A. Overview of Asia
1. Prior to the crisis (1997-1999), Asia led the world in growth; skyscrapers rose everywhere and living standards skyrocketed.
2. The Asian crisis was mainly a result of runaway, over-leveraged financial institutions that gambled, “hot money,” etc. (e.g. Korea debt/equity ratios). Its effect was dramatic to the region.
3. The Asian economies have recovered, as evidenced in the table below:
Growth Rates in Asia (Measured in Real GDP % Change)
| Country | 1998 | 1999 | 2000 | 2001 (projected) |
| Asia | 4.1 | 5.9 | 6.7 | 6.6 |
| Japan | -2.5 | 0.2 | 1.7 | 0.6 |
| China | 7.8 | 7.1 | 8.0 | 7.3 |
| ASEAN-4 | -9.3 | 2.6 | 4.5 | 5.0 |
| Indonesia | -13.0 | 0.8 | 4.8 | 5.0 |
| Malaysia | -7.4 | 5.8 | 8.5 | 5.3 |
| The Philippines | -0.6 | 3.3 | 3.9 | 4.5 |
| Thailand | -10.2 | 4.2 | 4.3 | 8.1 |
| Asian “Tigers” | -3.8 | 6.7 | 7.1 | 2.8 |
| Hong Kong SAR | -5.3 | 3.1 | 10.5 | 3.5 |
| South Korea | -6.7 | 10.9 | 8.8 | 3.5 |
| Singapore | 0.3 | 5.9 | 9.9 | 5.0 |
| Taiwan | 4.6 | 4.4 | 6.0 | 4.1 |
Source: IMF World Economic Outlook, May 2001, September 2000
* Projections for 2001 are higher than actual figures have been.
B. Asia Still the Future
1. The standard of living is generally higher in the West than in Asia, but this gap will become even less over the next 25 years. In some Asian countries (i.e. Hong Kong and Singapore) by the year 2025, per capita income may be higher than that in the U.S.
2. Today, the West’s share of the world’s income is about 45% with only about 13% of the world’s population. Asia’s share of the world’s wealth, on the other hand, is about 35% with about 60% of the world’s population.
3. By the Year 2020:
• Asia’s GNP is likely to reach $13 trillion.
• Europe’s GNP will be around $6.5 trillion.
• Over 30% of Asia’s population will be under 30.
• Nearly 25% of the world’s population will reside in Mainland China
• The Chinese consumer market may well exceed that of the U.S.
4. By the year 2025, the West’s share of the world’s income will decrease to 20-30% with about 12% of the world’s population. By 2025, Asia’s share will increase to 55-60% of the world’s income, and still have about 60% of the world’s population. See table below:
World Population Predictions (In millions)
| 2000 | 2050 | |
| World | 6,057,000,000 | 9,322,000,000 |
| Africa | 794,000,000 | 2,000,000,000 |
| Asia | 3,672,000,000 | 5,428,000,000 |
| Europe | 727,000,000 | 603,000,000 |
| Oceania | 31,000,000 | 47,000,000 |
| North America | 312,000,000 | 438,000,000 |
| South America | 519,000,000 | 806,000,000 |
Source: United Nations Population Division, 2000
Note: Even if China’s population grows at a rate of only 1%, its population will
still double to 2.4 billion people in 50 years.
C. Rest of the World Has Limited New Opportunities
1. There are still opportunities in Europe and the U.S., but these are mature economies with slow growth.
2. Today, South America has growth, but it has a relatively small population when compared to Asia. It also still has a mañana mentality.
D. Key Future Trends in the Asian Healthcare Markets
1. Over the next 20 years, healthcare in Asia will grow at about two and one half times the growth rate in the West, and the overall quality is getting better.
a. With increased wealth, Asians are living longer, and diseases of the poor are being replaced by the diseases of the West (i.e. cancer, heart disease). Many people in Asia want and can pay for better healthcare. The Singapore Economic Development Board predicts that Asia (excluding Japan) currently spends $150 billion on healthcare and this will increase to $225 billion in the next 3-5 years.
b. Although most Asians currently rely on state-subsidized care, more than 130 million Asians (not including Japanese) can pay for some type of private healthcare. Some see private healthcare growing dramatically in the next 10 years, and commanding over 60% of the overall healthcare sector. In Taiwan, private care is growing about 30% per year.
