Business Development Asia LLC

South East Asian Health News

ISSUE 6, APRIL 1998

Focus: Healthcare Distribution in SE Asia

The ASEAN pharmaceutical and medical device market has tripled in the last decade. The current economic crisis has had a great impact on the region, but growth will return over the next two years. The dramatic growth over the last ten years has allowed international companies to enter and succeed in the market relatively easily. Rapidly rising living standards ensured continued demand for higher quality products and services. The crisis has led to greatly increased competition as companies address efficiency and cost cutting issues with new vigor. Distributors have a crucial role in these markets by playing a large role in determining market share.

Principals use distributors as a cost and time effective route of ensuring that their products reach their end-users. The cost for the principal of establishing its own infrastructure in each market is outweighed by the distributors’ specific skills in marketing, warehousing and distribution and obtaining regulatory approval for the products. This is especially true for relatively small markets, such as those in South East Asia. While some specialize, most distributors handle a wide range of goods besides healthcare products.

The crisis has impacted the distributors even more than the principals. Some distributors are small in scale and only operate on the national level while there are also a number of better-capitalized regional distributors that are beginning to benefit from a flight to quality. While there will always be distributors at a national scale, there is a tier of large, regional distributors developing which can reap the advantages of economies of scale and information technology. Large regional distributors provide principals with a "one-stop shop" to effectively handle all their needs for ASEAN, rather than having to negotiate multiple arrangements with local distribution companies. As ASEAN progresses under AFTA towards a free trade zone on January 1^st 2003, the balance will tip further in favor of the large players.

Prior to taking on a new product line, a distributor will want a full understanding of what the principal’s goals are for its products in the market and what resources it is willing to commit to ensure that its products succeed. Increasingly distributors are being selective as to what products they are willing to take on, as they wish to ensure that having gone through the regulatory process there will be a viable market for the product and that the corporate will exists to ensure that this market is approached aggressively.

In most cases distributors organize the applications for product regulatory approval on behalf of its principals. The distributor may occasionally absorb some of this cost, but typically the principal shoulders this cost. The regulatory bodies in SE Asia use the US, the UK, Australia, Canada and Sweden as reference countries regarding drug approvals. However, approval in the reference countries is not a guarantee of approval in the ASEAN countries. The well-established national and regional distributors fully understand the details of the approval process and can sometimes actively contribute to achieving a speedy result.

Singapore’s approval process is among the most straightforward and transparent in the region. It lasts between six and nine months and costs about US$1,000 in administrative fees. Indonesia, Malaysia and Thailand’s processes are all considerably more complex and can take up to two years. The cost in each of these countries is roughly US$1,000, but can vary substantially.

Regional Distributors

Diethelm is one of the largest distributors in Malaysia, Singapore and Thailand, incorporating a large array of pharmaceutical and healthcare products. The company represents over 130 multinational and local companies and distributes OTC, health and beauty, nutritional and pharmaceutical products. Diethlem & Co is Thailand’s biggest distributor of consumer goods and pharmaceuticals. Its current principals include Bausch & Lomb and Nivea.

Getz Brothers distributes pharmaceutical and medical products. Getz operates in Cambodia, China, Hong Kong, India, Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam.

Healol Pharmaceuticals provides a wide range of services including distribution. Healol operates in Cambodia, Laos, Malaysia and Vietnam.

Inchcape Healthcare distributes medical systems, pharmaceuticals, dental products and diagnostic tools throughout South East Asia. The company operates in Brunei, China, Hong Kong, Indonesia, Malaysia, Singapore and Thailand.

Zuellig Pharma, a subsidiary of The Zuellig Group, has become one the key players in the pharmaceutical industry, offering distribution, marketing and manufacturing. Zuellig operates in Brunei, China, Hong Kong, Macau, Malaysia, New Zealand, Singapore, Taiwan, Thailand and Vietnam. In addition Zuellig is the leader in the Philippine pharmaceutical distribution market.

Local Distributors

Distribution costs in Indonesia have historically been high due to the geography of the country. The Government has also refused to allow foreign ownership of distribution companies, which has hindered development of the sector. PT Enseval, PT Kimia Farma, PT Scan Pacific and PT Wigo Hoslab are the largest local distributors within Indonesia.

Malaysia is well covered by the regional distributors and the local pharmaceutical companies. Southern Task Sdn Bhd is the leading distributor of pharmaceutical products to the public sector in Malaysia.

Singapore has become a key offshore manufacturing and support base for multinational pharmaceutical companies. The distribution channel in Singapore is single tier, comprised of mostly local agents and distributors.

Thailand’s healthcare related distribution needs are well served by Diethelm, which is the largest distributor in the country. However, the following two companies also are important distributors. Osotspa is the sole distributor of Bayer’s OTC core health products in Thailand. Samaphan Trading is the leading importer of food supplements and medical equipment from Australia, the US, the Netherlands and New Zealand.

