Chapter 1

PROJECT PROFILE
1.0 INTRODUCTION
Pharmaceutical is the world’s largest industry with revenues of USD 518 billion and 9% of
global GDP (North America contributing USD 248 billion). The pharmaceuticals sector in
Bangladesh is recognized as one of the fastest growing industry with an annual average
growth rate of 16% p.a. and market size of around BDT 30 billion. This sector is the
second largest contributor to the Govt. exchequer, employing around 75,000 skilled &
unskilled employees. According to IMS the growth rate in 2004 stood at 16%. In the early
eighties, there were 166 pharmaceuticals manufacturers, and the foreign manufacturers
controlled 75% of the market, which has by now changed dramatically.

1.1 Origin of the Report

The report is prepared under the supervision of Mr. Mohiuddin Ahmed, Lecturer, Institute
of Business Administration, as a part of the internship requirement of BBA program of
IBA, University of Dhaka. The Citibank N. A. guide on the project is Mr. K. M. Adnan
Masud, Resident Vice President and Head of Top Tier Local Corporates (TTLC) Unit of
Corporate Banking (CBG) Division. This report involves the project work at the Citibank,
N. A. Dhaka for a 12 weeks period from February 19, 2005 to May 19, 2005.

1.2 Background of the Report

Pharmaceutical sector is the recent thrust sector for Bangladesh. Every great opportunity
goes together with enormous threats. Existing legal and administrative infrastructure can
hinder the boom, but the real threat is the overriding of TRIPS facility after 2016. This span
of a decade is really crucial for not only expansion but also for building infrastructure
capable to fight the later rainy days. The smaller firms will most likely be unable to
compete against large local corporate and foreign competitors. The amalgamation, joint
venture and strategic alliance in various forms are likely to be taken place among the
industry players. With this regard, an effort has been made in the report to analyze the

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current scenario of the pharmaceutical industry from a strategic perspective and identify
opportunities for Citibank in expanding its business in this sector.

1.3 Objectives of the Report

The primary objective of this report is the partial fulfillment of the BBA program
requirement. Other objectives are --

• To give an overview of the pharmaceutical industry of Bangladesh with respect to

structure, marketing mix, key industry players, export import scenario, industry
growth etc.
• To illustrate the major rules and regulations governing the industry, the
implications of TRIPS- the major provision of GATT and the strategies to be
undertaken by Bangladesh.
• To find out the major risks of the industry and their mitigants and the critical
success factors of the industry.
• To analyze newer opportunities for Citibank, N. A. to expedite the business in
Pharmaceutical Industry down to the customer level of business sector.

1.4 Scope of the Report

The scope of the report is limited to Pharmaceutical industry of Bangladesh. More over the
information are limited to interaction with the respected Relationship Managers and their
industry contacts and the players are basically limited to Citibank clients or known
persons., All Citibank N.A. information are related to the Citibank N.A., Dhaka operations.
Moreover, Confidentiality of Citibank’s information has been maintained. Hence exact
values which have been used in the report submitted to Citibank have been approximated in
this report. Moreover, the report is prepared according to the requirement and specification
of Citibank which kept the area of exploration limited.

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1.5 Methodology & Sources of Information
Both primary and secondary data has been used in this report.

The Primary Sources of Information were informal interviews with the bank officials.
Different Pharmaceuticals customers are interviewed in different occasions to know about
their responses regarding the opportunities. To get a comprehensive view of the industry
some major buyers and distributors have also been interviewed.

To have Secondary Information, data from International Market Survey (IMS) and related
publications, Annual report and web sites have been used.

1.6 Limitations
In preparing this report, different organizations were visited and informal interviews were
taken within a short period of time. Moreover, as information related to this sector was not
available in a structured form, the main constraint in writing the report is considered to be
the search of information.

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 Chapter 2
PHARMACEUTICALS INDUSTRY

2.1 Healthcare and Pharmaceuticals

Pharmaceutical companies are establishments primarily engaged in manufacturing,
fabricating, or processing drugs in pharmaceutical preparations for human or veterinary
use. The greater part of the products of these establishments are finished in the form
intended for final consumption, such as ampoules, tablets, capsules, vials, ointments,
medicinal powders, solutions, and suspensions. Pharmaceuticals are effectively medicinal
chemicals. In its basic chemical form, allopathic pharmaceuticals are called bulk drugs that
are basically the raw materials and the final dosage forms are known as Formulations
(Tablets, Syrups and all other medicines we use as consumers).

2.2 Bulk & Formulation Drugs

Bulk drugs are medicinally effective chemicals. These are derived from four types of drug
intermediates:

 Plant derivatives (herbal products)

 Animal derivatives (e.g.) insulin extracted from bovine pancreas
 Synthetic chemicals
 Biogenetic (human) derivatives (e.g.) human insulin

Formulations can be categorized as per the route of administration to patients, viz.

 Oral (i.e.) tablets, syrups, capsules, powders etc taken internally.

 Topical (i.e.) ointments, creams, liquids, aerosols that are applied on the skin.
 Parental (i.e.) sterile solutions injected in an intravenous or intramuscularly fashion.
 Others such as eye-drops, peccaries, surgical dressings etc.

