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Submitted to

Farzana Akter

Lecturer

Department of Business Administration

East West University

Submitted by

Group Name- ADROIT

Section No. : 10

Group Members-

Name ID

Md. Abdullah Hel Kafi ID: 2012-1-10-087

Adittya Barua ID: 2012-1-10-091

Hasan Md. Zahir ID: 2012-1-10-005

Sraboni Rahman ID: 2012-1-10-044

Taslim Alam ID: 2012-1-13-020

Md. Emran Hossain ID: 2011-2-10-051

Date of Submission- 13/012/2013

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Letter of Transmittal

13th

December, 2013

Farzana Akter

Lecturer

Department of Business Administration

East West University

Subject: Submission of a Report on Review, problems and project of pharmaceutical industry.

Mam,

With due to respect we hereby state that we are submitting the report on account of myPrinciples of Finance course under your instruction. we was assigned to prepare this report onReview, problems and project of pharmaceutical industry provided all the necessaryinstruction and information for preparing this report.

The report is based on the topic has helped to acquire knowledge about overall pharmaceuticalindustry. We tried to give our best possible effort to prepare this report and we hope you will besatisfied. There might be some mistake in my report because my inexperience in the practicalmarket environment which we hope you will be kind enough to overlook them underdeliberation.

We are cordially thankful to you for giving such opportunity to make the report. We will behonored if this report helps you in future.

Yours Sincerely,

Md. Abdullah Hel Kafi ID: 2012-1-10-087

Adittya Barua ID: 2012-1-10-091

Hasan Md. Zahir ID: 2012-1-10-005

Sraboni Rahman ID: 2012-1-10-044

Taslim Alam ID: 2012-1-13-020

Md. Emran Hossain ID: 2011-2-10-051

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Acknowledgement

At first we would like to thanks Almighty Allah who made us able to finish this report at perfecttime.

Our next thanks are due Farzana Akter for giving us supports, courage, opportunity to make thereport Review, problems and project of pharmaceutical industry. Such a competitive world she

helps us to learn about pharmaceutical industry. Without her help it was impossible to make thisreport in a standard way.

We also want to give thanks to our all group members who helped each other to prepare thisreport.

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Table of Contents

Serial no Name of the topics Page No

Executive summary 5

Objective of the report 5

Introduction 6

Methodology 6

Strengths and weaknesses of the pharmaceutical sector inBangladesh

7

Growth potential of pharmaceutical sectors 9

Market players 10

Raw Materials & Source of APIs 12

Availability of Machinery 13

Distribution Channel 15

Drug Regulation 16

Global Export Market 19

Contract Manufacturing 21

Problems 22

Demand for essential drugs 25

Price Control 25

Investors and sources of capital 26

Specific risks of national production 26

Conclusion 27

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Executive summary

Pharmaceutical industry is one of the dynamic growing sectors in Bangladesh. It is the secondbiggest foreign currency earner sector in Bangladesh. Firms in this sector are already expanding

into international exports, API (Active Pharmaceutical Ingredient) production, and factoryupgrades to improve quality. At the same time, the quality of drugs available domestically variessignificantly. Some firms are producing world class quality drugs while others are producingdrugs of a lower quality.

This report mainly focuses on the review and prospect of Bangladesh pharmaceutical industry.This report aims to find out the overall export prospect, its whole pharma scenario, total foreignmarkets, current scenario, its machinery, raw materials, barriers etc. on the basis of Bangladeshpharmaceutical industry.

If Bangladeshs pharmaceutical firms can improve their cost competitiveness and their quality,

they can potentially increase the pharmaceutical sector. Furthermore, exporting providesBangladesh firms the opportunity to participate in a fully competitive market and creates anincentive for firms to improve both quality and price competitiveness. This study also exploresthe problems as well as the projects of the industry. It also highlights on how to become moreglobally competitive. It takes into account two external forces that are impacting Bangladesh.The first is WTOs TRIPS (Trade Related Aspects of Intellectual Property), which grantsBangladesh the right to domestically manufacture pharmaceuticals off-patent. In the long run,however, Bangladesh firms will have to excel based on the price and quality of their drugs. Thesecond force is the rapidly changing international marketplace. Globalization means that theinternational marketplace is extremely competitive with firms looking for low costmanufacturing sources.

In conclusion, the government and industry need to make partnership to build a long termsustainable and internationally competitive industry to meet these challenges and opportunities.The main focus should be on mechanisms to improve the cost and quality of pharmaceuticalsmanufactured in Bangladesh. Specific recommendations include support for pharmaceuticalfirms that export, improved quality control, updating the patent law, and investigating APIproduction, contract or toll manufacturing, and the feasibility of a bioequivalence laboratory.

Objective of the report

Objectives mean the purpose of the study why we do this study. We have categorized our objectives of

the research into two categories one is broad objective, one is specific objective.

Broad Objectives:

The broad objective of the report is review, problems and project of pharmaceutical industry.

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Specific Objectives:

To know about the pharmaceutical industry. Problems and project of pharmaceutical industry. How to puzzle out the problems.

Methodology

This project was completed through in-depth interviews of pharmaceutical industry in Bangladesh. Thisstudy focused on the pharmaceutical industry. Bangladeshi pharmaceutical industries are improving thequality and cost of its drugs. Thus, along with the government, they should be actors in tackling theseissues. From this report we find the current scenario of pharmaceutical industry in Bangladesh.

Introduction

The pharmaceutical market in Bangladesh is pretty small compared to the population size of the country,mainly because of the lack of spending power of the population. Pharmaceutical spending is also amongstthe lowest in the world in per capita terms. Healthcare expenditures consist of only 3.35% of GDP.However, increased awareness of healthcare, increase in per capita income, emergence of privatehealthcare services and the governments increased expenditure in this sector, together with other factors,have caused the demand to rise in recent years. The sector is also protected from external competition asimports are completely restricted for similar drugs that are manufactured locally. This sector reportsprovides an overview of the pharmaceutical sector in Bangladesh and highlights the top performers thatare listed in the Dhaka Stock Exchange (DSE).Bangladesh pharmaceutical companied focus primarily on branded generic final formulations, mostly

using imported APIs (Active Pharmaceuticals Ingredient). Branded generics are a category of drugs,including prescription products, that are either novel dosage forms of off-patent products produced by a

manufacturer that is not the originator of the molecule, or a molecule copy of an off-patent product with atrade name. About 85% of the drugs sold in Bangladesh are generics and 15% are patented drugs - thestructure differs significantly from the international market. Branded generic drugs represent about 25%on average of worldwide pharmaceuticals sales; however, given the popularity in emerging markets likeChina, India and Latin America, branded generic drugs may well dominate the total sales within a decade.Surprisingly, the pharmaceutical sector, which is widely regarded as a hi-tech industry, is the most

developed among the manufacturing industries in Bangladesh. Roughly 250 companies are operating inthe market. According to IMS, a US-based market research firm, the retail market size is estimated to bearound BDT 55 billion, which grew by 16.8% in 2009. The market size in 2008 was BDT 47 billion witha growth of 6.9%. The actual size of the market may vary slightly since IMS does not include the ruralmarket in their survey. However, the deviation is estimated to be not more than 5-10% in either direction.Unfortunately, there is no solid information source in Bangladesh other than IMS. The retail market is

about 90% of the total market. In that respect, the total market size is more than BDT 60 billion.One of the fastest growing sectors with an annual average growth rate consistently in the double digits,Bangladeshs pharmaceutical industry contributes almost 1% of GDP. It is the third largest tax payingindustry in the country. Bangladeshi pharmaceutical firms focus primarily on branded generic finalformulations using imported APIs (Active Pharmaceutical Ingredients). Branded generics are a categoryof drugs including prescription products that are either novel dosage forms of off-patent productsproduced by a manufacturer that is not the originator of the molecule, or a molecule copy of an off-patentproduct with a trade name. This definition is used by both the FDA and the United Kingdom's National

