Over 2023 to 2025, the market is expected to continue to grow thanks to the likely ongoing rise in incidences of chronic non-communicable diseases (NCDs), the extension of universal health coverage programs to cover the whole of the Thai population, the increasing number of foreign patients seeking treatment in Thai hospitals, and the rising global concerns with wellness and preventative healthcare that are influencing Thai consumers.
However, the industry will also face challenges in the form of: (i) the country’s lack of manufacturing capacity, which means that the Thai pharmaceutical industry is highly dependent on imports; (ii) intensifying competition from new players, both Thai and international; and (iii) rising overheads, which are being driven up both by the need to overhaul and upgrade production lines to comply with the GMP-PIC/S standard, and by the greater cost of inputs. The net effect of these pressures will then be to place a limit on players’ ability to generate profits.
Over 2023 to 2025, the domestic market for pharmaceuticals is expected to grow on increasing rates of NCDs among the general population, the broader access to healthcare provided for by the Universal Coverage Scheme, the greater number of overseas patients seeking treatment in Thai hospitals, and global trends that are encouraging greater consumer interest in wellness and preventative healthcare. However, stiffening competition will limit how far operators’ profits may grow.
Manufacturers of pharmaceuticals: Income will tend to strengthen on: (i) continuing demand for COVID-19 vaccines and medicines to treat the illness once contracted, while the relaxation of pandemic controls means that social and economic activity has returned to normal and with this, individuals are now increasingly seeking treatment in hospitals; (ii) the steady rise in rates of NCDs; (iii) the greater access to medical services provided by government welfare programs, which is underpinning growth in the volume of medicines distributed through hospitals, especially for treatments that are under patent; and (iv) the ability of manufacturers to increase distribution through pharmacies and expand export markets in the ASEAN region, where demand for medicines and vaccines remains strong.
There are some challenges in this business as follows: (i) The entrance of new players which will intensify market competition; (ii) the steadily rising cost of imported precursors; (iii) moves by the government to control the prices of medicines used in private hospitals and business, which may make it difficult for manufacturers to raise their prices; and (iv) the additional costs imposed by the need to upgrade facilities to meet the GMP-PIC/S standards, which would affect business margin.
Distributors of pharmaceuticals (retailers and wholesalers): Income growth will be steady in the coming years, helped by: (i) increased interest in personal healthcare and preventative medicine; (ii) recovery in the tourism sector, which will bring increased footfall in pharmacies, especially in the major tourist areas; and (iii) the broadening of distribution channels to include online sales, advertising on digital media, and the development of mobile phone applications that offer health advice. However, it is also likely that players will have to contend with greater competition within their particular segment.
Stand-alone pharmacies will likely have to contend with a worsening threat from large chain stores. For example, Fascino (a chain of pharmacies) plans to extend its network from its current total of 105 branches (as of 2020) by opening another 200 franchises by 2022, Save Drug (part of the Bangkok Hospital group) also hopes to expand its network (from current 80 stores nationwide). Pure Pharmacy (by BIG C) aims to expand additional 7 branches in 2022 from 146 branches in 2021. In addition, the range of retail sites from which pharmaceuticals are sold is broadening to include discount stores, supermarkets (of which at least 50 new branches open every year) and convenience stores (7/11 plans to open 700 new branches a year).
Wholesalers are increasingly moving into the market space currently occupied by retail operations. They expand new distribution channels, provide promotion campaign and advertise via online media so that they can respond to customers’ needs, with the lower cost of medicines purchased as their main advantage.
Domestic market: Medicines and pharmaceuticals are distributed through two main channels.Hospitals: Thailand’s public healthcare system is extensive, covering both civil servants and the majority of scheme claimants. By value, 80% of the total domestic market for medicines is distributed through hospitals, comprising 60% government hospitals and 20% private-sector operations. Medicines distributed through hospitals are generally prescription drugs, which can be further sub-divided into (i) generic drugs, which account for 61% of the value of medicines distributed via hospitals, and (ii) patented drugs, which make up the remaining 39%. But although this latter group has a smaller share, consumption of patented drugs is growing faster than the consumption of generic drugs, because they are mostly used to treat common chronic non-communicable conditions such as high blood pressure, diabetes, and heart disease.
Over-the-Counter (OTC) medicines: Although the government health insurance scheme encourages individuals to increasingly seek medical care in hospitals instead of buying OTC medicines from pharmacies, the latter remain an important distribution channel for those with common minor ailments which can be treated with a quick trip to a pharmacy.
