Pharmaceuticals outlook in Southeast Asia

Pharmaceutical Outlook 
in Southeast Asia
Oficom Indonesia

Pharmaceuticals 
in Southeast Asia
The manufacture of basic pharmaceutical
products and preparations, and the wholesaling
of pharmaceutical goods are facing the intensity
of competition and changing market dynamics.
According to the ¨Asian competition barometer on
pharmaceuticals¨ developed by The Economist
Intelligence Unit, there are 6 key drivers for the
pharmaceutical industry in Southeast Asia.*
*Source: ¨Asian competition barometer on pharmaceuticals¨ developed by The Economist Intelligence Unit. https://aseanup.com/competition-profitability-pharmaceuticals-asia/

6 KEY 
DRIVERS
1. SECTOR
Asian pharmaceutical sector has been growing
rapidly, in the with the region´s economic growth
and demographic changes.
2. PLAYERS
The number of players, homegrown and global,
is rising.
3. INVESTMENT
Global companies are investing heavily in Asia
across sales and marketing , R&D and
manufacturing.
4. MARKET
Despite slight increase in market concentration,
competition in Asia´s pharmaceutical sector
remains fierce.
5. PROFITABILITY
Profitability has not increased due partly to
increase in material cost s and overall wages.
6. PARTNERSHIPS
The end of patent protection for some
blockbuster drugs is leading to more
partnerships between generic manufacturers and
big brand pharmaceutical firms.
*Source: ¨Asian competition barometer on pharmaceuticals¨ developed by The Economist Intelligence Unit.
https://aseanup.com/competition-profitability-pharmaceuticals-asia/

Healthcare
Spending
Several broad trends, including rising household income, increasing government expenditure on healthcare,
higher life expectancies, consumer health awareness and the growing incidence of chronic developed-world
diseases associated with changing lifestyles have all boosted demand for pharmaceutical products in the region.
Governments in the region have been investing in healthcare infrastructure and services in order to alleviate the burden on
households and to cope with changing diseases. Authorities in countries like Indonesia have been trying to broaden basic
health coverage though national insurance schemes. This combination of public and private spending has lead to a steady
rise in per capita healthcare spending in the region.*
*Source: ¨Asian competition barometer on pharmaceuticals¨ developed by The Economist Intelligence Unit. https://aseanup.com/competition-profitability-pharmaceuticals-asia/

Market 
Overview
In 2017, Vietnam's pharmaceutical market was valued at
USD5.3bn, the second largest medicine market in South East
Asia after Indonesia and slightly ahead of Thailand. In the same year,
on a per-capita basis, medicine spending was relatively low at
USD55, behind other emerging countries such as China. Prescription
drugs remain the dominant class of treatments in the country,
accounting for 75% of total sales, while the majority of this figure (at
over 70%) is represented by generic medicines.
Vietnam's healthcare market had a value of USD16.2bn in 2017, which
represented 7.5% of the country's GDP. The government is a major
contributor towards overall spending, accounting for 56% of overall
healthcare expenditure in that year, a reflection of the funding provided to the
social health insurance scheme. Per capita spending stood at a relatively
modest USD170.
Vietnamese drugmakers account for about 50% of the total medicines market,
while the country imports around 90% of the active pharmaceutical
ingredients used in drug production. In recent years, the authorities have
stepped up their efforts to reduce the country's reliance on imports. As part of
their 2020 strategy, authorities intend to have 80% of domestic pharmaceutical
demand met by local drugmakers, through measures such as tendering
preferences. * *Source: Business Monitor International Vietnam Pharmaceuticals & Healthcare Report | Q3 2018

SWOT
Analysis
Risk/Reward Index
In Q318, Vietnam remains included in the top
ten most attractive pharmaceutical markets in
the Asia Pacific region (out of 20 markets
covered). While it unsurprisingly lags behind larger
markets of Japan, Australia, South Korea and
China, it stands above the smaller, but more
developed markets such as New Zealand.
Vietnam’s overall score stands at 55.7, out of 100,
supported more by its rewards rather than risk
components. For comparison purposes, the
regional average stands at 53.2.
*Source: Business Monitor International Vietnam Pharmaceuticals & Healthcare Report | Q3 2018
*

