Communicated By: M. M. Chowdhury (Mithu), USA CEO, Amreteck LLC, USA A Pharmaceuticals Consulting Company www.amreteck.com
Pharmaceutical exports: poised for a takeoff
Adnan Khandker looks at the significant new opportunities that can lead to massive gains in pharmaceutical export and the challenges Bangladesh must overcome to do so
 Nisoral (generic name: esomeprasol) is an anti ulcer drug produced by Eskayef Bangladesh, a local pharmaceutical company. Back in May 2006, Eskayef Bangladesh started exporting this drug to Sri Lanka with hopes of building a strong market there. At the time, the product faced immense competition from similar anti ulcer drugs from India and China. In fact, drugs from India and China had a significant price advantage as they were priced between 6 to 8 rupees in the local currency. On the other hand, Nisoral was being marketed in Sri Lanka at 28 rupees. But when the sales records were tabulated, it was found that the higher priced Nisoral was outpacing its lower priced competitors from advanced pharmaceutical exporting countries like India and China.
Industry leaders often cite this case as proof of how Bangladeshi pharmaceutical exports are of a high quality and are capable of competing with the top players in the market. A M Faruque, managing director of Eskayef says, 'This just goes to show that if we ensure product quality and market our products, we can be very competitive. When we first started exporting we did not know with surety how well we would do. Soon, we noticed that doctors were prescribing our drug and commended its quality.'
Moreover, recent reports of export targets by pharmaceutical giants in Bangladesh are indicative of the bright prospects of the industry in terms of exports. Beximco Pharmaceuticals Limited has announced that it hopes to capture one per cent of the Gulf Cooperation Council countries' pharmaceutical market which is worth around $ 4 billion. Add to that, four top companies are aiming for exports worth $ 10 million this year through contract manufacturing only.
Square Pharmaceuticals Limited has completed manufacturing contracts valued at $1.5 million with two British companies last year. Incepta Pharmaceuticals Limited, the country's third largest pharmaceuticals company has signed a contract with Bano Pharmaceutical, an Austrian company, where it would transfer its production site to newly built factory of Incepta this year.
Furthermore, many companies have acquired international certifications like USFDA, UKMHRA and TGA enabling them to penetrate into regulated markets. Incepta has received accreditation from the European Medicines Agency and also has a GMP (Good Manufacturing Practices) Certificate from Europe.
The export data also shows that the pharmaceutical exports from Bangladesh are growing. Sources in the Export Promotion Bureau (EPB) inform New Age that the sector has grown from exporting $8.2 million in 2003-04 to $28.3 million in 2006-07. 'Thus, the industry has quadrupled in value percent during the period. Meanwhile, it has also expanded its export base from 51 countries to 61,' adds a top official of EPB.
Bangladesh Association of Pharmaceutical Industries (BAPI) sources inform that Bangladeshi companies are exporting a wide range of pharmaceutical products covering all major therapeutic classes and dosage forms. Besides regular brands, it is also exporting high-tech specialised products like inhalers, suppositories, nasal sprays, injectables and infusions. 'Apart from overseas retail customers, the country is supplying to world-renowned hospitals and institutions like Raffles Hospital of Singapore, Jinnah Hospital of Pakistan, MEDs of Kenya, SPC of Sri Lanka and KK Women & Children Hospital of Singapore. The product quality, packaging and presentation of the products have been highly appreciated in all the countries,' says a BAPI top official.
The pharmaceutical export industry in Bangladesh dates back to the late 80's. At that point in time, only one or two pharmaceutical companies took proactive efforts to initiate export of pharmaceuticals. Despite the fact that there was no support or incentive from the government, these companies with their own initiative started exporting finished formulations to some of the neighboring less-regulated overseas markets like Myanmar, Sri Lanka and Nepal.
Officials at the directorate of drug administration (DDA), the regulatory body for the industry, further elaborates that after being successful in these less-regulated markets, in the early 90's, the companies took the initiative to explore some of the more-regulated markets like Russia, Ukraine, Georgia and Singapore. 'Success in registering and marketing their products in these countries was a major breakthrough for Bangladesh pharmaceuticals industries. This was a clear testimony not only to the product quality, but also to capabilities to meet stringent regulatory requirements, ' adds a high official of the DDA.
The pharmaceutical industry in Bangladesh is currently valued at $650 million with an annual growth rate of 12 per cent. It is primarily a generics industry producing around 8,000 different brands which can cater to 97 per cent of the domestic demand. 'At present, there are 240 registered pharmaceutical manufacturers in Bangladesh out of which 168 are operational. The industry is one of the highest contributors to the national exchequer and it is the largest white collar intensive employment sector of the country. The market share of the local companies is around 80 per cent.
