The pharmaceutical industry in the Philippines is dominated by foreign companies, with the majority of the 20 largest firms having operations in the country. However, a domestic drug producer, Unilab, stands as the largest entity in the sector. Unilab operates seven manufacturing units throughout the Philippines and has managed to secure a significant market share from multinational competitors like Pfizer (US), Abbott Laboratories (US), and GlaxoSmithKline (UK) since 2008.
By 2018, 14 out of the world’s top 20 pharmaceutical companies had established manufacturing facilities in the Philippines. Despite this, the country still faces a considerable trade deficit in the pharmaceutical sector. UN Comtrade data reveals that pharmaceutical imports reached a value of US$3.7 billion in 2021, more than double the previous year’s figure. Meanwhile, exports were valued at US$63 million, a 30% year-on-year increase.
The 2008 Cheaper Medicines Act significantly impacted the pharmaceutical landscape in the Philippines, making it harder for patent holders to renew patents through evergreening practices. Local producers like Unilab have used this law to challenge patents held by international drugmakers. In addition, the act opened up the market to parallel imports of patented drugs, primarily from Indian manufacturers. The Philippine government has been actively encouraging Indian pharmaceutical companies to set up manufacturing plants in the country.
The pharmaceutical market in the Philippines is expected to grow in value from PHP300.1 billion (USD6.1 billion) in 2021 to PHP333.9 billion (USD5.6 billion) by 2026, and eventually reach PHP388.5 billion (USD6.3 billion) by 2031. This growth represents a five-year compound annual growth rate (CAGR) of 2.2% in local currency terms and -1.5% in US dollar terms. Pharmaceutical sales constituted 26.0% of total health expenditure in 2021, a figure projected to decline to 17.8% by 2026 and further drop to 13.2% by 2031. Annual medicine spending per capita is expected to remain relatively stable, decreasing from USD55 in 2021 to USD50 by 2031.
Several factors will contribute to the increased spending on medicines in the Philippines over the forecast period. These include a growing population, increased urbanization, a rising burden of communicable and non-communicable diseases, and support for universal healthcare coverage. The Philippine government is implementing nationwide improvements such as new medical facilities, emerging virus research programs, insurance coverage expansion, and foreign direct investment initiatives. These factors present a promising outlook for international drugmakers and pharmaceutical expenditure in the Philippines.
However, the pharmaceutical market in the Philippines also faces several challenges. Widespread corruption, ongoing pricing controls, and inadequate healthcare services significantly hinder market opportunities. A potential reversal of democratic ambitions by the government could discourage foreign direct investment. Furthermore, the pharmaceutical market’s regulation is currently poorly defined, with several aspects lagging behind those of its peers.
Rising drug prices have long been a concern in the Philippines, even prior to the Covid-19 pandemic. The Department of Health has identified unaffordable medicines and high out-of-pocket spending as two of the country’s most significant health system challenges. The introduction of maximum retail prices (MRP) aims to broaden access to medicines and improve health outcomes. The MRP scheme sets price levels throughout the supply chain, including manufacturers, wholesalers, and retailers. The government is also aligning with drug pricing recommendations from the UN and the WHO, both of which believe that the latest biomedical innovations are too expensive for governments and patients in emerging markets.
In the long term, these price controls could have a positive impact on the Philippine pharmaceutical market. As patients and other payers are drawn to lower-priced pharmaceuticals, greater demand should attract more suppliers to the market, which is often overlooked by firms seeking opportunities in the Asia Pacific region. Alongside the robust generic drug market, increased government spending on innovative treatments is anticipated, despite the currently low uptake in the Philippines. These developments hold the potential to reshape the pharmaceutical landscape in the country and ultimately improve public health outcomes.
The increasing demand for chronic disease medicines in the Philippines is fueled by an aging population and enhanced healthcare provisions. However, to control pharmaceutical spending, more stringent cost-containment measures will be enforced, limiting the prescription market’s growth. The implementation of a mandatory health insurance system and the associated rise in medicine reimbursement funds will promote greater prescription medicine consumption, although the Covid-19 pandemic has postponed the country’s goal of achieving universal healthcare.
