Pharmaceutical Industry in Thailand

Table of Contents

Thailand is known to promote wellness and good health. Thailand is the second largest healthcare market in the South-Eastern Asian region, following Indonesia, making up 20% of the total healthcare expenditure in the region. The healthcare sector is poised to be one of the key economic drivers in Thailand in the coming years, with government-led incentives and an increasing private-sector interest moving in tandem.

From 2016-2020, the country’s healthcare sector grew from 20 billion USD to 25 billion and is expected to grow to 47.9 billion USD by the year 2026. Identified drivers for growth are government funding, private participation, medical tourism, increased income levels and an ageing population.

The COVID-19 pandemic and resulting lockdown have hurt purchasing power of Thai and foreign patients. It is projected that private hospitals’ revenues would contract by 10.0-12.0%. Operations are expected to recover in 2021-2022 underpinned by structural changes in Thai demographics including an ageing society, urbanization, a growing middle class, and rising health awareness worldwide as individuals take a greater interest in personal health and wellness.

Hospital operators are likely to invest to offer a more comprehensive set of integrated services to meet a wider range of needs. In this environment, private hospitals that are part of extended commercial networks will have an advantage in terms of operating costs, human resources, and access to a wider market. Stand-alone hospitals will need to increase competitiveness to address several challenges, including the entry of new operators.

As of 2020, Thailand is home to 38,512 facilities that offer some form of healthcare services. About 35% of these are state-funded (e.g. public health centres, district public health offices, and community and general hospitals), and the remaining 65% are private ventures (i.e. private clinics and hospitals). Divided according to the size and range of medical services offered, 98.3% are classified as primary healthcare providers (9,800 public health and district health promotion centres and 24,800 private clinics). The remaining 664 (1.7%) are secondary and tertiary healthcare providers, comprising 294 (0.8%) managed by the government, Ministry of Public Health, local administrative bodies, state enterprises or Bangkok Metropolitan Administration, and 370 private hospitals (0.9%).

There are state hospitals dotted across the country but their capacity to serve patients is limited in some locations:

(i) Bed occupancy rate is high, and in some areas, it is close to or over 100%. In 2020, the bed occupancy rate is 126% in Loei, 100% in Mukdahan, 97% in Kanchanaburi, 94% in Pathum Thani, and 90% in Surat Thani. Thus the supply of public hospital beds in some areas is insufficient to meet demand,

(ii) outpatients typically face long waits before being seen by a healthcare professional. The failure of the government healthcare system to meet rising demand has created an opportunity for private healthcare providers, which typically emphasize the speed and convenience of their services. This has prompted more middle-class consumers with sufficient spending power to turn to private hospitals whocharge more than government hospitals for equivalent services.

Private hospitals may be divided into three subgroups according to the number of registered beds. This is a good proxy to evaluate the range of medical services that each hospital offers.

Large hospitals (more than 249 beds): Bangkok and the central region of Thailand have the highest concentration of mid to high-income consumers. Hence, about 90% of large hospitals (5.8% of the total) are located in these areas.

Medium-size hospitals (31-249 beds): This group comprises around 67.5% of the total.

Small hospitals (1-30 beds): There are many small hospitals which account for about 26.7% of the total.

Private hospitals have benefitted from tax exemption and other supporting government policies. In addition, business expansion has been driven by rising demand, especially from patients in neighbouring countries following the opening of the Asian Economic Community in 2015. The number of health and wellness tourists from further afield has also been rising steadily. These factors helped to stimulate a marked uptick in investment by private healthcare operators that has transformed the sector; large, dynamic operators have engaged in mergers and acquisitions, opened new hospitals in Bangkok and important regional centres, and bought into other private hospitals as investment and to extend their commercial networks. This led to the creation of several large commercial groups that operate private hospitals, including Bangkok Hospital Group, Thonburi Healthcare Group and Bangkok Chain Hospital (Kasemrad Hospital group). The mergers have increased their competitiveness, and the groups have their own clear target customer groups. And amid changes in the market structure, mid and small-size operators have had to adjust their operations by specializing to target more niche markets.

The largest share (35.2%) of private hospitals’ revenue is derived from the sale of medicines and pharmaceuticals. This is followed by medical treatment/services (20.0%), laboratory tests and x-rays (13.7%), accommodation fees (8.5%), and other revenues (22.6%).

Hospitals in Thailand

Hospitals are trying to penetrate new markets by investing in the development of comprehensive supply chains.

