Rising incomes and public expenditure raise market expectations

With double-digit growth widely predicted and indeed being realised by many new market entrants, Myanmar’s pharmaceuticals sector has been attracting a great deal of attention of late – particularly from companies able to offer low-cost products in this still largely lowincome market. At the same time, international companies are positioning themselves to take advantage of relatively low production costs by establishing pharmaceutical manufacturing centres in the country.

Nonetheless, as with many other sectors in this emerging economy, challenges to doing business remain. Regulatory uncertainties – the result of ongoing political reforms – persist, alongside distribution and quality control issues. However, in the promising context of government health care reform and rising per capita incomes, pharma’s future looks bright.

State Of Affairs

Historically, government health care spending in Myanmar has been low compared to regional peers. A 2014 Forbes article put the figure at around 2% of GDP, while neighbouring Laos and Cambodia spend 4.5% and 5.6%, respectively. As a result, the public health care system has evolved with a generally low level of provision. Indeed, the World Health Organisation (WHO) ranks it last out of 190 countries worldwide in terms of overall performance.

At the same time, few private companies provide employees with any kind of coverage. This has created space for supplementary health care services, with those who can afford to do so making out-of-pocket payments for additional medicines and treatments.

Add to this a growing share of the population that is comparatively better off. GDP growth averaged 6.5% in 2012-13, with World Bank estimates at 8.3% for 2013-14. This puts GDP per capita for the population of 51.4m, according to preliminary 2014 census data, at around $1105. Although still one of the lowest in East Asia and the Pacific, it is trending strongly upwards.

Given this backdrop, the market has tended to favour pharma firms that provide less expensive generic drugs and medical supplies over large multinationals – with Indian companies in particular benefitting. A 2013 report by BioPharm International found that 35-40% of Myanmar’s pharmaceuticals market was comprised of Indian firms, followed by outfits from Bangladesh, China, Indonesia, Pakistan, Thailand and Vietnam – with Indian heavy-hitters such as Ranbaxy Laboratories and Cipla continuing to dominate.

Way Forward

While this market structure is likely to hold out over the short to medium term, insiders suggest that there are already signs that conditions are beginning to change. Key to this is the recent increase in government health care spending, particularly on pharmaceuticals. This translates to extra funding for the Food and Drug Administration, the state body responsible for signing off on new products, which has helped to speed up drug approvals.

Furthermore, more resources are being provided to expand the national formulary – the group of WHO-approved medicines to be made available at all public health facilities. At the same time, the size of public hospital pharmaceutical tendering has grown rapidly. The Ministry of Health, which oversees the process, announced funding for tenders of $8m in 2012, $40m in 2013 and $70m in 2014, according to DKSH Healthcare, an industry services provider focused on Asia.

However, the market remains trying. The uncertainty of a country still in transition means local partnership – particularly with a distributor – is still highly advisable for international firms. Infrastructure in many areas remains undeveloped, adding to costs and delays – though major investment is taking place. Calls for greater transparency continue, in addition to more involvement by health sector stakeholders.

Nonetheless, rising incomes and expanding public health budgets are fuelling forecasts that the market will double from 2013 to 2015. For higher-end, international pharma firms, a major market breakthrough may still lie a ways ahead. Meanwhile, outfits such as Roche, GSK and GE Healthcare are establishing local distribution networks and preparing for expansion.

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The Report: Myanmar 2015

Industry & Retail chapter from The Report: Myanmar 2015

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