Healthcare Distribution in SE Asia

The ASEAN pharmaceutical and medical device market has tripled in the last decade. The current economic crisis has had a great impact on the region, but growth will return over the next two years. The dramatic growth over the last ten years has allowed international companies to enter and succeed in the market relatively easily. Rapidly rising living standards ensured continued demand for higher quality products and services. The crisis has led to greatly increased competition as companies address efficiency and cost cutting issues with new vigor. Distributors have a crucial role in these markets by playing a large role in determining market share.

Principals use distributors as a cost and time effective route of ensuring that their products reach their end-users. The cost for the principal of establishing its own infrastructure in each market is outweighed by the distributors’ specific skills in marketing, warehousing and distribution and obtaining regulatory approval for the products. This is especially true for relatively small markets, such as those in South East Asia. While some specialize, most distributors handle a wide range of goods besides healthcare products.

The crisis has impacted the distributors even more than the principals. Some distributors are small in scale and only operate on the national level while there are also a number of better-capitalized regional distributors that are beginning to benefit from a flight to quality. While there will always be distributors at a national scale, there is a tier of large, regional distributors developing which can reap the advantages of economies of scale and information technology. Large regional distributors provide principals with a "one-stop shop" to effectively handle all their needs for ASEAN, rather than having to negotiate multiple arrangements with local distribution companies. As ASEAN progresses under AFTA towards a free trade zone on January 1^st 2003, the balance will tip further in favor of the large players.

Prior to taking on a new product line, a distributor will want a full understanding of what the principal’s goals are for its products in the market and what resources it is willing to commit to ensure that its products succeed. Increasingly distributors are being selective as to what products they are willing to take on, as they wish to ensure that having gone through the regulatory process there will be a viable market for the product and that the corporate will exists to ensure that this market is approached aggressively.

In most cases distributors organize the applications for product regulatory approval on behalf of its principals. The distributor may occasionally absorb some of this cost, but typically the principal shoulders this cost. The regulatory bodies in SE Asia use the US, the UK, Australia, Canada and Sweden as reference countries regarding drug approvals. However, approval in the reference countries is not a guarantee of approval in the ASEAN countries. The well-established national and regional distributors fully understand the details of the approval process and can sometimes actively contribute to achieving a speedy result.

Singapore’s approval process is among the most straightforward and transparent in the region. It lasts between six and nine months and costs about US$1,000 in administrative fees. Indonesia, Malaysia and Thailand’s processes are all considerably more complex and can take up to two years. The cost in each of these countries is roughly US$1,000, but can vary substantially.

Regional Distributors

Diethelm is one of the largest distributors in Malaysia, Singapore and Thailand, incorporating a large array of pharmaceutical and healthcare products. The company represents over 130 multinational and local companies and distributes OTC, health and beauty, nutritional and pharmaceutical products. Diethlem & Co is Thailand’s biggest distributor of consumer goods and pharmaceuticals. Its current principals include Bausch & Lomb and Nivea.

Getz Brothers distributes pharmaceutical and medical products. Getz operates in Cambodia, China, Hong Kong, India, Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam.

Healol Pharmaceuticals provides a wide range of services including distribution. Healol operates in Cambodia, Laos, Malaysia and Vietnam.

Inchcape Healthcare distributes medical systems, pharmaceuticals, dental products and diagnostic tools throughout South East Asia. The company operates in Brunei, China, Hong Kong, Indonesia, Malaysia, Singapore and Thailand.

Zuellig Pharma, a subsidiary of The Zuellig Group, has become one the key players in the pharmaceutical industry, offering distribution, marketing and manufacturing. Zuellig operates in Brunei, China, Hong Kong, Macau, Malaysia, New Zealand, Singapore, Taiwan, Thailand and Vietnam. In addition Zuellig is the leader in the Philippine pharmaceutical distribution market.

Local Distributors

Distribution costs in Indonesia have historically been high due to the geography of the country. The Government has also refused to allow foreign ownership of distribution companies, which has hindered development of the sector. PT Enseval, PT Kimia Farma, PT Scan Pacific and PT Wigo Hoslab are the largest local distributors within Indonesia.

Malaysia is well covered by the regional distributors and the local pharmaceutical companies. Southern Task Sdn Bhd is the leading distributor of pharmaceutical products to the public sector in Malaysia.

Singapore has become a key offshore manufacturing and support base for multinational pharmaceutical companies. The distribution channel in Singapore is single tier, comprised of mostly local agents and distributors.

Thailand’s healthcare related distribution needs are well served by Diethelm, which is the largest distributor in the country. However, the following two companies also are important distributors. Osotspa is the sole distributor of Bayer’s OTC core health products in Thailand. Samaphan Trading is the leading importer of food supplements and medical equipment from Australia, the US, the Netherlands and New Zealand.