Business Development Asia LLC

South East Asian Health News

ISSUE 2, AUGUST 1997



FOCUS ON THAILAND: A GROWING PUBLIC SECTOR



The Thai pharmaceutical market was worth Bht24bn (US$790m) in 1996, equivalent to US$13.16 per person, with growth averaging 11% over the past five years. Healthy growth in the market is expected to continue despite the recent economic downturn. This growth is driven by an increasingly wealthy and health-conscious middle class. 19,000 drugs are manufactured and sold in Thailand. These drugs fall into two categories: generic locally produced pharmaceuticals and branded products that are either imported or produced locally under license. The market remains competitive, with cut-throat pricing on locally-produced generics capping margins for international products. Net imports amounted to Bht5.3bn (US$174m) in 1996 or 22% of the total market. Drug and raw material imports are subject to duties which currently range from 10% to 30%. The local generic drug manufacturers are estimated to account for 60% of the market in volume terms, but only 30% in value terms.

Local pharmaceutical manufacturers in Thailand:
Source: USDOC, International Trade Administration, May 21, 1997

Pharmaceutical products are purchased through three channels: hospitals, which command 60% of all sales, pharmacies, which command 30%, and clinics and other sources, which rounds out the last 10%. Pharmacies are still dominated by "mom and pop" operations. P & F represents the largest of these local operations, comprising 43 outlets. As demand for health care soars, the expansion of hospitals is inevitable, particularly the market for private hospitals. In the early 1980's, 90% of hospital operations were in the public sector. In 1996, the percentage dwindled to 70%. Arguably the Bangkok area is now saturated with private hospitals. As private hospital growth continues beyond Bangkok, so will the demand for pharmaceutical products. The Thai Food and Drug Administration (FDA) under the Ministry of Public Health, controls importation of all food and drug products. The licensing and registration process is usually described as difficult.

The Government Pharmaceutical Organization, which is a state enterprise under the Ministry of Public Health, is one of the largest manufacturers and distributors of pharmaceuticals in Thailand. All public hospitals are required to purchase at least 80% of their pharmaceuticals from the National List of Essential Drugs, and with few exceptions, these drugs must be purchased from the GPO.

Foreign pharmaceutical manufacturers in Thailand:
Source: USDOC, International Trade Administration, May 21, 1997

The government created new legislation in 1992 regarding pharmaceutical patents, but the law did not provide "pipeline" protection. In 1993 the Thai government established administrative measures, such as safety monitoring programs, to provide a measure of market exclusivity for pharmaceutical products not eligible for protection under the 1992 law. However, this period is only five to six years.

Thailand has proposed to create an independent intellectual property and international trade court that would operate under expedited procedures and would be staffed with judges trained in intellectual property matters. In realizing the tremendous growth potential of its pharmaceutical and health care industries, the Thai government has acted wisely in its efforts to create the legal infrastructure necessary for continued growth.

For foreign companies considering entering the Thai market, room still exists for players bringing new drugs, formulations or delivery techniques. However, success is likely to depend heavily on the selection of local distributors. Despite questions regarding quality standards and intellectual property rights protection, most major international pharmaceutical companies are represented in Thailand. The three largest international pharmaceutical companies in Thailand are Glaxo-Wellcome, with sales of US$29m, Roche, with sales of US$28m, and Hoechst Marion Roussel, with sales of US$27m. Pharmaceutical Producers Association members, primarily foreign pharmaceutical companies, achieved an average growth of 16% over the 1990-96 period.

The medical devices market in Thailand is dominated by multinationals. In 1996, Thailand imported 90% of its medical device imports totalling US$184m, up by 20% from 1995. The US commanded a 28% share (US$52m) and Japan followed with a 23% share (US$42m) of this figure. Within the surgical accessories and equipment area, the US holds a 40% share of the market, or US$18m. Major local importers, who in turn distribute the equipment to hospitals and clinics, include B Grimm Healthcare and Berli Jucker. This market shows significant profitability, and BDA expect revenue growth of 20% during the next three years.

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