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2.3 Major Disease Classes
The worldwide pharmaceutical industry is complex to all the business participants as well
to the end patients. The driver for this global industry is the Disease classes prevalent
around the globe. The pharmaceutical companies address these diseases through their
product offerings. The Therapeutic classification of Pharmaceutical products is also done
according to the major disease categories. Hence a brief understanding of the major classes
of ailments afflicting the people of the world will facilitate the understanding of the
Pharmaceutical industry. Table 1 below provides a major classification of the disease
classes as identified by researchers worldwide.
Table 1: Major Disease Classes Worldwide
Major Disease Disease Breakdown
Colorectal cancer, Breast cancer, Lung/airway cancers,
Prostate cancer, Bladder cancer, Lymphomas, Multiple
myeloma, Stomach cancer, Melanoma and other skin cancers,
Cancer Uterine Cervical cancer, Pancreas cancer, Leukemia, Liver
cancer, Ovarian cancer, Mouth and throat cancers,
Esophagus cancer, Cervical cancer
Ischemic heart disease (angina heart attack), Cerebrovascular
disease (stroke), Other cardiovascular diseases, Hypertensive
Cardiovascular heart disease (angina, CHD), Inflammatory heart disease
(from Infection)
Migraine, Depressive disorders, Alcohol use disorders,
Alzheimer and other dementias, Insomnia (primary), Drug use
Central Nervous
disorders, Epilepsy, Bipolar disorder, Schizophrenia, Panic
System (CNS) disorder, Obsessive-compulsive disorder, Post-traumatic
stress disorder, Parkinson disease, Multiple sclerosis
Misc. digestive diseases, GERD, etc, Peptic ulcer disease,
Gastro-Intestinal Cirrhosis of the liver, Appendicitis
Tuberculosis, STDs excluding HIV, Chlamydia, Gonorrhea,
Syphilis, HIV/AIDS, Diarrhoeal diseases, Childhood diseases,
Pertussis, Measles, Tetanus, Poliomyelitis, Diphtheria,
Infections Meningitis, Streptococcus pneumoniae, Meningococcemia
without, Homophiles influenza, Hepatitis B, Hepatitis C,
Malaria, Lower respiratory infections including Influenza,
pneumonia, or others
Metabolic Diabetes
Muscular-skeletal Osteoarthritis, Rheumatoid arthritis
Respiratory Asthma, Chronic obstructive pulmonary disease
Skin Skin diseases
Urogenital Benign prostatic hypertrophy, Renal failure
Source: www.fuji-keizai.com/e/report/ww_drug_e.html

The essential focus of this study is the Allopathic Pharmaceutical Manufacturers and
distributors operating within Bangladesh both Local & MNCs.

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 Chapter 3
GLOBAL PHARMACEUTICALS
Table2: Global Pharmaceutical Sales, Global pharmaceutical sales grew by 5 percent in 2004
1997 - 2004
% Growth to USD 518 billion. For the first time, global
Global
over Prev
Year Sales
Year pharmaceutical sales surpassed the $ 500 billion
(US$B)
(Constant $)
threshold; and continuing to show the growing trend.
1997 289
1998 297 7
The global growth rate moderated as the market is
1999 332 11 increasingly influenced by pressures and uncertainties,
2000 357 10 including pricing, safety and regulatory issues.
2001 387 12
Nevertheless, market growth continues to reflect the
2002 426 9
unmet need for medications, as well as ongoing
2003 493 10
2004 518 5 demographic dynamics that are strengthening
All Information current as of Feb 05
Source: IMS Global
underlying demand. New opportunities are emerging in
markets such as China, and from sources of innovation in biotechnology, which will
continue to fuel future growth.

Cost Control & Rise of Generics

Factors contributing to growth in 2004 included a focus on cost containment by players in

major markets and the rise in
Figure 1: Global Pharm a Sales 1997-2004

600
the use of generics. In 2004,
500 generics accounted for more
400
than 30% of volume
300
200 consumption in the US,
100
Germany, Canada and the UK,
0
1997 1998 1999 2000 2001 2002 2003 2004 and 17% in the top 12
European markets.
Nevertheless, generics still only accounted for 8% of drug sales by value in North America
and Western Europe. IMS expects cost containment to increasingly impact the US market,
where volume increases will be the major driver of growth. The worldwide pharmaceutical

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market is expected to grow by 6-9% between 2005 and 2009. China, ranked as the ninth
largest individual market in 2004, is predicted to be ranked eighth by 2008, and possibly
higher, with 13-16% compound annual growth expected through 2008 – outstripping the
other major markets.
Blockbusters & Biotechnology

In 2004, 82 drugs qualified as blockbusters - defined as drugs with sales over $1 billion
annually -- 17 more than the previous year. Increasingly, blockbusters target specialist
markets such as Oncology, and are fueled by a surge in new products derived from
biotechnology. Last year, 11 blockbuster drugs originated from Biotech companies.
Biotech products accounted for 27 percent of the active research and development pipeline
and 10 percent of global sales in 2004. According to IMS, biotechnology drugs now
account for 27% of the active R&D pipeline and over the next five years, innovative
products derived from biotechnology will continue to grow in the double digits and
represent an increasing share of the overall market.

Nearly 48 percent, or $248 billion of all global pharmaceutical sales, were in North
America. Of the major pharmaceutical markets, China showed the strongest year-over-year
performance, growing 28 percent to $9.5 billion.

3.1 Regional Performance

North America, Europe and Table 3: Pharmaceutical Sales by Region, 2004 (in USD Billion)
% Growth Year-
Japan accounted for 88 percent 2004 Sales % Global
World Audited Market over-Year
(US$B) Sales
(Constant $)
of audited worldwide North America $248 47.8% 7.8%
pharmaceutical sales in 2004, the Europe (EU) 144 27.8 5.7
Rest of Europe 9 1.8 12.4
same level as in 2003. North Japan 58 11.1 1.5
Asia, Africa, Australia 40 7.7 13.0
America sales grew 8 percent, to
Latin America 19 3.8 13.4
$248 billion. Sales in the Total IMS Audited* $518 100% 7.1%
*Source: IMS Health Global
European Union rose 6 percent,
to $144 billion, while the rest of Europe saw sales growth of 12 percent, to $9 billion.
Japan realized modest year-over-year growth of 2 percent, to $58 billion.

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 Figure 2: Regional Sales Performance 2004
The Chinese market continued to grow
Asia, at a strong pace in 2004, up 28 percent
Africa, Latin
Australia America to $9.5 billion. China, currently the
4%
Japan 8%
11% North ninth-largest pharmaceutical market, is
Rest of America
47%
expected to become the world's eighth
Europe
2% largest by 2008 (Source: IMS Health).
Europe (EU)
28%

"At a time when pharmaceutical

growth is moderating in North America, Europe and Japan, China has emerged as a
significant growth market, which will support sustained global growth in the future," said
Graham Lewis, IMS vice president, Strategic Consulting.