Hence, the value of the OTC drugs market has been stable at 20% share of the total market for medicines. There are 22,205 registered pharmacies in Thailand (source: FDA, August 2022), 18,551 are modern pharmacies (83.5%), 19.8% of which are in Bangkok and 80.2% in the provinces. Pharmacies can be split into the two major groups: (i) stand-alone stores, mostly SMEs, which account for around 75% of modern pharmacy outlets in the country, and (ii) chain stores, which may either be run, centrally-funded, or organized for expansion through franchising, such as Fascino and Save Drug (a member of BDMS). Beyond this, modern trade outlets (including discount stores, supermarkets, convenience stores, and specialist health stores) are turning over a part of their floor space to medicines and pharmaceuticals, and so are able to reach a wide range of customers.
The pharmaceuticals industry should see ongoing growth through 2022, helped by demand for medicines and medical supplies that will be boosted by several factors; (i) The effects of the COVID-19 outbreak are lessening and both society and the economy have now largely adjusted to its impacts. As such, life (including the level of economic activity) has mostly returned to its pre-pandemic state. (ii) Spending power will tend to strengthen in line with growth in the economy (Krungsri Research sees GDP growth reaching 3.2% this year, up from 1.6% in 2021) and this will help to bring patients back to hospitals for treatment. However, the effects of this may be limited by the continuing high cost of energy, which has pushed up the prices for goods and services and hence inflation. This will drag on spending power in some consumer groups. (iii) The full reopening of the country from July 1, 2022, will add substantially to tourist arrivals, including those traveling for health reasons. For all of 2022, Thailand expects to welcome 10.4 million visitors, up from just 0.43 million a year earlier. This will then boost demand for medicines, especially in the main tourist areas. In addition to these factors, COVID-19 is now an endemic disease and so large numbers of people will continue to be infected with it, strengthening overall demand for medicines, medical supplies, and vaccines.The value of the domestic market for these goods will grow by some 4.5-5.0% relative to a year earlier. Distribution through hospitals is benefitting from the government’s decision to allow hospitals to secure their own supplies of certain medications (from September 1, this has included favipiravir, molnupiravir and paxlovid). Likewise, pharmacies have also increased their role in the market by becoming providers of healthcare services and by completing doctors’ prescriptions for COVID-19 related medications (over 800 businesses have joined the government’s self-isolation program for non-severe COVID-19 cases, and as of August 29, 55,482 patients with mild symptoms had been treated under this.) Pharmacies are also completing prescriptions for some treatments for non-communicable diseases, including diabetes and hypertension, and over 1,000 companies have joined a scheme to promote the distribution of medicines through pharmacies. Overall, the value of medicines distributed through hospitals and over the counter is therefore forecast to increase by respectively 5.2% and 4.5% YoY.
Growth will extend through the period 2023 to 2025 and the domestic market should increase in value by an average of 5.0-6.0% per year. By segment, distribution through hospitals will perform slightly better, growing at the average annual rate of 6.3%, compared to the expected 5.0% growth for OTC distribution. Factors supporting this growth are outlined below.
Rates of illness can be expected to increase for both communicable and non-communicable diseases (NCDs). Among the former, the most common are, in order, diarrhea, pneumonia, and dengue fever, while newly emerging diseases will also likely become more common, both at home and abroad. Recent examples of these have included SARS, bird flu, H1N1 influenza (2009), Ebola, Zika, monkeypox/Mpox (cases of which have recently broken out), and of course, COVID-19. In the case of the last of these, Pfizer expects that this will become endemic worldwide by 2024, but with more than 50 major mutations recorded since the disease was first identified, the effectiveness of a double dose of vaccinations has declined significantly. With regard to NCDs, the most common are hypertension, diabetes, chronic obstructive pulmonary disease, heart disease, and strokes . Two principal factors have combined to increase rates of these. (i) Thailand is already an aging society, that is, more than 10% of the population are over 60. This has increased the incidence of conditions such as hypertension (almost half of the elderly in Thailand have elevated blood pressure), diabetes, heart disease, strokes, and cancers. Thailand is now expected to become an aged society (i.e., 20% of the population will be over 60) in 2023 and a super-aged society (i.e., more than 28% of the population will be over 60) by 2033. This will then add to medical bills, and as of 2022, the cost of providing medical care to the elderly has risen to THB 230 billion, or 2.8% of GDP and up from 2.1% in 2010 (source: 12th National Health Action Plan). (ii) Increasing urbanization will mean that an ever-greater share of the population will have to endure a rushed, high-pressure lifestyle lived out in a polluted environment and with only limited opportunities for exercise. This will add to rates of physical and mental ill-health. Indeed, Bangkok has the highest rates of cancer in the country, and at 5%, rates of depression are almost double the national average of 2.7%. Data from the World Health Organization for 2019 indicates that 76.6% of Thai deaths are attributable to NCDs, and this underscores the high and rising demand for medicines, especially for the patented drugs needed to treat more complex conditions.
