Life Sciences Cluster in Selangor (Part III:...

2015

Supporting Pharmaceutical Industry towards Operational Excellence As stated in the previous report “Life Sciences Cluster in Selangor (Part I: Healthcare Providers)”, private healthcare services have grown tremendously over the past decade. To further develop Malaysia’s healthcare infrastructure, Malaysian government is continually seeking for initiatives to enhance collaboration between public and private healthcare providers as well as encouraging more private investments in related industries such as medical devices (For more information, kindly refer to the Part II report), pharmaceutical products, clinical research, aged-care services etc. This part III report tackles a relatively young industry in Malaysia and also in Selangor - the pharmaceutical industry. As this industry is still in its early stage of development, continuous support from both government and private investment is needed to achieve pharmaceutical excellence.

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Life Sciences Cluster in Selangor (Part III: Pharmaceuticals)

Life Sciences Cluster in Selangor -‐ Part III: Pharmaceuticals -‐

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Report on Life Sciences Cluster in Selangor (Part III: Pharmaceuticals) - Summary 2014

Malaysia Selangor Rank in Malaysia Population (2013) 29.92 million 5.8 million 1 Average Annual Population Growth Rate (2013) 1.4% 1.6% 2

Average Life Expectancy (years) 74.8 (estimate) 75.7 (estimate) 4

GDP at constant 2005 Prices (2013, RM)

787,611 million (100%)

186,548 million (23.70%) 1

GDP Growth (2013) 4.7% 5.8% 3

Investment Volume (2013, RM) 52.1 billion (100%) 9.8 billion (18.8%) 2 Workforce (2013) 13.6 (100%) 2.90 (21.3%) 1 Percentage of Total

in Malaysia Pharmaceutical Sales in Malaysia (2012, USD) 1.6 billion NA NA

Pharmaceutical manufacturers registered under DCA 254 87 34%

Pharmaceutical wholesalers registered under DCA 1,028 190 18%

Pharmaceutical importers registered under DCA 377 181 48%

Incentives for Pharmaceuticals • Incentives for Manufacturing Companies • Incentives for High Technology Companies • Incentives for Strategic Projects • Incentives for Research & Development (R&D) • Incentives for Operational Headquarters (OHQ) • Incentives for International Procurement Centres (IPC) /

Regional Distribution Centres (RDC) • More details on page 21-23

Useful Contacts • Ministry of Health Malaysia: http://www.moh.gov.my • National Pharmaceutical Control Bureau (Drug Control

Authority): http://portal.bpfk.gov.my • Malaysian Organisation of Pharmaceutical Industries:

http://www.mopi.org.my/ • Pharmaceutical Association in Malaysia:

http://www.pharma.org.my/ • Ministry of International Trade and Industry:

http://www.miti.gov.my • Malaysian Investment Development Authority:

http://www.mida.gov.my • Economic Transformation Programme:

http://etp.pemandu.gov.my


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Table of Contents

1. Overview of the Pharmaceutical Industry ..................................................... 4

(1) The Global Pharmaceuticals Industry ......................................................... 5

(2) The Influence of Emerging Markets ............................................................ 8

(3) The Asian Pharmaceuticals Industry .......................................................... 9

2. The Industry Performance in Malaysia ....................................................... 10

(1) Key Industry Players ................................................................................. 11

(2) Regulating the Malaysian Pharmaceutical Industry .................................. 14

(3) Industry Associations ................................................................................ 16

3. Potential Driving Forces in Malaysia .......................................................... 17

(1) Growth Factors .......................................................................................... 17

(2) Emerging Trends ...................................................................................... 20

4. Incentives for Investments ......................................................................... 21

(1) Incentives for Manufacturing Companies .................................................. 21

(2) Incentives for High Technology Companies ............................................. 22

(3) Incentives for Strategic Projects ............................................................... 22

(4) Incentives for Research and Development (R&D) .................................... 22

(5) Incentives for Operational Headquarters (OHQ) ....................................... 22

(6) Incentives for International Procurement Centres (IPC) / Regional

Distribution Centres (RDC) ........................................................................ 23

(7) Other Incentives ........................................................................................ 23

5. Why Invest in Selangor? ............................................................................ 24

(1) Social and Demography ............................................................................ 26

(2) Strategic Location of Selangor .................................................................. 27

(3) Promising Local Customer Base ............................................................... 27

(4) Strong Supporting Industries .................................................................... 28

6. Main Sources ............................................................................................. 30


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1. Overview of the Pharmaceutical Industry Malaysia’s life sciences cluster has witnessed positive growth over the past decade. In particular, the healthcare sector has been categorised as one of the 12 National Key Economic Areas (NKEAs) under the Malaysian Government’s Economic Transformation Programme (ETP), which targets to generate RM35.3 billion in Gross National Income (GNI), RM17.2 billion new investment and create 181,000 new job opportunities by 2020. ETP has currently identified 17 Entry Point Projects (EPPs) for the healthcare sector. No EPPs Location Status

