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-ORIGINAL MANUSCRIPT IN ENGLISH-

Title : Malaysia Pharmaceutical Industry

Collaboration and Investment Opportunities


Author : Jimmy Piong, Cheah Ming Loong
Journal : Journal of Pharmaceutical Machinery and Engineering, Japan

Date Submit : 28th November 2013 / Publication: 2014 Vol.23 No.1


Exchange Rate : 100 = RM3.20, and USD1.00 = RM3.20

Malaysia Healthcare System

Malaysias healthcare system consists of the private and public sector. The government
heavily funds the public healthcare sector, and patients pay a nominal sum for treatment.
The public expenditure represents 55% of the total healthcare expenditure. The remaining
45% of the total healthcare expenditure is consumed by the private healthcare services
which are paid fully by the patients themselves (out of pocket), their employers, or by
insurance companies. In comparison, Japan healthcare expenditure is paid by
government (37.5%), social health insurance (48.6%) and out of pocket (13.9%).

Malaysia healthcare expenditure was estimated to be RM 33.7 billion ( 1.05 trillion),


equivalent to 4.96% of the GDP in 2009 for a population of 28 million people. This
expenditure has been increasing on a single digit growth year-on-year, reaching RM44.5
billion ( 1.39 trillion) in 2012. However, the Malaysia healthcare expenditure per capita is
relatively small, only about 10% compared to Japans healthcare expenditure per capita.

Malaysian Statistics on Medicine Report indicated that the top 150 prescription medicines
were spent mainly on non-communicable diseases or life-style diseases like diabetes,
cardiovascular diseases, chronic pulmonary disease (COPD), allergies, anti-inflammatory
and anti-rheumatic. The rising healthcare drug expenditure is due to rising population
growth, sedentary lifestyle, increase life expectancy and escalating drug cost.

In January 2013, the government introduced a bill which proposes that pharmacists be
granted an exclusive right to dispense medicines. The bill is yet to be passed and still
waiting for public comment and consultation. With the escalation of healthcare cost, the
government is also proposing an equitable healthcare program for all through the National
Health Financing Scheme, the 1Care Program. If approved, these will change the
landscape of healthcare system in Malaysia which will see doctors playing a decreased
role in the selection of drug. Pharmacists influence will increase, and patients (payers) will
be able to make choices on factors such as price.

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Malaysia Pharmaceutical Industry

Business Monitor International (BMI) estimated, for 2012, the Malaysia pharmaceutical
market is worth RM 6.06 billion ( 189.4 billion). The market for prescription medicines
alone was valued at RM 4.39 billion (137.2 billion), of which the market shares for the
patented and generic drugs were 56% and 44% respectively. Almost all of Malaysias
pharmaceutical needs for patented and specialized drugs are imported, which is estimated
to account for more than 80% of the local pharmaceutical market (in value terms).

Malaysia pharmaceutical industry produces mainly generic drugs for local consumption
and for export. There are four broad categories of products that are manufactured
prescription medicines (RM 4.39 billion/( 137.2 billion), over the counter medicines (OTC)
(RM 1.67 billion/ 52.2 billion), herbal & health supplements (RM 1.0 billion/ 31.25 billion)
and traditional medicines. The industry manufactures most dosage forms.

According to the Drug Control Authority (DCA) of the Ministry of Health, as of October
2012, there are 259 manufacturing companies licensed by DCA comprising 182 traditional
medicine companies, 75 pharmaceutical companies and 3 veterinary product companies.

The Malaysian pharmaceutical manufacturers are represented by the Malaysia


Organisation of Pharmaceutical Industry (MOPI). MOPI has only 37 members because
not all manufacturing companies licensed by DCA are a member. MOPI estimated that
their members can produce 80% of the drugs on the Malaysian National Essential Drugs
Lists (NEDL). Collectively they are exporting to more than 50 countries with a modest
turnover of RM 484.6 million ( 15.1 billion). Among the key players in Malaysia are
Pharmaniaga Manufacturing Berhad, Chemical Company of Malaysia Berhad (CCM),
Hovid Berhad and Kotra Pharma (M) Sdn. Bhd.

MOPI estimated generic drugs prescription account for 70% (in unit terms) of the drugs
consumption in the country, and 44% in value terms due to the cost-effectiveness of the
generic medications. Generic drugs in Malaysia are more cost-effective than the innovator
product equivalent, usually 20-90% less expensive.

