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Somya Datta, Research Analyst

Healthcare Industry

Economic Research Analytics

12 February, 2008

Where Is Russian Healthcare Industry Positioned Among other BRIC Nations?

•Konda Reddy

•Research Analyst, Healthcare Practice

•Economic Research and Analytics

•August 13, 2008

Malaysian Healthcare Industry: What lies Ahead?

© 2008 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.

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Focus Points

44

2266

77

3355

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FOCUS POINTSFOCUS POINTS

Health Condition and Changing Demographics

Healthcare Expenditure

Pattern

Drivers and Restraints

Growth Opportunities

Country Profile

Trends and Growth Prospects for:

• Healthcare Services

• Pharmaceuticals

• Biotechnology

• Medical Devices and

Equipments

Healthcare System

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Malaysian Healthcare Industry – Country Snapshot

• Barisan Nasional (National Front) coalition government led by Seri Abdullah Ahmad Badawi resumed office in 2008

• The next general election is due in 2013

• Significant support for the healthcare industry

• Impressive GDP growth rate of 6.3 percent in 2007

• Nominal GDP reached US $186.6 billion in 2007

• The unemployment rate was 3.2 percent in 2007

• Focus is to ensure the stability of Malaysian currency Ringgit, control inflation, prosperity, and welfare of all Malaysian citizens

• Growing interest of global investors in the Malaysian economy

• The Government offers tax rebates and incentives to encourage the flow of investments into the desired sectors.

• The country has entered into trade agreements with many countries to avoid double taxation on dividends, profits, interest, royalties, and so on.

• Trade is one of the key drivers of the Malaysian economy

• Malaysia’s trade policy is formulated with the objective of expanding and improving the trade opportunities with major trading partners, entering into new markets, and promoting and assisting the exports of Malaysian products.

• Government is continued to pursue a prudent fiscal policy.

• Increased government spending on education, healthcare, and other social services

Investment Policy Political Scenario

Trade Scenario Economic Overview

Fiscal PolicyMonetary Policy

Country

Snapshot

1

2

34

5

6

4

• Health insurance polices provide non-indemnity benefits for specified

health events.

• Currently, Malaysia does not have a voluntary or compulsory national

health insurance plan.

• The Government is contemplating a national health insurance that could

successfully achieve the goals of Vision for Health program, which

emphasizes wellness rather than ill health or disease and maintain the

strengths of the present system.

Healthcare Insurance System

Healthcare Services

Private SectorPublic Sector

Community Polytechnic andMaternal and Child health clinics

Rural Health Clinics

Public HospitalsPrivate Hospitals

Private Health Clinics

Concentrates on provisionof secondary and tertiary

Healthcare services

Provides comprehensivePrimary healthcare services

Source: Ministry of Health, Frost & Sullivan

Malaysia – Healthcare System

Provides majority and free healthcare Services to

most people

Provides mainly curativeHealthcare services and

financing

Growth Opportunities

• Rural Healthcare Services

• Healthcare Infrastructure

• Healthcare IT

• Telemedicine

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Malaysia – Health Condition and Changing Demographics

Trends

• Significant improvement in commonly used healthcare indicators such as death rate, infant mortality rate, and life expectancy

• Rise in the standard and quality of healthcare services

• The government’s key focus is on the development of a primary healthcare infrastructure and providing services in rural areas

• Deaths due to Septicaemia are the principal cause of mortality

• Decrease in birth rate contributed to the reduction, as people are more educated, resulting in more controlled population.

• Septicaemia

• Heart Diseases & Diseases of Pulmonary Circulation

• Malignant Neoplasms

• Cerebrovascular diseases

• Pneumonia

• Accidents

• Digestive system related diseases

• Certain problems originating in the Perinatal period

• Nephritis, Nephrotic, Syndrome and Nephrosis

• Poor health conditions

Top 10 Causes of Death inMOH Hospitals, Malaysia

Healthcare Indicators in Malaysia, 2001 and 2007

Parameter 2007

Infant mortality rate/1,000 live births

Life expectancy at birth – males

Life expectancy at birth – females

Total fertility rate

Birth rate/1,000 people

Death rate/1,000 people

Healthcare expenditure (as a % of GDP)

16.39 deaths

70.3 years

75.9 years

2.98 children born/woman

22.44

5.02 deaths

3.5

2001

20.3 deaths

68.4 years

73.9 years

3.24 children

24.7 children

5.2 deaths

3.7

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Malaysia – Healthcare Expenditure Pattern

• Public sector healthcare financing has been spiraling upward due to the increase in government healthcare allocations. However, the role of the private sector in the provision of health care has been increasing.

