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SALIM AFZAL SHAWON
Management Trainee
Research Report : Pharmaceutical Industry of Bangladesh
Date : 28 June 2011
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Abstract
Pharmaceutical is the core of Bangladesh’s Healthcare sector, and serves as one of the most important
manufacturing industry. With a history since 1950s, the industry has now turned one of the most
successful pharmaceuticals manufacturing industry among the developing countries. Presently, the
industry meets 97% of local demand and exports to more than 80 countries.
The industry has been experiencing robust growth over the last few years. A local industry supporting
drug policy and effective regulatory framework, along with TRIPS relaxations are the key reasons for
success of the industry.
While the industry is achieving self sufficiency, it yet procures 70% of raw materials from abroad. But
developments are already taking place, with a number of firms now manufacturing raw materials locally.
In addition, an API project has already been undertaken to accelerate the vertical integration within the
industry.
The industry has been expanding locally and internationally. Local market grew at 23% in 2010, while
import reached USD 50 Million landmark. A number of firms got accreditations from USA, UK, Australia
etc. developed markets, and are underway toward expansion into the developed markets. Locally, firms
are preparing themselves for post 2016 scenario, when TRIPS will be implemented. Almost all the firms
are upgrading their facilities and taking up precautions for post 2016 scenario, while aggressively
expanding in both local and export markets.
While TRIPS and import dependence on raw materials put challenges to the growing sector, prospect of
the sector depends largely on the interactions among the players, regulatory bodies and the govt.,
whether they can meet up the requisites to continue growth of the sector while facing the challenges
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List of Abbreviations
API - Active Pharmaceutical Ingredient
TRIPS - Trade Related Intellectual Property Rights
IMS - Intercontinental Marketing Services, a market research company providing data on
markets, especially on healthcare industry
WTO - World Trade Organization
MNC - Multi National Corporation
R&D - Research and Development
cGMP - Current Good Manufacturing Practice
BP - British Pharmacology
USP - United States Pharmacology
BAPI - Bangladesh Association of Pharmaceutical Industries
LDC - Least Developed Country
VAT - Value Added Tax
OTC - Over The Counter
ETP - Effluent Treatment Plant
IV - Intra Vascular
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11.. 00 PPRR EE FF A A CC EE
Pharmaceuticals industry is the core of healthcare sector of Bangladesh.
Being part of healthcare sector, its performance is related to
demographic variables like population growth as well as economic
growth and healthcare policy. In our country, with improving
demographic characteristics, recent economic growth and favorable
policy, the industry has seen good growth.
The following table represents changes in our demographic variables,
economic growth and performance of Pharmaceuticals industry -
Indicator Name Unit 2005 2006 2007 2008 2009 2010
GDP growth (annual %)1 % 5.96% 6.63% 6.43% 6.19% 5.74% 6.7%
4
Health expenditure, total (% of GDP)
% 3.21% 3.40% 3.46% 3.32% 3.35% 3.21%
Pharmaceuticals market size2
BDT Bn 35.42 37 40 54.93 68
Pharmaceuticals Industry Growth %
Pharmaceuticals Export
3
$ Mn 18.18 26.96 37.74 46.54 45.71 50
2
Source -
1 WorldBank,
2 IMS,
3 WTO,
4National Budget 2011-12
22.. 00 IINN DD UU SS TT RR Y Y OO VV EE RR VV II EE WW
A brief history
The history of Pharamceuticals industry dates back to 1950s. Over the
years, The industry has gone through some significant changes. After
liberation in 1971, the industry was largely dominated by MNCs, and the
country was very much import dependent. In 1982, through the
formulation of national drug policy, and drug control ordinance, a
defined guideline for the development of the industry was created. By
then, 75% of the market was dominated by the MNCs, whereas the rest
were shared by some 133 local firms. Since then, the local firms have
established a stronger foothold, and the country has become from an
import dependent to an active exporter of pharmaceuticals products. At
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
2 0 0
1
2 0 0
2
2 0 0
3
2 0 0
4
2 0 0
5
2 0 0
6
2 0 0
7
2 0 0
8
2 0 0
9
2 0 1
0
Health expenditure, public (% of GDP)
Health expenditure, private (% of GDP)
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2010, top 5 MNCs have approximately 9.05% of the market share and
97% of total local demand is met through local production.