Malaysia is the pioneer and global leader in the manufacturing and certification of halal
medicines for export to other Muslim countries. The Chemical Company of Malaysia
(CCM) was the first pharmaceutical firm to be awarded a halal certification, mainly for OTC
products in January 2013.

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Malaysia biotechnology is at its infancy. The government is renewing its commitment in


the biotechnology industry. In the phase II (2010-2015) of its National Biotechnology
Policy, the government emphasizes biotech business aspects such as drug discovery,
new product development, technology acquisition and licensing. Malaysia Biotechnology
Corporation estimated that Malaysia attracted RM12.72 billion in biotechnology investment
in 2011-12, surpassing the target of RM9.0 billion. Local companies like CCM Duopharma
Biotech Berhad (CCMD), a subsidiary of CCM Berhad, and Kotra Pharma are actively
pursuing the development of biosimilar products through partnership and collaboration.

The pharmaceutical industry in Malaysia is one of the most open pharmaceutical markets
in ASEAN. This makes Malaysia an attractive destination for foreign direct investment as
a gateway to the ASEAN market (10 countries) of 500 million populations. Under the
ASEAN harmonization for pharmaceuticals, the respective countrys drug regulator is
working towards mutual recognition of GMP certification and drug registrations by 2020.

Pharmaceutical Inspection Convention & Pharmaceutical Inspection Co-operation


Scheme (PIC/s)

The National Pharmaceutical Control Bureau (NPCB) of the Ministry of Health Malaysia is
a member of the PIC/s. This means NPCB has the arrangements and competence
necessary to apply an inspection system at an international standard. NPCB scored a first
in the world to introduce electronic online product registration.

PIC/s mission is to lead the international development, implementation and maintenance


of harmonised Good Manufacturing Practice (GMP) standards and quality systems of
inspectorates in the field of medicinal products. There are 43 participating authorities,
including the United States Food and Drug Administration that joined recently.

Malaysia celebrated its 10th year anniversary as a member of the Pharmaceutical


Inspection Cooperation Scheme (PIC/s) in 2012. The standards required under this
scheme have necessitated massive investment by all members of MOPI to upgrade its
facilities. Up to 2012, only Singapore and Indonesia were members of PIC/s among
ASEAN countries. This leads to a disparity in the manufacturing cost-base among ASEAN
countries.

The Malaysias membership to PIC/s since 2002 has impacted the pharmaceutical
industry in more ways than one. First, the number of local pharmaceutical manufacturers
has dwindled from slightly more than 100 (prior to PIC/s admission) to 75 today. Second,
there was an approximate 44% decline in the number of Malaysia generics registration for
the 10-year post-PIC/s period. The higher standards of compliance to PIC/s caused delay
in Research & Development (R&D) and the closing down of smaller players.

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Since becoming a PIC/s member, Malaysia has become an increasing attractive


investment destination for multinational companies to seek partnership with Malaysia-
based pharmaceutical companies. The high GMP standards of PIC/s would allow
multinational companies to make Malaysia a manufacturing hub for the ASEAN region and
beyond. Yung Shin Pharmaceutical (Taiwan), B Braun (Germany) and Ranbaxy (India), to
name a few, have made Malaysia their manufacturing base for the region for many years.
In 2011, Taisho Pharmaceutical from Japan acquired HOE Pharmaceutical for its market
access to Malaysia and Asian markets.

The benefits of the higher standard of GMP have encouraged some of the multinational
pharmaceutical companies like Pfizer, GSK, Sanofi and Servier to seek collaboration with
the local pharmaceutical companies for contract manufacturing of their products in
Malaysia for the ASEAN region.

Pharmaceutical Technology

The local pharmaceutical industry invested heavily since Malaysia becoming PIC/s
member to keep up with the stringent GMP standard. The investments were necessary to
upgrade their research & development, investment in the latest technology and
automation.

In the last 5 years, there were a few major investment announcement made. Kotra
Pharma invested RM150 million ( 4.7 billion) in the state-of-the-art manufacturing
facilities, and an addition of RM60 million ( 1.9 billion) for the sterile injectable under the
EPP program. CCM invested RM 135 million ( 4.2 billion) expansions for its
pharmaceutical division.

In 2012, German pharmaceutical giant B.Braun announced its RM1.75 billion ( 54.7
billion) expansion plan in Malaysia to upgrade its research & development facilities,
automation and production technology.