Despite the expected expansion of
pharmaceutical exports, Vietnam's negative
trade balance will not be reverted in the
coming years, given the limited domestic
c a p a c i t y t o p r o d u c e i n n o v a t i v e
pharmaceuticals. Instead, growing demand
for chronic disease treatments at home will
serve to boost import potential. Moreover,
imports of generic medicines and active
pharmaceutical ingredients will remain a
major driver of imports growth given
large and growing demand, especially
given government's efforts in terms of the
use of the bidding process for public sector
procurement.*
TRADE MARKET FORECAST
*Source: Business Monitor International Vietnam Pharmaceuticals & Healthcare Report | Q3 2018

Market 
Overview
Thailand's pharmaceutical market is valued at THB169.57bn
(USD5.0bn) in 2017. However, pharmaceutical expenditure stood at
only 1.1% of GDP. Prescription drugs account for the majority of
pharmaceutical sales at 80.5% of the total by value in 2017.
Thailand's business landscape remains moderately attractive,
with about 60 of the 200 registered rms being multinational companies.
In the past, a spate of compulsory licences issued by the government
served to upset leading multinational players, most notably Abbott,
which drew its application to register new drugs in retaliation.
In 2017, Thailand's total health expenditure was 3.95% of GDP. The Thai
government plays an active role in healthcare provision and has made
strong pledges to improve healthcare infrastructure. Consequently,
government spending accounted for 80.3% of total healthcare expenditure
in 2017.
Driven by an aging population, changing lifestyles and increasing
urbanization, Thailand’s rising chronic disease burden will be a central
factor supporting pharmaceutical market growth over a multi-year
horizon. The disease landscape will remain highly dynamic, reflected in the
country's ongoing epidemiological transition, illustrated in the disability-adjusted
life years (DALYs) lost in Thailand, with non-communicable diseases (NCDs)
accounting for the majority of the total DALYs lost in 2017. The burden of
chronic conditions such as cancer and diabetes will see strong growth. *
*Source: Business Monitor International Thailand Pharmaceuticals & Healthcare Report | Q3 2018

SWOT
Analysis
Risk/Reward Index
The attractiveness of Thailand's pharmaceutical
market to innovative drugmakers is weakened by
low levels of intellectual property rights and the
m o u n t i n g d o w n w a r d p r e s s u r e o n
pharmaceutical prices through government
calls for declaration of production costs,
reflected in a score of 48.7 out of 100 in BMI’s
Innovative Pharmaceuticals Risk/Reward Index,
ranking 13th in the region. While there is an
increased prevalence of chronic diseases, the
focus on cost-efficiency within the healthcare
sector will limit the market’s growth potential.
*

As Thailand is highly dependent on
pharmaceutical imports, and as such the
country will continue to run a persistent trade
deficit. Imports will continue to develop
robustly, further augmented by the rising
demand for medicines as the country's
disease burden grows. While exports will
see a faster growth over the forecast period,
this is from a low base, with the majority of
domestic drugmakers remaining focused on
low-value generic drugs. *

Market 
Overview
The Philippines' universal healthcare system will be limited in its ability
to spur the growth of the pharmaceutical and healthcare sector. While
a high enrollment rate creates an upside risk to our forecast for
the Philippines' healthcare sector - factors such as a lack of
human resources, poor patient access to clinics and hospitals,
and limited insurance coverage will all hold back growth in the
healthcare sector. Moreover, drugmakers seeking to market their
innovative products in the Philippines are beset with issues concerning
regulatory data protection, intellectual property enforcement and
restrictive patentability criteria.
The country's pharmaceutical spending came in 2017 is equivalent to 1.03% of
GDP and 20.38% of healthcare spending.The generic drug sub-sector forms the
largest portion of the market 45.4%., as a result of strong traditional
preferences, the dubious quality of copy products, intensive advertising and the
availability of parallel imports. Driven by an aging population, changing
lifestyles and increasing urbanization, Philippines' rising chronic disease
burden will be a central factor supporting pharmaceutical market growth
over a multi-year horizon.
The country is a rapidly-growing pharmaceutical manufacturing location.
With a positive operating climate, reflecting strong economic growth prospects,
an improving regulatory landscape and an evolving retail sector, the country
holds significant potential for multinational pharmaceutical rms. Multinationals
have traditionally been able to grow their businesses in the Philippines by
adding well-established brands to their existing portfolios. *
*Source: Business Monitor International Philippines Pharmaceuticals & Healthcare Report | Q3 2018