2.1 Industry ClassificationAs per Global Industry Classification Standard (GICS®), it can be defined
as Pharmaceuticals industry, a part of Healthcare Sector.
2.2 Industry StructureThe industry has some distinct features compared to other countries.
First, R&D activity is virtually nil in Bangladesh pharmaceutical industry
– it is a branded generic market. At present, there is approximately 258
manufacturers, with approximately 8000 branded generics in
Bangladesh pharmaceuticals market. Companies basically manufacturefinished formulation by assembling known generic and patented (in
some cases) product combination. Some firms have been engaged in
producing APIs, the core of pharmaceutical products, but these
productions are limited to synthesis stage (final stage) only.
2.2.1 Competitive structure
Degree of concentration
Being Branded-generic product oriented business, manufacturers
usually are able to charge a premium for established brands, and enjoy
a relatively stable market share. As a result, the list of top performingfirms have been quite consistent over the years, with the leader, Square
pharmaceuticals topping since 1985.
Over the last three years, the top 4 players are consistent, with 5th to
10th position interchanged among 6 market players. As a total, top 5
firms capture on average 45% of the aggregate market. Adding 5 more
to the list brings on average 66% of total market to Top 10. Thus the
market is very much concentrated. (Source:IDLC Research)
Market Dominance
Prior to formulation of National Drug Policy and Drug control ordinance,
the market was chiefly controled by MNCs, holding about 75% of total
market (1985). Since then, market structure has changed, and now local
firms dominate the industry. At present, 97% of local demand is met
from local production, and the top 10 MNCs possess only 9.05% of
market share, compared to 67.6% held by local top 10 firms. (Source:IDLC
Research)
0% 50% 100%
M a r k e t s h a r e
97%
77.70%
67.60%
46.40%
Top 5 Top 10
Top 20 Local Production
Branded Generic Industry
Mainly FinishedFormulation products
High concentration of
business
Local firms dominate
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Intra industry Business Practices
Pharmaceutical is an emergency product, and its demand is not akin to
other products. Not only consumers’ show inelastic demand, but also
the demand is more driven by doctors’ prescription and product
availability compared to end customers demand. Furthermore, brand
loyalty is quite common. Thus, success in this market requires
competitor firms to strive for higher share in prescriptions as well as
higher product availability in pharmacies.
For this, firms engage in several product promotion strategy, including
aggressive pricing, credit policy and establishing relationships with
doctors, hospitals and pharmacies.
The common business strategy is to employ medical representatives to
establish these relationships. Success is usually measured in terms of
prescription share (often termed as Rx share), which demonstrates how
much of pharmaceuticals product demand goes to a certain producer
and is an indicator of future market share.
And for increased product availability, firms often engage in aggressive
marketing, particularly for products in the low end. The strategy is
reflected in providing products at a lower price than competitors, and
providing a more relaxed credit policy. The industry on an average has a
collection period of approximately 30 days.
Alongside, Bangladesh pharmaceutical industry is more retail oriented
and thus, mass distribution is done by the companies themselves
through their own warehouses to retailers and wholesalers.
Wholesalers usually have a limited role in marketing of such products.
Key Players:
Due to the branded generic nature of products, companies are usually
able to charge a premium price, while enjoy stable position. As a result,
the top performing companies in the industry are relatively consistent
over the years, often along with their respective market position. The
market leader is Square pharmaceuticals, which have enjoyed the top
position since 1985. At present, it has a 19.19% market share. The next
player is Incepta, followed by Beximco, Acme, Opsonin, and others. The
top 10 firms are almost the same over the years, often with little change
in order.
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Market share of the top 10 firms over last two years are presented
below-
2.2.2 Segmentation
The overall business activities of pharmaceuticals can be classifeid inthree layers. The primary layer is R&D Activities – where reasearch and
development of new drugs are done, and this business concerns Drug
Discovery, and development. This is often a very costly and hish risk
business, and for many of global Pharmaceutical firms, represent the
majority of costs. However, in Bangladesh, this activity is nil, and all the
firms are producers of known and established drugs.
