Market Opportunity

Increase in demand/consumption

• There is an apparent big demand for medical and pharmaceutical products in the Philippines with importation increasing at an annual average rate of 12% from 2004-2008. Importation in 2009 is projected to reach US$736 Million.Pharmaceutical Demand in the Philippines

• With Philippines population projected to increase to 92.23 million by the end of 2009 from 88.27 million in 2007, increase in demand for pharmaceutical products is more likely to happen.

• Also, with the expiration of the number of patents in 2009, as well as those that had lapsed over the past 2-3 years, local manufacturers will have the opportunity to start introducing generic versions of patented drugs. This would not only reduce the cost of medicine but would also expand the domestic market.

• Total family expenditures for drugs and medicines increased to Php 16,085,226 in 2000 or by 8% over a 4-year period from its 1997 level.

- Average Expenditures per family is reported at Php 1,292 in 2000.

- About 40% of the total expenditures in 2000 were spent by families located in the National Capital Region and its nearby cities/municipalities of Region IV.

• From 1998-2005, there is steady increase in the number of hospitals, both private and government, from 1,172 to 1755, or an increase of about 50% over a period of 7 years.

• From 2001-2006, there is also an increase in the number of medical practitioners, specially medical doctors, from 44,238 to 45,555, or an increase of about 3% over a period of 5 years.

Philippine Advantage

Human resources

Availability

• More than 490,000 college-degree graduates in 2008

- About 20% are graduates of medical/natural science and engineering/technology courses suitable for the pharmaceutical sector.

- Over 20,000 per year of new licensed medical and allied sciences practitioners, and more than 25,000 new licensed engineers/year

• Annual growth rate of tertiary level graduates estimated at 3.8%.

Quality

• Literacy rate of 92%, one of the highest in the world due to a culture-based desire to be educated and skilled to attain a better quality of life.

• 3rd largest English-speaking country in the world

• Highly-educated, flexible, productive, loyal, dedicated with excellent work ethics and attention to detail

• Surveys of executives in the Asian region have consistently ranked both skilled and unskilled Filipino workers high in terms of quality of work, communication capabilities and receptiveness to technology transfer.

Pioneering Market for Research and Development

• Existing manufactures are concentrated on the manufacture of products discovered and developed outside the Philippines, and about 90% of the raw materials used are imported.

• A pharmaceutical activity concentrated on research and development and discovery of new drugs are a pioneering activity.

Industry Potentials

Growths –

Number of Industry playersTotal Philippine Market Size

• From 373 total registered pharmaceutical companies in 2003 to 471 in 2007, or an increase of 26% in 5 years.

- Local companies – from 208 in 2003 to 240 in 2007, or an increase of 15%

- Foreign companies – from 165 in 2003 to 231 in 2007, or an increase of 40%.

Sales

• Sales of pharmaceuticals increased by an average of 9.6% per year based on the 2004-2008 performance of the industry.

• In terms of counting units (CU) or the number of tablets, capsules, milliliters sold, sales increased from 36 billion CU in 2003 to 45 billion CU in 2007, or an increase of 25%.

Market Share

• Philippines’ share in the world pharmaceutical market in 2007 was placed at 0.31%.

• Within Asia-Pacific region, the Philippines contributed 3.9% in 2007.

New Product Introductions

• In 2002 to 2007, there were about 240 new products introduced into the market by both foreign and local pharmaceutical companies.

Leading Therapeutic Classes

• Top 20 therapeutic classes amount to Php53.09 Billion or 51% of the total industry.

Research and Development

• The industry, at present, is into compounding and manufacturing existing drugs rather than formulating breakthrough drugs. Research and development (drug discovery and clinical trials) is the pioneering endeavor.

Contribution to the economy

Percent Of GDP

• The Philippines currency spends 3.4% of GDP on health but this is expected to increase to 3.6% by

• 2013.

Government Support

Enabling laws/policies

• Universally Accessible Cheaper & Quality Medicines Act of 2008 (R.A. 9502)

- Allows parallel importation of patented medicines from other countries were they are affordable.

- Imposes price ceiling (Maximum Drug Retail Price) on essential drugs upon the recommendation of the Department of Health

• Philippine Generics Act of 1988 (R.A. 6675) – Mandates the implementation of the Pilippine National Drug Formulary (PNDF) to rationalize the pharmaceutical sector to give consumers more informed choice and greater cost savings.

• Intellectual Property Code of the Philippines (R.A 8293)

• Special Law on counterfeit Drugs (R.A. 8203)

• 2010 Investment Priorities Plan – provides fiscal and non-fiscal incentives for:

- Healthcare and wellness products covering the manufacture of drugs and medicines in accordance with the PNDF

- Research and Development for in-house use, and external clients.

Development Plans and Programs

• FOURmula one for Health – Roadmap for health Sector Reforms in the Philippines 2005-2010 – in consonance with health system goals identified by the world Health organization, the Millennium Development Goals and Medium –Term Philippine Development Plan

- Better health outcomes

- More responsive health system

- More equitable healthcare system

R&D support

• Philippine council for Health Research and Development (PCHRD) creates and sustain an enabling environment for health research in the country.

Incentives

Fiscal

• 4 to 8 years Income Tax Holiday (ITH);

• Special 5% tax rate on gross income after the lapse of ITH (for Eco-zone locators);

• Tax and duty exemption in imported capital equipment (for Eco-zone locators); Duty-free importation of capital equipment (for BOI-registered firms under E.O. 528);

• Exemption from 12% input VAT on allowable local purchase of goods and services, e.g., communication charges (for Eco-zone locators);

• Additional deduction for labor expense.


Non-fiscal

• Unrestricted use of consigned equipment;

• Exemption from wharfage dues and export tax, duty, impost and fees;

• Employment of foreign nationals;

• Special Investors Resident Visa

Cost of Doing Business

Average Manufacturing Cost

• Cost of Goods makes up at least 49% of the total cost

• Operating and Selling Expenses account for 40%

• Employee salaries and benefits is at least 7% of the operating and selling expenses.

• Research and development or clinical trials, make up only an average of less than 1% of the total cost.

Salaries and Wages (Basic, Annual Average, US$)

• Chemest/Q.A. Analyst – 2,750 – 3,750

• Chemical Engineer/Supervisor – 3,250 - 4,500

• Plant Manager/Department Head – 5,000 – 7,500

• Maintenance Technician – 2,250 - 2,500

• Medical Sales Representative – 2,500 – 3,000

Rentals, Lease, acquisition (average, US$)

• Commercial space lease – 2.0 – 9.0/sq.m.

• Office space rental – NCR: 10-12/sq.m.; Regional/Provincial: 5.0-6.0/sq.m.

• Within an economic zone – lease of lots – 0.40/sq.m.

• Outside NCR – lease of lots – 62.5 – 104.17/sq/month

Business Permits

• License to Operate and Product Registration from the Bureau of Food and Drugs (BFAD);

• Environmental Compliance Certificate from Environmental Management Bureau (EMB);

• Registration of Incorporation from the Securities and Exchange Commission (SEC).