SWOT
Analysis
Risk/Reward Index
Medicine pricing controls and weak intellectual
property protection will continue to limit the growth
potential of the Philippines's pharmaceutical
market, reflected in the country's score of 45.7 out
of 100 in BMI's Innovative Pharmaceuticals Risk/
Reward Index. However, over the longer term, a
fast-growing population and the progressive
implementation of universal healthcare
coverage, coupled with the country's relatively
strong economic growth, will boost
pharmaceutical consumption.
*

The import/export balance in the Philippines
is unlikely to change significantly in the near
future and will continue to record a steady
decline as the local industry continues to
concentrate predominantly on supplying
the domestic market using imported raw
materials. Nevertheless, possible future
drivers of exports include the progress of
regional harmonisation and the facilitation of
inter-regional trade.

Market 
Overview
The Indonesian pharmaceutical market is the largest in South
East Asia, just topping USD7.0bn in 2017. This translates into 23%
of total healthcare expenditure and amounts to USD27 per person.
Generic drugs will continue to be favored in the country given the low
purchasing power. Consequently, generic drugs will continue to be
the dominant class, having accounted for 67% for the prescription
market and 43% in the broader pharmaceutical sector in the same
year.
Healthcare spending in Indonesia in 2017, represented 3.0% of GDP and
USD114 per capita. Government spending has become a driver of the
overall sector due to the ongoing roll out of universal healthcare. Private
expenditure will, however, continue to be the dominant source of financing,
representing 63% of the total.
According to BMI's Disease Database, between 2015 and 2030, the number of
DALYs lost to non-communicable diseases will rise significantly, led by heart
disease, cancer and diabetes. Conversely, the number of DALYs lost to
communicable diseases will decline sharply, as treatment options and delivery
become more targeted. Intellectual property protection remains a concern
in Indonesia due to the use of compulsory licenses and has resulted in
the country being listed as a 'Priority Watch List' country in the latest
Pharmaceutical Research and Manufacturers of America (PhRMA). *
*Source: Business Monitor International Indonesia Pharmaceuticals & Healthcare Report | Q3 2018

SWOT
Analysis
PROJECT
Risk/Reward Index
Despite its large and rapidly growing population,
which provide strong support to its country
rewards component, Indonesia’s weaknesses, such
as the lacking intellectual property environment,
will continue to detract multinational involvement.  
In this quarter, Indonesia/s overall score stands at 53.0
out of 100. It scores 45.9 out of 100 for the total Risk,
while its Rewards component is stronger, at 58.0, with
scores for the industry rewards especially positive.
Although per capita spending in the country is modest,
the sheer size of its population allows for a strong
current and longer term earning potential, although
risks – in the form of patent respect especially, need to
be heeded.  
*Source: Business Monitor International Indonesia. Pharmaceuticals & Healthcare Report | Q3 2018
*

Indonesia will continue to actively aim to
reduce its reliance on the imports of
active pharmaceutical ingredients that are
needed to meet its local manufacturing
requirements. Presently accounting for 90%
of all its needs, imports will be negatively
i m p a c t e d a s a d d i t i o n a l d o m e s t i c
manufacturing plants begin their operations,
although trade balance will continue to
widen. Exports are expected to see stable
growth though the country, with South East
Asia being a key focal point for Indonesian
medicine exports. *
*Source: Business Monitor International Indonesia Pharmaceuticals & Healthcare Report | Q3 2018

Market 
Overview
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 medicine. We calculate that pharmaceutical
spending represented 15.0% of health expenditure and 0.7% of GDP
in 2017, which is low even by regional standards. Generic drug sales
topped 43% of the overall pharmaceutical market. The patented drug
subsector held a 36% share of the total market with OTC medicine
sales representing the remaining 21%.
Total health expenditure in 2017 reached 4.5% of GDP. The government
contributed 55% of health expenditure with MYR33.87bn (USD7.88bn) in 2017.
Private health expenditure accounted for the remaining 45% of the total.
Malaysians were calculated to have spent around USD450 per person on
healthcare that year.
From an industry perspective, the Malaysian drug manufacturing and
clinical trial industry will continue to develop as an increasingly attractive
option for international rms, such as Novartis, Johnson & Johnson and
GlaxoSmithKline. The government has been making concerted efforts to
reinforce Malaysia's role as a regional biotech hub; the country attracts both
national and international investment as a result. Domestic drug
manufacturers mainly focus on the country's low-value generic drugs,
with multinational drugmakers contributing the majority of high-value
innovative medicines.*
*Source: Business Monitor International IMalaysia Pharmaceuticals & Healthcare Report | Q3 2018

