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With spending on healthcare increasing in Malaysia, access to innovative drugs remains a challenge as the country juggles its dual public-private health system.
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Over the last decade, the Malaysian pharma sector has grown at a rate of between eight and ten percent per year, faster than the country's GDP over the same period. The latest WHO data for Malaysia puts spending on healthcare at four percent of GDP in 2012, lower than many developed countries but the second highest expenditure per capita in the ASEAN region. This spending is set to increase as the Malaysian government is aiming for universal coverage. At the same time, in 2010, healthcare has been identified as one of ten National Key Economic Areas (NKEAs) with the ambition that a growing healthcare sector will help advance Malaysia into a high-income nation by 2020.
Credits: Ong Yong Da, 17. Ong has limited speech, yet is armed with a cheerful smile. He participates in many exhibitions locally and internationally in the "Special Artist" category. Courtesy: Deloitte Malaysia
According to Tan Sri Dato' Seri Dr. Robaayah Zambahari, chief executive director of the IJN National Heart Institute, one of the main roles of the healthcare NKEA is to encourage further private investment in Malaysian healthcare: "While the local industry has been dominated by the public healthcare sector, over the past decade, there has been tremendous growth of private healthcare services. As such, the government, through the healthcare NKEA, aims to further grow this sector by encouraging more private investments 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."
Partnering for Malaysia's success
The private sector currently accounts for 45 percent of Malaysia's total spending on healthcare. But the dual healthcare system currently in place is having an impact on access, according to Yew Wei-Tarng, President of PhAMA, Malaysia's association for innovators: "One of the main challenges is market access or the timely access of innovative drugs to patients. In Malaysia, 60 to 70 percent of patients go to public hospitals; so if the drug is not listed in public hospitals, the patient does not get access to these innovative drugs."
Dato' Dr. Noor Hisham, Director General of Health, Ministry of Health
This dual system may not be sustainable for much longer. "There are concerns in terms of financing the system and whether we should maintain our current dual public-private system," explains Dato' Dr. Noor Hisham, director general of health at the Ministry of Health. "We know for sure that in the long run our current system is not sustainable."
Increased collaborative efforts between public and private healthcare providers will be a great source of growth for the pharma sector, according to Zarif Munir, partner and managing director of Boston Consulting Group Malaysia. "As companies who provide private healthcare insurance start to see the logic of partnerships with hospitals and pharmaceutical companies, it's only going to increase the willingness of the consumers to buy branded and innovative products. This is what makes Malaysia a very attractive market for originators who have innovative solutions."
Leah Goodman, Managing Director, Sanofi Malaysia, Singapore and Brunei
How successful has the healthcare NKEA been so far? "The NKEA has transformed the Malaysian healthcare sector, bringing a set of opportunities for many stakeholders," opines the president of PhAMA. However, he believes more needs to be done in order to increase the effectiveness of the NKEA. "In order to boost EPP 2 and 3 we need to have the right incentives in place, which have not been present so far. This means better tax incentives, faster regulatory approval and innovative medicine funding."
Tan Sri Dato' Seri Dr. Robaayah Zambahari, Chief Executive Director, IJN National Heart Institute
But so far, the concrete investments that have come as a result of the NKEA have been impressive, as Dato' Azman Mahmud, CEO of the Malaysian Investment Development Authority, explains: "Based on MIDA's Investment Performance Report, investment in the pharmaceutical industry (2011-2013) under EPP 3 was USD 340 million with domestic investment of USD 164 million (46.9 percent) and foreign investment of USD 176 million (53.1 percent)."
Dato' Azman Mahmud, CEO, Malaysian Investment Development Authority
"We have been quite successful in meeting the various targets set for the healthcare NKEA," states the Health Minister. "We will continue our efforts to attract both local and international companies to participate in the healthcare NKEA, especially as lead organizations in the various EPPs. This will help grow the healthcare industry and further encourage collaboration between the public and private sectors."
