Overview of philippine healthcare system november'13 by Sutherland Global Services

Overview of Philippine Healthcare System with a focus on Pharmaceutical Industry November 2013

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Agenda

Overview of Philippine Healthcare

Organizational Structure in the Philippine Health Care System

Philippines Pharmaceutical Industry

Philippines Pharmaceutical industry â&#x20AC;&#x201C; New Products, Sales & Marketing

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Philippine Healthcare Spending Snapshot Health Expenditure Per Capita (PHP)

Source: World Health Organization (WHO), BMI

Health Expenditure (PHP Bn)

Source: World Health Organization (WHO), BMI

Observations

Health Expenditure by Source of funds (PHP Bn)

• In 2012, the average Filipino spent less than PHP4,698 a year on healthcare and it is expected to increase to PHP7,496 by 2017 • Most healthcare spending is in the private sector, equal to 63.1% of total expenditure in 2011 – Private out of pocket expenditure comprises of majority of the total spending in healthcare expenditure – Public expenditure was split nearly evenly between the local and national governments but totaled just 27.0% of total spending in 2011 Source: National Statistical Coordination Board Philippine Source: National Statistical Coordination Board Philippine; World Health Organization (WHO); BMI; News articles; SGS research

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Organizational Structure & Accountability in the Philippine Health Care System Organizational Structure & Accountability in the Health Care System National Government Other Departments

Local Government Units

Private Sector

Department of Health

Provincial Hospitals

Health Care Facilities

Office of the Secretary

Municipal/City Hospitals

Health Care Providers

National Centers for Specialized Health Care

Rural Health Units

Pharmacies

Dangerous Drug Board

Barangay Health Stations

Patients

Health Human Resource Development Bureau Health Emergency Management Staff

Philippines Institute of Traditional and Alternative Health Care

Health Policy Development and Planning Bureau

Philippine Health Insurance Corporation

External Affairs Bureau of Quarantine and International Health Surveillance Bureau of International Health Cooperation Bureau of Local Health Development Retained Hospitals

Health Regulations

Health Operations

Bureau of Health Facilities and Services Food and Drug Administration Bureau of Health Devices and Technology

National Center for Disease Prevention and Control

National Epidemiology Center National Center for Disease Prevention and Control National Center for Health Promotion National Center for Health Facilities Development

Source: News articles, Industry agencies, Sutherland Secondary Research

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Major Regulatory Bodies in the Philippine Healthcare Industry Department of Health • It is responsible for ensuring access to basic public health services to all Filipinos through the provision of quality health care and regulation of providers of health goods and services, it also acts as: ― A policy and regulatory body for health

― A technical resource, a catalyst for health policy and a political sponsor and advocate for health issues in behalf of the health sector ― and provides direction to national plans for health programs and services

Food and Drug Administration • The Food and Drug Administration of the Philippines or FDA, (formerly the Bureau of Food and Drugs or BFAD) was created under the Department of Health to license, monitor, and regulate the flow of food, drugs, cosmetics, medical devices, and household hazardous waste in the Philippines ― The FDA's main goal is to ensure the health and safety of food and drugs made available to the public ― It also conducts licensing and accreditation of processed foods, drugs and other related products ― It is also monitors, evaluates and ensures compliance of manufacturers, distributors, advertisers and retailers of processed foods, drugs and other related products to health rules and regulations and standards of quality

Health care Providers • The private sector, which represents an important provider of primary, secondary and tertiary care, is regulated by the DoH through the Hospital Licensure Act, which sets standards and controls the construction and expansion of hospitals • The Philippines has over 1,700 DoH-licensed hospitals with more than 1,100 of these are privately operated, while the remaining 640 are either operated by the DoH or local governments ― In 2010, there were a total of 98,155 hospital beds; 50% or 49,372 were in government hospitals. Of the 17 regions, only 4 have sufficient numbers of beds per 1000 population Source: News articles, Industry agencies, Sutherland Secondary Research

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Types of Health Care/Health Insurance Plans in the Philippines Types of Health Care/Health Insurance Plans in the Philippines

