KUALA LUMPUR (Sept 29): BMI, a Fitch Solutions company, said Malaysia’s New Industrial Master Plan 2030 will promote the integration of value chains for better local production of active pharmaceutical ingredients, vaccines and medicines.
In a note on Thursday, the firm said government incentives will continue to drive local investment in Malaysia’s pharmaceutical market in the near term.
BMI said it believes Malaysia can attract more investments and position itself as a regional leader in the pharmaceutical industry.
The firm said pharmaceutical sales were RM11.2 billion in 2022 and it forecast medicine sales to increase to RM15.5 billion in 2027, equating to a compound annual growth rate of 6.7% in local currency terms.
Government incentives
BMI said the 12th Malaysia Plan highlighted the pharmaceutical and medical devices sectors as key industries that will drive economic growth over this period.
It said the Malaysian government stated it will undertake efforts to increase domestic investment in the pharmaceutical industry, while reinforcing Malaysia's role as a regional biomedical hub.
“We note that Malaysia has already been making concerted efforts in this regard.
“For example, the country’s 2022 budget has extended the preferential tax rate incentive, which provides investors with a tax rate ranging from zero to 10% for a period of 10+10 years if they locally manufacture pharmaceutical products, including vaccines,” BMI said.
Medicine pricing controls
BMI said medicine pricing controls will continue to weigh on multinational drugmaker profits and discourage foreign enterprise.
It said in May 2019, Malaysia’s Cabinet announced price control measures for medicines in the country.
The price controls are based on external reference pricing, which involves benchmarking local prices against lower drug prices in other markets.
Ceiling prices are then set and constitute an average of the three lowest prices identified.
“It is our view that price controls will have a significant impact on innovative drugmaker profit margins in the country and this will potentially limit multinational investment,” it said.