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Health Service (NHS). About 80% of the drugs sold in Bangladesh are generics and 20% are patenteddrugs. The country manufactures about 450 generic drugs for 5,300 registered brands which have 8,300different forms of dosages and strengths. These include a wide range of products from anti-ulcer ants,flouroquinolones, anti-rheumatic non-steroid drugs, non-narcotic analgesics, antihistamines, and oral anti-diabetic drugs. Some larger firms are also starting to produce anti-cancer and anti-retroviral drugs.

Strengths and weaknesses of the pharmaceutical sector in Bangladesh:

Although the sector has a long way to go, the reasons we are optimistic about the sector can besummarized in Figure 1. We believe that the strengths outweigh the weaknesses.

Strengths

In Bangladesh, pharmaceutical is one of the fastest growing sectors. In 2002, the total size of thepharmacy market of Bangladesh was estimated to be US $ 520 Million. With an annual growthrate of 32%, Bangladesh pharmaceutical industry is now heading towards self-sufficiency in

meeting the local demand. At present, there are 225 registered pharmaceutical manufacturers inBangladesh. Bangladesh pharmaceutical industry is the second highest contributor to the nationalex-chequer after tobacco and it is the largest white-collar intensive employment sector of thecountry.The finished formulation manufacturing base of Bangladesh is very strong as most of thepharmaceutical companies have their own manufacturing facilities. Around 95 percent of thetotal demand of Bangladesh is being met by local manufacturing. The industry lacks the capacityonly for some specialized pharmaceuticals, such as vaccines, drugs using recombinant DNA,anti-cancer drugs and anti-retro viral. In order to get a sense of what might potentially be the size

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of the drug market let us consider a simple model. Here we assume that the economy will havean average GDP growth of 6%. The economy will witness an uptrend in healthcare expenditurebecause of the growing health consciousness and the increased demand for wellness drugs aswell as government expenditure. This means that drug and non-drug healthcare expenditure willincrease at about the same pace. So, we also assume that the percentage spent on drug as part of

total healthcare expenditure will remain similar current level, which is about 28%. These simpleassumptions present an impressive growth upside of 83.6% by 2015 with a 6 year CAGR of10.7%. Recent growth figures have proved to be better than the projection, which demonstratesthat the growth prospect of the sector is justified. Today, Bangladesh Pharmaceutical Industry issuccessfully exporting APIs and a wide range of products covering all major therapeutic classesand dosage forms to 71 countries. Beside regular forms like; Tablets, Capsules & Syrups,Bangladesh is also exporting high tech specialized products like HFA Inhalers, CFC Inhalers,Suppositories, Nasal Sprays, Injectables, IV Infusions, etc. are also being exported fromBangladesh, and have been well accepted by the Medical Practitioners, Chemists, Patients andthe Regulatory Bodies of all the importing nations. The packaging and the presentation of theproducts of Bangladesh are comparable to any international standard and have been accepted

bythem.

The Pharma Industry of Bangladesh is now on the verge of entering highly regulated overseasmarkets like USA and Europe. In this connection, several pharmaceutical manufacturers havealready made huge investments in their new state of art manufacturing facilitiesThe future of pharmaceutical exports from Bangladesh is bright. After the inclusion of the Dohadeclaration in WTO / TRIPS Agreement, each and every country belonging to the LDC Categoryhas the option not to opt for pharmaceutical product patent until 2016, which means they cannow legally reverse engineer patented products and sell in their markets as well as can export toother LDCs. This creates a huge export opportunities for Bangladesh, because, among all the 50LDCs, Bangladesh is the only country which had a strong base for the pharmacy manufacturing.Besides direct export operations, there is also a huge opportunity for the Bangladeshi companiesto go for the Contract Manufacturing and compulsory licensing. The good news is, the leadingpharmaceutical exporters of Bangladesh have already started availing these opportunities.

Weakness:

The advantages that TRIPS provide for Bangladesh are somewhat offset by the pace andcompetitiveness of the Indian and Chinese generic markets. In both the countries, companies canproduce drugs at highly competitive pricing, even with higher costs associated with buyingpatented APIs or paying royalties. Bangladesh will have to rely on the standard business

practices of producing the highest quality product at the lowest price to compete on theinternational market which may be difficult to achieve in the near term.

Bangladesh has a competitive disadvantage (when compared to India and China), since the localpharmaceutical industry is not backward-integrated. Most of the APIs have to be imported, andeven if the APIs are manufactured in the country, the basic raw materials still have to beimported. As such construction of API Park is not likely to add too high a value in thepharmaceutical manufacturing value chain. This results into higher factor costs, especially incases where the provider of the API is a competitor in selling the finished product. Building up

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backward-integration for all relevant APIs is also not a realistic option because of scaledisadvantages and infrastructure constraints. The reliance on importing API remains to be theonly significant threat for the pharmaceutical industry in Bangladesh. There are more weaknessin pharmaceutical sectors in Bangladesh.

Lack of production facilities: Initial plans exist to develop an API park which should greatlyaddress the industrys infrastructure problem when completed.API production requires expensivewater effluent treatment plants and other infrastructure that an API park could provide to firms asa common good. Some firms are still investigating building their own API facilities, mainlybecause of the slow progress toward establishing the park. Building a functioning API plantwilltake approximately 18 months after a site is approved.

Lack of scientific knows: Skills to build and run an API plant would have to be imported becausethey currently do not exist in the country. In the time required to develop skills locally, firms canuse consultants from India or China, for example. In addition, because India and China may beconsolidating API production due to phasing in TRIPS, a surplus of these skills in the regionmay result.

