Malaysia Pharmaceuticals & Healthcare Report - Q2 2012

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Q2 2012
malaYsia
pharmaceuticals & Healthcare Report

INCLUDES BMI'S FORECASTS
ISSN 1748-2038
Published by Business Monitor International Ltd.
MALAYSIA PHARMACEUTICALS & HEALTHCARE REPORT Q2 2012

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

Published by: Business Monitor International Copy deadline: February 2012
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Malaysia Pharmaceuticals & Healthcare Report Q2 2012
Business Monitor International Ltd
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CONTENTS
CONTENTS ........................................................................................................................................................ 3 Executive Summary ......................................................................................................................................... 7 SWOT Analysis ................................................................................................................................................. 9
Malaysia Pharmaceuticals And Healthcare Industry SWOT ................................................................................................................................. 9 Malaysia Political SWOT .................................................................................................................................................................................... 10 Malaysia Economic SWOT .................................................................................................................................................................................. 10 Malaysia Business Environment SWOT ............................................................................................................................................................... 11
Pharmaceutical Risk/Reward Ratings .......................................................................................................... 12

Table: Asia Pacific Pharmaceutical Risk/Reward Ratings For Q212 .................................................................................................................. 12 Rewards ............................................................................................................................................................................................................... 13 Risks .................................................................................................................................................................................................................... 14
Malaysia Market Summary ......................................................................................................................... 15 Regulatory Regime ......................................................................................................................................... 17

Recent Regulatory Developments ........................................................................................................................................................................ 18 Bioequivalence..................................................................................................................................................................................................... 19 Regional Collaboration ....................................................................................................................................................................................... 19 Pharmaceutical And Medical Advertising............................................................................................................................................................ 20 Labelling Requirements ....................................................................................................................................................................................... 20 Intellectual Property Regime ............................................................................................................................................................................... 21 Counterfeit Pharmaceuticals ............................................................................................................................................................................... 22 Compulsory Licensing ......................................................................................................................................................................................... 23 Free Trade Agreements........................................................................................................................................................................................ 24 Pricing And Reimbursement ................................................................................................................................................................................ 25
Industry Trends And Developments ............................................................................................................ 26

Epidemiology ....................................................................................................................................................................................................... 26 Table: 10 Leading Causes Of Death In Ministry of Health Hospitals, 2005 ........................................................................................................ 28 Communicable Diseases ...................................................................................................................................................................................... 28 Healthcare Sector ................................................................................................................................................................................................ 29 Health Insurance ................................................................................................................................................................................................. 31 MAIN FEATURES OF 1CARE ............................................................................................................................................................................ 31 Healthcare Sector Funding .................................................................................................................................................................................. 32 Medical Tourism .................................................................................................................................................................................................. 33 Biotechnology And Research ............................................................................................................................................................................... 34 Table: Key Points Of The Malaysian National Biotechnology Policy .................................................................................................................. 36 Table: The Benefits Of Conducting Biotechnology Research In Malaysia ........................................................................................................... 37 Clinical Trials ...................................................................................................................................................................................................... 38 Recent Developments in the Clinical Trials Industry ........................................................................................................................................... 39 Medical Devices................................................................................................................................................................................................... 40 Leading Medical Device Players ......................................................................................................................................................................... 41 Recent Developments In The Medical Devices Industry....................................................................................................................................... 42
Industry Forecast Scenario ........................................................................................................................... 44

Overall Market Forecast...................................................................................................................................................................................... 44 Table: Pharmaceutical Sales Indicators 2008-2016 ............................................................................................................................................ 45
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Healthcare Market Forecast ................................................................................................................................................................................ 46 Table: Healthcare Expenditure Indicators 2008-2016 ......................................................................................................................................... 47 Table: Healthcare Governmental Indicators 2008-2016 ..................................................................................................................................... 47 Table: Healthcare Private Indicators 2008-2016 ................................................................................................................................................ 48 Key Growth Factors Macroeconomic ............................................................................................................................................................... 49 Prescription Drug Market Forecast..................................................................................................................................................................... 52 Table: Prescription Drug Sales Indicators 2008-2016 ........................................................................................................................................ 53 Patented Drug Market Forecast .......................................................................................................................................................................... 54 Table: Patented Drug Market Indicators 2008-2016 ........................................................................................................................................... 55 Generic Drug Market Forecast............................................................................................................................................................................ 56 Table: Generic Drug Sales Indicators 2008-2016 ............................................................................................................................................... 57 OTC Medicine Market Forecast .......................................................................................................................................................................... 58 Table: OTC Medicine Sales Indicators 2008-2016 .............................................................................................................................................. 59 Pharmaceutical Trade Forecast .......................................................................................................................................................................... 60 Table: Exports and Imports Indicators 2008-2016 .............................................................................................................................................. 62 Medical Device Market Forecast ......................................................................................................................................................................... 63 Table: Medical Devices Sales Indicators 2008-2016 ........................................................................................................................................... 64 Other Healthcare Data Forecasts........................................................................................................................................................................ 65 Key Risks To BMIs Forecast Scenario ................................................................................................................................................................ 66
Competitive Landscape Analysis ................................................................................................................. 67

Domestic Pharmaceutical Industry ...................................................................................................................................................................... 67 Foreign Pharmaceutical Industry ............................................................................................................................................................................. 68 Table: Leading Malaysian Pharmaceutical And Healthcare Companies............................................................................................................. 69 Recent Company Activities................................................................................................................................................................................... 69 Halal Medicine .................................................................................................................................................................................................... 70 Traditional Medicine ........................................................................................................................................................................................... 71 Pharmaceutical Distribution................................................................................................................................................................................ 72
Company Profiles ........................................................................................................................................... 73

Leading Domestic Manufacturers ............................................................................................................................................................................. 73 Pharmaniaga ....................................................................................................................................................................................................... 73 Prime Pharmaceutical ......................................................................................................................................................................................... 76 Bumimedic Sdn. Bhd. ........................................................................................................................................................................................... 77 Hovid ................................................................................................................................................................................................................... 78 Chemical Company of Malaysia (CCM) .............................................................................................................................................................. 80 Kotra Pharma ...................................................................................................................................................................................................... 83 Multinational Companies.......................................................................................................................................................................................... 86 GlaxoSmithKline (GSK) ....................................................................................................................................................................................... 86 Pfizer ................................................................................................................................................................................................................... 89 Novartis ............................................................................................................................................................................................................... 91 Merck & Co ......................................................................................................................................................................................................... 93 Sanofi-Aventis ...................................................................................................................................................................................................... 95 Eli Lilly Malaysia ................................................................................................................................................................................................ 96 Ranbaxy Malaysia ............................................................................................................................................................................................... 97
Country Snapshot: Malaysia Demographic Data ........................................................................................ 98

Section 1: Population........................................................................................................................................................................................... 98 Table: Demographic Indicators, 2005-2030 ........................................................................................................................................................ 98 Table: Rural/Urban Breakdown, 2005-2030 ....................................................................................................................................................... 99 Section 2: Education And Healthcare .................................................................................................................................................................. 99
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Table: Education, 2000-2003 .............................................................................................................................................................................. 99 Table: Vital Statistics, 2005-2030 ........................................................................................................................................................................ 99
Glossary ........................................................................................................................................................ 100 BMI Methodology ......................................................................................................................................... 102

How We Generate Our Pharmaceutical Industry Forecasts ...............................................................................................................................102 Pharmaceuticals Business Environment Ratings ................................................................................................................................................103 Risk/Reward Ratings Methodology .....................................................................................................................................................................103 Ratings Overview ................................................................................................................................................................................................103 Table: Pharmaceutical Business Environment Indicators ..................................................................................................................................104 Weighting............................................................................................................................................................................................................105 Table: Weighting Of Components .......................................................................................................................................................................105 Sources ...............................................................................................................................................................................................................105
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Executive Summary
BMI View: Malaysias longer term potential as an attractive pharmaceutical market will remain shaped by the prevailing economic conditions and the export situation, which are crucial for the countrys overall economic development and thus also the availability of individual funding for medicines, given the high out-of-pocket contribution to healthcare. Nevertheless, volume demand will continue to grow on the back of demographic and epidemiological changes, supported by the expansion of modernisation of healthcare provision in both public and private sectors. Headline Expenditure Projections Pharmaceuticals: MYR4.92bn (US$1.61bn) in 2011 to MYR5.23bn (US$1.64bn) in 2012; +5.9% in local currency and +2.1% in US dollars. Forecast down slightly from Q212 due to macroeconomic factors. Healthcare: MYR38.93bn (US$12.73bn) in 2011 to MYR41.32bn (US$13.01bn) in 2012; +6.1% in local currency and +2.3% in US dollars. Forecast down slightly from Q212 due to macroeconomic factors. Medical devices: MYR3.82bn (US$1.25bn) in 2011 to MYR4.00bn (US$1.26bn) in 2012; +4.9% in local currency and +1.1% in US dollars. Forecast broadly unchanged from Q212. Business Environment Rating: In our latest proprietary Pharmaceutical Risk/Reward Rating (RRR) matrix for Asia Pacific, Malaysia ranks in an unchanged position 8 out of the 18 countries surveyed regionally. The countrys rewards are considered modest at best, given the low per capita spending on pharmaceuticals, but its matrix position continues to be supported by the strong risk scores. Key Trends & Developments In January 2012, Malaysian Minister of Health Liow Tiong Lai stated that a dengue fever vaccine will be available in the country by 2014 or 2015. The health ministry is set to enter the third phase of clinical trials on a vaccine by the end of 2012. Liow said the ministry achieved success during the second phase of trials, which involved monitoring about 2,000 people from Penang and Putrajaya. The ministry and French drugmaker Sanofi have been developing the vaccine to treat dengue. BMI Economic View: Despite a better-than-expected real GDP growth reading of 5.2% year-on-year (y-o-y) in Q411, we are happy to maintain our below consensus view on the Malaysian economy in 2012. Our core view that cooling global demand will continue to drag on production of cyclical goods including industrial metals and electrical and electronic components means that we expect manufacturing sector growth to remain weak going forward. Accordingly, we expect Malaysia's real GDP growth to come in at a subdued 3.3% in 2012, compared to consensus forecast of 4.2%. BMI Political View: The opposition Democratic Action Party (DAP) has proposed new measures aimed at addressing corruption. Some of the key measures include a ban on political parties' involvement in businesses and the adoption of an open tender system for government contracts. DAP Secretary General Lim Guan Eng said that economic losses due to corruption are close to estimates published by Washington-based financial watchdog Global
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Financial Integrity (GFI) at MYR1.1bn (US$0.3bn) annually. We believe that the move will put further pressure on the ruling Barisan Nasional to speed up efforts to tackle corruption.
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SWOT Analysis
Malaysia Pharmaceuticals And Healthcare Industry SWOT
Strengths
Increasingly progressive government policy, aimed at attracting international investment. Improving local manufacturing standards, with a commitment to biotech development. Robust growth in recent years, partly due to the absence of price controls in the private sector. Sizeable generic drugs market, given low patient purchasing power and lax patent laws. Prescribing and dispensing presently dealt with by general practitioners, boosting overall value of the prescription market. Manufacturing of halal medicines improving access to other global Islamic markets. Advertising and marketing regulations have been relaxed for pharmaceutical companies. Markedly behind South Korea, Singapore and Taiwan in terms of per-capita pharmaceutical expenditure and foreign direct investment (FDI). Lax patent law remains conspicuously below international standards. Recent reform aimed at increasing generic product development worsening operating conditions for multinationals. 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. Talks on a bilateral free trade agreement with the US have been abandoned. Healthcare sector continues to suffer from chronic shortage of qualified doctors. Exports growing due to rising regional and global demand, as well as increasing trade links. Increasingly sophisticated pharmaceutical demand. Government desire to prevent and contain disease outbreaks. 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. Increased trade and investment collaboration with China. Planned investment in the expansion of medical facilities. Malaysia offers a considerable contract manufacturing opportunities. Cooperation agreements with Egypt, India and Pakistan arranged in late 2010 should increase the number of qualified doctors and medical specialists in the country. 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 failure to revise discriminatory pricing policy. Increased focus on internationally recognised legislation to disadvantage local players. Possible introduction of price ceilings on essential medicines. Government seeking compulsory licences for patented drugs.
Weaknesses
Opportunities
Threats
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Malaysia Political SWOT
Strengths
Malaysia is an example of a successful democratic Islamic state. Despite murmurs of discontent among hard-line Muslims in some states, Malaysia is unlikely to abandon moderate Islam. Despite having two significant minority ethnicities, the Chinese and the Indians, Malaysia has not been rocked by any major racial unrest since 1969. This lends credence to the argument that its multiracial society is sustainable. The Malay half of the population holds a constitutionally enshrined special position in society, amounting to positive discrimination in jobs and wealth. Resentment is an obvious by-product, and the challenge is to produce enough prosperity to reduce tension. The controversial Internal Security Act, which allows for detention without trial, has been wielded by the government on several occasions with the avowed intention of quelling unrest. However, some detentions have been viewed as an attempt by the government to suppress the opposition The relatively weak performance by the ruling Barisan Nasional in the 2008 general elections has paved the way for the stalled reformist agenda promised by former Prime Minister Abdullah Ahmad Badawi back in 2004 to gather pace. This would help open up the country's closed political system and improve transparency and accountability within key institutions. Prime Minister Najib Razak came to power in 2009 promising reforms and changes. His actions have thus far been deemed progressive, potentially paving the way for a significant overhaul of Malaysia's political and economic system. Although it is likely to remain non-violent, ethnic tension will continue to simmer as long as there remains a threat that the influence of hard-line Islam could revive. For now, however, the hardliners have lost much of their political clout. Despite a change of premier in April 2009, the ruling 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 the Barisan Nasional from power.
Weaknesses
Opportunities
Threats
Malaysia Economic SWOT
Strengths
During the past four decades, Malaysia has transformed itself from a commoditydependent economy into a major world source for electronics and computer parts. Malaysia is one of the world's largest producer of rubber, palm oil, pepper and tropical hardwoods, and is still a net exporter of crude oil. All this provides a solid platform for economic growth. Malaysia's relative insulation from global energy price shocks is being eroded. It is now likely that within the next few years Malaysia will become a net importer of oil. Malaysia's economic openness can be as much of a burden as a benefit, since it confers a high degree of vulnerability to global growth and capital flows. Oil-related taxes contribute more than 40% of the state's revenues. The lack of alternative income poses a threat to the government's ability to function and sustain economic development, potentially leading to economic stagnancy. 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.
Weaknesses
Opportunities
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Threats
Malaysia's majority Muslim population and the government's ongoing efforts to boost Islamic finance could see Malaysia become a major financial hub over the medium term. Wages are higher in Malaysia than in a number of its competitors, such as China and Vietnam, which could be a long-term hindrance to economic expansion. To maintain its competitive edge, Malaysia needs a steady stream of inward investment. Malaysia's dependence on migrant labour, particularly for low-skilled jobs, poses a threat to long-term economic stability. Oil-related taxes make up more than 40% of the state's revenues at a time when Malaysia is expected to become a net petroleum importer by as early as 2013. The over-reliance on oil poses a threat to the government's ability to fund and sustain economic development over the long term. The government's already-poor fiscal position is threatened by increasingly unsustainable subsidies on essential consumer goods (especially petrol) which could further strain its finances.
Malaysia Business Environment SWOT
Strengths
Standards of corporate governance in Malaysia have greatly improved since the Asian financial crisis at the end of the 1990s more so, in fact, than in many neighbouring countries. Foreign companies, or at least foreign manufacturing companies, looking to do business in Malaysia will continue to be welcomed with open arms with the government offering lavish tax breaks and concessions. State subsidisation of prices will remain a peripheral but persistent part of daily economic life in Malaysia. Doing business in Malaysia will always, to some extent, mean dealing with the politically well-connected. Big construction projects and big contracts for foreign construction firms are unlikely to be as much of a priority for Malaysia's government as they were under the administration of former Prime Minister Mahathir Mohamad. The opportunity to invest in Malaysian state assets could improve. The government, if it sticks to its word, will conduct its biggest ever divestment of state shareholdings. Malaysia is eager to compete globally in banking. It currently lacks a domestic champion; however, with 10 main institutions in the market, bank consolidation is a strong possibility. The opening of free trade agreement negotiations with the EU as well as the Trans-Pacific Partnership may lead to an improvement to the country's business environment owing to freer markets, if talks succeed. The waterways and shipping lanes that surround Malaysia will continue to experience the threat of piracy and terrorism. Malaysia is at risk of losing out to China in the race for foreign investment. As Malaysian income level rises, it will need to seek investment opportunities in higher value-added industries.
Weaknesses
Opportunities
Threats
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Pharmaceutical Risk/Reward Ratings

Table: Asia Pacific Pharmaceutical Risk/Reward Ratings For Q212
Rewards Industry Rewards

Japan South Korea Australia Singapore China Taiwan Hong Kong Malaysia India New Zealand Thailand Philippines Indonesia Vietnam Bangladesh Pakistan Sri Lanka Cambodia Regional Average 77 63 50 43 67 53 47 50 60 30 53 50 50 47 43 40 33 33 49
Risks Country Rewards

63 67 87 80 50 60 70 60 43 80 47 57 50 47 43 47 43 37 57
Rewards
73 64 59 53 63 55 53 53 56 43 52 52 50 47 43 42 36 34 51
Industry Risks
80 70 72 80 67 70 67 70 60 60 37 43 40 40 40 33 40 30 55
Country Risks
77 69 84 79 56 65 79 69 50 87 58 45 46 44 36 40 48 36 59
Risks
79 70 77 80 63 68 72 70 56 71 45 44 42 42 38 36 43 32 57
Pharma RRR
75.5 66.4 66.2 63.4 62.5 60.2 60.2 59.3 56.0 53.9 49.1 48.7 46.9 44.7 41.3 39.5 38.7 33.5 53.7
Regional Ranking
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Source: BMI. Scores out of 100, with 100 highest.
Globally speaking, Asia Pacific remains the second most attractive region for multinational drugmakers. Although it is currently closely followed by Emerging Europe, over the medium to longer term, Asia Pacific is expected to increase its lead over the latter due to its improving reward profile and more favourable economic and demographic factors.
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In BMIs RRR matrix for Q212, Malaysia is again placed eighth, out of the 18 markets surveyed. Key attractions of the Malaysian pharmaceutical market over the longer term are the governments encouragement of the biotechnology sector and the countrys economic development, which will improve consumer purchasing power with regard to pharmaceuticals. On the other hand, per-capita pharmaceutical consumption is quite low, especially due to the high out-of-pocket payment levels, which make the market vulnerable to economic downturns. The component parts of Malaysias ranking are:
Rewards
Pharmaceutical market and country structure scores are weighted and combined to form the overall rewards score. Malaysia scores an unchanged 53, which is above the regional average of 51.
Industry Rewards Malaysias pharmaceutical market receives 50, illustrating a 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. Nevertheless, the demand for drugs will rise over the forecast period due to an increased need for modern medicines, population growth and healthcare service improvements, as well as developing economic conditions. In
Risk/Reward Rankings By Sub-Sector Score Q212
Source: BMI
addition, the domestic drug industry is relatively basic, comprising a small number of large domestic producers and an array of small, private manufacturers, with imports playing an important part, especially in regards to hi-tech medicines. However, the market remains under threat from one-off factors, such as natural disasters. Country Rewards Malaysia again scores 60 for this indicator, on a par with the Philippines and Taiwan, while also remaining above the regional average. 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.
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Risks
Pharmaceutical market and country risks are weighted and combined to form the score for risks to potential returns. Malaysias score of 70 is considerably above the regional average (57 for the quarter). The country is considered as posing some risks to multinationals, although presenting a respectable longterm prospect in the Asian region. Industry Risks Malaysias score remains at 70 for market risk, which refers to a subjective assessment of the countrys IP laws, policy and reimbursement regimes, as well as to the speed and efficiency of the approvals process. However, despite the positive prospect of harmonisation with the Association of South East Asian Nations (ASEAN), the significant counterfeit drug industry, the difficulty in applying process patents, the lack of data exclusivity and generally poor regulatory enforcement will continue to act as major drawbacks for multinationals. Country Risks The figure for Malaysias country risk (69) is supported by a relatively high level of policy continuity, but is weighted down by corruption, cumbersome bureaucracy and a patchy legal framework. While tourism and some private investment continue to fuel GDP growth, healthcare will continue to be inadequate in many parts of the country. Overall, however, Malaysias score remains considerably above the regional average, which serves to increase its attractiveness as an investment destination. Indeed, according to the World Bank's Governance Indicator, Malaysia alongside Singapore and Vietnam in the immediate region scores positively (score ranges from a low of -2.5 to a high of +2.5) in 'Political Stability and Absence of Violence/Terrorism'.
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Malaysia Market Summary