Yew Wei Tarng, President, PhAMA
Leah Goodman, Sanofi's general manager in Malaysia, Singapore and Brunei concurs. "Malaysia is a priority for Sanofi and we are doing everything we can to keep this priority status." Not only is the French drugmaker involved in EPP3 through a partnership with local company Hovid, they have also been working with the government in anticipation of the launch of their breakthrough dengue vaccine. " In 2012, Sanofi launched a program named "Dengue Patrol" in collaboration with the Ministry of Health and Ministry of Education. This program played a significant role with school children located in dengue hot spots, where we must maintain the information and an extremely high awareness level." explains Sanofi's Goodman. "The Ministry of Health and Ministry of Education have been crucial elements in raising awareness and keeping everyone alert. Government stakeholders are fundamental for the successful launching of the dengue vaccine."
Entry Point Projects for the Pharma Sector
"Today, around 20 percent of trials are done in public hospitals and our objective is to reach at least 30 percent this year and in the near future 50 to 60 percent. Clinical trials represent a national priority and we are proud to be the catalyzer of this goal.", explains Chua Hong Teck, the director of the Healthcare NKEA at PEMANDU, the unit charged with overseeing the implementation of the NKEAs.
"Malaysia has a unique advantage over other countries: its ethnicity base," says Leonard Ariff Abd. Shatar, acting CEO of CCM Berhad, a large local company, when asked about clinical trials. "Therefore diverse patient recruitment is possible in Malaysia with a community comprising people of Malay, Chinese and Indian extraction. This Asian DNA present in Malaysia allows companies to concentrate trials in Malaysia instead of having to pursue various trials in various countries, resulting in possible savings."
Rhenu Bhuller, Senior VP Healthcare, Frost & Sullivan Malaysia
However, not everyone is as optimistic about this fact as Shatar. "I don't believe that we are able to become a clinical trial hub because while we are ethnically diverse, the size of populations for each is not equal," admits Rhenu Bhuller, senior VP in charge of healthcare for Frost & Sullivan Malaysia. "While the Malaysian society is diverse, the overall population is still too small to be relevant."
Alan Ong, Executive VP for the Asia Pacific Region for INC Research
"The Malaysian government is incredibly supportive of clinical trials," says Alan Ong, executive VP for the Asia Pacific region for INC Research, a CRO, but explains that concrete advancements are needed. "Whilst the vast growth potential for clinical trials in Malaysia is very clear, the country is in need of additional talented professionals to conduct clinical research. Malaysia, like most areas where clinical development is on the rise, is in need of an influx of investigators, monitors and other research professionals."
Bringing Phase I to Malaysia
Under EPP 3, the Malaysian government initially set out just to promote generic manufacturing, but has recently expanded its mandate to look at OTC, supplements, biologics and vaccines, in order to boost its export platform. "The priority should be to focus on manufacturing value added products, and we must also focus on being early into certain fields like biologics, for example," opines Tan Sri Dato' Dr. Abu Bakar Suleiman, president of Malaysia's International Medical University. "A country will not become developed and advanced if it focuses on low cost manufacturing and basic healthcare. We need to take Malaysia to the next level and the government will play a big role in this journey to excellence."
Tan Sri Dato' Dr. Abu Bakar Suleiman, President of Malaysia's International Medical University
According to PEMANDU, pharmaceutical exports grew by 8 percent between 2012 and 2013, with an export value of USD 187 million, but Big Malaysian manufacturers still struggle today to make exports a major part of their turnover. "Our exports represent 11 percent of our total revenues," explains Leonard Ariff Abd. Shatar of CCM. "Malaysia still has manufacturing plants from the 1980s; it does not show an image of modernity and high standards even though many of the players have invested in new equipment and new greenfield facilities in order to maintain quality manufacturing standards. We need to have a local industry effort to raise our standards and show to the rest of the world that Malaysia is advanced in terms of manufacturing assets and ability to meet all necessary international standards."