Growth potential of pharmaceutical sectors:

In Bangladesh the pharmaceutical sector is one of the most developed hi-tech sectors which arecontributing in the countrys economy.After the promulgation of Drug Control Ordinance 1982, the development of this sector was accelerated. The professional knowledge, thoughts andinnovative ideas of the pharmacists working in this sector are the key factors for thisdevelopment. Due to recent development of this sector it is exporting medicines to global marketincluding European market. This sector is also providing 97% of the total medicine requirementof the local market.Leading pharmaceutical companies is expanding their business with the aim

to expand export market. Recently few new industries have been established with high techequipment and professionals which will enhance the strength of this sector.The export value ofpharmaceuticals, though small, is growing at 50 per cent per year. Exports increased from $8.2million in 2004 to $28.3 million in 2007 and expanded further in last two of years. The exportdestinations have now risen from 37, to 72 countries during the period.The inception in the1950s was small, with a handful local and multinational companies producing medicines in thethen East Pakistan. By 1982, many top ranking multinationals established their manufacturingfacilities in Bangladesh.Bangladeshs pharmaceutical industry have potential to grow andcompete in the international market. Its ability to comply otherwise with the guidelines of qualityassurance provides it the competitive advantage. Most companies follow the good manufacturingpractice (GMP) standards, set by the UN World Health Organization (WHO).Bangladesh can

compete with countries like India, China, Brazil and Turkey in the international export marketdue to its quality compliance. If enjoys the exemption limit until 2016 under the provisions of theWorld Trade organization with regard to generic, patients and other related matters. The abilityof the Bangladesh industry is otherwise undisputed about achieving excellence.The countryexports high-tech specialized products like HFA, inhalers, suppositories, hormones, steroids,oncology, immunosuppressant products, nasal sprays, injectibles and IV infusions. The local pullof demand for medicines set the industry in a second footing.The industry produces qualitymedicines for millions of people in Bangladesh. Almost self-reliant in pharmaceutical products,

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the industry meets 97 per cent of national demand for medicines.Epidemics like malaria, dengue,cholera and typhoid, no more kill as many people in Bangladesh as they once did. Affordabilityand availability of medicines contributed to the achievement.Bangladesh tops South Asia with itsaverage life expectancy of 61 years though per capita consumption of medicines is one of thelowest in the region. Over 50 new factories came up in last three years, of which about two

dozen took to aggressive marketing. Out of 230 companies, 200, including five multinationals,have their manufacturing facilities.At least 21 companies produce 41 active pharmaceuticalingredients (API). To feed the local industry, more API industries are needed. The recentapproval, as was reported in a section of the media, to a 30 billion dollar API industrial park inMunshiganj will inject fresh momentum to the pharmaceutical industry. Bangladesh can save atleast 70 per cent of expenditure on raw materials when the API part goes intoproduction.Bangladesh imports 80 per cent of its pharmaceutical raw materials. A good numberof skilled professionals from home and abroad are expected to join the industry to enrich itshuman resources pool. The country can continue to produce patented products until 2016 as pertrade related intellectual property rights (TRIPS). The industry is legally permitted to reverseengineer, manufacture and sell generic versions of on-patent pharmaceutical products for

domestic consumption as well as for export to other LDCs. It created a big opportunity to makeBangladesh a new chemical entity. Bangladesh can share its long years of experience inpharmaceutical formulation and marketing with the Least Developed Countries (LDCs) anddeveloping ones, who need it. Opportunities have been created in Bangladesh for bioequivalencestudy, validation report, clinical trials and manufacturing plant audit mechanism.For bioequivalency tests alone in Singapore, Malaysia or in European countries Bangladeshpharmaceutical industry has to spend a lot of money now. These sub-sectors would need moreinvestment in future. The industry created opportunities for foreign direct investment.Over $250million invested in the sector, has helped modernize and create new facilities.The investment hashelped the companies get certification from the international regulatory bodies.Now,Bangladeshi companies are in a situation to export pharmaceutical products to any part of theworld.

Market players:

Major Players

Based on the IMS report for the fourth quarter 2011, Square Pharmaceuticals (DSE:SQURPHARMA) holds the top market share in the retail market - 18.7%, followed by InceptaPharmaceuticals (INCEPTA) - 9.3%, Beximco Pharmaceuticals (DSE: BXPHARMA) - 8.8%,

OpsoninPharma (OPSONIN) - 5.1% and Renata (DSE: RENATA) - 4.9%. The top fivecompanies held 46.8% market share in 2011, slightly more than their 46.2% market holding in2010 - indicating cumulative revenue growth in excess of the sector growth. Among the top five,three are listed in DSESquare, Beximco and Renata.

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Others market players:

Domestically, Bangladeshi companies including the locally based MNCs produce 95%-97% ofthe drugs and the rest are imported. Although about 250 pharmaceutical companies are registeredin Bangladesh, less than 100 are actively producing drugs.The domestic market is highly concentrated and competitive. However, the local manufacturersdominate the industry as they enjoy approximately 87% of market share, while multinationalshold a 13% share. Another notable feature of this sector is the concentration of sales among avery small number of top companies. The top 10 players control around two-third of the marketshare while the top 15 companies cover 77% of the market. In comparison, the top ten Japanesefirms generated approximately 45% of the domestic industry revenue, while the top ten UK firmsgenerated approximately 50%, and the top ten German firms generated approximately 60%.Square Pharmaceuticals is the stand out market leader with a market share of 19.3% whichposted domestic revenue of BDT 11.2 billion in the last four quarters (Apr 09 - Mar 10). Theirnearest competitors are Incepta Pharmaceuticals and Beximco Pharmaceuticals with marketshares of 8.5% and 7.6%.RespectivelyIncepta and Beximco had BDT 4.9 billion and BDT 4.4 billion in domestic sales for

the last four quarters. Although a number of MNCs are operational in Bangladesh market, noMNCs are in the top ten in terms of domestic sales.

Current Scenario of Bangladeshi Pharmacy market:

In Bangladesh the pharmaceutical sector is one of the most developed hi-tech sectors within thecountry's economy. After the promulgation of Drug Control Ordinance - 1982, the developmentof this sector was accelerated. The professional knowledge, thoughts and innovative ideas of thepharmaceutical professionals working in this sector are the key factors for these developments.Due to recent development of this sector it is exporting medicines to global market including

European market. This sector is also providing 97% of the total medicine requirement of thelocal market. Leading pharmaceutical companies are expanding their business with the aim toexpand export market. Recently few new industries have been established with high techequipment and professionals which will enhance the strength of this sector.

Two organizations, one government (Directorate of Drug Administration) and one semigovernment (Pharmacy Council of Bangladesh), control pharmacy practice in Bangladesh. TheBangladesh Pharmaceutical Society is affiliated with international organizations InternationalPharmaceutical Federation and Commonwealth Pharmaceutical Association.

According to Bangladesh Pharmaceuticals and Healthcare Report Q1 2011, Bangladeshmedicine sales reached Tk 7,000 crore in 2010. Business Monitor International in its latest report

(Q1 2011) said Bangladesh has moved up one place to occupy the 14th position in 17 regionalmarkets surveyed in BMIs Pharmaceutical & Healthcare Business Environment Ratings for theAsia region. Still, Bangladesh has a long way to go, the report said. This adjustment now seesBangladesh placed below Vietnam and above Sri Lanka. Bangladesh's pharmaceutical rating is40.2 out of 100, a figure that has changed marginally from the previous quarter but remainsowerthan the regional average of 53.1. Globally, Bangladesh occupies 67th position in BMIs83th position.

