Country Report: The Philippines - Pharmaceutical Executive

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Country Report: The Philippines


Pharmaceutical Executive


IN SEARCH OF A NICHE

While the biggest players are focusing on diversification, more nimble companies are looking for a niche in which to position themselves.

Multinationals such as Novo Nordisk and Lundbeck have chosen to focus on diabetes and central nervous system (CNS) diseases, respectively. They are prime examples of how specialization has led companies to achieve stronger positioning in the market. For instance, the vision of Lundbeck Philippines is "to become the world leader in psychiatry and neurology," while its mission is "to improve the quality of life for people suffering from psychiatric and neurologic disorders," says Joan Alvarez, country manager of Lundbeck Philippines. To achieve this result, the company has to overcome some challenges, namely the social stigmas surrounding CNS, and low patient compliance due to high medicine prices and a lack of reimbursement.

In the case of Lundbeck, specialization has proven a more successful strategy than diversification. In the words of Alvarez, "While everybody else is into diversification, we remain focused on CNS, which is believed to lead to the largest amount of debilitating disorder cases by the year 2020." In addition to a number of drugs that will be launched in the next three years, Lundbeck has recently signed an agreement with Teva Pharmaceutical Industries for the Parkinson's disease drug Azilect®, which will allow the company to further strengthen its position in the Philippines, and eventually become the preferred CNS provider in the industry.


Pioneering unibranded generics in the Philippines
A specialization strategy has also been adopted by some distributors. For example, Phoenix Pharmaceuticals specializes in distributing steroids, while GenAsia Biotech focuses on orphan drugs. For these distributors, specialization allows them to succeed in a market in which 85% of distribution is concentrated in the hands of the two leaders, Zuellig Pharma and Metro Drug—and where specialization is the best way to compete.

THE RISE OF GENERICS

While the Philippine pharmaceutical industry registered a negative growth in 2010, the generics segment has been growing steadily. Historically, generics have not been positively perceived, mainly because of lack of support from doctors. The Philippines is a prescription-driven market, where patients put utmost trust in their physicians—the doctors' non-endorsement of generics, derived from a limited promotional effort by the generics players, hampered the sector's development.

However, since 2001, the generics market has been on the rise, fuelled by the opening of The Generics Pharmacy—the first generics retail pharmacy—which started franchising in 2007. The company recorded impressive growth, expanding from one store in 2007, to more than 900 in 2010. Benjamin Liuson, president and founder of The Generics Pharmacy, believes that "the retail prices of generic medicines dropped in the Philippines because of The Generics Pharmacy. Thanks to our company, the market started following the law of supply and demand." With a forecast of 1,000 stores by the end of 2010, The Generics Pharmacy is now the chain with the highest number of outlets, overtaking the market leader Mercury Drug—which currently controls 60% of the market, but has 800 drugstores.

Amongst its target areas, The Generics Pharmacy is establishing stores in rural regions, supporting the development of pharmaceutical retailing in zones that were previously devoid of drug distribution. Historically, businesses in the industry have focused only on the three Philippine centers of Metro Manila, Cebu, and Davao. Only recently have companies started to see the potential of outlying areas of the country.

The increasing importance of the generics segment is confirmed by the number of new players that are entering the market. Sandoz, the generics arm of Swiss multinational Novartis, Pakistan's Getz Pharma, and the Taiwanese corporation OEP are amongst the fastest-growing companies in the Philippines. Several Indian generics players have also started operations in the country, including Torrent Pharma, Ranbaxy, and Lupin—the latter having acquired a 51% stake in the Philippine company Multicare Pharmaceuticals. However, Indian companies are facing additional challenges in entering the market as Filipinos are very brand conscious, and they prefer either Western (i.e. European and American) brands, or locally manufactured products.


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Source: Pharmaceutical Executive,
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