlikely to have an impact on sales because gloves are a necessity item in the healthcare industry. Similarly, rubber gloves remain the most basic and affordable protection, and can therefore be afforded by most stakeholders in the healthcare industry globally. In terms of foreign medical device players, medical technology company B Braun Medical Industries has a considerable interest in Malaysia, which also acts as its Asia Pacific regional office. Since establishing a presence in 1972, to 2008, the company invested a total of MYR1bn (US$287mn) in the South East Asian country. A total of 4,700 people are employed and over 10% are engaged in the manufacturing of pharmaceuticals. According to the Democratic Action Partys secretary general, Lim Guan Eng, Malaysias Ministry of Health must permit the manufacturers of medical devices to sell their goods directly to the public health sector, rather than through a wholesaler, as a means of reducing expenses. Eng stated that his request echoed the concerns of B. Braun Medical Suppliers former board chairman, Ludwig Georg Braun. Other foreign companies active in Malaysia include Japanese Japan Medical Products, Australian Ansell, and US-based Sharp-Roxy (which provides ioniser systems to hospitals, among other products), Tyco, Rusch and CR Bard.
Recent Medical Devices Industry Developments

EPI Mobile Health Solutions launched a handheld heart monitor in Malaysia in August 2012, forming part of a mobile phone. The phones built-in sensors can take an electrocardiogram and then send this file to a Health Concierge centre. A response to the results of the ECG is sent back via SMS.
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In February 2012, Bernama reported that US-based firm Motorola Solutions is aiming to improve the healthcare sector in Malaysia, as services in the county are facing challenges. Through its Malaysian venture, Motorola Solution Malaysia, the firm is collaborating with major healthcare providers to offer better healthcare services, while also looking to build a long-term partnership with the country.
In the same month, Malaysian healthcare group BP started offering an extensive range of new healthcare and other professional services through its companies in the country. The group has also rolled out centralised tele-radiology services through BP Radiology that allow facilities to link all the radiographic images from x-rays, mammograms, DEXA, CT scans and ultrasounds digitally to its other diagnostic centres nationwide.
Also in February, UK-based medical technology company PneumaCare reported plans to expand its business footprint in South East Asia with a collaboration with Hospital Kuala Lumpur (HKL). The company wants to step up its operations as a potentially huge market exists in the region for its PneumaScan respiratory assessment device.
In November 2011, US manufacturer and distributor of medical products Mitegen and Malaysian Helix Biotech reached an agreement for the distribution of the Mitegens products in Malaysia. Helix Biotech will market and distribute MicroMount, MicroLoop, MicroMesh, RT Aligner and other product lines.
In July 2011, US-based St Jude Medical announced plans to lay off 450 Swedish employees by the end of 2012 and to move its cardiac rhythm management products manufacturing to Puerto Rico and Malaysia in order to cut costs.
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Industry Forecast Scenario

Overall Market Forecast
BMI revised up its forecast for the Malaysian pharmaceutical market following receipt of the most recent market information and reappraisal of historic data. According to the Pharmaceutical Association of Malaysia (PhAMA), combined sales of prescription and OTC drugs increased to MYR5.00bn (US$1.55bn) in 2010, equating to strong y-o-y growth of 17%.
The Malaysian pharmaceutical market is skewed towards private (60%) over public (40%), which leaves it vulnerable to macroeconomic factors. Supported by an expanding economy, improving medicine regulations, healthcare provision expansion and modernisation and relative political stability, combined sales of prescription drugs and OTC drugs are forecast to increase to MYR8.68bn (US$2.89bn) in 2016. Due to the gradually strengthening ringgit, the CAGR growth of 9.4% in local currency terms will translate into a US dollar CAGR of 9.8%. In addition, the country expects to generate
Pharmaceutical Market Forecast 2007-2021
f = forecast. CER = constant exchange rate. Source: IMS Health Asia, AC Nielsen, domestic companies, local press, BMI
revenue of MYR17.1bn (US$5.4bn), gross national income of MYR11.4bn (US$3.6bn) and 86,000 new jobs by 2020 through seven healthcare industry EPPs under the Healthcare NKEA, including projects for pharmaceutical exports, clinical research and health tourism. According to Minister of Health Liow Tiong Lai, the six EPPs already in operation, excluding the medical device manufacturing project that is launching in 2012, successfully contributed gross national income of MYR4.65bn (US$1.52bn) in 2011. While external risks are present, for the time being, we envisage the key drivers of growth will be medical tourism, the growing reputation of Malaysian pharmaceuticals, the encouragement of the generic and specialist segments, as well as the rising demand for and supply of halal medicines. On the downside, Malaysia will still feel the effects of the global economic downturn, and factors such as the governments decision to not support the Trans-Pacific Partnership Agreement, according to local press reports, may deter investment by multinationals, particularly those concerned about the robustness of patent protection
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in the country. By 2021, we expect the market to be worth MYR12.13bn (US$4.04bn), translating into a local currency CAGR of 8.1% over our 10-year forecast period. The public sector will continue to provide the bulk of volume demand, especially with the planned improvement and expansion of medical services. The government has made the healthcare industry a priority, implementing schemes to boost the sector. Growth should also be supported by an ageing and expanding population, as consumers becomes increasingly aware of alternative products, and government priorities remain favourable. Traditional medicine is expected to post strong gains, due to rising awareness of self-medication and cost containment, although the prospect of pharmacists charging a MYR5 (US$1.60) consultation fee may deter patients from using the pharmacy, and they could opt for cheaper sources of treatment as a result increasing the risk of use of counterfeit drugs.
Table: Pharmaceutical Sales Indicators 2008-2016
2008 Pharmaceutical sales (US$bn) Pharmaceutical sales (US$bn), % chg y-o-y Pharmaceutical sales (MYRbn) Pharmaceutical sales (MYRbn), % chg y-o-y Pharmaceutical sales at constant exchange rate (US$bn) Pharmaceutical sales, per capita (US$) Pharmaceutical sales, % of GDP Pharmaceutical sales, % of health expenditure 1.215 14.189 4.048 10.700
2009 1.214 -0.102 4.276 5.629
2010 1.553 27.922 5.001 16.958
2011e 1.814 16.796 5.549 10.945
2012f 1.926 6.207 6.116 10.224
2013f 2.165 12.393 6.712 9.738
2014f 2.410 11.315 7.351 9.520
2015f 2.669 10.751 8.008 8.935
2016f 2.895 8.445 8.684 8.445
1.323 44.187 0.546 14.404
1.398 43.435 0.629 13.715
1.635 54.679 0.653 14.860
1.814 62.850 0.651 15.264
1.999 65.697 0.683 15.672
2.194 72.685 0.703 16.048
2.403 79.666 0.720 16.453
2.617 86.904 0.736 16.843
2.838 92.856 0.750 17.237
f = forecast. Source: IMS Health Asia, AC Nielsen, domestic companies, local press, BMI
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Key Growth Factors Industry

BMI calculates that in 2011, Malaysia spent 4.3% of its GDP on healthcare, a figure that sits below the regional average of around 5%. The value does not correlate directly to the quality of healthcare provided, but it does give an indication of the governments commitment to healthcare provision. Since 2004, private healthcare expenditure has increased more than government healthcare expenditure. In 2011, private healthcare expenditure reached MYR16.25bn (US$5.31bn), representing just under 45% of total healthcare spending in Malaysia. While the implementation of 1Care will increase government healthcare spending, BMI believes the rate of increase will still be lower than in the private sector. This assumption is confirmed with recent developments, such as BP Healthcares decision to open 10 new branches, announced in June 2012, and its announcement that it opened a specialists ENT and gastroscopy speciality centre in Cheras, Kuala Lumpar, in July 2012. Further development will be driven by a greater knowledge of disease and better access to modern medicines, especially in rural areas where healthcare is based on traditional remedies.
Improving regulatory and trade conditions should continue to attract investment from multinationals, aiding market development: Novartis MoU signed with the Ministry of Health in June 2012 to further enhance the countrys progress in the National Key Economic Area is one example of Malaysias attraction to private investors. Closely tied in with this advance is the harmonisation of procedures within the ASEAN region, with alignment providing better market access for multinationals looking to establish or expand operations in an increasingly
Healthcare Expenditure Forecast 2007-2021
f = forecast. CER = constant exchange rate. Source: World Health Organization (WHO), BMI
lucrative regional market. The recent strengthening of regional cooperation and collaboration with respect to significant healthcare areas suggests that the harmonisation initiative is developing successfully. Where Malaysia risks deterring the manufacturers of innovative drugs is in its intellectual property regime, with the state reportedly rejecting parts of the Trasn-Pacific Partnership Agreement which would see international firms granted extended patent protection rights.
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Table: Healthcare Expenditure Indicators 2008-2016
2008 Health expenditure (US$bn) Health expenditure (US$bn), % chg y-o-y Health expenditure (MYRbn) Health expenditure (MYRbn), % chg y-o-y Health expenditure at constant exchange rate (US$bn) Health expenditure per capita (US$) Health expenditure (% GDP) 8.44 19.03 28.11 15.40
2009 8.85 4.91 31.18 10.93
2010 10.45 18.06 33.66 7.94
2011e 11.88 13.71 36.35 8.01
2012f 12.29 3.44 39.03 7.35
2013f 13.49 9.76 41.82 7.16
2014f 14.65 8.58 44.68 6.83
2015f 15.85 8.19 47.54 6.41
2016f 16.79 5.96 50.38 5.96
9.19 306.78 3.79
10.19 316.70 4.59
11.00 367.96 4.39
11.88 411.76 4.26
12.76 419.21 4.36
13.67 452.92 4.38
14.60 484.22 4.38
15.54 515.98 4.37
16.47 538.69 4.35
f = forecast. Source: World Health Organization (WHO), BMI
Table: Healthcare Governmental Indicators 2008-2016
2008 Government health expenditure (US$bn) Government health expenditure (US$bn), % chg y-o-y Government health expenditure (MYRbn) Government health expenditure (MYRbn), % chg y-o-y Government sector health expenditure, % of total 4.657
2009 4.931
2010 5.801
2011e 6.572
2012f 6.778
2013f 7.417
2014f 8.029
2015f 8.661
2016f 9.149
20.1 15.515
5.9 17.371
17.6 18.684
13.3 20.107
3.1 21.521
9.4 22.994
8.3 24.490
7.9 25.982
5.6 27.448
16.5
12.0
7.6
7.6
7.0
6.8
6.5
6.1
5.6
55.20
55.71
55.51
55.31
55.14
54.98
54.81
54.65
54.49
e/f = BMI estimate/forecast. Source: WHO, BMI
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Table: Healthcare Private Indicators 2008-2016
2008 Private health expenditure (US$bn) Private health expenditure (US$bn), % chg y-o-y Private health expenditure (MYRbn) Private health expenditure (MYRbn), % chg y-o-y Private sector health expenditure, % of total 3.8
2009 3.9
2010 4.6
2011e 5.3
2012f 5.5
2013f 6.1
2014f 6.6
2015f 7.2
2016f 7.6
17.7 12.6
3.7 13.8
18.6 15.0
14.2 16.2
3.8 17.5
10.2 18.8
9.0 20.2
8.6 21.6
6.3 22.9
14.1 44.8
9.7 44.3
8.4 44.5
8.5 44.7
7.8 44.9
7.6 45.0
7.2 45.2
6.8 45.4
6.3 45.5
e/f = BMI estimate/forecast. Source: WHO, BMI
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Key Growth Factors Macroeconomic

Malaysia's real GDP grew by a better-than-expected 5.4% year-on-year (y-o-y) in Q212, beating consensus estimates of around 4.6% by a significant margin. Real GDP growth in Q112 was also revised upwards to 4.9% from 4.7% previously. The latest reading is expected to trigger a wave of analyst upgrades over the coming weeks, which is likely to push consensus estimates for growth towards the upper range of Bank Negara Malaysia (BNM)'s target of 4.0-5.0%. From our perspective, however, more recent economic data in July which reflected a substantial slowdown in exports across the region and a peak in the industrial production cycle in Malaysia reinforced our view that economic growth would remain subdued this year. Nonetheless, we have revised our full-year real GDP growth forecast upwards to 3.8% (up slightly from 3.3% previously), after taking into account the better-than-expected print for Q212.
Pickup In Investment Unlikely To Last Malaysia Contribution to Real GDP Growth by Expenditure (pp)
Source: BMI, Bank Negara Malaysia
One-Off Effects Looking at the expenditure breakdown, we note that economic activity was mainly driven by a sharp pickup in gross fixed capital formation (GFCF), which contributed 6.2 percentage points (pp) to headline growth. In year-on-year terms, GFCF growth accelerated from 16.2% in Q112 to 26.1% in Q212. The acceleration in GFCF growth was mainly attributed to the implementation of new investment projects in the oil and gas, transport, utilities and services sectors, according to BNM governor Zeti Akhtar Aziz. These projects have also boosted growth in the construction sector, which accelerated from 7.5% y-o-y in
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Q112 to 15.5% in Q212. We believe that this one-off increase in new investment projects is unlikely to be sustained over the remaining quarters of the year, especially given that the outlook for Malaysia's economy remains cloudy. Meanwhile, net exports continued to be a greater drag on the economy having contributed a negative 4.9pp to headline growth in Q212, down from the negative 3.1pp contribution in the previous quarter.
Peaking Cycle Malaysia Industrial Production Index & Components, % chg m-o-m annualised 3mma
Source: BMI, Bank Negara Malaysia
Industrial Production Peaked As the accompanying chart shows, industrial production in Malaysia appears to have peaked in May. We note that industrial production activity since 2007 has traditionally peaked around May, and we expect to see the same phenomenon this year. This has been supported by the trade figures in June, which showed a sharp decline in import growth and a continued slowdown in export growth (see 'Disappointing Trade Data Suggest Potential Rate Cut In September' August 10, 2012). Imports of intermediate goods which we see as a leading indicator of activity in the manufacturing sector contracted by 5.3% y-o-y in June, falling sharply from the 6.6% growth rate recorded in May. This is in line with our view that manufacturers will continue to draw down their inventories in anticipation of a continued slowdown in export orders over the coming months. These factors suggest to us that economic growth should moderate over the coming quarters, culminating in a subdued full-year real GDP growth of just 3.8%.
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Prescription Drug Market Forecast

