Malaysia Pharmaceuticals & Healthcare

Summary

The Malaysian pharmaceutical market, which has expanded at an annual rate of around 8% in the past 12-18 months, has a relatively high growth potential when compared to other similarly developed countries in the region. Prescription drugs account for around 75% of the total market value, with the segment likely to remain dominant in the future due to private sector support for established prescribing habits. Branded drugs, which presently represent over 70% of the total market, will continue to command the larger share in terms of value, as the demand for novel and life-style drugs increases. The situation will be reflected in the rising share of imports over time, which will further tip the trade balance in favour of foreign-made products, especially as Malaysia finalises foreign trade agreements (FTA) with the US and other key trading partners.

BMI expects the Malaysian pharmaceutical market to grow 12% in US dollar terms in 2006. Market value is likely to exceed US$1.56bn by 2010, boosted by changing demographics and rising healthcare expectations, which will boost demand for cardiovascular, central nervous system (CNS), metabolic and cancer drugs in particular. The treatment of infective diseases, especially hepatitis and HIV/AIDS, will necessitate supplies from abroad, while stimulating local R&D activities in this direction. However, the country's continued failure to align its intellectual property (IP) regulations and enforcement with international standards will continue to hamper local activities of foreign companies, while simultaneously boosting the trade in fake drugs.

Nevertheless, Malaysia will outperform a number of its immediate neighbours. The authorities' commitment to the development of a local pharmaceutical R&D base will attract foreign investment. The demand for cheap generic medicines will remain strong, given that public hospitals - mostly supplied by a single government company - account for a significant share of the market. However, strong regional competition in the field of R&D, especially in biotechnology, will have some detrimental effect on the rate of industry expansion, as will the current deficiencies of the IP regime.

Malaysian firms lack sufficient capacity to expand overseas, and will instead continue to focus on the local, mainly generic market. However, increased regional competition as well as the pressure on the authorities to comply with international IP standards will change the local landscape over the coming years, bringing a certain amount of industry consolidation. State-held Pharmanianga, the leading local player, will increase its efforts to secure a higher share of the generic market. In the meantime, multinational sector activity in the country will continue sporadically, dependent on prevailing regulatory and pricing conditions.

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