Can Bangladesh’s pharma sector close its API amid supply chain shock?

Bangladesh's pharmaceutical industry is often described as one of the country's most significant industrial achievements. In the decades following independence, Bangladesh moved from near-total dependence on imported medicines to a position where local companies now meet around 98% of domestic demand.

The sector has also become an export earner, supplying products to 166 countries and reaching markets as diverse as Myanmar, the United States, the United Kingdom and Australia.

By the second quarter of 2025, the domestic market had reached Tk36,963 crore, or roughly $3.37 billion, growing by 12.43% year on year. Exports in FY2024–25 stood at $213 million, up from around $100 million seven years earlier.

Yet this success story has always rested on a shakier foundation than the headlines suggest. Bangladesh is highly capable of manufacturing medicines; however, it is not yet able to produce the chemical ingredients on which those medicines depend. That distinction matters because the ongoing US–Israel–Iran conflict has turned a long-standing industrial weakness into a potential strategic risk.

The vulnerability lies in active pharmaceutical ingredients (APIs), the core compounds that give medicines their therapeutic effect. Bangladesh imports more than 85% of these ingredients, at an annual cost of roughly $1.3–$1.5 billion. China and India are the dominant sources.

Domestic production remains limited. At least six companies, including Square, Beximco, ACME and Incepta, produce APIs at a meaningful scale, while up to 21 companies are involved in some form of API activity. Yet together they cover only around 40 to 41 types of active ingredients, out of approximately 400 required by the industry.

This is why the claim that Bangladesh produces 98% of its own medicines, although technically accurate, does not tell the full story. What Bangladesh has mastered is formulation: converting imported chemical compounds into tablets, syrups, capsules and injectables at scale. What it has not yet developed at scale is synthesis — the ability to produce those compounds in the first place.

In short, although Bangladesh does not rely heavily on the import of finished pharmaceutical products, it remains deeply dependent on imported active chemical inputs. These inputs are now increasingly exposed to geopolitical disruption.

The roots of the industry's success remain important for understanding the present predicament. Before 1982, Bangladesh imported nearly all its medicines. Eight multinational corporations effectively controlled the market, selling products at high prices. The National Drug Policy of 1982 fundamentally altered the sector's trajectory for the better. 

It restricted imports of drugs that could be produced locally, prioritised essential medicines, imposed price controls and encouraged domestic manufacturing. Over time, this created one of Bangladesh's strongest industries.

Yet the policy shift of the 1980s addressed only part of the problem. It built a strong formulation industry, not a full-spectrum pharmaceutical ecosystem. While this limitation was manageable in the past, it has now become critical.

The Strait of Hormuz handles around 20 million barrels of oil per day — roughly one-fifth of global petroleum trade — and is also a key route for petrochemical products. By 16 March 2026, commercial shipping activity through the strait had fallen by around 90% from pre-war levels. Clarksons Research estimated that approximately 3,200 vessels, or about 4% of global shipping capacity, were stranded or inactive in the Persian Gulf, while another 500 were waiting near ports in the UAE and Oman.

This matters for pharmaceuticals because medicines are not insulated from petrochemicals. APIs, solvents, plastics, polymers, packaging materials and excipients all depend on the broader petrochemical supply chain.

Around $20–$25 billion worth of petrochemical products passes through Hormuz annually. As that trade has been disrupted, prices of industrial chemicals have risen to roughly four-year highs. Industry analysts suggest that up to 50% of global polyethylene supply is now offline, restricted or otherwise affected by the Middle East crisis.

Bangladesh's vulnerability is compounded by the structure of its supplier network. India, which supplies around 30% of Bangladesh's APIs, receives roughly 40% of its crude oil through Hormuz. Its own pharmaceutical sector is already under strain.

Infograph: TBS

In recent weeks, the price of paracetamol API in India rose from around INR220–240 per kilogram to roughly INR550–600. Thiocolchicoside, a muscle relaxant API, reportedly increased from INR3.4 lakh to INR7 lakh. 

Experts estimate the crisis could cost India's pharmaceutical and preventive healthcare sector between INR2,500 crore and INR5,000 crore in export disruption. Since Bangladesh depends heavily on India and China for inputs, rising upstream costs in those countries inevitably filter into Bangladeshi production.