Opportunities to expand export
There are a number of exciting opportunities which can drive growth in the industry and create a second crucial base for Bangladeshi exports along with from ready made garments. The most significant of them has been created in recent times through a global treaty. Nazmul Hasan, managing director of Beximco, says that following the TRIPS compliance as part of the WTO Agreements, both India and China as well as other countries except the 49 least developing countries (LDCs), will not be able to export patented drugs from their countries from January 2005.
Nazmul adds that among the 49 LDCs, Bangladesh is the only country which has a very strong manufacturing base in pharmaceuticals. Nazmul explains 'as per TRIPS guidelines, Bangladesh as an LDC is now 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. The 50 LDC countries represent a large market for pharmaceutical products with a total population of over 700 million and with an increasing demand for quality healthcare. Moreover, in cases of national emergency, say a devastating natural disaster, a country can scrap patent rules for a certain period. But it will be unfeasible to go for production and then treat the ill.' Thus, they will need to import them and Bangladesh should be ready to export as it is allowed to produce such drugs.
ABM Farooque, professor of pharmacy at Dhaka University argues that there are huge opportunities in the overseas markets for APIs (Active Pharmaceutical Ingredients) . Farooque says '76 per cent APIs for US drug industry are imported. For API, 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. Bangladesh also imports 80 per cent of its imports. Investment in API will lead to import substitution but Bangladesh can leverage its many strengths to become a major exporter of API too.'
DDA officials clarify that each year patents on pharmaceutical products expire with annual sales worth billions of dollars. Official estimates show that there are blockbuster drugs coming off-patent by 2007 which have sales in excess of US $82 billion. This will be one of the key factors which will help drive generic pharmaceutical growth over the next decade.
'Our low manufacturing cost will provide a competitive edge over our global competitors in any international generic pharmaceutical market. In fact, export of off-patented products in the developed and developing countries will probably remain as our single largest opportunity to grow exponentially, ' adds the DDA official.
Cost of medication is becoming a major concern in the developed countries. Faruque of Eskayef points out that concern about rising drug prices along with severe price competition from the generic manufacturers has prompted a number of giant multinational companies to shift or outsource their production from developed to developing and less developed countries. 'The industries in developing countries provide huge cost advantage. Big companies will continue to look for suitable partners in their supply chain management in order to reduce their cost of production,' adds Faruque, whose company aims to earn $ 5 million this year through contract manufacturing deals.
Professor Farooque says that that the Bangladeshi industry's key strengths are its highly skilled labor force and strong manufacturing base. 'The industry has very strong reverse engineering skills and a strong marketing and distribution network. It has rich biodiversity and a growing biotechnology industry. But the industry has a number of challenges that it faces which can eliminate any advantage it may have,' adds Professor Farooque.
The challenges
Nazmul says that the biggest challenge is the overall poor image of Bangladesh that ultimately tarnishes the image of the companies as well as the products in the overseas markets. Forms and documents as supplied by various government offices of Bangladesh are of extremely poor quality. 'When we try to export or market our products, most people can only relate to the country in terms of floods and natural disaster. Thus, the image of the country is a big deterrent for prospective clients,' adds Nazmul.
Professor Farooque points out that another major problem arises due to the lack of policy direction being created to aid pharmaceutical export. The lack of promotion conducted by the various missions of Bangladesh in countries is also a problem. Farooque says 'The new drug policy does not address the issue of pharmaceutical export let alone lay out plans for the development of the industries exports. There is a need for a detailed plan to achieve success in exports but unfortunately it does not exist. In the absence of such a plan, the government is not being able to facilitate trade as much as it should. The embassies aboard are not very cooperative and exports require full embassy trade support to develop.'
Thirdly, Faruque argues that there is lack of much needed information, especially information about the overseas market and information regarding product registration, which is another problem facing the pharmaceutical companies when they intend to go for export. Countries with moderately regulated drugs regimes like Singapore, Russia, Czech Republic, UAE Arab Emirates etc. require some additional documents like bioequivalence study, validation report, clinical trials and manufacturing plant audit report.
'The big problem we face is in case of Bioequivalence Study and Clinical Trials. In Bangladesh we don't have any recognised government organisation or contractual research organisation like universities or private institutions to conduct bioequivalence study or clinical trials. There are such centres in India, but many of them are not recognised by the regulatory authorities of most of the moderately regulated countries. In that case, we have to undertake bioequivalence study in Singapore or Malaysia, which are very costly,' adds Faruque.