1 EPP 1: Mandating Private Insurance for Foreign Workers Nationwide

2 EPP 2: Creating Supportive Ecosystem to Grow Clinical

Research Nationwide

3 EPP 3: Malaysian Pharmaceuticals – Increasing Local Generic Manufacturing for Exports Nationwide

4 EPP 4: Reinvigorating Healthcare Travel Nationwide

5 EPP 5: Creating a Diagnostic Services Nexus Nationwide

6 EPP 6: Developing a Health Metropolis: A World-Class Campus for Healthcare and Bioscience Selangor

7 EPP 7: Upscale Malaysia’s In-Vitro Diagnostic (IVD)

Industry Nationwide

8 EPP 8: Build Malaysian Showcase on Next Generation of Core Single Use Device (SUD) Products Nationwide

9 EPP 9: Become the Hub for High-Value Medical Devices Contract Manufacturing Nationwide

10 EPP 10: Malaysian Clinical Device Champions Nationwide

11 EPP 11: Medical Equipment Supply Chain Orchestration Penang

12 EPP 12: High-Value Medical Devices Manufacturing Nationwide

13 EPP 13: Build Medical Hardware and Furniture Cluster Nationwide

14 EPP 14: Renal Products

15 EPP 15: Mobile Healthcare Services

16 EPP 16: Institutional Aged Care

17 EPP 17: Retirement Villages

Operational

Work in Progress

Not Started

Table 1: List of Healthcare EPPs, Source: Economic Transformation Programme website 2014


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To date, 40 project owners are expected to create 26,966 new jobs, generate an income of RM6.59 billion, as well as RM4.96 billion in new investments. Being a rather young industry in Malaysia, the pharmaceutical industry is still in its early stage of development. Despite the fact that most of the pharmaceutical products in Malaysia are currently imported, the pharmaceutical industry is becoming more and more important due to its high growth potential and domestic manufacturers are also catching up. The Malaysian government has also recognised this huge potential, Healthcare EPP 3 was specially assigned to pharmaceuticals and a supporting EPP 2 was initiated to grow clinical research (a supporting sector of pharmaceuticals).

The pharmaceutical industry in developed countries is seen to be a more integrated sector, which includes all major functions in the value chain such as research & development, manufacturing, sales & marketing, clinical trials and regulatory affairs. Although Malaysia currently still focus predominantly on manufacturing pharmaceutical products, it is slowly moving up the value chain.

(1) The Global Pharmaceuticals Industry

Note: (1) All sales are expressed in US dollars at constant exchange rates; (2) The growth markets include, in descending order of size, China, Brazil, Russia, India, Mexico, Turkey, Poland, Venezuela, Argentina, Indonesia, South Africa, Thailand, Romania, Egypt, Ukraine, Pakistan and Vietnam. (3) EU-Big 5 is France, Germany, Italy, Spain and United Kingdom Chart 1: The Global Pharmaceutical Market by 2020, Source: Business Monitor International, Pwc 2014

United States Canada EU-Big

5 Japan Growth markets ROW

Sales in 2011 337 27 205 127 205 183

Sales in 2020 425 31 194 149 499 273

0

100

200

300

400

500

600

US$ billions


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Forecasted Growth Rates (2014-2017) of Global Pharmaceutical Market: 2014 2015 2016 2017 4-6% 4-6% 5-7% 6-8%

Table 2: Forecasted Growth Rates of Global Pharmaceutical Market, Source: IMS Health Market Prognosis 2013 Regional Market Share Forecast (2017) for Global Pharmaceutical Market:

Note: 1. Based at ex-manufacturer price levels, not including rebates and discounts. Contains audited

and audited date. All compound annual growth rate (CAGR) based on five years. 2. EU5 include France, Germany, Italy, Spain and UK. 3. Pharmerging countries include Algeria, Argentina, Colombia, Egypt, Indonesia, Mexico,

Nigeria, Pakistan, Poland, Romania, Saudi Arabia, South Africa, Thailand, Turkey, Ukraine, Venezuela, and Vietnam.

Chart 2: Regional Market Share Forecast 2017, Source: IMS Market Prognosis 2013

With expected sales of USD 989 billion in 2013 (a year-on-year increase of 3-4%), the global pharmaceutical market is steadily growing. Taking into consideration growing emerging markets, it is believed that advanced research and development will continue to introduce new and innovative therapies to new markets all over the world. The forecasted future growth rates of the global pharmaceutical market are relatively promising and the market could reach $1.6 trillion by 2020. According to IMS Market Prognosis, by 2017, the US will be ranked No. 1 with 31% market share in the global pharmaceutical sector. Should traditional Chinese medicines been taken into consideration, China will enjoy a global market share of 15%, overtaking Japan (9% share) as the 2nd global pharmaceutical giant. However, if traditional Chinese medicines are excluded, Japan will still remain No. 2. The pharmaceutical markets of the EU5 will collectively represent a 13% share, while Brazil, Russia and India will hold 8% together. Pharmerging countries, on the other hand, are expected to hold a 10% market share.

31%

2%

15% 9%

13%

5%

8%

10%

7% US Canada China Japan EU5 Rest of Europe Brazil, Russia & India Pharmerging countries Rest of World


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Top 50 Pharmaceutical Companies in the World: Rank Company Country Rank Company Country

1 Johnson & Johnson

26 Actavis

2 Novartis

27 Biogen Idec

3 Roche

28 Mylan

4 Pfizer

29 Celgene

5 Sanofi

30 Allergan

6 Merck and Co

31 Eisai

7 GlaxoSmithKline 32 Servier 8 Bayer 33 Valeant Pharmaceuticals

9 Fresenius 34 CSL

10 AstraZeneca 35 Shire 11 Eli Lily

36 UCB

12 Abbott

37 Menarini 13 Boehringer Ingelheim 38 Chugai

14 Teva

39 Mitsubishi Tanabe

15 Abbvie

40 Hospira

16 Amgen

41 Dainippon Sumitomo

17 Takeda

42 Forest

18 Bristol-Myers Squibb

43 Kyowa Hakko Kirin

19 Novo Nordisk

44 Grifols

20 Baxter

45 Shionogi

21 Merck KGaA 46 Lundbeck

22 Otsuka

47 Aspen Pharmacare

23 Astellas

48 Endo Pharmaceuticals

24 Daiichi Sankyo

49 Sun Pharmaceuticals

25 Gilead Sciences

50 Purdue Pharma

19

4 10

2

1 1 2 2 2

1

1 1

1

1

1

1

Table 3: Top 50 Pharmaceutical Companies of 2014 (by 2013 revenues), Source: Current Partnering 2014