In 2021, prescription medicines accounted for 74.2% of the total market sales by value, amounting to PHP222.6 billion (USD4.5 billion). Growth in this sector is primarily driven by demographic shifts and the government’s efforts to improve public health. In 2022, the sector is projected to reach PHP192.4 billion (USD3.5 billion), a 13.6% year-on-year decrease in local currency terms (22.6% drop in US dollar terms). By 2026, prescription medicine sales are estimated to rise to PHP253.7 billion (USD4.3 billion), with a five-year local currency compound annual growth rate (CAGR) of 2.7% (-1.1% in US dollar terms). By 2031, prescription drug sales are anticipated to achieve a CAGR of 3.1% in local currency terms and 0.8% in US dollar terms, reaching PHP302.2 billion (USD4.9 billion) and comprising 77.8% of the Philippines’ drug market.
The prescription drug sector is the largest segment of the overall pharmaceutical market in the Philippines. Factors such as a growing population and increasing chronic disease prevalence continue to drive prescribed medicine sales. Additionally, efforts to attain universal healthcare coverage will further bolster the prescription drug market. Self-medication with non-prescription medicines is a common trend in developing Asian markets due to the high costs of prescription drugs. The Philippines’ health insurance coverage aims to reverse this trend by improving access to prescription medicines, presenting a substantial revenue opportunity for drug manufacturers.
Healthcare reform remains a priority for the government, and as a result, stringent cost-containment measures for this high-value sector will become more prominent throughout our forecast period. The demand for chronic disease medicines will continue to grow alongside the aging population of the Philippines. However, pricing pressures and a hesitance to reimburse medications, particularly expensive ones, will moderate growth in the long term. The patented drug sector will be negatively impacted by the increasing use of generic medicines.
In 2021, patented drugs accounted for 26.0% of the total market and 35.0% of prescription sales, valued at PHP77.9 billion (USD1.6 billion). The sector is projected to decrease by 15.2% in local currency terms in 2022, reaching PHP66.1 billion (USD1.2 billion). With a five-year compound annual growth rate (CAGR) of 0.7% in local currency terms (-2.9% in US dollar terms), the patented drug sector is expected to reach sales of PHP80.8 billion (USD1.4 billion) in 2026.
By 2031, the end of our current forecast period, the patented product sector is forecast to grow to PHP87.3 billion (USD1.4 billion), representing a CAGR of 1.1% and -1.1% in local currency and US dollar terms, respectively. As a result, the segment will constitute a lower share of the total market by 2031, at 22.5%. Healthcare reforms pose a long-term upside risk to patented medicine market growth due to increased medicine accessibility. The expansion and modernization of healthcare infrastructure and growing awareness of health conditions will also contribute to sustaining the rising demand for treatment. Nonetheless, the high cost of innovative medicines will remain a barrier for the lower-middle income population. Significant market access barriers, such as weak intellectual property protection, will continue to challenge the operating environment for patented drugmakers. Additionally, as the country expands universal healthcare to improve access for low-income Filipinos, the government will increasingly favor low-cost generic medicines to control health expenditure.
Long-term market growth will be supported by government cost-containment measures as universal healthcare coverage develops. This will benefit the generic sector as the state aims to reduce high-value patented medicine usage and increase lower-value generic drug consumption to cut pharmaceutical spending. In 2021, generic drug expenditure amounted to PHP144.7 billion (USD2.9 billion), constituting 65.0% of prescription sales and 48.2% of the total market. By 2031, we expect generic drug sales to reach PHP215.0 billion (USD3.5 billion), with a CAGR of 4.0% (1.7% in US dollar terms), representing a larger share of both prescription and total sales at 71.1% and 55.3% respectively.
As the country expands universal healthcare, the government will increasingly favor low-cost generic medicines. The Generics Act of 1988 mandates doctors to prescribe generic drugs, which are 50%-70% cheaper than branded alternatives. The Department of Health asserts there is no difference between generic and branded medicines to improve patient compliance. The Philippines Medicines Policy (2017-2022) aims to strengthen the generic drug industry by establishing pharmaceutical economic zones and facilitating raw material importation for low-value pharmaceutical manufacturing. The Universal Health Coverage bill, enacted in October 2018, ensures citizens have access to affordable, quality medicines without financial hardship. Under Section 25 of the bill, drug outlets must carry generic equivalents of all drugs in the Primary Care Formulary.
