Malaysia Pharmaceuticals & Healthcare Report - Q4 2012

Q4 2012www.businessmonitor.com

pharmaceuticals & healthcare report

issN 1748-2038published by Business monitor international ltd.

malaYsia INCLUDES BMI'S FORECASTS

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MALAYSIA PHARMACEUTICALS & HEALTHCARE REPORT Q4 2012 INCLUDES 10-YEAR FORECASTS BY BMI

Part of BMI’s Industry Report & Forecasts Series

Published by: Business Monitor International

Copy deadline: August 2012

Malaysia Pharmaceuticals & Healthcare Report Q4 2012

© Business Monitor International Ltd Page 2



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



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 BMI’s 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



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





Executive Summary

BMI View: Malaysia may have one of the region’s 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 government’s 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. Malaysia’s 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%.



In June 2012, Novartis signed a Memorandum of Understanding with the Ministry of Health to

further enhance the country’s 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 BMI’s 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 Malaysia’s economy include its net exports and

property sector.

BMI Political View: Malaysia’s 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 government’s 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.



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.

Weaknesses 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.

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.

Threats 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.



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.

Weaknesses 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.

Opportunities 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.

Threats 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.

Malaysia Economic SWOT

Strengths During the past four decades, Malaysia has transformed itself from a commodity-dependent 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.

Weaknesses 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.



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.

Threats 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.



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.

Weaknesses 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.

Opportunities 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 Trans-Pacific Partnership may lead to an improvement to the country's business environment owing to freer markets, if talks succeed.

Threats 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.



Pharmaceutical Risk/Reward Ratings

Table: Asia Pacific Pharmaceutical Risk/Reward Ratings, Q412

Rewards Risks

Industry Rewards

Country Rewards Rewards

Industry Risks

Country Risks Risks

Pharma RRR

Regional Rank

Japan 80 63 76 80 77 79 77,0 1

South Korea 63 67 64 70 69 70 66,4 2

Australia 50 87 59 72 84 77 66,2 3

China 67 50 63 67 56 63 62,5 4

Singapore 40 80 50 80 79 80 61,9 5

Taiwan 53 60 55 70 65 68 60,2 6

Hong Kong 47 70 53 67 79 72 60,2 7

Malaysia 50 60 53 70 69 70 59,3 8

India 60 43 56 53 50 52 54,4 9

New Zealand 27 83 41 60 87 71 52,9 10

Indonesia 53 50 53 40 46 42 48,4 11

Vietnam 50 47 49 40 45 42 46,3 12

Thailand 47 47 47 37 58 45 46,1 13

Philippines 43 57 47 43 45 44 45,7 14

Sri Lanka 37 43 38 40 48 43 40,2 15

Pakistan 40 47 42 33 40 36 39,5 16

Bangladesh 37 43 38 40 36 38 38,3 17

Cambodia 33 37 34 30 36 32 33,5 18

Regional Average 49 57 51 55 60 57 53,3

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

In BMI’s 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

government’s encouragement of the biotechnology sector and the country’s 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 Malaysia’s RRR are:



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

Malaysia’s pharmaceutical market

receives a score of 50 – a figure that has

remained unchanged this quarter.

Malaysia’s 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

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. Malaysia’s 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.

Risk/Reward Ratings By Subsector Score

Q412

Source: BMI



Industry Risks

Malaysia’s score remains at 70 for market risk, which refers to a subjective assessment of the country’s 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 Malaysia’s 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, Malaysia’s score remains considerably above

the regional average of 60, which serves to increase its attractiveness as an investment destination.



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 lion’s 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

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

Pharmaceutical Market By Sub-Sector (US$bn)

2011

Source: IMS Health Asia, AC Nielsen, domestic companies, local press, BMI



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.



Regulatory Regime

The government introduced Malaysia’s 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 government’s 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



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, Liow’s announcement of mandatory GMP certification implies

implementation of the Drug and Cosmetics Regulations has not been entirely effective in keeping non-

CPP 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.



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 region’s 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 ASEAN’s 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 health-

related 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 country’s 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



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 non-

prescription 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



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 manufacturer’s 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 original’s 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 holder’s 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 Trans-

Pacific Partnership Agreement, as the health minister is cited as stating that this agreement, if

implemented, will make healthcare more expensive. The Malaysian government’s 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

WTO’s TRIPS agreement) and the overall poor standard of regulatory enforcement.



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 Singapore’s

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.



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

Squibb’s 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 Malaysia’s 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



(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 Malaysia’s

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 government’s 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 NEDL’s 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



insurance. All foreign workers are required to purchase hospital insurance, which is expected to bring in

some MYR200mn in revenue per annum.



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.

According to BMI’s 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 country’s 1990 ranking of 42nd,

when Malaysia had an under-five child mortality rate of 16.43.

Burden Of Disease Projection

2005-2030

f = forecast. DALYs = disability-adjusted life years. Source: BMI's Burden of Disease Database (BoDD).