The market for prescription drugs was valued at MYR4.01bn (US$1.3bn) in 2011. As market modernisation continues, the use of doctors and hospitals will encourage higher consumption of prescription medicines, although the higher uptake of generic drugs and the expected separation of prescribing and dispensing will act as barriers to growth, as will economic pressure on the private sector and the possible extension of compulsory licences for some patented products.
Threats to the forecasts are on the downside, given the discussions over the separation of prescribing and dispensing. To this end, in January 2009, the Malaysian Pharmaceutical Society (MPS) proposed the creation of a zoning system to facilitate the transition, with those areas with sufficient numbers of pharmacists to be the first to start dispensing but to date, no major changes have been implemented in this area. BMI forecasts that the prescription market to grow by a local currency CAGR of 8.8% over our 10-year forecast period, which is ahead of the overall market (8.1%). By 2021, the segments value at consumer prices will
Prescription Drug Market Forecast 2007-2021
f = forecast. Source: IMS Health Asia, domestic companies, local press, BMI
top MYR9.30bn (US$3.10bn), representing a larger 76.7% of the total market. Presently, the distinction between OTC and prescription market is also blurred, as doctors can both prescribe and dispense, which has in the past made market estimations difficult to make. The private sector accounts for 60-70% of the prescription market. Much of this is informal, with prescription drugs often available OTC. As in many Asian countries, physicians often sell the drugs they prescribe. Around 45% of non-OTC drugs are sold by dispensing medical practitioners, with a further 30% being sold through public/private healthcare institutions. Dispensing pharmacies account for the remaining 25%. With pharmacists requesting permission to charge a professional fee of MYR5 (US$1.60), the percentage share held by pharmacies may decline. According to the Health Ministry, some MYR150-200mn is spent on medicines for diabetes, high blood pressure and elevated cholesterol levels each year. There is an increasing mortality and morbidity rate from diabetes mellitus, which varies due to the culturally diverse population. The proportion of the
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population with diabetes has increased from 6% to 10% over the past 20 years and this figure is expected to reach 13% by 2020. Officials have noted that as the data indicate that less than 2% of the population use hypolipaemics on a regular basis, it is likely that related conditions are under-diagnosed. The relative expense of patented cholesterol reducers has been blamed as a disincentive for their use.
Table: Prescription Drug Sales Indicators 2008-2016
2008 Prescription drug sales (US$bn) Prescription drug sales (US$bn), % chg y-o-y Prescription drug sales (MYRbn) Prescription drug sales (MYRbn), % chg y-o-y Prescription drug sales, % of total sales 0.89 11.76 2.96 8.35 73.11
2009 0.88 -0.53 3.11 5.17 72.80
2010 1.12 26.49 3.60 15.65 71.98
2011e 1.31 17.36 4.01 11.48 72.33
2012f 1.40 7.06 4.46 11.11 72.91
2013f 1.59 13.24 4.93 10.56 73.46
2014f 1.78 12.10 5.44 10.29 73.98
2015f 1.99 11.48 5.96 9.65 74.47
2016f 2.17 9.11 6.51 9.11 74.92
e/f = BMI estimate/forecast. Source: IMS Health Asia, domestic companies, local press, BMI
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Patented Drug Market Forecast

A focus on generic drugs will lead to a gradual decline in the demand for advanced medicines should fall over the coming years. Patented drugs will also play a smaller role in the market, as manufacturers may be reluctant to launch advanced, innovative medicines in Malaysia without adequate guarantees that patent protection will be enforced. Overall, the five- and 10-year growth of the patented market is expected to be at a level of around 9.0% and 7.4% respectively in local currency CAGR terms, therefore trailing that of the overall and generic drug markets.
Patented Drug Market Forecast 2007-2021
Patented drugs will lose market share, as generic products take a greater share of the total market. BMI calculated that the patented market held 42.3% of the total market in 2011, down on 43.5% in 2010, even though its absolute value continues to grow. By 2016, patented products will be worth MYR3.87bn (US$1.29bn), making up 44.5% of the total market, before dropping to just under 42.7% by 2021. Diabetes treatments, beta blockers, angiotensin agents, drugs for pulmonary obstruction disorders, antihistamines and serum anti-lipidaemia products remain some of the best-sellers, followed by drugs in a number of other categories, including calcium channel blockers, systemic anti-bacterials, antiinflammatories and anti-rheumatics and diuretics. The present levels of under-diagnosis and undertreatment will boost the growth of the above therapeutic areas, although the relatively high price of novel patented medicines represents a hindrance. Overall, main drivers of the patented segment will include higher healthcare expectations, demographic changes and the availability of new drugs on the market, boosted by improved operating conditions, made possible by rising international collaboration and FTAs. As such, the Malaysian governments reported reluctance to agree to the Trans-Pacific Partnership Agreement, which would increase the patent periods of drugs by foreign companies, could have a negative impact on the market share taken by patented drugs during the course of our forecast period.
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Table: Patented Drug Market Indicators 2008-2016
2008 Patented drug sales (US$bn) Patented drug sales (US$bn), % chg y-o-y Patented drug sales (MYRbn) Patented drug sales (MYRbn), % chg y-o-y Patented drug sales, % of prescription sales Patented drug sales, % of total sales 0.585 10.099 1.948 6.736 65.807 48.115
2009 0.558 -4.493 1.967 0.986 63.187 46.000
2010 0.675 20.925 2.175 10.560 60.408 43.484
2011e 0.768 13.703 2.349 8.007 58.525 42.332
2012f 0.856 11.424 2.716 15.639 60.912 44.412
2013f 0.977 14.218 3.029 11.520 61.438 45.133
2014f 1.084 10.907 3.305 9.119 60.784 44.968
2015f 1.195 10.244 3.584 8.437 60.110 44.762
2016f 1.289 7.847 3.866 7.847 59.416 44.515
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Generic Drug Market Forecast

BMI has raised its forecast of the size of the generic drug market in this report, thanks to new historical data. We calculate that the generic drug market stood at MYR1.66bn (US$544mn) in 2011, and that it continues to show further growth potential. BMIs forecast shows a local currency CAGR of 9.7% over the 20112016 period, which will moderate in subsequent years. Through to 2021, we expect the generic drug market to reach MYR4.13bn (US$1.38bn) at consumer prices, with a CAGR of 8.2% and 8.4% in local currency and US dollar terms, respectively.
Generic Drug Market Forecast 2007-2021
Drivers of generic drug market growth are mostly volume based, with the government spending an increasing amount of money on the purchasing of generic medicines, on account of the rising number of non-communicable disease patients across the country. Malaysias Ministry of Health has implemented a generic drug policy in which government hospitals have to prescribe generic drugs when the patents for the originator drugs expire. This is in line with the governments aim to promote the local medicine manufacturing industry under the National Key Result Areas programme. Patent expiries will be the key driver for growth in Malaysias generic drug sector. At the Global Bio-Herbs Economic Forum in Kuala Lumpur, Health Minister Liow Tiong Lai said that, with state support, generic drugs could contribute US$5bn to Malaysias economy by 2020. He added that foreign worker insurance, diagnostic services, medical tourism, health metropolises and clinical research centres were other sub-sectors in line for government assistance under the NKEA programme. Other growth drivers are the rising quality of generic products, cost-containment needs and implementation of the ASEAN Free Trade Area (AFTA) agreement, with products from signatory countries to be exempt from import barriers and tariffs. The flow of imports is expected to increase, tightening competition and pushing local manufacturers to create competitive advantages. Additionally, government efforts to lower healthcare spending, which prompted new regulations, will stimulate the generic drugs market, which has so far been growing at a very modest pace. Presently,
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generic drugs are poorly promoted in Malaysia, with branded drugs generally viewed as superior in quality. One of the main barriers to the development of the generic drug market is not pharmacists, but doctors. Doctors are still unwilling to prescribe generic drugs in large amounts, as most are engaged in the lucrative practice of dispensing patented and branded prescriptions.
Table: Generic Drug Sales Indicators 2008-2016
2008 Generic drug sales (US$bn) Generic drug sales (US$bn), % chg y-o-y Generic drug sales (MYRbn) Generic drug sales (MYRbn), % chg y-o-y Generic drug sales, % of prescription sales Generic drug sales, % of total sales 0.304 15.109 1.012 11.593 34.193 25.000
2009 0.325 7.090 1.146 13.234 36.813 26.800
2010 0.443 36.036 1.425 24.377 39.592 28.500
2011e 0.544 22.943 1.665 16.784 41.475 30.000
2012f 0.549 0.896 1.743 4.713 39.088 28.500
2013f 0.613 11.716 1.901 9.077 38.562 28.328
2014f 0.699 14.002 2.133 12.163 39.216 29.012
2015f 0.793 13.395 2.379 11.536 39.890 29.705
2016f 0.880 11.005 2.640 11.005 40.584 30.406
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OTC Medicine Market Forecast

Malaysias OTC drug market is expected to record a 7.2% local currency CAGR value increase over the 2011-2016 period, which will dip to 6.3% over the 10-year forecast. The value of OTC products reached a calculated MYR1.54bn (US$502mn) in 2011 (27.7% of the total market) and is forecast to expand to MYR2.18bn (US$726mn) in 2016, accounting for a smaller share (25.1%) of the total market.
Steady absolute value growth is attributed to several factors, but mainly to importance of branding, greater health awareness among consumers and greater willingness to self-medicate. Additionally, the expected separation of prescribing and dispensing has the potential to improve OTC values and volumes beyond the forecast, if and when implemented. Downside risks to the OTC market include a lack of distinction between OTCs and prescription-only medicines: if consumers do not know the difference, and if they are able to purchase both prescription and
OTC Medicine Market Forecast 2007-2021
f = forecast. Source: AESGP, BMI
OTC drugs without a prescription, then market divisions are absent. Manufacturers ability to advertise all types of medicine to the general public blurs this distinction further. One other concern for OTCs is the prospect of pharmacists charging a MYR5 consultation fee. Patients often visit the pharmacist for minor ailments that can be treated with non-prescription remedies; a charge will deter patients from consulting the pharmacist and will have a negative impact on sales. In the meantime, the value of herbal medicines will also increase, supported by the governments backing for R&D in the area of medicinal plants. Having been worth around MYR300mn (US$82mn) in 2006, the herbal medicines market is likely to top MYR1bn (US$330mn) at consumer prices by 2013, according to local sources estimations, despite some outstanding regulatory and quality issues. Growth in vitamins and dietary supplements and stable demand for cough, cold and allergy remedies, analgesics and medicated skincare treatments should be among the main contributors to overall growth in the sector. Digestive remedies in particular, will perform strongly over the forecast period, while the government anti-smoking drive expected to benefit the nicotine replacement segment of OTC medicines. Additionally, traditional medicines are also expected to make notable gains over the coming years, as the population seeks to lower its healthcare costs.
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Most of the OTC medicines are imported, illustrating future commercial potential for foreign manufacturers. Vitamins and dietary supplements are an exception, with Malaysia exporting such products to over 30 countries worldwide, including Singapore, Vietnam, Brunei, Hong Kong, Taiwan, Japan and Germany, as well as Africa and Central America.
Table: OTC Medicine Sales Indicators 2008-2016
2008 Over-the-counter (OTC) medicine sales (US$bn) Over-the-counter (OTC) medicine sales (US$bn), % chg y-o-y Over-the-counter (OTC) medicine sales (MYRbn) Over-the-counter (OTC) medicine sales (MYRbn), % chg y-o-y Over-the-counter (OTC) medicine sales, % of total sales 0.327
2009 0.330
2010 0.435
2011e 0.502
2012f 0.522
2013f 0.575
2014f 0.627
2015f 0.682
2016f 0.726
21.352 1.088
1.067 1.163
31.761 1.401
15.343 1.535
3.982 1.657
10.113 1.781
9.140 1.913
8.679 2.045
6.515 2.178
17.645
6.866
20.468
9.565
7.915
7.512
7.380
6.897
6.515
26.885
27.200
28.016
27.668
27.088
26.539
26.020
25.533
25.079
e/f = BMI estimate/forecast. Source: AESGP, BMI
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Pharmaceutical Trade Forecast