The second layer is manufacture of ingredients for finished
formulations. These activities cover production of Active
Pharmaceuticals Ingredients (API), Excipients, Solvents etc. that are
used as raw material in producing the final drug formulations. Among
these, the major business area is in production of APIs, also known as
Bulk drugs business, that has a large global market. In bangladesh,
companies have only recently entered API business. They are also
Layer 3: Manufacture of Formulation
Layer 2 : Manufacture of ingredients
Layer 1 : Research & Development
Market
100%
Top 20
84%
Top 10
68%
Top 5
46%
Market Structure 2010
1 9 . 4 8 %
8 . 2 4 %
7 . 7 2 %
4 . 8 1 %
4 . 7 6 %
4 . 5 9 %
4 . 5 4 %
4 . 4 8 %
4 . 0 7 %
3 . 8 8 %
1 9 . 1 9 %
8 . 9 8 %
8 . 3 5 %
4 . 5 3 %
4 . 9 4 %
4 . 9 2 %
3 . 2 3 %
4 . 2 1 %
3 . 9 7 %
3 . 7 9 %
0%
5%
10%
15%
20%
25%
Market Share2009 2010
Source: IMS
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producing other necessary ingredients as well, but the overall
production is very low compared to total demand.
The final layer concerns producing final products, finished formulations.
In this layer, there are both patented and generic products. However, in
bangladesh, only generic products are produced.
API, Excipients and other ingredients
Historically, bangladesh has been dependent on imports for APIs and
other ingredients. Companies imported APIs and other materials and
used them for final production. The pharmaceutical manufacturers in
Bangladesh procure raw materials from various countries namely UK,
France, Germany, Japan, Holland, Italy, Denmark, China, Switzerland,
Austria, Hungary, India, Ireland etc. Recently, local firms has been
approaching to producing ingredients locally, especially API. These has
reduced dependency on imported raw materials to 70% of total.
Active Pharmaceutical Ingredient or API is the core element of
pharmaceutical products, and is the primary cost component for
production. At present, there are 21 companies in Bangladesh
manufacturing 41 APIs. Industry participants claim already becoming
self-sufficient in some APIs, namely, Penicillin, Cephalexin, NSAID and
Anti-Pyretic. The production of APIs is confined to the last stage of
Synthesis. Presently, Local APIs take a 20% share in domestic
production. The rest 80% is imported. These imported APIs represent
majority of raw materials import by bangladesh, approximately 70%.
Another important area is regarding packaging materials. In this area,
firms have improved their position. A number of firms now produce
many of the packaging materials.
Major APIs presently produced in Bangladesh1. Amoxicillin Trihydrate 2. Ampicillin Trihydrate 3. Aspirin
4. Flucloxacillin Sodium 5. Ferrous Suplhate 6. Fluconazole
7. Cefalexin 8. Ciprofloxacin Hcl 9. Loratadine
10. Metronidazole 11. Oxytetracycline 12. Paracetamol
13. Cephradine 14. Celecoxib 15. Ceterizine
16. Trimethoprim 17. Ranitidine 18. Diclofenac Sodium
19. Diclofenac Free Acid 20. Diclofenac Potassium 21. Diclofenac Diethylamine
22. Salbutamol 23. Zinc Sulphate Monohydrate
Source: Presentation by Square Pharmaceuticals in International Conference on Local Pharmaceutical Production in Africa, Cape Town, 2011.
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Formulations
Formulations represent the mainstream business in pharmaceuticals
industry of Bangladesh. Presently, the market consists of approximately8000 generic products and 258 firms with manufacturing capability,
along with some imported patented products. (Source:IDLC Research)
From the perspective of business nature, the industry can be classified
as-
1. High-End products (Anti Cancer, Insulin, Vaccines etc.)
2. Branded generics (Products with a brand presence )
3. Low End generics
4. Contract manufacturing (domestic and export)
High End Generics:
These are essentially products specific to market niches, i.e. Anti cancer,
Diabatic products, Vaccines etc. these products are usually high priced
and represent a small portion of the market. Profit margins in such
products is very high. Historically, it has been import dependent, and
MNCs were the key provider. Recently, domestic firms have been
entering into this field, and competition is expected to drive prices and
import dependency down. Especially, in Anticancer, Insulin and several
vaccine production, several local firms have made significant progress.
