Prospects and challenges for the Bangladesh pharmaceutical industry
The pharmaceuticals industry (pharma in short) in Bangladesh has progressed well over the last three decades and the country is nearly self-sufficient in pharmaceuticals with 97% of its demand being met by domestic manufacturers.
At present, this is one of the most technologically advanced sectors in the country employing probably the highest number of white collar professionals. Since the promulgation of Drug Policy in 1982, the sector has grown from Tk173 crore to more than Tk12,000 crore (or $1.5 billion) today.
Thanks to the private sector for its significant investment in building capabilities – both infrastructure and people – to bring this industry to compete in the global marketplace.
Bangladeshi medicines are also being exported to many countries in the world and leading players are making forays into the most regulated markets of Europe, US and Australia which are known for strict regulation and highest quality standards.
In view of its export potential, pharma has been declared as the thrust sector in Bangladesh with an aim to diversify the country’s export portfolio and lower its dependency on RMG (ready-made garments).
The country is still heavily dependent on RMG for its export earnings and there is still no vibrant sector next to it which could make it to the billion dollar club. The export data of Bangladesh shows that in 1980 RMG export was just $3mn, contributing to less than 1% of the country’s total export which sharply rose to $1bn in 1992. Today this accounts for 82% with value in excess of $25bn.
Pharma has received a lot of attention in recent times for its huge potential to become a major export oriented sector. However, we need to keep in mind that pharma as a sector is fundamentally different from RMG. RMG is highly labour intensive and the competitive cost of labour plays a major role in developing this sector.
Pharma, on the other hand, is largely a knowledge-driven and technology-intensive industry and this requires significant investment in R&D compared to other industries. A pharma company’s success mostly depends on its intellectual capital where special skill-set is required to deal with every stage of its operations.
Fortunately for Bangladesh, Drug Policy of 1982 created an opportunity for the local industry to flourish and make it self-reliant whereby local companies increased their share of production from 30% in 1970 to almost 90% today, which translates to a tremendous amount of foreign currency savings for the country every year.
Bangladesh is the only country among all LDC countries which has a well-developed pharma industry that, over the time, could successfully make the transition from being an import dependent to an exporting one.
Although medicine export from BD constitutes only a small percentage of total production, the sector has, over the last few years, attracted overseas buyers and it has earned good reputation as a quality drug manufacturer.
Leading pharma companies have already secured accreditations from major drug regulatory agencies like UKMHRA, TGA, ANVISA, Health Canada etc. while two of them, Beximco and Square, have successfully completed US FDA audit (remarkably, without any major observations) in January 2015 and are awaiting approval.
The country certainly has huge potential in pharmaceutical export. But we need to seriously evaluate how far we have progressed in terms of infrastructure development and achieving competitiveness.
The industry is yet to have any accredited bioequivalence testing facility which is mandatory for product registration in developed markets, and there is increasing pressure from even semi-regulated markets for such compliance.
A central bioequivalence facility in the country can largely benefit the industry by saving foreign currency. At the same time this will significantly improve the quality of our medicines.
Bangladesh is always publicised for having the advantage under TRIPS waiver which allows the LDC country to produce any patented drugs and even export to other LDC countries till December 2015, but in reality this waiver period is almost over without any real benefit to the industry.
This is because we could not utilise the benefits due to lack of proper infrastructure such as API (active pharmaceutical ingredient) technology park for producing bulk drugs, central bioequivalence testing lab, collaboration between industry and university etc.
It’s unfortunate that the industry has in fact gained nothing out of this TRIPS flexibility since Doha declaration in 2003. India and China are two major hubs for generic drugs. India has more than 150 US FDA-approved pharma plants, the highest number outside the US; and they are increasingly focused on R&D.
India’s export sales is currently valued at $15bn, about the same as its domestic sales; almost 40% of its export goes to US alone. How did they make it? It’s interesting to note that India took export initiatives for pharma in the late 80s; within the next few years Bangladesh also began exporting medicines to overseas markets.
Since then India has worked throughout the entire pharma value chain with tremendous backward integration into API and today established itself as a major generic drug hub whereas we are still struggling with issues of infrastructural development.
Lack of sufficient backward linkage remains a major challenge for our pharma industry. Although we are producing some of the old and conventional APIs on a commercial scale, we are far from synthesising the new and patented drugs, and meeting the growing demand.
API constitutes a significant percentage of the total cost in medicine production which can run up to 30-40% and, in many cases, even more. We must emphasize on improving our process and synthetic chemistry skill in order to be more competitive in global market.
To build up the capabilities we must start from the university, we must improve our education system with practice-oriented advanced courses having adequate laboratory facilities.
There should be more industry-university alliance and collaborative research between universities at home and abroad to promote research in the fields of generic drugs, reverse engineering, and also new drug development.
If we cannot have the competence developed in the university level, we cannot take this industry to the next level to compete in the global marketplace.
Although highly successful in developing the domestic market, the pharma sector of Bangladesh is faced with several long standing challenges which need to be addressed to realise its actual export potential:
Backward integration into API: The proposed API technology Park in Munshiganj, which was scheduled to be completed by July 2012, is delayed with the cost of the project now increasing by 55%. This delay has been a major hurdle for the pharma industry to gain better control over the inputs and improve operational efficiencies.
