Sector in Focus: Pharma & Healthcare
The Philippine healthcare industry is continuously confronted with financial challenges and poverty-induced circumstances. As stated in the EPBN Business primer, 46% of the out-of-pocket medical expenses of Filipino households are drugs and medicines. Healthcare spending in the Philippines is estimated at Php 500 billion in 2013 with gross value added amounting to Php. 172.04 billion that increased at least 10% in 2014. Most people in the labor sector have access to health insurance for themselves and dependents, while majority of the Filipinos if not all, are members of the Philippine Health Insurance Corporation (PhilHealth).
Philippine government initiatives
The Philippine government has doubled its efforts in improving the healthcare sector. The government through joint cooperation between the Department of Health (DOH) and Department of Science and Technology (DOST) has adopted the “Philippines e-Health Strategic Framework and Plan 2014-2020,”which would pave the pivotal infusion of Information and Communication Technologies (ICT) with medical services. With the e-health strategic plan, the Philippine government is expected to develop infrastructure for ICTs in health to promote equitable and affordable universal access, establish national centers for service improvements, upgrade medical equipment for state sponsored hospitals and health centers at the barangay levels, as well as implement national electronic public health information system.
The foci of Public-Private Partnership (PPP) projects include clinics in provincial areas and developing existing health facilities. Most hospitals will be handled and operated by the private sector for several years before transferring back to the government again to improve services and infrastructures. A consortium of private organizations have established the Philippine Healthcare Initiative to look upon three PPP healthcare related projects, which include the Quality Management Framework on Healthcare Facilities, Human Touch Program for Nursing Homes, and the Development of the Geriatric Curriculum. Likewise, a segment of this industry called “medical tourism” has been gaining attraction especially from foreign retirees, which have been offered special visa arrangement by the Philippine government. With this projection, the demand for European products will escalate.
Trade between EU and the Philippines
As for the goods imported from the EU to the Philippines, medical equipment and pharmaceutical products top the list. The combined value amounted to EUR 700 million in 2015 which EUR 412 million constitutes for the pharmaceuticals, while EUR 287 million for the equipment.
The Philippine pharma market is seen to expand and achieve a market value of USD 8 billion by 2020. In 2014, the pharmaceutical industry amounted to Php 145.05 billion. In a study by the Pharmaceutical & Healthcare association of the Philippines (PHAP), the Philippines is third in being the most innovative country in Southeast Asia in the field of pharmaceuticals while Singapore and Thailand lead the list. Currently, there are 461 clinical studies being conducted.
In 2014, the Philippine market for medical devices reached USD 288.9 mn and is anticipated to increase to USD 430.3 mn by 2019 which is a CAGR of 8.3%. In terms of products, the CAGR for orthopaedics and prosthetics is 17.1% while 2.4% for other devices. Due to the underdeveloped industry of local medical devices, the Philippines mostly rely on foreign imports. 94% constitutes of wound dressing products from Belgium and China, 82% of protective equipment are from Malaysia, and approximately 98% comprise of auxiliary devices such as pacemaker are from Hong Kong and Switzerland. In 2011, 35% of medical equipment and devices is composed of diagnostic imaging product, 21.9% for medical consumable products while 21.5% for other devices. Auxiliary devices, dental products, and orthopedic implants amount to 9.1%, 8.6%, and 3.2%, respectively.
Source: Espicom (2012); ITRI IEK compiled (2012/08)
Several EU medical companies have successfully penetrated the Philippine market:
Local companies such as Ayala, Vitacare, and Metro Pacific Hospital Holdings have expressed in furthering their presence in the health industry. Plans of acquiring buildings and facilities in the next 5-10 years are underway. Ayala plans to build 10 new hospitals while Metro Pacific aims to construct 25-30 hospitals in the next 10 years.
The Philippines seeks to be as competitive as other SEA countries in terms of medical treatments through improving the quality of supplies and other services. Since stem-cell therapy is the current trend, the government hopes that the country becomes the leading stem-cell research and therapy center through innovative measures and procedures. Moreover, spa & wellness industry has grown to php 5 billion in 2011 which is an 80% growth from 2006. On the other hand, the retirement industry is established but operates on a small-scale only. Retirement center choices are only limited and specific aspects need improvements.
Despite the opportunities, there are several challenges both the foreign and local businesses will be encountering. Remote areas in the provinces lack access to healthcare needs due to unavailability of infrastructures and roads as a result of budget constraints; which is why public hospitals have a shortage of medical equipment and are understaffed. According to the World Health Organization, the amount of hospital beds in the Philippines is 1 per 1000 inhabitants whereas it should be 3.3 beds. There is also the issue of brain drain wherein most medical professionals opt to work abroad due to lack of opportunities and insufficient pay. As for the approval of new drugs, it takes six times longer than before to get an approval from the Food and Drug Administration. The current concern of foreign pharmaceutical companies is the growing industry of generic drugs. Most Filipinos choose to purchase generic drugs since it is economical compared to branded drugs.
For more information about the Health and Pharmaceutical sector of the Philippines, download the EPBN Business Primer (link to the paper).