PHILIPPINE PHARMACEUTICAL INDUSTRY

May 2011

Introduction

The Philippine pharmaceutical market is valued at US$2.51 Billion (Php111.6 Billion) in 2008, and
forecasted to reach US$3.91 Billion by 2013. In terms of the overall market this is comparable to Pakistan
and Thailand, and in terms of per capita, it is similar to China and Iran. The Philippines is continuously
ranked as the 11th most attractive pharmaceutical market in the Asia-Pacific region, and the third biggest
market in ASEAN after Indonesia and Thailand.

The local market includes all products classified as drug or non-drug. Drugs are either ethical (prescription)
or over-the-counter (OTC) products used for medication or in the diagnosis, cure, mitigation, treatment or
prevention of diseases in human beings, while non-drug items include nutritionals (health food), infant milk
preparations, baby care, cosmetics, diagnostic and other medical devices.

The bulk of the sales in the Philippines is from ethical or

prescription drugs, which represents about 70% of the total
sales. Over-the-counter (OTC) products account for about
24%, while nutritionals occupy the remaining share of the
pie. About 85% of products are sold through drug stores
and 15% are distributed to end-users in hospitals and
doctors clinics.

Fourteen (14) of the Top 20 pharmaceutical companies in

the world have manufacturing facilities in the Philippines.
The share of local manufacturers in the drug market is seen
to rise to 38% and will likely continue to expand through
2010 and beyond. Multinational drug companies are
expected to grow by 4% in 2009.

Pharmaceutical patents and trademarks are well-secured in

the country. The Intellectual Property Code of the Philippines provides harsh penalties for infringement of
patent and trademark rights.

The recently approved Universally Accessible Cheaper and Quality Medicines Act of 2008, while it will
result in lower prices, will increase consumption as more people will be able to afford the needed
pharmaceuticals for their health and wellness.

Market Opportunity
Philippine Importation of Medicinal &
Increase in demand/consumption Pharmaceutical Products (US$Billion, FOB)
There is an apparent big demand for medicinal
and pharmaceutical products in the Philippines
with importation increasing at an annual average 0.783
0.800 0.723
rate of 11.34% from 2005-2010. 0.657
0.700
With Philippine population projected to increase 0.584
0.600 0.521
to 94.01 million by the end of 2010 from 88.57 0.458
0.500
million in August 2007, increase in demand for
0.400
pharmaceutical products is more likely to
0.300
happen.
0.200
Also, with the expiration of a number of patents
0.100
in 2009, as well as those that had lapsed over the
-
past 2-3 years, local manufacturers will have the 2005 2006 2007 2008 2009 2010
opportunity to start introducing generic versions Source of Data: NSO
of patented drugs. This would not only reduce

Industry Studies Department 1

Board of Investments
 PHILIPPINE PHARMACEUTICAL INDUSTRY
May 2011

the cost of medicine but would also expand the domestic market.
Total family expenditures for drugs and medicine increased to Php 39.04 Billion in 2009 from Php
33.323 Billion in 2006 or by 17% over a 3-year period.
- About 45% of the total expenditures in 2009 were spent by families living in the National Capital
Region and its nearby cities/municipalities of Regions III and IV.
From 1998-2005, there is a steady increase in the number of hospitals, both private and government,
from 1,172 to 1,755, 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, specifically
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
About 470,000 college-degree graduates in 2009
- About 38% 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 manufacturers 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 players
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%.

Industry Studies Department 2

Board of Investments
 PHILIPPINE PHARMACEUTICAL INDUSTRY
May 2011

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 total
industry.

Top 10 Therapeutic Classes in the Philippines Research and Development

Rank Therapeutic Classes Indication The industry, at present, is into compounding and
1 Calcium Antagonists Hypertension manufacturing existing drugs rather than
2 Non-narcotic Analgesics Pain Relief formulating breakthrough drugs. Research and
3 Infant Formulas Nutrition Supplemen development (drug discovery) is a pioneering
4 Cephalosporins & Infection endeavor.
Combination
5 Broad Spectrum Penicillin Infection
Contribution to the economy
6 Anti-rheumatic Non-steroidal Pain Relief
Analgesics
7 Oral Anti-diabetics Diabetes Percent of GDP
8 Multivitamins + Minerals Vitamin Supplement The Philippines currently spends 3.4% of GDP
9 Expectorants Cough on health but this is expected to increase to 3.6%
10 Cholesterol & Triglyceride Hyper-cholesterolem by 2013.
Regulator
Source of Data: Pharmaceutical & Healthcare Association of the Philippines
Factbook, Nov. 2008

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 where they are affordable
- Imposes price ceilings (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 Philippine
National Drug Formulary (PNDF) to rationalize the pharmaceutical sector and 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:
- Drugs and medicines covering the manufacture of chemical compounds or biological substances,
other than food, intended for use in the treatment, prevention or diagnosis of disease in humans and
animals, including (1) articles recognized in official Pharmacopoeia or national drug formulary; (2)
articles intended for use as a component of the articles in (1) above; and (3) herbal and/or

Industry Studies Department 3

Board of Investments
 PHILIPPINE PHARMACEUTICAL INDUSTRY
May 2011

traditional drugs which are articles of plant or animal origin used in alternative medicine.
- Research and development for commercial and in-house R&D activities.

