Malaysia Pharmaceuticals and Healthcare Report Q2 2008

Although Malaysia's pharmaceutical market is one of the fastest growing in Asia Pacific, BMI's Business Environment Ranking table for Q208 places the country is the joint eight place, alongside India, out of the 14 markets surveyed in the Asia Pacific region. Economic development, a fast-growing population and Association of South East Asian Nations (ASEAN) harmonisation initiatives are among the main drivers of forecast market growth over the coming years, with the total market expected to top US$1.82bn in value by 2012, increasing by around 11% per annum. One of the areas of rising pharmaceutical demand is anti-smoking drugs, as the authorities highlighted the need to tackle the cost of three main smoking-related diseases borne by the Malaysian public health services, which topped US$1bn for the year 2007.

However, low per capita spending and shortcomings of the country's intellectual property (IP) environment have resulted in a dynamic market for counterfeit medicines. Enforcement work is challenging, given the use of advanced technologies to avoid detection and demand for cheap medicines. Moreover, free trade agreement (FTA) negotiations with the US have recently run into difficulties over various issues, including compulsory licensing, which will further threaten the growth of the patented drugs sector.

Nevertheless, Malaysia boasts a strong local drugmaking industry, although its output mainly comprises basic generics. While Malaysian medicines have gained a strong reputation abroad, especially in neighbouring South East Asian countries, the market will remain dependent on imports for the supply of expensive patented medicines. In the meantime, BMI has revised its export forecast upwards to reflect the strong growth in exports in 2007. According to the Malaysia External Trade Development Corporation (Matrade), the value of medicines exported from Malaysia reached MYR678mn (US$212mn), which is significantly more than BMI's previous estimate of US$134mn. Exports have benefited from rising demand in Asia, the modest but sustained growth in the global economy, especially in the US, and the further opening of China's market following WTO entry, which led to a drop in import tariffs. The ongoing elimination of tariffs under the Japan- Malaysia Economic Partnership Agreement and the consequent FTA will serve to further boost trade between the two countries.

Consequently, the domestic industry will remain committed to increasing its presence in foreign markets.

Local companies are likely to use the growing trade links with the Middle Eastern Islamic markets for their halal medicines. Indeed, while pharmaceutical companies have been aware of this niche for some time, they have only recently begun explicitly targeting this growth area. Similarly, the government is aiming to promote the biotechnology industry in order to attract foreign investment, with the sector already showing dynamism.

Most recently, US-based biopharmaceutical company Emergent BioSolutions and government-owned Ninebio (9Bio) formed a joint venture in Malaysia for the production of biodefense biologics and vaccines.