PhilHealth

• PhilHealth, the national health insurance program, provides sustainable, affordable and continuing social health insurance for Filipinos of any age at an affordable rate. This program ensures hospitalization discounts for contributing members at any accredited hospital in the Philippines • There are three kinds of PhilHealth membership available: employed membership, individually paying membership and lifetime membership ― Filipinos who are regularly employed pay less than individually paying (self-employed and freelance) members because employers provide monthly co-payments for their employees, as required by Philippine law ― A lifetime member doesn't have to pay the monthly contribution, since this kind of membership requires paying a lump-sum amount to cover the lifetime membership

Private Health Insurance

• Private health insurance companies cover health expenses for individuals, families and groups. Plans are either paid in full by freelance or self-employed members or partially paid or acquired for free by regular employees • A separate health insurance generally works independently from an HMO plan, it is a basic health insurance policy that covers hospital expenses as a supplement to HMO coverage

Health Maintenance Organization

• HMO is the common managed care plan in the Philippines while a health insurance plan works separately for emergency cases and hospitalization • An HMO plan is usually acquired for free through employment. However, freelancers and non-working individuals can also avail themselves of individual and family HMO accounts to cover basic medical expenses for preventive and outpatient care, medical treatment and hospitalization ― There are also health discount cards offered by specific groups, mostly medical and diagnostics clinics, to also supplement HMO and health insurance coverage

Source: News articles, Industry agencies, Sutherland Secondary Research

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Philippines Pharmaceutical industry Philippine Pharmaceutical Market, 2007-11 (PHP Bn, %) PHP Bn

% Growth

Comparative Share Trend: Foreign and Local Companies Market Shares of Foreign and Local Companies by Sales & Volume, (%)

2007

2008

2009

2010

2011

Overview – Pharmaceutical Industry Competitive Landscape • Foreign pharmaceutical companies are the main players in the Philippines and captured three quarters of the Filipino drug market in 2012 ― Novartis, Sanofi-Aventis Philippines, Wyeth, Abbott, Pfizer, and Johnson & Johnson are among the largest foreign pharmaceutical companies doing business in the Philippines ― Large domestic drug companies include United Laboratories, GV International, Pascual Laboratories and Natrapharm • There are more than 525 drug traders, 690 drug importers and 5,100 drug distributors in the Philippines and around three quarters of the top companies are of foreign origin Pharmaceutical Distribution and Retail • The sale of pharmaceutical products in the Philippines has been controlled by pharmacies and hospitals, although the former are responsible for nearly 90% of the total. Distribution fees currently range from about 12-15% of product sales • The distribution of pharmaceutical products in the Philippines is a three-tier set-up that starts from the manufacturer and/or importer and ends with the consumer ― Manufacturers of drugs can either sell direct to drugstores, hospitals and pharmacies through their own distribution divisions, or via an independent agent • There are three main pharmaceutical wholesalers in the Philippines; Zuellig Pharma, Marsman & Co and Metro Drug

Source: National Statistical Coordination Board Philippine; World Health Organization (WHO); BMI; News articles; SGS research

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Pharmaceutical Retail and Distribution in Philippines (1/2) Wholesale Distribution • There are three main pharmaceutical wholesalers in the Philippines; Zuellig Pharma, Marsman & Co and Metro Drug. The distribution network is further consolidated by the fact that Zuellig Pharma owns around one-third of Marsman. Metro Drug has been owned by Marsman since 1995, and the combined companies had an estimated market share of around 23%

Diethelm Keller Siber Hegner (DKSH) ― DKSH is one of Asia's leading Market Expansion Services and customized solutions provider for the food and beverage, personal care and household, pharmaceutical, and specialty chemical industries ― DKSH Philippines employs 300 specialists in four locations, and they manage a network of 110 suppliers and 500 customers ― The company’s Healthcare Business Unit is the leading partner for healthcare companies, and offers a wide range of services from product registration, marketing and sales to physical distribution Metro Drug ― Metro Drug is a nationwide distributor of pharmaceuticals with an 11,600 square metre distribution facility and 6,600 pallet capacity, located in Bicutan, south of Metro Manila Zuellig Pharma ― Zuellig Pharma dominates pharmaceutical distribution in the Philippines, with an estimated market share of around 42% ― Zuellig has an integrated network of regional distribution centres throughout Metro Manila, Provincial Luzon, the Visayas, and Mindanao, which are supplied from a national distribution centre ― In early 2000, Zuellig established a contract sales and marketing business unit, PharmaLink which is responsible for activities such as training reps, doctor targeting, territory planning and call reporting • The distribution sector has become a matter of some debate in recent years, with local politicians and media attacking its seemingly monopolistic structure; around 80% of drugs pass through the major distributors, with Zuellig accounting for nearly two thirds of this total • The remainder of the distribution market is composed of small independent distributors and manufacturers handling their own distribution arrangements Source: News articles, Industry agencies, Sutherland Secondary Research

