Ramonito ‘Monching’ T. Tampos, President & Managing Director of Merck Philippines, gives his insight into the rapidly changing pharmaceutical market in the Philippines, the remaining challenges the company faces, and what the strategies to overcome these challenges will be.
You have previously mentioned that the Philippine pharmaceutical market has changed drastically in the last four years. What is your perspective on the growth model for an MNC in this market?
The number one priority is to introduce new products. Companies do not even need to be that innovative, but simply bring innovation to some degree. A model of reference in this market is Boehringer Ingelheim, which is the most successful MNC in the Philippines at the moment. They are introducing a number of new products, which enables them to enjoy double digit growth.
In the past, we have been able to grow year-on-year in this market by introducing old products. Because of generization, however, this is no longer possible. I have never seen a product contracting as rapidly as Norvasc. The reason for this is that there are so many generics (Amlodipines) available now.
We have seen a lot of new generics companies popping up in the market. On the one side, we have a high number of Indian companies—I believe more than 60 already—with a presence in the Philippines. On the other side, we see a number of Filipino entrepreneurs, often former employees of pharmaceutical companies, setting up their own generics companies.
There is a certain provision in the generics law, which says that any generic molecule can claim to be therapeutically equivalent with the originator drug. In my view, this is a major flaw. Even at Merck we have an ‘Afformeds’ or affordable medicines portfolio where we had the opportunity to launch bioequivalent drugs. Once, we even had a supra-bioequivalent drug, which we voluntarily held back out of concerns over stronger side effects, despite having the permission to market.
The question is which innovative molecules we can introduce in a primary care market like the Philippines. The Philippines is still not a biotech market, an arena we will not even enter in the next five years in spite of a strong growth economy.
Do you think that there needs to be a change as to how healthcare is being funded in this country?
Yes. The Philippines is still an out of pocket market. In spite of universal healthcare, government funding is not sufficient to reimburse patients. Cancer treatments, for instance, are still very expensive, where therapies can easily amount up to PHP 1 million (USD 22,000).
There are statistics that show that only 30 percent of the population can really afford to buy medicines. Another question to which we need to find an answer now, is to find out how this percentage will evolve with the implementation of PhilHealth and universal health care.
Nonetheless, we are pleased to see that things are moving in the right direction with universal healthcare. Still, there needs to be a restructuring of our healthcare industry. The government has been pointing towards the pharmaceutical industry and implementing laws to lower drug prices, but they also need to realize that they need to be part of the solution. I think more can still be done.
We need to find ways to improve the overall quality of healthcare in the Philippines. A great avenue forward, which still remains largely unexplored when it comes to healthcare facilities, would be privatization.
On the patients’ side, it is not only affordability that is low in the Philippines, but also compliance. Filipinos still have a low willingness to pay for healthcare and medicines. Instead, we prefer to pay for consumer goods such as mobile phones. There is a reason why the Philippines has been named the ‘SMS capital of the world’, in spite of our poverty levels. Knowledge on health aspects is getting better in the Philippines, but is still far from perfect. For me, the bigger challenge is education.
Unless the MNCs introduce more innovative products, or unless the country improves its funding mechanisms, they will continue to contract in this market.
What is Merck’s growth strategy in view of these challenges?
Merck’s strategy is to expand the biotech side of its business in the Philippines. We are facing major obstacles because of funding and the lack of affordability in this market, in spite of the fact that we have very good products in areas such as oncology and fertility. Once again, growth is about products and the sources of funding.
The growing economy may have a positive impact on affordability in the future, but we also need to keep education as a major priority. Merck is in the chronic, cardiometabollic segment of the market and even there we see that the patients are not taking their medicines on a daily basis. Why? Because they do not feel the difference!
There are so many myths in the Philippines and even the educated people require more support. There are many misconceptions around healthcare. We see patients worrying more about their out of pocket expenditures than their own health.
Educating a population and changing health awareness is not an easy task. Within your capacity, what can an individual pharmaceutical company like Merck do?
