Backward linkage lag inhibits export of pharma products

Local pharmaceutical industry is failing to fortify its position in the global arena, though it dominates the domestic medicine market.

While 97 per cent of the local market demand is now met by the domestic drug makers, exports of pharmaceuticals overseas reached a paltry US$ 100 million last fiscal.

In spite of enjoying various policy support including cash incentives on exports, overseas sales of pharmaceuticals remain minuscule compared with many other major export items.

Stringent overseas regulatory requirements, lack of adequate testing facilities at home and weak backward linkage are among the reasons why exports remain sluggish.

Medicines worth US$ 103.46 million were exported from the country during the last fiscal, up from US$ 89.17 million the country shipped during FY 2016-17, according to figures from the state-run Export Promotion Bureau,

This growth may sound healthy, but it comprised only 0.3 per cent of the total exports of the country during FY 2017-18.

Exports of medicines remain also meagre when compared to other major items like readymade garments that fetched US$ 30.16 billion last fiscal.

Leather and leather products grabbed US$ 1.38 billion during the same period.

When asked about the underlying reason for such meagre export, the insiders pointed at the country's failure to grab a fair share in the value driven high-end markets.

"Most of Bangladesh's medicine exports are currently going to small neighbouring markets, where we can get at best US$ 15 million to US$ 20 million," said Tapan Chowdhury, managing director of Square Pharmaceuticals, the country's leading drug manufacturer.

"But to increase the export volume, we need to make foray into the large value-driven markets like the US," Mr Chowdhury said.

There is a US$ 500 billion market for generic medicine in the US alone and India has already made substantial inroads there, he noted.

"If we can grab at least five to 10 percent of the US market, it could translate into a big export amount", he said.

Mr Chowdhury's point was further corroborated by the fact that last year, only 3.3 per cent of Bangladesh's pharmaceutical exports went to the US. Meanwhile, the largest market of Bangladesh's medicine has been Myanmar and Sri Lanka, which together comprised almost 30 per cent of the pharma export.

In recent years, only a few top pharmaceutical companies of the country like Square or Beximco have been able to make some foray with a few products into the highly-regulated but lucrative US market.

Asked why Bangladesh was failing to curve its niche in the bigger markets, the industry insiders singled out one factor: The lack of a strong backward linkage industry including the Active Pharmaceuticals Ingredients or API industry in the country.

"All the major medicine exporters in India make their APIs by themselves. Meanwhile, we depend on imported API from India and China for formulating our products," said Dr. Shawkat Haider, general manager of Beximco, a big name in the local pharmaceuticals.

"Virtually, we are dependent on our own competitors for raw materials. This is not ideal if you want to be a global player," he added.

Amid growing concerns about the country's dependence on imported API, the government has recently come up with a separate policy for the production of API within the country.

The country's first API Industrial Park is also being set up in Munshiganj, some 37 kilometres off the capital.

Experts, however, observed that it took almost 15 years for the government to make this advancement.

Meanwhile, insiders identified the lack of adequate testing facilities including the virtual absence of any bioequivalence centre in the country as a major barrier to the growth of pharmaceutical exports.

"Bioequivalence studies are a must for entering the regulated developed countries. Even the semi regulated markets now require such testing," said Mr Chowdhury of Square.

"But in the absence of such testing facilities in the country, we have to conduct bioequivalence studies from abroad, which is quite expensive and time consuming," he said.

Even the drug testing lab of the Directorate General of Drug Administration is not prequalified by the World Health Organisation, insiders noted.

Asked about the issue, officials from directorate said that they had already given the green signal to five entities to set up bio equivalence centres in the country.

They also noted that the directorate is working to get the pre-qualification from the WHO for its drug testing lab in Dhaka.

"We are also working to get the membership of PIC/S," said director general of the directorate Md. Mustafizur Rahman, while referring to the Pharmaceutical Inspection Convention and Pharmaceutical Inspection Co-operation Scheme.

Founded in 1970, the PIC/S is meant as an instrument to improve cooperation in the field of Good Manufacturing Practices between regulatory authorities and the pharmaceutical industry. Currently, a total of 52 countries are members of PIC/S.

"It would be easier for our pharmaceutical products to get access to PIC/S member countries once we receive this membership," Mustafizur said earlier.

Meanwhile, some insiders noted that the country's protectionist measures to cushion its local pharmaceuticals industry are indirectly discouraging its exports.

They pointed at the Drug Control Ordinance of 1982, which banned foreign companies from selling imported pharmaceutical products in the country.

At the same time, Bangladesh is also enjoying waiver from Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, which enabled the local industry to offer generic medicines at a lower and competitive price without bothering about copyright issues.

"While such measures helped develop our local industry, it meant that local drug makers have found a big and secured domestic market where they can sell their product at a much lower price," an official said.

"So, they are not much interested to go to the highly regulated markets", said the senior government official, who preferred not to be named.

Meanwhile, experts also underlined the need for enhancing the capacity of the local manpower and increased investment in research and development to drive further value addition in the local pharma products.

"At present, there is a huge dependency on Indian experts and formulators in our pharmaceuticals sector", said Prosenjit Chakraborty, general manager of Square Pharmaceuticals.

"We can also bring in non-resident Bangladeshi pharmacists from abroad but that would be more expensive. So, we should develop the capacity of our own formulators," he added.

"Pharmaceutical is at the end of the day a knowledge-intensive industry where research and development is the most critical part," said Dr. Shawkat Haider of Beximco.

"Regulations are getting more and more stringent not only in the developed markets but also in semi-regulated LDC markets."

"So we need regular investment in R&D as well as human resources to comply with latest requirements and deliver quality products," he added.

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