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The industry players forecast the growth trend would take the sales volume to Tk 10,000 crore in2011. Square, Beximco, Eskayef, Incepta and Acme are the top five manufacturers by sales andgrowth rate.

Beximco grew faster than other companies at a staggering 33 percent in 2010 with Tk 523 croresales. Incepta's sales and growth rate were Tk 665 crore and 31 percent respectively, followed by

Acme's Tk 600 crore and 17 percent. Eskayef logged Tk 426 crore in sales and the growth ratewas 27 percent, the third highest pace in the year, said a company official.

Raw Materials & Source of APIs

Bangladesh has a competitive disadvantage when compared to India, since pharmaceuticalmanufacturing is not backward-integrated. Most APIs have to be imported, and even if the API ismanufactured in Bangladesh, the raw materials have to be imported. This generates higher factorcosts, especially in cases where the provider of the API is a competitor in selling the finishedproduct. Building up backwards-integration for all relevant APIs is not a realistic option: scaledisadvantages and infrastructure constraints are more relevant in the early stages of the value

chain, where the products have a strong commodity character.

About 80% of the active pharmaceutical ingredients (APIs) are imported as there are only a fewlocal companies (usually the leading ones) that are engaged in manufacturing APIs. However,the number is really small (below 50) compared to the total requirement. These local companiesusually run the relatively easier final chemical synthesis stage with API intermediaries, instead ofthe complete chemical synthesis.

For many APIs, the domestic market is too small to justify an API manufacturing plant - theinitial investment and the production scale required are high. However, the government hasplanned to set up an API park to facilitate the production of several APIs for the localmanufacturers. The value addition for the backward linkage will not be much as the country willagain need to import the basic chemicals for manufacturing APIs. It is estimated that cost ofAPIs will decrease by about 20% if the API Park is established. The government initially set atarget to complete the project by 2012 but realistically, it is unlikely that the manufacturing parkwill be completed within the stipulated time.

Since the APIs are imported, the companies are exposed to exchange rate risk. The localcurrency depreciated significantly against USD over the last decade as shown in chart 3 in next

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page. However, the local companies were able to contain the manufacturing cost by shifting theimport source of APIs to low cost manufacturers. As per discussion with the management ofBeximcoPharmaceuticals, China and

India currently accounts for more than two-thirds of the imported raw materials while theremaining materials are imported from Europe; back in 2000, 80% of the APIs were importedfrom Europe. The decrease in API cost from changing the source off-set most of the adversemovement in the exchange rate.

Availability of Machinery

The machinery for pharmaceutical manufacturing does also have to be imported. This places

Bangladeshi companies at a cost disadvantage compared with Indian manufacturers who cansource the machinery nationally. The leading manufacturers import most of their equipment fromEurope or Japan, a fact they claim ensures quality advantages over their Indian competitors.Other manufacturers import machinery e.g. from China or India. Part of the cost may becompensated by export subsidies these countries are giving. However, when competing ininternational markets, it becomes a question of comparative export subsidizing in thesecountries: whether machinery exports being more or less subsidized than drug exports.

Current Scenario of Pharmaceutical Industry

Pharmaceutical sector is technologically the most developed manufacturing industries inBangladesh and the third largest industry in terms of contribution to governments revenue. Theindustry contributes about 1% of the total GDP. There are about 250 licensed pharmaceuticalmanufacturers in the country; however, currently a little over 100 companies are in operation. Itis highly concentrated as top 20 companies produce 85% of the revenue. According to IMS, aUS-based market research firm, the retail market size is estimated to be around BDT 84 billionas on 2011.

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Based on market share and growth top 20 pharmaceuticals companies are Square, Incepta,Beximco, Acme, Opsonin, Eskayef, Reneta, ACI, Aristopharma, Drug International, Sanofi,Aventis, GlaxoSmithKline, Orion Pharma Ltd., Novo Nordisk, Healthcare Pharm, General,Sandoz, Popular Pharma, Novartis, IbnSina. Having those market leading companies its ironythat still Bangladesh has to export basic chemicals to many countries like Hong Kong, South

Korea, Malaysia and so on. After being successful in exporting basic chemicals, a few leadingcompanies also started registering and exporting their finished formulation in sixty seven othercountries, i.e. Australia, Brazil, Canada, Japan, etc. Overall pharma companies have exportactivities in about 72 countries.

Bangladesh pharmaceutical companied focus primarily on branded generic final formulations,mostly using imported APIs (Active Pharmaceuticals Ingredient). Branded generics are acategory of drugs, including prescription products, that are either novel dosage forms of off-patent products produced by a manufacturer that is not the originator of the molecule, or amolecule copy of an off-patent product with a trade name. About 85% of the drugs sold inBangladesh are generics and 15% are patented drugs - the structure differs significantly from the

international market. Branded generic drugs represent about 25% on average of worldwidepharmaceuticals sales; however, given the popularity in emerging markets like China, India andLatin America, branded generic drugs may well dominate the total sales within a decade.Bangladesh manufactures about450 generic drugs for 5,300registered brands which have8,300 different forms ofdosages and strengths. Theseinclude a wide range ofproducts from anti-ulcerants,flour quinolones, anti-rheumatic non-steroid drugs,non-narcotic analgesics,antihistamines, and oral anti-diabetic drugs. Some largerfirms have also startedproducing anti-cancer and anti-retroviral drugs. Domesticmanufacturers account for 97% of the drug sales in the local market while the remaining 3% areimported. This is a complete turnaround over from two/three decades back when imports used todominate the market. The imported drugs include essential live saving drugs and other highquality drugs. The ratio will further increase in favor of the local production as some of the bigplayers are poised to manufacture these high quality drugs in-house in the future.

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As stated earlier, the size of the retail market reached BDT 84.0 billion as on 2011 based on IMSreport. The report further stated that, retail sales in the domestic market achieved 23.6% growthin 2011 following 23.8% and 16.8% growth in 2010 and 2009 respectively. High growth in thelast three years (78.8% cumulative and 21.4% CAGR) meant that the Bangladesh Pharmaceuticalmarket doubled in just over four years. The retail market also crossed USD 1.0 billion in size in

2011. It is one of the fastest growing sectors in the country with an annual average growth rate of17.2% over the last five years and 13.1% over the last decade.However, considering that IMS does not include rural market in their survey, the actual size ofthe market will vary slightly (5%-10%). It is estimated that the retail market represent 90% of the

total market; in that respect the total market size (includingthe rural market) is expected to be over BDT 90.0 billion atpresent.

Distribution Channel

Basically, there are three distribution channel systems inBangladesh: public hospitals, private hospitals and privatepharmacies. Public hospitals source mainly from the state-owned Essential Drugs Company Limited (EDCL), whereasprivate hospitals and pharmacies source from the privatesector. However, public hospitals can also source fromprivate pharmaceuticals through tender bids.