2. Managed care with “Asian characteristics” is also growing in the region.
a. Asians, aware of monumental health bills in Western countries, fear a similar crisis if they don’t act fast to contain costs. For example, in China in 1997, medical costs soared 20-30% and GNP grew by only about 9.7%.
b. Private doctors’ practices are also beginning to merge. First Pacific Davies, the real estate arm of Hong Kong’s First Pacific conglomerate, is acquiring private doctors’ practices to create a system of primary care clinics in Hong Kong, and then plans to expand around the region. Raffles Medical in Singapore is also buying up local doctors’ practices as well.
c. Most Asian governments are now trying to shift more of their healthcare burden to companies and their employees. In China, at State Owned Enterprises the iron rice bowl has cracked and now each city or province has set up its own medical insurance plan. Some Chinese insurance programs now require individuals to make co-payments prior to treatment. These co-payments are typically 10-20% of the total medical costs and are taken out of an individual’s insurance account, which is made up of a set percentage of the individual’s wage. Other systems under consideration include “capitation systems” – a system where hospitals are reimbursed for treating insured patients on a per day cost basis as opposed to a per procedure system.
3. Globalization of healthcare (including in Asia) will continue full speed into the 21st century
a. Global companies will need to source parts, manufacture, service and perform R&D throughout Asia in order to maximize economies of scale, get closer to their customer needs, etc. For example, researchers in China and India, can be used to help expand R&D for U.S. companies.
b. Regulatory issues will continue to be harmonized globally. For example, clinical trials performed in the U.S. and/or Europe in time will really be utilized in Japan.
c. Medical alliances between business groups and medical institutions will become more and more commonplace. For example, Potomac Land and Health Corp. in Singapore have found an ally in Stanford University’s School of Medicine. Stanford owns a 17.5% market stake in a joint venture in Singapore that is building an advanced medical imaging facility. Stanford will train the staff and hope patients needing more advanced treatment will go to Palo Alto. Today Stanford treats about 1,000 Asian patients a year, and that figure is growing by 13% annually.
E . Key Asian Regulatory Trends
1. In some countries, where there were no medical regulations for registration, new regulations are being put in place.
a. There are currently very few regulations for imported medical equipment in Malaysia. The Ministry of Health (along with the Association of Malaysian Medical Industries), however, is drafting a more comprehensive regulatory framework for medical devices that should be implemented by 2002.
b. India, which has no regulatory body for medical devices will also formulate and implement new regulations by 2002.
2. In some countries where medical registrations were lopsided (domestic and foreign rules differed), they are becoming fairer to the foreign party.
a. Taiwan’s Department of Health (DOH) is revising its registration requirements for both domestically manufactured and imported medical devices. In 2004, Taiwanese companies will be required to start meeting Taiwan’s Good Manufacturing Practice (GMP) guidelines. The DOH has drafted what it believes to be comparable regulatory requirements for imported products to show GMP compliance.
3. In some countries where local rules only applied, global harmonization is becoming more prevalent.
a. In January 1999, in an effort to harmonize its drug classification with international standards, the Thai government decided to reclassify drugs into three categories: over-the-counter drugs, drugs sold by pharmacists and prescription drugs.
4. In some countries where current regulatory bodies have not been
adequate or their mission unclear, new organizations with more specific focuses are being put in place.
a. Formation of the State Drug Administration (SDA) in China several years ago.
b. Japan’s Ministry of Health and Welfare (MHW) has reorganized to meet new environment. It has merged with the Ministry of Labour to form the Ministry of Health, Labour, and Welfare (MHLW).
5. In some countries, despite protests from industry, regulations have not
improved or even become tougher.
a. In China new regulations require type testing locally for Class 2&3 medical devices.
6. The regulations in Asia will continue to evolve. While certain trends can
be identified, one cannot make generalizations for the region without
looking at the specific systems in each country.
China
A. Background
Overview: China represents a huge market and great opportunities for U.S. firms. In Shanghai, everything is under construction, and though economic growth has slowed considerably in recent years, GDP growth remains strong. However, the next few years may witness increasing tensions between a highly centralized political system and an increasingly decentralized economic system. Unemployment is a growing problem.
Population: 1.26 billion (2000)
Ethnic Groups: Han Chinese 91.9%, Zhuang, Uygur, Hui, Yi, Tibetan, Miao,
Manchu, Mongol, Buyi, Korean, and other nationalities 8.1%
GDP growth rate: 8.0% (2000)
Per capita income: $2,100 overall; $4,300 in major cities (2000)
B. Medical Device Market
• With a rapidly aging population, a rising standard of living and the government’s commitment to improving access to basic healthcare, China’s $1.5 billion medical device market is currently the second largest in Asia after Japan. It is expected that this market will grow 5-10% over the next 5 years.
• Electromedical, diagnostic and imaging equipment are the medical device products in highest demand.
• Imports have grown and now account for more than 50% of China’s medical device purchases. There are more than 200 foreign medical device companies operating in China, with the U.S. holding a 35% share of foreign imports, with sales totaling $240 million in 1998.
• Local production is expanding, but Chinese domestic strengths will continue to be in the low to medium technology range, and therefore will not directly compete with many sophisticated imported products.
C. Pharmaceutical Market
• At current growth rates, China’s total pharmaceutical market was expected to grow to $23 billion by the year 2000 and is expected to become the largest pharmaceutical market in the world by 2020.