Abdul Mukadir, president of the Bangladesh Association of Pharmaceutical Industries (BAPI), told The Business Standard, "Crude oil prices have nearly doubled from $60 per barrel to around $120, directly affecting chemicals and inputs used in pharmaceutical production. However, if the war ends quickly and global energy supply stabilises, prices may fall again."

"Due to electricity shortages, we are increasingly relying on diesel-powered generators to maintain production, which may create uncertainty around fuel supply in the future," he added.

Mukadir also noted that pharmaceutical companies distribute medicines nationwide using around 20,000 vehicles daily. The government has assured an uninterrupted diesel supply until April; if conditions improve by then, a major crisis may be avoided.

Industry insiders report that prices of most raw materials have increased by up to 30% on average due to global conditions, raising production costs and putting pressure on the sector. Gas shortages and rising costs of solvents and intermediates have further increased the cost of producing APIs, pushing up overall manufacturing expenses.

"Companies have little choice but to purchase raw materials at international market prices. However, since retail prices (MRP) remain unchanged, many firms are incurring losses," said DH Shamim, managing director of raw material importer BBCON.

He added that companies typically maintain three to six months of raw material stocks. "If the conflict lasts beyond one or two months, a major crisis could emerge once current inventories are depleted."

According to Raghu Mitra, Director of Lee Pharma, due to raw material shortages, "Many firms are currently unable to take new orders. We may manage for the next two to three months, but beyond that, the outlook is uncertain."

Most companies still hold inventories sufficient for three to six months. However, this buffer should not be mistaken for resilience; it is merely a temporary cushion.

This is why the health ministry's emergency instruction to identify alternative sources, while understandable, also highlights the limits of policy during a crisis. The event where these challenges were discussed was inaugurated by Health Minister Sardar Md Sakhawat Hossain Bakul, who reaffirmed the government's commitment to the sector and stressed the need for collective action.

The problem, however, is not simply finding another supplier — it is the time required to validate one. 

According to BAPI Secretary General Dr Mohammad Zakir Hossain, switching to a new API source requires documentation, sampling, laboratory testing, product development, at least six months of stability testing and regulatory approval. The full process takes between nine and fourteen months. Bangladesh cannot diversify its supply chain at the pace of a war.

The policy gap becomes even clearer when measured against Bangladesh's own targets. The 2018 API Policy aimed to attract $1 billion in investment, reduce import dependence from over 85% to 80% by 2032, and create 500,000 jobs.

More than five years later, import dependence remains largely unchanged. ACME alone has invested Tk500 crore in equipment imported from the US, Germany, Japan and India, yet the broader initiative is still awaiting the infrastructure and approvals required for large-scale operation.

All of this is unfolding as Bangladesh approaches another structural turning point: graduation from least developed country (LDC) status in November 2026. For pharmaceuticals, this is significant because LDC status has allowed Bangladesh to use TRIPS flexibilities to produce patented medicines without paying royalties.

That waiver enabled local firms to move into newer drugs. Once these flexibilities are reduced, the industry's cost structure will shift. A South Centre study estimates that insulin prices alone could rise by as much as eightfold without the waiver.

Meanwhile, more than 1,000 drug registrations were reportedly pending at the Directorate General of Drug Administration (DGDA) as of mid-2025, increasing pressure on firms attempting to act before regulatory conditions tighten.

The pharmaceutical sector is therefore confronting not one shock, but two. One is geopolitical and immediate — driven by war, freight disruption and petrochemical volatility. The other is structural and legal — driven by LDC graduation and tightening patent obligations.

Together, they expose the limitations of a model that is highly competent in formulation but still underdeveloped in synthesis.

Dr Mohammad Zakir Hossain reiterated that the industry cannot simply switch suppliers during a crisis. "Raw materials cannot be sourced overnight from just any country. The entire process typically takes nine to fourteen months," he said.

He added that long-standing trade relationships also influence pricing. "Due to established business ties with China and India, we receive raw materials at competitive prices. Switching to new sources carries the risk of higher costs."

Warning about the short-term outlook, he said, "We usually maintain stocks for two to three months. If the war continues for another one or two months, higher import costs will begin to affect the market."

He cautioned that the situation could worsen further. Some existing suppliers have already indicated price increases. "If the war persists and the petrochemical crisis continues, pressure on the pharmaceutical industry will intensify."