Branded Generics:
This represents broadest segment of the market, comprising products
with relatively stable margin and Brand orientation. This segment is
dominated by local manufacturers, and due to high brand loyalty
observed in our market, market share of manufacturers is usually moves
rarely. Competition is branding oriented, and firms try to improve RX
share and relationships with doctors and related parties to increase
market presence. Anti-Gastric and Anti-Biotic are the two dominant
product category in this segment.
Low-end branded generics:
This segment is small, often for products with low branding possibility,
and price war is most evident here. The number of competitors is very
high, and market share of each competitor depends on success of
marketing strategy.
High End Branded Generics
Contract
Manufacturing
Low End
FORMULATIONSMARKET
High End Generics
•Small % of total market
•Mostly imported
•Recent entry of local firms
•High Profit margin
Branded Generics
•Largest % of Market
•Local firms dominate
•Stable Margin
•Branding strategy
Low End
•Smallsegment
•Price based competition
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Contract manufacturing:
Locally, this segment is small as almost every firm manufactures its own
products. The business usually comes from Health organizations likeSMC (Social Marketing Company), UNICEF etc. to provide products such
as saline, contraceptives etc. However, there is a good market for
foreign contract manufacturing. As per observation of Bangladesh
Pharmaeuticals Society, our industry can earn approximately BDT 200
billion (USD 2.9 Billion) each year.
Presently, a number of top firms engage in contract manufacturing.
Competition is very low, as each firm engage based on foreign
counterpart relations. Manufacturing technologies and accreditations
play a vital rolein developing contract manufacturing capability.
2.3 Regulatory environmentThe industry is regulated by Drug regulatory authority (DRA) through
the Drug Control Ordinance of 1982, and National Drug policy 2004
Pricing:
Under the present regulatory structure, government fixes the maximum
retail prices (MRP) of 209 essential drug chemical substances. Other
drugs, listed as non-essential, are priced through an indicative price
system. For imported finished products, whether they fall in the
category of vital or non-vital drugs, a fixed percentage of markup is
applied to the C&F price to obtain the MRP. For local distribution, all
drugs must be registered with DRA. However, for export purpose, such
registration is not mandatory. (SOURCE: National Drug policy 2004)
Key registration areas:
1. Combination drugs (other than vitamins, nutritional preparations or
therapeutically useful) are not allowed
2. For imported drugs, GMP validation, bioavailability and bio-
equivalency are important registration criteria
Drug Production regulations:
1. Firms are required to upgrade their productive facilities to ensure
cGMP is followed.
2. Foreign and MNCs are allowed to manufacture drugs in Bangladesh
only if at least three of their original research drug products are
Price Regulations exists
Strong Quality control
issues
Contract Manufacturing
•Significant Growthoportunity exists in export
•Requires cGMP compliantplants
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registered in at least two of the following countries: USA, UK,
Switzerland, Germany, France, Japan, and Australia.
3. Drugs not in BP, USP, IP, INN or BPC will not be allowed tomanufacture.
4. Foreign firms can produce drugs in Bangladesh under licensing
agreement following certain conditions.
5. For export purpose only, any drug can be produced in Bangladesh
Drug distribution, storage and sale:
1. Only registered drugs are allowed for sale
2. Other than OTC drugs, no drugs should be sold without
prescriptions.
3. Advertisements are not allowed
33.. 00 RREE CC EE NN TT DDEE VV EE LL OO PP MM EE NN TT SS
3.1 BudgetIn the recent budget 2011-12, Pharmaceuticals industry has seen some
positive moves.
Withdrawal of VAT (15%) and Import duty (5%) from leucocyte filter
import by pharmaceutical companies.
Withdrawal of supplementary duty (20%) and reduction of import
duty (12% from 25%) for Cartridge/ Membrane filters import by
pharmaceutical companies.
Reduced duty (3% from 12%) for sandwich panel import by
pharmaceutical companies.
Reduced duty for import of certain pharmaceuticals raw materials
(5% from 12%).
Extending eligibility for tax holiday from June 2011 to June 2013.
