BMI View: The proposed 2016 government budget will be positive for the Philippines healthcare sector. The budget proposes a significant increase in funds allocated to the Department of Health which will enable authorities to finance the expansion of the country's health insurance scheme and upgrade medical facilities in the country. These two thrusts collectively address some of the key impediments to healthcare access in the Philippines and will reinforce commercial opportunities for pharmaceutical companies operating in the country. However, further price caps on high-value medicines and poor intellectual property protection continue to pose a substantial risk for multinational drugmakers.
Headline Expenditure Projections
Pharmaceuticals: PHP145.05bn (USD3.28bn) in 2014, rising to PHP150.49bn (USD3.32bn) in 2015; +3.8% in local currency terms and +1.0% in US dollar terms. Forecast revised upwards from last quarter .
Healthcare: PHP563.49bn (USD12.75bn) in 2014, rising to PHP623.75bn (USD13.74bn) in 2015; +10.7% in local currency terms and +7.8% in US dollar terms. Revised downwards from last quarter.
Out of the 19 pharmaceutical markets assessed in Asia Pacific, the Philippines remains in 14th place (scoring 46.1 out of 100), trailing the regional average in most metrics. In Q415, Japan is ranked as the most attractive market in the Asia Pacific region (scoring 73.3 out of 100), followed by South Korea (66.2). Compared with its peers, the Philippines' Risk/Reward Index score is dragged down by industry characteristics such as policy enforcement (policy enforcement score of 2.8 out of 7). In the medium-to-long term, the pharmaceutical market in the Philippines is expected to start becoming more appealing to foreign investment especially with the establishment of a FDA in the country; which will greatly speed up the Philippines' drug approval process. The regulatory body replaced the Bureau of Food and Drugs, which lacked resources, structure and enforcement powers.
Key Trends & Developments
The proposed 2016 budget for the Philippines will enhance healthcare access and with it, the commercial opportunities for pharmaceutical and medical device companies. In line with an overall expansion of the government's budget, investments into the healthcare sector are to rise by 38% y-o-y to amount to PHP132bn (USD2.8bn) for FY2016. The Department of Health (DOH) will be a major recipient of the funding with a significant 41% increase y-o-y in its budget from PHP87bn (USD1.8bn) in FY2015 to PHP124bn (USD2.6bn) for FY2016. This in turn has provided scope for the DOH to increase funding to the country's state institutions with the Philippine Heart Center seeing the largest rise of 65% with its PHP616mn (USD13mn) budget allocation for 2016.
Novartis Healthcare Philippines has reduced the price of Lucentis (ranibizuman), a drug used for the treatment of a visual defect caused by diabetes. The move is in line with Novartis' partnership with the Philippine Society of Endocrinology, Diabetes and Metabolism and the Vitreo-Retina Society of the Philippines to help address the 'unseen threat' of diabetes mellitus in the country. The collaboration is focused on increasing public awareness about diabetes and its problems, especially diabetic retinopathy and diabetic macular oedema, both of which are the major cause for blindness among adults diagnosed with the disease.
The Philippines' pharmaceutical firms have assured the government of their readiness to supply sufficient medicines in case the Middle East Respiratory Syndrome Coronavirus (MERS-CoV) re-emerges in the country. Apart from providing medicines, the PHAP is ready to collaborate with the government to conduct research for the development of a vaccine or cure for MERS-CoV, added Padilla. The threat of MERS-CoV has come closer to the Philippines with 150 cases reported in South Korea since May, including 16 deaths. The department of health has alerted all private and public hospitals, as well as the Bureau of Quarantine, to be on high alert in light of the threat of the virus (Sun Star).
BMI Economic View
Ongoing political and economic reforms, as well as increasing foreign investor interest, will help to speed up investment growth in the Philippines. This will in turn enable the country to sustain its strong growth trajectory over the coming years. As such, we forecast the Philippines' real GDP growth to average 5.8% over the period from 2015 to 2024, up from our initial forecast of 5.2%.
BMI Political View
During the past decade the Philippines has occasionally been hit by rumours of an imminent military coup. Although the Philippines has been relatively stable under President Benigno Aquino III (2010-), we cannot preclude renewed instability after he leaves office in 2016, given deep inequalities and high levels of political corruption.