Like most countries, Malaysia has a negative pharmaceutical trade balance, which is not expected to be reversed, despite strong increase in export values and volumes. According to UN Comtrade, the leading countries of origin in 2010 included Australia (US$97mn), Switzerland (US$84mn), France (US$83mn), Germany (US$84mn) and the US (US$71mn). In the same year, Malaysias key export destination was Singapore, which received US$30mn worth of Malaysian pharmaceuticals, or 36% of total exports. We highlight the governments concerted effort to enhance the pharmaceutical and healthcare sector. In its latest policy to improve pharmaceutical quality, imported pharmaceutical products not manufactured in PIC/S member countries were required to obtain good manufacturing practice certification from July 2012, prior to sale in the country. BMI also believes the governments plans as part of the NKEA programme will help to reduce the reliance on imports. The government will provide MYR96mn (US$32.3mn) from 2010 to 2012 to construct manufacturing facilities for the production of generic drugs. The pharmaceutical industry in Malaysia is forecast by the government to achieve export growth of 8% yo-y in 2012, reaching MYR610 (US$200mn), according to Minister of Health Liow Tiong Lai, with pharmaceuticals having been identified as a strategic economic area to be developed as a driver of growth for the economy. During the launch of the PhAMA Industry Fact Book, Liow said: It is my fervent wish to see more multinational companies partnering with local Malaysian pharmaceutical companies as this is one of the key strategies identified that can provide the impetus which will enable the sector to achieve its fullest potential. Consequently, we forecast sector exports will grow at CAGRs of 9.0% in local currency terms and 9.4% in US dollars term through to 2016, reaching MYR758mn (US$252mn) by the end of the five-year forecast period. In addition, the country is renewing its commitment in biotechnology. In phase II (2010-2015) of its National Biotechnology Policy, the government emphasises biotech business aspects such as drug discovery, new product development, technology acquisition and licensing. Despite these initiatives, we
f = forecast. Source: United Nations Comtrade Database DESA/UNSD, BMI
Pharmaceutical Trade Forecast (US$mn) 2007-2016f
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do not expect the country to reverse the negative pharmaceutical trade balance, given they are still in their early stages. Instead, increasing domestic demand for medicines, a significant proportion of which the local manufacturing industry will be unable to meet, will stimulate the growth of pharmaceutical imports over the next five years. Furthermore, although bilateral FTA negotiations with the US were abandoned in 2009, both parties will be aiming to include Malaysia in a multilateral trans-Pacific agreement. Yet recent local press reports from August 2012 suggest that Malaysia has objected to one aspect of the Trans-Pacific Partnership agreement: the obligation to increase patent periods of drugs by foreign companies. On a broader scale, exports have also benefited from the further opening of Chinas economy following WTO entry, which led to a drop in import tariffs. The elimination of tariffs under the Japan-Malaysia Economic Partnership Agreement and the consequent FTA will serve to further boost trade between the two countries. BMI expects more drugmakers in South East Asia to attain GMP accreditation after a major trade agreement was signed in April 2009. The Sectoral Mutual Recognition Arrangement for GMP Inspection of Manufacturers of Medicinal Products is designed to remove barriers that impede the trade of pharmaceuticals between ASEAN member states. A countrys drug regulator will approve a drugmakers plant and this certification will be accepted by fellow ASEAN states, thereby reducing a duplication of effort. In addition to adhering to GMP standards, the agreement states that medicine producers must also meet PIC/S guidelines. Conceived by the EU authorities, PIC/S is proving increasingly popular as it seeks to encourage dialogue between regulatory authorities.
Table: Exports and Imports Indicators 2008-2016
2008
Pharmaceutical exports (US$mn) Pharmaceutical exports (US$mn), % chg y-o-y Pharmaceutical exports (MYRmn) Pharmaceutical exports (MYRmn), % chg y-o-y Pharmaceutical imports (US$mn) Pharmaceutical imports (US$mn), % chg y-o-y Pharmaceutical imports (MYRmn)
2009
2010
2011e
2012f
2013f
2014f
2015f
2016f
116.28 -13.272 387.39 -15.922 767.580 8.338 2557.11
120.30 3.459 423.78 9.394 870.083 13.354 3064.88
144.74 20.310 466.15 9.998 900.480 3.494 2900.09
161.06 11.279 492.74 5.705 1120.30 24.412 3427.33
166.06 3.100 527.24 7.000 1242.47 10.905 3944.86
183.68 10.613 569.42 8.000 1460.87 17.577 4528.70
203.49 10.787 620.66 9.000 1695.66 16.072 5171.77
227.57 11.833 682.73 10.000 1963.55 15.798 5890.65
252.61 11.000 757.83 11.000 2230.59 13.600 6691.78
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Table: Exports and Imports Indicators 2008-2016
2008
Pharmaceutical imports (MYRmn), % chg y-o-y Pharmaceutical trade balance (US$mn) Pharmaceutical trade balance (MYRmn)
2009
2010
2011e
2012f
2013f
2014f
2015f
2016f
5.028 -651.29 2169.71
19.858 -749.77 2641.10
-5.377 -755.73 2433.94
18.180 -959.24 2934.58
15.100 1076.41 3417.62
14.800 1277.18 3959.28
14.200 1492.16 4551.10
13.900 1735.97 5207.91
13.600 1977.98 5933.94
e/f = BMI estimate/forecast. Source: United Nations Comtrade Database DESA/UNSD, BMI
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Medical Device Market Forecast

BMI calculates that Malaysias medical devices sector stood at MYR3.97bn (US$1.30bn) in 2011, accounting for just 0.5% of the countrys GDP. By 2016, we expect the value of Malaysias medical devices market to have reached MYR6.19bn (US$2.06bn), growing at a CAGR of 9.3% in local currency terms, which is above the increase in healthcare spending. BMI believes medical device manufacturers will benefit from the expected improvements in public health services and Malaysias commitment to drive its medical tourism industry. In addition, the Medical Device Act, will also boost the market once implemented in October 2012, and will help reduce the presence of counterfeit devices in the country. Downsides to the risk include the fact that healthcare modernisation efforts are currently focused on expanding access to medicines rather than to expensive medical diagnostics, which will remain the case for some years to come. Additionally, the high percentage of out-of-pocket expenditure as a proportion of total healthcare spending will continue to act as a brake on the development of medical device values in Malaysia, where much of the rural population (especially) has no means of accessing expensive medical services. Currently, most of the high-tech medical devices are imported from Germany, the US and Japan. However, Malaysia now has a positive trade balance, exporting US$1.03bn worth of medical devices and importing US$933mn in 2011. The most-traded medical devices include general devices such as sighttesting instruments, electro-medical apparatus, and radiotherapy and orthopaedic instruments. The country now serves 80% of the global catheters and 60% of the global rubber glove market. In the meantime, the local medical devices industry remains focused on lower-end scale, in terms of product mix. Although the demand is mostly met through imports, Malaysia does have a significant export activity in the field of surgical gloves, catheters and similar low-tech devices. The new Medical Device Act should help improve manufacturing standards nationally.
f = forecast. CER = constant exchange rate. Source: BMI
Medical Device Market Forecast 2007-2021
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Table: Medical Devices Sales Indicators 2008-2016
2008 Medical device sales (US$bn) Medical device sales (US$bn), % chg y-o-y Medical device sales (MYRbn) Medical device sales (MYRbn), % chg y-o-y Medical device sales at constant exchange rate (US$bn) Medical device sales, % of GDP Medical device sales, % of total healthcare sales 0.931 16.683 3.100 13.118
2009 0.936 0.576 3.297 6.347
2010 1.137 21.523 3.663 11.108
2011e 1.296 13.983 3.966 8.273
2012f 1.355 4.540 4.303 8.495
2013f 1.514 11.683 4.692 9.045
2014f 1.685 11.332 5.140 9.537
2015f 1.884 11.815 5.653 9.982
2016f 2.064 9.535 6.192 9.535
1.013 0.418 11.029
1.078 0.485 10.573
1.197 0.478 10.883
1.296 0.465 10.910
1.407 0.481 11.025
1.534 0.491 11.219
1.680 0.504 11.504
1.848 0.519 11.889
2.024 0.535 12.290
e/f = BMI estimate/forecast. Source: BMI
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Other Healthcare Data Forecasts

The number of private hospitals in Malaysia proliferated in the 1980s, driven by increased affluence of the countrys population, the demand for better services and the governments privatisation programme, which led to a number of state-owned healthcare facilities becoming for-profit enterprises. Private hospitals continue to increase in number. Recent examples include BP Healthcare Groups establishment of a ENT and gastroscopy speciality centre in Cheras, Kuala Lumpur in July 2012, and IHH Healthcare Berhads announcement in July 2012 that it plans to acquire more hospitals in the country. Malaysias Health Director General Hasan Abdul Rahman revealed that a total of 32,979 doctors were serving in the country in 2010, reported Bernama. He added that about 22,429 doctors were working in the public sector, 19,429 in the Health Ministry and the remainder with other government agencies including public universities and the Defence Ministry. Rahman mentioned that the government is aiming to achieve a doctor-population ratio of 1:400 by 2020, adding that the government has been making efforts to counter a shortage of doctors by bringing Malaysian specialist doctors back from abroad and recruiting foreign specialist doctors. In fact, the country is already facing shortages of certain medical professionals, due to its changing demographics and epidemiological profile and emigration. In a move to encourage doctors to continue practicing in the country, the government announced its plans in Q312 to allow speciality and private doctors to raise their charges by 14%.
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Key Risks To BMIs Forecast Scenario

While generic drugs play a major part in the Malaysian market, the development of a genuine sector has been slow. However, the government continues to encourage their use and its perseverance could see a sizeable increase in the generic drugs market above the level already forecast, especially given the recent legalisation of parallel trade and the challenging economic situation. The prescription of generic products in the public sector is becoming increasingly popular, indicating a greater willingness to use low-cost medicines, but it is the changes in the private sector that remain crucial to market development. In the meantime, the private sector, which favours patented products, as they bring higher revenues for healthcare providers, would have also felt the pinch of the economic downturn. Given the notable level of counterfeit pharmaceuticals in the country, the difficulties in applying process patents, a lack of data exclusivity and an overall poor standard of enforcement of regulations, multinationals revenues over the forecast period may be lower than predicted for certain products. In the long term, there are mixed messages for manufacturers of innovative, patented products. While Malaysia embraces ASEAN harmonisation procedures, it is also reluctant to permit extensions to patents, which forms part of the Trans-Pacific Partnership Agreement. In terms of counterfeit drugs, the prospect of a Medical Device Act in October 2012 will show increased government commitment to cracking down on substandard medical devices, while plans for a new regulatory body should help improve the operational environment. Moreover, regional competition, especially from Singapore and China, will hamper Malaysias efforts to increase pharmaceutical exports. Additionally, a serious risk to the sectors performance and development would be a sharper-than-expected Chinese slowdown, precipitated by a bursting of the property bubble that has been forming in large urban cities such as Beijing and Shanghai. Indeed, Chinese demand for Malaysian exports makes up about 20% of total outbound shipments for Malaysia. Malaysia is presently debating the separation of prescribing and dispensing, with the implementation of changes likely in the short to medium term, in line with wider Asia Pacific trends. When the change is actioned, BMI will adjust its prescription and OTC forecasts accordingly. Similarly, the government is debating the introduction of national social health insurance, the creation of which will shape the countrys healthcare spending priorities.
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Competitive Landscape
Domestic Pharmaceutical Industry
The local industry remains focused on the production of generic and lower-tech medicines. In the future, domestic sector development is likely to remain centred on the operations of the industrys larger producers, as these look to benefit from the onset of ASEAN harmonisation, which has brought marked growth in the private sector and opened up export markets. The modernisation of the sector is also likely to see many smaller drug companies disappear as a result of the tightening regulations, with the costs of the required upgrades being a major problem. At the end of 2007, there were approximately 235 GMP-compliant manufacturers in Malaysia licensed by the DCA, some of which act as sales agents for international pharmaceutical companies. Around 30 are licensed to manufacture prescription medicines, while the rest produce OTC medicines. Some 140 manufacturers are licensed to produce traditional and herbal medicines, with such products integrated into the mainstream healthcare system. In June 2010, Malaysian Health Minister Dato Sri Liow Tiong Lai was reported by The Star Online as saying that the healthcare industry has the potential to contribute MYR10bn (US$3.09bn) to the countrys economy by 2020, if it focuses on the areas of pharmaceuticals (including exports of higher quality generic drugs), the production of medical equipment, health tourism and specialists training. The ministry said healthcare services currently contribute only MYR4bn (US$1.23bn).
Foreign Pharmaceutical Industry