The Malaysian pharmaceutical market is relatively underdeveloped by international standards. The market is based on a strong domestic generic drugs sector and imports of branded and patented medicines (mostly from the US, Japan and Germany). Pharmaceutical spending represented a calculated 0.60% of GDP in 2011, low even by regional standards. Through to 2016, the Malaysian drug market, valued at around MYR4.92bn (US$1.61bn) in 2011, is expected to post a CAGR of 5.9% in local currency terms. Boosted by considerable encouragement from the government, the generic drug sector will expand in volume terms, although its value gains against the patented drug market will be smaller, due to its low prices. Imports (of patented and hi-tech drugs primarily) will continue to dominate the Malaysian market, with multinationals taking a lions share. The encouragement of the generic drug sector will provide new opportunities for the local industry, which will increasingly need to boost its competitiveness in the face of regional harmonisation and free trade agreements (FTAs) with major trading partners. The vast majority of local producers concentrate on generic and OTC medicines, with output mainly intended for domestic consumption. The domestic manufacturers association, the Malaysian Organisation of Pharmaceutical Industries (MOPI), claims that local manufacturers can produce 80% of the drugs on the Malaysian National Essential Drugs List (NEDL). In the meantime, exports have also been boosted by rising regional and global demand as well as increased trade links with other major markets, although the market will remain import-dependent. Leading domestic producers include Asia Pharmaceutical Products and Pharmaniaga, with the latter increasingly targeting overseas markets. From an industry perspective, the Malaysian drug manufacturing and clinical trial industry will continue to develop as an increasingly attractive option for international firms, since the country has a large pool of highly trained but inexpensive research professionals. The government has been making concerted efforts to reinforce this trend, focusing on the development of the pharmaceutical and biotech hub around the
Source: IMS Health Asia, AC Nielsen, domestic companies, local press, BMI
Pharmaceutical Market By Sub-Sector (US$bn) 2011
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capital, Kuala Lumpur. Malaysia is a member of the European Pharmaceutical Inspection Cooperation (PIC) Scheme, which is intended to ensure mutual confidence in manufacturing standards.
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Regulatory Regime
The current legal framework covering the regulation and enforcement of quality pharmaceuticals in Malaysia was put in place during the early 1950s, with the enactment of the relevant pharmacy laws. Through the legislation, pharmaceutical products, traditional medicines and cosmetics were registered. Simultaneously, manufacturers, importers, wholesalers and retailers were licensed. The main regulatory authority in Malaysia is the Drug Control Authority (DCA), under the auspices of the Ministry of Health. Five items of legislation form the basis for market regulation: The Poisons Act 1952 (Revised 1989); The Sales of Drugs Act 1952 (Revised 1989); The Medicines (Advertisement and Sales) Act 1956 (Revised 1983); The Registration of Pharmacists Act 1951 (Revised 1989); and The Dangerous Drugs Act 1952 (Revised 1980). 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 to be shortened from six months to 60 days in 2011, as part of the government's efforts to encourage growth in the pharmaceutical industry. Reducing the approval period will boost drugmakers revenues and consequently facilitate foreign direct investment (FDI) into manufacturing plants and R&D facilities. Pharmaceuticals are regulated by the DCA, which is managed by the director-general of health, director of pharmaceutical services, director of the National Pharmaceutical Control Laboratory, and seven other appointed members. 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 Organisation for Economic Cooperation and Development (OECD) countries, illustrating the quality of generic medicines produced in Malaysia. The DCAs duties include reviewing registration applications for drugs and cosmetics; licensing importers, manufacturers and wholesalers; post-marketing safety surveillance; and the monitoring of adverse drug reactions. Between 1991 and the end of 2008, Malaysia registered some 207,911 medicines in total, of which 154,507 were imports, according to the Ministry of Healths figures released in January 2009. Currently, the number of registrations stands at more than 43,000. According to the DCA, any drug in a pharmaceutical dosage form for human or animal use must be registered with the agency. This includes products that alleviate, treat or cure diseases; products that diagnose a disease; anaesthetics; and products that maintain, modify, prevent, restore or interfere with normal physiological functions. 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.
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All local pharmaceutical manufacturers must be licensed by the DCA. Regulations regarding foreign investment have made the establishment of pharmaceutical joint ventures (JVs) difficult in the past, though this process is becoming somewhat easier. Companies wishing to establish manufacturing operations in the region have tended to choose neighbouring Singapore instead, which offers a wider range of investment incentives, although the Malaysian government is working to redress this balance.
Recent Regulatory Developments

In early 2010, the DCA reminded pharmaceutical companies to inform it of changes to their production processes. Failure to do so will result in the cancellation of licences and withdrawal of products. It is BMI's view that this development underlines the steady evolution of the DCA. Standards employed by the regulatory body are now approaching international levels. According to the chairman of the DCA, Tan Sri Dr Mohd Ismail Merican, 'stern action' will be taken against drugmakers that modify manufacturing methods without approval. This policy ensures that the efficacy, safety and quality of medicines are maintained at all times. If a company wishes to amend its production process, it must submit data to the DCA and wait for official clearance. The DCA has also requested that prescribers, healthcare professional and consumers report altered, substandard or unapproved medicines. Under Malaysia's Control of Drugs and Cosmetics Regulations (1984), all pharmaceutical products must be evaluated by the DCA before they can be manufactured, imported, distributed or sold in the country. In July 2009, in a move similarly signalling regulatory maturity (even though the issue had been dealt with in a more timely manner in developed markets), the DCA limited the use of cough and cold medicines for children under two years of age. The DCA requested relevant paediatric medicines carry warning labels, although labelling remains suboptimal in some market segments. In the meantime, parents and carers were given advice on how to use the medicines in a correct manner. 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. All stakeholders healthcare professionals, patients and the pharmaceutical industry have been contributing their opinions on the potential new rules. 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. However, critics of this paradigm point out that the management of dispensing activities distracts doctors
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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. Instead, in January 2009, the Malaysian Pharmaceutical Society (MPS) proposed a zoning system that would identify the locations that would require new pharmacies to ensure adequate access, as chosen by patients themselves through piloting schemes. In the meantime, the president of MOPI called on the Health Ministry to draw up a timeline for the separation of duties, also adding the change would encourage more rational prescribing by doctors. However, the 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
Despite the clearly-stated regulations, some drugmakers have failed to successfully commercialise their products in Malaysia. Over the past decade, the DCA has cancelled or suspended 213 generic drug registrations for failing bioequivalence examinations. In the 2008-2009 period, the authority rejected 66 new product applications because they did not include the required data. 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 Health Minister Dato Sri Liow Tiong Lai, the regulations will bring the local pharmaceutical industry in line with international standards.
Regional Collaboration
The idea of Association Of Southeast Asian Nations (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 a 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
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five. We also note that regional harmonisation is likely to continue as countries have more incentives to promote regional harmonisation rather than act on a global level. As in the case of the ASEAN, pharmaceutical harmonisation is part of the region's ongoing efforts to promote economic integration. The regulatory environment in Malaysia has improved markedly over the last decade as the government has supported the alignment of domestic procedures with international norms. Moves to harmonise procedures across the ASEAN have furthered this progress. The Malaysian Pharmaceutical Product Working Group (PPWG) has been in operation since 1999, with a specific aim of facilitating the process.
Pharmaceutical And Medical Advertising

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. Nevertheless, some hospitals have already taken advantage of this new advertising privilege through new product launches. The government allows private healthcare providers to promote their services through all media, including newspapers, electronic media and online, 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. The government has decided to liberalise provisions under the Medicines (Advertisement and Sales) Act 1965. 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
During June 2008, reports were emerging that doctors and pharmacists were not adhering to 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. Labelling laws for dispensed medicines came under scrutiny in the course of early 2006 for not providing clear information to patients, especially to those who are receiving more than one medication. At present, Malaysian private clinics and pharmacies are not required to comply with standard labelling regulations.
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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. Additionally, labels for generic medicines are thought to be lacking, with professional groups urged to lobby the government for appropriate changes in legislation, which would complement recent efforts to make drug monitoring more effective. In October 2005, the Ministry of Health issued further guidance on the requirement 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 manufacturers serial number. The authenticity of the hologram can be confirmed by examining it with a special decoder and a microscope.
Intellectual Property Regime

Despite a major revision of patent law in 2001, and subsequent amendments in 2003, patent protection continues to be the cause of friction between the government and international drug manufacturers. While the government revised the period of protection for pharmaceuticals (increasing it to 20 years) following pressure from the international pharmaceutical community, it also implemented legal provisions that have come under heavy criticism from the industry. These include: The stipulation that the limited manufacturing, use and sale of a generic drug before the expiry of the originals patent should no longer be considered patent infringement; Provisions allowing the licensing and production of medicines by the government under certain conditions, without the patent holders consent. The 2003 amendment attempted to make registering a patent easier and less expensive. Under this system, international patent applications may be made in any one of the countries of the Patent Co-operation Treaty, an initiative by the World Intellectual Property Organisation (WIPO). Previously, the applicant had to make the application in each and every country where the patent was to be applicable. Although the amendment reflected the trend of liberalisation, with procedures increasingly aligned with regional
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and international norms, it did not address the issues at the centre of the debate between government and industry. The United States Trade Representative (USTR) has been listing Malaysia as a Watch List country since 2003 in its Special 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 World Trade Organization (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 proposals including the promotion of national self-reliance for the products within the National Essential Drug List (NEDL). While international criticism of the current state of patent legislation is expected to continue, the government is unlikely to significantly amend the law in the short term, not wishing to further pressure the indigenous industry. However, financial gains from parallel trade, which is encouraged as a cheaper option for the state-funded healthcare, will continue to be made almost exclusively by the middle traders, thus not achieving its aim, but instead serving further to antagonise multinational pharmaceutical players.
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. Malaysia, however, is moving in the right direction and the MoH has recently introduced a bill that is expected to curb counterfeit drugs, which will include tougher penalties for criminals manufacturing or distributing fake drugs. Despite the introduction of holograms on pharmaceutical packaging, the level of counterfeit trade in Malaysia remains significant due to lax enforcement and other issues. A small but not unimportant proportion of drugs on the market are counterfeit (a 1997 study by the Ministry of Health found that 5.3% of sampled drugs fell into this category, although other current estimates are at least double that amount), which has continued to represent a point of friction between the government and the international industry. According to the Pharmaceutical Services Division, around 5.28% of all OTCs on sale in
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Malaysia were counterfeit in 2008, with slimming products accounting for around 10% of all illegal medicines seized in 2007. Due to the conservative nature of Malaysian society, erectile dysfunction (ED) therapeutics are the most frequently copied medicines on the market, estimated to account for between 30 and 40% of all counterfeits. In March 2007, the Health Ministry seized 1.4mn capsules of counterfeit ED medicines worth MYR14mn (US$4mn) from a container in Penang. The seizure, the biggest to date by the ministrys pharmaceutical enforcement division, was made when enforcement officers detained a container from Singapore loaded with 142 boxes bearing the Miagra trademark. The consignment was suspected to be for Malaysia and Thailand, given the prevalence of counterfeit drugs in both countries. 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. In order to deter sale of imitation drugs, the government is looking to hand out more severe punishments for counterfeiters. Currently, most offences lead to prison sentences of no longer than five years, in addition to a fine of between MYR2,000 and MYR20,000 per infringement. After consulting with the Pharmaceutical Association of Malaysia, the Ministry of Domestic Trade and Consumer Affairs initiated calls for new legislation against the illegal trade. Specifically, the Malaysian International Chamber of Commerce recommended that the Trade Descriptions Act 1972, Sales of Drugs Act 1952 and the Poisons Act 1952 be amended so that there is a minimum fine for each counterfeit item and a mandatory jail sentence. A draft bill was expected in 2009, although no developments on the issue have been reported. Nevertheless and despite the fact that the country has no legislation that specifically targets online counterfeiting authorities (through a dedicated unit) have reportedly been successful with regard to reducing online sales of fake medicines.
Compulsory Licensing
In May 2007, as a sign of its strength in 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 will be strongly discouraged to do so by the US, as the profits of multinational drugmakers will be negatively impacted. Malaysias approach could further derail the FTA, given that the country is already unwilling to compromise on other issues. 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
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(ARVs) in the management of HIV/AIDS. The medicines involved were US-based Bristol-Myers Squibbs didanosine and UK firm GlaxoSmithKline (GSK)s zidovudine and lamivudine + zidovudine. This action has pushed prices down significantly. Previously at MYR1,200 (US$351) per month, the average cost for patients fell dramatically to MYR200 (US$58) and then to MYR150 (US$44). Given that the average monthly wage in Malaysia is approximately US$1,000, compulsory licences have made ARVs affordable to the vast majority of the population.
Free Trade Agreements

Malaysia and the US appear to have abandoned bilateral FTA negotiations in 2010, after discussions stalled due to mass protests in 2006 as well as a subsequent lack of agreement on a number of issues. The US is pressing Malaysia to open up government contracts to US firms, but this request trespasses on the politically sensitive issue of affirmative-action policies. These policies, which ensure that a certain proportion of state contracts are issued to ethnic Malays, are considered to be a political sacred cow, but are extremely unpopular with foreign investors. However, 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. Other deals signed by Malaysia in recent years include the July 2006 FTA with Japan. Malaysia became the third country after Singapore and Mexico to conclude an FTA with Japan, which will allow the two countries to scrap tariffs on most industrial goods, improve investment conditions and respect IP rights. The ASEAN-Australia-New Zealand FTA (AANZFTA) was signed in 2008, envisaging a regional common market by 2015. A proposed EU-Malaysia FTA entered the discussion phase centred around intellectual property rights in May 2011. Prices of medicines are expected to increase as, under the proposed agreement, pharmaceutical companies' patent rights would be extended from the present 15 years to 20 years. The country is also seeking to increase its co-operation with the Middle East, and especially Oman, which is Malaysias third-largest trading partner among the members of the Gulf Co-operation Council (GCC), providing healthcare and hospital management expertise, among other services. Going forward, the recent global financial crisis provided an impetus for an increase in Malaysia-China trade, as consumers from developed countries such as the US and the eurozone cut back on spending, turning Malaysian exports towards regional economies to sell their output. Indeed, the fact that Malaysia
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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 Malaysias export sector. Furthermore, we believe the signing of the ASEAN-China Investment Agreement in June 2009 the third and last instalment encompassing the three-part ASEAN-China FTA will cement the trend, as a common investment area will reduce market risk and uncertainty for Chinese investors to commit their funds to Malaysia.
Pricing And Reimbursement

Pricing regulations are different for the public and private sectors in Malaysia, but the division is becoming increasingly blurred. Parallel imports have been legalised in a bid to cut costs in the public sector, undermining revenues on branded products. The practice is angering the multinational sector, with foreign players critical of the governments biased approach to regulatory and enforcement issues. 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 Sdn Bhd (formerly known as 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 National Essential Drugs List (NEDL) is based on the essential drug list. Presently, the NEDL used in both the private and public sectors contains around 360 chemical entities and 600 preparations, which cover treatments in primary, secondary and tertiary settings. The supplementary list contains a further 257 entities and 391 preparations, and covers special treatments in tertiary healthcare facilities. The updated NEDL was published in 2008. Drugs outside the NEDLs remit are priced freely. Out-of-pocket spending on drugs accounts for around 25% of the total, with private insurance covering some 15%. According to reports in New Strait Times, around 15% of the population has private insurance. All foreign workers are required to purchase hospital insurance, which is expected to bring in some MYR200mn in revenue per annum.
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Industry Trends And Developments

