1) PHARMACEUTICAL INDUSTRY ANALYSIS
1.1 Industry Background:
The total industry can broadly be classified into two categories. Theses are
a) Patent Medicines
b) Generic Medicines
Patent medicines are the products that are invented by the company, who have their own
research team working on their own laboratories. These products are patented for many
years to enjoy the monopoly market. After years of business the formulation is sold in the
market so that others can go into mass production.
Generic medicines are the products that are produced in mass scale. These are marketed by
several companies under different brand name, where the formulation of this product is
almost same. Prices of the products are under this category are competitive. Bangladesh
mainly concentrates on this category, as labor cost is one of the lowest in the world.
1.2 Growth & Trends:
The growth potential of pharmaceutical industry is enormous. As urban population is
increasing and people are getting educated, they are now more concerned about healthcare.
So the demands of medical products are rising. In Bangladesh unhygienic conditions and
poor health maintenance plans provide vast scope for the pharmaceutical firms to sell their
products. On the other hand, the constant natural disasters provide opportunities to
pharmaceutical companies to boost its sales. The industry is growing the protection of
national Drug Policy 1982. But after the GATT regulation, changes are bound to take
place. Furthermore, the trend & growth of this industry tends to be positive as the demand
of medicines is rising, which have mentioned earlier.
1.3 Demand:
Bangladesh is prone to tropical diseases, and this leads to a high demand for
pharmaceutical goods. Because of this and the poor health and hygiene situations, a steady
growth in the pharmaceutical sector is possible. Demand is positively related to the
changes in disposable income. Assuming that income per capita will continue to increase,
it may be predicted that the demand for pharmaceuticals will also continue to rise.
Dhaka is the largest contributor, with nearly 35% market share. Chittagong and Sylhet
follow with 26% market share each. Khulna has a much smaller share of 14%, but it has an
immense growth potential because of the higher value sales per chemist.
Dhaka also has the highest per capita expenditure on drugs. Studies have shown that
people in urban areas tend to consume more pharmaceutical products compared to people
living in rural areas.
Urbanization is steadily increasing in Bangladesh, as more and more people move in from
rural areas to live in Dhaka and the other cities. Because of the increased frequency in
natural disasters, people prefer to live and work in cities other than in villages. This bears a
direct impact on the volume of sales of the pharmaceutical companies. As more people are
living in relatively developed areas, the demand for medicine is also rising. This provides a
great opportunity for the companies to increase their sales.
1.4 Imported Raw Materials:
The risk for the sector is, basic chemicals that are used as raw materials, need to import for
most of the cases. Large pharmaceutical companies like Beximco, Square and Gano
Shastho have taken up ventures to produce basic chemicals, though they yield lower
margin in spite of high demand. In order to remain healthy in the long run, the sector needs
support from the government in production of basic chemicals. Highly regulated drug
policy & price control mechanisms imposed by the government require that raw material
components produced locally may not be imported. 90% of the raw materials are imported
from different international suppliers through sight DC (L/C) and deferred DCs. Average
stockholding period is 165 days. Trade cycle is 120 days if (sales: 95% on cash basis & 5%
on 30 days credit basis and 80% of 90% imported RM are on deferred basis). Trade cycle
240 days if (sales 100% on 60 days credit and 90% import on sight basis); Trade cycle 156
days if (sales on 30-90 days credit and 70% import on DPC basis/30% on sight).
1.5 Export
There is tremendous potential for the export of medicine from Bangladesh to become a
growing, booming business. The pharmaceutical sector has a large potential market
abroad. Drugs produced in the country commands high demand in the foreign markets as
the sector maintains high quality. (See Appendix for more on Drug Export)
Policy plays important role in boosting any industrial sector and that has happened to the
pharmaceutical industry of the country. 1982 is considered as a landmark in the
pharmaceutical industrys history of Bangladesh when a new Drug Policy was formulated
in the year. The objective of the policy was to become self-reliant in the pharmaceuticals
sector to provide essential drugs to patients at an affordable cost, to uphold consumers
interest by providing them effective and quality drugs. Drug Policy was found highly
successful in achieving almost all its declared objectives. In fact, Bangladesh was the first
and the pioneer in formulating such a policy in the line with the guidelines for essential
drugs as recommended by the World Health Organization (WHO).
The Drug Policy is under review to meet the needs of the present time. According to the
Minister, Ministry of Health and Family Welfare, Dr. Khandaker Mosharraf Hossain, the
draft has already been proposed. To his opinion the reviewed policy will further facilitate
the growth of the pharmaceutical sector. (Source: The Business Bangladesh, March 2004)
Bangladesh is now almost a self-sufficient in its pharmaceuticals sector as 97% of the
countrys drug demand is met by local manufacturers. With the success in the domestic
market place the Bangladesh Pharmaceutical Industries are now attempting 7to enter into
