Pharmaceuticals Advance

Thailand

Economic News

22 Jul 2010
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Thailand's pharmaceuticals sector is set to post strong growth in the coming years, with growth in local demand supported by increases in disposable incomes. The industry and the government, however, still have some outstanding issues to resolve at home and abroad.



The pharmaceuticals market in Thailand has already shot to prominence, with spending on drugs accounting for almost 1.5% of GDP, according to a recent study by Business Monitor International. The market was estimated to have been worth more than $3.75bn last year and is expected to post strong growth throughout the upcoming decade.



Another study conducted by IMS Research and released in mid-March showed that Thailand is now a significant "pharmerging" economy, meaning its pharmaceuticals market is ranked as having high potential for expansion.



Sales of pharmaceuticals in Thailand are expected to increase by $1bn a year up to 2013 and beyond, with this dynamic growth presenting new opportunities for the pharmaceuticals industry, said David Campbell, a senior principal at IMS for pharmerging markets.



"Pharmaceuticals manufacturers that lead in building out organisational competencies, tailoring portfolios and adapting business models to these new markets will reap the benefits of differentiation and entrenched presence compared to those that wait," Campbell said.



However, those same companies have had trouble adapting to a position taken up by the Thai government in 2006. Late in that year Bangkok incurred the ire of some Western drug producers through its decision to remove the protections on patents for many cutting-edge medicines used to treat diseases, such as cancer and AIDS, allowing the domestic production or import of cheaper generic drugs.



While the move was deeply unpopular with international drug companies, many have been forced to lower the prices on some of their brand-name products to avoid seeing their markets eroded by state-licensed replicated versions of drugs. Other firms have threatened to withhold life saving medicines from Thai customers.



Thailand is trying to defuse the tension, seeking to work with the World Trade Organisation (WTO), according to Kiat Sittheeamorn, president of the Thailand Trade Representative Office.



"What we would like to see is US engagement with the WTO in order to come up with a multilateral regime that is good for all," Kiat said during an address to the American Chamber of Commerce in Thailand on March 8. "It is a very sensitive issue, but we also recognise that we don't want to violate any patent rights."



The final objective for all parties involved in the process should be for all of the Thai people to have access to affordable drugs while recognising the ownership rights of patent holders, he said.



While trying to resolve its dispute with overseas drug manufacturers, the Thai government has also been facing criticism at home from the domestic pharmaceuticals industry, which has called for changes to the charter of the Government Pharmaceutical Organisation (GPO), a state enterprise under the Ministry of Public Health.



The Thai Pharmaceutical Manufacturers Association (TPMA) wants the government to revoke the GPO's monopoly status as a supplier of medicines to state hospitals, allowing private firms the opportunity to access the lucrative market. The association also wants the GPO to reverse plans to step up production aimed at allowing the state enterprise to compete directly with private sector operators.



In late February, the TPMA's chairman, Chernporn Tengamnuay, said the GPO should not be seeking to produce generic drugs in competition with privately owned local firms as this was harming the domestic industry.



"Private drug makers are now very weak, due to government regulations favouring state drug manufacturers over free market competition," Chernporn said.



The GPO's practice of importing generic drugs at a cost lower than that of similar medicines produced domestically was also greatly affecting the ability of local drug firms to survive, he said.



Many of the generic drugs imported by the GPO and private companies come from India, one of the world's largest producers of such medicines. However, this situation could change should New Delhi strike a free trade agreement (FTA) with the EU, a deal that could see restrictions put on India's sales and exports of drugs to third-party countries.



Though talks over an FTA between India and the EU are only at the tentative stage at the moment, the possibility that the flow of low-cost drugs could be disrupted has Thailand worried.



Any provision in the FTA that could hamper early entry of generic medicines could affect patients across the developing world, said Kannikar Kijtiwatchakul, the coordinator of the health consumer protection programme at Thailand's Chulalongkom University.



"Our local drug industry is not very strong and we rely on India to supply us with medicines," he said on March 19. "In particular, people with HIV are able to lead a healthy life thanks to the antiretroviral drugs produced in India."



Though it is a robust multibillion-dollar industry, and is well placed for solid growth in the years to come, Thailand's pharmaceuticals sector could suffer a bout of ill health if it loses either its battle with leading international manufacturers for the right to produce or import generic drugs, or if it sees its main supplier – India – tighten up its sales practices. Though the sector's prognosis is promising, there could be complications in the future.

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