• China’s market for pharmaceutical products has been growing rapidly. Since the late 1970s, China’s annual pharmaceutical sales growth has averaged between 18-20% compared to an average of 6% in the U.S. and Europe.
• Pharmaceutical imports, which currently exceed $930 million, have also grown about 20% per year since the early 1990s.
• Opportunities for foreign pharmaceutical companies are expanding rapidly. Intensified competition among foreign and domestic companies, as well as a complex and often frustrating regulatory environment, however, have reduced the short-term profits and sales of many foreign companies.
• There are currently more than 1,800 foreign invested pharmaceutical enterprises in China, compared to less than a dozen in the late 1980s.
D. Key Regulatory Issues
1. Medical Device Registration Issues
• Medical devices were not required to be formally registered for sale in China until late 1994. In 1997, the State Pharmaceutical Administration’s (SPAC) “Provisions Governing the Registration of Medical Device Products” went into effect and unified the registration system throughout China.
• The SPAC was dismantled in 1999. The newly-established State Drug Administration (SDA) is in charge of registration and monitoring imported medical devices. The SDA’s responsibilities include:
– Developing, revising and promulgating legal standards for medical devices
– Establishing catalogs for the classified regulation of medical device products
– Registration, testing and administration of all medical devices
– Issuance of product registration certificates and production licenses
– Quality system and safety certification of medical device products
• The SDA has imposed new requirements on importers. The key provisions include:
– Type testing of Class II and Class III devices performed at one of 10 Chinese testing centers (test price to be determined by the lab).
– Mandatory clinical trials in China for Class III implantables
– Continued on-site inspection of implantables
– A registration fee of $2,500 per application to replace the former $400 fee
2. Intellectual Property Protection
• Because China’s registration laws require companies to submit such materials as product manuals and technical specifications, piracy and counterfeiting are widespread in China. Since China still maintains a “first to register” system that requires no evidence of prior use or ownership, it is relatively easy to “beat” the rightful owner to registration.
• Some protection of registered products is offered under the 1993 Product Quality Law, which prohibits producers and sellers from counterfeiting products or using quality marks that are not their own (i.e. certification marks, famous brand marks or marks of excellence).
3. Pharmaceutical Issues
• The State Drug Administration (SDA) is implemented a regulation in the year 2000 that differentiates between prescribed and non-prescription medicine. According to this regulation, all medicines are divided into two categories: prescribed medicines or non-prescription medicines, also referred to as over-the-counter (OTC) medicines.
• Though most medicine manufactured by foreign joint ventures, large State-owned enterprises, or foreign manufacturers (including imports) is labeled correctly, much of what is manufactured by small domestic producers is not. Product information and labels on locally manufactured products often omits potentially negative information, such as side effects, and often reads like advertising copy. Therefore, China’s State Drug Administration is now requiring the standardization of unified packaging of medicines as of October 1, 2001. Information provided on pharmaceutical drug labels will be uniformly presented so that consumers will be better informed. The same information and instructions will be required for the same kinds of medicine manufactured by different companies, including information on side effects, warnings, and periods of validity.
• The State Administration for the Supervision and Management of medicine issued the “Quality Control Convention in Drug Production,” “Rules for the Control Abstinence Drugs” and “Rules for the Control of Ephedrine” in 1999. The drug quality control convention divides GMP into basic principles and special requirements for different drugs. It also adds provisions concerning verification and authentication, specifying that verification and authentication cover facilities, equipment installations, operations, property and products.
Japan
A. Background
Overview: After over a decade of stagnation and recession, Japan is undergoing tremendous change. Lifetime employment and the keiretsu system (groups of companies working together based on relationships rather than free market principles) — two hallmarks of Japan’s economy — are eroding. Computer usage — which has always lagged behind the West — is growing rapidly. Japan’s traditionally closed society is also accepting more immigrants, mostly to perform low-wage work or to work in the computer industry. There is a sense in many ways that Japan has fallen behind the U.S. — but it wants to catch up fast.
Population: 127 million (2000)
Ethnic Groups: 99.4% Japanese — Homogeneous population
GDP Growth Rate: 1.7% (2000)
Per Capita Income: $23,400 (1999)
Health Care in Japan:
• Doctors are king
• Average hospital stay is 35 days
• Annual per person expenditure on pharmaceuticals is $225
B. Medical Device Market
• Japan’s $21 billion medical device market is currently the second largest in the world.
• Market demand grew approximately 13% annually from 1993 to 1995, but slowed to 5% between 1996 and 1998 during the recession. Japan’s economy is now beginning to recover and the demand for medical devices is expected to grow by approximately 6% annually for the next few years.
• There are several forces driving this demand. For example, by the year 2000, nearly 20% of Japan’s population will be older than 65, causing demand for cardiac pacemakers to increase by 30-40% during the next 10 years. Also, a growing number of Japanese are being diagnosed with cancer, heart disease, and other conditions that are common in industrialized countries. This is further driving the demand for advanced medical treatment.