As the demand and supply dynamics of medicine shift in the Philippines, the over-the-counter (OTC) market’s share of the total pharmaceutical market will decrease over our forecast period. The growing chronic disease burden among the population has already led to a rise in prescription medicine consumption, which will be furthered by the implementation of and commitment to universal healthcare. Increased public healthcare financing, including medicine reimbursement, will reduce healthcare inequalities, allowing greater access to healthcare services and decreasing patient reliance on OTC medicines.
In 2021, OTC drugs constituted 25.8% of the total market, a figure that has remained relatively consistent over the past decade. However, we forecast this percentage to decline to 24.0% by 2026 and 22.2% by 2031 as authorities work to make prescription drugs more affordable. Despite this, rising health awareness will fuel growth in the OTC market. Sales reached PHP77.5 billion (USD1.6 billion) in 2021, but we predict a decrease of 15.2% to PHP65.7 billion (USD1.2 billion) in 2022, followed by growth to PHP80.2 billion (USD1.4 billion) by 2026. This represents a five-year compound annual growth rate (CAGR) of 0.7% (-3.0% in US dollar terms). By 2031, we expect the segment to reach a value of PHP86.3 billion (USD1.4 billion), with a 10-year CAGR of 1.1% and -1.2% in local currency and US dollar terms, respectively. The combination of an aging population, increased access to medical care, and healthcare reforms will lead to a decline in the OTC market share as demand for and access to prescription medicines increase.
The Food and Drug Administration (FDA) of the Philippines serves as the national authority for the development and implementation of regulations related to drug safety, efficacy, and quality. It is also the primary agency tasked with enforcing drug regulatory system laws and regulations, encompassing all parties in the drug supply chain. Established after former president Gloria Macapagal-Arroyo signed Republic Act 9711 in August 2009, the Philippines FDA replaced the Bureau of Food and Drugs, which was under the Department of Health (DOH) but lacked the power and resources to control rising prices of patented drugs.
In recent years, the FDA has undergone significant changes aimed at enhancing regulatory transparency, aligning standards with international norms, and ensuring drug quality in the market. Despite procedural changes within the FDA initially causing a negative impact on approval times, they are expected to result in long-term improvements in regulatory efficiency and medicine quality. The FDA is permitted to retain funds from companies in addition to its government budget, enabling it to expand its capabilities in the future. Unlike its predecessor, the FDA has the authority to seize defective medicines and apprehend those who sell them without a court order, giving it full control over the manufacture, import, export, distribution, and sale of pharmaceuticals, food, cosmetics, and medical devices.
The agency has adopted the WHO’s standards for good distribution and storage practices, as well as the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use’s guidelines on good clinical practices. Another notable feature of the FDA is its modern testing laboratories located in Luzon, Visayas, and Mindanao, the three primary island groups of the Philippine archipelago. These facilities enable the regulatory body to evaluate generic medicines and ensure their bioequivalence to innovator products.
The pharmaceutical patent environment in the Philippines underwent a significant transformation with the enactment of Republic Act (RA) No. 9502, known as the Universally Accessible Cheaper and Quality Medicines Act of 2008. Passed by the Senate and House of Representatives on April 29, 2008, and effective from July 4, 2008, the legislation aimed to safeguard public health by implementing measures to promote and ensure access to affordable, high-quality generic drugs and medicines for everyone. The amended intellectual property (IP) code enabled local generic drug manufacturers to test, produce, and register their generic versions of patented medicines, allowing them to be sold immediately after patent expiration. The law also permitted parallel importation of patented drugs from other markets, such as Pakistan and India, where prices are significantly lower than in the Philippines. Additionally, RA No. 6675 (the Generics Act of 1988) and RA No. 5921 (the Pharmacy Law) were amended to support RA No. 9502, granting the president the authority to impose price ceilings on various medications, including those for chronic illnesses and other life-threatening diseases.