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“Big Pharma” is commonly used to represent the world’s vast and influential pharmaceutical industry as well as its trade and lobbying group. The top 50 pharmaceutical companies in the world control over three-quarter (USD 817.2 billion in 2013) of the global market, half of them have annual sales of more than USD 10 billion. Most of these top pharmaceutical companies spend approximately 10-20% of their revenue on research and development annually. (2) The Influence of Emerging Markets According to IMS Market Prognosis, emerging markets play an important role in influencing the growth of the global pharmaceutical industry. By 2017, it is forecasted that 50% of the pharmaceutical volume are from pharmerging markets, while the US and Europe will each only account for 13% respectively. Particularly, the BRIC countries (Brazil, Russia, India and China) will dominate the pharmerging market sales with a total share of 70% by 2017 and will continue to be an important engine of growth. On the other hand, Tier 3 pharmerging countries, as well as the so-called “frontier countries”, will also have certain contributions towards the growth of the global pharmaceutical industry. The list of “Frontier Countries” and their growth prospects are as shown below:

Expected △ sales increase 2012-2017 Country Pharma Sales

2012 CAGR*

2012-2017 Asia Pacific

$2.2 billion incremental

Philippines $3.0 billion 3.8%

Malaysia $1.6 billion 8.3%

Bangladesh $1.3 billion 10.4%

Latin America


Chile $2.3 billion 8.2%

Peru $1.5 billion 7.8%

Ecuador $1.3 billion 8.6%

East Europe


Kazakhstan $1.3 billion 10.3%

Middle East


Iran $2.6 billion 5.0%

U.A.E. $1.3 billion 8.9%

Lebanon $0.8 billion 6.6%


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Africa


Morocco $1.2 billion 4.5% Tunisia $0.8 billion 10.0% Ghana $0.8 billion 12.4% Kenya $0.5 billion 16.9%

Ethiopia $0.4 billion 10.0% * CAGR is compound annual growth rate. Bn is billion. At ex-manufacturer price levels. Table 4: The Pharmaceutical Sales and Growth Prospects of Frontier Countries, Source: IMS Health Market Prognosis 2013 The shift of pharmaceutical growth away from well-established drivers to high-potential pharmerging markets has provided great opportunities for pharmaceutical companies, in particular those that face high pressures in these established markets. As more and more pharmaceutical companies focus on fast growing emerging markets, these companies also face a number of challenges operating in the increasing complex, demanding and rapid changing environment. The traditional approaches for manufacturing and distribution may no longer be appropriate due to shorter market life cycles, outsourced production and increasing government regulations. (3) The Asian Pharmaceuticals Industry With increasing healthcare demand and comparatively low operating costs, Asia remains to be one of the attractive emerging markets for pharmaceutical companies. Moreover, Asia is evolving as a Research & Development (R&D) powerhouse for pharmaceutical products, due to its availability of large population, quality data, lower costs and skilled workforce. Hence, it is believed that global pharmaceutical companies will continually increase their presence in the region to exploit potential growth opportunities as well as to lower their production costs and improve efficiency. According to Achin Gupta, the senior vice president of corporate strategy of Glenmark Pharmaceuticals (Indian pharmaceutical company), most pharmaceutical companies are expecting a 15% growth in the Asian markets annually over the next 5-10 years.

Chart 3: Pharmaceutical Sales, Source: EIU, Epsicom & The Economist 2012


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2. The Industry Performance in Malaysia Over the past decade, the pharmaceutical industry in Malaysia has experienced steady growth and development. The industry is generally based on a strong domestic generic sector as well as imports of branded and patented medicines. With a population of approximately 30 million people only, the total healthcare expenditure of Malaysia is relatively promising, which achieved over USD 12 billion in 2013 and is expected to rise further to approximately USD 17 billion by 2015. Based on average estimation, every Malaysian spends more than USD 360 annually on healthcare. Hence, Malaysia is recognised as one of the key frontier countries for the pharmaceutical sector and has great market potentials (both domestic and exports) with a market growth rate of approximately 8% (as shown in Table 4). The value of the pharmaceutical market is expected to be above USD 2.3 billion by 2017. Besides, pharmaceutical companies also have great opportunities to develop resource-based biogeneric drugs, by capitalising on the diversified natural flora and fauna of Malaysia. Malaysia is a member of the Pharmaceutical Inspection Convention and Pharmaceutical Inspection Co-operation Scheme (PIC/S), indicating that the Malaysian pharmaceutical industry maintains high manufacturing standards. In the meantime, being a PIC/S member would also facilitate the exports of Malaysian pharmaceuticals to other member countries, including Europe, Australia and Canada. The types of pharmaceutical products manufactured in Malaysia can be mainly categorised into:

• Prescription • Over-the-counter (OTC) • Traditional medicines • Health and food Supplement

Note: Prescription medicines include patented and generic drugs, whereby the sales of such medicines shall confined to doctors and pharmacists only. The other categories, however, may be sold to the public by non-professional outlets. As at June 2012, Malaysia has a total of 254 pharmaceutical manufacturers licensed by the Drug Control Authority. Among these manufacturers, 77 are licensed to produce pharmaceuticals (including OTC and Veterinary), whereas another 177 are licensed to produce traditional medicines. Besides, there are 1028 wholesalers and 377 importers for pharmaceutical products in Malaysia.