Recently in 2013, Indian drug maker Ranbaxy announced it will invest USD35 million (1.1
billion) into a second new facility to manufacture generic drugs in Malaysia. In addition to
serve the local market, it will also export to the ASEAN markets, Middle East, Europe, Sri
Lanka, China and other countries.

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Refer to Appendix A for some of the cutting edge manufacturing technologies employed in
Malaysia. Photos courtesy from Kotra Pharma, taken from Kotra Pharma Technology
Centre.

Healthcare National Key Economic Areas Collaboration And Investment


Opportunities

The Malaysia Economic Transformation Program (ETP) was launched in 2010 with the
goal to elevate the country to developed-nation status by 2020, targeting Gross National
Income (GNI) per capita of USD 15,000 ( 1.5 million). The current income per capita is
only USD 10,662 ( 1.1 million). The ETPs targets for 2020 will be achieved through the
implementation of 12 National Key Economic Areas (NKEAs), representing economic
sectors which account for significant contributions to Gross National Income (GNI).

The healthcare sector is one of the 12 NKEAs identified by the government. The sector
growth has been robust over the past decade. This sector has one of the highest
multipliers in the economy in Malaysia. Changing demographics, a more affluent society
and more health-conscious lifestyle have let to the creation of a robust domestic industry.

The government aims to further grow this sector by encouraging more private investments,
through 13 Entry Point Projects (EPPs), in areas such as manufacturing of pharmaceutical
products, medical devices, clinical research, aged-care services and supporting
collaborative efforts between public and private healthcare providers. By 2020, the
Healthcare NKEA targets the sector to generate RM35.5 billion ( 1.1 trillion) in GNI and
create 181,000 new jobs.

The Healthcare NKEAs, through EPPs, provide ample opportunities for foreign direct
investment and collaboration with the local healthcare industry. Currently, the
manufacture of pharmaceuticals, biopharmaceuticals, nutraceuticals, microbials and
probiotics are eligible for Pioneer Status or Investments Tax Allowance incentives. The
development, testing and production of pharmaceuticals promoted under biotechnology
are eligible for High Technology Pioneer Status or Investments Tax Allowance incentives.
Refer to Malaysian Investment Development Authority (MIDA) for details
www.mida.gov.my.

Some of the successful EPPs announced were the collaboration between Hovid and
Winthrop (a subsidiary of Sanofi) to develop generic drugs, investment of Kotra Pharma
for sterile injectables, and investment of Biocon (India) at BioXcell, a custom-built
biotechnology park and ecosystem in Iskandar Malaysia.

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The key attractions of the Malaysian pharmaceutical market over the long term are the
governments encouragement of the biotechnology sector, its leading stance in the halal
pharmaceuticals sector and the country economic development. Furthermore, the
elimination of tariffs under the Japan-Malaysia Economic Partnership Agreement and the
consequent Free Trade Agreement (FTA) will serve to further boost trade between the two
countries. BMI rated Malaysia as the 8 th most attractive pharmaceutical market in the 18
countries surveyed in the Asia Pacific region, surpassing other ASEAN countries except
Singapore. Japan was ranked the most attractive in the region, followed by Australia and
South Korea.

Besides supportive government policies, Malaysia has an educated multilingual workforce,


and comprehensive system of vocational and industrial training. English is widely spoken
in Malaysia. It has a developed infrastructure with well-maintained highways, railways,
seaports and airports. There are fully developed industrial parks, including free industrial
zones, technology parks and Multimedia Super Corridor (MSC). Malaysia has a vibrant
business environment with well-developed financial and banking sector, including the
Labuan International Financial Exchange. Malaysia provides quality of life for expatriates
with modern housing, healthcare and medical facilities. For the family, there are Japanese
international schools for expatriates, and world-class recreational and sports facilities.

We look forward to seeing more Japanese pharmaceutical companies seeking


collaboration and investment in Malaysia.

Note about the authors:

Jimmy Piong
He is a pharmacist by training and has been working in the Malaysia pharmaceutical
industry for more than 30 years. He is the current executive council member of Malaysian
Organisation of Pharmaceutical Industry (MOPI). He is the Managing Director for Kotra
Pharma.

Cheah Ming Loong


He is a pharmacist by training and has been working in the Malaysia pharmaceutical
industry for close to 20 years. He is an active member of MOPI and Malaysian
Pharmaceutical Society (MPS). He is the General Manager for Kotra Pharma, Malaysia
and International markets.

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Appendix A: Kotra Pharma Technology Centre.