Non-Communicable Diseases

In June 2012, the Ministry of Health claimed that more than 17mn people in Malaysia lives with a non-

communicable 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.

Malaysia’s Deputy Prime Minister, Muhyiddin Yassin, has said that one of the main factors behind the

country’s 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 Federation’s

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 Singapore’s 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



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

country’s 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 Nation’s 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, HIV-

reduction 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 Malaysia’s

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



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 government’s 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 Target (FY2011) Actual (year to date)

EPP 1 Foreign workers with private health

insurance coverage 1,205,000 1,407,919

EPP 2 Number of researches conducted 260 321

EPP 3 Export growth of pharmaceutical

products 15% (MYR610mn,

US$199mn) 12% (MYR594mn,

US$194mn)

EPP 4 Revenue generated from medical

tourism MYR431mn (US$141mn) MYR436mn (US$142mn)

as of November 2011

EPP 5 Survey on radiology services in

Ministry of Health hospitals All 39 hospitals 39

Pilot project on outsourcing radiology

services Extended to September 30

2011 95% completed

EPP 6 Construction of Health Metropolis to

being in Q411 Q411 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.



Malaysia’s 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 country’s 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.



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 MoH’s 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 MoH’s 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 Malaysia’s 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.



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 country’s 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.

May 2012: According to the Business Times, the country could see at least 17 new private hospitals by

2015.

April 2012: MYR5 (US$1.60) administration fee for government hospitals and clinics will be scrapped from May.

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.

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.

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.

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 state-of-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 Malaysia’s 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



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 country’s 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 tourism-

related 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 country’s

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.



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 Singapore’s 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 medium-

sized 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 country’s 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 country’s biotechnology industry. By 2015, it

hopes to make MYR9bn (US$2.8bn) in investments in the country’s 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



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 government-

owned 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 10-

year 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.

Malaysia’s natural biodiversity is providing a further draw for R&D investment. In May 2011, Fanny

Rousin of France’s 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 Malaysia’s genetic

resources. The bill requires all parties involved in bioprospecting to obtain permits.



Clinical Trials

Despite some IP and regulatory shortcomings – not least the government’s 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 government’s

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

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

Clinical Trial Registrations

2006-2009

Sourced by date of initial registration. Source: ClinicalTrials.gov, BMI



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

Pasteur’s 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 Malaysia’s 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



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

country’s 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, Malaysia’s Top Glove is the world’s 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 Party’s secretary general, Lim

Guan Eng, Malaysia’s 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 phone’s 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.



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 Mitegen’s 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.



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

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 government’s

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

Pharmaceutical Market Forecast

2007-2021

f = forecast. CER = constant exchange rate. Source: IMS Health Asia, AC Nielsen, domestic companies, local press, BMI



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 2009 2010 2011e 2012f 2013f 2014f 2015f 2016f

Pharmaceutical sales (US$bn) 1.215 1.214 1.553 1.814 1.926 2.165 2.410 2.669 2.895

Pharmaceutical sales (US$bn), % chg y-o-y 14.189 -0.102 27.922 16.796 6.207 12.393 11.315 10.751 8.445

Pharmaceutical sales (MYRbn) 4.048 4.276 5.001 5.549 6.116 6.712 7.351 8.008 8.684

Pharmaceutical sales (MYRbn), % chg y-o-y 10.700 5.629 16.958 10.945 10.224 9.738 9.520 8.935 8.445

Pharmaceutical sales at constant exchange rate (US$bn) 1.323 1.398 1.635 1.814 1.999 2.194 2.403 2.617 2.838

Pharmaceutical sales, per capita (US$) 44.187 43.435 54.679 62.850 65.697 72.685 79.666 86.904 92.856

Pharmaceutical sales, % of GDP 0.546 0.629 0.653 0.651 0.683 0.703 0.720 0.736 0.750

Pharmaceutical sales, % of health expenditure 14.404 13.715 14.860 15.264 15.672 16.048 16.453 16.843 17.237

f = forecast. Source: IMS Health Asia, AC Nielsen, domestic companies, local press, BMI



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 government’s 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 Healthcare’s 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

country’s progress in the National Key

Economic Area is one example of

Malaysia’s 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

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.

Healthcare Expenditure Forecast

2007-2021

f = forecast. CER = constant exchange rate. Source: World Health Organization (WHO), BMI



Table: Healthcare Expenditure Indicators 2008-2016

2008 2009 2010 2011e 2012f 2013f 2014f 2015f 2016f

Health expenditure (US$bn) 8.44 8.85 10.45 11.88 12.29 13.49 14.65 15.85 16.79

Health expenditure (US$bn), % chg y-o-y 19.03 4.91 18.06 13.71 3.44 9.76 8.58 8.19 5.96

Health expenditure (MYRbn) 28.11 31.18 33.66 36.35 39.03 41.82 44.68 47.54 50.38

Health expenditure (MYRbn), % chg y-o-y 15.40 10.93 7.94 8.01 7.35 7.16 6.83 6.41 5.96

