Can the Philippines still make it as a manufacturing hub?
Before the introduction of universal healthcare (UHC), most major private hospitals in the Philippines had to rely on imported products. With the MNCs showing only limited interest in small volumes, all too often certain products would never actually make their way to market. It was a situation that skewed market prices upwards, with several critical care companies marketing their products at premium prices.
“We identified a gap in the products that were not available or approved by the FDA and only occupied a small market, and those that were being exclusively marketed by large companies, where the level of competition was low and the prices augmented. We could bring down prices in such niche markets and compete head on with existing large players,” explains J. De Ruyter ‘Toto’ Oroceo, president and general manager of Delex Pharma International (DPI), a Filipino hospital products company. “At the end of the day, we contribute directly to the vision of the president, the Department of Health, the FDA and our current administration to make pharmaceutical products in the Philippines more affordable, so that also the poor layers of society can be reached.” Since its incorporation in mid-2009, DPI has already grown to a staff of close to 100. “In three to five years, DPI will achieve PHP 1 billion (USD 22.5 million) sales revenue and will have its own manufacturing facility,” hopes Oroceo.
Healthcare spending in the Phillipines, 2010-2014
Traditionally, pharmaceutical marketing organizations in the Philippines have partnered with toll manufacturers for their production needs. But many, especially those in rapidly growing niche areas, quietly dream of major investments such as their own manufacturing plant.
On the vitamins and supplements side, for instance, the SV More Group has grown primarily on the back of its B Complex solutions, while it selectively outsourced its manufacturing. “First of all, we have to be careful in choosing who we manufacture through,” says Albert Santillana, group chairman and CEO. “Hizon Laboratories and Lloyd Laboratories, both leading Philippine toll manufacturers, are world-class players. If you work with foreign manufacturers, you have to carefully select to ensure that they work according to quality standards. In India, for example, there are bad manufacturers in the region but also many very good ones. We are prepared to take on South Korean manufacturers, which can be among the best.”
The investments of local pharma companies shows their level of confidence in the Philippine economy.”
Today, after 25 years, Santillana is part of the group of Filipino entrepreneurs ready to invest in manufacturing. “For these first 25 years, we did not want to take up big loans to fund an investment for manufacturing, which is why we have waited till the point where we have sufficient resources to build our own facilities. Now we have reached the point where we can afford manufacturing without external funding. Self-sufficiency is very important to ensure that the operating cash remains unaffected. In three to five years, we should have completed our first manufacturing facility in collaboration with our Philippine-based manufacturers,” adds Santillana.
The investments of local pharma companies shows their level of confidence in the Philippine economy. “In the last three years, only about 40 percent of investments were from foreign investors. This was not the case before, when most Filipinos were investing their money abroad. The changing dynamics imply that the Filipinos have regained confidence in the country, its leadership and its economy,” says Gregorio Navarro, managing partner and CEO of Deloitte Philippines, Navarro Amper & Co.
From an MNC perspective, the Philippines is now indeed solely considered for marketing and sales activity. There is, however, one remaining MNC manufacturing in the country. “Our facility in Cainta (a municipality in the Rizal province, just next to Metro Manila) is a mid size manufacturing facility that has about 100 to 120 employees,” says Francis del Val, president and managing director of GSK Philippines. “It manufactures products for both our pharmaceutical and consumer divisions and goes back a while: we recently celebrated our 50 years of manufacturing in the Philippines.”
Divesting is not in the plans of GSK either, as the company to continue to manufacture in the Philippines. “We are very proud of this manufacturing facility because it serves as a testimony to GSK’s commitment to be a partner in Filipino nation building. It also shows that Philippine manufactured products can be world class. Our site exports to many neighboring countries and we certainly look forward to more of that in the future, on top of catering to the increasing demand in the local market,” says del Val.