3.2 Leading Therapy Classes

The ten largest therapy Table 4: Leading Therapy Classes by Global Pharmaceutical Sales,
2004
classes accounted for 33 Audited World Therapy 2004 % Global % Growth
Class Sales Sales Year-over-Year
percent of the total audited (US$B) (US$) (Constant $)
1. Cholesterol & Triglyceride
world market in 2004, Reducers
$30.2 5.8% 11.7%

representing more than 2. Antiulcerants 25.5 4.9 1.4

3. Cytostatics 23.8 4.6 16.9
$173 billion. Five of those 4. Antidepressants 20.3 3.9 1.3
classes -- cholesterol and 5. Antipsychotics 14.1 2.7 12.1
6. Antirheumatic Non-
13.1 2.5 3.3
triglyceride reducers, anti- Steroidals
7. Angiotensin-II Inhibitors 12.0 2.3 22.1
cancer agents, 8. Calcium Antagonists Plain 11.6 2.2 1.6
antipsychotics, 9. Erythropoietin Products 11.4 2.2 8.9
10. Anti-Epileptics 11.3 2.2 17.7
angiotension-II inhibitors Total Leading therapy classes* $173.3 33.2% 8.9%
Source: IMS MIDAS®, MAT Dec 2004
and anti-epileptics -- grew
more than 10 percent year-over-year. Angiotension-II inhibitors grew at a 22 percent pace
and anti-epileptics sales were up 18 percent.

Cholesterol and Triglyceride Reducers continued to hold the number-one position in

therapeutic classes worldwide, with sales of $30 billion, up 12 percent. Antiulcerants

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remained the second-largest therapy class, growing 1 percent to $25 billion, with growth
slowed by the transfer of Prilosec® to over-the counter status in the United States.

Future prospect of Anti Cancer Drugs:

In 2004, the Anti-Cancer class grew dramatically, overtaking Antidepressants and Mood
Stabilizers as the third-ranked therapy class. Sales for Anti-Cancer products were up 17
percent from 2003, to $24 billion. The rising sales of anti-cancer agents are another
example of biotechnology's impact in the global marketplace. In 2004, seven anti-cancer
drugs -- MabThera®, Glivec®, Eloxatine®, Gemzar®, Casodex®, Taxotere® and
Zometa® -- have achieved blockbuster status. Looking to the future, however, IMS expects
cancer drugs to challenge the other long-standing leaders. Combined, the L1
(antineoplastics) and L2 (cytostatic hormone antagonists) groups registered 17% growth in
2004. An increasing number of newer, targeted cancer therapies are seeing impressive
sales, such as Eloxatin, Glivec, Rituxan, and now Avastin – approved for colorectal cancer
but also reporting a survival benefit in non-small cell lung cancer in March 2005.

Oncology projects accounted for almost 30% of the total industry R&D pipeline as of
February 2005, and the cancer market is expected to be worth more than $40 billion by
2008, driven by an ageing population, better diagnostics, and the introduction of further
innovative products that have many years of patent protection ahead of them. Moreover,
cancer drugs cannot be impacted by over-the-counter switching, which has affected the
performance of classes such as non-sedating antihistamines and proton pump inhibitors,
and, following the first introduction of Zocor Heart Pro in the UK in July 2004, could catch
on for the statins.

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3.3 Leading Brands 2004
Though the top 10 individual pharmaceutical products had mixed fortunes, and reported
lower growth combined over 2003, they increased their global market share slightly in
2004 and achieved $53.6 Table 5: Leading Products by Global Pharmaceutical Sales, 2004

billion in sales. Pfizer's 2004 Sales % Global

% Growth
Sl Leading Brands Year-over-Year
(US$B) Sales
Lipitor again sold twice (Constant $)

as much as its nearest 1. Lipitor $12.0 2.3% 13.8%

2. Zocor 5.9 1.1 -6.4
rival, continuing its solid
3. Plavix 5.0 1.0 31.4
growth of 14% from 4. Nexium 4.8 0.9 25.3
2003 to reach annual 5. Zyprexa 4.8 0.9 -3.5
revenues of $12 billion 6. Norvasc 4.8 0.9 1.2
7. Seretide/Advair 4.7 0.9 22.5
in 2004. Given upcoming
8. Erypo 4.0 0.8 -4.1
patent expiries and safety
9. Ogastro 3.8 0.7 -3.5
concerns for rival statins, 10. Effexor 3.7 0.7 20.1
Lipitor's position appears Total Leading
$53.6 10.3% 8.6%
Brands*
unassailable, at least in Source: IMS MIDAS®, MAT Dec 2004
the short term... although, the fastest growing product in 2004 was Zetia, the cholesterol
absorption inhibitor from Schering-Plough and Merck & Co.

The most impressive performance within the top 10 came from sanofi-aventis and Bristol-
Myers Squibb's Plavix: the platelet anti-aggregant rose from eighth to third position in
2004, driven by promising trial results. The only new entry was Wyeth's SNRI
antidepressant Effexor, which replaced rival Zoloft from Pfizer in tenth place.

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3.4 Top 10 Companies by Sales: 2004
According to the IMS report 2004 the top 10 corporations accounted for sales of USD 289
Bllion in 2004. Which was around 56% of Global sales? Pfizer was the top with sales of $

Table 6: Top 10 Companies By Sales (in $

Figure 3: Market Share of top 10 Billions)
Companies 2004
MKt
Sl Company Name Sales
Share
P fizer Inc GlaxoSmithK
line 1 Pfizer Inc 52.52 10.14%
10%
9% Sanofi- 2 GlaxoSmithKline 39.22 9.14%
Aventis
Others 3 Sanofi-Aventis 35.42 7.57%
44% 8%
Novartis
4 Novartis AG 28.25 5.45%
5% 5 Roche Holdings Ltd 27.64 5.34%
Roche 6 Merck & Co Inc 22.94 4.43%
Bristol- 5%
M yers 7 Johnson & Johnson 22.31 4.14%
Squibb
Abbott
M erck & Co 8 AstraZeneca Plc 21.43 3.80%
3%
Laboratories AstraZeneca J ohnson & Inc
9 Abbott Laboratories 19.68 3.74%
4% J ohnson 4%
4%
4% 10 Bristol-Myers Squibb 19.38 3.35%
Total 288.78 55.75%
Source: IMS MIDAS®, MAT Dec 2004
52.52 Billion and a corresponding market share
of 10.14 %. As Pfizer and GlaxoSmithKline retained their first and second places, there
was a new arrival in the shape of Sanofi-Aventis, formed when Sanofi-Synthelabo
Source: IMS
(Ranked 14 in 2003) merged with Aventis (seventh). Both Sanofi-Aventis and Roche had
above average growth across all the major geographical markets during 2004.