Due to their strength in innovative products, multinationals control about 70% of the pharmaceutical market, especially in terms of innovative and specialised drugs. All of the major multinational drug companies are represented in Malaysia, although only a few have a direct manufacturing presence, largely as a result of restrictive regulatory practices. Companies with significant local production facilities are B Braun, GlaxoSmithKline (GSK), Johnson & Johnson (J&J) and Ranbaxy. Multinationals, which are primarily represented by the Pharmaceutical Association of Malaysia (PhAMA), are gradually getting involved in the fields of local biotechnology, clinical trials and bio-equivalence studies, illustrating rising market potential as well as an improvement in operating conditions. Multinationals are gaining ground in Malaysia. In June 2012, Novarits signed a memorandum of understanding with the Ministry of Health to futher enhance the countrys progress in the National Key Economic Area programme for healthcare, while Sanofi, which has conducted Phase III trials for its dengue vaccine in the country, has also announced plans to expand its presence in Malaysia.
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In the future, multinational activity is likely to reflect sector modernisation and the proliferation of free trade agreements (FTAs), but at a pace of development slower than, for example, Singapore, which holds greater investment potential and offers a more favourable regulatory environment. In the current year, market activities will be dictated by negative economic conditions, which are likely to boost the use of cheaper generic products across the board.
Table: Leading Malaysian Pharmaceutical And Healthcare Companies
Name Pharmaniaga CCM Duopharma Apex Healthcare Hovid YSP Southeast Holding Kotra Industries Sunzen Biotech
Market capitalisation (US$mn) 189 109 75 43 36 23 10
P/E ratio 0.60 11.16 8.91 7.77 9.57 6.43 17.90
Revenue (US$mn) 391.0 35.0 88.0 108.0 39.0 30.0 8.5
Website www.pharmaniaga.com www.duopharma.com.my www.apexpharmacy.com www.hovid.com www.yspsah.com www.kotrapharma.com www.sunzen.com.my
Source: Investor Relations
Company Activities
Altona Diagnostics, from Germany, officially opened its new Asia Pacific regional headquarters in Kuala Lumpar in July 2012. In Q212, Novartis signed a memorandum of understanding with the Ministry of Health to further enhance Malaysias progress in the National Key Economic Area programme for healthcare. Novartis established a US$700mn fund to support the setting up of new Malaysian companies. In June 2012, Sanofi announced plans to expand its presence in Malaysia, through bilateral collaboration with the government in the healthcare sector. The cooperation will encourage R&D in the vaccine sector. In April 2012, Dutch-Malaysian firm NYOYN Asia said it intends to introduce its products to all local hospitals in Malaysia and will start operations at its manufacturing facility in Kedah to meet more local demand. In February 2012, biotechnology company Biocon said it plans to establish an insulin manufacturing facility in Johor state to produce insulin at an affordable price. The company will invest US$160mn for the first phase, the largest investment in Malaysias biotechnology sector. Chair Kiran Mazumdar-Shaw
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said the new facility will be operational by 2014 and will run as a production base to serve South East Asia and the global market. In the same month, the National Pharmaceutical Control Bureau of the Ministry of Health in Malaysia approved Bayer HealthCares once-daily drug rivaroxabam, which is used to reduce stroke-risk in patients with sustained irregular heart rhythm. In January 2012, US-based Watson Pharmaceuticals acquired Ascent Pharmahealth, the Australia and South East Asia generic pharmaceutical business of Strides Arcolab, for AU$375mn (US$399mn). In July 2011, Agila Specialties, a wholly-owned subsidiary of Indian pharmaceutical company Strides Arcolab, signed an agreement for the establishment of a new manufacturing plant in Malaysia. The biopharmaceuticals and sterile injectables plant will be located in the Bio-XCell biotechnology park in Iskander.. Under the deal, the facility will be developed by Bio-XCell and later will be leased to Strides on a long-term basis. Malaysian Biotechnology and UEM Land Holdings will manage the project.
Halal Medicine
Halal medicines are highly important to the Malaysian market, given that Islam is the countrys official religion. Halal is an Arabic term meaning permissible. With respect to pharmaceuticals, it excludes products derived from blood, animals slaughtered in the name of anyone but God, and swine. As such, many medicines for example those compounded in capsules with the animal product gelatine are not consumed by many observant Muslims. Pharmaceutical companies have been aware of this niche for some time, but it is only recently that drugmakers have explicitly targeted this growth area. In May 2012, Malaysias second minister of finance, Husni Mohamed Hanadzlah, and the Tunisian minister for investment and international cooperation, Riadha Bettaib, discussed prospects for collaboration between the countries in the halal industry, including pharmaceuticals. In April 2011, the Technical Committee on Halal Food and Islamic Consumer Goods, which operates under the auspices of Industry Standards Committee on Halal Standards (ISCI) that brings together experts from government and industry bodies, released halal pharmaceutical and medicines guidelines. Compliance with the Malaysian Standard document is voluntary, with the Ministry of Health not sanctioning halal logo stickers or other signs on packaging, although it does require disclosure of porcine and bovine materials in the medicines for procurement purposes. Like Pakistan, Malaysia is looking to become the conduit for medicine exports to the Islamic world. Demonstrating this intent, the countrys Halal Development Corporation (HDC) has agreed to certify as Halal traditional Chinese medicine manufactured in Ningxia province. Malaysia will then distribute the products to the consumers globally.
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Other companies concentrating on Halal medicines include Chemical Company of Malaysia (CCM), which has singled out Halal medicines as a key driver of its future growth.
Traditional Medicine
As with many Asian nations, traditional medicines are frequently used in Malaysia, often in tandem with modern drugs. This is evidenced by the Kepala Batas Hospital in Penang becoming the first healthcare facility in Malaysia to offer both modern and complementary (herbal preparations, acupuncture and traditional massage) medicine. The Kepala Batas Hospital will only employ internationally recognised traditional medicine practitioners, whose degree components comprise 30-40% modern medicine and 6070% traditional medicine expertise to enable them to treat patients accordingly. As seen in many emerging markets, demand for traditional medicines in Malaysia is high. Liow Tiong Lai stated in late 2010 that, of the 43,424 products registered by the DCA, 47% were traditional remedies, followed by prescription drugs (30%) and OTC medicines (23%). However, sampling of more than 1,000 traditional medicines found that 93 products were not compliant with regulations, such as those containing a microbial infestation (55%) or contamination with heavy metals (30%). Nearly a third of traditional remedies were imported, predominantly from China In order to address quality issues, in November 2011, the Malaysian Ministry of Health asked traditional medicine suppliers and wholesalers to register their products. Liow said registration with the ministry will enable the National Pharmaceutical Control Bureau to check the suitability of the drugs for public consumption. Only products that have been registered and checked by the ministry will be allowed to make claims regarding the treatment of specific diseases or illnesses. The registration procedure includes laboratory tests to certify whether a product can be used for the purpose it claims. On average, it will take about 60 working days to test each product. However, in March 2012, the director of the Ministry of Health pharmacy enforcement department, Mohd Hatta Ahmad, told the local press that in 2011 approximately 20 types of traditional medicine and health supplement slimming products, valued at MYR610,581 (US$199,536), were found to contain the illegal drug sibutramine or the controlled drug phentermine. This was three-times more than the value of products seized in 2010 (MYR195,365), highlighting the seriousness of the issue. He added that adulteration was more common in food products and health supplements than traditional medicines as manufacturers and distributors are not required to register these products with the National Pharmaceutical Control Bureau (NPCB) or the DCA. Between 2009 and 2011, five cases of registered traditional medicine products being altered after registration were recorded. In contrast to Ahmads statement, according to the NPCB all pharmaceutical products, health supplements, traditional medicine products and cosmetics have to be registered with the bureau and tested
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for their safety and quality prior to registration. In addition, the country also has a category called fooddrug interface products. Depending on the composition of product, it comes under the charge of different regulatory bodies, namely the NPCB or the Food Safety and Quality Control Division (FQCD), providing potential loopholes for manufacturers to add illegal substances.
Pharmaceutical Distribution
The main public sector wholesaler is Pharmaniaga Logistics (formerly Remedi Pharmaceuticals). This subsidiary of leading drug company Pharmaniaga is responsible for around 75% of medicines purchased by public healthcare institutions. In the private sector, there are a number of prominent distributors. These include Zuellig Pharma, which has been present in Malaysia since 1939, Apex Healthcare (also a manufacturer) and Medispec Malaysia. In July 2012, the secretary general of the Democratic Action Party Liam Guan Eng urged the government to permit the direct sale of pharmaceuticals and medical devices to the public health sector, rather than through wholesalers, as a means of cutting costs. In terms of pharmacies, in July 2012 the Malaysian Pharmaceutical Society requested that the government impose professional charges on consumers for visiting local pharmacists, according to national press reports. Pharmacists would like to be able to charge MYR5 (US$1.60) per visit. The Federation of Malaysian Consumers Associations chief executive rejected these proposals, claiming that the advice pharmacists give is part of the service they offer, alongside the sale of medicines. BMI believes that if implemented, such a fee would deter patients, particularly those with minor ailments, from using pharmacies, and would boost both counterfeit and substandard drugs, as well as herbal and traditional remedies.
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Company Profiles
Local Companies
Pharmaniaga
Strengths Leading company in the Malaysian market. Concession agreement with the Ministry of Health via its distribution unit. A focus on bioequivalent generic drugs. The plants customised to meet the US Food and Drugs Administration (FDA) standards, in a bid to improve it share in the contract manufacturing market. Dependent on one customer, the Ministry of Health, in a 15-year concession agreement. Product prices potentially considered for revision only once every three years. Limited geographic diversification. Government support for local drug manufacturers. Overseas expansion through local manufacture, joint-ventures and product launches. Increasing healthcare costs and consumer awareness boosting demand for cheaper locally manufactured drugs. Improvement in regulatory environment and approval procedures. Expansion of contract manufacturing capacities. From July 2012, pharmaceutical products not manufactured in PIC/S member countries will be required to obtain GMP certification prior to sale in Malaysia. The companys growth and performance dependent upon economic conditions in Malaysia and other countries, particularly Singapore, the Philippines and Vietnam. Relatively low barriers to entry, which is creating intense competition from new entrants such as Indias Ranbaxy. Generic manufacturers competing on price due to weak patent law and wide variety of generic drugs available, further reducing profit margins. A trend towards the purchase of branded drugs over low-cost locally manufactured generic drugs to benefit importers of products from companies based in the US, UK and Germany. The company may eventually lose its generic supply agreement with the government or see less favourable conditions in the near term.
Weaknesses
Opportunities
Threats
Company Overview
Pharmaniaga PhD, established in 1998, is Malaysias leading integrated local healthcare company. The company operates through nine business units: Manufacturing, Marketing, Logistics, Solutions, Pharmaniaga Research Centre, Pharmaniaga Diagnostics, Pharmaniaga Biomedical and Esteem Interpoint. The company produces through Raza Manufacturing, while its distribution unit, Pharmaniaga Logistics Sdn Bhd (formerly known as Remedi Pharmaceuticals) provides pharmacy management services. Presently, the company has three factories, which churn out more than 400 generic products, although ideally it is keen to have five or six facilities. The company is estimated to control more than a quarter of the total market. The group has also reportedly set aside MYR300mn for the development of more than 90 new products over the coming five years, and by 2013, it is hoping to become a US$1bn company. Currently accounting for 25% of total sales, exports are key to Pharmaniagas future.
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Strategy
Through Pharmaniaga Logistics, the company supplies around 75% of medicines purchased by Malaysias public healthcare institutions. The companys contract expired in 2009, but was extended for a further 10 years, subject to conditions that needed to be negotiated over the course of H109. The firm will supply pharmaceuticals to 3,517 government hospitals and clinics nationwide. The contract is worth MYR900mn (US$292mn) a year. One government official proposed in Q212 that the government permits pharmaceutical firms to sell their products directly to health service providers, and if this proposal is heeded, it would affect Pharmaniaga Logistics role in the wholesale and distribution market. Pharmaniaga is planning to expand into new markets. The company has already entered markets with very low barriers to entry, such as neighbouring countries at the early emerging stage (for example, Papua New Guinea and Myanmar) and those with nascent regulations (several countries in Africa). Now, it is looking at the larger markets of south-east Asia, the prosperous Middle East and some other member countries of the Organisation of the Islamic Conference (OIC) via mergers and acquisitions. Regionally, the company has 38 sites, in Indonesia and Vietnam, in addition to its home market. The companys most significant foreign enterprise is its 55% stake in Indonesian pharmaceuticals distributor PT Millennium Pharmacon International. Purchased for US$3.2mn in 2004 from Indonesias PT Tigamitra Multikarya, the acquisition gives it control of a unit that controls 2% of Indonesias promising pharmaceutical market. The distributor has 14 principals and 24 branches and controls 2% of the Indonesian market. A small-scale Thai venture, worth only MYR54mn (US$14.21mn) over five years, will replicate the companys IT systems for a hospital group. Meanwhile, the company is to begin a drug supply chain JV in South Africa with equal partners Procon Fischer and Corpafrica.
Developments
In April 2011, Pharmaniaga launched a new GMP-compliant factory, Pharmaniaga LifeScience, which will function as a contract manufacturer for the production of injectable medicines. The output will be destined both for the domestic and export market. In March 2010, following a routine audit, the Malaysian authorities revoked Pharmaniagas production licence, although the exact reason was not disclosed at the time. The company was reportedly working to remove the obstacles to further production, which accounts for around 10.8% of the groups annual turnover, or MYR203.6mn.
Financial Performance
In Q212, Pharmaniaga reported a 12.8% y-o-y rise in earnings to MRY15.7mn (US$5mn), boosted by revenues at its new subsidiary, Idaman Pharma Manufacturing. In FY11 (ending December 2011), group revenues reached MYR1.52bn. Profit before tax came in at MYR73.2mn, up from MYR45.5mn in FY10. In FY10, Pharmaniaga Group posted revenues of MYR1.38bn, up on MYR1.30bn posted in FY09, itself a 0.5% fall on FY08.
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Company Contacts
Pharmaniaga Bhd, 7 Lorong Keluli 1B, Kaw. Perindustrian Bukit Raja Selatan, PO Box 2030, Pusat Business Bukit Raja, 40800 Shah Alam, Selangor Darul Ehsan, Malaysia Tel: +60 (3) 3342 9999 www.pharmaniaga.com
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Prime Pharmaceutical
Strengths Presence in both the prescription and the OTC sector. Strong manufacturing and distribution network. Involved in contract manufacturing.
Weaknesses
Competition from other local manufacturers. Pressure on the government to reverse policies biased towards the local industry. Increasing demand for compliance with international IP standards.
Opportunities
Government programme for developing the pharmaceutical and biotechnology sectors. Expected increase in regional drug consumption. Rising demand for and encouragement of the generic drugs sector. Strong growth in both the generic and OTC drug markets over next nine years.
Threats
Widespread counterfeit industry. Increased competitiveness of local players driven by ASEAN harmonisation and other regulatory developments. Possible introduction of price ceilings on essential medicines.
Company Overview
Prime Pharmaceutical Products Sdn Bhd, established in 1988, is one of the more prominent local manufacturers of pharmaceuticals. The company produces, markets and distributes a variety of pharmaceutical products as well as traditional herbal preparations and health foods. Prime Pharmaceutical Products also deals in vitamins.
Strategy
Prime Pharmaceutical Products is one of the regular suppliers and distributors of medicines to government hospitals as well as private healthcare facilities, including pharmacies. The company has a factory in Bukit Tengah Industrial Park, which conforms to international GMP standards. Prime Pharmaceutical Products is also involved in contract manufacturing. The companys product range includes analgesics (including paracetamol and acetylsalicyclic acid), anti-asthmatics, anti-histamines, corticosteroids, gastrointestinal preparations, cough and cold remedies, antibiotics, antifungals and dermatologicals (such as hydrocortisone), among a few other therapeutic areas.
Company Contacts
Prime Pharmaceutical Products Sdn Bhd, 1505 Lorong Perusahaan Utama 1, Taman Perindustrian Bucket Tengahnda Bukit Mertajam, Penang, Malaysia Tel: +60 (4) 507 4787 www.primepharma.com.my
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Bumimedic
Strengths Threats Presence in both the prescription and the OTC sector. Strong manufacturing and distribution network. Backed by a large local healthcare group. Involved in contract manufacturing and research on behalf of foreign players. Competition from other local manufacturers. Pressure on the government to reverse policies biased towards the local industry. Increasing demand for compliance with international IP standards. Government programme for developing the pharmaceutical and biotechnology sectors in the country. Expected increase in regional drug consumption. Rising demand for and encouragement of the generic drugs sector. Strong growth expected in the generic and OTC drug markets over next nine years. Widespread counterfeit industry. Possible introduction of price ceilings on essential medicines. Increased competitiveness of local players driven by ASEAN harmonisation and other regulatory developments.
Weaknesses
Opportunities
Company Overview
Bumimedic (Malaysia) Sdn Bhd is a subsidiary of privately owned Antah HealthCare Group, which is controlled by one of the royal families of Malaysia. Bumimedic is one of the largest healthcare companies in Malaysia, dealing prescription and OTC pharmaceuticals, medical equipment and consumable supplies for hospitals, medical centres, clinics and pharmacies. The Antah Group distributes medicines and medical equipment to government, private and university hospitals, laboratories, health centres, state medical stores, GPs and retail pharmacies. Rising demand and strong marketing will support growth of the Group and its Bumimedic arm. Bumimedics factory, which complies with international GMP standards, manufactures more than 300 products in the form of tablets, capsules, liquids and ointments. The company supplies local and overseas customers, and it is engaged in contract manufacturing. At present, Bumimedic is engaged in the creation of another manufacturing site as a joint-venture.
Developments
In early 2006, US-based Amarillo Biosciences (ABI) entered into a distribution agreement with Bumimedic Malaysia. The Malaysian firm, which markets Amarillos low-dose interferon, manufactures lozenges from ABIs bulk natural human interferon supplied by Hayashibara Biochemical Laboratories, and distribute them to local hospitals, clinics and pharmacies. Antah Bumimedic also recently signed a distribution agreement with Koperasi Doktor Malaysia Berhad (KDM) Pharma (Pharmaceutical Division of KDM Berhad), with the former serving as a logistics operator for the latter. KDM, as a doctors cooperative, serves some 650 doctors throughout western Malaysia, having set up KDM Pharma as its dedicated procurement arm. ABI Bumimedic Antah Pharma Sdn Bhd, 3 Jalan 19/1 Petaling Jaya, 46300 Selango, Malaysia Tel: +60 (4) 7956 7677 www.ahcg.com.my
Company Contacts
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Hovid
Strengths Threats Company Overview One of the leading local drug producers and exporters. Strong manufacturing and distribution network. Involvement in the herbal supplements business. Considerable in-house R&D. Competition from other local manufacturers. Pressure on the government to reverse policies biased towards the local industry. Increasing demand for compliance with international IP standards. Government programme for developing the pharmaceutical and biotechnology sectors. Expected increase in local and regional drug consumption. Already present in a number of African and Middle Eastern countries, which are expected to continue their steady development. Demand for Malaysian pharmaceutical exports is forecast to grow over next four years. Widespread counterfeit industry. Increased competitiveness of local players driven by ASEAN harmonisation and other regulatory developments. Potentially detrimental impact of the pending FTA with the US.
Weaknesses
Opportunities
Hovid (formerly Ho Yan Hor) was established in 1945 as the manufacturer of herbal tea. In the 1980s, the company began engaging in pharmaceutical production. At present, Hovid is also involved in the manufacture of herbal and dietary supplements, teas and tocotreienols. It is the leading exporter in Malaysia and one of the largest GMP-certified pharmaceutical companies in the country. Hovid also owned local biotechnology firm Carotech, the leading supplier of phytonutrients and biodiesel products, which was divested by mid-2010.
Strategy
Hovid is already present in several countries, particularly in Asia. Outside Malaysia, where it operates two plants, its largest market is Nigeria, with annual sales there exceeding MYR16mn (US$4.6mn). The company is increasingly focusing on foreign markets, with offices in Singapore, Hong Kong and the Philippines, while planning to set up subsidiaries in Vietnam and India (where it has a production plant). Hovid has also earmarked China for future expansion. Hovid was responsible for the construction of the first gelatine encapsulation plant in the country, as well as the first film-coated analgesic and the development of the first ampitab in dispersible tablet form. Hovid which currently holds the right to 12 global patents became the first global company to succeed in the processing and extracting carotenes and vitamin E from palm oil. It also deals in drug delivery systems, nanotechnology research (into liposomes and polymeric nanoparticles). The drugmakers clinical trials are conducted both nationally and internationally, in collaboration with Japanese and US universities, among others. Hovids portfolio contains in excess of 350 different kinds of products, mostly branded generic medicines. Other products include health supplements, injectable products and herbal medicines. Some 100 products are prescription drugs, with a focus on antibiotics, anti-diabetics, antihypertensives, anti-malarials and anti-inflammatory analgesics. The company holds more than 700 marketing authorisations worldwide, launching on average 12 new products per year.
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Developments
In April 2012, Hovid indicated that it may build a pharmaceutical factory in the Philippines within the next two years, at a cost of at least MYR20mn. Hovid markets about 30 products in the Philippines market, which accounts for around 5% of its annual revenue. Hovid Philippines employs about 100 people. In January 2011, Hovid signed a deal with Sanofi-Aventiss local subsidiary Winthrop, aimed at the development and manufacture of generic drugs. The products in question include metformin 850mg MR for the diabetes treatment, and tramadol 100mg SR, which is used as a painkiller. Hovid also reported that the deal may be extended to another 30 products in the coming year, which are valued at over MYR50mn. In August 2010, Bernama reported that Hovid intends to set up a new plant overseas by 2013, on the back of increasing demand for its products. He added that the establishment of the plant will help the company grow in respective markets and that the company anticipates its revenue growing 10-20% on the back of increasing demand overseas. At the start of January 2008, Hovid purchased a controlling stake in Indian Biodeal Pharmaceuticals. Hovid chose India because of the more relaxed patent laws and lower labour costs, which will allow it to place cheaper generic products on the Malaysian market. The transaction will provide Hovid with a 100% increase of its production capacity for the manufacture of tablets and capsules.
For FY11 (ending June), Hovid posted MYR153mn, as Carotech was no longer its subsidiary. Loss after taxation was in the region of MYR6.1mn. In FY10, the company posted MYR365.2mn in revenue, up by 46.9% in relation to the previous year. However, the impairment of Carotech stocks resulted in a loss after tax of MYR90.8mn, up on the MYR6.8mn suffered the previous year. In FY09, Hovid posted MYR0.5mn in net profit, including MYR15.6mn in unrealised foreign exchange (forex) losses at Carotech, due to a weakening ringgit in relation to the US dollar. For the year, core net profit was MYR16mn excluding the forex loss down by 40% on the forecast, which was attributed to higher depreciation charges and interest expenditure. FY08 and FY07 revenues came in at MYR214.7mn and MYR186.9mn, respectively. Profit after taxation stood at MYR18.3mn and MYR29.1mn.
Company Contacts
Hovid Bhd, 121, Jalan Tunku Abdul Rahman, 30010 Ipoh, Perak, Malaysia Tel: +60 (5) 506 0690 www.hovid.com
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Chemical Company of Malaysia

