BMI View: Despite the decline in oil prices impacting government spending, we believe the Malaysian government will be able to maintain its commitment to the country ' s healthcare sector as it continues diversification of its revenue base. Moreover, healthcare provision remains critical to the government which will limit reductions that affect medical services. However, commercial opportunities for innovative drugmakers continue to be weighed down by low levels of intellectual property protection, the implementation of a Goods and Service Tax (GST) as well as the preferential treatment of local drugmakers.
Headline Expenditure Projections
Pharmaceuticals: MYR7.22bn (USD2.21bn) in 2014 to MYR7.88bn (USD2.13bn) in 2015; +9.2% in local currency and -3.4% in US dollar terms.
Healthcare: MYR42.75bn (USD13.06bn) in 2014 to MYR46.13bn (USD12.47bn) in 2015; +7.9% in local currency and -4.6% in US dollar terms.
Malaysia's Pharmaceutical Risk/Reward Index (RRI) score for Q315 is 58.9 out of 100, making it the eighth most attractive pharmaceutical market in the Asia Pacific region. It posts above-average scores for every indicator.
Key Trends And Developments
A total of 16 health infrastructure improvement projects, worth MYR2.3bn (USD644.7mn), will be implemented across the Malaysian state of Johor under the 11th Malaysia Plan (11th MP), reports Bernama. The proposal for the projects, which includes the construction of the new Pasir Gudang hospital and Sultanah Aminah 2 hospital in Tampoi, have been submitted to the Economic Planning Unit for consideration, according to State Health and Environment Committee Chairman Ayub Rahmat. The construction of new hospitals and health clinics under the 11th MP will be carried out by a collaborative effort between the state government and the health ministry. The state government is also proposing to upgrade the Segamat hospital to a specialist hospital as well as building health clinics in Rengit, Segamat, Parit Raja and Batu Pahat to meet requirements, Rahmat noted.
The government needs to regulate prices of medicine immediately, as healthcare costs escalate following the introduction of the goods and services tax (GST) in April 2015, according to Democratic Action Party (DAP) MP Charles Santiago. Malaysians were paying more for the same drugs than countries such as Australia, India and Sri Lanka even without the GST, as the country lacks drug-pricing regulations to put limits on prices and profits of pharmaceutical firms, noted Santiago, citing a comparative study. Also, Putrajaya's effort to privatise drug distribution system for public hospitals has led to a 30% increase in medicine costs. 'The introduction of a medicine pricing policy and price monitoring system that will make affordable and lower priced medicine possible, consistent with the government's 2009 National Medicines Policy,' said Santiago (the Malaysian Insider). Secondly, efforts should be made to eradicate all forms of state capture of government procurement of medicine by cronies, added Santiago.
One in five patients in Malaysia who receive treatment in private hospitals are likely to move to the already overburdened public healthcare system following the implementation of the Goods and Services Tax (GST) from April 1, reports Malay Mail Online. 'Many patients would initially shift from private to public hospitals when their medical insurance doesn't cover the more expensive treatments because it didn't take GST into account,' stated Malaysian Medical Association President H Krishna Kumar. Public hospitals, which receive heavy subsidies from the government, will reportedly not be able to handle the influx of additional patients. Meanwhile, private healthcare fees are expected to increase by 5% due to the GST, the Association of Private Hospitals of Malaysia said.
Malaysia has secured the top spot in the healthcare category of the International Living's Annual Global Retirement Index 2015. The index found that the country's healthcare system offers excellent and affordable care, and has some of the best-trained surgeons and specialists in the world. 'It shows that Malaysia is a country to reckon with when it comes to healthcare,' Malaysia Healthcare Travel Council (MHTC) CEO Sherene Azura Ali said. The MHTC is now working to push Malaysia as a major medical tourism destination, aiming to attract 1mn health tourists to the country in 2015 and garner at least MYR1bn (USD270.38mn) in revenue (The Star).
BMI Economic View
Malaysia's economy experienced real growth of 5.6% year-on-year (y-o-y) in Q115, slowing marginally from a 5.7% expansion registered in the previous quarter. With the country facing dual headwinds in the form of weak external demand and anaemic domestic conditions, we maintain our forecast for 2015 real GDP growth to come in at 4.2%, below consensus expectations of 4.7%.
BMI Political View
Malaysia's by-election results suggest that both the opposition Pakatan Rakyat (PR) and the ruling Barisan Nasional (BN) coalitions will continue to muddle through over the coming months. However, the potential introduction of a shariah criminal law bill in parliament and the ongoing debt scandal at 1 Malaysia Development Berhad (1MDB) will place pressure on both the fraying PR and embattled BN, respectively, increasing the likelihood of continued political turbulence in the country in the near-term.