Health expenditure at constant exchange rate (US$bn) 9.19 10.19 11.00 11.88 12.76 13.67 14.60 15.54 16.47

Health expenditure per capita (US$) 306.78 316.70 367.96 411.76 419.21 452.92 484.22 515.98 538.69

Health expenditure (% GDP) 3.79 4.59 4.39 4.26 4.36 4.38 4.38 4.37 4.35

f = forecast. Source: World Health Organization (WHO), BMI

Table: Healthcare Governmental Indicators 2008-2016

2008 2009 2010 2011e 2012f 2013f 2014f 2015f 2016f

Government health expenditure (US$bn) 4.657 4.931 5.801 6.572 6.778 7.417 8.029 8.661 9.149

Government health expenditure (US$bn), % chg y-o-y 20.1 5.9 17.6 13.3 3.1 9.4 8.3 7.9 5.6

Government health expenditure (MYRbn) 15.515 17.371 18.684 20.107 21.521 22.994 24.490 25.982 27.448

Government health expenditure (MYRbn), % chg y-o-y 16.5 12.0 7.6 7.6 7.0 6.8 6.5 6.1 5.6

Government sector health expenditure, % of total 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



Table: Healthcare Private Indicators 2008-2016

2008 2009 2010 2011e 2012f 2013f 2014f 2015f 2016f

Private health expenditure (US$bn) 3.8 3.9 4.6 5.3 5.5 6.1 6.6 7.2 7.6

Private health expenditure (US$bn), % chg y-o-y 17.7 3.7 18.6 14.2 3.8 10.2 9.0 8.6 6.3

Private health expenditure (MYRbn) 12.6 13.8 15.0 16.2 17.5 18.8 20.2 21.6 22.9

Private health expenditure (MYRbn), % chg y-o-y 14.1 9.7 8.4 8.5 7.8 7.6 7.2 6.8 6.3

Private sector health expenditure, % of total 44.8 44.3 44.5 44.7 44.9 45.0 45.2 45.4 45.5

e/f = BMI estimate/forecast. Source: WHO, BMI



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



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%.



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

segment’s value at consumer prices will

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

Prescription Drug Market Forecast

2007-2021

f = forecast. Source: IMS Health Asia, domestic companies, local press, BMI



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 2009 2010 2011e 2012f 2013f 2014f 2015f 2016f

Prescription drug sales (US$bn) 0.89 0.88 1.12 1.31 1.40 1.59 1.78 1.99 2.17

Prescription drug sales (US$bn), % chg y-o-y 11.76 -0.53 26.49 17.36 7.06 13.24 12.10 11.48 9.11

Prescription drug sales (MYRbn) 2.96 3.11 3.60 4.01 4.46 4.93 5.44 5.96 6.51

Prescription drug sales (MYRbn), % chg y-o-y 8.35 5.17 15.65 11.48 11.11 10.56 10.29 9.65 9.11

Prescription drug sales, % of total sales 73.11 72.80 71.98 72.33 72.91 73.46 73.98 74.47 74.92

e/f = BMI estimate/forecast. Source: IMS Health Asia, domestic companies, local press, BMI



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 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, anti-

inflammatories and anti-rheumatics and diuretics. The present levels of under-diagnosis and under-

treatment 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 government’s 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.

Patented Drug Market Forecast

2007-2021




Table: Patented Drug Market Indicators 2008-2016

2008 2009 2010 2011e 2012f 2013f 2014f 2015f 2016f

Patented drug sales (US$bn) 0.585 0.558 0.675 0.768 0.856 0.977 1.084 1.195 1.289

Patented drug sales (US$bn), % chg y-o-y 10.099 -4.493 20.925 13.703 11.424 14.218 10.907 10.244 7.847

Patented drug sales (MYRbn) 1.948 1.967 2.175 2.349 2.716 3.029 3.305 3.584 3.866

Patented drug sales (MYRbn), % chg y-o-y 6.736 0.986 10.560 8.007 15.639 11.520 9.119 8.437 7.847

Patented drug sales, % of prescription sales 65.807 63.187 60.408 58.525 60.912 61.438 60.784 60.110 59.416

Patented drug sales, % of total sales 48.115 46.000 43.484 42.332 44.412 45.133 44.968 44.762 44.515




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. BMI’s forecast shows a local

currency CAGR of 9.7% over the 2011-

2016 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.