As for the private Sector, there is a network of wholesalers, comprising of around 1200wholesale medicine shops. Whereas small and medium scaled pharmaceutical companies sell to

those wholesalers directly from the factory, the large companies usually have a complementingdistribution network of their own: from their factories, the drugs are taken to a central depot inDhaka, then to the zonal depots in the different regions and from there, they are sold both towholesalers and to retailers through trained sales representatives or distribution assistants.

Retail-sales of drugs in Bangladesh are allowed only under direct supervision of a pharmacistregistered with the Pharmacy Council of Bangladesh. The licenses for retail pharmacies and forwholesalers are also being controlled by the Drug Administration of Bangladesh. There are closeto 76,000 licensed retail pharmacies in the country, and an estimated 125,000 unregistered retailpharmacies. In addition, drugs like antibiotics can also be found in village shops etc. withoutproper supervision. Whereas the law foresees no OTC drugs, requiring all drugs to be dispensed

through a prescription, in fact all medicines are available without any prescription.

Bangladeshs drug distribution marketplace is composed of small independent pharmacies.Pharmaceutical firms can sell their products to private sector pharmacies, the government and itspublic health care facilities, or to international organizations operating in Bangladesh (e.g.,UNICEF). Government sales are not as profitable as private sector sales because the governmentpays less, on consignment, and at times, after considerable delay. Pharmaceutical firmsnevertheless still target pubic facilities because doctors become acquainted with the firms drugs

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and then prescribe them in their private practices. And, because drugs are not readily available atpublic facilities, patients receiving treatment there may still go to a private pharmacy to procurethe required drugs. Without these public sector connections, many firms would turn moreattention to the private sector.

Although there are approximately over 200,000 private pharmacies in Bangladesh, thegovernment lists officially around 76,000 pharmacies. The rest are illegal, without a license or alicensed pharmacist on staff. Pharmacists have varying education levels and many lack adequatetraining. Most pharmacies are individual shops, though some chains are starting to develop,especially in urban areas. Large pharmacies generally buy medicines according to sales trends,e.g., what sells the most. The medium and small pharmacies generally have affiliation with amedical doctor. Their sales are therefore usually skewed towards that medical professionals

preferences.

Several brands of each drug, with variable quality levels, are on the market. In urban areas, thepharmacies tend to sell higher quality brands, whereas in more rural areas, pharmacies tend to

sell lower quality, lower cost brands. This may be due to a districts local influences swayingbrand selection. The pharmacies tend to have brands associated with people who hold power inthat district.Those more distant from the city center consume increasingly more indigenous medicines suchas ayurvedic and herbal medicines. Indigenous medicine has a sizeable market size of anestimated BDT 10 billion (about 15% of the total market). Majority of the users are from low-income bracket with little or no education. However, indigenous medicine is a niche market andit is generally not considered as a competitive threat to mainstream medicine.

The top twenty pharmaceutical manufacturing firms have established extensive sales anddistribution networks. Most pharmacies have 10-50 pharmaceutical firms supplying theirmedicines daily. Hundreds of medical representatives of top pharmaceutical companies visitpharmacies daily to take drug orders. The success in sales for pharmaceutical companies havebecome extremely marketing oriented. They usually boost their sales by giving incentives topharmacies and to doctors in the form of higher commission so that they would recommend theirproducts to patients.

On an average, a company incurs 10-15% of their total costs in this process. However, theyusually hide these costs in their cost of goods sold. Since Bangladeshi firms produce low costproducts, the gross margin actually is more than 60% for most of the companies. But because ofthis widespread practice, they usually report 45-50% in gross margin.

Drug Regulation

The Directorate of Drug Administration (DDA), the national drug regulative authority, regulatesdrug manufacturing, import and quality control of drugs in Bangladesh. It belongs to theMinistry of Health and Family Welfare.

The Directorate issues licenses for import of raw materials for different drugs and packed drugsfrom a selected list to pharmaceutical companies and importers. It also monitors quality controlparameters of marketed drugs through an agency called the Drug Testing Laboratory. DDA also

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Under this Ordinance, (i) no medicine of any kind can be manufactured for sale or be imported,distributed or sold unless it is registered with the licensing authority; (ii) no drug orpharmaceutical raw material can be imported into the country except with the prior approval ofthe licensing authority; (iii) the licensing authority cannot register a medicine unless suchregistration is recommended by the Drug Control Committee; (iv) the licensing authority may

cancel the registration of any medicine if such cancellation is recommended by the Drug ControlCommittee on finding that such a medicine is not safe, efficacious or useful; (v) the licensingauthority is also empowered to temporarily suspend the registration of any medicine if it issatisfied that such a medicine is substandard; (vi) the government may, by notification in theofficial gazette, fix the maximum price at which any medicine may be sold and at which anypharmaceutical raw material may be imported or sold; (vii) no person is allowed to manufactureany drug except under the personal supervision of a pharmacist registered in the PharmacyCouncil of Bangladesh; (viii) no person, being a retailer, is allowed to sell any drug without thepersonal supervision of a pharmacist registered in any Register of the Pharmacy Council ofBangladesh; and (ix) the government may, by notification in the official Gazette, establish DrugCourts as and when it considers necessary. The National Drug Advisory Council advises the

government on the implementation of the national drug policy; on the promotion of localpharmaceutical industries and the production and supply of essential drugs for meeting the needsof the country and on matters relating to the import of drugs and pharmaceutical raw materials.

Intellectual Property Legislation

Bangladesh is a signatory of the GATT Uruguay Round and World Trade Organization (WTO)agreements, including the Agreement on Trade-Related Aspects of Intellectual Property Rights(TRIPS). It is also aleast developed country (LDC) and thereby is exempted by the Dohadeclaration from implementing patent protection for pharmaceutical patents until 2016. This onlyholds for countries that have not yet implemented a legislation that provides for such patentprotection, though. It is therefore necessary to look at the Bangladeshi law:

The Bangladeshi patent law dates from 1911 and was amended in 1985. The responsiblegovernment institution is the Ministry of Industries, Department of Patents, Designs and TradeMarks. The patent law is thereby largely the same as in India before adapting to the requirementsof TRIPS in 2005. Although there have been disputes about the patentability of pharmaceuticalproducts according to this law, it is reasonable to assume that the interpretation that was chosenin India, namely the patentability of pharmaceutical processes but not of pharmaceuticalsubstances, can also be adopted in Bangladesh.

Bangladesh is a member of the World Intellectual Property Organization (WIPO), and adhered tothe Paris Convention on Intellectual Property in 1991. Although its intellectual property laws areoften considered as outdated and enforcement as being weak, Bangladesh has never been on theUS trade representatives "Special 301 Watch List. This List identifies countries that deny whatthe US trade representative considers adequate and effective protection for intellectual propertyrights.

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The Industry After 1982

Bangladesh formulated its National Drug Policy (NDP) and established the Drugs ControlOrdinance in 1982, to ensure availability, affordability and safety of essential drugs. The DrugsControl ordinance bans certain types of drugs from the market, limits the marketing rights offoreign companies and establishes a price control for both finished drugs and their raw materials:

Bans: Combination drugs are only allowed in cases where single drugs are not available or notcost -effective; Sale and manufacturing of drugs with limited therapeutic usefulness (e.g. coughmixtures, throat lozenges) or with abuse potential are prohibited.