The declared moves will most likely result in following changes -
Withdrawal and
reduction in Taxes of
certain inputs
Extension of Tax Holiday
Benefit
Stimulates Export of
products
Direct marketing is
prohibited
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Reduced duty will lower product cost for certain product classes
(Anticancer drugs, Analgesics, Antipyretics, and Injectables)
providing potentials for local pharmaceuticals manufacturers.
In addition, completion of the API Park within 2011-12 would
provide pharmaceutical industry a cheaper source of API, improving
cost efficiency. Meanwhile, tax holiday would help reduce eligible
producers’ (API and Finished formulation) tax obligations and
achieve better return. Active Fine Ltd. will be one of the major
beneficiaries from the inclusion of this sector under tax holiday.
Period Of Tax Holiday And Tax Holiday Rate
For Dhaka and Chittagong divisions (excluding districts of Dhaka, Narayangonj, Gazipur,
Chittagong and three hill districts)
Other divisions and three hill
districts
Tax holiday period Tax holiday rate Tax holiday period Tax holiday rate
First two years 100% First three years 100%
Next two years 50% Next three years 50%
Next one year 25% Next one year 25%
Source: National Budget 2011-12
3.2 TRIPSIn 2001, under the trade-related aspects of intellectual property rights
(TRIPS), the World Trade Organization allowed developing and poor
nations to produce generic drugs without compulsory licenses or paying
the patent holders for a certain time frame. For developing countries
like India and China, the timeline was up to 2005. For Least developed
countries, including Bangladesh, the time line was up to 2016. Within
this timeframe, pharmaceutical industries are legally allowed to reverse
engineer, manufacture and sell generic versions of on-patent
pharmaceutical products for domestic consumption as well as for export
to other LDCs.
Anticancer producers will
have lower input cost
Tax Holiday reducing tax
expense of producers
Due to TRIPS relaxation,
LDCs can produce drugs
without patent or license
cost up to 2016
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And as 2005 passed, developing countries like India and China had to
stop exporting to other LDCs due to TRIPS implementation. This opened
a wide export opportunity for Bangladesh, since it is the only country
among the 49 LDCs having a strong manufacturing base in
Pharmaceuticals. And since then, Bangladeshi firms has been
experiencing a surge in exports.
Recently, the least developed countries have sought an extension of the
deadline from 2016 to 2021, as most of them have not yet enjoying the
benefits of TRIPS relaxation. In addition, WTO still could not finalize the
list of patented products. If such an extension is provided, Bangladeshi
pharmaceutical industry is most likely to enjoy a good growth from
exports to LDCs. (Source:IDLC Research)
3.3 API ParkThe govt. has undertaken a Pharma Ingredient project with an
estimated cost of BDT 235 Crore, which is to be completed by Dec-12.
The project would include common ETP and adequate utility services.
The costs would be borne by Plot Owners, on a 60% Allotment and 40%Installments basis. The Projected impact of this project is to save 90% of
pharma ingredient (API) import. At present, land filling of the park is to
be completed by June 2011. (Source:IDLC Research)
3.4 Formulations Market:Presently, the formulations market is shifting gradually from acute care
to chronic care. Many of the previous high growth Branded generic
products are experiencing lower growth, and price based competition is
getting intense over time.
Regionally, pharmaceutical business is experiencing higher growth in
areas like Chittagong and Rajshahi. Whereas Dhaka region had a growth
of 18% in 2010, Chittagong and Rajshahi showed a growth of 24% and
33% respectively.
LDCs have sought an
extension of TRIPS
relaxation up to 2021
API Park to be completed
by 2012
Shifting market focus
Change in regional
business growth
Growth in exports to LDCstill TRIPS implementation
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Due to higher direct sales and aggressive marketing strategy pursued by
companies, wholesaler’s role is on the decline. In 2008, their
contribution stood about 20.73%; by 2010, it has fallen to 16.19%.
(Source:IMS)
A tendency toward producing Raw materials locally has been seen as
firms are now manufacturing everything from pellets to freeze-dried
injections to IV amino acids.