Strengths One of the leading local chemical and pharmaceutical producers. Diverse business portfolio, including herbal supplements. Local leader in small volume injectables. Leading generic drugs player in the country. Competition from other local manufacturers. Pressure on the government to reverse policies biased towards the local industry. Increasing demand for compliance with international IP standards. Government programme for developing pharmaceutical and biotechnology sectors, including the improvement of the regulatory environment. Expected increase in local and regional drug consumption. Focus on halal medicine, which is in demand in the Islamic world. Rising demand for OTCs. Recent launch of anti-flu medicine Omniflu, with demand increased following the onset of swine influenza. Widespread counterfeit industry. Increased competitiveness of local players driven by ASEAN harmonisation and other regulatory developments. Potentially detrimental impact of a possible FTA with the US.
Weaknesses
Opportunities
Threats
Company Overview
Chemical Company of Malaysia (CCM) was established in 1930. The company was listed as a public company in 1966, initially as a subsidiary of UK-based ICI PLC and now as a Malaysianowned corporation, controlled by Permodalan Nasional Bhd (PNB), which had shown interest in the takeover of Pharmaniaga. CCM Pharmaceuticals is the largest local manufacturer of generic drugs, currently holding a 21% share. According to the pharmaceuticals division director, the company plans to increase this share to at least 23%. Its portfolio consists of more than 280 products, including antihistamines, antibiotics and expectorants. The division is also the leading producer of OTCs, with key brands being Champs, Proviton and Uphamol. CCM Duopharma Biotech manufactures oral preparations, sterile injectables, haemodialysis and sterile irrigation solution. The division is the leading local manufacturer of sophisticated and specialised small volume injectables.
Strategy
The company is focused on chemical products and applications, fertilisers and pharmaceuticals and healthcare products and services. It has four divisions, namely CCM Chemicals, CCM Fertilizers, CCM Pharmaceuticals and CCM Duopharma Biotech. CCM Duopharma is raising its profile in the traditionally low-margin vaccine sector. The company is spending MYR7mn (US$2mn) on a vaccine fill and finish facility in Klang, Selangor. In H209, the company launched Omiflu, a generic version of influenza drug Tamiflu (oseltamivir). CCM is planning to enhance its pharmaceutical, chemical and fertiliser business footprints both regionally and in the Middle East region. According to Amirul Feisal Wan Zahir, the firm had undertaken several initiatives in its core businesses that have enabled it to enhance production
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capacity and improve efficiencies, which in turn enhance the companys competitiveness and market presence in the region, by focusing on growth opportunities available in Indonesia, Singapore and Vietnam. The firm is also looking to offer value-added products and services and transform the business model from a process-driven to a knowledge-based business. The company already exports its products to a number of regional markets, including Vietnam, the Philippines, Singapore and Hong Kong, as well as to Pakistan, Yemen, Sudan and Bangladesh. CCM is also planning to increase its overseas promotional activities, and was targeting a figure of 40% of total sales for exports by 2010, up from 30% previously.
Developments
Thai pharmaceutical company The British Dispensary signed a deal with CCM in March 2010 for developing its manufacturing base and expanding its product range, reports Business Times. With the MYR50mn (US$15.3mn) collaboration, the Thai company is looking to include halal-based cosmetic and healthcare products in its existing 18-brand portfolio. The two companies are capitalising on the ASEAN free trade area to expand their businesses in the region. In April 2009, CCM inaugurated its new US$2.8mn research and development centre in Malaysia. The Innovax 63,000ft site is used for the manufacture of new and innovative generic drugs. Innovax is the largest facility of its kind in the country, with CCM planning an additional US$562,000 investment. Through to 2015, 35 new generic drugs will be launched.
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In 2011, group revenue fell by 2.8% to MYR1.61bn, with net profit down by 1.3% to MYR58.4mn. The chemicals business revenue fell for the year, although pharmaceutical sales grew by 4.5%, rising to MYR261.3mn. The group expects a challenging 2012 and aims to enhance its business processes and improve its reach. For the full FY10, the group posted a 6% y-o-y increase in revenue, which rose to MYR1.64bn. Profit for the year came in at around MYR33mn, rising from MYR5mn achieved in FY09. The groups pharmaceuticals arm posted MYR250mn in FY10 revenue. CCM had a challenging 2009. In Q309, the firm posted sales of MYR404mn (US$118mn), a 4.7% decrease compared with the previous quarter. Encouragingly, CCM returned to profit in Q309, after posting a net loss of MYR439,000 (US$129,000) in Q209. For the whole of 2009, the group posted MYR1.6bn in revenue, down by 27.4% (which was partly attributable to one-off write-offs). Profit before tax was down by 87%, to MYR120.3mn. CCMs pharmaceutical arm reported a 4.3% revenue growth, to MYR242.7mn, although its profit before tax was down by 22.9%, to MYR45.6mn, largely due to the expense on the capacity expansion in Bangi.
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Company Contacts
Chemical Company of Malaysia, 13 floor, Menara PNB, 201-A Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia Tel: +60 (3) 2612 3888 www.ccm.com.my
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Kotra Pharma
Strengths Company Overview One of the leading local drug producers, annually investing 5% of revenue in R&D. Strong OTC portfolio. Ability to expand its manufacturing capacity. Comprehensive and expanding marketing network. Competition from other local manufacturers. Pressure on the government to reverse policies biased towards the local industry. Increasing demand for compliance with international IP standards. Product portfolio mainly focused on OTCs. Government programme for developing the pharmaceutical and biotechnology sectors. Expected increase in local and regional drug consumption. Expansion of medical provision and infrastructure. Widespread counterfeit industry. Increased competitiveness of local players driven by ASEAN harmonisation and other regulatory developments. Rising prominence of Chinese drug makers, which can compete on price. Lawsuit filed against the company in May 2010.
Weaknesses
Opportunities
Threats
Kotra is a wholly owned subsidiary of Kotra Industries Berhad. The company is mainly engaged in the development, manufacture and sales of pharmaceutical and healthcare products. In 2007, Kotra was publicly listed on the main market of Bursa Malaysia. The company had modest beginnings, initially being a family-run enterprise specialising in traditional Chinese medicine, before evolving into the distribution of pharmaceutical products. In 2002, when Malaysia was admitted as a PIC/S member country, Kotra was selected to be audited for the quality inspection of its facilities. One year later, the company was awarded the internationally recognised ISO 9001 accreditation for the Quality Manufacture, Design and Development of pharmaceutical products.
Strategy
Currently, just over a third of Kotras business comes from overseas sales to countries such as Indonesia, Singapore, Brunei, Vietnam, Cambodia, Myanmar, Hong Kong, Mauritius and Sri Lanka. Mid-way through the firms five-year plan, Kotras exports should exceed domestic sales. Kotra is currently constructing a MYR120mn (US$35.3mn) plant in Melaka, which is a manufacturing centre for products ranging from food and consumer products, through to high-tech weaponry and automotive components, to electronic and computer parts. Phase 1 of the 35,000m production facility was finished in 2009, and total completion is expected in 2012. At full capacity, the new plant will have 10 times the current output of Kotras manufacturing lines. Kotra has 200 products currently registered with the National Pharmaceutical Controls Board, with OTCs accounting for the bulk of the portfolio and branded generic products increasing in importance. In FY09, the companys prescription medicines range grew by 19% in relation to the previous financial year, on the back of new product launches, such as antifungal Axcel Ecozalon cream, and psoriasis and dermatitis cream and ointment Axcel Clobetasol.
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Kotras Appeton health supplement range is the firms flagship franchise, accounting for 61% of sales over the past five years. In FY09, Appetons share of the market for childrens vitamin C increased from 48% to 55%, as reported by ACNielsen. Kotra is also aiming to strengthen its penetration of the adult multivitamin market, with efforts that include the recent introduction of Appeton Wellness 60+. Kotra Pharmas total annual production at its main factory includes sterile and non-sterile items. In the sterile range, the company manufactures 2mn eye drops and 2mn ampoules, 1.5mn of each powder vials and dry syrups, and 3mn liquid vials. In the non-sterile range, it produces around 528mn tablets, 139mn capsules, 38mn liquid bottles and 15mn tubes of cream.
Developments
Frost & Sullivan nominated Kotra Pharma Malaysian Pharmaceutical Company of the Year in 2011 because of its degree of business innovation, growth in revenue and growing international market penetration. In May 2010, it was reported that Takaso Rubber Products had taken legal action against Kotra Pharma for allegedly failing to pay for goods. The company said that it intends to file a counterclaim. In January 2009, Danish Leo Pharma won a court case against Malaysia generic manufacturer Kotra Pharma. The Malacca High Court ruled that Kotra infringed Leos trademarks Fucidin (fucidic acid) and Fucicort (fucidic acid) by adopting trademarks Axcel Fusidic and Axcel FusiCorte back in 2000. The products are used for the treatment of skin infections. In July 2007, Kotra Pharma unveiled a five-year plan that focuses on exports, initially to neighbouring ASEAN countries (Thailand and the Philippines in particular), but ultimately to the lucrative markets of Western Europe and the US. To achieve this goal, the company intends to expand production capabilities, increase R&D investment and enlarge its product portfolio.
In FY11 (ending June), Kotra posted MYR112.8mn in revenue, with domestic sales accounting for 65.8% of this figure. The company, however, posted a loss before tax of MYR2.1mn, due to lower margins partly caused by the depreciating US dollar. Group R&D expenditure topped MYR681mn, up from MYR425mn in the previous year. In FY10, the company posted MYR102.4mn in revenue, up by 13.7% on the previous year. Profit before tax was up 38.7%, to reach MYR12.5mn, mainly due to increased sales revenues, better advertising and changes in product mix. Domestic sales, which represented 61% of total revenues, rose by 6.2% y-o-y, to MYR62.5mn. Exports by 27.9%, with new export destinations reached during the year including Ethiopia, Sudan, China, Laos, Mongolia, Yemen and Kenya. In FY09, group revenues were MYR90mn, up by 3.8% y-o-y, with pre-tax profit reaching MYR9mn an increase of 17% y-o-y on the back of stronger domestic sales and exchange gains due to rising US exports. Exports, however, fell from MYR32.3mn in 2008 to MYR31.1mn in 2009. Demonstrating its commitment to R&D, the company increased its research expenditure from MYR1mn (US$293,900) to MYR6.4mn (US$1.9mn) for the fiscal year ended June 30 2008.
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Company Contacts
Kotra Pharma, 1 Jalan TTC 12, Cheng Industrial Estate, 75250 Melaka, Malaysia Tel: +60 (6) 336 2222 www.kotrapharma.com
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Multinational Companies
GlaxoSmithKline
Strengths Weaknesses Opportunities Threats One of the few multinational drugmakers with a direct manufacturing presence in Malaysia, enjoying the benefits available to local producers. Strong product portfolio covering a wide range of therapeutic areas and the highest market share amongst multinationals. Diverse local manufacturing portfolio in Malaysia. Involvement in the ED market. Malaysias weak domestic patent law and benefits granted to local generic-based pharmaceutical companies. Sizeable drug copying and counterfeiting sector. Lack of patent protection for GSKs anti-AIDS drugs. Lack of IPR protection and enforcement. Expected increase in local and regional drug consumption, driven by demographic and economic changes, as well as by improvements in regulatory standards. Increase in consumption of patented medicines supported by ASEAN harmonisation effort and pharmaceutical sector modernisation. Governments focus on developing the countrys biotechnology sector. The company sees potential for strong growth in Asia. Malaysia may join multilateral trans-Pacific trade agreement with the US. Resistance to aligning domestic patent law fully with internationally acceptable standards. Government failure to revise its discriminatory pricing policy. Competition from other multinationals wishing to expand its local base. Companys Avandia drug has been attacked for apparent heart risk links.
Company Overview
GSK Malaysia was incorporated in 1958 under the name Glaxo Malaysia Sdn Bhd. The incorporations of Beecham Products (Far East) Sdn Bhd and Sterling Drug (Malaysia) Sdn Bhd followed in 1959 and 1962, respectively. Due to the merger between SmithKline Beckman Corp (USA) and Beecham Group PLC (UK) in 1989, the name changed to SmithKline Beecham Consumer Brands Sdn Bhd. In 1992, the company moved to new premises in Bangsar Utama and has since moved to Petaling Jaya Selangor. Glaxo and Wellcome merged to form Glaxo Wellcome in 1995. In December 2000, Glaxo Wellcome and SmithKline Beecham merged to form GlaxoSmithKline.
Strategy
Currently, the company has around 600 employees. Its Malaysian manufacturing operations export to Singapore, Hong Kong, Thailand, China, the Philippines and Indonesia. GSK Consumer Healthcare is a fully owned subsidiary in Malaysia. Malaysia is home to one of GSKs consumer healthcare manufacturing sites. The facility produces OTCs for the domestic market, Singapore and Taiwan. Production costs exceed MYR40mn (US$12mn) a year. The sites annual output includes 800mn tablets, 400 tonnes of powder and 150,000kg of cream. Demonstrating its importance, GSKs consumer healthcare manufacturing units from Taiwan, Thailand and Venezuela were transferred to Malaysia.
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GSKs manufacturing portfolio in Malaysia is diverse. In addition to consumer healthcare products, the company produces a variety of ethical pharmaceuticals and vaccines. In addition, GSK also distributes a range of OTC medicines, including Eno, Eye-Mo, Oxy, Panadol, Scotts and Zentel, along with its oral healthcare products and a range of nutritional health drinks. The company has a distribution agreement with Diethelm Holdings (Malaysia), one of the countrys largest distribution concerns. GSKs main non-prescription brands include Horlicks, Ribena, Panadol, Scotts Emulsion, Menara Lien Hoe Eye-Mo, Eno, Oxy and Aquafresh. The companys local subsidiary sells a range of other prescription drugs, such as antibiotics, anti-asthmatics, anti-diabetics, anti-virals, anti-migraine treatments as well as vaccines for hepatitis A and B, varicella, meningitis, polio and diphtheria. GSKs anti-AIDS drugs, zidovudine and the combination therapy lamivudine, continue to suffer from a lack of patent protection. Developments In January 2011, GSK launched a new and selective angiogenesis inhibitor, pazopanib, in Malaysia for the treatment of tumour growth. The drug will add to the existing targeted therapies in the country, which include a new oral treatment option to treat patients with advanced renal cell carcinoma (RCC), a leading form of cancer. In March 2010, the Drug Control Authority (DCA) asked GSK to amend prescription information for its diabetes drug Avandia (rosiglitazone). The US Senate had previously suggested that GSK had known of Avandias heart risk links for some years before it had become widely known, which the company denies. The DCAs request was officially made on the back of 33 adverse effect reports received by the Ministry of Health. In October 2009, GSK announced that it was to spend MYR60mn (US$18mn) to upgrade its global IT facility in Petaling Jaya, Selangor. Funds were used to raise the headcount from 130 to 250 over six months. Malaysia was chosen as the site for the global IT facility because of its computer-literate, English-speaking workforce. The plant in Petaling Jaya receives tax breaks due to its MSC (formerly known as the Multimedia Super Corridor) status. In mid-2009, the price of some of GSKs drugs in select Asian countries was cut. Its breakthrough cervical cancer vaccine, Cervarix, is now cheaper in Thailand and Malaysia. In February 2009, GSKs avian influenza vaccine Prepandrix was approved in Malaysia, which became the first country outside Europe to do so. The company was working closely with local authorities in order to prepare for a possible pandemic.
