With increase in awareness for implementation of Sharia-approved healthcare products, modern lifestyle and rising income levels, the demand for Halal medicines also soared in recent times. Siddharth Dutta explains how.
Traditional and modern pharmaceutical industries have co-existed for a long time. On one hand, modern medicine is more technology based, while the traditional form is more herbal approach (sometimes animal products).
In the Middle East and North Africa (MENA) region, one of the prominent traditional forms of medicine called “Unani” or “Yunnai” (originating from Greece) gave birth to the traditional Muslim pharmaceutical industry in the time of Galen (131- 210 AD), a prominent Greek physician, surgeon and philosopher who had a huge influence on Muslim physicians. Later, this form of medicine was developed by Arab physicians Rhazes (850-925 AD) and Avicenna (980-1037 AD). The traditional medicine preferred by Muslims struggled to pick up due to poor R&D, lack of market demand and investment, and low-quality finished products. With growing awareness for implementation of Sharia-approved healthcare products, modern lifestyle and rising income levels, the demand for Halal medicines has also increased in recent years. Countries like Australia, the US and Singapore have started investing in Halal pharmacies, and it is likely that this trend will grow to other regions as well. Malaysia has been one of the major contributors in upgrading the processing and quality of Halal pharmaceuticals. The government has been working on this since 1975, and recently has come out with the world’s first Halal certification for pharmaceuticals in 2012. Malaysia is closely followed by Indonesia and Thailand.
Market overview
Halal pharmaceutical has strong growth opportunities for investors due to the existing niche population, high disease prevalence, and increased awareness of Sharia approvals for these products. More than 25 percent of the global population are Muslims—an estimated 1.8 billion people. Of the total Muslim population, approximately 48 percent live in MENA, 24 percent in Asia-Pacific, 7 percent in sub-Saharan Africa, and the rest in Europe and America. Out of faith, Muslims prefer pharmaceuticals which are permitted by the Sharia. Broadly speaking, pharmaceuticals for Muslims are categorised as “Halal” (in Arabic), which is lawful and permitted by Sharia; “Haram”, which means prohibited; and finally “Mashbooh”, which means doubtful or questionable. The global Halal market is estimated at US$2.3 trillion (excluding Islamic banking), of which the pharmaceutical industry has a share of US$0.5 trillion (market share of 22 percent). Malaysia, Indonesia and Singapore are some of the prominent markets for Halal pharmaceutical manufacturers, while retail outlets have been operational in countries in other regions. Factors that favour growth Investors who are looking at Halal pharmaceuticals as their next business should ask these questions: • What are the challenges? • Where is the addressable market? • How can I benefit from this? Currently the biggest challenge faced by pharmaceutical companies is finding the origin or source of the medicines. Most antibiotics are sourced from bacteria, and whether they be can Halal is highly debatable. This can be an opportunity for manufacturers to supply synthetic molecules with similar composition and efficacy. Strong R&D can only drive such a situation.
Halal vaccines
The vaccine market is lucrative since there is a pressing demand for vaccines amongst the population which heads to Mecca for their annual pilgrimage (Hajj). Since the existing vaccines for meningitis, hepatitis and meningococcal are pork-based (pork is forbidden or “Haram” in Islam), the Malaysian Industry Development Corporation (HDC), in collaboration with a Saudi Arabia-based partner, is now developing Halal vaccines for such diseases. These vaccines are expected to enter the market by 2017.
Entry point markets
Companies who are eyeing to set up new manufacturing facilities have to take a lot of factors into consideration, such as environmental regulation compliance, incentives for new investors (tax rebates), reliable infrastructure, and skilled manpower.
In the last few years, several countries have become sought-after places for new investors of Halal drug manufacturing. Some of them are:
1. Malaysia: The country is one of the few which has been favouring the Halal industry. Halal Industrial Parks in Penang have been opened for pharmaceutical investors to set up manufacturing plants. In addition, there is a Halal Penang port with warehouse and cold storage facilities for export. Due to the high cost of medical services and drugs, there is a high demand for low-cost medicines, herbals and biosimilars in the domestic market. So besides exporting Halal medicines, investors consider Malaysia as an alternative market for end users (non-Muslims and Muslims alike).
Sixty percent of the population in Malaysia are Muslims and can be considered a huge potential market for Halal pharmaceuticals. Chemical company Malaysia (CCM) Berhad is one of the leading Halal pharmaceutical companies in the country. It reported a net export of US$10.8 billion in 2012 with its 200 Halal-certified products. CCM — including its three subsidiaries, namely CCM Pharmaceuticals Sdn Bhd, Upha Pharmaceutical Manufacturing (M) Sdn Bhd, and Duopharma (M) Sdn Bhd) – is also the first and only company to have been awarded this certification.
Malaysia started its process of Halal pharmaceutical long back in 1975. In fact it is the first country in the world which created the halal certification for pharmaceutical products, MS2424, certified by JAKIM (Islamic Development Department of Malaysia).
2. Indonesia: The Indonesian government is currently indecisive in passing the Halal law for medicines, and it is unlikely that the law will be passed before 2016.
Many drug manufacturers (including vaccines) in the country import raw materials and hence the origin of products (Haram or Halal) is unclear. This will likely slow down Halal investment pickup in Indonesia.
3. Brunei: There are Halal pharmaceutical manufacturers in Brunei as well. Simphor Pharmaceutical, an emerging Halal pharmaceutical company, is aiming to enter the Middle East and ASEAN markets for its Halal nutraceuticals and pharmaceutical products. The company, which operates as a joint venture with Canada’s Viva Pharmaceutical Inc., has invested US$32.6 million for this project and currently awaiting certifications from local governments.
Final word
Halal consumption is a principal focus of Islam. With the awareness and availability of Halal medicines, the market demand has also increased. However, it remains to be seen if Asia-Pacific would take over MENA in terms of manufacturing and export. It would be also interesting to observe if Halal vaccine development can change the market perception.
Products with Halal certification can also be consumed by non- Muslims due to their high quality and hygiene. This means Halal medicines is not a niche market.
Dr Siddharth Dutta is the Industry Manager for Life Sciences at Frost and Sullivan, Malaysia.