For the Thai population, access to healthcare services has expanded substantially, and this may now be accessed through the Universal Coverage Scheme/Gold Card (which now covers 71% of the population), social security (18% of the population), and the civil service scheme (8% of the population). Recently, the government has extended the reach of these by including pharmacies among the channels through which healthcare is delivered to the public. This has been achieved through the ‘Pracharat Blue Flag’ project, the program to reduce crowding in hospitals by transferring demand to pharmacies, and an increase in the use of technology to dispense advice on health and medications, the latter including a greater reliance on telemedicine and the deployment of phone apps such as Mor Dee/Good Doctor and Clicknic (for which the userbase rose from 3 million in 2020 to 4 million a year later). Thanks to a combination of the greater convenience that these changes will bring and a wish to reduce the risk of infection, in the future the public are expected to show a much greater tendency to access health services through pharmacies, rather than by visiting a hospital. This will likely be most noticeable for those looking for treatments for NCDs such as diabetes, hypertension, asthma, and some mental health problems. Furthermore, private health insurance take-up is also expanding (coverage rose 10.6% in 2021), and this will add further to demand for products from the pharmaceuticals industry. Given this, for the period 2023-2025, spending on healthcare (medicines and treatments) will expand by an average of 7.6% annually, compared to a rise of 7.0% in 2022. This will be split between increases of 8.1% in the public sector and of 5.7% in the private sector, which compares to rises of respectively 7.6% and 5.3% in 2022.
Foreign patients will return to Thai hospitals in larger numbers over the next few years, and Krungsri Research predicts that foreign arrivals (both regular and medical tourists) will number 22.7 million in 2023, 35.3 million in 2024, and 40.4 million in 2025. Medical tourists mostly come from East Asia, Europe, and the Middle East, as they are attracted by Thailand’s status as one of the world’s leading providers of medical tourism services. Within this market, Thailand draws particular strengths from the quality of its services, the high standard of the care that is provided, and the lower costs compared to competitors in Singapore and Malaysia. Growth in this market will then add further to demand for pharmaceuticals.
Demand for wellness and preventive healthcare services and products is also on the rise, though growth in this market was accelerated greatly by the outbreak of COVID-19 in 2020. Consumers are thus increasingly changing their regular day-to-day behaviors as they try to avoid ill health, while hospitals and other organizations have also adapted their business strategies to improve health outcomes. This is then likely to support stronger demand for pharmaceuticals and other medical goods, especially for vaccines or products that are believed to boost the immune system such as vitamins, traditional Thai herbal preparations, food supplements, and health drinks. Players already active in the pharmaceutical industry will likely respond to these changes in consumer behavior by introducing or distributing new health products as they look to stake a claim to this rapidly growing market. This outlook is in keeping with work by Euromonitor, which estimates that the global market for health products will expand at an average annual rate of 5.7% over 2021-2025, up from the 3.4% growth maintained over the previous 5 years.
Continuing technological progress will help to make manufacturing processes more efficient and to expand the public’s access to medical treatments. Thus artificial intelligence and machine learning will help to increase the speed and efficiency of research and development programs; use of big data analytics will help manufacturers rapidly access in-depth information at all stages of the manufacturing process; use of bioreactor systems and low-energy continuous manufacturing processes will maximize output while minimizing wastes; 3D printing will allow players to manufacture human cells or tissue to use in drug development; and 5G technologies will facilitate the development of online platforms and the provision of telepharmacy services, and help to connect pharmaceutical supply chains from upstream manufacturers to downstream consumers (e.g., Medcare). Taken together, this will help to increase the overall ease and convenience of the system, reduce travel and waiting times, and provide easier access to healthcare services, hopefully before any conditions become too serious.
The industry will in addition benefit from government policy that aims to increase investment inflows into the production of pharmaceuticals. BOI investment promotion schemes aim to stimulate greater investment in the medical and related industries by offering 8-year corporate tax waivers for manufacturers of active pharmaceutical ingredients (APIs) and 5-year waivers for general manufacturers of pharmaceuticals. The pharmaceuticals industry is one of the government’s new S-curve industries in the EEC area, and promotion of the industry should lead to an increase in research and development, which will then help to lower production costs below those of imports, especially for medicines that require high-tech production processes. As part of this, the government is providing funding for R&D and offering further tax breaks (in the first half of 2022, one application was made for investment support for biotechnology-related R&D totaling THB 3.7 billion). Measures to support the domestic production of pharmaceuticals over 2023-2027 aim at increasing the value of national pharmaceuticals output by THB 100 billion and to grow export markets to a value of THB 13 billion. The motivation behind this is the wish to increase the security of the domestic supply of medicines. (iv) The 2021-2027 strategic plan to shift the economy to the BCG (bio, circular, and green) model will help to increase the output of medical and health goods drawn from Thailand’s natural biodiversity, to increase the added-value in the markets for vaccines and medicines, and to cut imports, thus providing the general public with greater access to high-cost medicines.
Source: Ministry of Public Health,The Office of Industrial Economics, Krungsri Research,Statista