Leonard Ariff Abd. Shatar, acting CEO, CCM Berhad
One way to improve exports is through government intervention. "The introduction of an Off-Take Agreement scheme under EPP 3 has generated much interest for both MNCs and local pharmaceutical companies," explains Minister of Health Subramaniam. "This initiative has provided some assurances of market access for public sector purchase, as well as facilitating exports of these products, as these manufacturers have a record that the Malaysian government is purchasing and using their products, thereby providing confidence to the export market of the safety and efficacy of these pharmaceuticals."
Dato' Kadhar Shah Abdul Razak, Managing Director, Nashmir Capsule
Sanofi is one MNC that has partnered with a local manufacturer to boost its Malaysian domestic production. "Local manufacturers are going to become more and more attractive to MNCs, especially for those wanting to properly enter the public sector," says Sanofi's Goodman, managing director of Sanofi Malaysia, Singapore and Brunei. Today, Malaysia is Sanofi's largest country in terms of generics production in Asia. "We know that other MNCs in Malaysia have tried making a success of their own generics without significant sustainability, so we can be proud of our achievements so far."
Sea Cucumber: natural, halal, and conquering new markets.
With the global halal medicines market estimated at around USD 34 billion in 2013, Southeast Asian countries like Malaysia and Indonesia, along with the Middle East, have a natural advantage in this arena because of strong domestic markets.
Kana K Thamby, Chief Executive, GCI MSC, Malaysia
"We like to believe that in the sea of generics, halal is a true differentiator," says Leonard Ariff Abd. Shatar of CCM. "When speaking about halal, ethical issues arise because of animal testing and molecules present in original patented formulas. Since quite a few innovator products have porcine or other kind of animal molecules, it has been a challenge on our side to develop halal generic equivalents and source raw materials that meet strict Halal guidelines. Halal will become the next differentiating standard in generics and market demand will dictate what manufacturers do, so CCM is proud to be a pioneer in this field At the end of the day, only doctors and pharmacists dispense medications to patients in Malaysia, so all we are hoping for is that they allow patients to have access to information and to exercise their rights to choose from the alternatives available which would include halal medications."
Nashmir Capsule is a halal-only producer, which Dato' Kadhar Shah Abdul Razak, the company's managing director, believes gives them an advantage over traditional pharma companies trying to move into halal. "Being a company focused on gelatin capsules, you can see how we can stay true to halal principles, as it is all about the animal bone used to produce our products and this can obviously be controlled. This is how we can provide our halal guarantee. I can say with confidence that the demand is constantly increasing and our plants are struggling to keep up with customer need."
Razak explains that being a Malaysian company has its advantages in other markets. "As a Malaysian company, we are not requested to pay taxes within ASEAN countries. So for example it would be more expensive for companies in Korea, China or India to enter this market. Also, the reputation of Malaysian products, which stand for quality, might have helped. Overall, I can say that the market demand is very good not only within Malaysia but amongst ASEAN markets too. And once we consolidate our presence here, we will surely look to expand further."
"As a global services location, Malaysia is third in the world behind India and China," explains Kana K Thamby, CEO of GCI, a healthcare IT company, but business process outsourcing has not been widely adopted by the Malaysian industrial base to date. "One of the things we do here in Malaysia is post-implementation support, which lends to the overall healthy BPO environment". GCI operates in multiple geographical locations across the world and has experienced a wide range of BPO environments and healthcare systems. But how can this experience be brought back to Malaysia? "We hope that Malaysia continues to implement more and better systems to help serve the patient base here," says Thamby. "It's definitely more exciting to be here in a developing market where you have more opportunities, despite the increased challenges of a young and developing market."
Thamby believes that the biggest hurdle in implementing BPO processes in the Malaysian healthcare sector is budget. "It's not so much a lack of desire to do it; the funding is just not there yet. Perhaps the formula needs to be changed. I think the national health insurance program is the right way to go, where the burden of the healthcare costs in the country are shared by the employer, the government and the patient. With this type of model there is more accountability and it reduces the burden of spending all the money on reactive care: funds can be more effectively allocated towards proactive care as well. It's just a matter of time."