Industry insiders explain that according to the export-policy, there are limits to sending product samples abroad. For a country with such enormous export potentials, these limits are not at all justifiable. There are even limits on imports of raw materials which are a major hindrance as raw materials are mostly imported. 'Import limits were set 8 years ago but the limits were going to be expanded within the current fiscal year. However this did not take place and the government started enforcing the limit. Thus, we were short on raw materials and had to cut down on production. If such limits remain, the production schedules of companies will be affected and they will not be able to export or hold on to any advantages they might have,' says one industrialist.
The previous government had announced the creation of an API Park to facilitate the growth of the industry and provide backward linkage. Serious delays in setting up the proposed API Park are holding back private sector investment for manufacturing raw materials. The present interim government took the decision for implementation of such a project in Munshiganj district last year, although the then BNP government had conceived the project back in November 2001. Sadly, it still awaits the nod of the Executive Committee of the National Economic Council.
DDA officials reveal that there are also certain limits created by the Bangladesh Bank (BB) relating to foreign currency transactions which are a big hassle. There are no proper banking relationships with some export destinations and other problems related to trade services. 'Companies need to conduct laboratory tests aboard as we do not have the facility here. They need to prepare a number of documentation and pay fees for registration which can be quite high for some countries. Aside from that, companies must maintain offices to run marketing activities and oversee distribution. All of these activities require the company to send money aboard but BB limits are too low. Thus, companies cannot send funds properly,' adds DDA official.
Addressing concerns
Nazmul believes that the country has to address the problems that have been faced by the pharmaceutical industry in its export activities. Problems relating to image, information, transfer of operational expenses and samples, scarcity of cargo space, duty drawback have to be solved on an immediate basis. 'To encourage and boost pharmaceutical export from Bangladesh government should immediately offer cash incentives both for export of APIs and finished formulations. It should create the API Park as quickly as possible so that Bangladesh can quickly achieve greater cost competitiveness, ' adds Nazmul.
In the light of the export opportunities as revealed by WTO/TRIPS, Faruque believes that we have to invest both in bulk drugs and Research & Development (RND) facilities. With regard to bulk drugs, the domestic market is too small to attract any company to invest. Therefore, cash incentives are mandatory for export promotion. 'With regards to RND, the country should be allowed to import all the equipment duty-free and tax-free. The registration requirement for imported products should be made stringent so that the market is not flooded with spurious and substandard drugs from neighbouring countries. In case of new product registration, all patented products should be given priority,' says Faruque.
Professor Farooque points out that in order to take full advantage of post WTO opportunities, our National Drug Policy/Drug Ordinance must be updated in line with TRIPS guidelines. Professor Farooque adds 'Apart from that, there should be a separate cell dedicated for pharmaceutical export. And the govt. should set export target for pharmaceuticals. Moreover, greater support from the embassies in facilitating trade is necessary. Export and Import Policy alongside banking regulations must also be updated to meet the needs of the time.'
In recent times, the government has taken some actions to assess the situation of pharmaceutical export and bring about positive changes to assist its growth. Officials of the EPB say that the government has formed a technical committee to analyse the issues and make recommendations for improvement. 'A technical committee selected pharmaceutical products as the product of the year, pointing out that Bangladesh pharmaceutical sector is enjoying low cost labour and patent liberty compared with the neighbouring countries,' says a top EPB official.
The committee in its proposal submitted to the Ministry of Commerce submitted a nine-point proposal to help export growth. EPB sources reveal that the proposals include a 10 per cent cash subsidy for the export-oriented pharmaceutical factories and relaxation of the stringent foreign currency expenditure policy for the pharmaceutical industry. 'The committees recommended a ceiling of such expenditure at US$50,000 per year for a new company. It also recommended sending pharmaceutical samples to overseas market at 10 percent of each consignment of the export,' informs a top EPB official.
l Of 240 registered pharmaceutical manufacturers in Bangladesh, 168 are operational
l Pharmaceutical exports have increased from $8.2 million in 2003-04
to $28.3 million in 2006-07 while the export base increased from 51
countries to 61
l The industry is valued at $650 million with an annual growth rate of 12 per cent
l Bangladesh is now 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
l However, Bangladesh's poor image abroad makes prospective clients
hesitant
l The lack of policy direction to aid pharmaceutical export is a detriment
to the industry's growth
l There is lack of necessary information about product registration,
bioequivalence study, validation report, clinical trials and manufacturing plant audit report
l To encourage and boost pharmaceutical export the government should immediately offer cash incentives for Active Pharmaceutical Ingredients (APIs) and finished formulations so the industry can achieve greater cost competitiveness
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