• In an effort to be more cost effective, the country is looking to foreign medical companies that can supply innovative products at a much lower cost.
• In 1998, Japan also began to deregulate its medical industry to reduce burgeoning healthcare costs. Deregulation should be complete by the year 2000 and will remove numerous barriers to foreign companies by untangling some of the country’s complicated product testing and registration regulations.
C. Pharmaceutical Market
• The size of the Japanese pharmaceutical market is approximately $53 billion.
• Pharmaceuticals are the main focus of the current healthcare reform debate in Japan. Japan’s universal health insurance system covers prescription drugs. The share of the cost of drugs in Japan’s total medical expenditures has been around 30%. However, measures to cut drug prices and decrease the consumption of drugs are now being implemented.
• Generally, foreign share in Japan’s pharmaceutical industry is about half the domestic production. The U.S. became the largest foreign supplier in 1996 with a share of 20.5% of total imports.
• In light of the high costs involved in introducing a drug to the market and complex distribution network in Japan, U.S. firms interested in entering the market for the first time may wish to consider using established drug companies of either Japanese or foreign origin. Japanese companies are interested in handling innovative drugs for importation or licensing to supplement their existing product lines.
D. Recent Regulatory Issues
• Due to a 1999 decision by the MHLW, over 700 over-the-counter (OTC) drugs were reclassified as “quasi-drugs” to make them available for sale in supermarkets, convenience stores and other non-pharmacy outlets. The reclassified drugs came from 150 categories, the largest being tonics (from which 200 products, excluding those with stimulants, were reclassified). Also, despite demands to deregulate from retailers and consumers, the MHLW did not reclassify cold medicines and painkillers as “quasi-drugs” since they work on the central nervous system and have strong side effects.
• As a result of work under the Enhanced Initiative, in October 2000, the MHLW revised the reimbursement pricing procedures to increase transparency and create more appropriate valuations that recognize increased innovation. Previously, reimbursement levels were often based on those set for previous generation, less sophisticated products. MHLW has also indicated that it will review the timing of granting reimbursement to encourage faster introduction and greater availability of innovative new products.
• In March 2001, MHLW issued an official publication that clearly outlines, by use of flowcharts, the process for the approval of “improved” and “new” medical devices. The document is extremely helpful in establishing a “roadmap” to the process, and allows for direct communication between applicants and MHLW reviewers.
Hong Kong
A. Background
Overview: Hong Kong has a bustling free market economy highly dependent on international trade. Natural resources are limited, and food and raw materials must be imported. Indeed, imports and exports, including re-exports, each exceed GDP in dollar value. Even before Hong Kong reverted to Chinese administration on July 1, 1997 it had extensive trade and investment ties with China. Real GDP growth averaged a remarkable 8% in 1987-88 and approximately 5% in 1989-97. The Asian crisis hit this trade-dependent economy quite hard, with GDP down 5% in 1999.
Population: 6.85 million (July 1999)
Ethnic groups: Chinese 95%, other 5%
GDP growth rate: -5.0% (1999 est.)
Per capita income: $25,100 (1998)
B. Medical Device Market
• Hong Kong’s medical device market of $550 million grew by 7% in 1998. It is currently the least regulated market in Asia as well as the world and is dominated by foreign suppliers.
• Medical and health standards have risen considerably in recent years and are among the best in the world. There are practically no legal or trade barriers to imports of foreign medical devices, no import duties and virtually no regulation on the sale of medical devices.
• Hong Kong does not manufacture any sophisticated medical equipment. It relies entirely on imports and its medical market is dominated by U.S., German and Japanese products.
C. Pharmaceutical Market
• Sales potential for Western medicines in Hong Kong is substantial, approximately $1.5 billion in 1998. Hong Kong will continue to import Western pharmaceutical products because its domestic production does not meet the market demand. The import market grew by approximately 10% in 1996 and 1997.
• Local production occupies approximately 13-15% of the market. About 50% of imported pharmaceutical products, irrespective of country of origin, are branded names. Most patent and generic drugs come from the U.S. and Europe, only very basic, simple OTC drugs are produced locally.
• OTC drug imports in Hong Kong should increase 10% annually starting in the year 2000, for the next few years, because of limited local production, a rebounding economy and increased awareness of OTC drugs benefits and availability.
D. Recent Regulatory Issues
• Hong Kong’s legislation on the pharmaceutical industry is minimal. For example, it does not have special legislation regarding agents and distributors. Virtually anything that both sides can agree to and put into a written contract is acceptable and enforceable including restrictions on territory and a grace period for termination of the agreement.
• Hong Kong to date has kept its regulatory environment intact and distinct from China.
India
A. Background
Overview: Indian think-tanks projected GDP growth of about 5% in 1999. Exports fell 5% in 1998 mainly because of the fall in Asian currencies relative to the rupee. Energy, telecommunications, and transportation bottlenecks continue to constrain growth. A series of weak coalition governments have lacked the political strength to push reforms forward to address these and other problems.
