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I. INTRODUCTION
Thailand's pharmaceutical market, which only two years ago was growing at an average annual rate of 15%, suffered a harsh blow in July 1997 when the baht's switch to a floating rate triggered a severe economic crisis in the country. From 1997 to 1998, the Thai pharmaceutical market fell about 16% to US$670 million. In 1999, however, there are increasingly encouraging signs that Thailand's economy - and thus the country's large drug market - will recover. The government has implemented a new fiscal stimulus package and lowered interest rates to stimulate domestic demand. In addition, the baht has maintained a fairly stable position against the dollar over the past few months. GDP is expected to grow about 1% in 1999, inflation has fallen almost 5% over the previous year, and export growth is expected to rebound. Figure 1. Changing Economic Trends in Thailand (% Change) Economic Indicators GDP Rate Exports (US$ terms) Imports (US$ terms) Consumer Prices Private Consumption *Estimated, **Forecasted So rce: World Bank, 1999 With the expected rise in private consumption and expected decrease in inflation, consumer demand for pharmaceuticals is also expected to rebound. Domestic demand for pharmaceuticals has been the industry's greatest driving force - Thailand's rapidly aging population (by 2020, the number of people over 65 will increase to 10%, compared to only 4% in 1990), and increased incomes from a spectacular 8% annual economic growth that lasted from the mid-eighties to mid-nineties, has accelerated the demand for better healthcare. Even during 1998, when Thailand experienced 8% negative GDP growth, only tonics and vitamins experienced negative growth while sales of generic drugs and basic medicines remained stable. Overall, drug expenditure constitutes about 35% of Thailand's total health expenditure. While Thailand's regulatory environment is still quite bureaucratic, a gradual liberalization of pharmaceutical law has also improved forecasts for the industry in 1999, and the pharmaceutical market is expected to grow at 5 - 10% for 1999. Foreign drug companies can therefore take advantage of renewed demand for quality pharmaceuticals, and perhaps over the next few years achieve the same 16% average growth rates attained by members of the Pharmaceutical Producers Association (PPA), the leading international industry association in Thailand, before the crisis began. However, foreign drug companies must make sure they understand Thailand's pharmaceutical regulations and regulatory environment completely if they are to succeed in its rapidly growing drug market. 1997* -0.4 4.0 -13.4 5.6 0.1 1998* -8.0 -6.9 -33.5 8.1 -11.4 1999** -0.7 4.1 10.3 3.0 0.5
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The local pharmaceutical industry in Thailand is mainly a formulating industry and does not involve much R&D. Most of the pharmaceutical ingredients of locally manufactured drugs are imported. Thailand's pharmaceutical market is made up of locally produced domestic drugs (generic products, which account for an estimated 46% of the drugs on the market), locally produced international brands (about 32% of the market), and imports (22% of the market). There is probably a greater reliance on imported products in Thailand, since companies manufacturing international brands in the country have concentrated on ethical drugs. Government hospitals and pharmacies are the largest distribution channels, with each accounting for 35 - 40% of all sales: Figure 2. Total Pharmaceutical Sales in Thailand b Market Segment Market Segment Government Hospitals Private Hospitals Doctors/Clinics Pharmacies/Drugstores Retail Stores So rce: Z ellig Pharma Whatever method of entry is chosen, new entrants should be aware that competition is intense. New entrants who choose to introduce their products into the Thai market must have a long-term plan and be prepared to commit resources to developing the market. Pharmaceutical Sales 39% 15% 9% 34% 3%
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would gain after being taken out from under the MOPH could greatly speed up drug approval. In late 1998, the FDA requested the Secretary for Public Health that it be allowed to become an independent executive agency, and urged public health administrators to reconsider their earlier decision against that plea. However, no decision has been made on this proposal yet.