Alongside, entry of local firms into High end product segment (Insulin,
Anticancer etc) is also noticeable. In the insulin market, Square
Pharmaceuticals has already made its entry, providing at 22% lowerprice than imported ones. Novo-Nordisk, the largest producer of insulin
(80% of local market), has established a 5 million vials insulin plant that
is to be operational from October 2011. In the anticancer field, Beacon
Pharma, Orion, Square pharmaceuticals, Renata etc several firms have
made entry.
Firms has been establishing cGMP compliant plants, and some has
already achieved accreditations from UK,USA, Australia etc countries –
which suggest a stronger international presence in upcoming future.
Among the top firms, Beximco Pharmaceuticals Ltd. has already made
an agreement with Adamis Pharmaceuticals of USA to introduce four
drugs in the US market over within 2013. (Source:IDLC Research)
44.. 00 IINN DD UU SS TT RR Y Y OO UU TT LL OO OO K K
Globally, Bangladesh market has demonstrated the highest growth
among all countries in 2010. Whereas Global market and Afro-Asian
market is growing at a rate of 6.70% and 15.70% only, our country is
demonstrating an annualized growth of 24.58%. As a result of such
sigfnificant growth along with a consistent economic growth of around
6%, recently bangladesh was included on the Goldman Sachs "Next
Local manufacture of
ingredients increasing
Local entry into High
Margin segment
Move toward grabbing
international market
Declining Wholesalers’
contribution
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
Market Growth Rate
6 . 7 0 % 1
5 . 7 0 %
2 4 . 5 8 %
Global Market
Afro Asian Market
Bangladesh Market
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Eleven" list as well as the JP Morgan "Frontier Five". As per their
observation, Bangladesh represents significant potentials to become an
important global manufacturer of pharmaceuticals, joining China, India,
Brazil and Russia. (Source:IMS)
4.1 Local MarketBeing part of health care sector, domestic market size of
pharmaceuticals has a direct relationship with economic variables, such
as population growth, healthcare expenditure, income level etc.
In Bangladesh, the industry has been experiencing a good growth over
the last few years. The growth is attributable to rising population with
increasing healthcare expenditure per capita. Noticeably, the increase in
healthcare expenditure is due to higher level of private pending,
demonstrating a rising health awareness among the people. As
demographic variables improve over the coming years, the industry is
expected to continue its growth at least up to the implementation of
TRIPS [2016 expected].
However, the growth is not expected to be uniform across the marketdue to differences among the segments.
API
The API indsutry is still at its infancy and significant growth opportunity
exists for the companies. In local market, there is a large gap between
local demand and local supply, as 80% of total demand is yet fulfilled
from imported APIs.
FormulationIn formulations, several changing trends are observed. Price based
competition is increasing within the local market. New investments are
also taking place. Firms are entering into previously unencharted
territories like insulin, AntiCancer etc products. And almost all the firms
130
135
140
145
150
155
160
165
-
2
4
68
10
12
14
16
18
20
2 0 0 1
2 0 0 3
2 0 0 5
2 0 0 7
2 0 0 9
Millions
Population, total
Health expenditure per
capita (current US$)
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are increasing product lines each year. Thus growth is likely to continue
for the coming future.
4.2 ExportThe export market has shown significant growth over the years. Since
2004, Exports have increased multifold, with export destinations rising
from 37 in 2004 to 84 in 2011.
API
Due to the relaxations provided by TRIPS up to 2016, APIs can bring
huge opportunities from exports. This is because for API (also known as
Bulk Drugs), there is no stringent registration requirement and the
operational as well as promotional costs are also nominal. The only
decisive factor in this regard is the cost competitiveness. API can be
exported to several countries if cost effectiveness is ensured.
But Being confined to synthesis stage only, Bangladesh has to rely on
import of core compound, solvent and other intermediates. Thus cost
effectiveness of local production can be a bit dependent on import
costs. Alongside, these productions often also entail effluent treatment
plans, requiring a high investment. Further, economy of scale is yet to
be achieved, and high investment requirement has troubled achieving
entrepreneurs’ attention.
Formulation
Finished formulations (finished products) have a global market with
varying rules and regulations. In terms of regulatory structure, overseas
markets can be categorized in three ways.
First one is the Highly Regulated Markets like USA, UK etc. that require
various certifications like USEDA, UKMCA etc. and need huge
investment in facilities and documentation.