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Chart 4: Type of pharmaceutical products produced by licensed manufacturers, Source: National Pharmaceutical Control Bureau 2012

As mentioned earlier, the Malaysian pharmaceutical industry is relatively young, thus most of the pharmaceuticals still have to be imported from developed countries. However, the domestic manufacturers are catching up and the industry possesses high capability to produce a large variety of pharmaceutical products, including sterile preparations, injections, capsules, time-release medications and powder form medications. Based on information published by MATRADE, the industry is currently able to produce nearly 80% of the various pharmaceutical categories in the Malaysian Essential Drug List (See more at: http://www.pharmacy.gov.my/v2/sites/default/files/document-upload/nedl-only-list-publish-website.pdf).

(1) Key Industry Players

Chart 5: Top Pharmaceutical Companies in Malaysia (2011/12), Source: IMS Health 2011

70%

20%

9%

1%

Traditional Medicines

Pharmaceuticals

OTC

Veterinary

Merck, Sharp & Dohme,

8.5%

Pfizer , 7.7%

Glaxosmithkline, 6.6%

Sanofi-Aventis, 5.2%

Novartis, 4.7%

Roche Pharma, 4.7%

Astrazeneca, 4.1%

Pharmaniaga, 3.1%

Abbott Pharma, 3.1%

Janssen Cilag, 2.4%

Idaman Pharma, 2.1%

Boehringer Ingelheim,

2.1%


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Company Company / Factory Location Growth Merck Sharp & Dohme (M) Sdn. Bhd.

Petaling Jaya (Selangor) 14.0%

Pfizer

Kuala Lumpur 5.1%

Glaxosmithkline Pharmaceutical Sdn. Bhd.

Petaling Jaya (Selangor) -11.6%

Sanofi-Aventis (M) Sdn. Bhd.

Petaling Jaya (Selangor)

8.4%

Novartis Corporation (M) Sdn. Bhd.


Roche (M) Sdn. Bhd.

Bandar Sunway (Selangor) 5.1%

AstraZeneca Sdn. Bhd.


Pharmaniaga Berhad

Headquarter: Shah Alam (Selangor)

Factory: Bandar Baru Bangi (Selangor)

2.8%

Abbott Laboratories (M) Sdn. Bhd.

Shah Alam (Selangor) 13.2%

Janssen Cilag


Idaman Pharma Manufacturing Sdn. Bhd.

Sungai Petani (Kedah) or Sri Iskandar (Johor)

12.4%

Boehringer Ingelheim

Kuala Lumpur 13.4%

Table 5: Top Pharmaceutical Companies in Malaysia (2011/12), Source: IMS Health 2011


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The list of “Top Pharmaceutical Companies in Malaysia 2011/12” is largely made up of big multi-national companies. The top 3 market leaders Merck Sharp & Dohme, Pfizer and Glaxosmithkline command a market share of 8.5%, 7.7% and 6.6%, respectively. Although multi-national companies such as Merck Sharp & Dohme, Boehringer Ingelheim, Bayer, Pfizer, Novartis, Eli Lilly and AstraZeneca are active in Malaysia, these companies often do not set up their manufacturing operations here, instead they are mainly licensed importers. This phenomenon is rather surprising, since Malaysia offers a far better legal framework and a stronger protection for intellectual property. As for Malaysian local manufacturers, Pharmaniaga and Idaman Pharma have a market share of 3.1% and 2.1%, respectively. In 2012, Idaman Pharma became a member of the Pharmaniaga Group, which could further enhance the Group’s manufacturing facilities, production capabilities and total market share. Other examples of key pharmaceutical companies are as follow:

Company Company / Factory Location

CCM Pharmaceuticals Sdn Bhd

Factory: Bandar Baru Bangi (Selangor) Marketing: Shah Alam (Selangor)

CCM Duopharma Biotech Bhd

Klang (Selangor)

Kotra Pharma (M) Sdn Bhd

Headquarter: Cheng Industrial Estate (Melaka);

Sales and Marketing: Petaling Jaya (Selangor)

Y.S.P. Industries (M) Sdn Bhd

Headquarter: Kuala Lumpur Factory: Kajang (Selangor)

Logistics: Kajang (Selangor)


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HOE Pharmaceuticals Sdn Bhd

Headquarter: Petaling Jaya (Selangor) Factory: Port Klang (Selangor)

Hovid Sdn Bhd

Ipoh (Perak)

Royce Pharma Manufacturing Sdn Bhd

Nilai (Negeri Sembilan)

Table 6: Other Key Industry Players, Source: MATRADE 2014

Observing the operating base of the above pharmaceutical companies in Malaysia, Selangor state, in particular, appears to be a preferred spot and successfully housed a number of large pharmaceutical companies, some of them even established manufacturing operations in the State. While certain parts of Northern and Southern Malaysia also host some pharmaceutical companies, most sales and representative offices are still located in the pulsating commercial hub of Selangor – Petaling Jaya. Selangor is considered to be the heart of healthcare, especially for the related manufacturing sectors.

(2) Regulating the Malaysian Pharmaceutical Industry

i. Regulatory Agencies

National Pharmaceutical Control Bureau

The National Pharmaceutical Control Bureau (NPCB) (formerly known as ‘National Pharmaceutical Control Laboratory’) is an organisation established under the Pharmaceutical Services Division of the Ministry of Health. The organisation is responsible to ensure the quality, efficacy and safety of the pharmaceutical products, traditional medicines and cosmetics marketed in Malaysia. Hence, NPCB undertakes most of the


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day-to-day regulatory implementation, monitoring and post-market surveillance.