In the Philippines, advertising of pharmaceutical products is regulated by guidelines found in the Implementing Rules and Regulations of the FDA Act of 2009, as well as regulations issued by the FDA and the DOH. According to Administrative Order 65, pharmaceutical products that the FDA classifies as ethical or prescription medicines cannot be promoted through any form of mass media. The exception to this rule is advertising in medical journals or publications intended for medical professionals.
In July 2013, the Philippines declared its formal adoption of the Association of Southeast Asian Nations (ASEAN) Common Technical Dossier (ACTD) and common technical requirements for registering pharmaceutical products for human use, as stated in Administrative Order No. 2013-0021. The ASEAN ACTD serves as a guideline for creating a well-structured Common Technical Dossier (CTD) that will be submitted to ASEAN regulatory authorities for human pharmaceutical registration. This guideline outlines a CTD format that considerably reduces the time and resources necessary for compiling registration applications and will eventually facilitate the preparation of electronic document submissions.
The idea of ASEAN pharmaceutical regulatory harmonization was initially proposed by Malaysia in 1992. In 1999, the regional bloc established a Pharmaceutical Product Working Group to develop harmonized pharmaceutical regulations and a CTD for member states. The harmonization process aims to eliminate technical barriers to trade without compromising drug quality, safety, and efficacy. Brunei, Indonesia, Malaysia, Singapore, the Philippines, Thailand, and Vietnam have fully implemented the ACTD, while Cambodia and Laos have achieved partial implementation, and no significant update has been reported from Myanmar.
The immediate benefits of a CTD include the elimination of technical barriers to trade without compromising drug quality, safety, and efficacy. This enables pharmaceutical companies, particularly multinationals, to gain faster approval for their pharmaceuticals in each member state. The ASEAN market is highly fragmented on its own, with the majority of pharmaceutical markets being small. If there is a specific regulatory requirement not mandated in major pharmaceutical markets such as the US or the EU, it is unlikely that companies would be willing to spend additional resources to register their drugs in individual ASEAN markets.
Counterfeit medicines are a widespread issue in the Philippines, as in many developing markets. The distribution and sale of unregistered and fake drugs are prevalent due to insufficient regulatory control, and the lack of regular inspections by recognized drug enforcement or regulatory bodies enables substandard drugs to enter the pharmaceutical market. This poses a significant concern for foreign drugmakers. Most consumers cannot differentiate between original and counterfeit or substandard medicines, and under-the-counter sales at pharmacies and retail outlets offer an easy route for these drugs to reach the market. Supply and demand dynamics, driven by the low price of counterfeit medicines compared to authentic drugs, contribute to the problem. Affordable and genuine medicines are hard to find in the Philippines, and drug prices have risen faster than in neighboring markets like Thailand, Malaysia, and Indonesia since 1985.
In March 2018, Philippine President Rodrigo Duterte launched an initiative against fake OTC medicines to curb the spread of counterfeit drugs. He ordered the arrest of anyone involved in manufacturing, importing, or distributing falsified pharmaceuticals and charging them with economic sabotage. This followed a public warning by the Filipino FDA and United Laboratories, which emphasized the distinction between genuine and counterfeit medicines. Implementing a global product identification number on packaging will serve as an effective track-and-trace system to combat illegal trade. In August 2019, Senator Ralph Recto filed a resolution after a UN Office on Drugs and Crime report showed that the Philippines had the highest incidence of counterfeit medicines in Southeast Asia. The Senate will investigate the issue to propose remedial measures. Additionally, in August 2020, the Philippines issued an advisory against using counterfeit drugs, including paracetamol, amid rising health concerns during the COVID-19 pandemic.
In June 2022, ASEAN’s health and economic ministers, including those from the Philippines, adopted the ASEAN Pharmaceutical Regulatory Policy (APRP). The policy addresses quality, safety, efficacy, and availability of pharmaceuticals, covering vaccines, antidotes, and other critical or life-saving medicines, as well as their development, testing, production, and distribution. The APRP’s long-term goal is to establish a common policy across ASEAN member states, serving as a foundation for structuring regulatory systems for pharmaceutical products. This will reduce trade barriers, enhance compatibility of requirements, foster collaboration among regulators, and ensure access to safe, effective, and high-quality pharmaceuticals.
BioPharma Unit, Hera Group