Population: 1 billion (July 1999)
Ethnic groups: Indo-Aryan 72%, Dravidian 25%, Mongoloid and other 3%
Capital: New Delhi
GDP growth rate: 5.4% (1998)
Per capita income: $1,720 (1998)
B. Medical Device Market
• Although India’s medical device market is relatively small, at $600 million, it has been growing at an impressive 15-18% annually.
• Since most of the doctors in India are trained in the United States and Europe, they tend to favor sophisticated foreign medical devices. Overall, private hospitals purchase approximately 40-50% of imported devices in India.
• There is no central regulatory approval body in India for medical devices, and thus only the approval of the healthcare provider is needed to market a medical device in the country.
• Despite the lure of a large, untapped market, foreign medical device manufacturers should proceed cautiously in India. There are many obstacles including poor infrastructure, bureaucracy, weak international property protection, etc.
C. Pharmaceutical Market
• India’s pharmaceutical market was valued at more than $3 billion in 1998. At its current annual growth rate of 15% (almost double the world’s 6% annual growth rate), this market is expected to reach 6 billion by the end of 2001.
• Average per capita expenditure on pharmaceuticals in India is only $3, compared to $191 in the U.S. and $412 in Japan. This is due in part to the prevalence of alternative healing methods in India, such as ayurvedic medicine and homeopathy. Also, drug prices have been kept artificially low by the Indian government.
• India’s pharmaceutical industry is one of the most highly regulated in the world. Price controls have affected the profitability of the industry, and weak patent protection has posed a longer-term threat to foreign investment in India’s drug market.
• While India’s pharmaceutical market will remain regulated in the short term, there are plans for reform. Pressure from the World Trade Organization is speeding up discussions within the government to improve patent protection.
Indonesia
A. Background
Overview: The collapse of the rupiah in late 1997 caused GDP to contract by an estimated 13.7% in 1998. The Indonesian Government initially wavered on meeting the conditions it agreed to in exchange for a $42 billion IMF assistance package, contributing to further loss in investor confidence and outflows of capital. Indonesia remains unstable, with social unrest and government stability both lingering issues.
Population: 216 million (July 1999)
Ethnic groups: Javanese 45%, Sundanese 14%, Madurese 7.5%, coastal Malays 7.5%, other 26%
Capital: Jakarta
GDP growth rate: -13% (1998)
Per capita income: $2,830 (1998)
B. Medical Device Market
• The size of Indonesia’s medical device market in 1998 was about $150 million.
• Historically, the main factor for growth in the Indonesian medical market was the rapid development of Indonesia’s economy combined with the inadequacy of the health service sector. Imports account for 93% of Indonesia’s medical device market.
• Surgical equipment, over-the-counter test kits, medical lasers and diagnostic equipment comprise most of Indonesia’s medical imports. Domestic production is generally limited to commodity type products like disposable syringes.
C. Pharmaceutical Market
• The size of the Indonesian pharmaceutical market is about $350 million and is expected to grow at 5-6% for the next few years, assuming Indonesia achieves some measure of stability.
• With the effects of the Asian crisis, Indonesia’s pharmaceutical market was down approximately 71% in dollar terms in 1998.
• Indonesian drug firms lack the financial resources and the technical expertise to carry out original research and create new compounds. Instead they produce drugs under license from foreign drug firms or more commonly survive by manufacturing and distributing generic pharmaceuticals copied from foreign companies.
• International pharmaceutical firms face difficulties with the drug approval process and the protection of intellectual property rights. On a positive note, the Indonesian government has responded by establishing a program to speed up the approval time for new medicines.
• Foreign companies’ access to the market is restricted by regulations that prevent them from establishing marketing and distribution networks without manufacturing in the country. Drug companies without facilities in Indonesia must partner with Indonesian firms, who can manufacture and distribute the products. The local firm is also responsible for registering the product with the Director General for Food and Pharmaceutical Control.
D. Recent Regulatory Issues
• Patent law in Indonesia provides legal protection only if a pharmaceutical is manufactured in the country. Imported drugs that have been registered with the Ministry of Health are not covered by patent law. Thus, if a foreign company, through a local partner, registers, imports and distributes a proprietary drug, an Indonesian company can legally manufacture the same drug and sell it as a generic product under a different name.
Malaysia
A. Background
Overview: After a decade of 8% average GDP growth, the Malaysian economy, severely hit by the regional financial crisis, declined 7% in 1998. Malaysia was still in a recession for the first half of 1999. Since then, things have turned around. Both government and private forecasters expect Malaysian GDP to grow another 5% to 6% this year. However, while Malaysia’s economic future looks bright in the short-term, its long-term prospects will be hampered by the lack of reforms in the corporate sector, particularly those dealing with competitiveness and high corporate debt.