Meeting increased demand by expanding existing sites and building new branches in Bangkok and upcountry –

Bangkok Hospital plans to expand from 49 branches in 2019 to 50 by 2023, and construct new facilities named ‘Bangkok International Hospital’.
Bumrungrad Hospital would open a branch on Phetchaburi Tad Mai Road.
Kasemrad Hospital will open a branch in Aranyaprathet
Principal Healthcare has ambitious plans to expand from 10 branches in 2019 to 20 by 2023, mostly in second-tier cities. Many mid-size operators are also working with partners to conduct joint expansion.
Synphaet Hospital has tied up with Ramkhamhaeng and Vibhavadi hospital groups to develop the Phatthanakan and Amata branches of Vibharam Hospital.

In addition, some hospitals are in joint ventures with local players upcountry, especially in the EEC where demand for healthcare services is forecast to rise. Research studies estimate that between 2020 and 2022, the supply of in-patient facilities will increase by at least 2,000 beds nationwide.

Partnering with other hospitals to penetrate new, high-potential markets – Hospitals might benefit from participating in a patient referral network.

For example, Praram Hospital works with nine hospitals upcountry to refer patients with kidney problems, and Bumrungrad Hospital has partnered with 58 healthcare providers across the country to establish ‘centres of excellence’ in partner hospitals which have the potential to engage in joint operations. This helps to expand their customer base to include middle-income earners and those who have private health insurance. These partners need to meet a level of investment, expenses, resources, revenue and supply chain management that would enable them to set prices for their services that are suitably competitive. In 2022, Ramkamhaeng Hospital also expanded its branch network upcountry with the acquisition of shares in Thonburi Hospital Group.

Developing competitiveness by establishing a unique value proposition – This applies especially to the increasing use of technology and new innovation to treat illnesses.

For example, by using robotic assistants in surgical procedures and establishing centres of excellence to attract domestic and international patients. The latter might include setting up comprehensive cancer treatment centres and selling packages for a course of treatments, or developing the organization as a healthcare leader.

Expanding upstream and downstream into non-hospital businesses – This includes manufacturing medicines, providing medical laboratory services, producing food supplements and medically-approved food, running pharmacies, health centres and care facilities for the elderly, and selling beauty products and operating beauty clinics. Moving into these separate yet related areas would help private hospitals to develop more comprehensive supply chains, connect to a wider range of consumer groups, and help them to broaden and grow their sources of income over the long term.
Partnering with other types of business – Hospitals may tie up with real estate developers, life insurers, and hotels. Bumrungrad group has tied up with MK Real Estate Development and Minor International to invest in an anti-ageing and preventative healthcare clinic.
Increasing the share of and types of foreign patients being treated – New markets with significant growth potential include the CLMV region, China, Russia and Africa because healthcare services often fall short of consumer expectations there. This creates an area of opportunity for Thai hospitals to respond to untapped demand. This move would also reduce their reliance on a single customer group. In pursuit of this strategy, many hospitals have opened fertility clinics to appeal to the Chinese market, where many couples seek IVF treatment to conceive a second child.

Thonburi Healthcare opened Thonburi Bamrungmuang Hospital in 2019 to appeal to foreign and medical tourists. Many other hospitals are expected to follow suit. This would lead to a steady increase in the number of foreign patients coming to the country for treatment. Allied Market Research estimates the market for medical tourism in Thailand will grow by an average of 13.7% p.a. during 2018-2025. Looking ahead, Thai healthcare operators are also expected to expand their network overseas by building their own hospitals, forming joint ventures with local partners, or setting up an agency to refer local patients to Thai facilities. They include Thonburi Hospital’s new hospital in Lao PDR (a joint investment with Chinese players), Myanmar and Vietnam, Kasemrad Hospital’s new Kasemrad International Hospital Vientiane in Lao PDR (opening in 2021), and Ramkamhaeng Hospital’s 70% stake in Vientiane International Hospital, also in Lao PDR (opening in 2022).

Government support for the industry included the following:

Promoting Thailand as an international healthcare hub: This strategy is aligned with rising interest worldwide in medical tourism. The Global Wellness Institute estimates that in Asia, the market for medical tourism will grow by 13% annually. Additionally, to help attract more foreign patients, the government is trying to raise standards to internationally acceptable levels in the areas of cosmetic and beauty treatments, sex reassignment, treatments for knee and heart disorders, fertility treatment, and dental work. There are also efforts (now successful) to have Thai massage recognized as an intangible cultural heritage. From now to 2024, The Tourism Authority of Thailand will promote the country as the ‘medical and wellness resort of the world’.