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. Malaysia’s 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 government’s 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 Malaysia’s 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 Malaysia’s 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,

Generic Drug Market Forecast

2007-2021




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 2009 2010 2011e 2012f 2013f 2014f 2015f 2016f

Generic drug sales (US$bn) 0.304 0.325 0.443 0.544 0.549 0.613 0.699 0.793 0.880

Generic drug sales (US$bn), % chg y-o-y 15.109 7.090 36.036 22.943 0.896 11.716 14.002 13.395 11.005

Generic drug sales (MYRbn) 1.012 1.146 1.425 1.665 1.743 1.901 2.133 2.379 2.640

Generic drug sales (MYRbn), % chg y-o-y 11.593 13.234 24.377 16.784 4.713 9.077 12.163 11.536 11.005

Generic drug sales, % of prescription sales 34.193 36.813 39.592 41.475 39.088 38.562 39.216 39.890 40.584

Generic drug sales, % of total sales 25.000 26.800 28.500 30.000 28.500 28.328 29.012 29.705 30.406




OTC Medicine Market Forecast

Malaysia’s 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 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 government’s 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.

OTC Medicine Market Forecast

2007-2021

f = forecast. Source: AESGP, BMI



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 2009 2010 2011e 2012f 2013f 2014f 2015f 2016f

Over-the-counter (OTC) medicine sales (US$bn) 0.327 0.330 0.435 0.502 0.522 0.575 0.627 0.682 0.726

Over-the-counter (OTC) medicine sales (US$bn), % chg y-o-y 21.352 1.067 31.761 15.343 3.982 10.113 9.140 8.679 6.515

Over-the-counter (OTC) medicine sales (MYRbn) 1.088 1.163 1.401 1.535 1.657 1.781 1.913 2.045 2.178

Over-the-counter (OTC) medicine sales (MYRbn), % chg y-o-y 17.645 6.866 20.468 9.565 7.915 7.512 7.380 6.897 6.515

Over-the-counter (OTC) medicine sales, % of total sales 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



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,

Malaysia’s key export destination was

Singapore, which received US$30mn

worth of Malaysian pharmaceuticals, or

36% of total exports.

We highlight the government’s 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 government’s 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% y-

o-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

Pharmaceutical Trade Forecast (US$mn)

2007-2016f

f = forecast. Source: United Nations Comtrade Database DESA/UNSD, BMI



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 China’s 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 country’s drug regulator will approve a drugmaker’s 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 2009 2010 2011e 2012f 2013f 2014f 2015f 2016f

Pharmaceutical exports (US$mn) 116.28 120.30 144.74 161.06 166.06 183.68 203.49 227.57 252.61

Pharmaceutical exports (US$mn), % chg y-o-y -13.272 3.459 20.310 11.279 3.100 10.613 10.787 11.833 11.000

Pharmaceutical exports (MYRmn) 387.39 423.78 466.15 492.74 527.24 569.42 620.66 682.73 757.83

Pharmaceutical exports (MYRmn), % chg y-o-y -15.922 9.394 9.998 5.705 7.000 8.000 9.000 10.000 11.000

Pharmaceutical imports (US$mn) 767.580 870.083 900.480 1120.30 1242.47 1460.87 1695.66 1963.55 2230.59

Pharmaceutical imports (US$mn), % chg y-o-y 8.338 13.354 3.494 24.412 10.905 17.577 16.072 15.798 13.600

Pharmaceutical imports (MYRmn) 2557.11 3064.88 2900.09 3427.33 3944.86 4528.70 5171.77 5890.65 6691.78



Table: Exports and Imports Indicators 2008-2016

2008 2009 2010 2011e 2012f 2013f 2014f 2015f 2016f

Pharmaceutical imports (MYRmn), % chg y-o-y 5.028 19.858 -5.377 18.180 15.100 14.800 14.200 13.900 13.600

Pharmaceutical trade balance (US$mn) -651.29 -749.77 -755.73 -959.24

-1076.41

-1277.18

-1492.16

-1735.97

-1977.98

Pharmaceutical trade balance (MYRmn)

-2169.71

-2641.10

-2433.94

-2934.58

-3417.62

-3959.28

-4551.10

-5207.91

-5933.94

e/f = BMI estimate/forecast. Source: United Nations Comtrade Database DESA/UNSD, BMI



Medical Device Market Forecast

BMI calculates that Malaysia’s medical

devices sector stood at MYR3.97bn

(US$1.30bn) in 2011, accounting for just

0.5% of the country’s GDP. By 2016, we

expect the value of Malaysia’s 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 Malaysia’s 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 sight-

testing 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.

Medical Device Market Forecast

2007-2021

f = forecast. CER = constant exchange rate. Source: BMI



Table: Medical Devices Sales Indicators 2008-2016

2008 2009 2010 2011e 2012f 2013f 2014f 2015f 2016f

Medical device sales (US$bn) 0.931 0.936 1.137 1.296 1.355 1.514 1.685 1.884 2.064

Medical device sales (US$bn), % chg y-o-y 16.683 0.576 21.523 13.983 4.540 11.683 11.332 11.815 9.535

Medical device sales (MYRbn) 3.100 3.297 3.663 3.966 4.303 4.692 5.140 5.653 6.192

Medical device sales (MYRbn), % chg y-o-y 13.118 6.347 11.108 8.273 8.495 9.045 9.537 9.982 9.535

Medical device sales at constant exchange rate (US$bn) 1.013 1.078 1.197 1.296 1.407 1.534 1.680 1.848 2.024