Epidemiology
Cancer, hypertension and circulatory problems account for most deaths and cases of hospitalisation in Malaysia. Heart disease is the number one killer. According to the February 2009 statement by the Health Minister, some 43% of all Malaysians aged 30 or above are at risk of hypertension, with estimates suggesting that some 4.8mn Malaysians are already affected by the condition. 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.
In the meantime, diseases including heart problems resulting from unhealthy lifestyle (such as smoking) are increasing in prevalence. By December 2007, there were more obese men than women in the 25-64 age group. The Chronic Disease Risk Factor study by the Health Ministry showed there were 1mn obese women, compared to 850,000 obese men. In fact, 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
Burden Of Disease Projection 2005-2030
f = forecast. DALYs = disability-adjusted life years. Source: BMI's Burden of Disease Database (BoDD).
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 sugarrelated diseases such as obesity and diabetes. Malaysian patients spend about MYR700mn (US$219.4mn) every year on kidney dialysis, according to Health Director-General Hasan Abdul Rahman. Hasan 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
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through proper care and early detection. The government will spend around MYR3mn (US$0.9mn) on training to doctors on new guidelines in 2012. 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.
Insulin And Other Anti-Diabetes Treatment In Malaysia
Source: Ministry of Health (Pharmaceutical Services Division) Previously, in November 2010, the Malaysian Minister of Health, Dato Sri Liow Tiong Lai, said the ministry will re-examine its public awareness programmes for healthy living after the country was ranked with the sixth highest level of obesity in Asia. This was attributed to the eating habits of the population, which consumes a lot of fried, oily and high-fat foods. In June 2011, the Malaysian Rare Disorders Society (MRDS), a local non-governmental organisation, asked the government to prepare a rare disorders registry in a bid to help people suffering from such diseases. According to President and co-founder Hatijah Ayob, the registry would allow the government to identify and categorise rare disorder patients as well as offering them medical healthcare assistance. The MRDS website revealed that a total of 75% of rare disorder cases were identified in children, approximately 25% of which died before the age of five. Hatijah also appealed to the health ministry to finalise the Orphan Act, which could encourage drugmakers to prepare drugs to counter the diseases. Osteoporosis is also a growing problem in Malaysia. According to a recent programme, conducted by Anlene, as many as one in three Malaysians are at risk of developing the condition. Malaysians of
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Chinese origin are most at risk of osteoporotic hip fractures, while as many as 71% of women are failing to consume adequate daily dosages of vitamin D. On a 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 years of age in 2010, giving the country a 5.1 mortality rate (per 1,000 births). The institute estimates a total of 2,852 underfive deaths in 2010 in Malaysia. This is a significant improvement on the countrys 1990 ranking of 42, when Malaysia had an under-five child mortality rate of 16.43. According to BMIs Burden of Disease Database (BoDD), Malaysia will experience the next greatest improvement in disease burden, after Singapore on a regional basis. By 2030, a projected 106.4 disabilityadjusted life years (DALYs) per 1,000 population 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 hi-tech hospitals and clinics, while personal spending will be directed to goods such as OTCs.
Table: 10 Leading Causes Of Death In Ministry of Health Hospitals, 2005
Rank 1 2 3 4 5 6 7 8 9 10
Description Septicaemia Heart disease and diseases of pulmonary circulation Malignant neoplasms Cerebrovascular diseases Accidents Pneumonia Diseases of digestive system Certain conditions originating in the prenatal period Nephritis, nephrotic syndrome and nephrosis Ill-defined conditions
As % of total 16.54 14.31 10.11 8.19 5.67 5.3 4.45 4.37 3.89 2.82
Source: United States Department of Commerce (USDOC), 2007
Communicable Diseases
Malaysia is largely free of diseases such as polio, which was eradicated in 1992. Over the past decade, Malaysia has stepped up efforts to prevent and contain infectious disease outbreaks. 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
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linked only to monkeys, has been shown to be widespread among humans in the country. Potentially fatal malaria cases caused by the P. knowlesi parasite are thought to account for around two thirds of the total. Universiti Sains Malaysia (USM) commenced a partnership with Italys University of Parma in February 2010 to develop anti-malarial treatments. USMs facilities and expertise will be used for clinical trials, according to New Straits Times. In October 2010, the WHO faced criticism from Malaysia over its failure to counter the spread of dengue in the Asia Pacific region. A total of 242,000 cases of the mosquito-borne disease were reported in the region during 2009. Health Minister said the efforts made by the WHO were not adequate to deal with the threat. He has asked the WHO to push countries to implement a more comprehensive strategy to tackle the disease. From the start of 2010 to end-November 2010, the number of deaths due to dengue outbreak in Malaysia stood at 117, while the number of diagnosed patients had risen 53% to 38,000 cases. According to most WHO recent figures, Malaysia has around 75,000 HIV-positive patients. The countrys HIV/AIDS prevalence is the fifth highest in the region. Some 70% of HIV-positive people were infected through drug injections, with the remainder mostly infected through unprotected sex. The government has implemented public health programmes targeting a decrease in HIV infections by providing contraceptives and educating commercial sex workers on dangers of unprotected sex. The United Nations UNICEF programme has been providing care for HIV orphans in Malaysia. Malaysia was largely on target to achieve the UN Millennium Development Goals on curbing the spread of HIV/AIDS by 2010, by implementing needle-exchange services and similar harm-reduction measures. Through to 2013, HIV-reduction programmes are expected to receive a further US$88mn in funding.
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 and more than 130 hospitals and 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. 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. Allianze University College of Medical Sciences (AUCMS) will also build two hospitals in Penang, Malaysia, by 2015, at a cost of MYR2bn
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(US$0.63bn). The construction work on the 200-bed first hospital is scheduled to start in mid-2012 and is expected to be finished by mid-2013. Work on the 800-bed second hospital is due to start in 2013 and is likely to be concluded by 2015. In related developments, in September 2011, Malaysia's Deputy Director General of Health (Medical), Datuk Dr Noor Hisham Abdullah, stated that the ministry will continue to upgrade public health services by focusing on improving service quality, as he believes healthcare infrastructure had reached a satisfactory level. Indeed, in February 2012, the Normah Medical Specialist Centre in Malaysia secured Joint Commission International (JCI) accreditation for the delivery of its healthcare services, making it the first private hospital in Borneo to be awarded the accreditation. The full three-year accreditation from 2011 to 2013 recognises the centre's commitment to quality and compliance with high standards of healthcare services, CEO and managing director Au Yong Kien Hoe said. The 1Malaysia clinics programme was launched in early 2010. 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. Patients with more serious illnesses are still referred by MAs to hospitals and polyclinics. Nevertheless, given the shortages of medical personnel, many patients have welcomed the initiative that reduces waiting times as well as consultation costs (which can now be as low as MYR1). 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, mini-clinics will be established in schools in remote parts of the state. According to Sabah Health Department, a total of 800 rural clinics will be opened across the state. Yusuf Ibrahim, director of the department, said that the clinic will be managed by a medical assistant, providing basic medical services. Ibrahim added that the proposal has already received support from the state education department. The Health Department introduced the country's first flying dental team to complement its existing flying doctors service and offer dental care to villagers.
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Health Insurance
MAIN FEATURES OF 1CARE
Primary health care (PHC)
Aim: Promote preventive care and early intervention. Each individual will be registered with a primary healthcare provider (PHCP) who is a family doctor and dentist. The PHCP 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, thereby narrowing the gap between rich and poor in terms of healthcare access. 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. The proposal of universal healthcare coverage is in line with the agenda proposed by the WHO, especially given problems such as long waiting times, inadequate amenities and overworked medical professionals in the public sector in Malaysia, and high charges in the private sector. Indeed, 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 give strong support for it if and when it gets implemented. Much of the dissatisfaction the public has towards 1Care has is due to speculation, as official details have not yet been released. 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
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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.
Healthcare Sector Funding

The Malaysian government allocates only 7% of the national budget to healthcare and in July the amount allocated for 2010 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 October 2011, the Malaysian government allocated MYR300mn (US$95.7mn) to upgrade the 141year-old Hospital Kuala Lumpur (HKL) into the premier hospital in the country with state-of-the-art equipment. Prime Minister Najib Razak said the government has also provided MYR15bn (US$4.8bn) to cover operating expenditure and MYR1.8bn (US$574.0mn) for development expenditure for health services in 2012. The government will also build and upgrade hospitals in Bera, Kuala Krai, Dungun, Sri Aman and Tuaran, as well upgrade 81 rural health clinics and open 50 new clinics. According to a study by the International Islamic University (IIU)s deputy rector, up to 50% of the MYR2.2bn (US$650mn) worth of medicines is wasted in Malaysia each year. The deputy rector suggested that many patients fail to follow prescriptions properly or throw the drugs away if they judge themselves to be healthy again. He also called for a better programme regarding pharmaceutical care services, which would provide more information to patients at the point of medicines dispensing.
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Medical Tourism
Medical tourism is becoming increasingly important to both Malaysias travel and healthcare industries. The government claims that around 350,000 individuals visited Malaysia for medical purposes each year between 2007 and 2009. Malaysia received a total of 392,956 healthcare travellers in 2010, generating over US$100mn in revenue. The government set a target to achieve 22% y-o-y rise in revenue to MYR430mn (US$137.7mn) during 2011. 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. Similarly, in October 2011, Malaysia Airlines' travel and tour division, MASholidays, signed a memorandum of understanding (MoU) with local healthcare group Sime Darby Healthcare (SDH) to promote medical tourism. SDH has agreed to offer specialised medical health screenings and surgical packages such as gastroscopy, colorectal, cardiac and digestive tract screenings at attractive rates. MASholidays will include the options in its all-inclusive travel packages and promote them to tourists. 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. In August 2011, the Penang state government in Malaysia was reported by thesundaily.com, citing Penang Chief Minister Lim Guan Eng, to be set to develop and promote Penang as the Medical City of the Region. He added that the government is aiming to offer affordable and quality healthcare services to serve all segments of the market as well as creating a proactive administration to meet the needs of
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patients and their families. He noted that, upon development, Penang can provide holistic and costeffective healthcare services to cater to patients from the ASEAN region. Lim further mentioned that Penang contributed 66% of Malaysia's total medical tourism receipts in 2010. 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. Additionally, the number of medical tourists from Singapore is expected to increase, as from the start of March 2010 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, opened in November 2009) and Malacca (Mahkota Medical Center). The Singapores Ministry of Health (MOH) added that the scheme will be initiated with two providers Health Management International (HMI), which runs the two Malaysian hospitals, and Parkway Holdings. HMI also planned to apply for Malaysian physician licences, which would allow Singaporean doctors to work in its Malaysian facilities.
Biotechnology And Research

In regional terms, Malaysia has a small biotechnology sector, dominated by around 35 small and mediumsized companies. A number of larger players have developed strong R&D sectors within the overall corporation structure. Most of the activity is recorded in specialist biotechnology (dealing in tissue culture, diagnostics, vaccines, clinical testing and blood bank collection), bio-pharmaceuticals and suppliers to the biotech industry. The government is also involved in the development of biotechnology. The biotech policy was originally designed so the sector would become a new economic driver for Malaysia. The policy is divided into three main phases: 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.
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In 2009, the chief executive officer of the Malaysian Biotechnology Corporation (BiotechCorp) stated that the Malaysian biotech industry is expected to contribute 5% to the countrys GDP by 2020, up from the current 1%, 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 recent months, BMI notes that the Malaysia biotechnology (both within and outside the pharmaceutical industry) has been making headlines, with investments pouring into the sector, although we caution that there are high risks involved in developing life sciences for commercial ends. Nevertheless, 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. Malaysian biotechnology and life sciences industries currently employ around 35,000 staff and appear to be relatively resilient to economic downturn. In March 2009, the managing director and chief executive officer of Malaysia Debt Ventures (MDV) stated that there were adequate funds in the market to support biotechnology firms, adding that financial assistance could be easily obtained by companies that demonstrate their intentions to develop high-quality products and initiate projects. The 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. By the end of 2006, the fund swelled to US$200mn, with US$140mn already invested into over 20 companies. 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. The new policy was
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announced after the disappointment of the Bio-Valley Project venture, which was inaugurated in 2001 inside Malaysias new US$3.7bn Multimedia Super Corridor. 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.
Table: Key Points Of The Malaysian National Biotechnology Policy
To transform and enhance value creation of the agricultural sector through biotechnology. To capitalise on the strengths of biodiversity to commercialise discoveries in health-related natural products and bio-generic drugs. To leverage our strong manufacturing sector by increasing opportunities in bio-processing and bio-manufacturing. To establish biotechnology centres of excellence in the country, where we bring together multi-disciplinary research teams in coordinated initiatives. To build the nations human capital in biotechnology via education and training. To develop financial infrastructure to support biotechnology. To improve Malaysias innovation system by reviewing the countrys legal and regulatory framework. To build international recognition for Malaysian biotechnology. To establish a dedicated and professional agency to spearhead the development of Malaysias biotechnology sector.
Source: Malaysian government
Nevertheless, the government is undeterred in its focus on the development of biotechnology. Authorities have recently created BioNexus Malaysia. The 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. A number of players providing biotech solutions are raising their profile in Malaysia. One such company is the Malaysia Genomics Resource Centre (MGRC), created in July 2005. The centre was set up with the specific focus of establishing a bioinformatics services for the analysis of biological data. MGRC collaborates with industry and individual partners, providing specially adapted applications for online use. Malaysias natural biodiversity is providing a further draw for R&D investment. Scientists are searching the countrys forests for new medicines in a process known as bioprospecting. 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
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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. With a paid-up capital of MYR75mn (US$22.1mn), Inno Biologics is a wholly-owned subsidiary of Inno Bioventures, which is 90% owned by a Ministry of Finance-owned company. The remaining stake in the company is owned by the Malaysian Industry-Government Group on High Technologies (MiGHT). Inno Biologics makes generic drugs for other companies and operates Malaysias first biopharmaceutical plant in Nilai, Negri Sembilan.
Table: The Benefits Of Conducting Biotechnology Research In Malaysia
Strategic location in the heart of Asia Pro-business government Political stability Cost-effective base for business Excellent transportation and ICT Infrastructure Located nearby fast-growing markets Long history in open trade Strong in outsourcing services Highly skilled workforce Presence of several multinationals Government support Extensive base and network of R&D Excellent quality of life Rich biodiversity Presence of Multimedia Super Corridor Knowledge workers Multi-ethnicity
Source: BiotechCorp
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Clinical Trials
Despite some IP and regulatory shortcomings, 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. BMI currently estimates that more than 100 are currently ongoing in the country, which is impressive considering that there were just 50 being conducted in 2004. Studies take place in Ministry establishments, private hospitals and medical teaching facilities. According to clinicaltrials.gov, some 116 studies were recruiting volunteers in late February 2012, out of some 434 total trials registered by the source. By 2020, the governments aim is to increase the number of clinical trials tenfold.
However, further growth of the sector will be dependent on the governments willingness to ensure that bioequivalence data cover all therapeutic areas, as well as ensure a more balanced regulatory environment that would not discriminate between local and foreign producers. Nevertheless, various estimates suggest that market capitalisation of publicly listed biotechnology and biotechnologyrelated healthcare companies topped US$857mn in 2007. Foreign direct investment (FDI) in the sector in the same year was almost US$286mn, with biotechnology forecast to generate over US$70bn in revenue by 2020.
Clinical Trial Registrations 2006-2009
Source: ClinicalTrials.gov, BMI. N.B. Sourced by date of initial registration.
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
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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 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. In July 2010, Quintiles entered into an alliance with the University of Malaya Medical Centre (UMMC) near Kuala Lumpur in Malaysia, with the aim of expanding its Asian network and improving clinical trial capabilities in the Asia Pacific region. Meanwhile, in 2009, global CRO Kendle created three new units in Asia, namely in Malaysia (in Kuala Lumpur), Thailand and the Philippines, as its commitment to the region grows. Malaysia is seen as an attractive market due to low costs, a moderately sized population, rapid patient enrolment, a diverse gene pool and high quality data, as well as government support. Other regional companies are also increasingly interested in Malaysia as a clinical trial destination. To this end, in late 2008, Chinese CRO Tigermed Consulting established a global clinical trials network, in partnership with Russian OCT and South Korean LSK. The latter is responsible for operations in Malaysia, Taiwan, Japan and South Korea. In June 2009, Indian Veeda Clinical Research announced the creation of its South East Asia office in Malaysia. At the same time, the company signed a collaborative agreement with the Malaysian Ministry of Health, with a view to opening an early clinical trials centre within the Ampang Hospital in Kuala Lumpur, which specialises in haematological oncology.
Recent Developments in the Clinical Trials Industry

In January 2012, Malaysian Minister of Health Liow Tiong Lai stated that a dengue fever vaccine will be available in the country by 2014 or 2015. The health ministry is set to enter the third phase of clinical trials on a vaccine by the end of 2012. Liow said the ministry achieved success during the second phase of trials, which involved monitoring about 2,000 people from Penang and Putrajaya. The ministry and French drugmaker Sanofi have been developing the vaccine to treat dengue. Liow said a larger population sample will be included during phase III before the vaccine becomes available on the market.
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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. CEO BN Manohar has revealed that the approval has helped the firm become the only stem cell company to achieve the milestone in Malaysia. He added that the firm is planning to establish a large upscaling of mesenchymal stem cells facility in the country.
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. The company has brought together a highly experienced global team of professionals for the trials, according to Jane Cardosa, chief scientific officer and founder of Sentinext. The vaccine is designed for the treatment of patients with hand, foot and mouth disease (HFMD).
In April 2011, global CRO SIRO Clinpharma launched operations in Malaysia as part of its strategy to extend its presence in Asia. This move will allow the company to gain additional geography to conduct clinical trials for new and existing clients. Previously in 2010, the company co-operated with CROs in South Korea and Taiwan for similar reasons.
Medical Devices
An initial draft of Malaysias Medical Device Bill was submitted in September 2005. One of the requirements contained in the proposed legislation is the registration of all healthcare equipment with the Ministry of Health. The enforcement of the Medical Device was due to begin 2007, and the voluntary registration of healthcare equipment commenced at the end of 2005. The bill applies to all medical devices within Malaysia. In fact, in June 2011, Malaysia introduced a new Medical Device Bill to prevent sub-standard and unsafe medical tools from reaching the markets. Previously, Malaysia did not have a medical device regulatory authority, and as such, the government was eager to implement a system that will be in line with the standards of other Asian countries. Under the bill, a supervisory body would be established within the Ministry of Health to ensure the safety of all healthcare equipment. The main responsibilities of the new governing body would be to oversee the registration, enforcement and monitoring of all laser and healthcare equipment in the country. It now appears that a new department within the Ministry of Healths Engineering Division has been created. The new Medical Devices Bureau will be in charge of medical devices regulation, in line with ASEAN and global standards.
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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. Indeed, Malaysia is active in exports of low-end devices. According to the Malaysia External Trade Development Corporation (Matrade), exports of healthcare services and low-end medical devices, such as surgical gloves, reached a value of MYR3bn (US$937mn) in 2007. In the previous year, the market for clinical diagnostics was worth US$418mn, according to the US Commercial Service. US companies supplied around 58% of this total. In 2008, total medical devices exports were around US$2bn. 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. Malaysia supplies some 60% of the global demand for surgical gloves, according to 2005 figures by AMMI, although the competition in this field from other regional players has intensified in recent years, pushing local manufacturers to increase their role in the production of non-rubber catheters, surgical drapes and gowns and medical tubing, among other items.
Leading Medical Device Players

Malaysia has around 300 small and medium-size manufacturers of medical devices, according to the countrys Medical Devices Association (MMDA). 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. The number of companies involved in the industry was expected to increase during economic downturn, as players from automation equipment, engineering and product packaging turn to medical devices to combat falling demand for their products. The key driver of such a trend will be the fact that most manufacturing undertaken in the industry is still semi-automated, leaving room for further growth, according to Wong Engineering Corp Bhd. One of the more prominent local medical device manufacturers is Ambu Sdh Bhd, which is active in the cardiology and neurology segments. The company is expecting to continue to register strong growth over the coming years, due to the conducive environment provided by various government incentives and various other changes. In fact, according to the 2006 report by the AMMI, the Malaysian medical devices industry was expected to continue posting an average annual growth of 8% through until 2010. Other more prominent local players include WRP Asia Pacific and Supermax Corp.
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Established in 1991, Malaysias Top Glove is the worlds largest producer of rubber gloves. Its 20 factories churn out nearly 15bn pairs of gloves annually and export goods to 180 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. B Braun is currently investing a further MYR103mn to expand its business for intravenous safety canals in Penang, including R&D and regulatory affairs. The investment was to double the production output of the intravenous safety canals from 140mn pieces to 290mn a year by the end of 2009. As part of its strategy to become a leading supplier of medical products in the Asia Pacific region, B Braun is also building two factories in China, designed to manufacture infusion solutions and surgical instruments. 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 Developments In The Medical Devices Industry

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. In January 2011, St Jude Medical received CE accreditation for its manufacturing facility in Malaysia. The approval will allow St Jude to export its pacemakers and leads to the European Union (EU). Over the coming years, the US manufacturer is planning to extend its product range manufactured in Malaysia, to include devices such as implantable cardioverter defibrillators (ICDs). In the same month, Synergy Health acquired Malaysian company Sterilgamma as part of its strategy to expand its medical device sterilisation network.
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In December 2010, WaferGen Biosystems (M) Sdn Bhd, the Malaysian subsidiary of US-based WaferGen Biosystems, signed a US$5mn equity private placement agreement with Malaysian venture capital and development firm Malaysian Technology Development Corporation.
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Industry Forecast Scenario

