Economic growth, political stability boost Cambodia’s pharma market

The sector’s 2023 growth is expected to come from a low base effect from 2022.

A positive economic outlook and expectations of political stability are expected to boost Cambodia’s pharmaceutical market growth in 2023, when medicine spending is projected to grow by 3.8% YoY to reach $400m (KHR1.6t), according to Fitch Solutions.

Medicine spending shrank 12% in 2022, which meant that growth from 2023 will benefit from the low base effects as well as the economic recovery, the report stated.

“We expect real GDP growth of 4.7% in 2022 and 5.2% in 2023. Our outlook for growth to accelerate stems from easing Covid-19 restrictions which will facilitate further economic normalisation, thereby bolstering consumption and investment growth,” Fitch said.

READ MORE: Healthcare budget boost to beef up Australia’s pharma sector

The Cambodian People's Party (CPP) is expected to maintain a tight grip on power in the 2023 elections, which could bring political stability and support policy-making and progression in the pharmaceutical sector in the coming years.

Pharmaceutical and healthcare policies in 2023 are expected to remain largely in line with the strategies of the previous government. In October last year, the second phase of the Health Equity and Quality Improvement Project (HEQIP), co-financed by the government and the World Bank, was launched with the aim to improve the quality of the health sector in Cambodia.

“As an important step towards the goal of achieving universal health coverage by 2030, the project will support the rollout of national healthcare quality standards, expand service delivery grants, and implement performance-based financing,” Fitch said.

The establishment of national health insurance is also expected to support Cambodia’s pharmaceutical market, as wider access to healthcare and medical services under the scheme would allow commercial opportunities for generic drugmakers in 2023.

However, financing the universal healthcare scheme could potentially remain a key challenge, as the country relies heavily on foreign aid to fund its healthcare programmes, Fitch said.

Cambodia is expected to continue relying on importing a large proportion of even the most basic medicines in 2023, given its proximity to regional production bases and the country's low levels of domestic manufacturing.

Based on TradeMap data in 2021, its latest data, China is the country’s leading drug import source, making up 62.1% of the country’s imports. The country’s major exporters also include India, Thailand and Pakistan.

But Cambodia’s government has taken steps to improve the country's attractiveness to multinational drugmakers and this is expected to be positive for the domestic pharmaceutical industry over a longer time frame, Fitch said.

“Nevertheless, the pharmaceutical sector will remain underdeveloped in the year ahead as the nascent regulatory environment and general lack of healthcare coverage will deter any meaningful investment by multinational firms,” the report stated.