BMI View: Malaysia's epidemiological profile will remain attractive to pharmaceutical companies as the country sees a rising burden of both communicable and non-communicable diseases. This commercial opportunity is further reinforced by the government's commitment to improve healthcare in its FY2015 budget. However, poor intellectual property protection and the implementation of a Goods and Service Tax continue dampen opportunities for innovative drugmakers.
Headline Expenditure Projections
Pharmaceuticals: MYR7.22bn (USD2.21bn) in 2014 to MYR7.88bn (USD1.97bn) in 2015; +9.2% in local currency and -10.7% in US dollar terms. Forecast in line with last quarter.
Healthcare: MYR42.62bn (USD13.02bn) in 2014 to MYR45.85bn (USD11.46bn) in 2015; +7.6% in local currency and -12.0% in US dollar terms. Forecast revised downwards from last quarter.
Malaysia's Pharmaceutical Risk/Reward Index (RRI) score for Q415 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
The prices of imported drugs might rise as a result of a weak Malaysian ringgit, according to Health Minister Subramaniam Sathasivam . However, the increase would not be permanent and the situation will not be limited to Malaysia - occurring in other countries as well as it is a global phenomenon, Subramaniam added. The minister assured that government hospitals and clinics will remain unaffected by the increase in drug costs.
Malaysia-based private healthcare chain KPJ Healthcare will set up 10 new hospitals with an investment of MYR1.5bn (USD373.76mn) over the coming five years, according to KPJ president and managing director, Datuk Amiruddin Abdul Satar. The group plans to build two hospitals each year with average cost of the hospitals expected to be around MYR100mn (USD25mn), noted Amiruddin. It will allocate funds worth MYR200mn (USD50mn) from recent private placement and an Employee Stock Option Scheme to the project.
Malaysia has been working to build capacity with the aim of becoming a regional hub for biopharmaceutical investments. In view of the goal, established in line with the introduction of the national biotechnology policy in 2005, Malaysian Biotechnology Corporation (BiotechCorp) opened an office in San Francisco, California, US, in June to assist US companies looking to establish biotech hubs in South East Asia. The country is offering attractive tax incentives for companies that qualify under the BioNexus status. BiotechCorp also has teamed up with the Larta Institute in Los Angeles to help Malaysian firms bring their products to the US and establish strategic partnerships to increase the value of their products.
Non-communicable diseases (NCDs) have been on the rise in Malaysia, mainly due to lack of awareness and education, according to Pfizer Malaysia's Medical Director Vicknesh Welluppillai. Better healthcare, more advanced drugs and access to vaccinations have helped successfully reduce communicable diseases such as tuberculosis, malaria and polio in the country. However, NCDs such as hypertension, heart disease, diabetes, cancer and depression, which are not easily detectable, are increasing in the country.
The medical tourism industry in Malaysia is expected to generate around MYR1bn (USD246mn) from healthcare travellers in 2015, according to Prime Minister Najib Razak. The industry continues to bring in revenue for the country, and its market share has almost doubled over the past four years. In 2014, around 770,000 patients visited the country, with the industry generating nearly MYR700mn (USD185mn) in revenue. The number is likely to increase to 930,000 patients in 2015.
BMI Economic View
We have upgraded Malaysia's 2015 real GDP growth forecast to 4.7% from 4.2% previously to reflect stronger than expected H115 growth figures. However, with Malaysia facing internal and external headwinds that are unlikely to abate over the coming quarters, we have revised our forecast for the ringgit to end 2015 at MYR4.2000/USD and average MYR4.000/USD in 2015.
BMI Political View
The sacking of Deputy Prime Minister Muhyiddin Yassin is a sign that Malaysian Prime Minister Najib Razak is consolidating his power, but his failure to expel Muhyiddin from the ruling party will lead to future problems as the latter remains as deputy party president. While Muhyiddin's removal from the cabinet will lead to near-term protests, which will weigh on the business environment, this will be contained largely to Kuala Lumpur.