3.5 Retail Drug sales in 13 key Pharma markets in 2004

IMS HEALTH reported a 6% growth in drug sales through retail pharmacies in 13 key
markets in the 12- month TABLE 7: KEY COUNTRY DRUG PURCHASES - RETAIL PHARMACIES
Retail 2004 in USD 2003 in USD %
period from January 2004 MM MM Growth
through to December SELECTED WORLD 347,497 315,888 10
NORTH AMERICA 184,573 170,878 8
2004, closing at US$347 U.S.A. 174,525 162,302 8
CANADA 10,049 8,577 17
billion. IMS Retail Drug
EUROPE (leading 5) 86,724 75,655 15
Monitor covers direct and GERMANY 25,097 22,725 10
FRANCE 21,248 18,432 15
indirect pharmacy channel ITALY 14,468 12,756 13
purchases from UNITED KINGDOM 15,628 12,981 20
SPAIN 10,283 8,761 17
wholesalers and JAPAN (*including Hospital) 57,627 53,109 9
LATIN AMERICA (leading 3) 13,289 11,932 11
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MEXICO 6,448 6,202 4
BRAZIL 5,035 4,173 21
ARGENTINA 1,806 1,557 16
AUSTRALIA/NEW ZEALAND 5,284 4,314 22
Source: IMSHealth - Retail Drug Monitor: 12 Months To Dec 2004
manufacturers in 13 key countries. Sales figures are at ex-manufacturer prices and include
all prescription and certain over-the-counter data. Figures include sales from the hospital
sector in Japan and mail order in the USA.

• Retail pharmacy sales for these key markets had a 6% growth at constant exchange to
December 2004.

• Sales in the top five European markets showed a 4% constant exchange growth, a
slight decrease from the previous IMS survey.

• North America posted an 8% sales growth at $184 billion in sales in the 12 months to
December. The Key therapy growth area for North America was the Central Nervous
System group with an 11% growth at constant exchange

• Japan’s overall growth at constant exchange decreased slightly by 1%, with a market
worth $57.67 billion in the 12 months to December 2004.

Table 8: Retail Sales By Therapeutic Category • US dollar Growth in the three Latin
Sales Sales American Markets decreased
2004 2003 %
(USD (USD Growth slightly from the last IMS survey.
MM) MM)
CARDIOVASCULAR 68,560 61,307 12
CENTRAL NERVOUS SYSTEM 64,733 57,274 13
ALIMENTARY/METABOLISM 49,584 46,481 7 • By therapeutic category the biggest
RESPIRATORY 30,013 28,001 7
ANTI-INFECTIVES 27,587 27,045 2
increases worldwide were the blood
MUSCULO-SKELETAL 22,577 19,720 14 agents and cytostatics categories,
GENITO-URINARY 18,574 17,455 6
CYTOSTATICS 17,293 14,715 18 with sales growth at constant
DERMATOLOGICALS 10,163 10,763 6
BLOOD AGENTS 12,710 10,480 18 exchange of 12%.
SENSORY ORGANS 7,049 6,386 10
DIAGNOSTIC AGENTS 6,393 5,760 11
HORMONES 5,603 5,012 12 • The single largest therapeutic sub
MISCELLANEOUS 4,127 4,029 2
HOSPITAL SOLUTIONS 2,022 1,933 5 category in dollar sales continues to
PARASITOLOGY 507 442 15
Source: IMS Health - Retail Drug Monitor: 2004
be the C10, hypolipidemia, class
selling $26.59 billion with a growth of 11.8% in the 12 months to December 2004, a

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 slight decrease from last IMS survey. The second biggest group is the A2, anti-
ulcerants, class at $21.99 billion and with a 0.5% growth.

• The best selling drug for the 12 months ending December 2004 was still Lipitor, worth
over $10.60 billion, with growth at 13.6%. Plavix still has the largest growth at the top
with 31%, a slight decrease since last survey. The five top drugs are 1. Lipitor, 2.
Zocor, 3. Nexium, 4. Plavix, 5. Norvasc

• The top 5 corporations in the year to December 2004 were in order: 1.Pfizer,
2.GlaxoSmithKline, 3.Merck, 4.Sanofi- Aventis, 5, AstraZeneca.

3.5.1 New Products 2004

According to IMS, last year's sales growth hinged on market traction from new products.
Among the notable new products introduced in 2004 were several potential blockbusters,
including Eli Lilly's Cymbalta(R) (for depression), Genentech's Avastin(TM) (for
colorectal cancer), Forest Laboratories' Namenda(R) (for Alzheimer's disease), Bristol-
Myers Squibb/Imclone's Erbitux(TM) (for colorectal cancer) and Merck/Schering-Plough's
Vytorin(TM) (for cholesterol reduction). The full impact of these launches, however, will
not be felt until later in 2005.

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 Chapter 4
BANGLADESH PHARMACEUTICALS INDUSTRY

4.1 History of Pharmaceutical Industry in Bangladesh

There are various types of medicines that are used in Bangladesh depending on the medical
practice, such as: Allopathic, Homeopathic, Ayurvedics, Herbal, Unani and so on. This
study is focused on the Allopathic medical practice, the modern Pharmaceutical industry.
The Non-traditional Medicines or Homeopathics, Ayurvedic s etc. are prepared from
plants, herbs, fruits, and flowers. They are relatively free from side effects. In fact not only
in Bangladesh there are rich verities of Herbal medicines worldwide. According to WHO,
herbal medicines have developed from the ancient times and further developed through the
ages of trials and reforms. It has stood test and are practiced all over the world. Bangladesh
also has a rich heritage of these kinds of non-chemical based medicine, which dates back
centuries. The modern Pharmaceutical industry of Bangladesh at present is one of the most

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promising sectors of the economy that after meeting 95-97% local demand increasingly
going for export.