A well-structured and comprehensive system is currently in place to handle the registration for pharmaceuticals (including traditional medicine) and the notification of cosmetic products, under the Control of Drugs and Cosmetics Regulations 1984. The introduction of these regulations in 1984 has lead to the establishment of the Drug Control Authority to regulate the Malaysian pharmaceutical industry. NPCB also acts as the secretariat to the Drug Control Authority.

Drug Control Authority

In Malaysia, the Drug Control Authority of the Ministry of Health is the main regulatory authority for the production, import and sales of pharmaceuticals (including traditional medicines). Hence, all manufacturers, importers and wholesalers for pharmaceutical products must obtain license from the Drug Control Authority in order to operate in Malaysia.

iii. Regulatory Acts

List of Regulatory Acts

1.0 Poisons Act 1952 (Revised 1989) 1.1 Poisons Regulations 1952 1.2 Poisons (Sodium Hydroxide) Regulations 1962 1.3 Poisons (Exemption) (Sabah and Sarawak) Regulations 1978 1.4 Poisons (Exemption) Regulations 1980 1.5 Poisons (Fees) Regulations 1983 1.6 Poisons (Psychotropic Substances) Regulations 1989 2.0 Dangerous Drugs Act 1952 (Revised 1980) 2.1 Dangerous Drugs Regulations 1952 2.2 Dangerous Drugs (Hospitals, Etc.) (General Exemption) Order 1952 3.0 Registration of Pharmacists Act 1951 (Revised 1989) 3.1 Registration of Pharmacists Regulations 1953 4.0 Sale of Drugs Act 1952 (Revised 1989) 4.1 Sale of Food and Drugs (Cosmetic) Regulations 1977 4.2 Sale of Food and Drugs (Clioquinol) Regulations 1982 4.3 Sale of Food and Drugs (Margosa Oil) Regulations 1985 4.4 Control of Drugs and Cosmetic Regulations 1984 5.0 Medicines (Advertisement and Sale) Act 1956 (Revised 1983) 5.1 Medicine Advertisements Board Regulations 1976 6.0 Indecent Advertisement Act 1953 (Revised 1981) 7.0 Trade Descriptions Act 1972 8.0 Weights and Measures Act 1972


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9.0 Patent Act 1983 Any other relevant Acts.

Table 7: List of Regulatory Acts

Due to pharmaceutical patent issues, a paper was presented to the Cabinet in November 2013. The paper recommended amendments to the Patent Act for the pharmaceutical industry in Malaysia based on a study conducted by the International Centre of Law and Legal Studies (I-CeLLs) – “Patent Law and Regime in Malaysia”. The government has agreed to review the recommendations and make necessary adjustments to the Patent Act by August 2014.

(3) Industry Associations

i. Malaysian Organisation of Pharmaceutical Industries

(MOPI)

Eight local, foreign and joint venture companies involved in the manufacture of pharmaceutical products have established the Malaysian Organisation of Pharmaceutical Industries (MOPI) on 1981. MOPI membership is only open to pharmaceutical manufacturers licensed by the Drug Control Authority. All Associate Membership categories are also available on application.

The number of MOPI memberships issued has increased from the initial 8 members to the current 41 members, which includes all major pharmaceutical manufacturers in Malaysia. The MOPI members collectively fulfil approximately 35% of the Malaysian medicine requirements.

With reference to the chart below, most MOPI members are located in Klang Valley (41%), whereby 24% are specifically located in Selangor.

Chart 6: MOPI members by State, Source: MOPI 2014

24%

10%

3% 3% 17% 10%

5%

2%

22%

2% 2%

Selangor Johor Kedah Kelantan Kuala Lumpur Melaka Negeri Sembilan Pahang


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iii. Pharmaceutical Association of Malaysia (PhAMA)

The Pharmaceutical Association of Malaysia (PhAMA) was registered in 1972. The Association is affiliated to the International Federation of Pharmaceutical Manufacturers & Association (IFPHMA) and also World Self-Medication Industry (WSMI).

PhAMA represents the interests of 44 member companies all from Klang Valley, which comprise of importers, distributors and manufacturers of medicines. Referring to Chart 7, 23% are specifically located in Selangor.

Chart 7: PhAMA members in Klang Valley, Source: PhAMA 2014

3. Potential Driving Forces in Malaysia (1) Growth Factors

i. ASEAN Harmonisation Efforts for Pharmaceuticals Efforts toward harmonisation of ASEAN pharmaceutical regulations were initiated in 1992 through the ASEAN Consultative Committee for Standards and Quality (ACCSQ). The Pharmaceutical Product Working Group of ACCSQ is responsible to develop harmonisation schemes of pharmaceuticals’ regulations of the ASEAN member countries to complement and facilitate the objective of ASEAN Free Trade Area, particularly, the elimination of technical barriers to trade posed by these regulations, without compromising on drug quality, safety and efficacy.

77%

23%

Selangor Kuala Lumpur


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ii. Increasing Demand The demand for pharmaceuticals continues to rise, not only from the overseas markets, but the domestic markets as well. The prevalence of various diseases, increasing healthcare needs and an ageing population are important factors that safeguard a steady growth for the pharmaceutical industry.

(i) Ageing Population Life expectancy has jumped nearly 20 years over the past 50 years. The worldwide demographics are increasingly moving towards older population: between 2000-2050, population aged over 60 years in developed regions will grow from less than 20% to 34%, while the proportion of children aged under 15 years is set to decline by 2% from 18%. Same applies to Malaysia, the country will be classified as an ageing nation with at least 10% of its population aged 60 years and above by 2020 compared to the current 6%; by 2030, the population aged 60 years and above will further increased to at least 15%. As such, Selangor being the state with the most population will certainly face aging issues in the near future. Generally, elderly requires more healthcare services. This demographic shift is an assurance for the pharmaceuticals industry of increasing market demand. (ii) Urbanisation & Changes in Lifestyle According to Frost & Sullivan, approximately 2.6 million people are expected to move from rural areas to urban areas in Malaysia between 2013 and 2018. Increasing urbanisation is accompanied by growing consumer awareness, expanding of middle class population and changes in lifestyle, thus resulting in a greater demand for improved healthcare services. Although urbanisation is already very much accomplished in Selangor (91.4% in 2010), increasing construction activities and Malaysian’s leaving their villages for the convenience of an urban life-style within the state indicate that urbanisation is still an on-going process.

