Healthcare is one of eight target industries at the Invest Myanmar Summit 2019 and will be covered in one of the focus sessions on Day 2 of the Summit programme.
Zaw Moe Khine launched AA Medical and Pacific Pharmaceuticals in 1994 with just four products and four employees. Since then, he has expanded his company to more than 1,000 employees and more than 600 products. The chief executive and managing director of the company now known as AA Medical Products Ltd sat down to discuss opportunities for growth in the market.
Note: Zaw Moe Khine spoke in his capacity as general secretary of the Myanmar Pharmaceuticals and Medical Equipment Entrepreneurs Association.
Q: Is the pharmaceuticals sector growing?
A: There are three parts to the sector: manufacturing, healthcare, and distribution. The government opened up the manufacturing sector in 2013, and there are now about ten factories under construction or that have started production, which is a good sign.
Q: Why should companies invest in Myanmar over other regional countries?
A: Myanmar is a member of the World Trade Organization and the World Intellectual Property Organization, but is legally exempted from the obligation to pass an intellectual property law until 2023. A copyright law is expected to come out soon, but the patent law will be introduced only after this temporary waiver comes to an end.
Myanmar’s pharmaceutical market is estimated to be worth about US$600 million and is expected to grow to $1 billion in the next five years. If there is more investment in manufacturing, pharmaceutical companies will be able to sell their products competitively.
While there is significant potential, for the industry to grow the government needs to establish a solid national procurement policy that encourages domestic production. In many countries, there is a points-based, preferential system for local products. This would not necessarily only benefit Myanmar-owned factories if factories built with foreign investment were also considered domestic manufacturers.
Because import taxes are so low—the customs duty is only 1.5 percent—it is easy to do business by importing and selling products, which puts unnecessary pressure on the Myanmar currency, the kyat. Major investments are needed to stabilise the exchange rate, not just investments in sales and distribution.
Q: What are the standards for testing pharmaceuticals and quality control?
A: Under World Health Organization Good Manufacturing Practice, all factories have their quality control assurance and are regulated by the Food and Drug Administration, which inspects products produced by local factories quite frequently; more than imported products.
Q: Let’s talk about the challenges. What are the key challenges to the import of pharmaceutical products?
A: Some problems that had been solved have re-emerged as the country undergoes political changes. One major challenge is the implementation of regulations at the directorate level. At the ministry, or policy level, there is much good will to improve business-friendly regulations, but there are challenges in implementing the policies down the line.
For example, under the Union Tax Law, there is a commercial tax exemption for pharmaceutical products and medical devices, on which customs is not supposed to collect any import tax.
Now when we apply for an import license, an import recommendation letter or an approval letter from the FDA is required to identify it as a medical device. But customs officials may claim not to know if it is a medical device or not, or interpret the letter as not being addressed to them. This can cause delays up to two months to clear goods.
Q: What about the infrastructure challenges?
A: Air-conditioned transport is an issue in this country. Traffic congestion is common here. For products that need to be stored at less than 25 degrees, this poses a logistical challenge, as they can be exposed to high temperatures for many hours on the road.
The power supply is another challenge, especially for storage. This is because pharmaceutical businesses need up to three types of storage conditions, each at a different temperature, for their products. To create these conditions, we need air-conditioned rooms. The irregular electricity supply means we must have a backup diesel generator.
As part of good storage practice, we need a contingency plan. When there are frequent power blackouts, backup generators are no longer for backup, but normal daily use. For distribution warehouses, we must be prepared for the backup generator’s failure, which necessitates a secondary backup generator.
These are costs that add up, on top of the product cost. Companies that can afford this can invest, but retail outlets may find these conditions for storage challenging. In Yangon, companies can only build new generators behind buildings, due to the Yangon City Development Committee’s revision of the law, and not all buildings have enough room to house such generators.
Q: What facilities exist for storage?
A: Under FDA standards, companies must have their storage facilities audited before they can begin importing pharmaceutical products, which improves storage conditions. The FDA also requires companies to have a backup generator— but not a secondary backup generator.
Problems occur at the retail level too. The FDA carries out inspections of outlets. But if they shut down all the pharmacies that don’t have good air-conditioned storage, that would probably affect more than 90 percent of the pharmacies across the country.
FDA is working with the Myanmar Pharmaceuticals and Medical Equipment Entrepreneurs Association to hold seminars about storage conditions. In November, we held a seminar at the Shwe Mingalar market, in Yangon’s Mingalar Taung Nyunt Township on a Sunday, not in a meeting room, so people could easily listen. We hoped they would see the seminar as motivational and inspirational.
We have also launched a pharmaceutical management course to explain how to implement good pharmacy practice, and we have invited officials from the FDA to talk about regulations.
Photo credit: Theint Mon Soe | Frontier