4.2 Brief of Bangladesh Health Sector

Hospitals: According to the last official statistics total number of hospital in Bangladesh
were 1,382 wherein 670 were govt. and 712 were non-govt. (Source: BBS)

Physicians & Nurses: Total no. of registered physicians was 32,498. Persons per physician
are 4,043. Registered nurses were 18,135. (Source: BBS)

Govt. Expenditure on Healthcare: Total government expenditure on health including

family planning was BDT 23,450 million in 2003-2004 and per capita government
expenditure on health and family planning was USD. 4 in 2003-04. (Source: BBS)

Drug Manufacturers: At present, there are 231 Allopathic, 204 Ayurvedic, 295 Unani and
77 Homeopathic drug manufacturing companies in the country. They manufacture about
10,900 brands of medicine in different dosage forms. There are 1,500 (approx.) wholesale
drug license holders and about 50,000 (approx.) retail drug license holders in Bangladesh.
A detailed list of the manufacturers is provided in the Annexure. (Source: Directorate of
Drug Administration)

Drugs: There are about 450 generics registered in the country. Out of these 450 generics,
117 are in the controlled category i.e. in the essential drug list. The remaining 333 generics
are in the decontrolled category. The total number of brands /items that are registered in
Bangladesh is currently estimated to be 10,900, while the total number of dosage forms and
strengths are 8,300. (Source: Director of Drug Administration)

4.3 Market structure

Bangladesh Pharmaceutical market can be divided in terms of Geography, Demography as
well Medical Practice.

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4.3.1 Geographic Concentration
Though the market for the modern pharmaceutical products is pervaded all over the
country, the urban areas accounts for around 85% of the market due to higher purchasing
power. Five major districts (Dhaka, Chittagong, Comilla, Sylhet and Khulna) account for
70% of the entire market. A vast majority of people in rural areas seek treatment from
unqualified Allopaths, un-trained Paramedics, untrained Midwives and Traditional Healers
where quality control is virtually non-existent. The market for non-traditional medicine like
Unani, Ayurvedic, and Homeopath is also higher in rural areas. However that scenario is
gradually changing due to initiatives taken by the Govt. as well as the various NGOs
promoting modern treatment in the rural areas. The establishments of Thana Health
Complexes have also contributed to the spread of modern Healthcare system in the rural
areas. As a consequence the market of modern pharmaceutical industry is also expanding.

4.3.2 Demographic Concentration

Table 9: Demographic Concentration of The pharmaceutical market can also be grouped on
Population & Disease
Age Group 0-4 5-15 16+ the basis of demographic concentration. The main
Population 14% 31% 55% consumer of pharmaceutical products is people aged
Disease 24% 31% 45%
above 16 years. The population and concentration of
Source: Bangladesh Bureau of
Statistics disease by age is shown in table 9.

4.3.3 Major Disease Classes

The major diseases that people suffer from in the country are very much related to the
climate and economic standard of the people. Being a tropical country people suffers
regularly from Gastro Intestinal ailments among which Diarrhoeal disease is the most
recurrent and disease related to infection which accounts for almost one-third of all
diseases in the country, followed by anemia. Two other major classes of Disease in the
country is Common Cold and Pleurae related ailments.
Figure 4: Bangladesh Non Traditional &
4.3.4 Modern & Traditional Traditional Pharm a Market

Pharmaceutical Market Non

Veterinary
Traditional

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Generic
Bangladesh Pharmaceutical market can be divided into two major categories with one sub
category depending on the kind of medicine or medical practice used.

Traditional: Bangladesh has a rich heritage for traditional medicine like Unani, Ayurvedic,
Herbal & Homeopathic. As mentioned previously in 2004, there were 204 Ayurvedic, 295
Unani and 77 Homeopathic and Biochemic licensed manufacturing units. They produced
medicines worth Tk. 700 million in the year 2004.

Generic Drug Manufacturers’ Modern Pharmaceuticals Industry:

Unlike most of the import-based countries of South Asia and Africa, 95 percent of the total
Table 10: Veterinary Pharmaceutical Industry Overview
Market Size Tk.200-300 Crore
demand for modern Pharmaceutical
Market Growth Rate 10-15% stable products of Bangladesh is being met
• Marketing policy for Dairy and
Key Factors that drive
poultry by local manufacturing. The remaining
the growth of this
• Available quality product supply,
industry
Govt. loan 5 percent basically constitutes import
• Antibiotic
Major Therapeutic • Vaccine of very specialized products like
Class: • Sulphur
• Anthalmentics (anti warm) vaccines, anticancer products etc. The
• Coccidiostacs
• Renata- Everything but vaccine Pharmaceutical Industry of
Major players • Novartis- Vaccine
• Rampart Power Bangladesh contributed almost 1.30%
• Bayer Crop Science
Raw Material
30% import (China / Korea / India / of GDP roughly about BDT 30 billion
Japan). and 70% local
Source: http://w3.whosea.org/cntryhealth/bangladesh in 2004 (Source: Bangladesh Bank,
IMS), mostly around 85% contributed by the Local companies. At present there are 231
registered Drug manufacturers in the country, which are employing around 75,000 skilled
& unskilled employees.
Veterinary Pharmaceuticals: This industry is a sub category of the broad pharmaceutical
industry that we discussed earlier. This is a BDT 3 Billion industry. Being an agro based
country there is good growth potential for this sector in
Table 11: Domestic
Bangladesh. We can see a brief overview of this sector in Pharmaceutical Market Size:
1995-2004
table 10. Market Size (BDT
Year
MM)
1995 11,316
1996 12,819
4.4 Pharmaceutical Market Size 1997 14,500
Bangladesh 1998 16,000
1999 15,520
2000 17,922
-17- 2001 22,371
2002 24,734
2003 26,385
2004 28,654
Source: IMS
The pharmaceuticals sector in Bangladesh is recognized as one of the fastest growing
industry with an annual average growth rate of 14-16% p.a. and market size of around BDT
30 billion including export proceeds. According to IMS the growth rate in 2004 stood at
16%.