Medical device sales, % of GDP 0.418 0.485 0.478 0.465 0.481 0.491 0.504 0.519 0.535

Medical device sales, % of total healthcare sales 11.029 10.573 10.883 10.910 11.025 11.219 11.504 11.889 12.290

e/f = BMI estimate/forecast. Source: BMI



Other Healthcare Data Forecasts

The number of private hospitals in Malaysia proliferated in the 1980s, driven by increased affluence of

the country’s population, the demand for better services and the government’s 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 Group’s establishment

of a ENT and gastroscopy speciality centre in Cheras, Kuala Lumpur in July 2012, and IHH Healthcare

Berhad’s announcement in July 2012 that it plans to acquire more hospitals in the country.

Malaysia’s 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%.



Key Risks To BMI’s 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 Malaysia’s efforts to

increase pharmaceutical exports. Additionally, a serious risk to the sector’s 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

country’s healthcare spending priorities.



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 industry’s 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 country’s

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 country’s 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.



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

Market capitalisation

(US$mn) P/E ratio Revenue (US$mn) Website

Pharmaniaga 189 0.60 391.0 www.pharmaniaga.com

CCM Duopharma 109 11.16 35.0 www.duopharma.com.my

Apex Healthcare 75 8.91 88.0 www.apexpharmacy.com

Hovid 43 7.77 108.0 www.hovid.com

YSP Southeast Holding 36 9.57 39.0 www.yspsah.com

Kotra Industries 23 6.43 30.0 www.kotrapharma.com

Sunzen Biotech 10 17.90 8.5 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

Malaysia’s 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 Malaysia’s biotechnology sector. Chair Kiran Mazumdar-Shaw



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 HealthCare’s 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 country’s 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, Malaysia’s 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 country’s 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.



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 60-

70% 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 Ahmad’s statement, according to the NPCB all pharmaceutical products, health

supplements, traditional medicine products and cosmetics have to be registered with the bureau and tested



for their safety and quality prior to registration. In addition, the country also has a category called ‘food-

drug 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.



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.

Weaknesses 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.

Opportunities 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.

Threats The company’s 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 India’s 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.

Company Overview Pharmaniaga PhD, established in 1998, is Malaysia’s 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 Pharmaniaga’s future.



Strategy Through Pharmaniaga Logistics, the company supplies around 75% of medicines purchased by

Malaysia’s public healthcare institutions. The company’s 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 company’s most significant foreign enterprise is its 55% stake in Indonesian

pharmaceuticals distributor PT Millennium Pharmacon International. Purchased for US$3.2mn

in 2004 from Indonesia’s PT Tigamitra Multikarya, the acquisition gives it control of a unit that

controls 2% of Indonesia’s 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 company’s 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 Pharmaniaga’s

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 group’s 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.



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



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 company’s 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



Bumimedic

Strengths 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.


Opportunities 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.

Threats Widespread counterfeit industry. Possible introduction of price ceilings on essential medicines. Increased competitiveness of local players driven by ASEAN harmonisation and other

regulatory developments.

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.

Bumimedic’s 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 Amarillo’s low-dose interferon,

manufactures lozenges from ABI’s 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.

Company Contacts ABI Bumimedic Antah Pharma Sdn Bhd, 3 Jalan 19/1 Petaling Jaya, 46300 Selango, Malaysia

Tel: +60 (4) 7956 7677 www.ahcg.com.my



Hovid

Strengths 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.


Opportunities 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.


regulatory developments. Potentially detrimental impact of the pending FTA with the US.

Company Overview 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 drugmaker’s clinical trials are conducted both nationally and internationally, in

collaboration with Japanese and US universities, among others.

Hovid’s 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, anti-

hypertensives, anti-malarials and anti-inflammatory analgesics. The company holds more than

700 marketing authorisations worldwide, launching on average 12 new products per year.



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-Aventis’s 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.

Financial

Performance

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



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.


Opportunities 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.


regulatory developments. Potentially detrimental impact of a possible FTA with the US.

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 Malaysian-

owned 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



capacity and improve efficiencies, which in turn enhance the company’s 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 63,000ft2 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.

Financial

Performance

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

group’s 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. CCM’s 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.

Company Contacts Chemical Company of Malaysia, 13th floor, Menara PNB, 201-A Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia

Tel: +60 (3) 2612 3888 www.ccm.com.my



Kotra Pharma

Strengths 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.

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. Product portfolio mainly focused on OTCs.

Opportunities Government programme for developing the pharmaceutical and biotechnology sectors. Expected increase in local and regional drug consumption. Expansion of medical provision and infrastructure.


regulatory developments. Rising prominence of Chinese drug makers, which can compete on price. Lawsuit filed against the company in May 2010.

Company Overview 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 Kotra’s 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 firm’s five-year plan, Kotra’s 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

35,000m2 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 Kotra’s 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 company’s 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.