• Demand for healthcare services is expected to increase further, creating additional pressures on government healthcare financing pattern as well as on individual and private sector financing.

• The role of private medical insurance is to harmonize and increase the government in financing healthcare services.

• Increasing trend of private health care expenditure, including out-of-pocket payments.

Sources of Healthcare Expenditures in Malaysia

Healthcare Expenditure as a % of GDP (2001-2007)

Healthcare Financing Pattern

Government Sources

• Taxes

• Provincial and local revenues

• Contributions to EPF

(Employee Provident Fund) and

SOCSO (Social Security

Organization).

Private Sector Sources

• Fee-for-service

• Out of pocket expenditure

• Insurance/Third Party

Administrator (TPA)

• Donations from not for profit

organizations

Source: Frost & Sullivan

3.7

2.1

1.6

3.7

2.0

1.7

3.8

2.2

1.6

3.8

2.2

1.6

3.7

2.2

1.5

3.7

2.2

1.5

3.5

2.1

1.4

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Percentage

2001 2002 2003 2004 2005 2006 2007

Years

Total Expenditure on Health as a Percentage of GDP

Share of Public Sector

Share of Private Sector

7

Healthcare Industry

Healthcare

Serv

ices

Pharmaceutic

als

Biote

chnology

Medic

al Devi

ces and

Equipm

ent

Malaysia – Healthcare Industry Segments

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Healthcare providers in Malaysia

Ministry of Health (MOH)

Malaysia – Healthcare Services

Private Sector

Other Government Agencies

• The Ministry of Education

• The Ministry of Defense

• Malaysia has one of the most heavily funded government health care systems in Asia.

• The government Healthcare initiatives:

• Allocated approximately $2.8 billion in 9th Malaysian Plan (9MP) compared to $2.5 billion in 8th

Malaysian Plan (8MP) for the industry.

• Subsidized 97 percent of drug purchase in the government hospitals, totaling $210.5 million, annually.

• Provided low fees for consultation in a government hospital that run to about $0.25 to $1.20.

• Provided financial assistance to NGOs for health-related activities worth $6.58 million per year.

• Subsidized 98 percent of the total cost of health services.

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Malaysia – Healthcare vision, Challenges and Programs

8th Malaysian Plan – Focus points

• Focus was to improve access to health care services for all, especially for people in the rural areas.

• Encouragement of private sector to expand their coverage of health services to complement the public health sector.

• Regulatory mechanism is in place to ensure quality healthcare is provided at a reasonable cost by both the public and private sectors.

9th Malaysian Plan, Prospects 2006-2010

• To prevent and reduce the disease burden.

• Enhancing R&D to support evidence-based decision-making.

• Enhancing the healthcare delivery system.

• Management of healthcare related crisis and disasters effectively.

• Increasing human resources development.

• Strengthening health information and management systems.

Key Challenges:

• Provision of quality healthcare services

• Improve the quality and quantity of healthcare professionals

• Integrated promotion and marketing of Malaysia’s healthcare services in foreign counterparts

• Fiscal incentives for the development of healthcare sector

• Liberalize and co-ordinate advertising strategies by the healthcare sector

Vision for Health:

“Malaysia is be a nation of healthy individuals, families and communities”

Through a health system:

• Equitable

• Affordable

• Efficient

• Technologically appropriate

• Consumer friendly

• Environmentally adoptable

• Quality

• Innovation

• Health Promotion

• Respect for Human dignity

• Community Participation

Towards

An enhanced quality life

With Emphasis on:

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Malaysia – Pharmaceuticals and Drugs Segment

Overview

• Malaysian pharmaceutical market was worth an estimated U.S. $1.1bn in 2007

• High growth in 2005 is accounted by an increment in export value as the country became the member of Pharmaceutical Inspection Co-operation Scheme

• Branded drugs are imported by the larger MNCs as licensed importers.

