The pharmaceutical sector, one of Bangladesh’s few knowledge- and technology-intensive industries, is anticipated to develop at a compound annual growth rate (CAGR) of more than 12% and reach a value of more than USD 6 billion between 2019 and 2025. Even during the pandemic in FY 2020, when other major sectors saw a decline in output, the pharmaceutical and medical chemicals business growth accelerated.
However, in recent decades, the industry has kept its manufacture of active pharmaceutical ingredients (API) the same. Consequently, the whole sector is gradually relying on numerous players to ensure the continuous supply of API goods. Furthermore, since the global pharmaceutical sector faces unprecedented production pressure, the significance and demand for API have begun to rise. To overcome the hurdles, Bangladesh has finally begun to produce API, ushering in a new chapter in the pharmaceutical business.
Why is API so important?
API of medicine is its physiologically active component. APIs are synthesized or taken from natural sources and packaged into tablets, pills, and injections. Ibuprofen, aspirin, and acetaminophen are APIs. Thus, API is the basis of any Bangladeshi pharma product.
APIs make up 30% of small molecule medication prices and 55% of generics. Currently, Bangladesh can satisfy 98% of the demand for finished pharmaceutical goods produced inside the country. Though self-sufficient in finished pharmaceuticals, over 90% of API and raw ingredients are imported.
However, substantial raw material imports leave the pharmaceutical business subject to supply chain disruptions and price instability. The backward linkage may affect our burgeoning pharmaceutical industry. The current global economic crisis has also delayed global commerce, manufacturing, and supply chain disruption, posing several problems for the global pharma business. In this respect, the relevance of API is more than it has ever been before in the annals of history.
Government initiatives and journey of Bangladesh’s API industry
The Bangladesh government and pharmaceutical sector recognized the necessity of API manufacturing and even the prospect of export. The Government of Bangladesh (GoB) has been granted various incentives to stimulate the domestic manufacture of pharmaceutical raw materials. The API policy and establishing API parks are also key factors in incentivizing local API production.
The Ministry of Commerce developed the National Active Pharmaceutical Ingredients (API) and Laboratory Reagents Production and Export Policy to encourage API manufacturing in 2018. The API strategy seeks to generate 370 major API compounds for export (41 in 2017) and reduce raw material import dependency from 97% in 2016 to 80% by 2032.
In May 2019, the National Board of Revenue (NBR) granted domestic API makers a 15% VAT exemption until December 2025, subject to a minimum value addition of 60% to imported raw materials. However, since 60% value addition is not practicable for all pharmaceutical items (many medications need just 30% to 40% value addition), NBR cut the rate of value addition from 60% to 20% on January 6, 2020. NBR also lowered the number of molecules generated yearly from 5 to 2 locally.
How will this benefit the pharma industry and Bangladesh’s economy?
Bangladesh’s pharma industry has transformed and become an economic driver. Bangladesh’s USD 3.5 billion pharmaceutical business fulfills 97% of local demand. In fiscal year 22 (FY22), the government exported pharmaceutical items valued at USD 189 million. This indicates that the nation’s pharmaceutical industry has the potential to grow yearly export revenues to USD 5 billion in the next five years, up from the current level of USD 200 million. Local API manufacturing will strengthen its position in this environment and build a bright future.
After 2026, Bangladesh will lose its WTO exemptions from the Agreement on Trade-Related Aspects of International Property Rights (TRIPS), making API manufacturing flexible for the post-LDC economy. Our pharmaceutical sector will struggle with intellectual property taxes on medication and rising API imports. Because of this, the local API business will become a game changer for the pharmaceutical industry in Bangladesh. Self-sufficiency in API production may also help Bangladesh’s pharmaceutical sector survive TRIPS.
Accessing the vast API manufacturing market will provide a platform for pharmaceutical sector growth with overseas enterprises. The API Policy also encourages new raw material producers and attracts USD 1 billion in foreign direct investment. Thus, pharma FDI will surge. Bangladesh’s API Park provides a chance to expand commercial partnerships with Indian and other Asia-Pacific pharmaceutical and related sectors.
Additionally, Bangladesh may export API to regional and worldwide markets. Due to the COVID-19 pandemic, the Asia Pacific API market is expected to expand by 9% from 2021 to 2027. Bangladesh’s developing market offers collaboration prospects and a model for penetrating global markets. Moreover, a dedicated backward connection would allow pharmaceutical producers to make world-class goods at lower rates and local customers to obtain high-quality medications at lower prices.
The API sector in Bangladesh is growing, although there are some obstacles. The impending global economic crisis, technology inadequacy, and infrastructure issues are prevalent. However, Bangladesh has built a world-class pharmaceutical sector from scratch. Therefore, the country can and does possess the capability to lessen all obstacles by using its enchanted economic expansion, qualified workforce, and supportive authority.
To further enhance Bangladesh’s pharmaceutical industry, increasing its API exports is crucial to producing raw materials domestically and decreasing the country’s excessive import dependence. Because of this, the initiative made by both the government and the pharmaceutical sector has indicated that Bangladesh’s pharmaceutical business’s future will be prosperous and clairvoyant.