Furthermore, the availability of modern infrastructure encourages an unhealthy lifestyle among the society, which increases the risk of acquiring chronic diseases. According to “Statistics on Causes of Death” prepared by Department of Statistics Malaysia, heart diseases, pneumonia, diabetes, stroke, cancer, respiratory diseases, hypertension and kidney


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diseases are some of the main causes of death in Malaysia. Increased life-style diseases have led to the rising demand for pharmaceutical products. Undeniable, lifestyle diseases are also global issues. Thus, provide Malaysia a long-term opportunity for pharmaceuticals exports as well. (iii) Increasing Number of Healthcare Providers Malaysia operates under a two-tier healthcare system, consisting of a government-run universal healthcare system (public sector) and a co-existing private healthcare system (private sector). Based on “Health Facts 2014” published by MoH, as at 31 December 2013, Malaysia has a total number of 363 hospitals (2012: 356), which comprises of 149 (2012: 147) public hospitals and 214 (2012: 209) private hospitals. Both the public and private healthcare sectors are still gradually expanding in terms of number of hospitals, with an annual growth rate of 1.36% and 2.39%, respectively. Therefore, the increasing number of healthcare providers provides a growing customer base for the Malaysian pharmaceuticals industry.

iii. Government Support Under the NKEA, the Malaysian government has also recognised the huge potential in pharmaceuticals industry and specially designed Healthcare EPP 3 to boost pharmaceuticals growth, as well as another supporting EPP 2 to improve clinical research in Malaysia (a supporting sector of pharmaceuticals). Besides, the Malaysian government also provides Pioneer Status and Investment Tax Allowance incentives for local manufacture of pharmaceuticals and related products, including intravenous dialysis solutions, vaccines and medicaments. For more information in regard to incentives, kindly refer to the Chapter 4 of this report. iv. Supporting Industry: Natural Haven for Clinical

Research Compared to other countries, Malaysia has the natural advantage to become the centre for clinical research due to its multiracial composition, relatively low research costs, good infrastructure and the availability of trial participants. Moreover, the corporatisation of Clinical Research Malaysia (CRM), a unit under the Clinical Research Centre of the Ministry of Health, enables the


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company to efficiently perform its role as a business unit in working closely with the pharmaceutical industry to bring industry-sponsored clinical trials into the country.

(2) Emerging Trends i. The Development of Halal Pharmaceutical Market According to “PhAMA Industry Fact Book 2012”, more than 20% of the world’s population is Muslim and accounts for a halal pharmaceutical market worth more than US$ 650 billion. Malaysia is a leader in the international halal trade and has obtained global recognition in terms of its halal accreditation, certification and other halal services. Hence, the country is well positioned to benefit from the growing global demand for halal-certified pharmaceutical products. The Malaysian government has also introduced general guidelines in the manufacturing and handling of halal pharmaceuticals, which serves as a basic requirement for Malaysian industry players. ii. Great Potential for Biologics and Biogenerics Drugs More and more drugs have been produced using bioactive compounds from plants and animals over the past few decades. Compared to chemical drugs, these biologic drugs offer better treatment options for patients suffering in cancer, AIDs, Alzheimer or other life-threatening illness.

Due to the unique characteristic of all natural compounds, it is relatively challenging to seek for the perfect natural mixture in producing biologic drugs. Besides, biological compounds are highly sensitive to the manufacturing environment, such as temperature, light and pollutants. Despite biologic drugs are sold more expensive than purely chemical therapeutics, such drugs are difficult and more complex to produce. Hence, the biogenerics sector seems to be more attractive. Given the biodiversity nature in Malaysia and the huge untapped potentials in the Malaysian biogenerics sector, industry players may slowly start to explore opportunities in developing resource-based biogeneric drugs.


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iii. Health and Food Supplements The health and food supplement sector complements the pharmaceutical sector by improving the general health and well-being of Malaysians. Over the years, increasing disposable income and rising health concerns has led to growing consumption in health and food supplements in Malaysia. In addition, Malaysia manufacturers also export health and food supplements to a number of countries, such as Singapore, Vietnam, Brunei, Hong Kong, Taiwan, India, Japan, Germany etc. 4. Incentives for Investments The manufacturer of pharmaceuticals and related product is categorised as “promoted activities” or “promoted products”. The list of promoted activities and products available in MIDA website at www.mida.gov.my. Some of major tax incentives available for the pharmaceutical industry are as follows: • Incentives for Manufacturing Companies • Incentives for High Technology Companies • Incentives for Strategic Projects • Incentives for Research & Development (R&D) • Incentives for Operational Headquarters (OHQ) • Incentives for International Procurement Centres (IPC) / Regional

Distribution Centres (RDC) • Other incentives

(1) Incentives for Manufacturing Companies • Pioneer Status with income tax exemption of 70% or 100% on statutory

income for a period of 5 years, or • Investment Tax Allowance (ITA) of 60% or 100% on qualifying capital

expenditure incurred for a period of 5 years, or • Reinvestment Allowance (RA) of 60% on qualifying capital expenditure

(to be offset against 70% or 100% of statutory income) for 15 consecutive years.