Drug Classification
Previously, the MOPH classified pharmaceuticals into "modern" and "traditional" (i.e. herbal) pharmaceuticals. Modern pharmaceuticals, which included generic and new drugs for human use as well as veterinary products, were further divided into three categories: Ready-packed pharmaceuticals, which are similar to those available in over-the-counter drug stores; Dangerous pharmaceuticals, which must be sold by a registered pharmacist; and Specialty controlled pharmaceuticals. However, the modern/traditional classification was too general, leading to multiple sub-categories for different drugs and creating general confusion over how certain drugs were to be treated in the market. For example, many drugs in the Thai market were misclassified as "dangerous drugs," and thus according to law kept off the National List of Essential Drugs (NLED, the standard drug price list in Thailand). As a result, manufacturers were prevented from advertising these products in media other than professional medical publications, ultimately lowering sales. In January 1999, in an effort to harmonize its drug classification with international standards, the government finally decided to reclassify drugs into three categories: 1) over-the-counter drugs; 2) drugs sold by pharmacists; and 3) prescription drugs. This new classification, while not following international standards exactly, does eliminate much of the subjectivity in the previous system and thus makes the identification of drugs more accurate. Also, with the reclassification of drugs and revision of the NLED, the government has also begun allowing many drugs previously labeled as "dangerous" to be sold in drugstores. As a result, the revised NLED will contain about 800 items, compared to only 367 before the revisions - thereby expanding market opportunities and increasing competition for pharmaceutical manufacturers in the country. Regulatory Procedure Thailand's national drug control system stems from its Drug Act BE 2510 (1967) and its four amendments. The MOPH, along with the Drug Control Division of the FDA, is responsible for administering the system. Companies interested in manufacturing or exporting pharmaceutical products must obtain prior approval from the FDA. Both manufacturers and importers are required to get a license to produce, sell or import any pharmaceutical products into Thailand. The pharmaceutical control system is divided into a pre-marketing and post-marketing phase. In the pre-marketing phase, companies must obtain a license to produce, sell or import any pharmaceuticals into Thailand, as well as register their products in the country. The Bangkok metropolitan area's Drug Control Division and surrounding provincial health offices are in charge of licensing. There are nine categories of licenses, including a license to produce, a license to sell, a license to act as a wholesaler of modern drugs, etc.
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Application form Drug formula (complete) Manufacturing method In-process control Raw materials specifications of active and inert ingredients Finished product specification Certificate of analysis Drug analytical control method Packaging and labeling samples Storage condition information Stability studies of finished product 3. Application for approval of granted credential certificate (requires the following materials): Application form Permit to manufacture or import drug sample Drug sample Approved drug quality and analytical control method Pharmacological and toxicological study (if any) Clinical trials Safety and efficacy study (if any) Drug formula Drug literature Labeling and packaging information Certificate of free (for imported drugs) A Certificate of Free Sale from the country of origin is required when registering a new chemical entity, and samples of the new drug must be submitted to the Thai Department of Medical Science for analysis prior to acceptance of the registration documents. This analysis usually takes 6 months, but can often take longer given the bureaucratic nature of the FDA. Once the registration file is received, the FDA can take up to 18 months ensuring that it is complete, before submitting the clinical work to the Review Committee for consideration. In turn, the Review Committee may ask additional questions or require that a local study be carried out to ensure that Thai national companies under local conditions can duplicate the clinical data in Thailand. For manufacturers of pharmaceutical products, a Good Manufacturing Practice (GMP) certificate has also been recommended and offered by the Thai government for about 10 years. While continued efforts are needed, Thailand's pharmaceutical market is trying to establish Good Manufacturing Practice (GMP) in all local manufacturing facilities. The Thai FDA began giving out GMP certificates to local drug companies meeting the standards in 1996, and FDA officials from Thailand have also been participating in a new AsiaGMP improvement program sponsored by the World Health Organization (WHO), where foreign companies train Asian health officials on international pharmaceutical GMP. After these month-long training sessions, Thai inspectors have gone back to Thailand and developed their own internal GMP training courses to spread acceptance of the international standard. However, the GPO is still exempt from registration and GMP requirements, and thus Thailand still has a long way to go in harmonizing its standards with those accepted internationally.
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procedure, and registration timing is now falling back the old two-year filing term.