Overall Market Forecast
Malaysias pharmaceutical market suffered from a weak economy in 2010, with medicine sales increasing by just 5.3%, in local currency terms over two percentage points below the historic 2005-2010 trend. As confidence returns to the economy and as the population ages, we expect pharmaceutical sales growth to return to former levels. The market is skewed towards private (60%) over public (40%).
Supported by an expanding economy, improving medicine regulations, healthcare provision expansion and modernisation and relative political stability, combined sales of prescription drugs and OTCs are forecast to increase to MYR6.57bn (US$2.19bn) in 2016. Due to the gradually strengthening ringgit, the CAGR growth of 5.9% in local currency terms will translate into a US dollar CARG of 6.4%. While external risks are present, for the time being, we envisage the key drivers of growth will be medical tourism, the
Pharmaceutical Market Forecast 2007-2021
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, although the economic downturn will negatively impact shorter-term market development, as will patent expirations. By 2021, we expect the market to be worth MYR8.38bn (US$2.79bn), translating into a local currency CAGR of 5.5% over our 10-year forecast period. The public sector will continue to provide the bulk of demand, especially with the planned improvement and expansion of medical services. The government has made the healthcare industry a priority, implementing schemes to boost the sector. Growth should also be supported by an ageing and expanding population, as consumers becomes increasingly aware of alternative products, and government priorities remain favourable. As purchasing power and private insurance increase and the government shifts more drug costs to patients, per capita drug expenditure will rise significantly in US dollar terms (at a CAGR of 4.7%
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through to 2016), despite dipping in value in 2009, due to adverse economic conditions and exchange rate considerations. OTC manufacturers are particularly well placed to exploit this trend, encouraged by the recent and future finalisation of a number of FTAs. Traditional medicine is expected to post strong gains, due to rising awareness of self-medication and cost containment.
Table: Pharmaceutical Sales Indicators 2008-2016
2008 Pharmaceutical sales (US$bn) Pharmaceutical sales (US$bn), % chg y-o-y Pharmaceutical sales (MYRbn) Pharmaceutical sales (MYRbn), % chg y-o-y Pharmaceutical sales at constant exchange rate (US$bn) Pharmaceutical sales, per capita (US$) Pharmaceutical sales, % of GDP Pharmaceutical sales, % of health expenditure 1.2 14.6 4.1 11.1
2009 1.2 -0.1 4.3 5.6
2010 1.4 15.2 4.5 5.3
2011f 1.6 14.7 4.9 8.9
2012f 1.6 2.1 5.2 5.9
2013f 1.8 9.3 5.6 6.7
2014f 1.9 7.8 5.9 6.0
2015f 2.1 7.4 6.2 5.7
2016f 2.2 5.4 6.6 5.4
1.3 44.4 0.5 12.8
1.4 43.6 0.6 12.6
1.5 49.4 0.6 12.4
1.6 55.8 0.6 12.6
1.7 56.0 0.6 12.6
1.8 60.3 0.6 12.7
1.9 64.0 0.6 12.8
2.0 67.7 0.6 12.8
2.1 70.3 0.6 12.8
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Healthcare Market Forecast

Malaysia spends approximately 4.7% of its GDP on healthcare, and, while this is slightly lower than the regional average of 5%, it is still the highest among Malaysia's immediate neighbours Indonesia (2%), Singapore (3.3%) and Thailand (4.1%). 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. Nevertheless, since 2004, private healthcare expenditure has increased more than government healthcare expenditure. In 2011, private healthcare expenditure reached MYR22.00bn (US$7.19bn), thus considerably more than government healthcare expenditure of MYR16.93bn (US$5.53bn), which represented 43.5% of the country's total healthcare expenditure. While the implementation of 1Care will increase government healthcare spending, BMI believes the rate of increase will still be lower than in the private sector, especially as the details of the programme remain sketchy. Still, economic growth and the development of the healthcare sector, as well as the consequent increase in sector spending, are expected to play a key role in the growth of the pharmaceutical market and the industry despite the fact the goals of a national plan are not currently being met in financial terms. Further development will be driven by a greater knowledge of disease and better access to modern medicines, especially in rural areas where healthcare is based on traditional remedies.
Improving regulatory and trade conditions should continue to attract investment from multinationals, aiding market development. Closely tied in with this advance is the harmonisation of procedures within the ASEAN region, with alignment providing better market access for multinationals looking to establish or expand operations in an increasingly lucrative regional market. The recent strengthening of regional cooperation and collaboration with respect to significant healthcare areas suggests that the harmonisation initiative is developing successfully.
Healthcare Expenditure Forecast 2007-2021
Source: World Health Organization (WHO), BMI
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Table: Healthcare Expenditure Indicators 2008-2016
2008 Health expenditure (US$bn) Health expenditure (US$bn), % chg y-o-y Health expenditure (MYRbn) Health expenditure (MYRbn), % chg y-o-y Health expenditure at constant exchange rate (US$bn) Health expenditure per capita (US$) Health expenditure (% GDP) 9.57 17.13 31.87 13.55
2009 9.65 0.82 33.98 6.61
2010 11.32 17.41 36.47 7.35
2011e 12.73 12.37 38.93 6.74
2012f 13.01 2.27 41.32 6.14
2013f 14.13 8.57 43.80 6.00
2014f 15.17 7.33 46.26 5.60
2015f 16.24 7.05 48.71 5.30
2016f 17.06 5.10 51.19 5.10
10.42 347.84 4.30
11.11 345.09 5.00
11.92 398.72 4.76
12.73 440.95 4.72
13.51 443.86 4.73
14.32 474.36 4.67
15.12 501.32 4.61
15.92 528.61 4.56
16.73 547.38 4.50
Table: Healthcare Governmental Indicators 2008-2016
2008 Government health expenditure (US$bn) Government health expenditure (US$bn), % chg y-o-y Government health expenditure (MYRbn) Government health expenditure (MYRbn), % chg y-o-y Government sector health expenditure, % of total 4.217
2009 4.229
2010 4.937
2011e 5.533
2012f 5.633
2013f 6.089
2014f 6.509
2015f 6.940
2016f 7.265
16.3 14.050
0.3 14.896
16.7 15.901
12.1 16.926
1.8 17.886
8.1 18.877
6.9 19.852
6.6 20.819
4.7 21.795
12.8
6.0
6.7
6.4
5.7
5.5
5.2
4.9
4.7
44.09
43.84
43.60
43.48
43.28
43.10
42.92
42.74
42.58
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Table: Healthcare Private Indicators 2008-2016
2008 Private health expenditure (US$bn) Private health expenditure (US$bn), % chg y-o-y Private health expenditure (MYRbn) Private health expenditure (MYRbn), % chg y-o-y Private sector health expenditure, % of total 5.3
2009 5.4
2010 6.4
2011e 7.2
2012f 7.4
2013f 8.0
2014f 8.7
2015f 9.3
2016f 9.8
17.7 17.8
1.3 19.1
17.9 20.6
12.6 22.0
2.6 23.4
8.9 24.9
7.7 26.4
7.4 27.9
5.4 29.4
14.2 55.9
7.1 56.2
7.8 56.4
7.0 56.5
6.5 56.7
6.4 56.9
5.9 57.1
5.6 57.3
5.4 57.4
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Key Growth Factors Macroeconomic

BMI View: In line with our commodities team's view that commodity prices will see further declines, we expect cost-push inflationary pressures to ease as we head into 2012. Furthermore, our outlook for real GDP growth to come in at 3.2% in 2012 (well below consensus estimate of 5.0%) mean that we are pencilling 25bps worth of rate cuts, bringing the central bank's policy rate from 3.00% to 2.75% by end2012. However, incipient signs of a potential credit squeeze resulting from the sovereign debt crisis in eurozone suggests that further rate cuts are a possibility. Recent economic indicators continue to point towards a bleak outlook for external demand. Furthermore, commodity prices have also been on a steady decline since early 2011. Thus, we are increasingly convinced that Bank Negara Malaysia (BNM) will shift its monetary policy stance from fighting inflation to supporting economic growth in 2012. Back in September, we mentioned that should we see evidence that the slowdown in external demand is turning out to be much more severe than we initially anticipated, we would consider pencilling in rate cuts by the BNM (see 'Risk To Economic Growth To Take Precedence Over Inflationary Concerns', September 23). In line with our recent downgrade of Malaysia's real GDP growth forecast from 4.2% to 3.2% for 2012 (well below Bloomberg consensus estimate of 5.0%), we are now pencilling in 25bps worth of rate cuts, bringing the BNM's policy rate from 3.00% to 2.75% by end-2012.
Rate Cut In 2012

Malaysia Headline CPI, & Policy Rate
Source: Bank Negara Malaysia, BMI Malaysia's headline consumer price inflation (CPI) slowed from 3.4% y-o-y in October to 3.3% in November and we expect inflationary pressures to continue to cool over the coming months. As the accompanying chart shows, commodity prices have remained on a downward trend since early 2011. In line with our commodities team's view that commodity prices will see further declines, we expect costpush inflationary pressures to ease as we head into 2012.
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Input Costs Coming Down

S&P Goldman Sachs Commodity Indices
Source: Bloomberg, BMI Money Supply Growth Eases In terms of money supply growth, we also see evidence that inflationary pressures are becoming a secondary concern for the central bank (M3 money supply growth slowed from 12.5%y-o-y in September to 11.4% in October). Given that the BNM has kept its policy rate on hold at 3.00% since May, we believe that the full impact of monetary tightening has almost entirely fed through to the economy. However, even without further tightening of monetary policy by the BNM, we continue to see a contraction in credit growth.
Keeping Inflationary Pressure At Bay

Malaysia M2 & M3 Money Supply, % chg y-o-y
Source: Department Of Statistics, BMI
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Growing Risk Of A Credit Squeeze In a recent article we mentioned that the unfolding sovereign debt crisis in the eurozone has resulted in rising borrowing costs and difficulties in obtaining financing in Asia (see 'Credit Squeeze A Destabilising Risk In The Region', December 20). We see increasing risks of a severe credit squeeze in the region as European banks attempt to strengthen their capital ratios by calling back higher-risk loans and imposing curbs on issuing new loans. Malaysia in particular is among the most vulnerable to a credit squeeze, with bank loans from Europe amounting to more than 25% of GDP. Thus, we caution that should conditions in the eurozone deteriorate further culminating into a rush to repatriate funds from Malaysia, we could potentially see a contraction in credit. Should such a scenario play out in the coming months, we would expect the BNM to intervene by introducing further rate cuts to help ease credit conditions to support economic growth.
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Prescription Drug Market Forecast

The market for prescription drugs was valued at MYR3.56bn (US$1.16bn) 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. Still, the majority of the pharmaceutical expenditure will continue to be recorded in the private sector, which is vulnerable to economic fluctuations. Moreover, the government is seeking compulsory licences for some patented products, which could dent the values of the prescription sector over the coming years.
Indeed, 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. However, to date, no major changes have been implemented in this area. For the time being, therefore, BMI expects the prescription market to grow by a local currency CAGR of 6.1% over our 10-year forecast, which falls ahead of
Prescription Drug Market Forecast 2007-2021
Source: IMS Health Asia, domestic companies, local press, BMI
the overall market (+5.5%). By this point, the segments value at consumer prices will top MYR6.43bn (US$2.14bn), 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%. The leading prescription category is cardiovascular drugs, followed by nervous system treatments, in line with the countrys demographic and epidemiological profile. Producers of cancer drugs will also benefit
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from rising demand for oncology treatments over the coming years, with the threat of avian and swine influenza boosting the commercial potential of treatments against such viral infections. According to a 2006 Ministry of Health survey, the leading therapeutic classes were diabetes treatments, beta blockers, angiotensin agents, drugs for pulmonary obstruction disorders, anti-histamines and serum anti-lipidaemia products. These categories were followed by calcium channel blockers, systemic antibacterials, anti-inflammatories and anti-rheumatics and diuretics. As part of its cost-containment drive (and due to antibiotic resistance concerns). However, the government may wish to limit the use of antibiotics, which would have a negative impact on the sectors value. 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 population with diabetes has increased from 6% to 10% over the past 20 years and this figure is expected to reach 13% by 2020. The highest prevalence of diabetes, for example, is recorded among Indians. However, 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. Figures obtained from the Malaysian National Renal Registry show that, 14,647 kidney patients were on dialysis in 2006.
Table: Prescription Drug Sales Indicators 2008-2016
2008 Prescription drug sales (US$bn) Prescription drug sales (US$bn), % chg y-o-y Prescription drug sales (MYRbn) Prescription drug sales (MYRbn), % chg y-o-y Prescription drug sales, % of total sales 0.89 12.20 2.97 8.77 73.11
2009 0.89 -0.53 3.13 5.17 72.80
2010 1.01 13.89 3.25 4.13 71.98
2011e 1.16 15.22 3.56 9.45 72.33
2012f 1.20 2.90 3.80 6.79 72.91
2013f 1.32 10.13 4.09 7.52 73.46
2014f 1.43 8.51 4.37 6.76 73.98
2015f 1.55 8.12 4.64 6.35 74.47
2016f 1.64 6.06 4.92 6.06 74.92
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Patented Drug Market Forecast

The demand for advanced medicines should fall over the coming years, due to patent expirations, compulsory licences, and a focus on generic medicines, despite high demand for cardiovascular and central nervous system therapies growing notably and providing substantial opportunities for foreign players in particular. Overall, the five- and 10-year growth of the patented market is expected to be at a level of around 5.6% and 4.8% 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 45.3% of the total market in 2011, down on 45.6% in 2010, even though its absolute value continues to grow. By 2016, patented products will be worth MYR2.93bn (US$975mn), 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
Patented Drug Market Forecast 2007-2021
Source:IMS Health Asia, domestic companies, local press, BMI
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. However, high prices for patented drugs will be targeted by the government, while they are also likely to lose out to generic drugs in terms of volume. On a positive note for manufacturers of patented drugs, according to a GfK HealthCare Asia survey conducted for the first time in Malaysia in October 2008, pharmaceutical sales representatives remain a major force in terms of market penetration. The RepOtimiser Study, involving around 350 Malaysian
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physicians and over 1,500 companies, found that doctors are receptive to information provided by them, with such marketing and promotional investment thus judged to be worth the effort and money. The survey, published in May 2009, found that in addition to journals continuing medical education (CME) is the most popular information source for practicing physicians. Broken down by specialties, some 90% psychiatrists and 69% of general practitioners report reliance on sales representatives, in contrast with only 44% of ear-nose-throat (ENT) specialists. Overall, however, around 70% of doctors use sales representatives to gain up-to-date information on new drugs and diseases in general.
Table: Patented Drug Market Indicators 2008-2016
2008 Patented drug sales (US$bn) Patented drug sales (US$bn), % chg y-o-y Patented drug sales (MYRbn) Patented drug sales (MYRbn), % chg y-o-y Patented drug sales, % of prescription sales Patented drug sales, % of total sales 0.59 10.53 1.96 7.15 65.81 48.11
2009 0.57 -2.62 2.01 2.96 64.42 46.90
2010 0.64 11.95 2.06 2.35 63.33 45.59
2011e 0.73 14.06 2.23 8.35 62.69 45.34
2012f 0.74 1.88 2.36 5.74 62.07 45.26
2013f 0.81 9.00 2.51 6.42 61.44 45.13
2014f 0.87 7.36 2.65 5.63 60.78 44.97
2015f 0.93 6.92 2.79 5.17 60.11 44.76
2016f 0.98 4.83 2.93 4.83 59.42 44.52
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Generic Drug Market Forecast

The generic drug market was worth just MYR1.33bn (US$434mn) in 2011, although its growth potential is substantial. BMIs forecast shows a local currency CAGR of 8.5% over the 2011-2016 period, which will moderate in subsequent years. Through to 2021, we expect the generic drug market to reach MYR2.85bn (US$951mn) at consumer prices, with a CAGR of 7.9% and 8.2% in local currency and US dollar terms, respectively. Drivers of generic drug market growth are mostly volume based. 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 (NKRA) programme. At the Global Bio-Herbs Economic Forum in Kuala Lumpur, Health Minister Dato Sri 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 National Key Economic Area (NKEA) programme.
Other growth drivers are the rising quality of generic products, costcontainment 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 Drug Market Forecast 2007-2021
generic drugs market, which has so far been growing at a very modest pace. Efforts to create a genuine generic drugs sector have been patchy, but the expiry of patents on 47 drugs with high sales figures in the next five years is a chance for manufacturers to produce generic versions. Presently, generic drugs are poorly promoted in Malaysia, with branded drugs generally viewed as superior in quality.
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A study published in March 2009 by the School of Pharmaceutical Sciences at the Universiti Sains Malaysia (USM) indicates that the substitution of branded drugs with generic equivalents has the potential to substantially reduce healthcare costs. The research states that patients using private hospitals could slash their bills by between 60 and 90% if they used generic products. According to the USM team, up to 80% of all essential drugs marketed in Malaysia have generic equivalents. A survey conducted by the Universiti Sains Malaysia on community pharmacists perceptions of generic substitution, published in March 2010, found that attitudes were mostly favourable. As many as 93.6% of the respondents agreed that pharmacists ought to have generic substitution rights, the survey found. While 96.8% thought that pharmacy-only medicine was the most appropriate drug category for generic substitution, 51.6% showed a preference for universal substitution for any prescription, Biotech Week reported. Although the response rate was fairly limited, the survey shows the overwhelmingly favourable attitudes of community pharmacists in Malaysia towards a generic substitution policy the future, which could have a positive impact on sales for the sector. However, 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. In addition, the plans to introduce price ceilings on essential drugs would be negatively reflected in the value of the generic drugs segment.
Table: Generic Drug Sales Indicators 2008-2016
2008 Generic drug sales (US$bn) Generic drug sales (US$bn), % chg y-o-y Generic drug sales (MYRbn) Generic drug sales (MYRbn), % chg y-o-y Generic drug sales, % of prescription sales Generic drug sales, % of total sales 0.31 15.56 1.02 12.03 34.19 25.00
2009 0.32 3.49 1.11 9.43 35.58 25.90
2010 0.37 17.40 1.19 7.33 36.67 26.40
2011e 0.43 17.22 1.33 11.35 37.31 26.99
2012f 0.45 4.60 1.44 8.55 37.93 27.65
2013f 0.51 11.97 1.58 9.32 38.56 28.33
2014f 0.56 10.35 1.71 8.57 39.22 29.01
2015f 0.62 9.98 1.85 8.17 39.89 29.70
2016f 0.67 7.90 2.00 7.90 40.58 30.41
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OTC Medicine Market Forecast

Malaysias OTC drug market is expected to record a 4.42% local currency CAGR value increase over the 2011-2016 period, which will dip to 4.14% over the 10-year forecast. The value of OTC products reached a calculated MYR1.36bn (US$445mn) in 2011 (27.7% of the total market) and is forecast to expand to MYR1.45bn (US$550mn) 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. The expansion of the prescription market, through the improvement of access to services, will, however, impact the role of OTC products.
OTC Medicine Market Forecast 2007-2021
Source: AESGP, BMI
In the meantime, the value of herbal medicines will also increase, supported by the governments backing for R&D in the area of medicinal plants. Having been worth around MYR300mn (US$82mn) in 2006, the herbal medicines market is likely to top MYR1bn (US$330mn) at consumer prices by 2013, according to local sources estimations. 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. 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.
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The widespread availability of most OTC medications via direct sales, pharmacies, supermarkets or traditional medicine stalls will continue to encourage self-medication sales. Pharmacists, however, remain the main source of OTCs, having accounted for some 38% of total pharmaceutical sales in 2004. Their efforts to increase their revenues will support the future development of the OTC market, although the segments performance remains vulnerable to economic fluctuations. The Global Health Survey 2011, published by The International Research Institute, has found that only about a quarter of Malaysians tend to make their decisions about treatment mainly from information from sources other than a doctor. However, about 30% of Indians have less faith in their doctor's advice than in advice obtained from other sources. Other countries that showed high levels of distrust in doctors' opinions were China, Pakistan, the Netherlands and Indonesia. The public opinion survey took samples from 22,493 people aged 18 and over in 28 countries. The data was collected between August and October 2011.
Table: OTC Medicine Sales Indicators 2008-2016
2008 Over-the-counter (OTC) medicine sales (US$bn) Over-the-counter (OTC) medicine sales (US$bn), % chg y-o-y Over-the-counter (OTC) medicine sales (MYRbn) Over-the-counter (OTC) medicine sales (MYRbn), % chg y-o-y Over-the-counter (OTC) medicine sales, % of total sales 0.33
2009 0.33
2010 0.39
2011e 0.45
2012f 0.45
2013f 0.48
2014f 0.50
2015f 0.53
2016f 0.55
21.83 1.09
1.07 1.17
18.63 1.27
13.24 1.36
-0.06 1.41
7.09 1.48
5.65 1.54
5.40 1.59
3.54 1.65
18.11
6.87
8.47
7.57
3.72
4.56
3.94
3.68
3.54
26.89
27.20
28.02
27.67
27.09
26.54
26.02
25.53
25.08
Source: AESGP, BMI
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Pharmaceutical Trade Forecast