Population: 21 million (July 1999)
Ethnic groups: Malay and other indigenous 58%, Chinese 26%, Indian 7%, others 9%
Capital: Kuala Lumpur
GDP growth rate: 5% (1999)
Per capita income: $10,700 (1999)
B. Medical Device Market
• Since the early 1990s, Malaysia’s medical device market has been growing at 15-20% annually. With the rejuvenation of the Malaysian economy after the crisis of 1997-98, the country’s medical device market is currently worth about $300 million, with imports accounting for more than 90% of this total.
• Best sales prospects for medical devices in Malaysia are high-tech equipment such as anesthesiology equipment, diagnostic equipment, home healthcare products, life support equipment, ultrasound equipment, MRIs and radiology equipment.
• There are currently very few trade barriers or regulations for imported medical equipment in Malaysia. Only latex rubber products (such as condoms or surgical gloves) require certification by the Ministry of Health. The government also maintains some safety related regulations on medical devices. For instance, it is government policy not to buy used/refurbished medical equipment, or allow new, experimental products into the country without FDA or other international standard approval. Also, any x-ray equipment must be specially examined and approved by the Ministry of Health before being used by doctors and radiologists.
C. Pharmaceutical Market
• 65% of Malaysia’s $210 million pharmaceutical market is accounted for by imports. Most doctors are reluctant to switch to local brands as they prefer the higher quality of imported drugs. Thus, most local drugs are generic pharmaceuticals such as painkillers and antibiotics.
• All products, whether locally manufactured or imported, must be registered with the Drug Control Authority prior to being manufactured, imported, sold or supplied, unless the product is exempt under specific provisions of the regulations.
D. Recent Regulatory Issues
• There are very few regulations with respect to medical device registration in Malaysia. The Ministry of Health is currently drafting a more comprehensive regulatory framework for medical devices. The proposed framework will be implemented in 2002 and it will cover the registration of medical devices and regulate compliance of GMP for local and imported devices. It will also regulate the importation of medical devices and the use of certain medicines.
• Product registration for pharmaceuticals in Malaysia can easily take 2 years.
Philippines
A. Background
Overview: In 1998, the Philippine economy deteriorated as a result of spillover from the Asian financial crisis and poor weather conditions. The government has promised to continue its economic reforms to help the Philippines match the pace of development in the newly industrialized countries of East Asia. Their strategy includes improving infrastructure, overhauling the tax system to bolster government revenues, and moving toward further deregulation and privatization of the economy.
Population: 79.3 million (July 1999)
Ethnic groups: Christian Malay 91.5%, Muslim Malay 4%, Chinese 1.5%, other 3%
Capital: Manila
GDP growth rate: 2.0% (1999 est.)
Per capita income: $3,500 (1998)
B. Medical Device Market
• The total market size of medical equipment in the Philippines was $51 million in 1998, with imports accounting for about $46 million –approximately 90% of the market. The U.S. had the largest market share — about 35%. Since many Filipino doctors have studied in the U.S., they are familiar with U.S. products and strongly prefer them.
• Industry insiders optimistically predicted an 8% growth in the medical device industry in 1999 due to the increased consumption of medical equipment and other medical products, offering excellent opportunities for U.S. suppliers. Continuous requirements for medical services, new technology, and equipment replacement should spur market growth.
C. Pharmaceutical Market
• The size of the Philippine pharmaceutical market is about $300 million and it is expected to grow at a rate of 6% in 1999.
• The Philippine Bureau of Food and Drugs (BFAD) requires the registration of imported pharmaceutical and diagnostic products. The registration process is long and tedious, taking from 12-18 months to finish.
Singapore
A. Background
Overview: Singapore has an advanced economy with strong service and manufacturing sectors and excellent international trading links. Singapore bore the effects of the Asian financial crisis better than its neighbors, but the crisis did pull GDP growth down to 1.3% in 1998 from 6% in 1997. Rising labor costs and appreciation of the Singapore dollar against its neighbors’ currencies continue to be a threat to Singapore’s competitiveness in Southeast Asia.
Population: 3.5 million (July 1999)
Ethnic groups: Chinese 76.4%, Malay 14.9%, Indian 6.4%, other 2.3%
Capital: Singapore
GDP growth rate: 5.5% (1999 est.)
Per capita income: $26,100 (1998)
B. Medical Device Market
• The Singapore market for medical devices in 1998 was estimated to be about $410 million. Imports from the U.S. are estimated at $173 million, or about 33% of the total imports of medical devices.
• More than 80% of local demand is met through imports, in particular imaging and diagnostic equipment.
• Singapore’s healthcare facilities are widely recognized as the best in Asia, outside of Japan, with a strong bias toward U.S. and European products and an emphasis on quality over price.
• A rapidly aging population and double-digit growth in the incidence of cancer is driving the medical industry’s commitment to maintaining its high standard of care. The device market was expected to grow 7.3% in 1999, and both the overall market and the import market for medical devices are expected to grow an average of 5% annually for the next few years.
