Healthy Growth Despite Challenges

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Healthy Growth Despite Challenges

The Nepali pharmaceutical market is being regulated through laws which are almost 40 years old. This is an industry-crippling handicap, say medicine producers.


Organised with the slogan ‘Self-sufficiency Through Quality Sustenance’, the 6th Nepal Pharma Expo 2017 recently concluded with the participation of 46 domestic and 45 foreign pharmaceutical companies and more than 50,000 visitors. According to Shanker Ghimire, President of Association of Pharmaceutical Producers of Nepal (APPON), the three-day event was a success in terms of raising public awareness on quality medicine, an on showcasing the modern technology domestic producers have been adopting in recent years. The expo included 108 stalls from pharmaceutical producers from countries including India, China, Japan and Germany.  “The expo has also raised different issues concerning the producers, consumers and other stakeholders,” says Ghimire.   

Medicine Industry in Nepal
Medicine production in Nepal has been associated with ancient eastern medicine practices described in Ayurveda's, Charak Samhita and other documents and homemade remedies for various types of aliments. Singhadurbar Vaidyakhana, which traces its history back to the late Malla era, still manufactures ayurvedic medicines. The import of modern (allopathic) drugs started with the establishment of Bir Hospital in 1889.

Modern pharmaceutical industry in the country was started with the foundation of Royal Drugs Limited (now Nepal Drugs Limited) in 1972. 

Impressive Growth
Once dominated by foreign medicines, the Nepali medicine market is now thriving with domestic private pharmaceutical companies becoming the major market players.  The years after 1990 have seen a sea change in the quality and quantity of drugs from Nepali pharmaceutical producers. Initially only producing normal medicines for common illnesses, the domestic industry is now producing essential drugs for even acute to chronic disorders.

The Department of Drug Administration (DDA) is the drug market regulator in the country and the industry is governed according to the nearby 40 years old Drugs Act, 2035 BS. The National Drug Policy was adopted in 1995 AD, a new Act to suit the policy is still not prepared.  

As per APPON, there are 57 registered allopathic drugs producers in Nepal. Among them, 51 are members of the association. Almost all companies have their own laboratories and follow standards set by United States Pharmacopeia (USP), British Pharmacopoeia (BP) and Indian Pharmacopoeia (IP). Similarly, 37 companies are WHO GMP certified. Meanwhile, there are a total of 80 Ayurvedic drug producers in the country.

The domestic pharmaceutical industry fulfils about 40 to 45 percent of demand for medicine in the country, while the rest is occupied by foreign products. This is to despite the fact that Nepali companies produce almost 60 percent of the types of drugs required. Meanwhile, Nepal imports 70 percent of the raw materials for pharmaceutical products from India and the rest from third countries. The size of the pharmaceutical market in Nepal is estimated to be somewhere between Rs 36 billion to Rs 40 billion. In the meantime, domestic investments total about Rs 50 billion in the sector. It costs from Rs 800 to Rs 900 million to establish a new pharmaceutical industry, according to the sector. 

With the growing number of companies and expanding market, Nepal has become self-sufficient in 72 different types of pharmaceutical products including vitamins, painkilles and drugs related to common cold, coughs, headaches, gastric problems, high blood pressure and diabetes. Similarly, many antibiotics, hormones, steroids, anti-allergy drugs and psychotropic drugs are also being produced here. APPON President Ghimire says, what Nepali pharmaceutical industries do not produce yet are vaccines, chemotherapy drugs and insulin.

As per Ghimire, Director of Asian Pharmaceuticals, his company has been producing 200 different types of medicines. “Our company produces medicines for patients of dental, psychological and chronic ailments.” 

Mahesh Gorkhali, Marketing Director of Nepal Pharmaceuticals Laboratory (NPL) informs that the company produces more than 350 various types of medicines covering both acute (common disease) and chronic or life style segments. 

Lomus Pharmaceuticals is another Nepali company that has been supplying the market with much needed live saving drugs. According to Prajwal Jung Pandey, Executive Director of Lomus Pharmaceuticals, the company produces 300 types of drugs for cardiac, heart, mental illness and other common diseases. As per Pandey, Lomus has plans to introduce more modern technology to produce more quality products within 2-3 years.  

Mountain of Challenges
Despite the noteworthy growth (which entrepreneurs argue is all due to the efforts made by the private sector), the domestic pharmaceutical sector also lacks proper policy support and assistance in other necessary areas. Outdated laws, rules and regulations prevail hindering the overall development of the sector. The Drugs Act, 2035 which governs the medicine market was formulated at a time when there was only one pharmaceutical company in the country. “Moreover, the Act was also introduced to establish a uniform control mechanism on imports all over Nepal,” points out Ghimire. 

The Nepali pharmaceutical market is being regulated through laws which are almost 40 years old, such as the Drug Registration Regulation, 2037, Interrogation and Inspection Regulation, 2038, Codes on Drug Manufacturing, 2040 and Drug Standard Regulation, 2041. 

Entrepreneurs say that the outdated laws have stopped the industry from fully exploiting its potential. It has led one of the country’s most potent industries to reel under various problems, they state.  The price disputes in recent years between the government and pharmaceutical producers, for instance, are attributed to the archaic Act and obsolete pricing mechanism of drugs. A bit of recent history throws light on the problematic structure and state of problems inherent in the sector. 