V. MARKETING REGULATIONS
The Advertising Control Division of the FDA controls marketing and advertising regulations. To date, there have been many complaints that document forgery and bribery undermine the advertising approval process. Proposals for advertisements, for example, are often forwarded to FDA officials through advertising agencies hired by manufacturers or importers of the product. To seek fast approval, these agencies have often been willing to pay "tea money" to officials or add misleading marketing information to convince the public into having full faith in their products. In addition, FDA officials have often told companies that hundreds of other companies are on the "waiting list" for advertising approval, thus prolonging the approval time to several weeks unless payment was made under the table. How much money is needed to speed the approval process has depended on the content of the advertising slogans, and rates charged often range from US$260 to over $2,000. Often, such payments can allow the company to receive a FDA endorsement in two days. The government has been trying to crack down on internal corruption in the regulatory process, and has recently announced that advertisements of drugs under its supervision will come under closer inspection as to prevent abuses. Beginning February 5, 1999, for example, all drug advertisements on television, radio or in the print media must state their FDA approval number, and all endorsements must be screened by a technical team before they are sent to administrators. Regulations on correct labeling and packaging have been strengthened to ensure that more drugs in the market meet quality and safety standards, and also to prevent unscrupulous officials from bargaining for extra money by maintaining unclear advertising criteria for products. Also, to reduce the risk of forgery, application forms for advertisements will be separated from approval forms, and product owners must apply themselves or give advertising agencies written authority for marketing approval. Advertisers will be informed if their advertisements are considered inappropriate. Finally, over the past year, the Advertising Division of the FDA was also changed to a Publicity Division to turn its focus away from marketing (where FDA officials would often earn huge incomes for considering approval of advertisements) and more towards creating public awareness and protecting consumer rights. While the new regulations are stricter, the FDA asserts that they will not prolong the procedure to receive advertising approval, and the time to consider an application will remain at around a couple of weeks.
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Thailand has been on the U.S. 301 Watch List for the past few years due to alleged copyright and patent infringement. Thailand did extend patent protection to pharmaceuticals in 1992, but it did not provide protection for foreign-patented products not yet marketed in Thailand. In 1994, the FDA created a "Transitory Provision to Conduct Safety Monitoring and Bioequivalence Studies of New Drugs," where pipeline protection was granted for pharmaceutical products patented elsewhere in the world between January 1, 1986 and September 1991. This procedure required companies to report adverse reactions for a two-year period, and companies could also request an additional "two plus one" year reporting period in which the FDA would not accept registration applications for generic copies of the product. Under the 1994 legislation, up to five years' market exclusivity would be provided for patented drugs, the only restriction being that sales were to be confined to hospitals and clinics (no drugstore sales). However, the effect of this legislation has also been undermined by the MOPH's recent decision to make the NLED a "maximum list" for government hospitals, thereby excluding products given this pipeline protection from the list. As a result, innovative products qualifying for the pipeline protection will not be listed or stocked in most hospitals. Thailand also introduced a new Patent Law Amendment Bill into Parliament in late 1998, which if passed would delete some important provisions on the government's authority to enforce compulsory licensing of pharmaceutical products. The amendment would also disband a pharmaceutical patent law committee. However, many original provisions of the 1992 legislation are untouched in the new legislation. For example, it still excludes naturally existing biologicals from patent protection; generic use of patented products is still allowed prior to the originating company's patent expiration; compulsory licensing of patented products not manufactured in Thailand is still required; and dependent compulsory licenses, compensation and appeals are all still inconsistent with the World Trade Organization's TRIPS (Trade-Related Aspects of Intellectual Property Rights). Finally, the new legislation also introduces new inconsistencies: it extends the protection period for "state of the art" pharmaceuticals to 18 months, compared to the internationally-accepted period of 12 months. This may be used as a mechanism to reject an application by a foreign company on the basis that the company's country does not offer the same rights to Thai applicants. Also, the new bill allows import of the patented product if the patentee or licensee has already sold the product in Thailand, therefore allowing other countries to import the same drug without recognizing the rights of its original product/process patent holder. If the company holding the patent does not license its product, it still has control over its IPR - but there are still many risks to foreign companies in Thailand's existing patent regime.
VII. CONCLUSION
With its economic recovery and renewed demand, growth prospects in the Thai pharmaceutical market are quite good. The major obstacles to foreign companies lie in skirting the regulatory system's widespread corruption, which can manifest itself in everything from intentional delays in the approval process to weak IPR protection. Fortunately, Thailand's government has begun to recognize the need to improve its regulatory structure, and reforms are gradually taking place. Foreign pharmaceutical companies will most likely see the bulk of reforms occurring over the next few years, as Thailand completely recovers from its economic slump and the switch to more market-based, efficient practices will become easier. Any foreign firm looking to stay in the Thai pharmaceutical market for the long term must pay attention to these developments carefully in order to gain an edge in the country's lucrative drug market.
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