Kotra’s Appeton health supplement range is the firm’s flagship franchise, accounting for 61% of

sales over the past five years. In FY09, Appeton’s share of the market for children’s 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 Pharma’s 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 Leo’s trademarks Fucidin

(fucidic acid) and Fucicort (fucidic acid) by adopting trademarks Axcel Fusidic and Axcel Fusi-

Corte 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.

Financial

Performance

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.



Company Contacts Kotra Pharma, 1 Jalan TTC 12, Cheng Industrial Estate, 75250 Melaka, Malaysia Tel: +60 (6) 336 2222 www.kotrapharma.com



Multinational Companies

GlaxoSmithKline

Strengths 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.

Weaknesses Malaysia’s weak domestic patent law and benefits granted to local generic-based pharmaceutical companies.

Sizeable drug copying and counterfeiting sector. Lack of patent protection for GSK’s anti-AIDS drugs. Lack of IPR protection and enforcement.

Opportunities 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.

Government’s focus on developing the country’s biotechnology sector. The company sees potential for strong growth in Asia. Malaysia may join multilateral trans-Pacific trade agreement with the US.

Threats 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. Company’s 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 GSK’s consumer healthcare manufacturing sites. The facility

produces OTCs for the domestic market, Singapore and Taiwan. Production costs exceed

MYR40mn (US$12mn) a year. The site’s annual output includes 800mn tablets, 400 tonnes of

powder and 150,000kg of cream. Demonstrating its importance, GSK’s consumer healthcare

manufacturing units from Taiwan, Thailand and Venezuela were transferred to Malaysia.



GSK’s 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 country’s

largest distribution concerns. GSK’s main non-prescription brands include Horlicks, Ribena,

Panadol, Scotts Emulsion, Menara Lien Hoe Eye-Mo, Eno, Oxy and Aquafresh.

The company’s 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. GSK’s 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 Avandia’s heart risk links for some years before it had become widely known,

which the company denies. The DCA’s 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 GSK’s drugs in select Asian countries was cut. Its

breakthrough cervical cancer vaccine, Cervarix, is now cheaper in Thailand and Malaysia.

In February 2009, GSK’s 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 company’s 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



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.

Weaknesses Weak domestic patent law and benefits granted to local generic-based companies. No direct manufacturing presence. Lack of IPR protection and enforcement.

Opportunities 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 government’s focus on developing the country’s biotechnology sector likely to result in improved investment opportunities, a favourable business environment and a cost-effective R&D proposition.

Threats 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.

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 company’s 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



Malaysia’s Biotechnology Corporation (BiotechCorp), marks the largest FDI in Malaysian biotech

sector. Biocon’s 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 company’s 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.

Company Contacts Pfizer Malaysia Sdn Bhd, 3rd & 4th 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



Novartis

Strengths 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.

Weaknesses 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.

Opportunities 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. Government’s focus on developing the country’s biotechnology sector.

Threats 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 company’s

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 country’s ambitions to become a biotech rival to Singapore or

Taiwan. Novartis may also invest in Malaysia’s biotechnology industry, and is evaluating

Malaysia’s 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, Parkinson’s 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 country’s 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 November 2009, Novartis signed an agreement with BiotechCorp and Sarawak Biodiversity

Centre in order to discover bioactive compounds. Novartis’s director Alexander Jetzer-Chung said

that the agreement enables the company to leverage capitalise on the country’s 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 Johor’s 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



Merck & Co

Strengths 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.


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.

Opportunities 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. Government’s focus on developing the country’s 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.

Threats 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.

Company Overview 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 company’s

potential in the country), allergy and cardiovascular drugs. The merger with Schering-Plough has

allowed MSD to gain access to a considerable portfolio of women’s health products, which have

been heavily promoted.

The company deals with both public and private sectors. MSD’s 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 Merck’s Malaysian operations. Additionally, the

counterfeit industry and lax patent protection continue to disadvantage some of its patented



products’ performance, especially given ongoing patent expirations.

Financial

Performance

The performance of its cardiovascular product Coozar (losartan) in Malaysia came under threat,

following Ranbaxy’s 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. MSD’s 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 Malaysia’s managing director Ewe Kheng

Huat stated that the company’s 2010 revenue fell in the region of US$103mn. In comparison, the

company’s annual sales in the last 1990s were less than US$5mn.

Company Contacts Merck Sharpe & Dohme Malaysia, 9th 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



Sanofi

Strengths Third largest drug manufacturer in the world. Among the leading foreign producers in Malaysia. Broad portfolio of products, including antibiotics, vaccines and OTC pharmaceuticals.


Biased drug-pricing policy adopted by the Malaysian government. Lacking IPR protection and enforcement.

Opportunities 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 government’s focus on developing the country’s 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.

Threats 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.

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 Pasteur’s 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 Sanofi’s 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



becomes available on the market.