The dispute between the private pharmaceutical producers and the government intensified when the Department of Drugs Administration (DDA), the drugs market regulator, set prices for 96 essential medicines produced by Nepali pharmaceutical companies back in 2015. After a brief standoff, the two sides formally agreed to resolve the issue through discussions and talks. A committee comprising government officials and representatives from the private producers was formed. Nevertheless, after a few meetings, the committee became inactive leaving the issue unresolved. It still is. Nepali pharmaceutical producers say that they cannot comply with the government fixed rates. 

“Given the price of raw materials in the international market and other associated costs, we are unable to sell medicines at the rate fixed by the DDA,” argues Ghimire.  He says that the medicines imported from other countries are priced much higher than those produced in Nepal.  Though the DDA has set prices for the Nepal made medicines, imported products are sold across the country at higher prices. Pharmaceutical industrialists want the same for Nepali medicines. 

Meanwhile, problems such as the lack of sufficient electricity for production, adequate supply of water to the industries, transport related problems and other issues related to the manufacturing side have largely contributed to the capacity underutilisation of Nepali pharmaceutical companies. As per APPON, only about 10 to 12 companies have been utilising 75-80 percent of their production capacity. The rate of capacity utilisation for most of the industry is around 50 percent. 

Meanwhile, the domestic drugs industry’s market share has also remained stagnant, remaining at 40 to 45 percent for years. Nepali producers say they have the capacity to grow the market share to 60 to 65 percent within a short period and increase it to around 70 to 80 percent by 2025 if a favourable environment is created.      

Control Demand for Import 
Nepali pharmaceutical producers have long argued that the government must control the import of medicines to help the domestic industry to grow. “In our market now we do not need to import many types of medicines,” remarks Gorkhali. According to him, the unrestricted access of foreign pharmaceutical companies has created difficulties for domestic producers as well as causing various anomalies in the market. It is one of the major factors fuelling the unhealthy competition in the market, they say, citing the so-called ‘deal bonus’ as one example.

Domestic companies are forced to pay huge sums of money and provide expensive ‘incentives’ to doctors and hospitals in order to secure deals to supply medicines. “We have no wish to engage in such activities. But it has become something we must do due to the unchecked presence of foreign brands here,” says Ghimire. He points out that import licenses for medicines are provided without proper supervision. 

Despite the problems, it’s important to note that Nepali producers have been supplying the market with medicines at competitive prices. According to Gorkhali, Nepali producers have been supplying drugs at affordable prices as far as possible. “The medicines produced here are available at competitive prices,” he says. “However, the wide availability of Indian pharmaceutical products in Nepal has made things difficult for us in terms of market competition.”  

Industrialists say that various factors are contributing to increasing prices of medicines despite their best efforts to make them affordable. Among such factors is the absence of ancillary industries, they say. “We have to import pharmaceutical packaging materials which add to our production costs,” says Gorkhali. 

Had there been proper support from the government, the production costs might have been lower which would ultimately reflect in the shelf price of medicines, entrepreneurs say. APPON president Ghimire cites example of India where the government actively provides the pharmaceutical industry with a range of facilities which has made the sector such a major industrial force. 

The government in India has 35 different institutions to help the pharmaceutical industry.  Such institutions extend their support in a range of areas including providing technology to pharmaceutical companies for free, acquisition of land to establish production facilities, helping in business financing along with ensuring a continuous supply of essentials such as electricity and water. 

Indian companies also get active government assistance in bringing out new technologies and showcasing their brands and products in international exhibitions. “The government needs to invest money in R&D.  If producers themselves spend on R&D they may not be able to digest all the costs,” stresses Ghimire.  

According to Narayan Prasad Dhakal, Director General of DDA, a committee has been working to formulate policies to control imports. “The committee currently is collecting data from domestic pharmaceutical industries to prepare a report,” informs Dhakal. Based on the report, the committee will formulate the new policies after a thorough analysis of Nepal’s pharmaceutical industry.

APPON President Ghimire already has one suggestion to give to the government. It should place high registration charges on foreign medicines to control the import.

Import Scenario and Export Potential
Looking at the five-year data provided by the Trade and Export Promotion Centre (TEPC), the import of drugs in Nepal has sharply surged over the years. Meanwhile, the trade statistics clearly indicates that the country has a lot more to improve in the export side.   

Pandey of Lomus Pharmaceuticals says the Nepali pharmaceutical sector can become an export-oriented industry if the government adopts certain approaches. “If the medicines produced in Nepal are given the status of national products, it will be easier for us to increase our production capacity and take the drugs to international markets,” he points out. 

Currently, Deurali-Janta Pharmaceuticals, Quest Pharmaceuticals, Lomus Pharmaceuticals are exporting medicines from Nepal. Lomus has been exporting medicines that cure heart diseases, antibiotics and antiseptics and some other types of drugs in the markets across the globe. The company mainly exports its products to five African countries including Nigeria, Libya and Ghana. “We are also trying to export our products to markets in Asia,” informs Pandey, adding, “We are looking to introduce advanced technologies to produce medicines through joint venture in the coming days.” 

Meanwhile, some other companies have also stepped up to take their products in the international market. NPL, Elder Universal Pharmaceutical Nepal and National Health Care Nepal have already received the Certificate of Pharmaceuticals Product (CPP) which is one of the prerequisites for obtaining an export licence from the DDA.

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