SWOT
Analysis
Risk/Reward Index
Malaysia's growing population and a rising non-
communicable disease burden results in the country
scoring 58.5 out of 100 in BMI's Innovative
Pharmaceuticals Risk/Reward Index. While there is an
increased market access to new drugs, owing to
greater international collaboration and free trade
agreements, the focus on cost-effciency within the
healthcare sector will limit the market's growth
potential.*
*Source: Business Monitor International Malaysia Pharmaceuticals & Healthcare Report | Q3 2018
*

Malaysia has a negative pharmaceutical
trade balance, which is unlikely to be
reversed despite strong increases in export
values and volumes. The government's
commitment to improving healthcare
quality and access will increase domestic
demand for pharmaceuticals, much of
which the local industry will be unable to
meet, driving pharmaceutical import
sales.*
*Source: Business Monitor International Malaysia Pharmaceuticals & Healthcare Report | Q3 2018

Opportunities for pharmaceutical companies in the Asia
Pacific region will remain diverse. Multinational
drugmaker interest will be skewed towards the
larger markets of the region and the smaller,
underdeveloped pharmaceutical markets will
present the weakest commercial incentives owing
to their relative market size and level of
pharmaceutical development. As such, it is vital that
companies appreciate the varying levels of investment
risks and rewards that are present in the region's
markets.*
*Source: Business Monitor International Asia pacific Pharmaceuticals & Healthcare Report | Q3 2018
Regional
Highlights

Regional
Highlights
As further improvements are made to strengthen Malaysia’s fiscal position and business environment,
investor confidence in the economy will grow. The Malaysian Health Ministry has been taking an
increasingly active role in developing the country's pharmaceuticals and healthcare sectors, namely
through increasing healthcare access and pursuing policy changes to increase the country's
attractiveness to pharmaceutical companies. However, Malaysia’s designation as a 'Priority Foreign
Country’ in PhRMA's 2018 submission highlights inadequate levels of intellectual property protection
and mandatory medicine price disclosure as ongoing concerns for multinational drugmakers.
Commercial potential of the Vietnam's pharmaceutical and healthcare markets will continue to
mature, as the government aims to attract more foreign direct investment into those sectors,
and as it becomes more sophisticated in terms of determining population's needs. Still, the
prevalence of counterfeit drugs and the persistent intellectual property shortcomings combine to keep
the country and the sector's risk pro le elevated.*

Regional
Highlights
Indonesia's objective of achieving universal healthcare by 2019 will be difficult. While significant progress has been made in
growing enrollment into the national health insurance scheme (JKN), further expansion will be limited, with challenges including
uneven levels of healthcare access across the country. For the pharmaceutical industry, the JKN's positive impact on growth is
likely to wane over the medium term, as the scheme's boost is primarily comes from higher volume sales of low-cost
generic drugs.
Improvements to Thailand's regulatory environment, including medicine approval times, will support a greater
multinational presence over the long term. Sustaining this trend will be a confluence of the government's drive to foster
innovation and the growing momentum within the pharmaceutical industry towards new medicine launches. However, pressure on
pharmaceutical prices and aggressive cost-containment measures will continue to threaten the operations of multinational
drugmakers in Thailand.
The expansion of PhilHealth, with the aim of achieving universal coverage, will continue to be an important driver of
pharmaceuticals and healthcare market growth. While the Philippine´s disease pro le will continue to evolve in line with
economic and demographic trends and will provide a number of revenue earning opportunities for pharmaceutical rms, a
multitude of regulatory issues will create challenges while policies implemented to control expenditure will become more
prominent. The constraints on affordability and the demand for low-cost pharmaceuticals will spur greater investment from
drugmakers with strong generic drug portfolios. *

Thank YouDCIFUENTES@PROCOLOMBIA.CO

Pharmaceuticals outlook in Southeast Asia

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Pharmaceuticals outlook in Southeast Asia