• Biopharmaceutical sector is accelerating the growth speed due to the government support for R&D activities on natural resources.

Outlook

• Malaysian pharmaceutical industry focuses on generic drugs and OTC products as branded drugs are dominated by MNCs.

• Government will continue to be the major generics purchaser in order to reduce the cost of healthcare financing.

• Bio-generics segment is expected to cause a major market shake-up in the future.

• Growing trend of people moving from the use of synthetic allopathic drugs to herbal cures.

Pharmaceutical Market

Structure

Over-the-counter(OTC) Sector

Ethical SectorHerbal Preparation and

Health SupplementBiopharmaceuticals

Generic DrugsBranded

Pharmaceuticals

Source: Frost & Sullivan

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Malaysia – Pharmaceuticals and Drugs Segment (Continued..)

Government Initiatives Government Incentives Pricing Trends

• Grants and Financing schemes to support R&D initiatives

• Pharmaceutical Inspection Co-operation Scheme (PICS)

• Introduction of the Industrial Master Plan 3 (IMP3, 2006-2020)

• Malaysia’s Intellectual Property Laws

• Incentives for High technology companies

• Incentives for Strategic projects

• Incentives for R&D

• Apart from the above, there are incentives in the form of industrial building allowance, infrastructure allowance, import duty exemptions for raw materials/components equipment and machinery

• No control on the price of medicines, thus allowing prices to be determined by the market forces.

• Government practices an open market policy, and so the pharmaceutical industry fixes its own medicine prices.

• Ministry of Health (MOH) has embarked on the systematic monitoring of the price of medicines through its pharmaceutical services division (PSD).

DRIVERS

RESTRAINTS

• Medical Tourism

• Generics Market

• Specialist Driven Therapy Market

• Herbal/Traditional Medicines

• OTC/Dietary Supplement Market

• Continued reliance on imported products

• Price competition reduces potential profit margin

• Ban on Direct-to customer advertising activity

• Awarding of public hospitals contract to one company

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Malaysia – Biotechnology Segment

Growth Opportunities

• Agro Biotechnology

• Biopharmaceuticals

• Herbal and Marine products

• Biodiagnostics

• Nutraceuticals

• Enzymes

Characteristics:

• Malaysia’s biotechnology sector is expanding at an exciting and brisk pace and is a potentially significant contributor to the economy

• Huge emphasis on the development of the biotechnology sector was reflected in Budget 2008, where $64.6 million was allocated for the development.

• Government efforts to improve the investment regulatory framework, develop relevant infrastructure, increase the pace of research & development commercialization, and increase the skilled labor force and researchers in order to make biotechnology as one of the five core technologies which will accelerate Malaysia’s transformation into an industrialized society by 2020

Incentives for Investment in Malaysian biotechnology sector

• 100% income tax exemption for ten years commencing from the first year the company derives profit

• Tax exemption on dividends distributed by a BioNexus status company

• Exemption of import duty and sales tax on raw materials/components and machinery and equipment

• Double deduction on expenditure incurred for R&D and Double deduction on expenditure incurred for the promotion of exports

• Buildings used solely for the purpose of biotechnology activities will be eligible for Industrial Building Allowance to be claimedover a period of ten years

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Malaysia - Prospects in Clinical Trials

Advantages of Malaysia

• Large and diverse multi-ethnic population

• Internationally compliant regulatory regime; enforcement of compliance with Good Clinical Practices (GCP) and Intellectual Property Rights (IPR) protection

• Fast timelines for ethics review and regulatory approval

• Low cost advantage

• Efficient logistics for trial supplies & biological samples

• Strong Malaysian government commitment & support for the industry

Characteristics:

• Long history in participating in multi-centre clinical trials for most of the top multi-national pharmaceutical companies.