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Pharmaceutical Retail and Distribution in Philippines (2/2) Retail Distribution • Drugs are sold/dispensed in the Philippines through drugstores, hospitals and a range of small retail outlets. More than three fourths of the sales are made through retail drugstores, with hospitals and other retail outlets accounting for the rest of the market. ― Chains stores represented nearly two thirds (62.7%) of drugstore sales, whereas independent drugstores represented only 17.4% ― The remainder was sold in hospitals, clinics and government agencies and the government figures were very little in drug distribution, accounting only for 2.3% of the total goods sold Mercury Drug ― Mercury Drug is the Philippines' leading chain of drugstores, with close to 700 company-owned and franchised stores nationwide and nearly 9,000 staff ― Mercury Drug was also the first to operate self-service drugstores and stores that operate 24 hours, seven days a week ― The company was first to sell drugs 'tingi-tingi' (piece-by-piece), which helps people who cannot afford the whole bottle The Generics Pharmacy (TGP) ― TGP) is another leading chain of drugstores, with 887 mainly franchised outlets nationwide and is currently opening about 200 outlets per year and has increased sales by 300% since 2007 ― The company's policy is that it only sells generic, not branded drugs

Source: News articles, Industry agencies, Sutherland Secondary Research

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Top 20 Leading Philippine Pharmaceutical Companies as of 2011 Top 20 Leading Philippine Pharmaceutical Companies based on Value, 2011

Top 20 Leading Philippine Pharmaceutical Companies based on Volume, 2011

Rank

Company

% CAGR 4-Years

Total Pharma Market

3.06

United Lab

5.40

Pfizer Inc.

Company

% CAGR 4-Years

Total Pharma Market

3.16

United Lab

3.29

-3.21

Glaxosmithkline

-6.92

Glaxosmithkline

-2.41

Pfizer Inc

-3.46

Novartis

11.18

Pascual Labs

8.73

MSD

6.33

Sanofi-aventis

0.98

Sanofi-Aventis

-4.25

Abbott Lab

6.81

Astrazeneca

-1.07

Johnson

1.26

Boehringer Ingelheim

2.30

Intermed MKTG

2.53

Johnson

3.08

Tai Sho Pharm

1.52

Pascual Labs

8.92

International Phar

16.71

Roche Philippines

-2.55

Boehringer Ingelheim

-6.55

Natrapharm

9.58

GX International

-6.07

Abbott Lab

-6.50

Novartis

10.10

Bayer Pharm

-2.04

CNN Generics

Servier Phils

1.83

Mundipharma GMBH

-0.46

Cathay Drug Co

42.90

Ponds Chemical

-7.66

Merck Inc

5.72

Am-Europharma Corp

Invida

1.56

Natrapharm

10.17

Getz Pharma

29.87

RHEA

-2.37

GX International

-4.32

MSD

3.52

999.00

7.90

Source: IMS Health Philippines, Inc. IMSPlus – Combined using Dec 2011 Database. Above excludes sales of V06 – General Nutrients, V07 – Other non-therapeutics, K01 – Intravenous solutions, A13 – Tonics

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New Products Regulatory Requirements for Pharmaceutical Products Overview • The Philippine Food and Drug Administration (FDA) is the main body for Philippines pharmaceutical regulations. The FDA handles the registration of processed food, drugs, medical devices, in-vitro diagnostic reagents, cosmetics, and household hazardous substance products • Companies involved in the manufacture, packaging, re-packaging, importation, exportation, distribution, and retailing of processed foods, drugs, medical devices, in-vitro diagnostic reagents, cosmetics, and household hazardous substance products must secure a License to Operate (LTO) from the BFAD before applying for pharmaceutical product registration in the Philippines. • Philippines pharmaceutical regulations may require the following documents for the product registration: – An application for Registration of Pharmaceutical form – A valid License to Operate from the manufacturer/distributor/importer – Labeling materials – Product sample and product formulation and dosage, etc