Company Contacts Sanofi (Malaysia) Sdn Bhd, 8th Floor PNB Damansara, No. 19, Lorong Dungun Damansara Heights,50490 Kuala Lumpur, Malaysia

Tel: +60 (3) 2089 3333 www.sanofi.com.



Eli Lilly Malaysia

Strengths One of the leading global pharmaceutical companies. Strong product portfolio. Ability to expand through acquisition.

Weaknesses 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.

Opportunities 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.

Threats 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.

Company Overview Eli Lilly is one of the top 20 global pharmaceutical players. In the South East Asia region, Eli’s 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.

Company Contacts 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



Ranbaxy Malaysia

Strengths Strong generic portfolio and local production facilities. Nascent global generic player. Ability to expand through acquisition.

Weaknesses Relatively recent entry to the Malaysian market. Competition from government-supported local producers. Government policies biased towards the local industry.

Opportunities Government programme for developing the pharmaceutical and biotechnology sectors. Continued encouragement of the generic drugs sector. Higher level of patient awareness of cost containment.

Threats Widespread counterfeit industry. Increased competitiveness of local players driven by ASEAN harmonisation. Rising prominence of China and other regional suppliers of cheaper generic medicines.

Company Overview Ranbaxy Malaysia is a joint-venture established in 1984 by India’s 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. Ranbaxy’s portfolio contains around 80 brands,

including those managed through local partnerships. Ranbaxy Malaysia’s 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.

Ranbaxy’s 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 Malaysia’s 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 firm’s agreement with its parent

company Daiichi Sankyo to market Cravit (levofloxacin) in Malaysia since January 2012.

Company Contacts Ranbaxy (Malaysia) Sdn. Bhd.,Box 8, Wisma Selangor Dredging, 5th Floor South Block 142-A Jalan Ampang, 50450 Kuala Lumpur, Malaysia

Tel: +60 (3) 2161 4181 www.ranbaxy.com



Demographic Outlook

Demographic analysis is a key pillar of BMI’s 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 Malaysia’s 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



Table: Population By Age Group, 1990-2020 ('000)

1990 1995 2000 2005 2010 2012f 2015f 2020f

Total 18,209 20,721 23,415 26,100 28,401 29,322 30,714 32,986

0-4 years 2,445 2,652 2,721 2,953 2,828 2,802 2,897 2,953

5-9 years 2,284 2,460 2,612 2,840 2,948 2,926 2,824 2,894

10-14 years 2,026 2,285 2,469 2,614 2,839 2,908 2,947 2,824

15-19 years 1,830 2,039 2,315 2,483 2,616 2,705 2,840 2,950

20-24 years 1,670 1,856 2,092 2,341 2,487 2,536 2,620 2,845

25-29 years 1,649 1,708 1,934 2,115 2,343 2,413 2,489 2,623

30-34 years 1,411 1,689 1,795 1,942 2,112 2,206 2,341 2,487

35-39 years 1,190 1,444 1,759 1,791 1,935 2,000 2,106 2,334

40-44 years 926 1,208 1,486 1,746 1,779 1,825 1,924 2,094

45-49 years 679 930 1,221 1,467 1,727 1,755 1,763 1,908

50-54 years 617 670 921 1,195 1,440 1,556 1,700 1,738

55-59 years 455 593 646 887 1,155 1,251 1,399 1,656

60-64 years 370 420 549 605 836 939 1,097 1,334

65-69 years 258 322 366 489 545 617 764 1,010

70-74 years 190 210 261 306 417 432 473 671

75+ years 206 235 267 327 392 450 529 663

f = BMI forecast. Source: World Bank, UN, BMI



Table: Population By Age Group, 1990-2020 (% of total)

1990 1995 2000 2005 2010 2012f 2015f 2020f

0-4 years 13.43 12.80 11.62 11.31 9.96 9.55 9.43 8.95

5-9 years 12.54 11.87 11.16 10.88 10.38 9.98 9.19 8.77

10-14 years 11.13 11.03 10.55 10.02 10.00 9.92 9.59 8.56

15-19 years 10.05 9.84 9.89 9.51 9.21 9.23 9.25 8.94

20-24 years 9.17 8.96 8.93 8.97 8.76 8.65 8.53 8.63

25-29 years 9.05 8.24 8.26 8.10 8.25 8.23 8.11 7.95

30-34 years 7.75 8.15 7.67 7.44 7.44 7.52 7.62 7.54

35-39 years 6.53 6.97 7.51 6.86 6.81 6.82 6.86 7.08

40-44 years 5.09 5.83 6.34 6.69 6.26 6.22 6.26 6.35

45-49 years 3.73 4.49 5.21 5.62 6.08 5.99 5.74 5.78

50-54 years 3.39 3.24 3.94 4.58 5.07 5.31 5.54 5.27

55-59 years 2.50 2.86 2.76 3.40 4.07 4.27 4.55 5.02

60-64 years 2.03 2.03 2.35 2.32 2.94 3.20 3.57 4.04

65-69 years 1.42 1.56 1.56 1.87 1.92 2.11 2.49 3.06

70-74 years 1.04 1.01 1.12 1.17 1.47 1.47 1.54 2.03

75+ years 1.13 1.13 1.14 1.25 1.38 1.54 1.72 2.01


Table: Key Population Ratios, 1990-2020

1990 1995 2000 2005 2010 2012f 2015f 2020f



Dependent ratio, % of total working age 1 68.6 65.0 59.1 57.5 54.1 52.8 51.5 50.1