We need to ensure a collaborative effort of the entire industry and the government. I feel that we have been fighting significantly within the industry over the past years. Between MNCs and local pharmaceutical manufacturers, for instance, there are still very different views when it comes to ethics.
We need to work together as an industry and with the government. Even within the Pharmaceutical Healthcare Association of the Philippines (PHAP) it is sometimes challenging to reconcile the interests of the various members, which, beyond the MNCs, includes large local retailers such as Mercury Drug and The Generics Pharmacy. United Laboratories, the largest pharmaceutical company controlling 25 percent of the Philippine pharmaceutical market and 50 percent of the OTC segment, is then again not a member of PHAP. We need to be able to align interests and find better ways of working together.
Collaboration between government and private sector is one thing. There is collaboration, but for diabetes for instance there isn’t even a clear plan. We do not yet see situations where the government sets out a clear plan of which the implementation is then supported by the private industry.
How optimistic are you for Merck in the Philippines?
The last four years have been extremely challenging for us, even though we have been growing above the market year-on-year. As an MNC, we are not contracting. We are strong in ethics and enjoy positive growth even though we do not yet have a lot of innovative medicines here.
You referred to part of your portfolio as ‘Afformeds’. Can you elaborate?
This is our branded generics portfolio. One of the challenges of generics in the Philippines is to have a very wide range of products, just like any other country. Companies like United Laboratories have the privilege to have such broad portfolio. To succeed in this niche, one needs to be a cost leader, but the quality of the drugs are not really the same. Competing in this arena is thus quite tough for us.
Because of current delays in registration procedures at the Philippines Food and Drug Administration (FDA), we find it hard to introduce new products in this area. It now takes easily up to six times more time to get an FDA approval in the Philippines. A major reason for that is the understaffing at the FDA here.
How do you see ASEAN harmonization impacting the Philippine pharmaceutical market?
The ASEAN harmonization process may not affect the MNCs in the Philippines too much, although our prices may go down as a result. I do foresee most of the negative impact for the local Philippine companies, which face a high cost of manufacturing in the country.
The high cost is also the reason why Merck, since six years ago, no longer makes use of toll manufacturers in the Philippines. From my perspective, ASEAN harmonization will result in more consolidation among the local pharmaceutical manufacturers.
Manufacturing is in fact lacking in the Philippines, which is also why our chemicals business (ingredients, reagents, etc.) only accounts for 25 percent of our revenues. A number of economists are questioning the growth model of the Philippine economy. They say it is too service driven. To a certain extent, however, these analysts have been wrong since overseas remittances have kept on growing year-on-year. Overseas Filipino workers plough over USD 20 billion back into the economy every year. This is why the country has a GDP growth of 6.5 percent.
What is your ambition for Merck in the Philippines?
My ambition is to get us in the top ten pharmaceutical companies in the Philippines. We were on the right track until 2009, when the cheaper medicines law was implemented. I hope to reach our goal over the next five years. I would like to stay here and see this through, especially as we still expect some upheaval in the industry in the coming years.
I actually stepped away from joining lobbying initiatives on behalf of the industry a few years back, until recently. Now, I want us to be an active part of driving change in the Philippines. It will be crucial to get the cooperation from the entire industry.
Several MNCs have shown that they can be successful in the Philippines, but it is not yet a mature market. We are still far from covered with universal healthcare. If every stakeholder is transparent and open to collaboration, either voluntarily or by force, we can reach out to the 70 percent of the Philippine population that still cannot afford medicines.
If we work together in a better way, we can find methods to reach this 70 percent. There is so much money with the legislators that can be brought into the healthcare industry to upgrade the country’s healthcare facilities. The private industry has been upgrading hospitals, but I believe that much more can be done on the public side. Better facilities will bring in paying patients. The government can then use that money to fund those that cannot afford proper healthcare. Privatization can make huge improvements. Looking at other countries, the idea certainly is not new. We have to try it.
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