Source: Industry agencies, Sutherland Secondary Research

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Marketing & Sales of Pharmaceutical Products (1/2) Overview • The Food and Drug Administration (FDA), ensures the safety, efficacy, purity and quality of health products in the Philippines. The Food, Drug and Cosmetic Act provides the regulations to monitor food, drugs, medical devices, diagnostic reagents, cosmetics and household hazardous substances in the Philippines.

Promotion • While the Food, Drug and Cosmetic Act provides the regulatory guidance for the Philippines' pharmaceutical market, the Pharmaceutical Healthcare Association of the Philippines (PHAP) established its own regulations for pharmaceutical promotion in 2003 – Although the regulation is only applicable to member companies of the PHAP, it does play a significant role in the fair and ethical promotion of pharmaceutical products in the Philippines • Pharmaceutical promotional materials, including brochures and magazine advertisements, do not need prior approval from the FDA. However, the materials should be submitted to the FDA for reference. Unlike prescription drugs, OTC products can be directly advertised to the public • Additionally, physicians are not allowed to commercially endorse any medical or health product • Under the PHAP Code, specific information is required to accompany all pharmaceutical promotional material. The requirements for the first 12 months of promotion vary from those required after the initial 12 month period – Material within the first 12 months of promotion should include: product name, description, dosage quantities and forms, manufacturer name and address, clinical information, including precautions and warnings and storage conditions Source: News articles, Sutherland Secondary Research

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Marketing & Sales of Pharmaceutical Products (2/2) Sampling • Under PHAP code, member companies within the Philippines' pharmaceutical market can provide samples to hospital-based doctors and general practitioners. However, the quantity of samples is limited to the number necessary for a doctor to conduct a meaningful clinical evaluation. Companies that are not members of the PHAP are not subject to any sample distribution restrictions

Gifting • In the past, it was not uncommon for doctors to receive expensive gifts and be treated to lavish entertainment, such as resort weekends. But now, under the PHAP code, the types of gifts and other compensation provided to doctors is severely limited • The PHAP hopes to limit the influence a particular company within the Philippines' pharmaceutical market has on a doctor and the pharmaceutical products they prescribe. Some of the gifts that companies can offer in accordance with the PHAP code include: – Gifts valued at less than $18 – Gifts related to the doctor's work, including office supplies – A gift that benefits a doctor's patient

Source: News articles, Sutherland Secondary Research

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Philippine Data Privacy Act Overview - Data Privacy Act • The Republic Act 10173 or the Data Privacy Act of 2012 was signed by President Aquino on August 15, 2012. It puts in place measures to protect and preserve the integrity, security and confidentiality of personal data collected by government and private entities in their operations

• The act is based on standards set by the European Parliament and is aligned with the Asia Pacific Economic Cooperation (APEC) Information Privacy Framework • The Philippines Business Processing Association believes that the Act will facilitate the IT – BPO industry expanding from call centers to areas that involve handling sensitive personal data such as in the health care and human resources areas, with projections of revenue in the industry increasing from USD 9 billion in 2011 to USD 25 billion by 2016. • However, the Act does not apply to personal information which is originally collected from non-Philippine residents in accordance with the applicable foreign law, even if processed in the Philippines. This means that outsourced processing in the Philippines is exempt where data has been collected overseas, in an attempt to protect the Philippines IT – BPO industry. • The Act also creates the National Privacy Commission under the Office of the President that enforces the law, receive complaints, set investigations and impose requisite sanctions – Chapter VIII of the Act details penalties for violation of the Act, which include both monetary fines and prison sentences – Violations include unauthorized processing of personal information, unauthorized access, improper disposal, concealment of security breaches involving sensitive information, and unauthorized or malicious disclosure

Source: News articles, Sutherland Secondary Research

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