Foreign Companies: foreign brands are not allowed to be manufactured under license inBangladesh if similar products are being manufactured in the country. Multinational companiesthat do not have an own production facility in Bangladesh are not allowed to market theirproducts even if manufactured in the country by toll contract manufacturing (manufacturing by aBangladeshi company on behalf of the multinational).

Price Control: 150 drugs were defined as essential drugs. For those, level prices are fixed forthe finished drugs as well as for their corresponding raw materials. No manufacturer can setmaximum retail prices for their goods beyond that limit. Changes in these level prices aredecided by the Drug Control Committee. Since 1993, the number of price-controlled drugs hasbeen reduced to 117 primary health care drugs. However, currently there are 209 drugs on theessential drugs list. For drugs that do not fall into this Controlled Category, the manufacturer

can set their own price, which must, however, be approved by the

Drug Control Committee

This resulted in withdrawal of many foreign companies from the market in which they had had ashare of around 70% in 1970, and strong growth in local production. This also created a boon forlocal pharmaceutical manufacturers. According to the Directorate of Drug Administrationrecords, in the year 2002, all the essential drugs were produced locally and about 45% of thelocal drugs production concerned essential drugs. Locally produced drugs amount to over 80% ofthe market share and meet over 90% of the local drug demand. There are over 200 licensedpharmaceutical factories in the country, six of them are owned by multinational companiesproducing about 13% of the local production. 85% of the raw materials used in the localproduction are imported. Only about 1 % of the locally produced drugs are exported.

Global Export Market

Due to cost pressures, MNCs increasingly seek to manufacture pharmaceuticals in developingcountries. Pharmaceutical contract manufacturing and research services is a large and growingbusiness. Worldwide revenues totaled $100 billion in 2004. With a predicted average annualgrowth rate of 10.8%, revenues are estimated to reach $168 billion by 2009. Pharmaceuticalfirms in Bangladesh exported approximately $45.67 million (approximately 0.03% of theestimated global pharmaceutical market revenue) in products to 73 countries during 2008-09.Bangladeshs exports are growing rapidly, as shown in the table below.

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July-June July-June July-June July-June July-April

(USD Million) 2005-06 2006-07 2007-08 2008-09 2009-10

All Export 10,526.2 12,177.9 14,110.8 15,565.2 12,940.

Pharmaceuticals 27.5 28.2 43 45.7 35.4

Pharma % of

Total

0.26% 0.23% 0.30% 0.29% 0.27%

YoY Growth for

Pharma

2.51% 52.75% 6.21% 13.39%

Source: Export Promotion Bureau

Bangladeshi firms are trying export to the following markets

Regulated: Square Pharmaceuticals, the only Bangladeshi pharmaceutical firm accredited in aregulated market, received the UKs regulatory approval in May 2007. The largest barriers toregulated markets are modern manufacturing facilities which come at a cost of at least $50million, and know-how.

Moderately Regulated: Some markets, such as Pakistan, Sri Lanka, Tanzania and Malaysia, aremoderately regulated. While countries do not always require stringent certification, acertification from a regulated market signifies quality and provides a firm with a competitive

advantage

Unregulated: Most Bangladeshi pharmaceuticals are exported to less than fully regulated marketssuch as Bhutan, Nepal, Vietnam, Myanmar and African countries such as Ivory Coast, Male, etc.

Major Exporters

The majority of Bangladeshs pharmaceutical exports are from MNCs such as Sandoz. Sandoz,an MNC operating in Bangladesh, has approximately 25 manufacturing sites globally.Bangladesh is one of its smaller sites. The Bangladeshi manufacturing site is an EU certified

plant which produces about 500 million tablets a year and generates about USD 35-40 million insales. It has been growing rapidly15-18% per yearand is responsible for a significant portionof Bangladeshs pharmaceutical export growth. It imports APIs, acquires packaging

domestically, and manufactures final formulations in Bangladesh for export of USD 12 millionor for sale to the domestic market ranging from USD 23-28 million. Exporting pharmaceuticalproducts is not accessible for all companies. Each country has its own product regulations,registration requirements, language requirements, cultural preferences, national packagingrequirements, and industry protection mechanisms. Sales on the global market are quite

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competitive with firms from around the world vying for business. Furthermore, initiating exportsrequires a significant investment in money, time and paperwork to register the product in thetarget country. As generic products are branded in less regulated markets, pharmaceutical firmsalso need to make significant investments in sales and marketing to create product demand. Allthese investments are made without a guarantee of future sales.

Recent Export of some Bangladeshi Pharmaceuticals Firms:

Company Export(USD) Year of Export

Novartis Bangladesh/Sandoz 12,820,162 2004-05

Beximco Pharmaceuticals 1,400,000 2004

Square Pharmaceuticals 1,200,000 2004

Jams Pharmaceuticals 633,721 2000-2004

Jayson Pharmaceuticals 626,546 2004

The Acme Laboratory Co. 600,000 2004Eskayef Bangladesh 331,876 2004

Aristopharma 305,648 2004-05

Renata 281,788 2004

Navana Pharmaceuticals 240,175 2003-05

Aventis 223,999 2004

ACI 156,392 2004

Essential Drug Co. 124,687 2004

Globe Pharmaceuticals 68,410 2005-06

Most pharmaceutical firms in Bangladesh are family owned. While many have the capacity to

export, some do not have the in-house expertise. As a result, only sixteen firms export products.There are no majority exporters, e.g., companies that sell more than 50% of their output inexport markets. Beximco, for example, is one of the leading exporters. Its 2009 exports wereabout USD 4.0 million or 5.9% of total sales. However, many companies initiated the process ofproduct registration in international markets only in the last few years. The export situation isevolving. For example, Square Pharmaceuticals increased exports by 58% from 2007-08 to2008-09.

Indirect Benefits of Export

Bangladeshi firms that export are slightly more productive than non-exporting firms. Somepossible reasons for this advantage may be due to:

1. Technological lessons learned from foreign buyers.2. Exporters improved their own technological capabilities to exploit profitable

opportunities in export markets. For example, exporters need to adopt stringent technicalstandards to satisfy more sophisticated consumers, and/or they are under more pressure tofill orders in a timely fashion and to ensure product quality for export markets which aremore competitive than domestic market.

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3. Better firms self-selected to enter export markets for the prestige rather than the effects ofexporting necessarily improving the firms.

The pharmaceutical industry in Bangladesh has been aggressively investing in infrastructure.Most of the companies invested heavily in the 1990s and the late 2000s most likely to upgradetheir facilities to obtain international export certifications. The top ten firms accounted for mostof the investments.

MNCs can operate in a country in multiple ways, including foreign direct investment (FDI),contract manufacturing, joint ventures and strategic partnerships or licensing. Each arrangementvaries in terms of which partner contributes more resources and technical knowledge, whichpartner assumes more risk, and which partner accrues more benefits and profits.