Development Plans and Programs

Department of Health Administrative Order No. 2010-0036 - The Aquino Health Agenda: Achieving
Universal Health Care for All Filipinos focused on three (3) major strategies:
- Financial risk protection through expansion in National Health Insurance Program (NHIP)
enrolment and benefit delivery;
- Improved access to quality hospitals and health care facilities;
- Attainment of the health-related Millennium Development Goals (MDGs)
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 MDGs and
Medium-Term Philippine Development Plan (MTPDP)
- Better health outcomes
- More responsive health system
- More equitable healthcare system

R&D support
Philippine Council for Health Research and Development (PCHRD) creates and sustains 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 IT Park/Eco-zone locators);
Tax and duty exemption on imported capital equipment (for IT Park/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 IT Park/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.

Costs 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$)

Chemist/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

Industry Studies Department 4

Board of Investments
 PHILIPPINE PHARMACEUTICAL INDUSTRY
May 2011

Average Manufacturer/Trader Cost Structure

Rentals, lease, acquisition (average, US$) NET SALES 100%
Commercial space lease 2.0-9.0/sq.m. 1 COST OF GOODS MANUFACTURED AND SOLD 49.2
2 OPERATING AND SELLING EXPENSES 40.5
Office space rental NCR: 10-12/sq.m.;
2.1 General Management Costs 6.40
Regional/Provincial: 5.0-6.0/sq.m. 2.2 Selling Costs 17.25
Within an economic zone lease of lots 2.2.1 Salaries and benefits 7.45
0.40/sq.m 2.2.2 Travel and motorization 3.70
Outside NCR lease of lots 62.5 2.2.3 Other selling costs 6.10

104.17/sq.m./month 2.3 Advertising and Promotion 11.53

2.3.1 Literature and documentation 0.47
2.3.2 Samples 2.18
Business Permits/Licenses 2.3.3 Scientific seminars 2.56
License to Operate and Product 2.3.4 Ads (OTC and ethical drugs) 1.37
Registration from Bureau of Food and 2.3.5 Entertainment and representation 0.43
Drugs (BFAD); 2.3.6 Other promo and advertising expenses 4.52
2.4 R&D (Clinical trials, etc.) 0.61
Environmental Compliance Certificate
2.5 Royalties 0.70
from Environmental Management Bureau 2.6 Interest and bank charges 1.00
(EMB); 2.7 Other operating and selling expenses 3.01
Registration of Incorporation from the 3 CORPORATE TAX 3.3
Securities and Exchange Commission 4 NET PROFITS 7.0
(SEC). Source: PHAP Factbook ,July 2003

Contacts

Board of Investments
Industry and Investments Building
385 Sen. Gil J. Puyat Avenue, Makati City 1200
Tel. No. (+632) 896-8907
Fax No. (+632) 895-3521
E-mail Address: EMCagatan@boi.gov.ph
Website: www.boi.gov.ph

Food and Drug Administration (FDA)

Ms. Nazarita T. Tacandong, RPh, MPA Director IV
Civic Drive, Filinvest Corporate City Alabang, Muntinlupa City 1781
Tel. No. (+632) 809-4390 locals 2183 & 2184
Fax No. (+632) 807-0751
E-mail address: bfad@bfad.gov.ph
Website: www.bfad.gov.ph

National Drug Policy Pharmaceutical Management Unit

Department of Health
G/F, Building 12, San Lazaro Compound, Rizal Avenue, Sta. Cruz, Manila 1003
Tel. No. (+632) 743-8301 local 1101 up to 1103
Fax No. (+632) 749-8490
E-mail Address: ndppmu50@yahoo.com
Website: www.doh.gov.ph/ndp-pmu50/

Industry Studies Department 5

Board of Investments
 PHILIPPINE PHARMACEUTICAL INDUSTRY
May 2011

Intellectual Property Office of the Philippines

Director General Adrian S. Cristobal, Jr.
IP Philippines Building
Sen. Gil J. Puyat Avenue, Makati City
Tel. No. (+632) 752-5450 to 65 local 201 to 205
Fax No. (+632) 897-1724
E-mail Address: dittb@ipophil.gov.ph or mail@ipophil.gov.ph.
Website: www.ipophil.gov.ph

Philippine Chamber of the Pharmaceutical Industry, Inc.

Mr. Edward I. Isaac - President
Unit 1207 President Tower, 81 Timog Avenue, Quezon City
Fax No. (+632) 929-5184

Philippine Pharmaceutical Manufacturers Association

Ms. Sally Nolasco President
Room 1217 Cityland 10 Tower II
6817 Ayala Avenue cor. H.V. dela Costa St., Makati City
Tel. No. (+632) 893-4230
Fax No. (+632) 753-1040
E-mail Address: info@ppma1950.com

Pharmaceutical and Healthcare Association of the Philippines

Mr. Reiner W. Gloor
Unit 501 One Corporate Plaza
845 Pasay Road, Makati City
Tel. No. (+632) 815-0325; 816-7334; 816-7373
Fax No. (+632) 819-2702
E-mail Address: phap7346@phap.org.ph

Industry Studies Department 6

Board of Investments