4.4.1 Bulk & Formulation Market

The Pharmaceutical market of Bangladesh can be further divided in terms of Bulk and
Formulations sales. However Bangladesh Pharmaceutical market has developed mainly in
the formulations side rather than Bulk segment. Bulk drugs accounts for around 4-5% of
total Pharma production. There are now 13 drug manufacturing units, which also
manufacture certain basic materials or Bulk Drugs. These include Paracetamol, Ampicillin
Trihydrate, Amoxycillin Trihydrate, Diclofenac Sodium, Aluminium Hydroxide Dried Gel,
Dextrose Monohydrate, Hard Gelatin capsule shell, Chloroquine Phosphate, Propranolol
Figure 5: Bulk & Formulation Market Bangladesh 1989-2004 (BDT MM)

35000

30000

25000

20000

15000

10000

5000

0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Form ulations BULK

Hydrochloride, Benzoyl Metronidazole, Sodium Stibogluconate (Stibatin) Pyrantel

Pamoate etc. However, most of these are confined to the last stage of synthesis.
Source: BAPI
-18-
4.5 Fragmentation
Presently, local & MNC manufacturers together Figure 6: Market Share of 231
Pharm a Companies 2004
meet 95% of country’s drug demand. The market is M kt.
M kt.
Share of
Oligopolistic in nature despite the presence of 231 Rest 216 Share of
Top 15
(93%)
(7%)
government approved/licensed firms, of which 30 Firms
29% Firms
71%
are large-scale units meeting 95-97% of the total
local demand. Bangladesh pharmaceutical industry is mainly dominated by domestic
manufacturers. Of the total pharmaceutical market of Bangladesh, local companies are
enjoying a market share of around 85 percent, while the multinationals are having a market
share of 15 percent. Another notable feature of Bangladesh Pharmaceutical industry is the
concentration of sales among a few numbers of Top firms. Here the top 15 players or 7% of
the manufacturers control around 71% of the market. The rest 93% of the market players
control the rest 29% of the market.

4.5.1 Top Pharmaceutical Companies by Sales Value 2004

According to IMS report 2004 out of the top 10 pharmaceutical companies in Bangladesh,
eight are local pharmaceutical companies; while two are MNCs namely Glaxo & Sanofi-
Aventis. The top 15 companies accounted for more than 71% of market share making a
sale of more than BDT 20 Billion in 2004.
Table12: Ranking of the top Pharmaceutical players 2004 (Sales Value).
Rankings Manufacturer Quarter (4Q, 2004) 12 Months, 2004
12 M QTR Values+ 000 Share % Growth% Values+ 000 Share % Growth%
Market Size 7,169,566 100.0 0.3 28,654,395 100 8.6
1 1 Square 1,120,748 15.63% 0.9 4,361,210 15.2% 9.2
2 2 Beximco 593,356 8.28% 0.3 2,539,963 8.9% 15.3
3 3 Acme 381,007 5.31% 5.3 1,500,327 5.2% 6.8
4 5 Sanofi Aventis 350,436 4.89% -15.4 1,497,521 5.2% -13
5 4 Incepta 368,499 5.14% 27 1,406,481 4.9% 39.8
6 6 Eskayef 319,244 4.45% 14.7 1,252,339 4.4% 12
7 7 Opsonin 319,022 4.45% -4.3 1,241,388 4.3% -5.1
8 8 GSK 300,233 4.19% -8.4 1,147,717 4.0% -3.4
9 9 Renata 271,821 3.79% 20.2 1,065,318 3.7% 28.3
10 10 Drug Inter. 254,456 3.55% 5.9 1,016,808 3.5% 13.1
11 11 ACI 243,897 3.40% 0.5 961,681 3.4% -2.2
12 13 Aristopharma 177,242 2.47% -1 715,293 2.5% 14.5
13 12 Orion 184,286 2.57% 21.1 697,535 2.4% 24.5
14 14 Sandoz 144,373 2.01% 25 544,203 1.9% 14.3
15 15 General Pharma 130,926 1.83% 13 478,533 1.7% 18.3
Source: IMS
-19-
The top two domestic manufacturers, namely Square and Beximco Pharma are having a
market share of about 25 percent (combined sale of BDT 7 Billion) of the total
pharmaceutical market of the country.

The finished formulation manufacturing base of Bangladesh is very strong as most of the
pharmaceutical
Figure 7: Market Share of top Manufactureres by Sales
companies have their Value 2004
Orion
own manufacturing Drug Inter. AC I
4% 3%A ristopharma
2%

2%
facilities. As we can see Opsonin
Sandoz
2%
R enata
4% GSK
in table 12 above though Eskayef
4%
4%
4%
General
2%
according to cumulative Incepta
5%

result Incepta was in the

5th position, in the last
quarter of 2004 Incepta Sanofi Aventis
Others
5%
30%
th
came up as the 4 Acme
5%
B eximco Square
15%
9%

position pulling Aventis

in the 5th position. The growth rate of Incepta is quite high, in fact among the top 15 Incepta
recorded the highest growth rate in 2004 around 40%.

The top 2 MNCs namely Aventis & GSK both experienced negative growth. Aventis
experienced a negative growth –13% whereas GSK experienced a negative growth of –
3.4%.

-20-
 4.5.2 Top Pharmaceutical Companies by Unit Sales 2004

In terms of Unit sales the similar concentration has been observed. According to IMS in

