Myanmar, also known as Burma, has been getting a lot of international press coverage lately, not least because of the release from house arrest of dissident Aung San Suu Kyi, the lifting of US trade sanctions, and US President Barack Obama’s high-profile visit in November 2012.
In a 2012 study, the Asian Development Bank (ADB) forecast that Myanmar’s economy could grow at a rate of 7-8% per annum and join the ranks of middle income nations over the medium term. Provided development challenges can be overcome by wide-ranging economic and continued political reforms, the ADB forecasts that per capita income could triple by 2030, reaching almost $2,500 per annum.
A new foreign investment law in November 2012 promised a long list of new incentives, including long-term land leases, tax holidays, export tax rebates and minimal capital commitments, all designed to lure foreign investors to what has been dubbed “Asia’s last frontier”.
All this paints a positive background for the pharma industry, driven by increasing wealth and solid economic growth. Beyond all the hype though, early investors on the ground are already beginning to see a less attractive side to Myanmar. Infrastructure is still patchy, with power outages once or twice a week common. The banking, insurance and services sectors are not likely to be opened to foreign investors before 2015 at the earliest, making normal trading challenging for any early pharma entrants.
Strategically situated between two of the fastest-growing economies in the world, India and China, Myanmar is resource-rich but has been plagued by economic mismanagement, inefficient allocation and rural poverty. It is still one of the poorest countries in the ASEAN (Association of South East Asian Nations) group, and the lack of adequate infrastructure coupled with a lack of a skilled workforce has contributed to the economic problems.
The usual first waves of foreign investors are realizing that progress will be slow. So what are the prospects for the healthcare sector and pharma industry in one of the most challenging of the early emerging markets?
The healthcare system is regarded as one of the least developed worldwide, with the World Health Organization placing the country 190th in international rankings, and it is estimated that the government currently spends just 0.5-3% of GDP on healthcare. Although everybody is, on paper, eligible for free healthcare, the reality is that most patients end up paying for treatment even in public hospitals, which lack many basic facilities and equipment.
In Nay Pyi Taw, the official capital city of Myanmar, the new general hospital has 1,000 beds and provides general medical and special care facilities for cardiology, pulmonary, urology, neurology, gastrointestinal disorders and hepatology, but the richer population habitually travels to Bangkok or Singapore for treatment.
The government-run CMSD (Central Medical Stores Depot) under the Ministry of Health and the DPD (Defence Procurement Department) arm of the Ministry of Defence, are the two main bodies handling government tenders. But both agencies suffer from budgetary and financial constraints and are not able to meet either public health or military hospitals’ pharmaceutical needs.
There are five pharmaceutical factories in Myanmar but they have not been upgraded in the last 50 years or so, while poor maintenance and shortage of raw materials means that the factories are not at present able to meet public health needs.
Since 2010, private healthcare services can be registered and by the end of that year there were 103 private hospitals (87 general hospitals and 16 specialist hospitals), 192 specialist clinics, and 2,891 general outpatient clinics. Traditional medicine continues to be important, with an estimated 14 hospitals specializing in this field and supported by the state.
Myanmar has an estimated 6,300 doctors working in the public sector and over 11,000 in private practice, but the number of specialists is very low, which in turn explains the low consumption of specialist drugs, such as in the areas of CNS, oncology and endocrinology.
Leading medical conditions
For companies looking at potential therapeutic areas of interest, infectious diseases top the list of medical conditions, with cutaneous larva margrans, dengue fever and filariasis all having a high incidence.
Malaria is the leading cause of morbidity and mortality, with the majority of infections becoming resistant to commonly-used antimalarial drugs. Less than one-third of the total population is reportedly living in malaria-free areas, and tuberculosis is also endemic, with Myanmar being among the 22 countries globally with the highest burdens of TB, with multi-drug resistant TB now a healthcare challenge.
HIV/AIDS is reported to have an adult prevalence of 1-2%, classifying Myanmar as a country with a generalized AIDS epidemic, although prevalence varies by geographical location and population sub-groups. UNAIDS has estimated that by the end of 2011, there were 216,000 people living with AIDS in the country, and 18,000 people are known to have died the same year from AIDS-related illnesses. With over 8,000 new cases being reported in 2011, there is an ongoing need for more awareness and prevention measures.
As a result of various risk factors, non-communicable diseases, such as diabetes mellitus, cardiovascular illnesses, including hypertension, and cancers are also emerging as health problems, affected in part by widespread tobacco usage.
The pharma market
Estimates vary about the real size of the pharmaceutical market but it is thought to be $130-150 million. Some estimates put it closer to $220-250 million, with the discrepancy likely down to under-reported invoiced sales and illegal imports. The latter continue to be a challenge, being either smuggled or hand-carried.
