The pharmaceutical industry is currently one of the most promising sectors for industrial diversification in Bangladesh. Multinational companies (MNCs) dominated this industry during the early post-independence era of the country. At that time, eight leading MNCs controlled 75 per cent of the total domestic market valued at around Taka 1 billion, producing vitamins, enzymes and cough syrups locally, and importing other essential drugs from their sister units located abroad. In fact, imports met 90 per cent of the demand for medicines then. Later, the National Drug Policies of 1982 and 2005 helped the consolidation and growth of the domestic pharmaceutical industry in the country. As a result, Bangladesh could become a medicine-exporting country by late-1980s.
Pharmaceutical industry is now one of the largest capital-intensive white-collar sectors in the country and has grown tremendously over the past three decades. Bangladesh has been enjoying comparative advantages in the sector due to favourable WTO legal regime as well as adequate supply of skilled and cheap manpower. Medicine sales in Bangladesh stood at US$ 0.60 billion in 2007, reaching US$ 1.60 billion mark in 2014. Medicine exports from Bangladesh rose to USD 135.80 million in 2019-20 from USD 67.45 million in 2012. Significantly, exports marked a rise of 19 per cent even during Covid-inflicted 2020-21. On the other hand, the value of domestic medicine market rose to over Taka 250 billion in 2020 from Taka 90 billion in 2012. About 80 per cent of the produced drugs are generic, while 20 per cent are patented.
Bangladesh is now almost self-sufficient in pharmaceuticals, as 97 per cent of local needs are met by domestic manufacturers. The imported drugs are mostly specialised pharmaceutical products like vaccines and anti-cancer drugs. The current share may tilt further in favour of domestic producers as big local firms are on course to manufacture the imported drugs as well. As against the current 118 destination countries, the drug manufacturers expect to export medicinal products to 140 destinations soon. Bangladesh has also one of the strongest bases for manufacturing drugs among the LDCs. Besides, there are huge opportunities for the local companies to opt for contract manufacturing and compulsory licensing.
An immediate challenge for the growth of pharmaceutical industry in Bangladesh is the scheduled expiry of WTO/TRIPS agreement in July 2021, which provides patent exemption for pharmaceutical products among LDCs. Steps should be taken for extending this exemption for another 5-year term alongside preparations in the country for compliance with patent laws in case the exemption is not extended. Another challenge facing the local industry is absence of facility for bio-equivalence study, which is mandatory for drug exports to the regulated as well as moderately regulated markets. Such tests are now done abroad at a high cost. Establishment of a full-fledged bio-equivalence laboratory in Bangladesh is therefore very urgent in order to boost exports and improve the quality of products.
Pharmaceutical manufacturing generally consists of two steps. The first step, - production of active pharmaceutical ingredients (APIs), is a highly sophisticated, technically demanding chemical and biochemical fermentation cum synthesis process. The second step is the drug's final formulation, which belongs to the manufacturing phase. Bangladesh mainly manufactures the final formulation of branded generics from imported APIs. There is minimal R&D activity, and so the capacity for reverse engineering of patented drugs is very limited. Pharmaceutical manufactures are very import-sensitive in Bangladesh, as raw ingredients like API, packaging and materials are mostly imported from outside. The producers mainly run the final chemical synthesis stage with API intermediaries, instead of complete chemical synthesis. The government took initiatives for establishing an API Industrial Park at Munshiganj many years ago that would boost the industry's competitiveness as well as exports when completed.
There are currently 274 registered pharmaceutical companies (214 still in operation) in Bangladesh with the top 10 companies accounting for about 70 per cent of the market share. With around 120,000 workers employed, the industry employs the highest number of white collar workers in the industrial sector. But the incentives created by policies have led to a focus on import-substitution instead of enhancing reverse engineering capacity to take advantage of the WTO/TRIPS waiver. Factors that adversely affect exports include weak enforcement of regulations and strict foreign exchange controls. Lax enforcement of regulations provides scope for companies to fall below the standards demanded by export markets. Strict foreign exchange controls deter firms from undertaking critical activities like receiving certifications from overseas regulatory authorities for exports.
The government's drug-testing laboratories and the Directorate General of Drug Administration (DGDA) have monitoring and supervisory roles in ensuring the quality of manufactured medicines. The pharmaceutical sector has been among the highest priority sectors in Bangladesh's export policy since 2006, which are entitled to income tax exemption for export receipts, export credit at reduced rates, assistance in marketing abroad through participation in export fairs, etc. In addition, the government has reduced or exempted duties on some capital machinery and raw materials imported for pharmaceutical production. The sector also enjoys tax holiday and duty drawback facilities.
The DGDA under the Ministry of Health and Family Welfare is the regulatory authority for manufactured medicines. But despite elaborate rules and policies, the pharmaceutical market remains under-regulated due to lack of capacity at DGDA. Given the rapidly growing pharmaceutical market, large number of registered products and a huge population size, it is severely understaffed. Enforcement measures suffer as a result. The drug-testing laboratories including the two under DGDA also lack capacity, although its National Control Laboratory (NCL) has now been included in the list of 55 globally recognised laboratories by WHO. DGDA's effectiveness is further compounded by complexities emanating from multiple administrative bodies and committees involved in the regulatory process. The industry also lacks a bioequivalence testing facility, which is mandatory for product registration in developed markets. The government should undertake appropriate measures and initiatives for removing and rectifying these constraints in order to facilitate further growth of the industry.
Dr Helal Uddin Ahmed is a retired Additional Secretary and former Editor of Bangladesh Quarterly.