Dependent population, total, '000 2 7,411 8,164 8,697 9,529 9,971 10,136 10,435 11,016

Active population, % of total 3 59.3 60.6 62.9 63.5 64.9 65.4 66.0 66.6

Active population, total, '000 4 10,798 12,557 14,718 16,572 18,431 19,186 20,280 21,970

Youth population, % of total working age 5 62.6 58.9 53.0 50.7 46.7 45.0 42.7 39.5

Youth population, total, '000 6 6,755 7,396 7,803 8,406 8,616 8,636 8,668 8,671

Pensionable population, % of total working age 7 6.1 6.1 6.1 6.8 7.3 7.8 8.7 10.7

Pensionable population, '000 8 655 767 894 1,122 1,355 1,500 1,767 2,344

f = BMI forecast; 1 0>15 plus 65+, as % of total working age population; 2 0>15 plus 65+; 3 15-64, as % of total population; 4 15-64; 5 0>15, % of total working age population; 6 0>15; 7 65+, % of total working age population;8 65+. Source: World Bank, UN, BMI

Table: Rural/Urban Population Split, 1990-2020

1990 1995 2000 2005 2010 2012f 2015f 2020f

Urban population, % of total 49.8 55.7 62.0 67.6 72.6 74.3 76.9 80.7

Rural population, % of total 50.2 44.3 38.0 32.4 27.4 25.7 23.1 19.3

Urban population, '000 9,015.5 11,470.8 14,429.6 17,328.2 20,613.5 21,793.1 23,631.4 26,612.7

Rural population, '000 9,087.9 9,123.1 8,844.0 8,305.2 7,787.6 7,528.7 7,082.7 6,372.8




Glossary

Pharmaceuticals, medicines, drugs: synonym terms used interchangeably.

Pharmaceutical market/sales: the sum of revenues generated by generic, patented, and over-the-

counter (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 physician’s

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 non-

prescription 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



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): BMI’s disease database incorporates WHO, World Bank, IMF

and BMI’s own data to create a proprietary dataset. BoDD data are quantified as the sum of disability-

adjusted 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.



BMI Methodology

How We Generate Our Pharmaceutical Industry Forecasts

Pharmaceutical sub-sector forecasts are generated using a top-down approach from BMI’s 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:

BMI’s 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 BMI’s 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 BMI’s Country Risk analysts using an in-house econometric model.

The burden of disease in a country. This is forecast in DALYs using BMI’s BoDD, which is based on

the WHO’s burden of disease projections and incorporates World Bank and IMF data.

Subjective input and validation by BMI’s 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 country’s pharmaceutical market over the next five years. These may include

policy/reimbursement decisions, new product launches or increased competition from generic drugs.



Pharmaceuticals Risk/Reward Ratings Methodology

BMI’s 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 BMI’s 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 sector’s 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 state’s 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.



Table: Pharmaceutical Business Environment Indicators

Indicator Rationale

Rewards

Industry Rewards

Market expenditure, US$bn Denotes breadth of pharmaceutical market. Large markets score higher than smaller ones

Market expenditure per capita, US$ Denotes depth of pharmaceutical market. High value markets score better than low value ones

Sector value growth, % y-o-y Denotes sector dynamism. Scores based on annual average growth over five-year forecast period

Country Rewards

Urban-rural split Urbanisation is used as a proxy for development of medical facilities. Predominantly rural states score lower

Pensionable population, % of total Proportion of the population over 65 years of age. States with ageing populations tend to have higher per-capita expenditure

Population growth, 2003-2015 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 Markets with fair and enforced IP regulations score higher than those with endemic counterfeiting

Policy/reimbursements Markets with full and equitable access to modern medicines score higher than those with minimal state support

Approvals process High scores awarded to markets with a swift appraisal system. Those that are weighted in favour of local industry or are corrupt score lower

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

Policy continuity Rating from CRR evaluates the risk of a sharp change in the broad direction of government policy

Bureaucracy Rating from CRR denotes ease of conducting business in the state

Legal framework Rating from CRR denotes the strength of legal institutions in each state. Security of investment can be a key risk in some emerging markets

Corruption Rating from CRR denotes the risk of additional illegal costs/possibility of opacity in tendering/business operations affecting companies’ ability to compete

Source: BMI



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 Weighting

Rewards 60%

– Industry Rewards – 75%

– Country Rewards – 25%

Risks 40%

– Industry Risks – 60%

– Country Risks – 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.

Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.

Malaysia Pharmaceuticals & Healthcare Report - Q4 2012

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