C. Pharmaceutical Market
• The Singapore market for pharmaceuticals, both prescription and generic, was estimated to be worth about $200 million in 1998. The market for prescription drugs is expected to shrink while that for generic drugs is expected to increase because of cost-cutting measures in healthcare by the Ministry of Health (MOH).
D. Recent Regulatory Issues
• The Clinical Trials and Epidemiology Research Unit (CTERU) of Singapore has selected Clintrial 4™ software to manage its clinical data. The CTERU is a pivotal research organization that works closely with Singapore’s Ministry of Health and clinical groups in Singapore and the Southeast Asian region to encourage pharmaceutical collaborations and support the planning, launch and administration of multi-center studies meeting Good Clinical Practices (GCP).
South Korea
A. Background
Overview: South Korea is about the size of Virginia but has four times its population. As one of the Four Dragons of East Asia, South Korea’s economy grew tremendously from the 1960s through 1997. Korea was hit hard by the Asian Financial Crisis, but its recovery has been solid. By the beginning of 1999 Korea had improved its financial stability and rebuilt foreign exchange reserves to record levels by running a current account surplus of $40 billion.
Population: 47.4 million (2000)
Ethnic groups: homogeneous (except for about 20,000 Chinese)
GDP growth rate: 8.8% (2000)
Per capita income: $13,300 (1999)
B. Medical Device Market
• South Korea’s medical device market was growing rapidly at an annual rate of about 14% in 1997. In fact, the market was approaching $1 billion before the crisis struck in 1997. The crisis caused the market to lose about $300 million on a short-term basis. However, the medical device market in South Korea remains the third largest in Asia.
• While the market suffered huge losses in 1997 and 1998, this was due more to the decline in sales of expensive medical equipment (MRIs, CT scanners, etc.) than the decline in sales of lower costing hospital staples. With South Korea’s economic recovery, its medical device market is picking up quickly.
• Due to a rising per capita income prior to the crisis, many doctors and facilities developed a strong preference for sophisticated medical technology. About 70-80% of medical devices are currently imported. Due to the lack of local production, this share should remain stable over the next few years.
C. Pharmaceutical Market
• The Korean pharmaceutical market was approaching $9 billion before the country’s financial crisis hit full force in November 1997. The market volume has decreased about 30% since then – drug imports, which were growing at about 13% annually before the crisis, were slashed by 15% in 1998.
• The domestic industry’s lack of competitiveness in technological development will continue to keep domestic pharmaceutical firms in the background — producing mostly generics. Foreign pharmaceutical companies still face several disadvantages such as import approval requirements, unequal treatment and the lack of coverage by the Korean national medical insurance system. Despite this, over the past few years the growth rate of imported pharmaceuticals has been about 8%.
D. Key Regulatory Issues
1. Medical Device Registration Issues
• The new regulatory approval system for medical devices implemented by the Ministry of Health and Welfare (MHW) in 1997 ended its transitional period on September 1, 1999. In addition with the new approval system, the MHW delegated approval authority for medical devices to the Korean Food and Drug Administration (KFDA).
• Even though Korean regulations sometimes allow imported medical devices exemptions from local type tests when equivalent foreign test data is submitted, very few U.S. firms have been exempted from these expensive local tests.
• The requirements for submitting testing standards are full of inconsistencies. For example, the KFDA will not accept a U.S. manufacturer’s own standards and testing methods over the new ISO (GMP) documentation, even though they are often more stringent than international requirements. Furthermore, the KFDA has consistently required U.S. manufacturers to produce a certificate of U.S. Quality System Regulation compliance by the U.S. FDA even though the U.S. FDA does not issue such a “certificate of compliance.”
2. Reimbursement
• Korea’s monopolistic National Health System is closed to private healthcare insurance providers, resulting in artificially low reimbursement rates, inconsistency and a lack of transparency.
• R&D expenses incurred by foreign companies to develop or improve a medical device are lost under current regulations because the National Federation of Medical Insurance only lists improved, enhanced or upgraded medical devices on the National Reimbursement List when their prices are lower than those of the existing product.
3. Biocompatibility (Safety) Data Requirement
• The KFDA’s requirement that there be data to prove that the materials used in medical devices are safe is troublesome because some materials have been deemed so safe that data is no longer being generated and while exemption for some materials is being considered, there is little being done.
Taiwan
A. Background
Overview: Taiwan is a small island nation with few natural resources. Taiwan has a dynamic capitalist economy. Real growth in GDP has averaged about 8.5% a year during the past three decades. Export growth has been even faster and has provided the impetus for industrialization. Inflation and unemployment are low, and foreign reserves are the world’s third largest. Because of its conservative financial approach and its entrepreneurial strengths, Taiwan suffered little compared with many of its neighbors from “the Asian flu.”