Contract Manufacturing

Contract manufacturing is a good business opportunity for Bangladeshi firms, and if well done, it

can enable technology transfers to domestic firms. As a result, they can acquire world -classexperience in finished dosage manufacturing, APIs or other aspects of pharmaceuticalmanufacturing. Square Pharmaceuticals, one of Bangladeshs largest pharmaceutical firms,

attributes much of its success to what it learned by working with an MNC.

Bangladeshi pharmaceutical firms can make several types of contract manufacturingarrangements with MNCs, including:

Contract manufacturing with the product intended for export to a regulated market. Thecurrent National Drug Policy (NDP) permits this.. The domestic pharmaceutical firmmust have a facility accredited by the regulators of an advanced market. Square

Pharmaceuticals is one of the very few Bangladeshi firms with a qualified facility. It iscurrently initiating a contract manufacturing arrangement with a British firm. Contract manufacturing with the product intended for the domestic market. The Drug

Control Ordinance (DCO) prohibits foreign firms from selling products in Bangladeshunless they have a manufacturing presence in the country. Thus, Bangladeshi firms canonly contract manufacture for domestic distribution with MNCs that already have apresence in Bangladesh. An example of this arrangement is Beximco contractmanufactures Ventolin, which is an inhaler for GlaxoSmithKline.

Problems

Problems of Marketing

Because of having no sufficient incentives in comparison with their effort, the turnoverrate of medical representatives is very high.

Most of the time costs of marketing hardly affect the price of the medicine. Professionalism in marketing is not achieved yet in Bangladesh like other developing

countries.

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Lack of proper governmental laws and this implementation the law by the drugadministration.

Unstable political situation and different types of violence. Effect of globalization that has increased the competition. Smuggled production counterfeit, thats coming from the neighbor countries.

Problems of Foreign Competition

Foreign competitors have more equipment, technology and plant facilities than that oflocally owned firms.

Foreign competitors have their own local market so that they can absorb some losseshere.

Foreign competitors get government help in some cases.Problems of Export

Unstable political situation is one of the vital reasons for not achieving the expectation inexport.

Restriction of Bangladesh bank to remit transfer seriously hampering pharmaceuticalexport

Custom harassment in sending drug sample interrupts export promotion Lack of Bioequivalence tes facility in our country is a major problem of pharmaceutical

export Country image and production of substandard or fake drugs by some companies

hampering the acceptance of our products to international community. Lack of a modern drug testing laboratory in our country is a major limitation of drug

control authority of Bangladesh that also affects pharmaceutical export

The regulatory authorities of importing countries are not satisfied with thestatus , activities and documents of drug administration of Bangladesh.

Problems of port (both sea and air) hinder the timely export. Irresponsibility of customs officers is a regular phenomenon which results in increase on

the price and cost of medicine. Sometimes competition tends to follow unfair promotional activities. Still now, the products of the pharmaceuticals industries of Bangladesh are not world

class.

What may happen in the fate of pharmaceutical export of Bangladesh after 2016?

As a member country of LDC, Bangladesh is enjoying waiver from patent law enforcement which willcontinue up to 2016. By virtue of this opportunity, our companies can manufacture patented drugswithout giving any payment for patent right, thus it is now possible for us to produce any patented drugsat very low price and can export to other countries. For this reason, a Bangladeshi company would offerexport price to an LDC much lower than could do a company from India, China or other countries wherepatent right implemented. In this sense, Bangladesh is passing a golden time for export of patented drugsin other LDCs. Yet, our export price is not as lower as it would be compared to India and China, because

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we are not yet independent to our raw materials and other materials required for the production of afinished medicine. Still, we have to import more than 95% of active ingredients and excipients ofmedicines. This is still a great drawback for the achievement of our pharmaceutical export. If patent rightis enforced in Bangladesh after 2016, the production cost of medicines will remarkably be increased, thusit would not be possible for us to compete with the offer price of India and China, thus our export marketdrastically will be reduced, because the pharma market in LDCs will be opened for all and we will have to

face great challenges for our existence in global market. But fortunately, if the patent waiver is extendedfor another 10 years, we can really enjoy the taste of patent exemption at that time because our pharmasector will be almost self-reliable within that period.

Problems of Customer Choices

One main problem is in producing rare drugs foreign companies are ahead of us in termsof quality, experience and market share.

Most of the time, to purchase the medicinal products is not depending on the customerchoice. Customers buy their product according to the prescription of doctors.

Problems of Power Development

Like other industries, there is a crucial problem faced by the pharmaceutical industriesthat is power generation problem. They are not getting power according to their demand.

Red-Tapism of govt. offices hinders the development of power generation sector, wherethe government is not taking effective actions.

Lack of opportunity to supply the emergency power to smooth continuation of productionin pharmaceutical sector.

Problems in Quality management

Rework is the primary problem caused by poor quality work during a project. Reworkmeans that ones have to do the same work twice because the original effort was notsatisfactory. When anyone says the component is complete, the hope is that no morework is needed. However, if there are subsequent errors when the component is tied intothe larger application, rework is required.

If a solution is of poor quality, the client will not be happy. Some of this unhappinessmay be transferred to the support organization. However, if the client has a choice, it maynot buy from you again at a later date.

In many cases, projects that do not manage quality well end up with a lot of rework,which in turn leads them to miss their deadlines and exceed their budget. This can causethe business value to be delayed, or it may change the value proposition for the entire

project. No one likes to work for an organization that has poor processes or produces poor quality

solutions. No one likes to work on projects that are missing their deadlines because ofrework. People tend to find excitement and challenge in building a solution. However, theteams motivation level will go down when it has to continually repair and rework

deliverables that dont work correctly. In addition to poor morale in general, specificcosts can include increased absenteeism, higher turnover, and less productivity from thestaff.

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Demand for essential drugs:

Bangladesh has a strong pharmaceutical industry represented by private enterprises and the state-owned EDCL. Bangladesh is largely self-sufficient with regard to drugs and has no significantdrug availability problem. In fact, the availability of drugs has a stronger outreach than theavailability of health care professionals.Due to widespread vaccination schemes, successful eradication of leprosy and widespread use oforal rehydration for diarrhea, many of the traditional health problems are minimized and lifeexpectancy has risen to around 65 years comparable to India and Pakistan rather than toAfrican LDCs who mostly have life expectancies below 50. The most important health issues inBangladesh today are related to maternal health and malnutrition, vitamin and iron deficiency.AIDS, Malaria and TBC are potential health threats. Other important causes of death arecardiovascular diseases, diabetes and cancer. Mental disorders are an important reason fordisability. Thus, in line with the statement that there is no significant drug availability problem inBangladesh, the therapeutic groups do largely reflect the major health issues in the country.