Table 13: Ranking of the top Pharmaceutical players as per IMS 4TH Quarter Report. In terms
of Unit Sales
Rankings Manufacturer Quarter (4Q, 2004) 12 Months, 2004
4Q 12M Units+ 00 Share % Growth% Units+ 00 Share % Growth%
Market Size 92,207.90 100 -3.1 376,631.60 100 3.6
1 1 SQUARE 14,297.40 15.51% 1.2 55,735.00 14.80% 6.7
2 2 BEXIMCO 7,707.80 8.36% -14.1 34,875.50 9.26% 8.7
3 3 ACME 6,661.70 7.22% -1.8 26,936.50 7.15% 4.5
4 4 OPSONIN CHEM 5,964.00 6.47% -12.4 22,936.80 6.09% -8.2
6 5 SANOFI AVENTIS 4,450.00 4.83% -21 19,118.40 5.08% -16.1
5 6 GLAXOSMITHKLINE 4,634.10 5.03% -12.1 19,033.60 5.05% -4
8 7 RENATA 3,636.70 3.94% -1.6 15,679.70 4.16% 3.8
7 8 A.C.I 3,844.50 4.17% 4.4 15,212.80 4.04% -3.6
9 9 ESKAYEEF 3,045.10 3.30% 5 12,254.40 3.25% 5.3
10 10 INCEPTA PHARMA 2,861.90 3.10% 26.5 10,787.80 2.86% 44.6
11 11 GACO 2,359.80 2.56% 19.9 8,720.30 2.32% 9.2
12 12 JAYSON 2,184.40 2.37% -4.7 8,515.80 2.26% -4.1
13 13 OPSO SALINE 2,106.00 2.28% 5.9 8,132.50 2.16% 9.8
14 14 IBN SINA 2,105.20 2.28% 9.6 8,023.60 2.13% 13
16 15 ARISTOPHARMA 1,732.60 1.88% -13.5 7,220.20 1.92% 5
Source: IMS
2004 the Pharmaceutical manufacturers made a total sale of 377-million units of
pharmaceutical products in the Figure 8: Market Share of Top 15 in term s of Unit
Sales (2004)
OPSO SALINE
domestic market, which is a 4% INCEPTA GACO
J AY SON
2.26% 2.16% IBN SINA
ESKAY EEF 2.86% 2.32% ARISTOPHARM
2.13%
growth over the previous year. 3.25% A
1.92%
A.C.I
Among the top 10 we see from 4.04%

table 13 two are MNCs and the rest RENATA Others

4.16% 27.47%
GSK
are local companies. 5.05%
SQUARE
14.80%
SANOFI
BEXIM CO
AVENTIS
As we had seen earlier the 5.08%
ACM E
7.15%
9.26%
OPSONIN

concentration ratio of sales to No. 6.09%

of players is quite similar in this

case too. The top 15 players control almost 72% of the market and the rest control the

-21-
remaining 28% of the market. Similarly Beximco & Square the top 2 players of the market
control around 25% of the market. Again Square is top manufacturer in terms of unit sales
with a total sale of 56 million units followed by Beximco with a unit sales figure of around
35 million (Source: IMS).

However the ranking in terms of unit sale shows some differences from that of sales value.
We see Incepta and Eskayef has a different ranking when comes to sales by unit.
Previously Incepta & Eskayef was holding the position of 4th & 5th respectively in terms of
sales revenue. But in terms of unit sale Incepta & Eskayef is ranked as 10th & 9th
respectively in 2004. This is mainly because they operate in relatively higher margin
products. Again we see Incepta showing the highest growth rate. In 2004 unit sale of
Incepta recorded a 45% growth over 2003. Whereas the leading MNC Aventis again
recorded a negative growth of –16.1 % and the other MNC GSK also recorded a negative
growth of - 4% in 2004.

4.5.3 Top Pharmaceutical Companies by Number of Products

Table 14: Top 10 Manufacturers by Total
no. of Products 2004 Bangladesh Pharmaceutical industry is still at its
Rank Manufacturer No. of Brands
1 Square 204
growth stage. The market has experienced a
2 Opsonin 173 tremendous rate of new products introduction
3 Beximco 170
4 GACO 154 enjoying the patent free market Environment. As of
5 Aristopharma 139
6 ACME 129 2004 Square held the top position in the market with
7 Incepta 127
8 Drug Inter. 127
their 204 brands of generic formulations. Opsonin
9 ACI 127 & Beximco held 2nd & 3rd position respectively with
10 Sanofi Aventis 113
Source: IMS 173 & 170 no. of brands respectively. Incepta, the
youngest player among the top 10 market leaders, is ranked 8th with a total brand of 127
generic formulations.

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4.6 Therapeutic Segments
Formulations are end products of the pharmaceutical manufacturing process. There are
different therapeutic usage segments, each segment characterized by different market size,
growth rates, and competitive scenario. The domestic pharmaceutical market is mainly a
formulation market catering to the different therapeutic demands of the industry. Anti-
Table 15: Top 10 Therapeutic Class (TC) 2004
Ulcerants remains VALUE IN VALUE IN SHARE GROWTH
RANK TC NAME
USD BDT % %
the largest sector in 1 ANTIULCERANTS 61,544,860 3,631,397,381 12.78% 14.12%
the Bangladesh CEPHALOSPORINS &
2 49,259,058 2,905,590,592 10.23% 12.47%
COMBS
market, contributing 3 FLUROQUINOLONES 26,791,716 1,581,244,549 5.56% 4.37%
ANTIRHEUMATIC NON-
4 25,337,359 1,495,093,347 5.26% 1.93%
as much as 13% of STEROID
BORAD SPECTRUM
5 20,979,658 1,237,473,576 4.35% -1.39%
the total market size PENICILLIN
NON-NARCOTIC
in 2004. Growth in 6 15,310,646 903,635,272 3.18% 14.92%
ANALGESICS
MED+NARROW
this segment has 7
SPECTRUM PENIC
12,940,168 763,349,402 2.69% -6.99%
ANTIHISTAMINES
been consistent with 8
SYSTEMIC
12,634,671 745,143,716 2.62% -1.28%
9 ORAL ANTIDIABETICS 10,710,109 632,074,086 2.22% 16.46%
increasing
MULTIVITAMINS +
10 10,219,416 604,283,780 2.13% 82.77%
urbanization. The MINERALS
Source: IMS
Bangladeshi market
is mirroring the developed markets with the lifestyle-disease segment registering the
highest growth. The high rate of new product introduction as well as continuing
urbanization and lifestyle changes are likely to drive volumes in the Anti-Asthmatic,
Cardiovascular, Central Nervous System, Anti-Diabetic and Anti-Ulcerant segments. These
segments are also expected to become increasingly competitive as the number of players
rises.

The top 10 therapeutic classes accounted for around 52% of total market size in 2004. The
largest growth occurred in the area of Multi Vitamin & Minerals class (83%). This
indicates a growing trend in life style drugs category.

