Pharma on a Tk1 trillion journey

The pharmaceutical industry in the country is well-poised for a significant takeoff to grow threefold to an annual size of Tk1 trillion (1 lakh crore) in a decade, industry experts and analysts estimate.

A supportive policy adopted four decades ago together with the aspiration and talents of local entrepreneurs has created an over Tk27,000 crore pharmaceutical industry in Bangladesh, which is meeting almost the entire domestic demand alongside exporting to over 100 countries.

In its research report entitled "UCB Asset Pharma Outlook in The Fresh Decade", UCB Asset Management recently said the industry would reach the Tk1 lakh crore milestone mainly riding on the growing local market demand.

Alongside a local market boom, the country's pharmaceutical sector is expected to rake in over $1.5 billion or around Tk13,000 crore in export earnings per year by 2030 – almost nine times higher than $169 million earned in FY21.

The projected annual exports will leave room for the local market to contribute to around 87% annual revenue of the industry in 2030.

The annual growth rate of the industry may go as high as 15-16% this decade, which has been 12.1% over the last five years.

The pandemic helped the industry achieve a staggering 18.56% growth in the 2020-21 fiscal year.

Dr Firoj Ahmed, professor and chairman of the Department of Pharmacy at Dhaka University, said due to urbanisation and pollution, people are increasingly facing various health problems alongside a rise in income. As a result, the per-capita expenditure in the health sector is also on the rise.

"Demographic factors and increased capacity to spend boost sales of any product. Our pharmaceutical industry is also in line and the growth potential of the sector is huge," he said. 

The local market boom

"We are eying a significant demographic shift that will push up drug sales. For the first 40 years of your life, the food industry is trying to make you fat. In the next 40 years, the pharmaceutical industry is treating you for everything," said Md Risalat Huda, a co-author of the report.

Increasing healthcare expenditure, a demographic shift, and also the changing perception of modern medicine together will drive the local market growth, his report pointed out.

"Medicine heals doubts as well as diseases," Huda said while speaking on the changing perception of people regarding modern medicines as more people prefer modern drugs now.

According to the World Bank, among the regional peers, Bangladeshi people spend the least portion of their income on healthcare – only 2.4% to lag behind Pakistan, Indonesia, India, Philippines, Thailand, Myanmar, Nepal and, of course, Vietnam where the ratio is highest in the region, 6.4%.  

By 2030, people aged over 50 old will account for 22.4% of the local population, which is around 17% now, analysts pointed out, adding due to lifestyle, food habits, adulteration, and pollution, health issues such as gastric, heart diseases, respiratory problems, neurological issues, and cancer are on the rise here.

As the population group depends more on drugs and people here are more positive about modern medicines, analysts expect Bangladesh to follow Vietnam's track of increasing healthcare spending.

Alimentary tract and metabolism, cardiovascular, respiratory, neurological, oncological medicines are seeing increasing sales and are set to contribute to the upcoming market boom most.  

Exports growing strong

"Bangladesh's pharmaceuticals exports grew three times to $169 million in the last one decade. But the real growth story is yet to be written," said Masum Alvi Chowdhury, another co-author of the UCB Asset report.

"We expect the annual exports will grow to $1.5 billion by 2030, securing a 24% compound annual average growth," he said.  

Drugs manufactured by Bangladeshi companies have already entered all developed markets, including the USA, UK, Europe, and Australia, which have stringent regulations and the companies are busy with registering more drugs to export there.

Some top-tier pharmaceutical companies of the country, such as Square, Beximco and Renata, have well made their ways to the developed markets.

New export players, including DBL Pharma and ACI, too are investing for high revenues from the developed markets.

Currently, numerous policies, intermediaries, and existing generic drugs from competing countries are trimming the profit margin for Bangladeshi pharmaceutical exporters.

As Bangladeshi companies are more focused on the moderately regulated and unregulated markets, Southeast Asia and Africa are their biggest markets right now. But the good thing is they are gaining consumers' trust in the developed markets.

Companies are establishing supply chain networks abroad.

Masum Alvi said, "The developed markets are the next logical stop for our pharma growth train. Pharmaceutical products have a long way ahead to become a major export player."

Renata, the descendant of Pfizer Bangladesh, opened a subsidiary company in Ireland after Brexit.

ACI opened a US subsidiary to facilitate their export and Beximco's stock listing in London's over the counter market made it the only Bangladeshi share to be traded abroad.

Square Pharmaceuticals, the market leader, has built a factory in Kenya to compete in the $300 billion East African market. The foreign plant will also help Square mitigate any patent-related issue after the current waivers end by 2032.

Vaccine facility of Incepta, the second largest pharmaceutical player of the country, has been well praised by experts while Orion and some others are also investing for such facilities nowadays targeting Covid-19 vaccine production locally.

Beacon Pharmaceuticals has built its image as a major oncological drug maker in the country.

Four companies, including Square Pharmaceuticals, have registered their drug molecules both in the North American and UK jurisdictions.

For a higher profit margin against higher investments to comply with the stringent regulations like the ones by the US FDA, UK MHRA, the companies are focusing more on prescription drugs than over the counter drugs.

Middle-Eastern markets are also growing attractive and Beximco has entered the gulf market with several products launched in Kuwait.

M Shafiuzzaman, secretary to the Bangladesh Association of Pharmaceuticals Industries, said local companies are exporting their products to 151 countries of the world, which may be a benchmark for many others.

"A few companies have already left giant footprints in US and UK markets and are expanding their reach every day while around 1,000 products are going to be registered in the international market for subsequent export, which will unlock huge potential."

TRIPS adherence may not affect the industry massively

Waiver from the World Trade Organisation's Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement as a least developed country has been the most important aspect behind the Bangladesh pharmaceutical industry's growth and the facility will expire after 2032 as the country is graduating its economic status up.

Bangladeshi drug makers will be allowed to develop generic versions of the patented drugs until 2033 and even after that the TRIPS adherence is unlikely to affect the industry massively as over 85% of the generic drugs produced now by the industry are off-patent ones, which need no royalty payment to patent owner companies.

The slowed down pace in drug patent registration globally is unlikely to change the scenario drastically, especially for widely consumed medicines, the UCB Asset Management report anticipated.

"Even being TRIPS compatible after 2032, the availability and price of generic drugs might remain unaffected," it added.

The portion of drugs under patents will face a massive surge in price and under those circumstances Bangladesh can utilise some TRIPS flexibilities through incorporation of proper legislation into national laws.

Parallel importation of patented drugs which allows imports without patent owner's consent, compulsory licensing to companies by a local authority to produce patented drugs' generic version and meet local demand during certain understandable situation, and using the patented drug formula as soon as the patent expires are the flexibilities within TRIPS the industry may enjoy after 2032.

Backward linkage

The Bangladesh pharmaceuticals industry currently uses 97% of its raw material called active pharmaceutical ingredients (API).

The API Industrial Park in Munshiganj is expected to start production in the next year to reduce the import dependency to 80% by 2032.

It is not sure if the 27 companies securing plots there can deliver as per plans.

However, still, the 80% dependency on imported API will pose an external supply shock for the pharmaceutical industry.

If drug makers themselves produce APIs, they might secure a decent gross profit margin in various business contexts.

"Bangladesh is not a country that permits the pharmaceutical industry to charge exactly what the market will bear. Our drug regulators always put consumers before manufacturers," said Masum Alvi Chowdhury, stressing the need for cost control by the companies.