Pharmaceutical sector development necessitates vertical integration

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Raihan M Chowdhury
Bangladesh should move towards 'vertical integration', both backward and forward, to sustain its development achieved in the pharmaceutical industry, mainly attributable to large investments from the private sector.
This integration is also needed to remain globally competitive, market operators said.
The backward integration covers research and development (R and D) and Active Pharmaceutical Ingredients (API) Park while the forward integration includes logistic support, marketing and country brand.
Market operators said without framing a roadmap on the vertical integration, the Tk 33.67 billion market of Bangladesh's pharmaceutical industry will lose the pace earned in the last 15 years.
"As the year 2016 will mark the end of trade related intellectual property (TRIP) regulations that have allowed Bangladesh to copy world famous pharmaceutical products at a cheaper price, the expansion of export market through establishment of an API park and improving the R and D is imperative," Ashfaque ur Rahman of Novartis (Bangladesh) Limited told The FE.
He said this competitive advantage should be utilised to the maximum by a strong public-private partnership.
The Bangladesh pharmaceutical industry now accounts for 95 per cent of the domestic medicine market.
There are more than 200 pharmaceutical companies in the country, of them 20-30 are big and all these big ones have a quality manufacturing capacity.
Among the leading companies that invested heavily in quality control in recent years are Square Pharmaceuticals, Novartis, Beximco Pharmaceuticals, Acme, Opsonin, Incepta, ACI, Roche, Renata and Orion.
On the other hand, in terms of sales turnover in the recent period, the top 20 companies are Square Pharmaceuticals, Beximco Pharmaceuticals, Acme, Incepta, Eskayef, Aventis, Renata, Novartis, Drug International, ACI, Aristopharma, GlaxoSmithKline, Opsonin, Orion, Nuvista, Healthcare, Ibn Sina, Novo Nordisk, Roche and Bio-Pharma.
Bangladesh exports annually more than Tk 1.80 billion worth of drugs to 68 countries including the UK market, one of the most regulated markets in the whole world.
The concerned circles hold the view that if proper support from the government is provided, this sector will be able to export Tk. 20 billion to Tk. 30 billion worth of medicine per annum.
The recent accreditation of London-based Medicines and Healthcare Products Regulatory Agency (MHRA) to Square and Renata paved the way for increased exports of Bangladesh pharmaceutical products to European countries.
Square Pharmaceuticals and Renata Ltd have already obtained UK MHRA accreditation, the qualifying yardstick to export products to the UK market.
"More local companies are on the way to get the UK MHRA accreditation by April 2008, which will facilitate Bangladesh's export to European and other developed countries," a Bangladesh Association of Pharmaceutical Industries (BAPI) source said.
The country's export of pharmaceutical products declined 15.03 per cent in July-August of this year to $ 4.75 million compared with that of the corresponding period of the previous year, according to Export Promotion Bureau (EPB) statistics.
The Bangladesh pharmaceutical sector attained a whopping 17.50 per cent growth in 2005, however it came down to 4.08 per cent in 2006.
"There is nothing to be worried about such drastic decline as it happened only in a single year," Ashfaque ur Rahman said.
The pharmaceutical sector attained 10.18 per cent growth in 2002, 5.90 per cent in 2003 and 8.60 per cent in 2004.
Updating the Patent Act 1911, extending the limit of transfer of operational expenses, enhancing the limit of sending Product Samples for Registration, Promotion, Int'l Fair etc., awarding Cash Incentive for export of Pharmaceutical Finished Formulations and Raw Materials /APIs, Allocating land for Independent Drug Testing Laboratory (DTL) were suggested by the experts to ensure the growth of Bangladesh pharmaceutical sector.
"We have already met the chief adviser to discuss the issues and he has assured us to look into them," a BAPI source told this correspondent.
"It's a great success for the pharmaceutical industry of Bangladesh that the entrepreneurs are endeavouring to ensure the quality of products. But the problems we are facing are mostly related to 'country image' and government policy support," Nazmul Hassan of Beximco Pharmaceuticals Ltd (BPL) said.
Forms and documents as supplied by various government offices of Bangladesh are of extremely poor quality. Reports on counterfeit drugs and various published negative reports have also affected the image, he said.
Apart from these, there have been several incidences of pilferage /theft of cargo during shipment, which also severely tarnished the image of the companies.
"Lack of much needed information, especially about the overseas market and product registration is another problem for the pharmaceutical companies when they intend to go for export," the BPL top executive said.
As per Bangladesh Bank regulation, any company, which opens a representative or marketing office in a foreign country, is allowed to remit only US $ 30,000 per year (or US $ 2,500 per month). This amount is not at all adequate in view of the nature of pharmaceutical business and its huge potentials.
In Moscow and Singapore, only the office rent per month is US $ 10,000 and US $ 5,000 respectively and the operational expense per month is around US $ 25,000. In Europe and Latin America this expense is much higher.
"Considering this, necessary modifications should be done in the Bangladesh Bank regulations so that the pharmaceutical exporters can transfer at least US $ 25,000 per month to a country," Nazmul, also the secretary general of BAPI said.
According to the Export Policy, there are limits of sending product samples abroad. Currently, the limit for sending product samples is worth US $ 5,000 per year. For a country with such enormous export potentials, this limit is not at all adequate, he said.
In the overseas markets, the awareness regarding the brands of Bangladesh is insignificant or negligible. So, in order to establish these brands the pharmaceutical exporters need to promote them to the doctors' with literatures and proper samples.
"So, they need to send huge promotional samples abroad. Considering this, there should not be any limit in sending product samples for promotion," Nazmul added.
Participating in the international fairs can play vital role in developing the required awareness regarding the Bangladeshi companies as well as their brands in the overseas markets.
"So, the exporters need to send a sizeable quantity of samples for display in the international fairs. Considering this, the limit for sending samples for such fairs should be withdrawn," another market operator said.