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(2) Incentives for High Technology Companies • Pioneer Status with full income tax exemption on statutory income for 5

years, or • ITA of 60% on qualifying capital expenditure for 5 years to be offset

against 100% of statutory income. (3) Incentives for Strategic Projects

• Pioneer Status with full income tax exemption on statutory income for

10 years, or • ITA of 100% on qualifying capital expenditure for 5 years to be offset

against 100% of statutory income. (4) Incentives for Research and Development (R&D) i. Contract R&D Company • Pioneer Status with 100% income tax exemption on statutory income

for 5 years, or • ITA of 100% on qualifying capital expenditure for 10 years to be offset

against 70% of statutory income. ii. R&D Company ITA of 100% on qualifying capital expenditure for 10 years to be offset against 70% of statutory income. iii. In-house Research Investment Tax Allowance of 50% on qualifying capital expenditure for 10 years to be offset against 70% of statutory income. (5) Incentives for Operational Headquarters (OHQ) • 100% income tax exemption for a period of 10 years for income

derived from business, interest and royalties. • Dividends paid from the exempt income will be exempted from tax. • The income generated by an OHQ company in providing qualifying

services to its related companies in Malaysia will not be taxed during its


23

tax-exempt period, provided such income does not exceed 20% of its overall income derived by providing qualifying services.

• Expatriates working in OHQ companies are taxed only on the portion of their chargeable income attributable to the number of days that they are in Malaysia.

• Import duty and sales tax exemption. (6) Incentives for International Procurement Centres (IPC)

/ Regional Distribution Centres (RDC) • Full tax exemption of statutory income for 10 years. • Dividends paid from the exempt income will be exempted from tax in

the hands of shareholders. • Expatriates working in IPC/RDC companies are taxed only on the

portion of their chargeable income attributable to the number of days that they are in Malaysia

(7) Other Incentives i. Incentives for Export • Double Deduction for the Promotion of Export • Single Deduction for the Promotion of Export • Double Deduction on Export Credit Insurance Premium • Special Industrial Building Allowance for Warehouses • Double Deduction on Freight Charges • Incentive for the Implementation of RosettaNet • Double Deduction for the Promotion of Malaysian Brand Names ii. General Incentives • Exemption from Import Duty on Raw Materials/Components • Exemption from Import Duty and Sales Tax on Machinery/Equipment,

Spare Parts and Consumables


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5. Why Invest in Selangor?

Picture 1: Key Benefits to Invest in Selangor, Source: Invest Selangor 2015 This section will analyse the Selangor pharmaceutical industry structure with reference to the list of manufacturers, wholesalers and importers provided by Drug Control Authority (DCA). By 8 June 2012, DCA recorded a total number of 254 manufacturers, 1,028 wholesalers and 377 importers of pharmaceutical products in Malaysia. Out of which most of the manufacturers, wholesalers and importers are located in Selangor.

Chart 8: Share of Manufacturers of Pharmaceutical Products by State, Source: DCA 2012

Johor 13% Kedah

9%

Kelantan 3%

Melaka 6%

Negeri Sembilan 3% Pahang

1% Perak 9%

Perlis 0%

Pulau Pinang 11%

Sabah 0%

Sarawak 3%

Selangor 34%

Terengganu 1%

Kuala Lumpur 6% Putrajaya

0% Labuan 0%

Manufacturer


25

Chart 9: Share of Wholesalers of Pharmaceutical Products by State, Source: DCA 2012

Chart 10: Share of Importers of Pharmaceutical Products by State, Source: DCA 2012

8% 5% 5%

4%

3% 3%

10%

0% 8% 15%

15%

18%

3%

2% 0%

0%

Wholesalers Johor Kedah Kelantan Melaka Negeri Sembilan Pahang Perak Perlis Pulau Pinang Sabah Sarawak Selangor Terengganu Kuala Lumpur Putrajaya Labuan

5%

1% 0% 1% 0% 0% 3% 0%

7% 1%

2%

48%

0%

31%

0% 0%

Importers Johor Kedah Kelantan Melaka Negeri Sembilan Pahang Perak Perlis Pulau Pinang Sabah Sarawak Selangor Terengganu Kuala Lumpur Putrajaya Labuan


26

In regard to the manufacturers of pharmaceutical products in Selangor, most of the manufacturers still focus more on producing traditional medicine, which somehow reflects the national composition.

Chart 11: Type of Pharmaceutical Products Manufacturers in Selangor, Source: DCA 2012 (1) Social and Demography

Selangor being the most populous state with 5.8 million citizens and furthermore bordering the Federal Territories of Kuala Lumpur (1.7 million) and Putrajaya (0.1 million), the healthcare sector in Selangor serves the highest population in Malaysia.

Picture 2: Population density by state, Malaysia, 2010, Source: Department of Statistics Malaysia

68%

25%

6%

1%

Traditional Pharmaceutical OTC Veterinary


27

According to 2010 statistics by Department of Statistics Malaysia, apart from the “city-states” Kuala Lumpur and Putrajaya with a 100% urbanisation, Selangor (91.4%) is known for the highest degree of urbanisation in a territorial state. As mentioned earlier, 2.6 million people are expected to move from rural areas to urban areas in Malaysia between 2013 and 2018, for which Selangor with its vast economy and proximity to the commercial hub of Kuala Lumpur will be a main focus area.

