1.0 Introduction
1.1 Overview of Pharmaceutical Industry In Bangladesh
Pharmaceuticals industry is the heart of the healthcare sector of Bangladesh. After liberation in 1971, the industry was largely dominated by MNCs, and the country was highly import dependent. In 1982, through the formulation of national drug policy, and drug control ordinance, a defined guideline for the development of the industry was created.
One of the fastest growing sectors with an annual average growth rate consistently in the double digits, the Bangladesh Pharmaceutical industry contributes almost 1% to the nation’s GDP. According to the UKTI (April, 2010) the total size of the pharmaceutical market of Bangladesh was estimated to be US$700 million in 2007. The retail market is about 90% of the total market. In that respect, the total market size is more than BDT 60 billion.(Chowdhury, 2010) The industry produced medication worth $715 million in 2007 with the market growing over 12% annually over the last half a decade and firms primarily focus primary on branded generic final formulations by using mostly imported APIs. According to the World Bank report (2008) about 80% of the drugs sold in Bangladesh are generics and 20% are patented drugs. The country manufactures about 450 generic drugs for 5,300 registered brands which have 8,300 different forms of dosages and strengths. These include a wide range of products from anti-ulcerants, 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.It also reports that domestically Bangladeshi firms generate 82% of the market in pharmaceuticals and locally based multinational companies account for 13%, and the final 5% is imported. There are 240 registered pharmaceutical companies in Bangladesh where 164 of these actively involved in the manufacture or marketing of pharmaceutical products (Hussain et al., 2008). Though it is the top ranked LDC country, Bangladesh’s overall healthcare condition hasn’t been up to the mark. In terms of per capita spending on health care, Bangladesh ranks amongst the lowest in the world with healthcare expenditures consisting of only 3.4% of GDP. (World Health Organization Global Statistics, 2010) In spite of that, quite surprisingly Pharmaceutical industry is indeed one of the most technologically flourished sectors operating within the economy at present.
At present the national and multinational companies are manufacturing about 19,830 brands of medicines under 1081 generics in different dosage forms (Chowdhury, 2010).The top 30 to 40 companies dominate almost the entire market, where the top 10 hold 70% of domestic market share and the two companies Beximco and Square capture over 25% of the market (World Bank report, 2008). The pharmaceutical market of Bangladesh is dominated by a few large companies. This kind of market structure is defined as oligopoly (Gillespe, 2010, p. 302; Griffiths & Wall, 2008, p. 226; Salvatore, 2007, p. 340; Besanko et al, 2010, p. 221).

1.2 Major Players in the Industry
Due to the branded generic nature of products, companies are usually able to charge a premium price, while enjoying stable position. Hence, the top performing companies in the industry have remained relatively consistent over the years.
Sales of Square Pharmaceuticals, the market leader, were Tk 1,270 crore in 2010,Beximco grew faster than other companies at a staggering 33 percent in 2010 with Tk 523 crore sales. 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 rate was 27 percent, the third highest pace in the 2010. (Details in Appendix 1)
1.2.1 CURRENT PHARMACEUTICAL Export Scenario
Bangladesh Pharmaceutical Industry exports Active Pharmaceutical Ingredients (APIs) and a wide range of pharmaceutical products covering all major therapeutic classes and dosage forms to around 79 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 from Bangladesh, and have been well accepted by the Medical Practitioners, Chemists, Patients and the Regulatory Bodies of all the importing nations. The packaging and the presentation of the products of Bangladesh are comparable to any international standard and have been accepted by them. By the late 1980s, Bangladesh had become a drug exporting country. Bangladeshi pharmaceutical exports totaled US$48.3million in FY 2011/12, only 0.2 percent of total export earnings.
Rising competition and large scale exports (India: 6.1 billion USD, China: 4.5 billion. USD in 2010 (COMTRADE)) from these countries therefore poses a more significant threat to the industry in Bangladesh than competition from high income country producers. (Details in Appendix 2)
1.3 Implications of Trade-Related Aspects of Intellectual Property Rights (TRIPS).
The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) is an international agreement administered by the World Trade Organization (WTO) that sets down minimum standards for many forms of intellectual property (IP) regulation as applied to nationals of other WTO Members.
TRIPS provide Bangladesh pharmaceutical firms with patent-free production rights domestically until 2016 and limited exporting advantage. Domestically, as long as Bangladesh has to import APIs however, they will have to buy these from firms which are compliant with TRIPS laws and hence will have to incorporate the higher royalty patent price for these. Moreover, until 2016, Bangladesh may:
1. Export to any country if the drug is not under patent. For example, most drugs on WHO’s Model List of Essential Drugs are not patented as affordability is one of the criteria used in designating medicines as “essential.”
2. Export to another LDC or non-WTO country that has not implemented product patent protection. However, today, virtually all the LDC WTO members provide TRIPS patent protection.
3. Export to a country where the patent holder has not filed for patent protection for this drug. As companies do not file patents in all countries, there are gaps in patent coverage that can be exploited. Companies tend not to file patents in countries where sales and profit prospects are low or where there is no meaningful judicial patent protection.
