The domestic pharmaceutical industry, in spite of several constraints, has witnessed steady growth in the past few years. The domestic market might be flooded with imported products, but that hasn’t discouraged the growth of domestic medicine manufacturers.

Starting with production of medicines for common cold, cough, fever and diarrohea after economic liberalisation in 1990 that opened avenues for the private sector in terms of investment, the domestic industries today have begun manufacturing specialised drugs for liver, diabetes and heart patients among others.

The increasing penetration of domestic pharmaceuticals can be gauged by the fact that imports of pharmaceutical products in 11 months of fiscal year 2016-17 has gone down by around 11 percent. According to the data of Trade and Export Promotion Centre (Tepc), Nepal imported pharmaceutical products worth Rs 21.97 billion in the first 11 months of fiscal 2016-17. In the same period of previous fiscal year, the country imported products worth Rs 24.62 billion.

The size of the drug market in the country stands at around Rs 46 billion. Likewise, the sector is witnessing an annual growth of around 18 percent. Industry insiders say increasing accessibility of medicines as well as purchasing capacity of people, even in remote areas of the country, due to abrupt rise in income fueled by inflow of remittance has helped the industry maintain growth trajectory. Remittance accounts for around 28 percent of the national GDP.

“There is a silver lining for the pharmaceutical industry in Nepal in spite of numerous constraints,” Shankar Ghimire, President of Association of Pharmaceutical Producers of Nepal (APPON) said adding that the reputation of medicine manufacturers of the country has improved after obtaining good manufacturing practices (GMP) certification. “This has helped us obtain quality in products.”

A medicine which can be sold at retail price of Rs3 per tablet is being sold at Rs13. It is our responsibility to look after the benefits of the common people and hence we have asked the private sector to come up with proper solution to this issue

According to APPON, there are 57 pharmaceutical companies registered in Nepal at present. Of the total, 51 industries are APPON members and among them 39 companies have acquired GMP certification. GMP certification is required to confirm that guidelines recommended by the agency that controls authorisation and licensing for the manufacture and sale of drugs is followed. The World Health Organisation (WHO) version of GMP is used by pharmaceutical regulators and pharmaceutical industry in over 100 countries including Nepal.

For complying with the GMP regulation, a single local manufacturer has to invest Rs 80 – 100 million.

With enhanced quality and reputation of drugs manufactured by domestic industries, the penetration of medicines imported from overseas market has now dropped to around 60 percent, Ghimire said. “We aim to capture 80 percent market share replacing products that arrive from overseas,” he said.

The fact that just a dozen manufacturers out of 51 are running in full capacity gives factual support to Ghimire’s argument. According to Appon, around 40 pharmaceutical manufacturers of the country are utilising just 30-40 percent of the total installed capacity. This means, it won’t be difficult for local manufacturers to seize additional market share if they succeed in running on full capacity. For increasing production capacity of such industries, the government according to private sector players, can place orders of medical requirement for security agencies including Nepal Army, Nepal Police and government hospitals among others by setting quality and other necessary compliance.

An increment in production capacity of domestic industries will give multiple benefits to the country with employment generation, enhancement of skills and positive contribution to the state coffers.

Ghimire says the domestic pharmaceutical industries can do wonders if they get adequate policy support from the government. Private sector players say efficient implementation of existing policies too is enough to give an impetus to the industry that is bound to grow by leaps and bounds.

One of the examples of government failure in implementing policy can be its decision which states that government agencies should purchase locally manufactured medicines even if it is costlier by 15 percent compared to imported ones. Industry insiders say implementation of this decision alone can give a big boost to the country’s pharmaceutical industry. “The government agencies, however, are reluctant to abide by this decision,” Ghimire said.

Likewise, former Health Minister Gagan Thapa had decided to put a ban on import of medicine, which is abundantly available in Nepal. According to local drug manufacturers, the country is self-reliant in 80 different types of medicine. A recommendation committee coordinated by Department of Drug Administration (DDA) Director General (DG) Narayan Prasad Dhakal in the second week of May had recommended the Ministry of Health that the country is capable to completely substitute 30 types of medicine. The ministry, subsequently, put a ban on 30 medicines. Effective implementation of it, however, seems nowhere in sight.

While government agencies, themselves, are apathetic to the policies adopted by the country, another challenging issue for local manufacturers is competition with products from India. Competing with Indian products in terms of price is a herculean task for local industry as the Southern neighbour has massively facilitated the sector. “In such context, we feel the government should prioritise the sector and formulate policies accordingly,” Ghimire added that the government should curb import of medicines that are produced by domestic manufacturers.

Another factor that has made it difficult for local manufacturers to compete with products from India in particular is easy availability of smuggled products from the Southern neighbour. While manufacturers in India already have big advantage of mass production making the products affordable, smuggling of products taking advantage of the open border between Nepal and India make it cheaper as they aren’t subjected to customs duty. Owing to lucrative profitability, pharmaceutical stores as well as medical representatives tend to push sales of products from India and other countries.

DG Dhakal of Department of Drug Administration (DDA), however, argued that the government has adopted several policies to support the domestic pharmaceutical industries and those things are slowly and gradually getting better. According to him, the government through the Industrial Enterprises Act has offered tax rebate if industries are opened in a few listed districts. Likewise, the government has imposed just one percent customs tariff on the import of medicine and five percent on the import of pharmaceutical equipment.

“It is not that the government has done nothing for the sector,” Dhakal said adding that the government has made it mandatory for 20 different medicine products to have Nepali label, but the private sector has failed to do it. “Hence, the government as well as private sector being stakeholders for facilitating the country’s health sector should work in close coordination.”

Though there is no concrete answer to the query regarding government decision of imposing ban on imports of 30 different medicines, Dhakal said that the main reason behind delay in its imposition is an issue related with price. The DDA has asked domestic players to ensure that the price of those 30 medicines is revised as the price of the same product when imported.

“A medicine which can be sold at retail price of Rs 3 per tablet is being sold at Rs 13. It is our responsibility to look after the benefit of the common people and hence we have asked the private sector to come up with proper solution to this issue,” he said. The government will also be holding quality check of companies that have been manufacturing medicines that are supposed to substitute foreign imports.

Even though the production of medicines in Nepal is growing, the country is still dependent on overseas market for raw materials. Import of raw material from India accounts for around 70 percent while imports of medical equipment accounts for around 60 percent.

A leading importer of pharmaceutical products, seeking anonymity, said that the domestic industry has potential to substitute imports.

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