Figure 1: Sterile liquid manufacturing facilities. The Monoblock machine inspects for
vial leakages and foreign particles in the liquid vials.

Figure 2: Water treatment facilities. It uses double reverse osmosis and a triple
automated electrical deionisation system to produce United States Pharmacopeia (USP)
grade purified water. It becomes the source of water for distillation process to produce
Water for Injection (WFI).

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Figure 3: The dispensary system is managed through a computerized software system. It


ensures step-wise dispensing, accuracy and traceability.

Figure 4: High sheer mix granulator and fluid bed dryer are in a closed system to minimize
contamination to the external environment. Both utilize Clean in Place (CIP) systems
which allow validated cleaning automation. The fluid bed dryer incorporates stainless
steel filter-bag-system in the cleaning automation.

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References:

1. Ministry of Health Malaysia, Health Informatics Centre, Planning & Development


Division. Health Facts 2012 [11 November 2013] Available from:
http://www.moh.gov.my/images/gallery/stats/heal_fact/health_fact_2012_page_by_
page.pdf
2. Ministry of Health Malaysia, Pharmaceutical Services Division and Clinical
Research Centre. Malaysian Statistics On Medicine 2008 [12 November 2013]
Available from: http://www.pharmacy.gov.my/v2/sites/default/files/document-
upload/msom2008.pdf
3. WHO and Ministry of Health, Labour and Welfare, Japan. Health Service Delivery
Profile, Japan 2012 [11 November 2013] Available from:
http://www.wpro.who.int/health_services/service_delivery_profile_japan.pdf
4. Business Monitor International. Malaysia Pharmaceuticals & Healthcare Report Q2
2013.
5. Shafie AA, Hassali MA. Price comparison between innovator and generic medicines
sold by community pharmacies in the state of Penang, Malaysia. Journal of
Generic Medicines: The Business Journal for the Generic Medicines Sector.
2008;6(1):35-42.
6. Medical Tribune. Award to encourage raise quality-benchmark in Malaysian
pharmaceuticals [11 November 2013] Available from
http://www.mims.com/Malaysia/pub/topic/Medical%20Tribune/2013-
10/Award%20to%20encourage%20raise%20quality-
benchmark%20in%20Malaysian%20pharmaceuticals?q=Kotra%20Pharma
7. Stanton D. Ranbaxy To Invest $35 Million In Second Malaysian Facility [11
November 2013] Available from: http://www.in-
pharmatechnologist.com/Processing/Ranbaxy-to-Invest-35m-in-Second-Malaysian-
Facility
8. Achu C.Y. B. Braun Plans RM1.75b Expansion [11 November 2013] Available
from: http://www.investpenang.gov.my/portal/component/content/article/1-latest-
news/2021-b-braun-plans-rm175b-expansion.html
9. Chemical Company of Malaysia Berhad (CCM). CCM RM350 Million expansion
plan on track [11 November 2013] Available from:
http://www.ccmberhad.com/media_centre/press_arc.asp?intRecordID=133
10. Chemical Company of Malaysia Berhad (CCM). CCM Duopharma Biotech Berhad
To Commence Historic Phase III Clinical Trials For Treatment Of Kidney Failure In
Malaysia [11 November 2013]
http://www.ccmberhad.com/media_centre/press_newsDetails.asp?intRecordID=434
11. [11 November 2013] Available from:
http://www.taisho.co.jp/en/company/release/2011/2011040701-e.pdf
12. Taisho Pharmaceutical Company Ltd. Acquisition of Shares of Hoepharma
Holdings Sdn. Bhd [11 November 2013]
http://www.taisho.co.jp/en/company/release/2011/2011040701-e.pdf

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13. Economic Transformation Program [10 November 2013] Available from:


http://etp.pemandu.gov.my/About_ETP-@-Overview_of_ETP.aspx
14. Economic Transformation Program. Healthcare [10 November 2013] Available
from: http://etp.pemandu.gov.my/Healthcare-@-Healthcare.aspx
15. Economic Transformation Program. Focus On Healthy Growth In The Medical and
Biotech Sector [11 November 2013] Available from:
http://etp.pemandu.gov.my/upload/Inside%20Investor%20-%20Healthcare.pdf
16. Malaysia Investment Development Authority (MIDA). Guide On Pharmaceutical
Industry In Malaysia [13 November 2013] Available from:
http://www.mida.gov.my/env3/index.php?mact=Products,cntnt01,details,0&cntnt01p
roductid=51&cntnt01returnid=115

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