The two major cities, Yangoon and Mandalay, comprise approximately 60% of total pharmaceutical sales in the country, although close to 70% of the population lives in the rural areas where access to modern medicine is relatively poor.
Anti-infectives, analgesics and vitamins comprise more than three-quarters of total product sales and antimalarials are in high demand in government tenders. Prescription drugs can be bought and sold in the open market and most multinational companies’ products are sold and used in private sector hospitals and specialist clinics, whereas cheaper-priced generics are used mainly in government hospitals, private sector GP clinics and rural areas.
Indian and Thai generic companies are the main suppliers (accounting for 48% of total drug imports) and pricing levels as a result are generally low. Some of the leading Indian companies, such as Ranbaxy, Cipla, Dr Reddy’s and Lupin, are well established and their brands have a high degree of awareness and acceptance by both doctors and consumers. Both Cipla and Ranbaxy have annual revenues of around $7 million each.
The many years of authoritarian rule has meant that not enough money was spent on improving healthcare and related services, and the pharmaceutical market is still not well developed. Most private drug distributors in Myanmar today have not progressed enough to be highly specialized and usually sell other product lines apart from pharmaceuticals.
Of the two major Asia regional distributors, only DKSH has operations in Myanmar (Zuellig Pharma manages Myanmar out of Thailand). Mega Life Sciences is also well established, having set up its country operations as early as 1994, and is now the top pharmaceutical distributor in the country.
However, the number of relatively small distributors suggests that there will likely be a shake-out when Myanmar picks up speed in pharmaceutical market growth.
Other well-known local pharmaceutical distributors include San Lwin Trading, Model Pharma, Thukha Dana, JDS and Myanmar Executive Network.
Decades of centralized rule by a military junta not known for its modern outlook means that technology is not where it should be in Myanmar and not comparable to surrounding countries.
Personnel in the Ministry of Health and in the FDA also lack proper technical skills and training required to efficiently evaluate new drug applications.
On average, drug registration approval time is currently approximately 24 months, compared with 12-14 months before the current backlog built up as a result of regulatory resources and equipment not keeping pace with the increase in drug applications. As an example, there are no incubators installed in the FDA to check stability and shelf life, which means the regulator keeps samples on shelves for the duration of the applications.
Key operating challenges
Following the opening up of the country and the takeover of a new nominally civilian government in 2011, there is now a semblance of a gold rush in Myanmar. Western investors and managers consider the country too good an opportunity to pass, while a broad set of political and financial reforms have convinced the US and European countries to drop most junta-era sanctions.
There are more people in Myanmar than in South Korea and South Africa, and almost three times the population of Australia, and although there is still widespread poverty, the growing urban elite is quickly developing Western tastes for consumer goods and consumer durables.
However, as the early arrivals are finding out, conducting international business in Myanmar with its minimal infrastructure is proving to be a real challenge and many business leaders say that the magnitude of the opportunity is still hard to quantify.
Currently less than 1% of the population has access to the internet, while investors need to carry cash because of the banking issues. There is an acute shortage of hotel rooms, office space is hard to come by, and with only a quarter of the population having access to reliable electricity, most businesses need to invest in generators.
In the pharmaceutical sector, it is expected there will be an increase in demand for Western medicines, but the uptake is likely to be slow. In the first instance, with healthcare infrastructure steadily improving, there will be an increase in demand for branded generics of a high and reliable quality.
Meanwhile, given that drug approval times are not expected to reduce soon, there will be on going demand for both illegal imports and counterfeit medicines.
Although quick returns are not to be expected, it is important that international companies start mapping opportunities in Myanmar, in terms of products and partners, and take steps towards building insider status in what is arguably Asia’s last frontier market.
Case study: Myanmar’s Mega future
Mega is the first international company to set up distribution operations in Myanmar. It started its local journey by selling its own brands, as well as distributing other brands, in 1995.
Pfizer, Servier, MSD, GSK Consumer Health, and Sandoz are a few of the key pharmaceutical companies that use Mega, which represents about 15% of the total pharmaceutical market in Myanmar.
Mega Lifesciences was set up 25 years ago with 10 people in Thailand and has grown to employ more than 3,500 employees and operates in South-East Asia, Australia, Africa, the Russian Federation, Middle East and Latin America; it now has an estimated turnover of $240 million.
Mega saw the potential of Indochina and entered Vietnam, Myanmar and Cambodia quite early. It has invested considerable resources over the years to build up a dominant presence there. Among Mega’s two divisions, Maxxcare represents principal brands and Mega We care markets its own brands.
Mega’s CEO, Vivek Dhawan, attributes the company’s success in the market to the:
- focus on the retail and OTC products;
- timely development of quality generics;
- development of human capital;
- promoting human wellness;
- and working to develop relevant products for the market.