Unmet demand:

The demand for essential drugs in Bangladesh is largely covered. In accordance with the above,in many cases the cheap availability of essential drugs without adequate health careinfrastructure is not without problems. The global need for essential drugs is huge in theory andthe actual demand depends to a large extent on financing possibilities and mechanisms, whichare difficult to foresee in detail, but the creation and dedication of funds and institutions like e.g.the Global Fund to combat AIDS, Malaria and Tuberculosis, justify a significant growthexpectation for the actual demand. It is also to be expected that wherever donor funds aredirectly used to purchase drugs (as e. g. the Global Fund or the Gates Foundation), the demandwill come with such quality requirements that would put a country like Bangladesh with a goodtrack record and a lot of experience at advantage over African LDCs that are only just entering

the business of pharma manufacturing. On the other hand, the tendency of traditional donors tobudget funding may lead to governments of African LDCs giving preference to lower qualitylocal manufacturers for political reasons, creating high barriers of entry for Bangladeshimanufacturers in these market segments.Diseases that are typically considered developed country diseases like cardiovascular disordersor cancer are also on the rise in many developing countries. However, at present, both adequatediagnosis of these diseases and availability of funding for drug needs are doubtful.

Price Control

150 drugs were defined as essential drugs. For those, level prices are fixed for the finished drugs

as well as for their corresponding raw materials. No manufacturer can set maximum retail pricesfor their goods beyond that limit. Changes in these level prices are decided by the Drug ControlCommittee. Since 1993, the number of price-controlled drugs has been reduced to 117 primaryhealth care drugs. However, currently there are 209 drugs on the essential drugs list. For drugsthat do not fall into this Controlled Category, the manufacturer can set their own price, whichmust, however, be approved by the Drug Control Committee.

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This resulted in withdrawal of many foreign companies from the market in which they had had ashare of around 70% in 1970, and strong growth in local production. This also created a boon forlocal pharmaceutical manufacturers.According to the Directorate of Drug Administration records, in the year 2002, all the essentialdrugs were produced locally and about 45% of the local drugs production concerned essential

drugs. Locally produced drugs amount to over 80% of the market share and meet over 90% ofthe local drug demand. There are over 200 licensed pharmaceutical factories in the country, sixof them are owned by multinational companies producing about 13% of the local production.85% of the raw materials used in the local production are imported. Only about 1 % of thelocally produced drugs are exported

Investors and sources of capital

In Bangladesh, there are several national investors interested in building up pharmaceuticalmanufacturing: many of the existing pharmaceutical corporations, like Square and Beximco,

belong to large conglomerates that have proven the commercial opportunities to invest inpharmaceutical manufacturing plants. Foreign investors have not been particularly interested insetting up manufacturing plants in Bangladesh, notably the investment flow from India, expectedby some industry specialist following the Doha declaration, has not materialized so far.When investing in pharmaceutical manufacturing plants, the equity rate used by Bangladeshiinvestors is significantly higher than the usual equity rate in transnational pharmaceuticalcompanies. The reason lies partly in the comparatively high cost of capital and also in thenecessity to group together different banks for financing a large credit sum, since the sum eachbank is allowed to lend is usually not sufficient to finance a large drug manufacturing plant. As aresult, there is a large number of very small scale manufacturers present in the industry. Thesemanufacturers focus mostly on a handful of basic and essential drugs.

Specific risks of national production:

The dependence on import of APIs is the main risk, since the providers are also competitors.This has not affected Bangladeshi pharmaceutical manufacturers too much as they concentratedon the national market which was not deemed attractive by their providers. As long asBangladeshi manufacturers concentrate on developing country markets, they may be able tocircumvent this problem by sourcing from developed countries manufacturers who are not

targeting these markets. However, this would probably also increase their cost.

Findings:

From this report we find the current scenario of pharmaceutical industry in Bangladesh. What is our strangeness and weakness we can select this. We find our export- import pharmaceutical product and how much money we earn from this

industry. We get the top class companies whose contributions are most in our pharmaceutical industry. We get the main problems of our pharmaceutical industry. We find the demand market of pharmaceutical industry. Who are the main investors and where from we get capital.

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Risks and return of our pharmaceutical industry. Lacking of this industry.

Conclusion

The essential drugs market in Bangladesh is well supplied, and there is no availability problem ofessential drugs. The DDA, responsible for the safeguarding of the drug quality through licensingand control, lacks the necessary capacities, equipment (notably test laboratories) and governanceto perform all its tasks effectively. WHO is supporting the DDA through capacity building andnew test laboratories.Partly due to the failure of the local authorities to provide credible quality certifications, andpartly due to their aspiration to increasingly target export markets, leading Bangladeshimanufacturers are already successfully working on obtaining international quality certification

for their products and plants, in some cases bringing in experienced experts from MNCs orIndian competitors.The ability of the Bangladeshi drug industry to manufacture drugs for all kinds of needs isbeyond doubt. While some manufacturers are already able to produce world class quality drugs,others would require considerable assistance to be able to reach that target. However, theBangladeshi industry has been largely focused on the domestic market until recently. Knowledgeabout and contacts to the different players in potential export markets are still limited andconstitute a key bottleneck to expansion of manufacturing facilities.In terms of cost, Bangladeshi companies can be expected to compete successfully with Africanplayers, especially if an international quality standard is required. The ability to compete withIndian and Chinese manufacturers is limited due to the necessity to import machinery andnotably the precursor substances. The ultimate competitiveness of Chinese and Indianmanufacturers depends on the expected rigor of the TRIPS enforcement, the viability ofvoluntary or compulsory licensing for Indian and Chinese players, and the amount of license feesthey would have to pay, and the competitiveness of Bangladeshi manufacturers will largelydepend on the pricing of the raw materials. Still, Bangladesh is probably one of the few LDCswhere under the TRIPS agreement new patent protected drugs and APIs can be cost-effectivelyproduced and at high quality.Thus, Bangladesh is a natural candidate to supplement or substitute Indian and Chinese providersto the developing country markets of both finished drugs and APIs, notably in antibiotics, anti-ulcer ants, anti-hypertensives and anti-depressants. However, the domestic market is largeenough to be self-sustaining and lucrative for the domestic players until they become ready totake on the global pharmaceutical market.

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Bibliography

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November 2013)6. National Drug Policy (2005) Directorate of Drug Administration, Ministry of Family

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7. Novartis Bangladesh Pharmaceutical Marketplace by Mohammad YounusKazi(Accessed on 24 November 2013)

8. Pharmacy Council of Bangladesh, www.ddabd.org(Accessed on 24 November 2013)9. "Pharmaceutical industry - Business & Industry - Bangladesh Strategic & Development

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Appendix A: Abbreviations

APIs Active pharmaceutical ingredients

DDA Director of Drug Administration

EU European Union

GDP Gross Domestic Product

GMP Good Manufacturing Practices

LDCs Least developed countries

OTC Over-the-Counter

TRIPS Trade Related Aspects of Inellectual Property Right

TRIPS Trade Related Aspects of Intellectual Property Right

UKMHRA United Kingdom Medicines and Healthcare Product Regulatory Agency

WHO World Health Organization

WTO World Trade Organisation

END