In terms of healthcare, the region is experiencing typical challenges such as aging population, busy lifestyle, increasing lifestyle diseases, which will continuously increase the demand for medical devices. (2) Strategic Location of Selangor ASEAN Economic Community and further agreements on investment policies such as ACIA will standardise requirements to enter neighbouring markets, for both trade and investment. In addition, ASEAN is also highly promoting harmonisation of the standards within the 10-member countries region to complement and facilitate the objective of ASEAN Free Trade Area (AFTA). Consequently, Selangor being strategically located in the heart of Malaysia and ASEAN offers easy and convenient access to all regional market. Selangor can be a springboard and regional hub due to a stable political environment, excellent infrastructure and well-educated multi-lingual workforce. Selangor also offers the best logistics facilities in Malaysia by housing Malaysia’s largest port (Port Klang) and two major airports (Kuala Lumpur International Airport (KLIA) and Sultan Abdul Aziz Shah Airport or Subang Skypark).

(3) Promising Local Customer Base The increasing number of hospitals in Malaysia provides a growing local customer base for the pharmaceuticals industry. In Malaysia, majority of the hospitals are concentrated in Selangor, Johor, Federal Territories of Kuala Lumpur and Putrajaya. In short, Selangor in close proximity to Kuala Lumpur and Putrajaya simply means that it caters to the demand of most hospitals in Malaysia for all kinds of pharmaceutical products.


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(4) Strong Supporting Industries i. Education and Training Industries Selangor has more than 130 institutions of higher learning producing a large amount of graduates in different fields every year. The Pharmacy Board Malaysia has recognised 19 institutions of higher learning offering pharmacy courses, of which more than 50% is located in Selangor. To further address and service human capital needs of the investors, MIDA established an Industry Talent Management Division in January 2013. Bil Higher Learning Institution Location 1 Universiti Sains Malaysia Penang 2 Universiti Kebangsaan Malaysia Selangor 3 Universiti Malaya Kuala Lumpur 4 Universiti Teknologi MARA Selangor 5 Universiti Islam Antarabangsa Malaysia Kuala Lumpur 6 UCSI University Kuala Lumpur 7 International Medical University Kuala Lumpur 8 AIMST University Kedah 9 University Nottingham Malaysia Campus Selangor

10 Cyberjaya University College of Medical Sciences Selangor 11 Asia Metropolitan University Selangor 12 Management & Science University Selangor 13 SEGI University College Selangor 14 Monash University Malaysia Campus Selangor 15 MAHSA University Kuala Lumpur 16 Taylor’s University Selangor 17 Lincoln University College Selangor 18 Universiti Kuala Lumpur – Royal College of

Medicine Perak Perak

19 KPJ Healthcare University College Negeri Sembilan Table 8: List of Higher Learning Institutions Offering Pharmacy Courses, Source: MQA 2014 ii. Clinical Trials and Bioequivalence Centres The Clinical Research Centre (CRC) in Malaysia comprises a network of 17 centres, which serves as a one-stop-centre providing single point of contact to access all Ministry of Health hospitals and clinics in conducting clinical trials within the country. These clinical trial centres have linkages to more than 50 general and district hospitals, as well as more than 100 health clinics, which


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are potential sites for clinical trials. Besides, these clinical trial centres have access to 550 clinical investigators and 17 million patients from different therapeutic areas in the Malaysian public healthcare system. On the other hand, the Malaysian private healthcare sector consists a number of private entities which involve in clinical trials as below: Bil Clinical Trial Centres (Private) Location 1 Infokinetics Research Centre Sdn Bhd (also

bioequivalence centre) Penang

2 International Medical University Kuala Lumpur 3 University Malaya Medical Centre (also

bioequivalence centre) Kuala Lumpur

4 NCI Hospital Negeri Sembilan 5 Universiti Kebangsaan Malaysia Medical Centre Kuala Lumpur 6 Hospital Universiti Sains Malaysia (also

bioequivalence centre) Kelantan

7 Sunway Medical Centre Selangor 8 Universiti Teknologi Mara, Selayang and Sungai

Buloh Selangor

9 Mahkota Medical Centre Melaka 10 Lam Wah Ee Hospital Penang 11 Mount Miriam Cancer Hospital Penang 12 Gleneagles Medical Centre Kuala Lumpur 13 Columbia Asia Medical Centre Selangor & Others 14 Island Hospital Penang 15 Penang Adventis Hospital Penang 16 Pantai Hospital Penang Penang 17 Loh Guan Lye Specialist Centre Penang 18 Monash University Sunway Campus & Johor

Bahru Campus Selangor & Johor


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6. Main Sources l Ministry of Health Malaysia: http://www.moh.gov.my l National Pharmaceutical Control Bureau (Drug Control Authority):

http://portal.bpfk.gov.my l Malaysian Organisation of Pharmaceutical Industries:

http://www.mopi.org.my l Pharmaceutical Association of Malaysia: http://www.pharma.org.my l Ministry of International Trade and Industry: http://www.miti.gov.my l Malaysian Investment Development Authority: http://www.mida.gov.my l Malaysia External Trade Development Corporation:

http://www.matrade.gov.my/ l Economic Transformation Programme: http://etp.pemandu.gov.my l Department of Statistics Malaysia: http://www.statistics.gov.my l Malaysian Qualifications Agency: http://www.mqa.gov.my/ l Clinical Research Centre: http://www.crc.gov.my l Malaysian-German Chamber of Commerce and Industry:

http://www.malaysia.ahk.de/ l PwC: http://www.pwc.com/ l IMS Health: http://www.imshealth.com/ l Current Partnering: http://www.currentpartnering.com/ l MDDI Online: http://www.mddionline.com/ l Frost & Sullivan: http://www.frost.com l Pharmaniaga: http://www.pharmaniaga.com/ l The Economist: http://www.economistinsights.com/ l Asian Journal of Pharmaceutical Sciences and Research:

http://www.ordonearresearchlibrary.com/ l BERNAMA: http://www.bernama.com l The Star Online: http://www.thestar.com.my

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