37
62 6872
80 84
2 0 0 4
2 0 0 6
2 0 0 7
2 0 0 9
2 0 1 0
2 0 1 1
Export Destinations
(No. of countries)
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Second one is the Moderately Regulated Markets like Russia, Singapore
etc. which usually ask for Bioavailability, Bioequivalence, Clinical Trials
etc.
Third category is the Less Regulated Markets like Myanmar, Sri Lanka,
Nepal, Kenya, Yemen etc.
Bangladesh have already entered less regulated markets. And entry in
moderately regulated markets are already taking place. To continue
future growth in exports, Bangladesh will have to enter the highly
regulated markets soon. In this regard, some of the major companies
have already made million dollar investment in their manufacturing and
R&D facilities, and are going for certification in the highly regulated
markets.
4.3 Expected scenario after TRIPS ImplementationThe present relaxation of TRIPS are to be withdrawn from 2016. This will
create a radical change in the industry scenario as several major
changes is expected. First, price control will be lifted. Producers have to
pay for patented products, as well as license fees. Meanwhile, export ofpatented products will face problems, as Bangladesh cannot export
patented products without patent owner’s approval [which will be more
costly]. In addition, foreign firms will get access to local market, and
MNCs can produce several products in bangladesh that are not allowed
now. However, the impact will not be as much devastating as it seems,
because about 75% of the drugs in the WHO list are not subject to
Patent protections. And many of the products in bangladesh are
generics, thus not subject to patent protections. However, costs from
licensing fees, impeded access to export markets, withdrawal of local
protection, and potential rise in import costs (especially APIs) represent
significant challenges in the post TRIPS implementation scenario for
bangladesh pharmaceuticals industry.
Post TRIPS threats
No Price control
Impeded market access
Increased competition
Cost pressure
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4.4 Growth ExpectationFor a strong API base, R&D Activities, formulation and market are three
primary concerns. Whereas our industry does not have R&D activities,
we have a good domestic formulation industry and a moderate size
domestic market. Alongside, we have trained local human resources to
support development in the industry. With the govt. proposed utility
and ETP benefits, and present regulatory structure, it is possible for
Bangladesh to develop a good base in formulation of API and
formulations for generic products.
Alongside, due to growth factors such as low manufacturing labour cost,availability of relevant manufacturing technology and entrepreneurial
assertiveness, the doemstic market is to become a major emerging
market. Change in affordability, strength of continuous investment,
rapid spread of urbanization and education will result in high growth of
the industry in the coming years.
Being a part of healthcare sector, gorwth of pharmaceuticals industry is
related to several economic variables. And at present, bangladesh has a
quite good outlook on its demographics. GDP growth has been roaming
around 6% over last few years. Within 2001-09, average population
growth is 1.58%, with the growth rate declining at 1.68% per year. Life
expectancy at birth has increased at 0.89% annually, along with poverty
level reducing 1.68% each year. Most importantly, healthcare
expenditure per capita grew by a 8.7% per year, and private healthcare
expenditure grew by 3.16% annually, demonstrating a growing
propensity among people for healthcare expenditure.
With a consistent GDP growth rate around 6%, expected population
growth rate 1.55%, Health expenditure per capita growing an an
average rate of 8.7% and continued pattern of increased life expectancy
and poverty reduction, an expected growth of 15% can be expected for
period up to 2016 for the local market.
Growth Scenario 2011-2016
Local Market = 15%
Export Market = 10%
Overall Growth = 14.8%
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In the export market, growth (presently 9.4%) is expected to stay at an
average of 10% upto 2016, as TRIPS relaxation prevails, and present
effort towards improving international reach continues. Further, if the
present expectations materialize, the API industry can provide another
growth opportunity in the export market. Exports presently amount to
5.93% of total size (local + Export) of pharmaceutical market on average.
However, exports may contribute more in industry growth in coming
periods.
Overall, an growth of 14.8% can be expected from our pharmaceuticals
industry up to 2016. After 2016, growth pace would depend on whether
TRIPS relaxation is extended or not.