Like most countries, Malaysia has a negative pharmaceutical trade balance, which is not expected to be reversed, despite strong increase in export values and volumes. According to UN Comtrade, the leading countries of origin in 2010 included France (US$15.3mn), the US (US$8.3mn), the Netherlands (US$7.4mn), the UK (US$4.2mn) and Thailand (US$4.0mn). In the same year, Malaysia's key export destinations included Australia (US$1.1mn), Brunei (US$764,568), Indonesia (US$395,298), Vietnam (US$348,214) and Belgium (US$324,198). In 2011, Malaysia exported finished medicines with a value of US$185mn, primarily to other Asian countries, with this figure recently revised upwards on receipt of new historical data. Consequently, we forecast sector exports to grow at CAGRs of 11.1% and 11.6% in local currency and US dollars terms, respectively, through to 2016, reaching MYR957mn (US$319mn). Indeed, the pharmaceutical industry in Malaysia is forecast by the government to achieve export growth of 8% y-o-y in 2012, reaching MYR610 (US$200mn), according to Minister of Health Liow Tiong Lai. On the occasion of the launch of the Pharmaceutical Association of Malaysia (PhAMA) Industry Fact Book, Liow said pharmaceuticals have been identified as a strategic economic area to be developed as a driver of growth for the economy. He said: 'It is my fervent wish to see more multinational companies partnering with local Malaysian pharmaceutical companies as this is one of the key strategies identified that can provide the impetus which will enable the sector to achieve its fullest potential.'
Increasing domestic demand, a significant proportion of which the local manufacturing industry will be unable to meet, will stimulate the growth of pharmaceutical imports over the next five years. The market will remain receptive to foreign products, particularly at the hitech end of the scale. The overall trade balance will increasingly shift further in favour of imports throughout the forecast period, indicating sizeable business opportunities for foreign companies. Factors driving growth at a specific pharmaceutical trade level are the
Pharmaceutical Trade Forecast (US$mn) 2007-2016f
Source: United Nations Comtrade Database DESA/UNSD, BMI
modernisation of the local manufacturing industry, increased ability to produce biotechnology-driven products, an influx of foreign investment in manufacturing units which are serving both the domestic
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market and other key regional markets and ASEAN harmonisation. Under the Healthcare National Key Result Areas (NKRA), the government also aims to boost generic drug exports. Through the programme, the government will provide MYR96mn (US$32.3mn) from 2010 to 2012, in order to construct manufacturing facilities for production of generic drugs. Furthermore, although bilateral FTA negotiations with the US appear to have been abandoned, partly because of public pressure, both parties will be aiming to include Malaysia in a multilateral trans-Pacific agreement. The wider agreement, along with deals with a number of other trade partners, is set to improve export figures, albeit at some risk to local manufacturers if they fail to be competitive. On a broader scale, exports have also benefited from the further opening of Chinas economy following WTO entry, which led to a drop in import tariffs. The elimination of tariffs under the Japan-Malaysia Economic Partnership Agreement and the consequent FTA will serve to further boost trade between the two countries. In January 2009, China authorised Malaysian companies certified by the Malaysian Ministry of Health to export their products to China. Malaysias membership of the Pharmaceutical Inspection Convention and Pharmaceutical Inspection Co-operation/Scheme (PIC/S) puts local manufacturers in a good position to export to developed markets. BMI expects more drugmakers in South East Asia to attain Good Manufacturing Practice (GMP) accreditation after a major trade agreement was signed in April 2009. Upgrading facilities and processes will require considerable investment in the short term, but producers of pharmaceuticals will eventually see a significant upside, both domestically and abroad. This is because consumers, especially those on those low incomes, will increasingly appreciate the quality of medicines made in the region. The Sectoral Mutual Recognition Arrangement for GMP Inspection of Manufacturers of Medicinal Products is designed to remove barriers that impede the trade of pharmaceuticals between ASEAN member states. A countrys drug regulator will approve a drugmakers plant and this certification will be accepted by fellow ASEAN states, thereby reducing a duplication of effort. In addition to adhering to GMP standards, the agreement states that medicine producers must also meet PIC/S guidelines. Conceived by the EU authorities, PIC/S is proving increasingly popular as it seeks to encourage dialogue between regulatory authorities.
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Table: Exports and Imports Indicators 2008-2016
2008 Pharmaceutical exports (US$mn) Pharmaceutical exports (US$mn), % chg y-o-y Pharmaceutical exports (MYRmn) Pharmaceutical exports (MYRmn), % chg y-o-y Pharmaceutical imports (US$mn) Pharmaceutical imports (US$mn), % chg y-o-y Pharmaceutical imports (MYRmn) Pharmaceutical imports (MYRmn), % chg y-o-y Pharmaceutical trade balance (US$mn) Pharmaceutical trade balance (MYRmn) 116.3 -13.3 387.4 -15.9 767.6 8.3 2,557.1 5.0 -651.3
-2,169.7
2009 120.3 3.5 423.8 9.4 870.1 13.4 3,064.9 19.9 -749.8
-2,641.1
2010 144.7 20.3 466.2 10.0 900.5 3.5 2,900.1 -5.4 -755.7
-2,433.9
2011e 184.5 27.5 564.4 21.1 1,015.0 12.7 3,105.2 7.1 -830.5
-2,540.7
2012f 192.0 4.1 609.6 8.0 1,049.0 3.3 3,330.6 7.3 -857.0
-2,721.0
2013f 217.8 13.4 675.2 10.8 1,183.5 12.8 3,668.9 10.2 -965.7
-2,993.7
2014f 256.9 18.0 783.5 16.0 1,389.5 17.4 4,238.0 15.5 -1,133
-3,454.4
2015f 288.6 12.3 865.8 10.5 1,555.4 11.9 4,666.2 10.1 -1,267
-3,800.4
2016f 318.9 10.5 956.7 10.5 1,714.6 10.2 5,143.8 10.2 -1,396
-4,187.1
Source: United Nations Comtrade Database DESA/UNSD, BMI
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Medical Device Market Forecast

Malaysia's medical devices sector, valued at MYR3.82bn (US$1.25bn) in 2011, has been stable in terms of percentage of total healthcare sales. We expect medical devices to take a constant market share of approximately 9-10% through to 2021, still accounting for just 0.5% of the countrys GDP By 2016, we expect the value of Malaysias medical devices market to have reached MYR4.98bn (US$1.66bn), growing at a CAGR of 5.5% in local currency terms, which is broadly in line with the healthcare spending increase.
Source: BMI
Medical Device Market Forecast 2007-2021
BMI believes medical device manufacturers will benefit from both the expected improvements in public health services and Malaysia's commitment to drive its medical tourism industry. Moreover, certain few government public hospitals have been selected to be specialty hospitals for example, Selayang Hospital now specialises in liver and hand microsurgery. Malaysia also highlighted its fast-growing medical devices industry and its potential to be a regional hub for the sector during the inaugural 'Asia Medical 2011', Asia's first international medical supplies, equipment and technology exhibition and conference held at the Putra World Trade Centre in Kuala Lumpur on October 5 2011. The country expects to generate revenues of MYR17.1bn (US$5.4bn), gross national income (GNI) of MYR11.4bn (US$3.6bn) and 86,000 new jobs by 2020 through the introduction of seven new healthcare industry entry point projects (EPP) under the Healthcare National Key Economic Areas (NKEAs), bringing the total number of EPPs to 13. However, 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 has a slight negative trade balance, importing US$674mn worth of medical devices and exporting US$647mn. The three most-traded medical devices in 2009 were general devices such as
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sight-testing instruments, electro-medical apparatus, and radiotherapy and orthopaedic instruments. The country now serves 80% of the global catheters and 60% of the global rubber glove market. In the meantime, the local medical devices industry remains focused on lower-end scale, in terms of product mix. Although the demand is mostly met through imports, Malaysia does have a significant export activity in the field of surgical gloves, catheters and similar low-tech devices. Local manufacturing standards are expected to improve once Malaysia fully implements a new medical device regulatory authority, which should harmonise regulations in line with those of other Asian countries. The authorities are also aiming to introduce value-added products to the local product mix, through tax offerings and similar incentives. Key areas being promoted include medical and surgical instruments, in vitro devices and self-care products. The authorities efforts are supported by a low-cost and abundant labour force, as well as well-established infrastructure and supporting industries, such as information technology (IT).
Table: Medical Devices Sales Indicators 2008-2016
2008 Medical device sales (US$bn) Medical device sales (US$bn), % chg y-o-y Medical device sales (MYRbn) Medical device sales (MYRbn), % chg y-o-y Medical device sales at constant exchange rate (US$bn) Medical device sales, % of GDP Medical device sales, % of total healthcare sales 0.93 16.68 3.10 13.12
2009 0.94 0.58 3.30 6.35
2010 1.14 21.52 3.66 11.11
2011e 1.25 9.67 3.82 4.17
2012f 1.26 1.07 4.00 4.89
2013f 1.36 8.23 4.23 5.68
2014f 1.45 6.48 4.43 4.77
2015f 1.57 7.84 4.70 6.08
2016f 1.66 5.96 4.98 5.96
1.01 0.42 9.73
1.08 0.48 9.70
1.20 0.48 10.04
1.25 0.46 9.80
1.31 0.46 9.69
1.38 0.45 9.66
1.45 0.44 9.58
1.54 0.44 9.65
1.63 0.44 9.73
Source: BMI
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Other Healthcare Data Forecasts

The number of private hospitals in Malaysia proliferated in the 1980s, driven by increased affluence of the countrys population, the demand for better services and the governments privatisation programme, which led to a number of state-owned healthcare facilities becoming for-profit enterprises. The number of private hospitals is likely to further increase over the coming years (with seven added recently, as the country attempts to attract foreign patients, not just from the region but also from further afield. The demand for services will also be driven by a growing as well as ageing (an increase of 200% is expected in the coming years, putting a strain on public sector provision) population, although the boost in the private sector is likely to cause further shortages of both personnel and facilities in the public sphere. 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. To this end, in November 2008, the Malaysian Minister of Health was quoted by The Star as stating that the country needs at least 200 oncologists as cancer cases in the country are rising. At the time, official figures indicated that the country had only 39 oncologists for a population of more than 26mn, which is clearly insufficient. In order to address the shortages, in late 2008, the government unveiled various initiatives to increase the number of doctors including dentists, pharmacists and specialists in the country, which include employment of foreigners mainly from Indonesia and India as a temporary measure. The above move was followed in early 2011 by the Health Ministrys announcement that it will hire trained medical personnel from Egypt, India, Pakistan and Sri Lanka in order to improve the country's district health services. In the meantime, the government also plans to domestically train personnel, according to the Health Minister. However, despite the January 2011 formation of Talent Corporation, a government agency under the control of Prime Minister Najib Razaks office, the brain drain problem is expected to persist. The Talent Corporation will coordinate with other governmental departments to attract much needed human capital to fuel Malaysia's growth under Najib's five-year 10th Malaysia Plan (10MP). Nevertheless, the country's discriminatory policies are unfavourable to the Chinese and Indian minorities and the relative economic attractiveness of rival nations will likely lead to further outflows of talent.
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Key Risks To BMIs Forecast Scenario

While generic drugs play a major part in the Malaysian market, the development of a genuine sector has been slow. However, the government continues to encourage their use and its perseverance could see a sizeable increase in the generic drugs market above the level already forecast, especially given the recent legalisation of parallel trade and the challenging economic situation. The prescription of generic products in the public sector is becoming increasingly popular, indicating a greater willingness to use low-cost medicines, but it is the changes in the private sector that remain crucial to market development. In the meantime, the private sector, which favours patented products, as they bring higher revenues for healthcare providers, would have also felt the pinch of the economic downturn. Nevertheless, physicians reliance on sales representatives for up-to-date product information bodes well for market penetration by research-based companies. 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. Additionally, some companies may reconsider or delay launching products on the Malaysian market, which would have a further negative effect on the sectors value. The situation is likely to improve in a longer term, as Malaysia embraces ASEAN harmonisation procedures. The standardisation of requirements will also serve to improve Malaysias export potential, as already witnessed by a surge in exports following Chinas accession into the WTO. However, global economic difficulties resulted in lower overall exports from Malaysia, with economic fluctuations continuing to threaten forecast export figures, despite the positives brought about by the nascent biotechnology industrys potential. Moreover, regional competition, especially from Singapore and China, will hamper Malaysias efforts to increase pharmaceutical exports. Additionally, a serious risk to the sectors performance and development would be a sharper-than-expected Chinese slowdown, precipitated by a bursting of the property bubble that has been forming in large urban cities such as Beijing and Shanghai. Indeed, Chinese demand for Malaysian exports makes up about 20% of total outbound shipments for Malaysia. Malaysia is presently debating the separation of prescribing and dispensing, with the implementation of changes likely in the short to medium term, in line with wider Asia Pacific trends. When the change is actioned, BMI will adjust its prescription and OTC forecasts accordingly.
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Competitive Landscape Analysis

Domestic Pharmaceutical Industry
The local industry remains focused on the production of generic and lower-tech medicines. Local company Pharmaniaga controls around 30% of the total market. In the future, domestic sector development is likely to remain centred on the operations of the industrys larger producers, as these look to benefit from the onset of ASEAN harmonisation, which has brought marked growth in the private sector and opened up export markets. The modernisation of the sector is also likely to see many smaller drug companies disappear as a result of the tightening regulations, with the costs of the required upgrades being a major problem. Pharmaniaga itself had a turbulent start to 2010. Following the February release of financial results that BMI described as disappointing, the companys manufacturing licence was revoked by the Pharmaceutical Services Division of the Ministry of Health as of March 2010, following a routine audit of Pharmaniagas Bangi plant. BMI notes that medicine manufacturing is the companys most profitable division. The firms majority shareholder, UEM Group Berhad, has subsequently failed to deny claims that it plans to divest its interest in Pharmaniaga. In fact, in June 2010, its share (more than 86% of Pharmaniagas total stock) was sold to Boustead Holdings Bhd. Despite these setbacks, the outlook for Pharmaniaga is positive. According to Edge Malaysia, sources suggest that the pharmaceutical company has retained its lucrative 10-year concession for the provision of generic drugs to the Malaysian government. This deal which started in December 2009 will provide a steady revenue stream and allow Pharmaniaga to increasingly explore growth strategies, such as rampingup exports to neighbouring countries and producing higher-value medicines. 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. Malaysian companies market share rose to 20-30% in recent years, in comparison with the 1995 figures of only 10-15%. In June 2010, Malaysian Health Minister Dato Sri Liow Tiong Lai was reported by The Star Online as saying that the healthcare industry has the potential to contribute MYR10bn (US$3.09bn) to the countrys economy by 2020, if it focuses on the areas of pharmaceuticals (including exports of higher quality generic drugs), the production of medical equipment, health tourism and specialists training. The ministry said healthcare services currently contribute only MYR4bn (US$1.23bn).
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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. Malaysia represents a major and very competitive market for erectile dysfunction (ED) treatments, with the condition affecting an estimated 2.2mn men in the country. The main players in the field include US major Eli Lilly, which launched its ED drug Cialis (tadalafil) in January 2004. German pharmaceutical company Bayer and GlaxoSmithKline Malaysia (a subsidiary of British GSK) entered the market with the introduction of Levitra (vardenafil). The drugs also compete directly with Pfizers Viagra (sildenafil). However, the ED treatments have also been a frequent target for counterfeiting activities. Other multinationals are also making more concerted efforts to capture higher market shares in Malaysia, outside the ED segment. German drug giant Schering AG (now part of Bayer), leading Indian drug maker Ranbaxy and Belgium-based Agfa have made known their intentions to expand activities in the country, with the latter planning to create a regional R&D centre in Malaysia, and Ranbaxy intending to establish its Malaysian operations as a regional manufacturing base. Other companies present through imports include Swiss Roche, US-based Bristol-Myer Squibb (BMS) and German Boehringer Ingelheim, which employs around 60 staff in Malaysia. Roche is also active in the diagnostic segment. Aside from the above, recent multinational sector activity in Malaysia has been relatively low key. The situation reflects the decision of many companies to focus more on other Asian markets, such as China, Taiwan and Singapore, which offer greater opportunities and more favourable business climates. Nevertheless, Indias government is welcoming joint venture (JV) collaborations with Malaysian pharmaceutical firms. The development follows the higher degree of involvement of Indian pharmaceutical firms in the Malaysian pharmaceutical sector, most notably leading generic manufacturer Ranbaxy, which has constructed a new manufacturing plant in the country. Malaysian pharmaceutical firms have also expanded abroad, with leading local manufacturer Pharmaniaga being the most active. 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,
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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 Market capitalisation (US$mn) 189 109 75 43 36 23 10
Name Pharmaniaga CCM Duopharma Apex Healthcare Hovid YSP Southeast Holding Kotra Industries Sunzen Biotech
P/E ratio 0.60 11.16 8.91 7.77 9.57 6.43 17.90
Revenue (US$mn) 391.0 35.0 88.0 108.0 39.0 30.0 8.5
Website www.pharmaniaga.com www.duopharma.com.my www.apexpharmacy.com www.hovid.com www.yspsah.com www.kotrapharma.com www.sunzen.com.my
Source: Investor Relations
Recent Company Activities