India, the major generic drug player, has more than 3500 Drug Master File (DMF) approval for APIs whereas we have none. We must strengthen our synthetic chemistry skills for improving API capabilities.
Central bioequivalence and drug testing laboratory: Bioequivalence testing is conducted to see if the generic version is identical to originator brand and this is mandatory for product registration in any developed market. This testing is very expensive if done in US or Europe.
The government should support in setting up such a centre which would help the industry in a big way. The country also lacks a state of the art drug testing lab to routinely and accurately monitor quality of drugs produced locally.
Strengthening of Drug Regulatory Authority: The industry needs a highly credible drug regulatory authority similar to US FDA to regulate drugs as well as food products. Continuous training and exchange programmes with global regulatory bodies would help them equip with the skills and knowledge to perform their duties responsibly.
Special Economic Zone (SEZ) for Pharma: The government should formulate a policy for setting up pharma SEZ with the intention of providing an internationally competitive and hassle-free environment. This should offer to the manufacturers tax and other benefits to encourage export. Both China and India have successfully created numerous SEZs for boosting pharma export.
Export incentives from government: Bangladesh has the opportunity to excel in high quality generic drug manufacture for export. Government incentives in various forms can help the pharma companies to focus more on export and improve sectoral performance. These can be in the form of excise duty exemptions, income tax holidays, investment subsidy (on capital investment) and interest subsidies. India has created Pharmaceutical Export Promotion Council under the Ministry of Commerce to promote export of pharmaceuticals.
Capacity building in IP/regulatory and legal affairs: To be able to operate in regulated markets such as USA, EU or Australia, any aspiring generic drug company must have the sufficient knowledge and expertise to deal with increasingly important legal and regulatory issues including patent litigations.
This is a critical area for a knowledge based industry like pharma where our industry is still in its early stage. Government grants/assistance can help establish IP Centres and the government should also emphasise on strengthening its Patent Office in order to keep pace with WTO/TRIPS agreements and changing landscape of global trade.
Building biosimilar capabilities: Valued at nearly $200 billion, Biologic drugs have been a major segment in global pharma market today with seven of them occupying the top 10 positions. Biosimilar or generic version of these biologic drugs are increasingly becoming a major focus for pharmaceutical companies across the globe.
As the number of patent expiry is rising every year in this category, which offers greater opportunities for generic manufacturers, we should also enhance biosimilar capabilities with appropriate regulatory guidelines in place.
Industry and academia collaboration: To build and strengthen pharma capabilities in different areas namely developing specialised drug delivery systems, biosimilars and vaccines, drug research, patent due diligence, etc, there must be strong collaboration between industry and university.
Specialised pharmaceutical research institutes can be established to promote research and develop human resources for the industry. The government of India has established the National Institute of Pharmaceutical Education and Research (NIPER). There are seven such institutes and ten more are being established at a cost of $500 million. These provide post graduate and PhD level education and contribute to thousands of Masters and PhDs per year.
Incentive for promoting R&D activities: Reverse engineering is the key to success for any generic drug company and it requires significant investment in building capabilities to create strong differentiation. This is a continuous process and to encourage R&D there should be incentives from the government. For example Indian pharma industry enjoys increased weighted deduction of up to 200% on in-house research and development (R&D) expenses.
Export promotion scheme: A government scheme may support activities for the pharma sector by promoting seminars, conferences, exhibitions, sending delegations to and from the country for promotion of exports as well as investments, conducting studies/consultancies.
Venture capital fund: The idea of the VC fund will be to offer financial incentives to companies focussing on research, for example, in the areas of biosimilar, NDDS or early-stage drug development. This would promote entrepreneurship in the sector and support the development of a self-sustaining environment for R&D in the country. India has set up a venture capital fund of $370mn to promote R&D in the pharma sector.
Infrastructure for exporting high-end pharmaceuticals: Creating a dedicated cargo storage and handling zone exclusively for sensitive pharmaceutical products such as biologics, insulins, vaccines, etc which require cold chain system. India already has Pharma Zone for such products.
Contract manufacturing: The industry also needs to find new opportunities of growth in contract manufacturing and research, clinical research and custom synthesis. Pharmaceutical contract manufacturing is already a 55-60 billion dollar business and increasing number of MNCs are looking for outsourcing their production from cost effective destinations like India or China.
Having considerable cost advantages in manufacturing, Bangladesh is in a position to offer this service to global clients as the country has a sound track record of partnerships with a number of major multinational companies.
The opportunities in generic drugs are increasing day by day with increasing government pressure around the world to cut healthcare costs. The country has tremendous opportunities for pharma export, particularly for value added generics in regulated markets.
In 2015 alone, patented drugs worth $60bn are going off patent which opens up opportunities for generic manufacturers around the world. Bangladesh could be ideally positioned to gain from generic drug opportunities with its cost advantages and skilled manpower, but we need to address those key challenges faced by the industry in order to gain further competitive advantages and build presence in the global generics.