4. Be the first one to market when a patented drug goes off patent. As previously discussed, there is great profit potential for the first generic firm to get approval for a product. The Bolar Exception of TRIPS allows any country in the world to start working on a drug before patent expiry. Thus, Bangladesh’s patent-free LDC status does not offer any competitive advantages in this arena and Bangladesh will have to compete head to head in this very fierce and competitive market.
5. Export to a country that has issued a compulsory license for the drug and awarded the production contract to Bangladesh. Article 31 of TRIPS grants governments the right to issue a compulsory license for public health purposes. The 6 December 2005 Decision gives countries who do not have adequate manufacturing capacity (and all LDCs are given this status) the right to import the drug for which it issues a compulsory license. Thirty three developed countries have declared they will not use this TRIPS flexibility to import and eleven countries announced they would not use it unless it was a national emergency.
1.3.1 If TRIPS Expires
As a member country of LDC, Bangladesh is enjoying waiver from patent law enforcement which will continue up to 2016. Yet, our export price is not as lower as it would be compared to India and China, because we are not yet independent to our raw materials and other materials required for the production of a finished medicine. We have to import more than 95% of active ingredients and excipients of medicines.
The implication of the withdrawal of TRIPs can be divided into mainly four categories: First, price control will be lifted. Producers have to pay for patented products, as well as license fees. Meanwhile, export of patented products will face problems, as Bangladesh cannot export patented products without patent owner’s approval [which will be more costly]. In addition, foreign firms will get access to local market, and MNCs can produce several products in Bangladesh that are not allowed now. However, the impact will not be as much devastating as it seems, because about 75% of the drugs in the WHO list are not subject to Patent protections. And many of the products in Bangladesh are generics, thus not subject to patent protections. However, costs from licensing fees, impeded access to export markets, withdrawal of local protection, and potential rise in import costs (especially APIs) represent significant challenges in the post TRIPS implementation scenario for Bangladesh pharmaceuticals industry.
1.4 SWOT Analysis of the Bangladesh Pharmaceutical Industry
1.4.1 Strengths
1. The growth of middle class in the country has resulted in fast changing lifestyles in urban and to some extent rural centers. This opens a huge market for lifestyle drugs, which has a very low contribution in the Bangladesh market.
2. Bangladesh pharmaceutical manufacturers are one of the lowest cost producers of drugs in the world. With a scalable labor force, Bangladesh manufacturers can produce drugs at 40% to 50% of the cost to the rest of the world. In some cases, this cost is as low as 90%.
3. Bangladeshi pharmaceutical industry possesses skilled workforce and process reengineering skills. This adds to the competitive advantage of the Bangladeshi companies. The strength in chemistry skill helps Bangladeshi companies to develop processes, which are cost effective. For example, the Healthcare pharmaceuticals company manufactures the drugs with the active support and technical guidance of the globally reputed pharmaceuticals company F. Hoffmann-La Roche Limited, Basel, Switzerland.
4. There is huge demand in the domestic market. 65% of the drugs used in Bangladesh are produced locally while 35% of the drugs are imported from the foreign countries.
1.4.2 Weaknesses
1. The Bangladesh pharmaceutical industries are marred by the price regulation. Over a period of time, this regulation has reduced the pricing ability of companies. The DGDA (Directorate General of Drug Administration), which is the authority to decide the various pricing parameters, sets prices of different drugs, which leads to lower profitability for the companies. The companies, which are lowest cost producers, are at advantage while those who cannot produce have either to stop production or bear losses.
2. Bangladesh pharmaceutical market is one of the least penetrated in the world. However, growth has been slow to come by. As a result, most of the pharmaceutical companies are relying on exports for growth.
3. Most of the companies do not up to date their machineries, they perform their activities with the traditional machineries, and so it is difficult to maintain the quality of the medicines.
4. Sometimes per unit cost of the medicines are higher than the imported medicines. The selling prices of the medicines become higher. So the domestics company has to fight with the multi-national companies.
5. The industries have to depend on foreign experts, technology, and raw materials. Due to the lack of the proper guidelines and the lack of the proper infrastructure facilities, the industry faces problems in marketing the products.
1.4.3 Opportunities 1. Under the TRIPS agreement, Bangladesh, as a least developed country would get opportunity to produce patent medicines till 2016 (if TRIPS is not extended)
2. As Indian and Chinese companies are not being able to produce patented drugs, even though they have the requisite technology and expertise, Bangladesh pharmaceutical companies are an attractive option for joint venture for them.
3. The API park, set to be completed in Chittagong, will be able to house at least 20 plants and investments worth BDT 20 Billion are expected.
1.4.4 Threats
1. Illegal entry of cheap and substandard drugs from neighboring countries can affect the local manufacturers and destabilize the market.
2. Present Regulations do not allow for advertisement of OTC drugs in the mass media, when they are allowed in the neighboring countries. This result in an easier process of creating a market for foreign products compared to local ones.