If extended, the industry can expect another period of good growth,
with more growth coming from exports. However, total growth will be
lower than 2011-2016, due to indsutry size effect, saturation in many
product classes locally and rising competition. Therefore, assuming a
GDP growth of 5%, alignment of private expenditure on healthcare with
GDP, and a stable life expectancy level, 10.1% growth can be expected.
And If not extended, export growth would certainly fall (assumed
growth to be 2%), while domestic industry would reach saturation and
will depend on demographic variables. In that case, a growth rate of
8.5% can be expected.
Growth Scenario 2016-2021
If TRIPS benefit is extended,
Expected Growth = 10.1%
If TRIPS benefit is not extended,
Expected Growth = 8.5%
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Appendix 1: Pharmaceuticals Trade information
WTO Data - Bangladesh
Year Value USD Mn (currentprices)
Pharmaceuticals Export
2000 2119652 2.12
20013957480
3.96
2002 6995071 7.00
20036423924
6.42
200419534611
19.53
200518177105
18.18
200626960916
26.96
2007
37740790
37.74
200846541954
46.54
2009 45714931 45.71
Pharmaceuticals Import
2000139700056
139.70
2001 124578340 124.58
2002137591660
137.59
2003 145064519 145.06
2004149661640
149.66
2005147419132
147.42
2006171527526
171.53
2007229142923
229.14
2008 293733231 293.73
2009269029761
269.03
Source: World Trade Organization
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Appendix 2: Selected Macroeconomic Information
IndicatorName
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
GDP growth(annual %)
5.94 5.27 4.42 5.26 6.27 5.96 6.63 6.43 6.19 5.74
GDP per capita(current US$)
334.77 327.92 326.28 350.10 375.25 393.66 398.17 433.69 497.21 550.85
GDP per capita(constant 2000US$)
334.77 346.23 355.29 367.70 384.42 400.94 421.08 441.65 462.40 482.25
GDP per capitagrowth (annual%)
4.04 3.42 2.62 3.49 4.55 4.30 5.02 4.88 4.70 4.29
Povertyheadcount ratioat nationalpoverty line (%of population)
48.90 40.00
Povertyheadcount ratioat rural povertyline (% of ruralpopulation)
52.30 43.80
Povertyheadcount ratioat urban povertyline (% of urbanpopulation)
35.20 28.40
Population, total 143288578.0 145797298.0 148281341.0 150726249.0 153122039.0 155463091.0 157752512.0 160000128.0 162220762.0
Life expectancyat birth, total(years)
62.00 62.68 63.34 63.98 64.59 65.16 65.68 66.15 66.56
Birth rate, crude(per 1,000people)
26.39 25.66 24.90 24.13 23.37 22.65 22.00 21.43 20.95
Healthexpenditure percapita (currentUS$)
9.45 10.01 10.58 11.59 12.07 13.18 15.04 16.52 18.43
Healthexpenditure percapita, PPP
(constant 2005international $)
24.54 26.58 27.57 30.99 34.31 39.40 43.25 44.42 47.67
Healthexpenditure,private (% ofGDP)
1.79% 1.87% 1.89% 1.91% 2.09% 2.16% 2.27% 2.28% 2.29%
Healthexpenditure,public (% ofGDP)
1.19% 1.23% 1.14% 1.21% 1.12% 1.24% 1.19% 1.04% 1.06%
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Healthexpenditure,total (% of GDP)
2.98 3.09 3.04 3.12 3.21 3.40 3.46 3.32 3.35
Populationgrowth (annual%)
1.78 1.74 1.69 1.64 1.58 1.52 1.46 1.41 1.38
GDP (currentUS$ mn)
47,124.93 46,987.84 47,571.13 51,913.66 56,560.74 60,277.56 61,901.12 68,415.42 79,554.35 89,359.77
GDP (constant2000 US$ mn)
47,124.93 49,610.30 51,800.80 54,523.45 57,942.34 61,393.08 65,463.04 69,670.90 73,983.83 78,231.38
Source: World Bank Database
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Appendix 3: Pharma market growth across the world (2010)
Global Scenario 6.70%
North America 5.50%
Europe 4.90%
Africo-Asia 15.70%
Latin America 12.50%
Bangladesh 24.58%
Japan 5.90%
Source: IMS
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