Financial Performance The companys own figures put its annual sales from its Malaysian operation in the region of US$100mn, supported by the growth of prescription drug sales in the country. Despite the challenging economic scenario, combined sales of consumer health products and prescription drugs by GSK in Malaysia were MYR600mn (US$178mn) in 2008. Revenue generated by prescription and consumer health products grew by 6% and 10%, respectively. Company Contacts GlaxoSmithKine Pharmaceutical Sdn Bhd, Level 6, Quill 9, 112, Jalan Semangat, 46300 Petaling Jaya, Selangor, Malaysia Tel: +60 (3) 7495 2600 www.gsk.com.my
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Pfizer
Strengths Largest pharmaceutical company in the world. One of leading providers of ED medicines. Broad portfolio of products including antibiotics, vitamins and OTC pharmaceuticals, consumer and healthcare products. Weak domestic patent law and benefits granted to local generic-based companies. No direct manufacturing presence. Lack of IPR protection and enforcement. Drug consumption expected to increase, boosted by demographic and economic factors, as well as by improvements in regulatory standards. The ASEAN harmonisation effort and pharmaceutical sector modernisation increasing the demand for patented products in the country. The Malaysian governments focus on developing the countrys biotechnology sector likely to result in improved investment opportunities, a favourable business environment and a costeffective R&D proposition. Government resistance to aligning domestic patent law fully with internationally acceptable standards. Significant presence of the counterfeit drug industry. Key ED product Viagra (sildenafil citrate) particularly susceptible to competition, of both genuine (from Eli Lilly and Bayer/GSK) and fake nature. Government failure to revise its discriminatory pricing policy Strong competition from other multinationals.
Weaknesses
Opportunities
Threats
Company Overview
In Asia, Pfizer was incorporated as a private limited company in Singapore in 1964. The company began its operations modestly, selling only a few products. The Malaysian operation was set up as a subsidiary of the Singapore-registered company and became a fully registered company in 1978. Today, the company has a strong presence in Malaysia, with around 500 staff, most of who are engaged in sales operations across 9 offices. In 2009, Pfizer acquired compatriot Wyeth, which also operates in Malaysia through imports via a local office.
Strategy
Pfizer is investing heavily in the Malaysian market, including the expansion of existing manufacturing assets and the establishment of a new R&D centre. Pfizer Malaysia markets a wide range of pharmaceuticals and therapeutic products, ranging from vitamin supplements and nutritionals, to antibiotics and cardiovascular therapies. The companys portfolio of products includes cardiovascular, neuroscience, infectious diseases, arthritis/pain, urology, ophthalmology, oncology and respiratory disease. Pfizer will continue to be challenged by other multinationals on the one hand, and by local producers on the other, with Indian Ranbaxy also entering the fray with the 2006 launch of generic Lipitor (atorvastatin) under the brand name Storvas.
Developments
In October 2010, it was announced that Indian biotechnology company Biocon was set to invest US$161mn in the establishment of a manufacturing and research facility in Malaysia. The new facility, to be constructed as part of a strategic investment agreement signed between Biocon and
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Malaysias Biotechnology Corporation (BiotechCorp), marks the largest FDI in Malaysian biotech sector. Biocons chairperson and managing director Kiran Mazumdar-Shaw said that the new facility is scheduled to be operational by 2014 and will manufacture insulin for diabetes treatment, as required under the companys US$350mn global marketing deal with Pfizer. The new facility will allow the company to develop antibodies and other biologics during the next phase. In September 2007, Pfizer Malaysia reported that there were illegal imitations of Aricept (donepezil), Celebrex, Diflucan, Feldene (piroxicam), Lipitor, Norvasc, Ponstan (mefenamic acid), Zoloft and Viagra circulating in Asia. Around the same time, Sutent (sunitinib) was launched in Malaysia for kidney cancer and gastrointestinal stromal tumour.
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Company Contacts
Pfizer Malaysia Sdn Bhd, 3 & 4 Floors, Bangunan Palm Grove, No. 14, Jalan Glenmarie (Persiaran Kerjaya), Section U1, 40150 Shah Alam, Selangor Darul Ehsan, Malaysia Tel: +60 (3) 5568 6688 www.pfizer.com.my
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Novartis
Strengths Weaknesses Opportunities Threats Diverse manufacturing presence, including a broad portfolio of antibiotics, vitamins and OTC pharmaceuticals, consumer and healthcare products. Solid financial capability, business portfolio and industry experience. Presence in the generic drugs sector. Weak domestic patent law and benefits granted to local generic drugmakers. Low purchasing power of much of the population, exacerbated by high out-of-pocket contribution to pharmaceutical expenditure. Biased drug-pricing policy adopted by the Malaysian government. Increasing health awareness in the Asian region, which will boost overall drug consumption. Potential to expand in the fast-growing generic drugs market. ASEAN harmonisation effort and pharmaceutical sector modernisation boosting demand for patented products. Improving regulatory standards to stimulate involvement in the market. Governments focus on developing the countrys biotechnology sector. Government resistance to aligning domestic patent law fully with international standards. Significant counterfeit drug industry. Government failure to revise its discriminatory pricing policy likely to limit company expansion, both in terms of activity and investment.
Company Overview
Novartis was established in Malaysia following the merger of Sandoz and Ciba-Geigy in 1997. The company comprises Pharmaceuticals, Consumer Health, Ciba Vision and a generic drugs sector, with more than 100 staff employed around the country.
Strategy
Novartis is among the 10 leading pharmaceutical companies in Malaysia. The companys groundbreaking approach to the industry has seen it expand into generic products, in contrast with global peers such as Pfizer and GSK, which remain focused on high-profit, patented blockbuster pharmaceutical products. The progressive ageing of the population is increasing the need for medicines, as well as the need to restrain healthcare costs, and as such, generic medicines are likely to continue to penetrate the market. Novartis has expressed interest in locating research centres and conducting clinical trials in Malaysia, thereby boosting the countrys ambitions to become a biotech rival to Singapore or Taiwan. Novartis may also invest in Malaysias biotechnology industry, and is evaluating Malaysias rich biodiversity with the aim of producing novel treatments. The company has a broad portfolio of products, including medicines in transplantation and immunology, cardiovascular diseases, diseases of the CNS, Parkinsons disease, skin allergies, OTC and ophthalmic medications. Novartis is present in both branded and generic drugs sectors in Malaysia and therefore faces competition from both multinational and local producers.
Developments
In Q212 Novartis signed a memorandum of understanding with the Ministry of Health to further enhance the countrys progress in the National Key Economic Area programme for healthcare. Novartis established a US$700mn fund to support the setting up of new Malaysian companies.
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In November 2009, Novartis signed an agreement with BiotechCorp and Sarawak Biodiversity Centre in order to discover bioactive compounds. Novartiss director Alexander Jetzer-Chung said that the agreement enables the company to leverage capitalise on the countrys biodiversity in the development of new medical opportunities. CIBA Vision, the eye care business of Novartis, invested MYR500mn (US$132.45mn) to build an integrated contact-lens manufacturing plant in Malaysia. The plant, at Johors Tanjung Pelepas Free Trade Zone, was operational by December 2007. The facility now produces one of the most technologically advanced, high-oxygen transmissible products, O2OPTIX contact lenses. These breathable contact lenses are made from a silicone Lotrafilcon b the latest material used in hygrogel contact-lens technology. Initial production capacity was expected to reach 300,000 contact lenses a day, with output rising to 500,000 lenses a day by 2008. Investment in the project will be spread over eight years, with the plant creating 2,000-3,000 jobs in the later stages of operation.
Company Contacts
Novartis Corporation (Malaysia) Sdn Bhd, Level 15, The Crest, 3 Two Square, No.2, Jalan 19/1, 46300 Petaling Jaya / Selangor Darul Ehsan, Malaysia Tel: +60 (3) 7948 1888 www.my.novartis.com
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Merck & Co
Strengths Opportunities Company Overview Strong portfolio of prescription pharmaceuticals. Strong regional presence. A leading multinational, with extensive network in South East Asia. Presence in the vaccines segment. Considerable experience in conducting local clinical trials. Malaysias weak domestic patent law and benefits granted to local generic-based pharmaceutical companies. Biased drug-pricing policy adopted by the Malaysian government. Lack of local manufacturing capacities. Significant contribution of out-of-pocket expenditure to overall drug spending. Lack of IPR protection and enforcement. Increasing health awareness in the Asian region, which will boost overall drug consumption. ASEAN harmonisation and drug sector modernisation boosting patented drug demand. Improving regulatory standards to stimulate involvement in the market. Governments focus on developing the countrys biotechnology sector. Rising demand for treatments of chronic conditions. Expansion of private sector provision increasing the number of potential clients for Merck. Malaysia may join multilateral trans-Pacific trade agreement with the US. Government resistance to aligning domestic patent law fully with international standards. Significant threat from the counterfeit drug industry. Failure to revise discriminatory pricing policy likely to limit company expansion, both in terms of activity and investment. Strong competition from other multinationals. Threat posed by generic companies targeting off-patent medicines.
Weaknesses
Threats
Merck & Co (now incorporating Schering-Plough, following their 2009 merger) operates in Malaysia, as well as other countries in the region, through its subsidiary Merck Sharpe & Dohme (MSD) Asia Pacific. The Malaysian sales and marketing section, established in 1997, presently employs around 300 people. MSD Asia Pacific division is a considerable commercial force in the region. The company is involved both in local manufacturing and marketing initiatives, with the regional focus being on Japan, the leading Asian market.
Strategy
MSD Malaysia markets and sells a variety of prescription pharmaceuticals in the country. Main product areas include diabetes (which is reportedly the single key driver of the companys potential in the country), allergy and cardiovascular drugs. The merger with Schering-Plough has allowed MSD to gain access to a considerable portfolio of womens health products, which have been heavily promoted. The company deals with both public and private sectors. MSDs key customers in the private sector include private hospitals, pharmacies and general practitioners (GPs). Competition in some areas, such as HPV vaccines, has forced MSD to reduce the price of its Gardasil vaccine. Multinationals represent the main challenges to Mercks Malaysian operations. Additionally, the counterfeit industry and lax patent protection continue to disadvantage some of its patented
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products performance, especially given ongoing patent expirations. Financial Performance The performance of its cardiovascular product Coozar (losartan) in Malaysia came under threat, following Ranbaxys launch of a branded generic competitor in August 2009. According to primary market research firm IMS Health, Malaysian sales of Cozaar topped US$6.29mn in the 12 months ending June 2008. MSDs losartan is reportedly still under patent in Malaysia, which is due to expire in 2013. According to officials from MSD Malaysia, the company experienced virtually no sales increase in the course of 2010, as a result of negative market conditions. In comparison, joint value sales of prescription drugs achieved by the top 10 companies in the country fell by 5% y-o-y, on average. In an interview cited on Focus Pharma Reports, MSD Malaysias managing director Ewe Kheng Huat stated that the companys 2010 revenue fell in the region of US$103mn. In comparison, the companys annual sales in the last 1990s were less than US$5mn. Merck Sharpe & Dohme Malaysia, 9 Floor, Lot 33, No 3, Jln Semangat, Seksyen 13, 46200 Petaling Jaya, Selangor Darul Ehsan, Malaysia Tel: +60 (3) 7918 1600 www.msd-malaysia.com
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Company Contacts
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Sanofi
Strengths Opportunities Third largest drug manufacturer in the world. Among the leading foreign producers in Malaysia. Broad portfolio of products, including antibiotics, vaccines and OTC pharmaceuticals. Malaysias weak domestic patent law and benefits granted to local generic-based pharmaceutical companies. Biased drug-pricing policy adopted by the Malaysian government. Lacking IPR protection and enforcement. Drug consumption in the Asian region due to rise from increasing health awareness. Potential to expand its presence in the expanding generic drugs market. Improving regulatory standards to stimulate involvement in the market. The ASEAN harmonisation effort and pharmaceutical sector modernisation. The Malaysian governments focus on developing the countrys biotechnology sector, improving investment opportunities, providing a favourable business environment for the company, and a cost-effective R&D proposition. Expansion of private medical provision facilities. Persistence of counterfeit drug activities. Government failure to revise its discriminatory pricing policy. Focus on cost-containment in public healthcare. Competition from other generic drugs player in the country and region.
Weaknesses
Threats
Company Overview
With a workforce of more than 250 people across eight offices, Sanofi-Aventis Malaysia ranks among the top five pharmaceutical companies in the country, while also boasting a considerable regional market presence.
Strategy
Sanofi majors in a number of key therapeutic areas, including diabetes, cardiovascular/thrombosis, CNS, oncology and internal medicine. Leading brands include Plavix (clopidogrel), Aprovel (irbesartan), Epilim (sodium valproate), Lactacyd (lactoserum atomizate), Eloxatin (oxaliplatin), Rhinathiol (carbocisteine), Phenergan (promethazine), Stilnox (zolpidem), Ticlid (ticlopidine) and Tramal (tramadol).
Developments
Malaysia was one of Sanofi Pasteurs locations for Phase III trials of its dengue vaccine, which showed proof of efficacy according to the firm in July 2012. In June 2012, Sanofi announced its plans to expand its presence in Malaysia, through bilateral collaboration with the government in the healthcare sector. The cooperation will focus on R&D, particularly in the vaccine sector. In January 2011, Malaysian drugmaker Hovid tied a deal with Sanofis local subsidiary Winthrop, aimed at the development and manufacture of generic drugs, namely metformin 850mg MR for the diabetes treatment and tramadol 100mg SR, which is used as a painkiller. Hovid also reported that the deal may be extended to another 30 products, which are valued at over MYR50mn. In January 2012, Minister of Health Liow Tiong Lai stated that a dengue fever vaccine developed in collaboration with Sanofi will be available in the country by 2014 or 2015. The second phase of trials, which involved monitoring about 2,000 people from Penang and Putrajaya, was judged to be a success. A larger population sample will be included during phase III before the vaccine
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becomes available on the market. Sanofi (Malaysia) Sdn Bhd, 8 Floor PNB Damansara, No. 19, Lorong Dungun Damansara Heights,50490 Kuala Lumpur, Malaysia Tel: +60 (3) 2089 3333 www.sanofi.com.
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Company Contacts
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Eli Lilly Malaysia