They are trying to achieve this through several programs:

(i) Telemedicine for overseas Thais- this aims to help Thais living overseas receive medical and beauty treatment in Thailand. This is expected to generate THB80,000 per person.

(ii) global health insurance companies – To increase uptake of Thai healthcare services by civil servants in Myanmar, Lao PDR, Cambodia and the Middle East.

(iii) online health – This focuses on visitors seeking healthcare and beauty treatments arriving from Myanmar, China and the Middle East; the services are promoted on the online marketplace.

(iv) ‘hotelistic’ (a portmanteau of hotel and holistic)- promotes health services such as health checks and checking for toxins in patients and removing these in situ at tourist hotels or wellness centres.

(v) agent/media outreach – This aims to establish Thailand as a global ‘top-of-mind destination’ for medical and wellness tourism. Rising interest in personal health and well-being is also prompting hospitals to venture into the wellness industry. These include the BDMS Wellness Clinic (Bangkok Hospital), Vitalife Wellness Center (Bumrungrad Hospital, expected to open this year), and Medical City (Thonburi Hospital).

Combined, these measures will support the ongoing growth of the medical tourism industry in Thailand over the long term.

The government has offered a range of incentives (including generous tax breaks) to attract foreign investment in Thailand. That includes setting up facilities for the research and development of medical innovation and pharmaceutical products. This could help private hospitals to cut costs, increase their competitiveness against overseas players, and strengthen related industries in the area of medical tourism. The government responded to the anticipated new demand for medical equipment created by the COVID-19 pandemic by introducing more investment support measures.

As a result, 52 applications (+174% YoY) were received for investment support for projects related to the medical industry with a combined value of THB13bn (+123% YoY). Within the EEC, the government has also given the green light to Thammasat University’s new EECmd project in Pattaya, which will be home to medical innovation and an important part of the medical hub strategy. Several parties have expressed interest in investing in the project, including Japan’s Mizuho Bank, which will offer loans to customers who invest in the healthcare industry in the area, Chinese players looking to establish a centre for research into traditional Chinese medicine in the ASEAN zone, and a Taiwanese clinic for the elderly. Beyond this, there will also be an international health centre that specializes in medical genomics. There is support for private-sector investment in the construction of a new hospital to meet the rising demand for healthcare services from those working in industrial estates in the area.

Thailand hospitals to increase prices in 2023 due to rising staff needs due to an influx of foreign and local patient traffic. When the borders reopened in July 2022, Thailand had an increase in foreign patient traffic, especially from the Middle East, Myanmar, and Cambodia. In a brokerage report, CGS-CIMB said this will continue in the following years, making hospitals overwhelmed with domestic and international patients. This, in turn, would force hospitals to hire more staff and increase prices. Bumrungrad Hospital had already raised its prices by 5.8% in 2022 and would implement a 5% hike thereafter. Since hospitals target foreign patients, including Bumrungrad Hospital and Bangkok Dusit Medical Services, they do not need to launch aggressive promotion campaigns to attract patients.

Medical Tourism in Thailand

In 2022, the market for medical travel grew approximately to $5,687 million USD. Studies predict that medical tourism in Thailand will grow at a strong rate of 18.4%. 2% to 7% of the world’s medical tourism business is represented by the total revenue of the Thai medical tourism industry. As per Johns Hopkins University Global Health Security Index (2021), Thailand was ranked 5th out of 195 countries and first in Asia due to its ability to respond to the outbreak of pandemics. The market for medical tourism in Thailand is anticipated to expand steadily between 2022 and 2032. Thailand’s rapidly expanding health facilities and adequate government support would contribute to the expansion of the country’s medical tourism industry.

The public-private collaboration would aid in increasing the effectiveness of medical tourism in Thailand and keep the industry organized. It is anticipated that the Thailand medical tourism market will continue to draw tourists during the forecast timeframe. The reason behind this is the growing need for economical, high-quality healthcare throughout the world’s developing nations.

Bangkok is the only megacity in the world to anticipate 16 million international tourists in 2022. More than 900,000 of these are anticipated to seek medical attention as more and more people from all over the world visit Thai hospitals and centres. With best in class facilities and top-notch medical assistance, Thailand can provide the best medical experience in the world. More than 470 of the 1,000 hospitals in Thailand are private facilities. The nation takes pride in housing the biggest private hospital in Asia and is the first hospital to receive JCI and ISO 9001 approval. All 37 of Thailand’s top private institutions have received JCI accreditation.

