THE QUEST FOR VALUE & VOLUME, AND MORE
"The revival of the Universal Healthcare Scheme as proposed by the newly elected government will create a big opportunity
for the local industry volume-wise," said Chernporn Tenganmuay, president of the Thai Pharmaceutical Manufacturers Association
(TPMA). "There have been many government tenders, and over the last 5 years, local manufacturers have been growing very fast.
As a result, as they can produce drugs much cheaper than competing MNCs. Thanks to the tendering system, the market can shift
in favor of any company that gives the lowest price."
Still, the fight can no longer be won just on price. "It is safe to say that half of the current 140 manufacturers will not
be around anymore in a couple of years," said Wisanu Assawes, managing director of A.N.B., a manufacturer just acquired by
the Bangkok Hospital Group, owner of some of Thailand's biggest and most modern hospitals. "The reason is that a company that
sells less than 80 million Baht (USD 2.53 million) per year cannot stay on; they do not have the cash to improve and upgrade
Thai manufacturers over the past years have been hesitant to make the required investments in quality, a doubt underpinned
by uncertainty about whether the investment would pay off in a volume-driven market. But those that decided to invest early
on are reaping the benefits today. A prime example of such a company is Biolab, currently the number three domestic producer.
Rachod Thakolsri, managing director, Biolab
"The issue in Thailand is that 80 percent of the market is for the government hospitals, and their procurement method is solely
based on price," owner and managing director Rachod Thakolsri explained. "Whether or not to pursue membership of Pharmaceutical
Inspection Cooperation Scheme (PIC/S) is a tough decision, because it also means that we have to increase our cost, which
influences our competitiveness."
Prakarn Kunothai, country manager, Great Eastern Drug
The decision, however, has paid off for Biolab, with the company growing its market share with its high-quality generics,
while engaging in contract manufacturing for companies like Pfizer. Adhering to PIC/S is not only an advantage in the national
arena, said Thakolsri.
"This is a strategic time to invest in PIC/S, because in two or three years the picture might look very different. Japan,
for instance, announced that it will increase its budget for generic products from 17 percent to 30 percent, and in Korea
we see similar developments. That is why producers from these countries come to us: even if they want to produce generics,
they cannot do so at low cost."
Hospital channel growth declines as a result of the cost containment measures
In an environment where prices plummet while demand for quality increases, Thai manufacturers have to find a perfect balance
between the two. Beyond this balance, investing in brand recognition and company image becomes increasingly important—especially
in order to compete against the MNCs' branded generics. Great Eastern Drug (GED), part of leading Filipino manufacturer Unilab,
saw its business in Thailand grow 100 percent over the past 5 years.
GPO MBP Manufacturing Facilities
"We have been optimizing our portfolio and have developed new initiatives in a move away from generics, which led to annual
double digit growth," said Prakarn Kunothai, GED country manager. The main growth driver has been our flagship brand Decolgen,
a cold pill. Through rebranding and changes in marketing strategy has been performing remarkably well."
Kitima Yuthavong, CEO, PReMA
While branding led GED sales to soar in the Over the Counter (OTC) channel, the medical channel with its fixation on price
asked for another approach. "In the medical channel we have one core research product, a calcium channel blocker. Rather than
go into the areas where we would meet competition from big pharma such as Sanofi and Novartis, we have developed our calcium
channel blocker in a unique niche position," notes Kunothai.
Invida Finds the Cure
Even the Government Pharmaceutical Organization (GPO), which has fostered a very strong protected position in the hospital
channel for decades, is changing its ways. By 2015, it will have to give up its protected position as part of the regulation
that accompanies the AEC, and the company plans to expand into the ASEAN region. "This region is of interest to us, but it
also is to India, China, and big multinationals such as Pfizer and Bayer," said Dr. Witit Artavatkun, managing director of
the GPO. "We are currently in the process of developing an appropriate strategy."