In December 2011, Japanese pharmaceutical company Daiichi Sankyo and Indian pharmaceutical company Ranbaxy signed an agreement for Ranbaxy to market products in Malaysia that were originally discovered by Daiichi Sankyo. This is the second marketing collaboration for the companies in South East Asia following a deal for Singapore. Ranbaxy markets Cravit (levofloxacin), a synthetic antibacterial agent used to treat a wide range of infections, in Malaysia from January 1 2012. 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. The approval makes Malaysia the only country in Asia and the third in the world (after the US and Ukraine) to approve rivaroxaban for this purpose, according to Axel Bouchon, the general manager for Bayer in Malaysia, Singapore and Brunei. 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). As a result, Watson will become the fifth largest generic pharmaceutical company in Australia and the largest generic company in Singapore (Ascent Pharmahealth's Asian headquarters). It also gains sale offices in Malaysia, Hong Kong, Thailand and Vietnam. 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
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biopharmaceuticals and sterile injectables plant will be located in the Bio-XCell biotechnology park in Iskander, Malaysia, a site dedicated to industrial and health manufacturing and R&D activities. 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. The move has been driven by the presence of a pharma ecosystem and the attractive financial incentives offered by the Malaysian government, Adam Levitt, CEO of Americas at Strides Arcolab, said. The new plant will allow the Indian drugmaker to enhance its manufacturing capacity. In May 2011, Danish company Novo Nordisk's once-daily diabetes injection, liraglutide (glucagon-like peptide-1), was launched in Malaysia, making it the first South East Asian country to have the drug. We believe that the injection will increase the drugs use among the population given that its effects last a full day instead of a few hours. In April 2011, Japanese drug company Taisho Pharmaceutical entered an agreement for the acquisition of 100% stake in Malaysia-based pharmaceutical and cosmeceutical products company Hoepharma Holdings for MYR370mn (US$122.3mn). The agreement enables Taisho to acquire a 78.15% stake in Hoepharma from its parent company Goldis and a remaining 21.85% stake from other shareholders. In July 2010, Switzerland-based Helsinn Healthcare and Mundipharma entered into a distribution and licensing agreement for a second-generation 5-HT3 receptor antagonist Aloxi (palonosetron) in Malaysia, the Philippines and Singapore. Aloxi, developed by Helsinn, is used to prevent chemotherapy-induced nausea and vomiting (CINV) following therapy. The registration process is scheduled shortly.
Halal Medicine
Halal medicines are highly important to the Malaysian market, given that Islam is the countrys official religion. Halal is an Arabic term meaning permissible. With respect to pharmaceuticals, it excludes products derived from blood, animals slaughtered in the name of anyone but God, and swine. As such, many medicines for example those compounded in capsules with the animal product gelatine are not consumed by many observant Muslims. Pharmaceutical companies have been aware of this niche for some time, but it is only recently that drugmakers have explicitly targeted this growth area. Like Pakistan, Malaysia is looking to become the conduit for medicine exports to the Islamic world. Demonstrating this intent, the countrys Halal Development Corporation (HDC) has agreed to certify as Halal traditional Chinese medicine manufactured in Ningxia province. Malaysia will then distribute the products to the consumers globally. 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. BMI strongly endorses this approach as the firms other divisions fertilisers and chemicals will always return lower margins. To
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achieve increased profit, which has been falling in recent years despite booming revenues, CCM is expanding domestic manufacturing capabilities with a US$17.6mn plant. The factorys annual capacity will be 1bn tablets of generic drugs and vitamins. The company is simultaneously ramping up the recruitment of agents in markets where the Muslim population is large, such as in the Middle East. CCM is registering all of its products in countries such as Jordan, Syria, Vietnam, Thailand and Indonesia. In addition to all these countries having significant Muslim populations, the values of the pharmaceutical markets are increasing y-o-y. Chinese firm Shanghai Al-Amin Biotech recently unveiled a comprehensive Halal product range that is intended for global distribution. Given its low-cost manufacturing base, BMI believes that it has a distinct advantage over CCM. However, because CCM is headquartered in one of the most orthodox Muslim states compared with China, where the practice of religion is suppressed Shanghai Al-Amin Biotech will be frequently operating in unfamiliar territory, limiting its favourable fundamentals.
Traditional Medicine
As with many Asian nations, traditional medicines are frequently used in Malaysia, often in tandem with modern drugs. This is evidenced by the Kepala Batas Hospital in Penang becoming the first healthcare facility in Malaysia to offer both modern and complementary (herbal preparations, acupuncture and traditional massage) medicine. The Kepala Batas Hospital will only employ internationally recognised traditional medicine practitioners, whose degree components comprise 30-40% modern medicine and 6070% traditional medicine expertise to enable them to treat patients accordingly. As seen in many emerging markets, demand for traditional medicines in Malaysia is high. Health Minister Dato Sri Liow Tiong Lai stated in late 2010 that, of the 43,424 products registered by the Drug Control Authority, 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, which has something of a reputation for manufacturing sub-standard medications. In order to address quality issues, in November 2011, the Malaysian Ministry of Health asked traditional medicine suppliers and wholesalers to register their products. Health minister Liow Tiong Lai 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.
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Pharmaceutical Distribution
In order to help meet the governments pharmacist to population ratio of 1:2,000, pharmacy chain Guardian signed a memorandum of understanding (MoU) with the International Medical University in April 2010 to share industry and academic knowledge. At current population levels, Malaysia would need to double the number of pharmacists to around 14,000 to meet the governments target. The compulsory service period of pharmacists in government hospitals of Malaysia has been cut from three years to one year, reported the Star in October 2011. Positions for pharmacists at government hospitals were 89% filled, up from 40% in 2004, according to the health minister, Datuk Seri Liow Tiong Lai. The new policy is likely to benefit the private sector, which is experiencing a scarcity of pharmacists, according to the president of Malaysian Pharmaceutical Society, Datuk Nancy Ho. The main public sector wholesaler is Pharmaniaga Logistics Sdn Bhd (formerly known as 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 Berhad (also a manufacturer, with group revenues of MYR283mn in 2009) and Medispec Malaysia. In January 2011, the government of Malaysia launched Ubat Melalui Pos (UMP) 1Malaysia or the 'Medicine via Post' service in all major hospitals. The service will assist patients with chronic diseases to collect medicines from a dispensing machine located in hospitals in every state including Selayang Hospital, Putrajaya Health Clinic and Luyang Health Clinic in Sabah. The government aims to further extend the service in stages, following a survey that revealed more than 74.7% people in the country were in favour, according to Health Minister Dato Sri Liow Tiong Lai. In January 2012, the Malaysian Ministry of Health was considering tougher penalties for the sale of unregistered medicines, according to health minister Liow Tiong Lai has said. Liow said the ministry is making amendments to several laws in order to regulate the sector, safeguard customers and take tough action against violators of regulations. The amendments will affect legislation such as the Registration of Pharmacists Act 1951, the Sale of Drugs Act 1952, the Poisons Act and the Medicine (Advertisement and Sale) Act 1956. He said the ministry is considering prison sentences due to the ineffectiveness of other measures, as the punishments would send a warning to people involved in selling unregistered medicines.
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Company Profiles
Leading Domestic Manufacturers
Pharmaniaga
Strengths Leading company in the Malaysian market. Concession agreement with the Ministry of Health via its distribution unit. A focus on bioequivalent generic drugs. The plants customised to meet the US Food and Drugs Administration (FDA) standards, in a bid to improve it share in the contract manufacturing market. Dependent on one customer, the Ministry of Health, in a 15-year concession agreement. Product prices potentially considered for revision only once every three years. Limited geographic diversification. Sales revenue dropped in 2009. 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. The companys growth and performance dependent upon economic conditions in Malaysia and other countries, particularly Singapore, the Philippines and Vietnam. Relatively low barriers to entry, which is creating intense competition from new entrants such as Indias Ranbaxy. Generic manufacturers competing on price due to weak patent law and wide variety of generic drugs available, further reducing profit margins. The governments policy of tariff-free imports of pharmaceutical products. A trend towards the purchase of branded drugs over low-cost locally manufactured generic drugs to benefit importers of products from companies based in the US, UK and Germany. The company may eventually lose its generic supply agreement with the government or see less favourable conditions in the near term.
Weaknesses
Opportunities
Threats
Company Overview
Pharmaniaga PhD, established in 1998, is Malaysias leading integrated local healthcare company. The company operates through nine business units: Manufacturing, Marketing, Logistics, Solutions, Pharmaniaga Research Centre, Pharmaniaga Diagnostics, Pharmaniaga Biomedical and Esteem Interpoint. The company produces through Raza Manufacturing, while its distribution unit, Pharmaniaga Logistics Sdn Bhd (formerly known as Remedi Pharmaceuticals) provides pharmacy management services. Presently, the company has three factories, which churn out more than 400 generic products, although ideally it is keen to have five or six facilities. The company is estimated to control more than a quarter of the total market. The group has also reportedly set aside MYR300mn for the development of more than 90 new products over the coming five years, and by 2013, it is hoping to become a US$1bn company. Currently accounting for 25% of total sales, exports are
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key to Pharmaniagas future.
Strategy
Through Pharmaniaga Logistics, the company supplies around 75% of medicines purchased by Malaysias public healthcare institutions. The companys contract expired in 2009, but was extended for a further 10 years, subject to conditions that needed to be negotiated over the course of H109. In the meantime, the previous contracts requirements remained operational. A massive risk to Pharmaniaga's short-term prospects was the potential failure to retain its lucrative generic drug supply agreement with the Malaysian government. However, the Annual Report 2009 revealed that the company has managed to retain the contract. Pharmaniaga was planning to expand into new markets such as Thailand and Myanmar by H211, according to reports by Bernama (Malaysian National News Agency) in August 2010. 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). Regionally, the company has 38 sites, in Indonesia and Vietnam, in addition to its home market. The companys most significant foreign enterprise is its 55% stake in Indonesian pharmaceuticals distributor PT Millennium Pharmacon International. Purchased for US$3.2mn in 2004 from Indonesias PT Tigamitra Multikarya, the acquisition gives it control of a unit that controls 2% of Indonesias promising pharmaceutical market. The distributor has 14 principals and 24 branches and controls 2% of the Indonesian market. A small-scale Thai venture, worth only MYR54mn (US$14.21mn) over five years, will replicate the companys IT systems for a hospital group. Meanwhile, the company is to begin a drug supply chain JV in South Africa with equal partners Procon Fischer and Corpafrica.
Developments
In April 2011, Pharmaniaga launched a new GMP-compliant factory, Pharmaniaga LifeScience, which will function as a contract manufacturer for the production of injectable medicines. The output will be destined both for the domestic and export market. In March 2010, following a routine audit, the Malaysian authorities revoked Pharmaniagas production licence, although the exact reason was not disclosed at the time. The company was reportedly working to remove the obstacles to further production, which accounts for around 10.8% of the groups annual turnover, or MYR203.6mn.
Financial Performance
In the first nine months of FY11 (ending September), revenues rose 15.0% y-o-y, to MYR1.15mn. Profit after tax rose from MYR32.3mn to MYR40.6mn over the same period. In H111, the group posted MYR396mn in revenue, up on H110s MYR350mn. In FY10, Pharmaniaga Group posted revenues of MYR1.38bn, up on MYR1.30bn posted in
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FY09, itself a 0.5% fall on FY08. 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
Company Contacts
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Prime Pharmaceutical
Strengths Company Overview Presence in both the prescription and the OTC sector. Strong manufacturing and distribution network. Involved in contract manufacturing. Competition from other local manufacturers. Pressure on the government to reverse policies biased towards the local industry. Increasing demand for compliance with international IP standards. Government programme for developing the pharmaceutical and biotechnology sectors. Expected increase in 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. Widespread counterfeit industry. Increased competitiveness of local players driven by ASEAN harmonisation and other regulatory developments. Possible introduction of price ceilings on essential medicines.
Weaknesses
Opportunities
Threats
Prime Pharmaceutical Products Sdn Bhd, established in 1988, is one of the more prominent local manufacturers of pharmaceuticals. The company produces, markets and distributes a variety of pharmaceutical products as well as traditional herbal preparations and health foods. Prime Pharmaceutical Products also deals in vitamins.
Strategy
Prime Pharmaceutical Products is one of the regular suppliers and distributors of medicines to government hospitals as well as private healthcare facilities, including pharmacies. The company has a factory in Bukit Tengah Industrial Park, which conforms to international GMP standards. Prime Pharmaceutical Products is also involved in contract manufacturing. The companys product range includes analgesics (including paracetamol and acetylsalicyclic acid), anti-asthmatics, anti-histamines, corticosteroids, gastrointestinal preparations, cough and cold remedies, antibiotics, antifungals and dermatologicals (such as hydrocortisone), among a few other therapeutic areas.
Company Contacts
Prime Pharmaceutical Products Sdn Bhd, 1505 Lorong Perusahaan Utama 1 Taman Perindustrian Bucket TengahndaBukit Mertajam, Penang, Malaysia Tel: +60 (4) 507 4787 www.primepharma.com.my
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Bumimedic Sdn. Bhd.

Strengths Threats Presence in both the prescription and the OTC sector. Strong manufacturing and distribution network. Backed by a large local healthcare group. Involved in contract manufacturing and research on behalf of foreign players. Competition from other local manufacturers. Pressure on the government to reverse policies biased towards the local industry. Increasing demand for compliance with international IP standards. Government programme for developing the pharmaceutical and biotechnology sectors in the country. Expected increase in regional drug consumption. Rising demand for and encouragement of the generic drugs sector. Strong growth expected in the generic and OTC drug markets over next nine years. Widespread counterfeit industry. Possible introduction of price ceilings on essential medicines. Increased competitiveness of local players driven by ASEAN harmonisation and other regulatory developments.
Weaknesses
Opportunities
Company Overview
Bumimedic (Malaysia) Sdn Bhd is a subsidiary of privately owned Antah HealthCare Group, which is controlled by one of the royal families of Malaysia. Bumimedic is one of the largest healthcare companies in Malaysia, dealing prescription and OTC pharmaceuticals, medical equipment and consumable supplies for hospitals, medical centres, clinics and pharmacies. The Antah Group distributes medicines and medical equipment to government, private and university hospitals, laboratories, health centres, state medical stores, GPs and retail pharmacies. Rising demand and strong marketing will support growth of the Group and its Bumimedic arm. Bumimedics factory, which complies with international GMP standards, manufactures more than 300 products in the form of tablets, capsules, liquids and ointments. The company supplies local and overseas customers, and it is engaged in contract manufacturing. At present, Bumimedic is engaged in the creation of another manufacturing site as a joint-venture.
Developments
In early 2006, US-based Amarillo Biosciences (ABI) entered into a distribution agreement with Bumimedic Malaysia. The Malaysian firm, which markets Amarillos low-dose interferon, manufactures lozenges from ABIs bulk natural human interferon supplied by Hayashibara Biochemical Laboratories, and distribute them to local hospitals, clinics and pharmacies. Antah Bumimedic also recently signed a distribution agreement with Koperasi Doktor Malaysia Berhad (KDM) Pharma (Pharmaceutical Division of KDM Berhad), with the former serving as a logistics operator for the latter. KDM, as a doctors cooperative, serves some 650 doctors throughout western Malaysia, having set up KDM Pharma as its dedicated procurement arm. ABI Bumimedic Antah Pharma Sdn Bhd3 Jalan 19/1 Petaling Jaya 46300 Selango,Malaysia Tel: +60 (4) 7956 7677 www.ahcg.com.my/companies_bme.htm
Company Contacts
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Hovid
Strengths Threats Company Overview One of the leading local drug producers and exporters. Strong manufacturing and distribution network. Involvement in the herbal supplements business. Considerable in-house R&D. Competition from other local manufacturers. Pressure on the government to reverse policies biased towards the local industry. Increasing demand for compliance with international IP standards. Government programme for developing the pharmaceutical and biotechnology sectors. Expected increase in local and regional drug consumption. Already present in a number of African and Middle Eastern countries, which are expected to continue their steady development. Demand for Malaysian pharmaceutical exports is forecast to grow over next four years. Widespread counterfeit industry. Increased competitiveness of local players driven by ASEAN harmonisation and other regulatory developments. Potentially detrimental impact of the pending FTA with the US.
Weaknesses
Opportunities
Hovid (formerly Ho Yan Hor) was established in 1945 as the manufacturer of herbal tea. In the 1980s, the company began engaging in pharmaceutical production. At present, Hovid is also involved in the manufacture of herbal and dietary supplements, teas and tocotreienols. It is the leading exporter in Malaysia and one of the largest GMP-certified pharmaceutical companies in the country. Hovid also owned local biotechnology firm Carotech, the leading supplier of phytonutrients and biodiesel products, which was divested by mid-2010.
Strategy
Hovid is already present in several countries, particularly in Asia. Outside Malaysia, 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. Hovid has also earmarked China for future expansion. Hovid was responsible for the construction of the first gelatine encapsulation plant in the country, as well as the first film-coated analgesic and the development of the first ampitab in dispersible tablet form. Hovid which currently holds the right to 12 global patents became the first global company to succeed in the processing and extracting carotenes and vitamin E from palm oil. It also deals in drug delivery systems, nanotechnology research (into liposomes and polymeric nanoparticles). The drugmakers clinical trials are conducted both nationally and internationally, in collaboration with Japanese and US universities, among others. Hovids portfolio contains in excess of 350 different kinds of products, mostly branded generic medicines. Other products include health supplements, injectable products and herbal medicines. Some 100 products are prescription drugs, with a focus on antibiotics, anti-diabetics, antihypertensives, anti-malarials and anti-inflammatory analgesics. The company holds more than 700 marketing authorisations worldwide, launching on average 12 new products per year. .
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Developments
In January 2011, Hovid signed a deal with Sanofi-Aventiss local subsidiary Winthrop, aimed at the development and manufacture of generic drugs. The products in question include metformin 850mg MR for the diabetes treatment, and tramadol 100mg SR, which is used as a painkiller. Hovid also reported that the deal may be extended to another 30 products in the coming year, which are valued at over MYR50mn. In August 2010, Bernama reported that Hovid intends to set up a new plant overseas by 2013, on the back of increasing demand for its products. He added that the establishment of the plant will help the company grow in respective markets and that the company anticipates its revenue growing 10-20% on the back of increasing demand overseas. At the start of January 2008, Hovid purchased a controlling stake in Indian Biodeal Pharmaceuticals. Hovid chose India because of the more relaxed patent laws and lower labour costs, which will allow it to place cheaper generic products on the Malaysian market. The transaction will provide Hovid with a 100% increase of its production capacity for the manufacture of tablets and capsules.
For FY11 (ending June), Hovid posted MYR153mn, as Carotech was no longer its subsidiary. Loss after taxation was in the region of MYR6.1mn. In Q111 (ending December), Hovid posted an MYR5.41mn loss, in contrast to net profit of MYR7.84mn achieved in the same period of 2010. Overall revenues came in at MYR42.42mn, down from some MYR98mn in Q110, due to the underperformance of Carotech. Nevertheless, even though its pharmaceutical profits suffered, Hovids pharmaceutical business posted an 8.68% y-o-y increase in sales, to MYR34.15mn. In FY10, the company posted MYR365.2mn in revenue, up by 46.9% in relation to the previous year. However, the impairment of Carotech stocks resulted in a loss after tax of MYR90.8mn, up on the MYR6.8mn suffered the previous year. In FY09, Hovid posted MYR0.5mn in net profit, including MYR15.6mn in unrealised foreign exchange (forex) losses at Carotech, due to a weakening ringgit in relation to the US dollar. For the year, core net profit was MYR16mn excluding the forex loss down by 40% on the forecast, which was attributed to higher depreciation charges and interest expenditure. FY08 and FY07 revenues came in at MYR214.7mn and MYR186.9mn, respectively. Profit after taxation stood at MYR18.3mn and MYR29.1mn.
Company Contacts
Hovid Bhd, 121, Jalan Tunku Abdul Rahman 30010 Ipoh, Perak, Malaysia Tel: +60 (5) 506 0690 www.hovid.com
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Chemical Company of Malaysia (CCM)