• Clinical trials are offered by most big hospitals; both private and government, as well as universities and research institutions.

• Phase I trials in Malaysia have improved from nil four years ago to 7 in 2005, while Phase II trials were 11 in 2005 compared to two in 2003 and 96 Phase III trials in 2005 compared to more than 70 in 2001.

• The use of information an communications technology to increase efficiency in conducting clinical trials.

• The need for specific human resource development strategies to create a pool of experienced healthcare professionals.

• The need to strategize the marketing of Malaysia as a regional clinical trials hub, in line with other Government campaign to promote Malaysia as a clinical trial destination.

• The setting up of a multi-disciplinary body regulating healthcare products, like Singapore’s Health Sciences Authority that, among others, coordinates approvals for clinical trials, as well as conducts continuous reviews of clinical trials and monitoring adverse events.

9th Malaysia Plan and Clinical Trail Issues

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Malaysia - Trends and Growth Prospects in Medical Devices Segment

Growth Opportunities

Electromedical equipment

Ultrasound Imaging equipment

Orthopaedic products

Cardiovascular products

Wound care products

MRI Scanners

Ophthalmic products

Patient Monitoring Instruments

Home care products

Medical Imaging Equipment

Overview and Trends

• The medical devices market has reached an estimated US $ 1.35 billion in 2007 and is expected to grow to US $ 3.0 billion by 2010

• Majority of the demand for hi-tech devices is met by medical devices and equipment imports

• Strong market demand for advanced and innovative medical devices and equipment

• The medical devices market is expanding its manufacturing value chain by moving from basic processes and conventional assembly to product and process research & development, design and prototyping, distribution and logistics

Medical Device Exports & Imports, 2001-2007

Source: Frost & Sullivan

523.0

437.8

419.3

213.2

232.8

268.2

509.4 502.0

425.8

401.6

330.3

293.1

230.4

227.5

0.0

100.0

200.0

300.0

400.0

500.0

600.0

2001 2002 2003 2004 2005 2006 2007

$ Million

Medical Device & Equipment Exports Medical Device & Equipment Imports

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Malaysia – Drivers and Restraints

Government Initiatives

Economic Growth

High Disease Incidence Rates

Increase in Household

Consumption Expenditure

Increased Level of Patient

Awareness

Drivers Restraints

Healthcare IndustryLack of Fiscal

Incentives

Poor Health Staff in Rural Areas

Cost Containment Strategies

Shortage of Skilled Labor

Ban on Direct-to Customer

advertising

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Medical Tourism

• Building reputation globally

• Increasing public awareness of medical tourism options

• Greater confidence in Malaysia hospitals

• Satisfaction with the tourism elements

Medical Devices and Equipment

• Growing demand for medical products

• Encouragement of advanced devices production

Growth Opportunities

Generic Drugs

• Patent expiry of blockbuster products

• Government support for local pharmaceutical manufacturers

• Rising healthcare cost

Medical Tourism

• Building reputation globally

• Increasing public awareness of medical tourism options

• Greater confidence in Malaysia hospitals

• Satisfaction with the tourism elements

Biotechnology

• Great promise for medical biotechnology

• Biopharmaceuticals holds great potential for growth

• Herbal and Marine products

• Biodiagnostics

Herbal/Tradition Medicines

• Growing at a rate of 15 to 20 percent

• Grants offered for local companies to carry R&D activities

Pharmaceuticals & Drugs

• Generic drugs

• OTC/dietary supplement and herbal based products

• Specialist driven therapy

• Bio-generics shows great potential

Clinical Trials

• Increase in phase III clinical trials

• Strong Government support for the growth

Malaysian Healthcare Industry: Growth Opportunities

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HC Industry

Political and Policy Analysis

Economic Analysis

Social and Infrastructure Analysis

Related HC Studies

• India

• Russia

• Malaysia

• Germany

• South Africa

• Thailand

• Poland

• U.K.

• South Korea

• India

• China

• Brazil

• Mexico

Published Studies Upcoming Studies

Country Industry Forecast

ERA – Research Studies

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