OVERVIEW-How attractive is Malaysia’s halal pharmaceutical sector?

Photo: TORONTO, CANADA - MAY 07, 2014: Different types of vitamins and supplements on shelves in a pharmacy / Niloo / Shutterstock.com

Malaysia is one of the world’s top halal pharmaceuticals producers and is leading the way in terms of standards. But demand is still niche at the domestic and export level, despite government support to bolster the sector. How attractive is Malaysia’s halal pharmaceutical sector?

MARKET OVERVIEW

Malaysia has been at the forefront of the global halal pharmaceutical sector. The country’s leadership particularly in setting halal standards for the sector has enabled the overall Islamic Economy to shift from being primarily food-focused to also include pharmaceuticals and nutraceuticals.

The country’s certification body, the Department of Islamic Development Malaysia, better known by the acronym of its official Malay name JAKIM, has been particularly active, publishing the world’s first halal pharmaceuticals standard according to ISO guidelines – the MS2424: 2012 Halal Pharmaceuticals General Guidelines.

Malaysia had also established a separate halal certification scheme for pharmaceutical products due to the specialized requirements of the industry.

Chemical Company of Malaysia Berhad (CCM) was the first to get involved in the halal sector around 17 years ago. This milestone marked the start of the transition in the sector, from vitamins and health supplements to over-the-counter (OTC) medicines such as painkillers, analgesics, eye drops, cough mixtures, ointments and creams.

In the past three years, the number of halal pharmaceutical players, excluding traditional medicines and cosmetics manufacturers, has significantly increased.

“When we got halal certification in 2013, we were the first, and we now see 20 to 30 companies out of around 70 pharma manufacturers in the country, so the sector has grown quite well,” Leonard Ariff, Group Managing Director of CCM Berhad, told SalaamGateway.

Malaysia External Trade Development Corporation (MATRADE) reports 250 manufacturers in the country licensed by the Drug Control Authority (an agency under the Ministry of Health), only 74 of which are licensed to produce pharmaceuticals. 176 manufacturers are licensed to produce traditional medicines and 207 for cosmetics, according to the MATRADE website.

Ariff estimates the overall pharmaceutical sector to be growing by 10 to 12 percent per year, while CCM’s exports are growing at close to 15 percent.

Demand is driven at the domestic level by the country’s 31.7 million people, around 60 percent of whom are Muslim, although uptake of halal pharmaceuticals is still low overall.

“What sells the most in the halal segment, at 35 percent of the market, is food and beverage, then ingredients, and pharmaceuticals is 1 percent. Acceptance is still low at the moment,” said Dr Tabassum Khan, Managing Director of AJ Pharma Holding and Chairman of AJ Biologics, an initiative of the Aljomaih Group of Saudi Arabia, which has facilities in Malaysia.  

Malaysia is pushing exports of pharmaceuticals which, according to the Malaysia External Trade Development Corporation (MATRADE), were valued at 1.31 billion ringgit ($317 million) in 2015, an increase of 15.8 percent on 2014.

Exact export figures for halal pharmaceuticals are not readily available, but Malaysia’s Halal Industry Development Corporation (HDC) estimated that the top export markets were the United States and Singapore at around $24.2 million each, and Nigeria, Hong Kong, and China with around $726,521 each in 2014.

CHALLENGES

Halal pharmaceuticals’ niche presence in Malaysia is somewhat surprising given the advanced nature of certification, government support and increasingly more products being on offer.

Low levels of knowledge and awareness

“One of our biggest challenges is actually demand. Although Malaysia has a large Muslim population, demand is not being driven by knowledge. For the market to expand, it needs to be seen as a religious obligation for Muslims globally, to be cognizant of halal pharmaceuticals, not only medicines, but also vitamins and health supplements,” said Ariff.

Regulatory web

Also holding back exports is the lack of mutual recognition of halal certification by regulatory bodies around the world, few of which have the same standards as JAKIM, especially in pharmaceuticals.

Lack of raw materials

At the domestic level there is a general lack of raw materials for the industry, despite the country’s biodiversity, which could be tapped into to develop resource-based biogeneric drugs. 

“Raw materials is a big dilemma. The local industry has to develop more. Although it’s not possible to produce everything, investment should be encouraged in APIs (Active Pharmaceutical Ingredients),” said Dr Khan.

“It is also hard to compete with India and China, and multinationals source their own raw materials,” he added.

What is needed for the sector to develop further is greater synergy and economies of scale, such as through halal pharma hubs, bigger market players, and for the global pharmaceutical sector to be more geared towards halal ingredients.

Ariff believes this is gradually happening, with global ingredients players like DSM and BASF certifying halal lines.

“It will happen when there are enough companies like CCM manufacturing halal pharmaceuticals, and also a growing consumer demand. So it works backwards, like a chain reaction. I think there will come a time when raw materials manufacturers will produce halal ingredients that comply with halal requirements,” he said.

SCIENCE AND VACCINES

An expected boon for the sector is JAKIM’s plan to extend halal certification to prescriptive medicines, slated to be open for application before the end of 2016.

Currently prescription medicines cannot carry halal logos on packaging, but halal references in promotional materials are allowed. Labeling of gelatin is compulsory, to ensure its source of origin is clear.

“One of the factors Malaysia is grappling with is prescription products, since the government is being cautious to avoid patients refusing life saving medication purely because they are unsure of its halal status. This involves a holistic approach to educate stakeholders, and how quickly halal pharma companies develop halal products,” said Ariff.

CCM is moving into larger molecule products such as biologics, and has invested in a South Korean company to push such development.

AJ Biologics is also pushing R&D, recently acquiring Denmark’s Statens Serum Institut (SSI) vaccine production business to develop halal vaccines for EV71 (against Hand, Foot and Mouth Disease) and MCV4 (meningococcal meningitis).

“The biggest motivation for acquisition was to have access to the global vaccine market and to have upstream manufacturing capabilities for our project in Malaysia. The other motivation was to have access to a polio vaccine. Developing an animal source-free polio vaccine would be a major contribution to the Islamic world,” said Dr Khan.

AJ Biologics is expected to start commercial operations in the first quarter of 2018, targeting the Middle East and East Asian markets. “The MCV4 will be the first ever halal certified meningococcal vaccine for all the pilgrims traveling to Saudi Arabia,” added Dr Khan.

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