Population: 22.2 million (2000)
Ethnic groups: Taiwanese 84%, Mainland Chinese 14%, Aborigine 2%
GDP growth rate: 6.0% (2000)
Per capita income: $16,100 (1999)
B. Medical Device Market
• With net incomes remaining high in Taiwan despite the crisis, there is money available to spend on quality healthcare.
• Taiwan’s currency depreciation from the crisis has also been small compared with other countries, and medical device imports continued to grow at 3-5% between 1997 and 1999. Total market demand in Taiwan for medical devices is currently around $700 million, with imports accounting for nearly 80% of this figure.
• The demand for sophisticated medical services and technology has also increased rapidly. The market for cancer diagnostic and therapy equipment, for example has been growing at approximately 8-10% per year since 1995.
• The most frequently imported instruments in Taiwan today include CAT scanners, ultrasonic diagnostic machines and electronic diagnostic devices.
• Local clinics and hospitals continue to prefer U.S. medical equipment for its quality and innovation. U.S. medical manufacturers have about a 42% market share in the Taiwanese market.
C. Pharmaceutical Market
• The size of Taiwan’s pharmaceutical market is about $2 billion and is expected to grow at a healthy 10% annually for the next few years.
• U.S. firms have prospered in Taiwan’s pharmaceutical industry. The region’s medical market is expected to grow rapidly in the future as the demand for high quality medical products drives sales of imported equipment and pharmaceuticals.
• All imported and locally produced pharmaceuticals must be registered and issued product licenses by the Department of Health (DOH) before they are marketed in Taiwan. When applying for registration and market approval, domestically manufactured medicines must be strictly tested for drug stability to ensure that the amount, quality and purity of the products in use meet the existing specifications.
D. Recent Regulatory Issues
• Taiwan has one of the most demanding regulatory environments in Asia.
• A 1999 agreement between the Pharmaceutical and Research Manufacturers of America (PhRMA) and Taiwan’s Department of Health involves the mutual recognition of good manufacturing practice standards for new drugs and medical equipment.
Thailand
A. Background
Overview: After months of speculative pressure on the Thai baht, the government decided to float the currency in July 1997, the beginning of the Asian Financial Crisis. After years of rapid economic growth (averaging about 9% in the early to mid 1990s), the Thai economy contracted 0.4% in 1997 and shrunk another 8.5% in 1998. GDP growth became positive again in 1999 and the economy has made steady progress since that time.
Population: 60.6 million (July 1999)
Ethnic groups: Thai 75%, Chinese 14%, other 11%
Capital: Bangkok
GDP growth rate: 4% (1999)
Per capita income: $6,400 (1999)
B. Medical Device Market
• The total medical device market in Thailand was approximately $600 million in 1997. Imports accounted for 85% of the total market, or about $510 million. The depreciation of the Thai baht, however, caused an increase in the cost of imported medical products of anywhere between 15-40%.
• The tough economic conditions have not stopped foreign medical device firms from tapping into the Thai market. Taking advantage of a 40-70% drop in land prices, a 36% drop in office rents since 1997, an oversupply of industrial real estate, lower labor costs, overhead and materials, foreign medical device companies are setting up manufacturing operations in Thailand. For example, Safeskin Corp., established its third glove-manufacturing facility in Thailand in 1999.
• With cardiovascular disease and automobile accidents being the two leading causes for deaths in Thailand, the demand for implantable medical devices is increasing. Thailand has a limited amount of local manufacturing companies in this sector and thus relies on imports. In 1998, 42% of total imports in the implantable device market were from the U.S.
C. Pharmaceutical Market
• Domestic demand for pharmaceuticals has been the industry’s greatest driving force – Thailand’s rapidly aging population and increased incomes from a spectacular 8% annual economic growth that lasted from the mid 1980s to the mid 1990s accelerated the demand for better healthcare.
• While Thailand’s regulatory environment is fairly bureaucratic, a gradual liberalization of the pharmaceutical law has improved forecasts, and the pharmaceutical market was expected to grow 5-10% in 1999. Foreign drug companies can take advantage of renewed demand for quality pharmaceuticals.
• Thailand’s pharmaceutical market is made up of locally-produced domestic drugs (generic products, which account for 46% of the drugs on the market), locally produced international brands (about 32% of the market), and imports (22% of the market).
D. Regulatory Issues
• Previously, Thailand’s Ministry of Public Health (MOPH) classified pharmaceuticals into “modern” and “traditional” (i.e. herbal) pharmaceuticals. Modern pharmaceuticals were further divided into different categories. In January 1999, in an effort to harmonize its drug classification with international standards, the government finally decided to reclassify drugs into three categories: 1) over-the-counter drugs, 2) drugs sold by pharmacists and 3) prescription drugs. This new classification, while not following international standards exactly, does eliminate much of the subjectivity in the previous system and thus makes the identification of drugs more accurate.