Pharmaceuticals sector contributed 1.85% of the GDP in 2016-17 (Source: BBS). At present, 257 licensed pharmaceutical companies are present in Bangladesh, among which, 150 are functional. Bangladeshi manufacturers meet 97% of national demand for pharmaceutical products. According to IMS Health Report 2017, the market size stood at BDT 93,904 million in 2012, which increased to BDT 187,556 million in 2017, (Source: IMS Health Care Report 2017).
Trends & Industry Drivers
The growth in the pharmaceutical sector has largely been driven by local players, particularly due to government policies favoring domestic players. Due to the benefits of TRIPS agreement applicable for manufacturers in LDC, local players end up producing medicines at much cheaper rates, compared to their international counterparts. As a result, medicine prices have remained within reach of the mass population. According to industry experts, the sector will be growing at 15% rate over the next 4-5 years due to the following factors:
- Economic Growth: The country’s growth has been healthy and growing by 6-7% each year. This has contributed to higher per capita income and growing middle and affluent class population. With growing industrialization over the next decade, income level is expected to increase further leading to higher consumer spending. Demand for consumables like medicines would also increase in tandem with rising disposable income.
- Population Growth: Although Bangladesh’s population is growing at a steady pace of 1.2%, total population is already around 166 million, with population expected to reach 250 million within 2025. (Source: WB) Higher population will increase demand for essentials like medicine.
- Healthcare and Life Expectancy: Bangladesh’s population life expectancy has increased to 71 years, which is particularly due to better access to healthcare and increased awareness of health issues. With rising average age of the population, demand for healthcare products and services would increase at a significant pace.
- Environmental Issues: Bangladesh’s urban population is particularly exposed to adverse environmental impact, which includes- pollution and contaminated food, which have resulted in increased risk of chronic non-communicable diseases. As a result, increasing number of people would require rigorous healthcare services.
Key Players & Market Share
Although the market has a number of players, the top 15-20 players control the domestic market. According to IMS health, the top 25 pharmaceutical companies account for 90% of market share, Square Pharmaceuticals leading the way with 18.06 % market share.
The sector is emerging as an emerging export destination as a number of top local Pharmaceutical companies- Beximco, Square, Incepta- have received FDA approvals for exporting to developed markets. Alongside, pharmaceutical players are targeting to capture a significant market share in price sensitive African markets. Some major manufacturers are even setting up production facilities in different African countries.
Considering Bangladesh’s export potential, government has been supporting the sector through policy support and incentives like tax holidays, priority in getting lands and allocation of dedicated economic zones. Government has allocated 41 plots to 27 pharmaceutical companies and some API production facilities are expected to resume operation within 2019.
Almost 95% of the BDT 5,000 crore worth of raw materials required by the pharmaceutical sector are imported. Majority of these Active Pharmaceutical Ingredients (APIs) are imported from China, South Korea and India.
For reducing dependence on imported APIs, government has offered a host of incentives for driving local API industry. Key incentives include:
- Tax – holiday till 2032
- Vat deduction at source
- 20% cash incentive
- 12 year tenure for long term loans.
WTO has extended the Trade Related Aspects of International Property Rights (TRIPS) agreement till 2032, which would allow LDC based manufacturers to produce patented drugs without necessarily paying royalty to the patent holders. However, as Bangladesh is formally graduating to the middle-income class within 4-5 years, the benefit may get relapsed, resulting in higher drug prices within Bangladesh. Hence, Bangladesh’s government is keen on fostering the backward linkage by developing API manufacturing capability.
Two organizations regulate drugs and pharmacies in Bangladesh.
- The Directorate General of Drug Administration (DGDA) is the national drug regulatory authority which is under the Ministry of Health and Family Welfare. DGDA regulates all activities related to import and export of raw materials, packaging materials, production, sale, pricing, licensing, registration of all kinds of medicine including those of Ayurvedic, Unani, herbal and homeopathic systems.
- The Pharmacy Council of Bangladesh(PCB) was established under the Pharmacy Ordinance Act in 1976 to control the pharmacy practice in Bangladesh. Some key regulation features are restrictions on imported drugs (where these are produced by four or more local firms), a ban on local production of around 1,700 drugs that are considered non-essential or harmful and strict price controls on some 117 principal medicines.