Strengths One of the leading local chemical and pharmaceutical producers. Diverse business portfolio. Involvement in the herbal supplements business. Local leader in small volume injectables. Strong OTC portfolio. Leading generic drugs player in the country. Exploiting ASEAN free trade area. Growth in profit in 2009. Competition from other local manufacturers. Pressure on the government to reverse policies biased towards the local industry. Increasing demand for compliance with international IP standards. Government programme for developing pharmaceutical and biotechnology sectors, including the improvement of the regulatory environment. Expected increase in local and regional drug consumption. Focus on halal medicine, which is in demand in the Islamic world. Rising demand for OTCs. Recent launch of anti-flu medicine Omniflu, with demand increased following the onset of swine influenza. Widespread counterfeit industry. Increased competitiveness of local players driven by ASEAN harmonisation and other regulatory developments. Potentially detrimental impact of a possible FTA with the US.
Weaknesses
Opportunities
Threats
Company Overview
Chemical Company of Malaysia (CCM) was established in 1930. The company was listed as a public company in 1966, initially as a subsidiary of UK-based ICI PLC and now as a Malaysianowned corporation, controlled by Permodalan Nasional Bhd (PNB), which had shown interest in the takeover of Pharmaniaga. CCM Pharmaceuticals is the largest local manufacturer of generic drugs, currently holding a 21% share. According to the pharmaceuticals division director, the company plans to increase this share to at least 23%. Its portfolio consists of more than 280 products, including antihistamines, antibiotics and expectorants. The division is also the leading producer of OTCs, with key brands being Champs, Proviton and Uphamol. CCM Duopharma Biotech manufactures oral preparations, sterile injectables, haemodialysis and sterile irrigation solution. The division is the leading local manufacturer of sophisticated and specialised small volume injectables.
Strategy
The company is focused on chemical products and applications, fertilisers and pharmaceuticals and healthcare products and services. It has four divisions, namely CCM Chemicals, CCM Fertilizers, CCM Pharmaceuticals and CCM Duopharma Biotech. CCM Duopharma is raising its profile in the traditionally low-margin vaccine sector. The company is spending MYR7mn (US$2mn) on a vaccine fill and finish facility in Klang, Selangor. In H209,
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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, reported Bernama in mid-2011. 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. He added that the firm will implement its expansion plans 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. Launches of new products will be fuelled by a new 63,000 square feet (ft ) research and development facility that cost MYR10.0mn (US$2.7mn) to build. The firm spent MYR2mn (US$550,000) on advanced analytical equipment in 2009 to facilitate the testing of pipeline products. Through to 2015, a total of 35 new generic drugs will be introduced to the marketplace. 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.
2
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 November 2009, CCMs Duopharma arm and Inno Biologics agreed to develop a version of erythropoietin (EPO) for the treatment of cancer-related anaemia, thus entering the high-potential biosimilars field. Inno Biologics supplies bulk EPO to CCM Duopharma, which finishes the product and markets it to healthcare specialists. Inno Biologics and CCM Duopharma estimate their version of EPO will reduce the governments expenditure on EPO by 40%. In April 2009, CCM inaugurated its new US$2.8mn research and development centre in Malaysia. The Innovax 63,000ft site is used for the manufacture of new and innovative generic drugs. Innovax is the largest facility of its kind in the country, with CCM planning an additional US$562,000 investment. Around the same time, the company won two government contracts. The MYR20mn deal will mean that CCM will supply the government with an HIV drug (SLN 30) and methadone over the next two years. The company is also in the process of setting up a manufacturing base for inert vaccines fill and finish, which would be the first such venture in ASEAN.
2
For the first nine months of FY11 (ended September), the company posted MYR47.8mn in consolidated group profit before tax, up by 18.9% y-o-y, on the back of strengthening margins in its pharmaceutical and chemical divisions. Revenue rose 2.3% y-o-y, to top MYR1.2bn. For the full FY10, the group posted a 6% y-o-y increase in revenue, which rose to MYR1.64bn.
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Profit for the year came in at around MYR33mn, rising from MYR5mn achieved in FY09. The groups pharmaceuticals arm posted MYR250mn in FY10 revenue. In Q110, CCM group posted a 7.5% increase in revenue, to MYR368.7mn. Profit before tax, however, fell to MYR3.1mn, down by 60.7% y-o-y. The groups pharmaceutical division posted a 5.7% hike in revenues, to MYR58.1mn, although its profit before tax was down 60.5%, to MYR3.5mn, which was attributed to lower margins on sales to the public sector, quota limitations on certain drugs and an increase in the costs of finances. CCM had a challenging 2009. In Q309, the firm posted sales of MYR404mn (US$118mn), a 4.7% decrease compared with the previous quarter. Encouragingly, CCM returned to profit in Q309, after posting a net loss of MYR439,000 (US$129,000) in Q209. For the whole of 2009, the group posted MYR1.6bn in revenue, down by 27.4% (which was partly attributable to one-off write-offs). Profit before tax was down by 87%, to MYR120.3mn. CCMs pharmaceutical arm reported a 4.3% revenue growth, to MYR242.7mn, although its profit before tax was down by 22.9%, to MYR45.6mn, largely due to the expense on the capacity expansion in Bangi.
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
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Kotra Pharma
Strengths Company Overview One of the leading local drug producers. 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. Government programme for developing the pharmaceutical and biotechnology sectors. Expected increase in local and regional drug consumption. Expansion of medical provision and infrastructure.
Opportunities
Threats
Widespread counterfeit industry. Increased competitiveness of local players driven by ASEAN harmonisation and other regulatory developments. Rising prominence of Chinese drug makers, which can compete on price. Lawsuit filed against the company in May 2010.
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. 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 member country for Pharmaceutical Inspection Convention Scheme, Kotra was selected to be audited for the quality inspection of its facilities. One year later, the company was awarded the internationally recognised ISO 9001 accreditation for the Quality Manufacture, Design and Development of pharmaceutical products.
Strategy
Currently, just over a third of Kotras business comes from overseas sales to countries such as Indonesia, Singapore, Brunei, Vietnam, Cambodia, Myanmar, Hong Kong, Mauritius and Sri Lanka. Mid-way through the firms five-year plan, Kotras exports should exceed domestic sales. Kotra is currently constructing a MYR120mn (US$35.3mn) plant in Melaka, which is a manufacturing centre for products ranging from food and consumer products, through to high-tech weaponry and automotive components, to electronic and computer parts. Phase 1 of the 35,000m production facility was scheduled to be finished in 2009, and total completion is expected in 2012. At full capacity, the new plant will have 10 times the current output of Kotras manufacturing lines. Kotra has 163 products currently registered with the National Pharmaceutical Controls Board, with OTCs accounting for the bulk of the portfolio and branded generic products increasing in importance. In FY09, the companys prescription medicines range grew by 19% in relation to the previous financial year, on the back of new product launches, such as antifungal Axcel Ecozalon
2
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cream, and psoriasis and dermatitis cream and ointment Axcel Clobetasol. Kotras Appeton health supplement range is the firms flagship franchise, accounting for 61% of sales over the past five years. In FY09, Appetons share of the market for childrens vitamin C increased from 48% to 55%, as reported by ACNielsen. Kotra is also aiming to strengthen its penetration of the adult multivitamin market, with efforts that include the recent introduction of Appeton Wellness 60+. Kotra Pharmas total annual production at its main factory includes sterile and non-sterile items. In the sterile range, the company manufactures 2mn eye drops and 2mn ampoules, 1.5mn of each powder vials and dry syrups, and 3mn liquid vials. In the non-sterile range, it produces around 528mn tablets, 139mn capsules, 38mn liquid bottles and 15mn tubes of cream.
Developments
In May 2010, it was reported that Takaso Rubber Products had taken legal action against Kotra Pharma for allegedly failing to pay for goods. The company said that it intends to file a counterclaim. In January 2009, Danish Leo Pharma won a court case against Malaysia generic manufacturer Kotra Pharma. The Malacca High Court ruled that Kotra infringed Leos trademarks Fucidin (fucidic acid) and Fucicort (fucidic acid) by adopting trademarks Axcel Fusidic and Axcel FusiCorte back in 2000. The products are used for the treatment of skin infections. In July 2007, Kotra Pharma unveiled a five-year plan that focuses on exports, initially to neighbouring ASEAN countries (Thailand and the Philippines in particular), but ultimately to the lucrative markets of Western Europe and the US. To achieve this goal, the company intends to expand production capabilities, increase R&D investment, attract world-class talent and enlarge its product portfolio.
In FY11 (ending June), Kotra posted MYR112.8mn in revenue, with domestic sales accounting for 65.8% of this figure. The company, however, posted a loss before tax of MYR2.1mn, due to lower margins partly caused by the depreciating US dollar. Group R&D expenditure topped MYR681mn, up from MYR425mn in the previous year. In FY10, the company posted MYR102.4mn in revenue, up by 13.7% on the previous year. Profit before tax was up 38.7%, to reach MYR12.5mn, mainly due to increased sales revenues, better advertising and changes in product mix. Domestic sales, which represented 61% of total revenues, rose by 6.2% y-o-y, to MYR62.5mn. Exports by 27.9%, with new export destinations reached during the year including Ethiopia, Sudan, China, Laos, Mongolia, Yemen and Kenya. In FY09, group revenues were MYR90mn, up by 3.8% y-o-y, with pre-tax profit reaching MYR9mn an increase of 17% y-o-y on the back of stronger domestic sales and exchange gains due to rising US exports. Exports, however, fell from MYR32.3mn in 2008 to MYR31.1mn in 2009. Demonstrating its commitment to R&D, the company increased its research expenditure from MYR1mn (US$293,900) to MYR6.4mn (US$1.9mn) for the fiscal year ended June 30 2008.
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Company Contacts
Kotra Pharma, 1 Jalan TTC 12 Cheng Industrial Estate, 75250 Melaka, Malaysia Tel: +60 (6) 336 2222 www.kotrapharma.com
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Multinational Companies
GlaxoSmithKline (GSK)
Strengths Weaknesses Opportunities Threats One of the few multinational drugmakers with a direct manufacturing presence in Malaysia, enjoying the benefits available to local producers. Strong product portfolio covering a wide range of therapeutic areas and the highest market share amongst multinationals. Diverse local manufacturing portfolio in Malaysia. Involvement in the ED market. Malaysias weak domestic patent law and benefits granted to local generic-based pharmaceutical companies. Sizeable drug copying and counterfeiting sector. Biased drug pricing policy adopted by the government. Lack of patent protection for GSKs anti-AIDS drugs. Lack of IPR protection and enforcement. Expected increase in local and regional drug consumption, driven by demographic and economic changes, as well as by improvements in regulatory standards. Increase in consumption of patented medicines supported by ASEAN harmonisation effort and pharmaceutical sector modernisation. Governments focus on developing the countrys biotechnology sector. The company sees potential for strong growth in Asia. Malaysia may join multilateral trans-Pacific trade agreement with the US. Resistance to aligning domestic patent law fully with internationally acceptable standards. Government failure to revise its discriminatory pricing policy. Competition from other multinationals wishing to expand its local base. Companys Avandia drug has been attacked for apparent heart risk links.
Company Overview
GSK Malaysia was incorporated in 1958 under the name Glaxo Malaysia Sdn Bhd. The incorporations of Beecham Products (Far East) Sdn Bhd and Sterling Drug (Malaysia) Sdn Bhd followed in 1959 and 1962, respectively. Due to the merger between SmithKline Beckman Corp (USA) and Beecham Group PLC (UK) in 1989, the name changed to SmithKline Beecham Consumer Brands Sdn Bhd. In 1992, the company moved to new premises in Bangsar Utama and has since moved to Petaling Jaya Selangor. Glaxo and Wellcome merged to form Glaxo Wellcome in 1995. In December 2000, Glaxo Wellcome and SmithKline Beecham merged to form GlaxoSmithKline.
Strategy
Currently, the company has around 600 employees. Its Malaysian manufacturing operations export to Singapore, Hong Kong, Thailand, China, the Philippines and Indonesia. GSK Consumer Healthcare is a fully owned subsidiary in Malaysia. Malaysia is home to one of GSKs consumer healthcare manufacturing sites. The facility produces OTCs for the domestic market as well as for Singapore and Taiwan. Production costs exceed MYR40mn (US$12mn) per annum. The sites annual output includes 800mn tablets, 400 tonnes of powder and 150,000kg of cream. Demonstrating its importance, GSKs consumer healthcare
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manufacturing units from Taiwan, Thailand and Venezuela were transferred to Malaysia. GSKs manufacturing portfolio in Malaysia is diverse. In addition to consumer healthcare products, the company produces a variety of ethical pharmaceuticals and vaccines. In addition, GSK also distributes a range of OTC medicines, including Eno, Eye-Mo, Oxy, Panadol, Scotts and Zentel, along with its oral healthcare products and a range of nutritional health drinks. The company has a distribution agreement with Diethelm Holdings (Malaysia), one of the countrys largest distribution concerns. GSKs main non-prescription brands include Horlicks, Ribena, Panadol, Scotts Emulsion, Menara Lien Hoe Eye-Mo, Eno, Oxy and Aquafresh. The companys local subsidiary sells a range of other prescription drugs, such as antibiotics, antiasthmatics, anti-diabetics, anti-virals, anti-migraine treatments as well as vaccines for hepatitis A and B, varicella, meningitis, polio and diphtheria. GSKs anti-AIDS drugs, zidovudine and the combination therapy lamivudine, continue to suffer from a lack of patent protection. Developments In January 2011, GSK launched a new and selective angiogenesis inhibitor, pazopanib, in Malaysia for the treatment of tumour growth. The drug will add to the existing targeted therapies in the country, which include a new oral treatment option to treat patients with advanced renal cell carcinoma (RCC), a leading form of cancer. In March 2010, the Drug Control Authority (DCA) asked GSK to amend prescription information for its diabetes drug Avandia (rosiglitazone). The US Senate had previously suggested that GSK had known of Avandias heart risk links for some years before it had become widely known, which the company denies. The DCAs request was officially made on the back of 33 adverse effect reports received by the Ministry of Health. In October 2009, GSK announced that it was to spend MYR60mn (US$18mn) to upgrade its global IT facility in Petaling Jaya, Selangor. Funds were used to raise the headcount from 130 to 250 over six months. Malaysia was chosen as the site for the global IT facility because of its computer-literate, English-speaking workforce. The plant in Petaling Jaya receives tax breaks due to its MSC (formerly known as the Multimedia Super Corridor) status. In mid-2009, the price of some of GSKs drugs in select Asian countries was cut. Its breakthrough cervical cancer vaccine, Cervarix, is now cheaper in Thailand and Malaysia. In some Asian countries, the firm will combine price cuts on its branded drugs with the introduction of more lowcost generic medicines. To achieve this goal, GSK has entered into an agreement with drug manufacturer Dr Reddys. In February 2009, GSKs avian influenza vaccine Prepandrix was approved in Malaysia, which became the first country outside Europe to do so. The company was working closely with local authorities in order to prepare for a possible pandemic.
The companys own figures put its annual sales from its Malaysian operation in the region of US$100mn, supported by the growth of prescription drug sales in the country. Despite the challenging economic scenario, combined sales of consumer health products and prescription drugs recorded by GSK in Malaysia were MYR600mn (US$178mn) in 2008. Revenue generated by prescription and consumer health products increased by 6% and 10%, respectively.
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Company Contacts
GlaxoSmithKine Pharmaceutical Sdn Bhd Level 6, Quill 9, 112, Jalan Semangat, 46300 Petaling Jaya, Selangor, Malaysia Tel: +60 (3) 7495 2600 www.gsk.com.my
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Pfizer
Strengths Largest pharmaceutical company in the world. One of leading providers of ED medicines. Financial capability, business portfolio and industry experience to exploit the Malaysian pharmaceutical market. Broad portfolio of products including antibiotics, vitamins and OTC pharmaceuticals, consumer and healthcare products. Weak domestic patent law and benefits granted to local generic-based pharmaceutical companies. The biased drug-pricing policy adopted by the Malaysian government. No direct manufacturing presence. Lack of IPR protection and enforcement. Drug consumption expected to increase, boosted by demographic and economic factors, as well as by improvements in regulatory standards. The ASEAN harmonisation effort and pharmaceutical sector modernisation increasing the demand for patented products in the country. The Malaysian governments focus on developing the countrys biotechnology sector likely to result in improved investment opportunities, a favourable business environment and a costeffective R&D proposition. Government resistance to aligning domestic patent law fully with internationally acceptable standards. Significant presence of the counterfeit drug industry. Key ED product Viagra (sildenafil citrate) particularly susceptible to competition, of both genuine (from Eli Lilly and Bayer/GSK) and fake nature. Government failure to revise its discriminatory pricing policy Strong competition from other multinationals.
Weaknesses
Opportunities
Threats
Company Overview
In Asia, Pfizer was incorporated as a private limited company in Singapore in 1964. The company began its operations modestly, selling only a few products. The Malaysian operation was set up as a subsidiary of the Singapore-registered company and became a fully registered company in 1978. Today, the company has a strong presence in Malaysia, with around 500 staff, most of who are engaged in sales operations across 9 offices. In 2009, Pfizer acquired compatriot Wyeth, which also operates in Malaysia through imports via a local office.
Strategy
Pfizer is investing heavily in the Malaysian market, including the expansion of existing manufacturing assets and the establishment of a new R&D centre. Pfizer Malaysia markets a wide range of pharmaceuticals and therapeutic products, ranging from vitamin supplements and nutritionals, to antibiotics and cardiovascular therapies. The companys portfolio of products includes cardiovascular, neuroscience, infectious diseases, arthritis/pain, urology, ophthalmology, oncology and respiratory disease. Pfizers key products include Aromasin (exemestane), Celebrex, Detrusitol (tolteridine), Diflucan, Lipitor, Neurontin, Norvasc, Viagra, Xalatan (latanoprost), and Zoloft. 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
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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 Floor, Bangunan Palm Grove, No. 14, Jalan Glenmarie (Persiaran Kerjaya) Section U1, 40150 Shah Alam, Selangor Darul Ehsan, Malaysia Tel: +60 (3) 5568 6688 www.pfizer.com.my
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Novartis
Strengths Weaknesses Opportunities Threats Diverse manufacturing presence, including a broad portfolio of antibiotics, vitamins and OTC pharmaceuticals, consumer and healthcare products. Solid financial capability, business portfolio and industry experience. Presence in the generic drugs sector. Weak domestic patent law and benefits granted to local generic drugmakers. Low purchasing power of much of the population, exacerbated by high out-of-pocket contribution to pharmaceutical expenditure. Biased drug-pricing policy adopted by the Malaysian government. Increasing health awareness in the Asian region, which will boost overall drug consumption. Potential to expand in the fast-growing generic drugs market. ASEAN harmonisation effort and pharmaceutical sector modernisation boosting demand for patented products. Improving regulatory standards to stimulate involvement in the market. Governments focus on developing the countrys biotechnology sector. Government resistance to aligning domestic patent law fully with international standards. Significant counterfeit drug industry. Government failure to revise its discriminatory pricing policy likely to limit company expansion, both in terms of activity and investment.
Company Overview
Novartis was established in Malaysia following the merger of Sandoz and Ciba-Geigy in 1997. The company comprises Pharmaceuticals, Consumer Health, Ciba Vision and a generic drugs sector, with more than 100 staff employed around the country.
Strategy
Novartis is among the 10 leading pharmaceutical companies in Malaysia. The companys groundbreaking approach to the industry has seen it expand into generic products, in contrast with global peers such as Pfizer and GSK, which remain focused on high-profit, patented blockbuster pharmaceutical products. The progressive ageing of the population is increasing the need for medicines, as well as the need to restrain healthcare costs, and as such, generic medicines are likely to continue to penetrate the market. Novartis has expressed interest in locating research centres and conducting clinical trials in Malaysia, thereby boosting the countrys ambitions to become a biotech rival to Singapore or Taiwan. Novartis may also invest in Malaysias biotechnology industry, and is evaluating Malaysias rich biodiversity with the aim of producing novel treatments. The company has a broad portfolio of products, including medicines in transplantation and immunology, cardiovascular diseases, diseases of the CNS, Parkinsons disease, skin allergies, OTC and ophthalmic medications. Novartis is present in both branded and generic drugs sectors in Malaysia and therefore faces competition from both multinational and local producers.
Developments
In November 2009, Novartis signed an agreement with BiotechCorp and Sarawak Biodiversity Centre in order to discover bioactive compounds. Novartiss director Alexander Jetzer-Chung said that the agreement enables the company to leverage capitalise on the countrys biodiversity in the
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development of new medical opportunities. CIBA Vision, the eye care business of Novartis, invested MYR500mn (US$132.45mn) to build an integrated contact-lens manufacturing plant in Malaysia. The plant, at Johors Tanjung Pelepas Free Trade Zone, was operational by December 2007. The facility now produces one of the most technologically advanced, high-oxygen transmissible products, O2OPTIX contact lenses. These breathable contact lenses are made from a silicone Lotrafilcon b the latest material used in hygrogel contact-lens technology. Initial production capacity was expected to reach 300,000 contact lenses a day, with output rising to 500,000 lenses a day by 2008. Investment in the project will be spread over eight years, with the plant creating 2,000-3,000 jobs in the later stages of operation.
Company Contacts
Novartis Corporation (Malaysia) Sdn Bhd Lot 9 Jalan 26/1, Seksyen 26 Kawansan Perindustrian Hicom, 40400 Shah Alam, Malaysia Tel: +60 (3) 5192 6666 www.my.novartis.com
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Merck & Co
Strengths Opportunities Company Overview Strong portfolio of prescription pharmaceuticals. Strong regional presence. A leading multinational, with extensive network in South East Asia. Presence in the vaccines segment. Considerable experience in conducting local clinical trials. Malaysias weak domestic patent law and benefits granted to local generic-based pharmaceutical companies. Biased drug-pricing policy adopted by the Malaysian government. Lack of local manufacturing capacities. Significant contribution of out-of-pocket expenditure to overall drug spending. Lack of IPR protection and enforcement. Increasing health awareness in the Asian region, which will boost overall drug consumption. ASEAN harmonisation and drug sector modernisation boosting patented drug demand. Improving regulatory standards to stimulate involvement in the market. Governments focus on developing the countrys biotechnology sector. Rising demand for treatments of chronic conditions. Expansion of private sector provision increasing the number of potential clients for Merck. Malaysia may join multilateral trans-Pacific trade agreement with the US. Government resistance to aligning domestic patent law fully with international standards. Significant threat from the counterfeit drug industry. Failure to revise discriminatory pricing policy likely to limit company expansion, both in terms of activity and investment. Strong competition from other multinationals. Threat posed by generic companies targeting off-patent medicines.
Weaknesses
Threats
Merck & Co (now incorporating Schering-Plough, following their 2009 merger) operates in Malaysia, as well as other countries in the region, through its subsidiary Merck Sharpe & Dohme (MSD) Asia Pacific. The Malaysian sales and marketing section, established in 1997, presently employs around 300 people. MSD Asia Pacific division is a considerable commercial force in the region. The company is involved both in local manufacturing and marketing initiatives, with the regional focus being on Japan, the leading Asian market.
Strategy
MSD Malaysia markets and sells a variety of prescription pharmaceuticals in the country. Main product areas include diabetes (which is reportedly the single key driver of the companys potential in the country), allergy and cardiovascular drugs. The merger with Schering-Plough has allowed MSD to gain access to a considerable portfolio of womens health products, which have been heavily promoted. The company deals with both public and private sectors. MSDs key customers in the private sector include private hospitals, pharmacies and general practitioners (GPs). Competition in some areas, such as HPV vaccines, has forced MSD to reduce the price of its Gardasil vaccine. Multinationals represent the main challenges to Mercks Malaysian operations. Additionally, the counterfeit industry and lax patent protection continue to disadvantage some of its patented
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products performance, especially given ongoing patent expirations. Financial Performance The performance of its cardiovascular product Coozar (losartan) in Malaysia came under threat, following Ranbaxys launch of a branded generic competitor in August 2009. According to primary market research firm IMS Health, Malaysian sales of Cozaar topped US$6.29mn in the 12 months ending June 2008. MSDs losartan is reportedly still under patent in Malaysia, which is due to expire in 2013. According to officials from MSD Malaysia, the company experienced virtually no sales increase in the course of 2010, as a result of negative market conditions. In comparison, joint value sales of prescription drugs achieved by the top 10 companies in the country fell by 5% y-o-y, on average. In an interview cited on Focus Pharma Reports, MSD Malaysias managing director Ewe Kheng Huat stated that the companys 2010 revenue fell in the region of US$103mn. In comparison, the companys annual sales in the last 1990s were less than US$5mn. Merck Sharpe & Dohme Malaysia 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
Company Contacts
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Sanofi-Aventis
Strengths Opportunities Third largest drug manufacturer in the world. Among the leading foreign producers in Malaysia. Broad portfolio of products, including antibiotics, vitamins and OTC pharmaceuticals. Malaysias weak domestic patent law and benefits granted to local generic-based pharmaceutical companies. Biased drug-pricing policy adopted by the Malaysian government having a negative impact on the market conditions for the company and restricting its market growth potential. Lack of IPR protection and enforcement. Drug consumption in the Asian region due to rise from increasing health awareness. Potential to expand its presence in the expanding generic drugs market. Improving regulatory standards to stimulate involvement in the market. The ASEAN harmonisation effort and pharmaceutical sector modernisation. The Malaysian governments focus on developing the countrys biotechnology sector, improving investment opportunities, providing a favourable business environment for the company, and a cost-effective R&D proposition. Expansion of private medical provision facilities. Persistence of counterfeit drug activities. Government failure to revise its discriminatory pricing policy. Focus on cost-containment in public healthcare. Competition from other generic drugs player in the country and region.
Weaknesses
Threats
Company Overview
With a workforce of more than 250 people across eight offices, Sanofi-Aventis Malaysia ranks among the top five pharmaceutical companies in the country. Sanofi-Aventis boasts a considerable regional market presence. Its Japanese operations include a number of licensing deals with local companies. Given the epidemiological profile of the region, Sanofi-Aventis is also highly present through vaccines.
Strategy
Sanofi-Aventis 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
In January 2011, Malaysian drugmaker Hovid tied a deal with Sanofis local subsidiary Winthrop, aimed at the development and manufacture of generic drugs, namely metformin 850mg MR for the diabetes treatment and tramadol 100mg SR, which is used as a painkiller. Hovid also reported that the deal may be extended to another 30 products, which are valued at over MYR50mn. Sanofi-Synthelabo (Malaysia) Sdn Bhd 8th Floor PNB Damansara, No. 19, Lorong Dungun Damansara Heights,50490 Kuala Lumpur, Malaysia Tel: +60 (3) 2089 3333 www.sanofi-synthelabo.com.my
Company Contacts
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Eli Lilly Malaysia

