1332567100Research Report on Pharmaceutical Sector of BD-Initiation, June 28, 2011

8/21/2019 1332567100Research Report on Pharmaceutical Sector of BD-Initiation, June 28, 2011

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SALIM AFZAL SHAWON

Management Trainee

[email protected]

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

Disclaimer: This Document has been prepared and issued by IDLC on the basis of the public information availablein the market, internally developed data and other sources believed to be reliable. Whilst all reasonable care hasbeen taken to ensure that the facts & information stated in the Document are accurate as on the date mentionedherein. Neither IDLC nor any of its director, shareholder, member of the management or employee represents orwarrants expressly or impliedly that the information or data of the sources used in the Document are genuine,accurate, complete, authentic and correct. Moreover none of the director, shareholder, member of the managementor employee in any way be responsible about the genuineness, accuracy, completeness, authenticity and correctnessof the contents of the sources that are publicly available to prepare the Document. It does not solicit any action basedon the materials contained herein and should not be construed as an offer or solicitation to buy sell or subscribe toany security. If any person takes any action relying on this Document, shall be responsible solely byhimself/herself/themselves for the consequences thereof and any claim or demand for such consequences shall berejected by IDLC or by any court of law.

1332567100Research Report on Pharmaceutical Sector of BD-Initiation, June 28, 2011

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