Strengths Threats Company Overview One of the leading global pharmaceutical companies. Strong product portfolio. Ability to expand through acquisition. Competition from government-supported local producers. Government policies biased towards the local industry. Widespread counterfeit industry. Patent expirations negatively impacting on company revenues and product positioning. Government programme for developing the pharmaceutical and biotechnology sectors in the country. Expected increase in regional drug consumption. Improving regulatory standards to stimulate involvement in the market. Continued encouragement of the generic drugs sector. Higher level of patient awareness of cost containment. Increased competitiveness of local players driven by ASEAN harmonisation and other regulatory developments. Rising prominence of China and other regional suppliers of cheaper generic medicines.
Weaknesses
Opportunities
Eli Lilly is one of the top 20 global pharmaceutical players. In the South East Asia region, Elis key markets include Singapore, Taiwan and the Philippines. In 2010, IMS ranked Eli Lilly as the fastest growing pharmaceutical company in the markets of China and South Korea.
Strategy
The company offers a wide-ranging product portfolio, mostly comprising branded drugs. Key therapeutic areas covered include cardiology, erectile dysfunction, cancer and diabetes. Patent expirations and counterfeiting will continue to negatively impact on company performance and the Lilly brand positioning in Malaysia.
Developments
In June 2011, Japanese company Takeda Pharmaceutical and Eli Lilly entered an agreement to sell Evista (raloxifene HCl tablets) in seven Asian nations South Korea, Hong Kong, Macau, Malaysia, the Philippines, Singapore and Thailand. Under the terms of the agreement, Takeda will assume the rights related to marketing, distribution and trademark, marketing authorisation and regulatory matters, while Eli, eligible for cash payment from Takeda, will retain the ownership of the drug patent. Evista is approved and marketed to treat and prevent osteoporosis in postmenopausal women in all the regions, as well as to reduce the risk of breast cancer in the Philippines, Singapore and Thailand. Eli Lilly (Malaysia) Sdn Bhd, Unit 18.1, Level 18, CP Tower, No. 11, Jalan 16/11, Pusat Dagang Seksyen 16, 46350 Petaling Jaya, Selangor Darul Ehsan, Malaysia Tel: +60 (3) 7957 7837 www.lilly.com
Company Contacts
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Ranbaxy Malaysia
Strengths Strong generic portfolio and local production facilities. Nascent global generic player. Ability to expand through acquisition. Relatively recent entry to the Malaysian market. Competition from government-supported local producers. Government policies biased towards the local industry. Government programme for developing the pharmaceutical and biotechnology sectors. Continued encouragement of the generic drugs sector. Higher level of patient awareness of cost containment. Widespread counterfeit industry. Increased competitiveness of local players driven by ASEAN harmonisation. Rising prominence of China and other regional suppliers of cheaper generic medicines.
Weaknesses
Opportunities
Threats
Company Overview
Ranbaxy Malaysia is a joint-venture established in 1984 by Indias Ranbaxy Laboratories Limited (RLL), and has shareholders from India as well as Malaysia. In 1987, the company established a manufacturing unit in Sungai Petani, Kedah, to supply markets in Malaysia and Singapore. Malaysia, South Africa, Nigeria, Egypt and Morocco are among its key markets.
Strategy
The company manufactures pharmaceutical products for oral use comprising liquid formulations, tablets, capsules and granules for suspension. Ranbaxys portfolio contains around 80 brands, including those managed through local partnerships. Ranbaxy Malaysias top 10 brands account for around two-fifths of total sales. Ranbaxy has a presence in the therapeutic segments of cardiovascular, antibiotic, pain management, gastrointestinal and food supplements. Ranbaxys second manufacturing facility in Kuala Lumpur (which is compliant with international standards) manufactures antibiotics, anti-bacterials, NSAIDS, vitamins, cough and cold remedies, antacids, anti-spasmodics, anti-fungals, anti-ulcerants and cardiovasculars. The company is the only foreign manufacturer of anti-retrovirals (ARVs) in Malaysia.
Developments
In August 2009, reinforcing its strong position in Malaysias cardiovascular drug sector, Ranbaxy launched Covance (losartan), which is manufactured locally. In May 2012, Ranbaxy announced that it will set up manufacturing facility in Malaysia, which is likely to be completed by 2014 and have annual capacity of 2.5bn doses, as a part of its plans to export to neighbouring countries such as Singapore and Thailand, with another manufacturing plant to be set up in Nigeria. This move followed the firms agreement with its parent company Daiichi Sankyo to market Cravit (levofloxacin) in Malaysia since January 2012. Ranbaxy (Malaysia) Sdn. Bhd.,Box 8, Wisma Selangor Dredging, 5 Floor South Block 142-A Jalan Ampang, 50450 Kuala Lumpur, Malaysia Tel: +60 (3) 2161 4181 www.ranbaxy.com
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Demographic Outlook
Demographic analysis is a key pillar of BMIs macroeconomic and industry forecasting model. Not only is the total population of a country a key variable in consumer demand, but an understanding of the demographic profile is key to understanding issues ranging from future population trends to productivity growth and government spending requirements. The accompanying charts detail Malaysias population pyramid for 2011, the change in the structure of the population between 2011 and 2050 and the total population between 1990 and 2050, as well as life expectancy. The tables show key data points from these charts, in addition to important metrics such as the dependency ratio and the urban/rural split.
Source: World Bank, UN, BMI
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Table: Population By Age Group, 1990-2020 ('000)
1990 Total 0-4 years 5-9 years 10-14 years 15-19 years 20-24 years 25-29 years 30-34 years 35-39 years 40-44 years 45-49 years 50-54 years 55-59 years 60-64 years 65-69 years 70-74 years 75+ years 18,209 2,445 2,284 2,026 1,830 1,670 1,649 1,411 1,190 926 679 617 455 370 258 190 206
1995 20,721 2,652 2,460 2,285 2,039 1,856 1,708 1,689 1,444 1,208 930 670 593 420 322 210 235
2000 23,415 2,721 2,612 2,469 2,315 2,092 1,934 1,795 1,759 1,486 1,221 921 646 549 366 261 267
2005 26,100 2,953 2,840 2,614 2,483 2,341 2,115 1,942 1,791 1,746 1,467 1,195 887 605 489 306 327
2010 28,401 2,828 2,948 2,839 2,616 2,487 2,343 2,112 1,935 1,779 1,727 1,440 1,155 836 545 417 392
2012f 29,322 2,802 2,926 2,908 2,705 2,536 2,413 2,206 2,000 1,825 1,755 1,556 1,251 939 617 432 450
2015f 30,714 2,897 2,824 2,947 2,840 2,620 2,489 2,341 2,106 1,924 1,763 1,700 1,399 1,097 764 473 529
2020f 32,986 2,953 2,894 2,824 2,950 2,845 2,623 2,487 2,334 2,094 1,908 1,738 1,656 1,334 1,010 671 663
f = BMI forecast. Source: World Bank, UN, BMI
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Table: Population By Age Group, 1990-2020 (% of total)
1990 0-4 years 5-9 years 10-14 years 15-19 years 20-24 years 25-29 years 30-34 years 35-39 years 40-44 years 45-49 years 50-54 years 55-59 years 60-64 years 65-69 years 70-74 years 75+ years 13.43 12.54 11.13 10.05 9.17 9.05 7.75 6.53 5.09 3.73 3.39 2.50 2.03 1.42 1.04 1.13
1995 12.80 11.87 11.03 9.84 8.96 8.24 8.15 6.97 5.83 4.49 3.24 2.86 2.03 1.56 1.01 1.13
2000 11.62 11.16 10.55 9.89 8.93 8.26 7.67 7.51 6.34 5.21 3.94 2.76 2.35 1.56 1.12 1.14
2005 11.31 10.88 10.02 9.51 8.97 8.10 7.44 6.86 6.69 5.62 4.58 3.40 2.32 1.87 1.17 1.25
2010 9.96 10.38 10.00 9.21 8.76 8.25 7.44 6.81 6.26 6.08 5.07 4.07 2.94 1.92 1.47 1.38
2012f 9.55 9.98 9.92 9.23 8.65 8.23 7.52 6.82 6.22 5.99 5.31 4.27 3.20 2.11 1.47 1.54
2015f 9.43 9.19 9.59 9.25 8.53 8.11 7.62 6.86 6.26 5.74 5.54 4.55 3.57 2.49 1.54 1.72
2020f 8.95 8.77 8.56 8.94 8.63 7.95 7.54 7.08 6.35 5.78 5.27 5.02 4.04 3.06 2.03 2.01
Table: Key Population Ratios, 1990-2020
1990
1995
2000
2005
2010
2012f
2015f
2020f
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Dependent ratio, % of 1 total working age Dependent population, 2 total, '000 Active population, % of 3 total Active population, total, 4 '000 Youth population, % of 5 total working age Youth population, total, 6 '000 Pensionable population, 7 % of total working age Pensionable population, 8 '000
1
68.6 7,411 59.3 10,798 62.6 6,755 6.1 655
65.0 8,164 60.6 12,557 58.9 7,396 6.1 767
59.1 8,697 62.9 14,718 53.0 7,803 6.1 894
57.5 9,529 63.5 16,572 50.7 8,406 6.8 1,122