Strengths Threats Company Overview A leading global pharmaceutical companies. Strong product portfolio. Ability to expand through acquisition. Competition from government-supported local producers. Government policies biased towards the local industry. Widespread counterfeit industry. Patent expirations negatively impacting on company revenues and product positioning. Government programme for developing the pharmaceutical and biotechnology sectors in the country. Expected increase in regional drug consumption. Improving regulatory standards to stimulate involvement in the market. Continued encouragement of the generic drugs sector. Higher level of patient awareness of cost containment. Increased competitiveness of local players driven by ASEAN harmonisation and other regulatory developments. Rising prominence of China and other regional suppliers of cheaper generic medicines.
Weaknesses
Opportunities
Eli Lilly is one of the top 20 global pharmaceutical players. In the South East Asia region, Elis key markets include Singapore, Taiwan and the Philippines. In 2010, IMS ranked Eli Lilly as the fastest growing pharmaceutical company in the markets of China and South Korea.
Strategy
The company offers a wide-ranging product portfolio, mostly comprising branded drugs. Key therapeutic areas covered include cardiology, erectile dysfunction, cancer and diabetes. Patent expirations and counterfeiting will continue to negatively impact on company performance and the Lilly brand positioning in Malaysia.
Developments
In June 2011, Japanese company Takeda Pharmaceutical and Eli Lilly entered an agreement to sell Evista (raloxifene HCl tablets) in seven Asian nations South Korea, Hong Kong, Macau, Malaysia, the Philippines, Singapore and Thailand. Under the terms of the agreement, Takeda will assume the rights related to marketing, distribution and trademark, marketing authorisation and regulatory matters, while Eli, eligible for cash payment from Takeda, will retain the ownership of the drug patent. Evista is approved and marketed to treat and prevent osteoporosis in postmenopausal women in all the regions, as well as to reduce the risk of breast cancer in the Philippines, Singapore and Thailand. Eli Lilly (Malaysia) Sdn Bhd Unit 18.1, Level 18, CP Tower No. 11, Jalan 16/11, Pusat Dagang Seksyen 16 46350 Petaling Jaya, Selangor Darul Ehsan, Malaysia Tel: +60 (3) 7957 7837 www.lilly.com
Company Contacts
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Ranbaxy Malaysia
Strengths Company Overview Strong generic portfolio and local production facilities. Nascent global generic player. Ability to expand through acquisition. Relatively recent entry to the Malaysian market. Competition from government-supported local producers. Government policies biased towards the local industry. The companys sales contracted in Asia in Q110. Government programme for developing the pharmaceutical and biotechnology sectors. Continued encouragement of the generic drugs sector. Higher level of patient awareness of cost containment. Improving regulatory standards to stimulate involvement in the market. Widespread counterfeit industry. Increased competitiveness of local players driven by ASEAN harmonisation and other regulatory developments. Rising prominence of China and other regional suppliers of cheaper generic medicines.
Weaknesses
Opportunities
Threats
Ranbaxy Malaysia is a joint-venture established in 1984 by Indias Ranbaxy Laboratories Limited (RLL), and has shareholders from India as well as Malaysia.
Strategy
The company manufactures pharmaceutical products for oral use comprising liquid formulations, tablets, capsules and granules for suspension. In 1987, the company established a manufacturing unit in Sungai Petani, Kedah, to supply markets in Malaysia and Singapore. Ranbaxys portfolio contains around 80 brands, including those managed through local partnerships. Ranbaxy Malaysias top 10 brands account for around two-fifths of total sales. Ranbaxy has a presence in the therapeutic segments of cardiovascular, antibiotic, pain management, gastrointestinal and food supplements. Ranbaxys second manufacturing facility in Kuala Lumpur (which is compliant with international standards) manufactures antibiotics, anti-bacterials, NSAIDS, vitamins, cough and cold remedies, antacids, anti-spasmodics, anti-fungals, anti-ulcerants and cardiovasculars. The company is the only foreign manufacturer of anti-retrovirals (ARVs) in Malaysia.
Developments
In August 2009, reinforcing its strong position in Malaysias cardiovascular drug sector, Ranbaxy launched Covance (losartan), which is manufactured locally. Given the low cost of the product and the unmet medical need, prescribers uptake of the drug should be rapid. 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
Company Contacts
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Country Snapshot: Malaysia Demographic Data

Section 1: Population
Population by age, 2005
75+ 70-74 65-69 60-64 55-59 50-54 45-49 40-44 35-39 30-34 25-29 20-24 1 5-1 9 1 0-1 4 5-9 0-4
Population by age, 2005:2030 (total)

75+ 70-74 65-69 60-64 55-59 50-54 45-49 40-44 35-39 30-34 25-29 20-24 1 5-1 9 1 0-1 4 5-9 0-4
-1.5
-1.0
-0.5 Male
0.0 Female
0.5
1.0
1.5
-3.0
-2.0
-1.0 2030
0.0 2005
1.0
2.0
3.0
Figures in millions. Source: UN Population Division
Table: Demographic Indicators, 2005-2030
2005 Dependent population, % of total Dependent population, total, 000 Active population, % of total Active population, total, 000 Youth population*, % of total Youth population*, total, 000 Pensionable population, % of total Pensionable population, total, 000 36.9 9,473 63.0 16,132 32.3 8,291 4.6 1,182
2010f 34.3 9,526 65.6 18,175 29.3 8,135 5.0 1,391
2020f 32.5 10,408 67.5 21,612 25.3 8,130 7.1 2,278
2030f 32.2 11,371 67.7 23,898 21.7 7686 10.4 3,685
f = forecast. * Youth = under 15. Source: UN Population Division
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Table: Rural/Urban Breakdown, 2005-2030
2005 Urban population, % of total Rural population, % of total Urban population, total, 000 Rural population, total, 000 Total population, 000 65.1 34.9 16,494 8,854 25,348
2010f 68.2 31.8 18,781 8,751 27,532
2020f 78.5 21.5 25130 6889 32,019
2030f 82.2 17.8 28994 6276 35,270
f = forecast. Source: UN Population Division
Section 2: Education And Healthcare

Table: Education, 2000-2003
2000/01 Gross enrolment, primary Gross enrolment, secondary Gross enrolment, tertiary Adult literacy, male, % Adult literacy, female, % 100 69 23 92.0 85.4
2002/03 93 70 29 na na
na = not available. Gross enrolment is the number of pupils enrolled in a given level of education regardless of age expressed as a percentage of the population in the theoretical age group for that level of education. Source: UNESCO
Table: Vital Statistics, 2005-2030
2005 Life expectancy at birth, males (years) Life expectancy at birth, females (years) 70.80 75.5
2010f 71.9 76.5
2020f 73.8 78.5
2030f 75.3 80.0
f = forecast Life expectancy estimated at 2005. Source: UNESCO
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Glossary
Pharmaceuticals, medicines, drugs: synonym terms used interchangeably. Pharmaceutical market/sales: the sum of revenues generated by generic, patented, and over-thecounter (OTC) drugs through hospitals, retail pharmacies and other channels. Unless otherwise stated, market value is reported at final consumer price including mark-ups, taxes, etc. Prescription drugs: patented and generic drugs regulated by legislation that requires a physicians prescription before they can be sold to a patient. Patented drug: an innovative medicine granted intellectual property protection by the patent and trademark office. The patent may encompass a wide range of claims such as active ingredient, formulation, mode of action, etc. giving the patent holder the sole right to sell the drug while the patent is in effect. Generic drug: a bioequivalent medicine that contains the same active ingredient as an originator drug. The originator drug is an innovative medicine that no longer has intellectual property protection due to patent expiry. OTC drug: a medicine that does not require a prescription to be sold to patients. Also known as nonprescription medicines. Counterfeit drugs: unregistered and illegal medicines which have not been subject to regulatory assessments to ensure quality, safety, efficacy and manufacturing standards. Similares: non-bioequivalent alternatives to either an originator patented drug or a generic drug. While similares and the originator/generic drug have a common indication, similares do not always contain the same active ingredient as an originator and invariably have a different pharmacokinetic and pharmacodynamic profile. Prevalent in select South American countries, similares are legal. BMI does not include their sales in total pharmaceutical market values. Health expenditure: the sum of the funds mobilised by government and private systems for the operation of a healthcare system, according to the World Health Organization (WHO). It includes the purchase of healthcare services and goods by public entities such as ministries and social security institutions; or by private entities such as non-profit institutions, commercial insurances and households acting as complementary funders to the previously cited institutions or unilaterally disbursing health commodities. The revenue base of these entities varies by country and comprises multiple sources. The inclusion of this in BMI forecasts necessitates taking into account the essential
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attributes of country-specific health accounting such as comprehensiveness, consistency, standardisation and timeliness. Government health expenditure: the sum of outlays for health maintenance, restoration or enhancement paid by government entities such as a Ministry of Health, other ministries, parastatal organisations and social security agencies, including transfer payments to households to offset medical care costs and extra-budgetary funds to finance healthcare provision. Private health expenditure: the sum of outlays for health by private entities such as commercial or mutual health insurance, households, non-profit institutions serving households, resident corporations and quasi-corporations not controlled by governments according to the WHO. Medical devices: products used for diagnosis or therapy in patients. Whereas pharmaceuticals achieve their principal action by pharmacological, metabolic or immunological means, medical devices act by physical or mechanical means. Medical devices include a wide range of products, including syringes, thermometers, blood-sugar tests, prosthetic limbs, ultrasound scans and X-ray machines, among others. Burden of Disease Database (BoDD): BMIs disease database incorporates WHO, World Bank, International Monetary Fund (IMF) and BMIs 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 (DALYs): the sum of the years of life lost (YLL) due to premature mortality in a population and the years lost due to disability (YLD) for incident cases of the health condition. The DALY is a health gap measure that extends the concept of potential years of life lost due to premature death (PYLL) to include equivalent years of healthy life lost in states of less than full health (broadly termed disability). One DALY represents the loss of one year of equivalent full health.
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BMI Methodology
How We Generate Our Pharmaceutical Industry Forecasts
Pharmaceutical sub-sector forecasts are generated using a top-down approach from BMIs Drug Expenditure Forecast Model. The semi-automated tool incorporates historic trends, macroeconomic variables, epidemiological forecasts and analyst input, which are weighted by relevance to each market. The following elements are fed into the model: BMIs historic pharmaceutical market data, which has been collected from a range of sources including: regulatory agencies; pharmaceutical trade associations; company press releases and annual reports; subscription information providers; local news sources; information from market research firms that is in the public domain. Data that has been validated by BMIs pharmaceutical and healthcare analysts using a composite approach, which scores data sources by reliability in order to ensure accuracy and consistency of historic data. Five key macroeconomic and demographic variables, which have been demonstrated, through regression analysis, to have the greatest influence on the pharmaceutical market. These have been forecast by BMIs Country Risk analysts using an in-house econometric model. The burden of disease in a country. This is forecast in disability-adjusted life years (DALYs) using BMIs Burden of Disease Database, which is based on the World Health Organizations burden of disease projections and incorporates World Bank and IMF data. Subjective input and validation by BMIs pharmaceutical and healthcare analysts to take into account key events that have affected the pharmaceutical market in the recent past or that are expected to have an impact on the countrys pharmaceutical market over the next five years. These may include policy/reimbursement decisions, new product launches or increased competition from generic drugs.
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Pharmaceuticals Business Environment Ratings Risk/Reward Ratings Methodology

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

MALAYSIA PHARMACEUTICALS & HEALTHCARE REPORT Q2 2012

Part of BMI's Industry Report & Forecasts Series

Malaysia Pharmaceuticals & Healthcare Report Q2 2012

Business Monitor International Ltd

Malaysia Pharmaceuticals & Healthcare Report Q2 2012

Pharmaceutical Risk/Reward Ratings .......................................................................................................... 12

Industry Trends And Developments ............................................................................................................ 26

Industry Forecast Scenario ........................................................................................................................... 44

Business Monitor International Ltd

Malaysia Pharmaceuticals & Healthcare Report Q2 2012

Competitive Landscape Analysis ................................................................................................................. 67

Company Profiles ........................................................................................................................................... 73

Country Snapshot: Malaysia Demographic Data ........................................................................................ 98

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Malaysia Pharmaceuticals & Healthcare Report Q2 2012

Business Monitor International Ltd

Malaysia Pharmaceuticals & Healthcare Report Q2 2012

Business Monitor International Ltd

Malaysia Pharmaceuticals & Healthcare Report Q2 2012

Business Monitor International Ltd

Malaysia Pharmaceuticals & Healthcare Report Q2 2012

Business Monitor International Ltd

Malaysia Pharmaceuticals & Healthcare Report Q2 2012

Business Monitor International Ltd

Malaysia Pharmaceuticals & Healthcare Report Q2 2012

Malaysia Political SWOT

Malaysia Economic SWOT

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Malaysia Pharmaceuticals & Healthcare Report Q2 2012

Malaysia Business Environment SWOT

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Malaysia Pharmaceuticals & Healthcare Report Q2 2012

Pharmaceutical Risk/Reward Ratings

Rewards Industry Rewards

Risks Country Rewards

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

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Malaysia Pharmaceuticals & Healthcare Report Q2 2012

Risk/Reward Rankings By Sub-Sector Score Q212

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Malaysia Pharmaceuticals & Healthcare Report Q2 2012

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Malaysia Pharmaceuticals & Healthcare Report Q2 2012

Malaysia Market Summary

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

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Malaysia Pharmaceuticals & Healthcare Report Q2 2012

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Malaysia Pharmaceuticals & Healthcare Report Q2 2012

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Malaysia Pharmaceuticals & Healthcare Report Q2 2012

Recent Regulatory Developments

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Malaysia Pharmaceuticals & Healthcare Report Q2 2012

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Malaysia Pharmaceuticals & Healthcare Report Q2 2012

Pharmaceutical And Medical Advertising

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Malaysia Pharmaceuticals & Healthcare Report Q2 2012

Intellectual Property Regime

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Malaysia Pharmaceuticals & Healthcare Report Q2 2012

Malaysia Pharmaceuticals & Healthcare Report - Q2 2012

Malaysia Pharmaceuticals & Healthcare Report - Q2 2012