Thailand is a popular choice for people seeking medical attention because of the following reasons –

Affordable treatment: Undoubtedly, the primary reason for choosing wellness tourism in Thailand is the cost of the treatment. Compared to Australia and the US, medical procedures and therapies in Thailand cost about 40–70% less than in other developed nations.
Highly Trained Staff and Doctors: Thailand provides the most modern and secure treatments carried out by only qualified and accredited personnel. The medical technology and training offered by paramedics, medical workers, and surgeons are proficient and widely recognized.
Hospital Facility: Some state-of-the-art hospitals have accreditations from JCI and provide 5-star amenities for healthcare in Thailand for tourists.
Holistic and Alternative Treatments: A variety of supplementary and alternative treatments, including holistic practices from both eastern and western cultures, are also available. The goal is to encourage overall health and harmonious body, mind, and soul integration following the operation. In Thailand’s largest institutions, these services are provided as part of a comprehensive package of specialist care. The hospitals handle an average of 1 million foreign patients annually and offer more than 35 specializations.
Less complicated entry procedures: Thailand’s system provides more specialist operations than other Asian nations. Thailand allows medical tourists to remain without a visa for up to 30 days; all they need is a passport that is valid for at least six months to take advantage of this deal.

Industry Challenges

Shortage of doctors and other medical staff: The World Health Organization recommends 2.8 doctors per 1,000 population. But in Thailand, it is only 0.4 per 1,000 population, significantly lower than in Singapore (1.92) and Malaysia (1.2). The rising number of private hospitals would increase competition for doctors and other medical staff, and push up operating costs.

Government regulations: The inclusion of pharmaceuticals, medical supplies and fees charged for medical care on the list of controlled prices means hospitals have less room to raise charges. This will affect stand-alone, small and mid-size operations the most. These players are normally more dependent on revenue from patients covered by the social security system, and so any changes to funding regulations would affect their operations.

Thai private hospitals lack competitiveness: The Fiscal Policy Research Institute awarded Thai hospitals a total of just 4.31 points, after market-leaders Germany (7.0 points), the US, Japan and Singapore, although Thailand performed better than Malaysia and India. Relative to its competitors’ average scores, Thailand’s worst scores were for technology and innovation, business environment and strategy, and productivity. Thai private-sector hospitals achieved mid-level scores for readiness to enter the ‘industry 4.0’ era. Unfortunately, the worst scores were for strategic readiness and investment. And over the next 5 years, operators need to concentrate their efforts to overcome shortfalls in these two areas.

Rising competition in the healthcare industry: There is rising competition not only from other private-sector hospitals but also from outside the industry.
(i) Hospitals are increasing investments, especially upcountry. This includes government hospitals which have raised service standards to match those in the private sector. They also enjoy advantages concerning their reputation, use of technology, and staff expertise (e.g. Siriraj Piyamaharajkarun Hospital, part of the Siriraj group of hospitals, and Ramathibodi Hospital’s Somdech Phra Debaratana Medical Center).

(ii) Major investors from other economic sectors such as real estate, are showing more interest in the industry. This is because, against a background of rising awareness about personal health, investing in private hospitals opens up the possibility of securing recurring, long-term revenues.

(iii) Overseas investors (especially from China) are interested in opening healthcare centres. They include fertility clinics to meet the rising demand from Chinese couples who are seeking treatment in Thailand.

(iv) Many other countries, particularly in the ASEAN region, have also laid out plans to develop their respective medical tourism industry. In many cases, these plans depend on attracting the same customers as Thailand. There is intensifying competition in the global medical tourism industry. If operators do not actively respond to the changing landscape, Thai private-sector healthcare providers would lose market share shortly.

Other factors: Digital and technological transformation will have a larger impact on hospitals. Since the COVID-19 pandemic, consumer behaviour has changed. Consumers are willing to pay a premium for hygiene and cleanliness. In addition, the success of the Thai public healthcare system in rapidly containing the spread of COVID-19 and gaining worldwide recognition for this may also increase demand for medical tourism services in the country.

The combined impact of the challenges could limit growth if operators do not adapt quickly and appropriately. Failure to respond to potential problems could cause hospitals to lose customers to competitors. Operators may also need to invest more in technology. So in the coming period, partnerships between hospitals will become more popular as players seek to cut costs, increase competitiveness, and adjust business strategies. This will put hospitals in a better position to address rising competition and seize new business opportunities in Thailand.