2
54.1 9,971 64.9 18,431 46.7 8,616 7.3 1,355
52.8 10,136 65.4 19,186 45.0 8,636 7.8 1,500

3
51.5 10,435 66.0 20,280 42.7 8,668 8.7 1,767
50.1 11,016 66.6 21,970 39.5 8,671 10.7 2,344
f = BMI forecast; 0>15 plus 65+, as % of total working age population; 0>15 plus 65+; 15-64, as % of total 4 5 6 7 8 population; 15-64; 0>15, % of total working age population; 0>15; 65+, % of total working age population; 65+. Source: World Bank, UN, BMI
Table: Rural/Urban Population Split, 1990-2020
1990 Urban population, % of total Rural population, % of total Urban population, '000 Rural population, '000 49.8 50.2 9,015.5 9,087.9
1995 55.7 44.3 11,470.8 9,123.1
2000 62.0 38.0 14,429.6 8,844.0
2005 67.6 32.4 17,328.2 8,305.2
2010 72.6 27.4 20,613.5 7,787.6
2012f 74.3 25.7 21,793.1 7,528.7
2015f 76.9 23.1 23,631.4 7,082.7
2020f 80.7 19.3 26,612.7 6,372.8
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Glossary
Pharmaceuticals, medicines, drugs: synonym terms used interchangeably. Pharmaceutical market/sales: the sum of revenues generated by generic, patented, and over-thecounter (OTC) drugs through hospitals, retail pharmacies and other channels. Unless otherwise stated, market value is reported at final consumer price including mark-ups, taxes, etc. Prescription drugs: patented and generic drugs regulated by legislation that requires a physicians prescription before they can be sold to a patient. Patented drug: an innovative medicine granted intellectual property protection by the patent and trademark office. The patent may encompass a wide range of claims such as active ingredient, formulation, mode of action, etc. giving the patent holder the sole right to sell the drug while the patent is in effect. Generic drug: a bioequivalent medicine that contains the same active ingredient as an originator drug. The originator drug is an innovative medicine that no longer has intellectual property protection due to patent expiry. OTC drug: a medicine that does not require a prescription to be sold to patients. Also known as nonprescription medicines. Counterfeit drugs: unregistered and illegal medicines which have not been subject to regulatory assessments to ensure quality, safety, efficacy and manufacturing standards. Similares: non-bioequivalent alternatives to either an originator patented drug or a generic drug. While similares and the originator/generic drug have a common indication, similares do not always contain the same active ingredient as an originator and invariably have a different pharmacokinetic and pharmacodynamic profile. Prevalent in select South American countries, similares are legal. BMI does not include their sales in total pharmaceutical market values. Health expenditure: the sum of the funds mobilised by government and private systems for the operation of a healthcare system, according to the World Health Organization (WHO). It includes the purchase of healthcare services and goods by public entities such as ministries and social security institutions; or by private entities such as non-profit institutions, commercial insurances and households acting as complementary funders to the previously cited institutions or unilaterally disbursing health commodities. The revenue base of these entities varies by country and comprises multiple sources. The inclusion of this in BMI forecasts necessitates taking into account the essential
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attributes of country-specific health accounting such as comprehensiveness, consistency, standardisation and timeliness. Government health expenditure: the sum of outlays for health maintenance, restoration or enhancement paid by government entities such as a Ministry of Health, other ministries, parastatal organisations and social security agencies, including transfer payments to households to offset medical care costs and extra-budgetary funds to finance healthcare provision. Private health expenditure: the sum of outlays for health by private entities such as commercial or mutual health insurance, households, non-profit institutions serving households, resident corporations and quasi-corporations not controlled by governments according to the WHO. Medical devices: products used for diagnosis or therapy in patients. Whereas pharmaceuticals achieve their principal action by pharmacological, metabolic or immunological means, medical devices act by physical or mechanical means. Medical devices include a wide range of products, including syringes, thermometers, blood-sugar tests, prosthetic limbs, ultrasound scans and X-ray machines, among others. Burden of Disease Database (BoDD): BMIs disease database incorporates WHO, World Bank, IMF and BMIs own data to create a proprietary dataset. BoDD data are quantified as the sum of disabilityadjusted life years (DALYs) lost to a disease in a particular country. Disability-Adjusted Life Years: the sum of the years of life lost (YLL) due to premature mortality in a population and the years lost due to disability (YLD) for incident cases of the health condition. The DALY is a health gap measure that extends the concept of potential years of life lost due to premature death (PYLL) to include equivalent years of healthy life lost in states of less than full health (broadly termed disability). One DALY represents the loss of one year of equivalent full health.
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BMI Methodology
How We Generate Our Pharmaceutical Industry Forecasts
Pharmaceutical sub-sector forecasts are generated using a top-down approach from BMIs Drug Expenditure Forecast Model. The semi-automated tool incorporates historic trends, macroeconomic variables, epidemiological forecasts and analyst input, which are weighted by relevance to each market. The following elements are fed into the model: BMIs historic pharmaceutical market data, which has been collected from a range of sources including: regulatory agencies; pharmaceutical trade associations; company press releases and annual reports; subscription information providers; local news sources; information from market research firms that is in the public domain. Data that has been validated by BMIs pharmaceutical and healthcare analysts using a composite approach, which scores data sources by reliability in order to ensure accuracy and consistency of historic data. Five key macroeconomic and demographic variables, which have been demonstrated, through regression analysis, to have the greatest influence on the pharmaceutical market. These have been forecast by BMIs Country Risk analysts using an in-house econometric model. The burden of disease in a country. This is forecast in DALYs using BMIs BoDD, which is based on the WHOs burden of disease projections and incorporates World Bank and IMF data. Subjective input and validation by BMIs pharmaceutical and healthcare analysts to take into account key events that have affected the pharmaceutical market in the recent past or that are expected to have an impact on the countrys pharmaceutical market over the next five years. These may include policy/reimbursement decisions, new product launches or increased competition from generic drugs.
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Pharmaceuticals Risk/Reward Ratings Methodology

BMIs approach in assessing the risk/reward balance for Pharmaceutical & Healthcare Industry investors globally is fourfold. First, we identify factors (in terms of current industry/country trends and forecast industry/country growth) representing opportunities to would-be investors. Second, we identify country and industry-specific traits which pose or could pose operational risks to would-be investors. Third, we attempt, where possible, to identify objective indicators that may serve as proxies for issues/trends to avoid subjectivity. Finally, we use BMIs proprietary Country Risk Ratings (CRR), ensuring that only the aspects most relevant to the Pharmaceutical & Healthcare Industry are incorporated. Overall, the system offers an industry-leading, comparative insight into the opportunities and risks for companies across the globe.
Ratings Overview
Ratings System Conceptually, the ratings system divides into two distinct areas: Rewards: Evaluation of the sectors size and growth potential in each state, as well as broader industry/state characteristics that may inhibit its development. Risks: Evaluation of industry-specific dangers and those emanating from a states political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period. Indicators The following indicators have been used. Overall, the ratings use three subjectively measured indicators and 41 separate indicators/datasets.
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Table: Pharmaceutical Business Environment Indicators
Indicator Rewards Industry Rewards Market expenditure, US$bn Market expenditure per capita, US$ Sector value growth, % y-o-y Country Rewards Urban-rural split Pensionable population, % of total Population growth, 2003-2015
Rationale
Denotes breadth of pharmaceutical market. Large markets score higher than smaller ones Denotes depth of pharmaceutical market. High value markets score better than low value ones Denotes sector dynamism. Scores based on annual average growth over five-year forecast period
Urbanisation is used as a proxy for development of medical facilities. Predominantly rural states score lower Proportion of the population over 65 years of age. States with ageing populations tend to have higher per-capita expenditure Fast-growing states suggest better long-term trend growth for all industries
Overall score for Country Structure is also affected by the coverage of the power transmission network across the state Risks Industry Risks Intellectual property (IP) laws Policy/reimbursements Approvals process Country Risks Economic structure Rating from CRR evaluates the structural balance of the economy, noting issues such as reliance on single sectors for exports/growth, and past economic volatility Rating from CRR evaluates the risk of a sharp change in the broad direction of government policy Rating from CRR denotes ease of conducting business in the state Rating from CRR denotes the strength of legal institutions in each state. Security of investment can be a key risk in some emerging markets Rating from CRR denotes the risk of additional illegal costs/possibility of opacity in tendering/business operations affecting companies ability to compete Markets with fair and enforced IP regulations score higher than those with endemic counterfeiting Markets with full and equitable access to modern medicines score higher than those with minimal state support High scores awarded to markets with a swift appraisal system. Those that are weighted in favour of local industry or are corrupt score lower
Policy continuity Bureaucracy Legal framework Corruption
Source: BMI
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Weighting
Given the number of indicators/datasets used, it would be inappropriate to give all sub-components equal weight. Consequently, the following weight has been adopted.
Table: Weighting Of Components
Component Rewards Industry Rewards Country Rewards Risks Industry Risks Country Risks
Weighting 60% 75% 25% 40% 60% 40%
Source: BMI
Sources
Sources used include national industry associations, government ministries, global health organisations, officially released pharmaceutical company results and international and national news agencies.
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pharmaceuticals & Healthcare Report

MALAYSIA PHARMACEUTICALS & HEALTHCARE REPORT Q4 2012

Part of BMIs Industry Report & Forecasts Series

Malaysia Pharmaceuticals & Healthcare Report Q4 2012

Business Monitor International Ltd

Malaysia Pharmaceuticals & Healthcare Report Q4 2012

Pharmaceutical Risk/Reward Ratings .......................................................................................................... 13

Industry Trends And Developments ............................................................................................................ 27

Industry Forecast Scenario ........................................................................................................................... 41

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Malaysia Pharmaceuticals & Healthcare Report Q4 2012

Competitive Landscape ................................................................................................................................. 63

Company Profiles ........................................................................................................................................... 68

Demographic Outlook .................................................................................................................................... 92

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Malaysia Pharmaceuticals & Healthcare Report Q4 2012

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Malaysia Political SWOT

Malaysia Economic SWOT

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Malaysia Business Environment SWOT

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Pharmaceutical Risk/Reward Ratings

Rewards Industry Rewards

Scores out of 100, with 100 highest. Source: BMI

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Risk/Reward Ratings By Subsector Score Q412

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Malaysia Market Summary

Pharmaceutical Market By Sub-Sector (US$bn) 2011

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Pharmaceutical And Medical Advertising

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Intellectual Property Regime

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Malaysia Pharmaceuticals & Healthcare Report - Q4 2012