-23-
 Figure 9: Top 10 Therapeutic Class Market Share 2004
16.00%

12.00%

8.00%

4.00%

0.00%

Source: IMS

4.6.1 Top 10 molecules

In the molecule segment Ranitidine ranked the top with 7.11% market share with a growth
Table 16: Top 10 Molecules 2004
of 7.15% over previous
VALUE IN VALUE IN SHARE GROWTH
RANK MOLECULE
year sales. The vitamin USD BDT % %
1 RANITIDINE 34,041,633 2,007,769,101 7.11 7.15
molecule segment
2 AMOXICILLIN 21,140,976 1,247,024,693 4.41 -1.16
experienced a huge 70% 3 CEFRADINE 18,936,793 1,117,237,577 3.95 5.22
4 OMEPRAZOLE 17,745,883 1,048,039,895 3.71 29.50
growth, which indicates a
5 CIPROFLOXACIN 17,383,773 1,026,053,750 3.63 -1.46
rising demand for lifestyle 6 ASCORBIC ACID 12,989,569 767,437,746 2.72 75.68
7 CEFTRIAXONE 11,484,120 677,020,019 2.40 12.95
drugs as discussed earlier.
8 PARACETAMOL 10,878,579 641,976,325 2.27 13.51
As we see in table16 the 9 VITAMIN E 9,393,562 555,167,162 1.96 69.91

top 10 molecules 10 DICLOFENAC 9,181,068 541,830,758 1.92 -1.51

Source: IMS
accounted for a total sale
of BDT 9.6 billion which is around 34% of the total domestic market.

Table 17: Top 10 Brands in terms of Sales Value 2004

Sl. Brand Company
Sales Value (BDT Mkt share
‘000) (%)
% +/- 4.6.2 Top 10 brands
1 Neoceptin-R Beximco 473,275 1.65% 23.10% 2004
2 Neotack Square 314,038 1.10% 19.40%
3 Napa Beximco 298,007 1.04% 22.70%
4 Fimoxyl Snaofi Aventis 267,464 0.93% 10.80%
5 Losectil Eskayef 248,146 0.87% 11.50%
6 Seclo Square 223,991 -24-
0.78% 55.40%
7 Lebac Square 207,156 0.72% 24.80%
8 Ciprocin Square 204,052 0.71% 6.00%
9 Sefrad Sanofi Aventis 195,143 0.68% -13.40%
10 Ranitid Opsonin 194,969 0.68% -0.60%
Source: IMS
Dugs manufactured by the top players of the industry dominated the leading brands market
in 2004

4.6.2.1 By Value

Of the 10 top selling brands 8 belong to the top 4 manufacturers of the industry. As can be
seen in table 17 the top 10 brands accounted for a total sale of around BDT 2.6 Billion,
which is around 9% of total market size. Neoceptin-R of Beximco topped the list with a
sale of BDT 473 Million, closely followed by Neotack of Square with sales of BDT 314
Million. The top brands are very consistent with the disease associated with tropical
ailments e.g. seasonal cold, gastric problems etc.

4.6.2.2 By Unit Sales

Sales volume showed a different

Table 18: Top 10 Brands by Sales volume 2004
Sl. Brand Company Sales Unit (+00) Mkt share % +/- composition than that of sales
1 Napa Beximco 7,731.3 2.05% 7.20%
2 Betnovate GSK 4,450.3 1.18% 1.80% value for the Pharmaceutical
3 Fimoxyl Sanofi Aventis 3,778.7 1.00% 10.80% products. The top 10 products
4 ACE Square 3,759.6 0.86% 21.40%
5 Orsaline SMC 3,234.2 0.86% 20.10% accounted for a total of 37 million
6 Aristovit Beximco 3,082.4 0.82% 10.40% unit sale in 2004, commanding a
7 Nebanol Square 2,871.1 0.76% -8.80%
8 Beonvex Renata 2,869.1 0.76% -6.70% market share of around 10%.
9 Dextrose Opso Saline 2,620.0 0.70% -3.60% However, even in term of volume
10 Brodil ACI 2,535.0 0.67% 11.30%
Source: IMS sale Beximco is ranked No. 1 with
their product Napa. In 2004 Napa of Beximco recorded the highest volume of sales with
sales of 7.7 million units as we see in table 18. Betnovate of GSk & Fimoxyl of Aventis
ranked 2nd & 3rd respectively. As we had seen earlier again the top selling brands are in the
category of diseases like Diarrhoea, Cold, fever, Ulcer, Anemia etc.

4.7 New Product

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Bangladesh Pharmaceutical market is increasingly moving towards the practice of R&D
investments and introduction of new products in Figure 10: Market share of New
& Old products 2004
the market. In 2004 alone a total of 1,052 new M kt
Share
M kt Old
brands of formulations were launched in share P roduc
New ts 2004
Bangladesh pharmaceutical market. In 2004 the P roduc 95%
ts 2004
new products generated a sale of total BDT 1.41 5%

Billion in the domestic market, which

Table 19: Top 10 Manufacturers by No. of New Product
Launch: 2004 is around 5% of the total domestic
Rank Manufacturer No. of New Products Launched
Market 1,052 market size. (Source: IMS). Among
1Beximco 62
2Incepta 53
the New Products (<13 months) during
3Square 47 the year 2004 Proviten A-Z of Incepta
4Aristopharma 43
5General 41 held the top position. In the top twenty
6Drug Inter. 37
new product list five products from
7ACI 37
8Eskayef 35 Incepta, four products from ACME,
9Orion 33
10Silva Pharma 32 three products from Square and three
Source: IMS
products from Renata were included.

In the new products category multivitamin and multiminerals are the main segment.
Gatifloxacin, Valdecoxib, Ambroxol, Amlodopine and Atenonol combination, Clopidogrel
and Aspirin combination, Flupentixol and Melitracen combination, Diofnin and
Hesperidine combination captured good market share.

4.7.1 New Product Launch Top 10 Firms

Beximco ranked top with a launch of 62 new products in 2004. Incepta was ranked 2nd with
a total of 53 new products launched in 2004. The top 10 firms in table 19 launched a total
of 420 new drugs in 2004, which is around 40% of the total new drugs launched in
Bangladesh market in 2004. This indicates a healthy practice among the Pharmaceutical
manufacturers in Bangladesh. To survive after 2016 Bangladeshi pharmaceutical
companies must focus on R&D as well as new product development, which is key to
survival in the global Pharmaceutical industry.
4.7.2 New Product Revenue Top 10 Firms 2004

-26-
Out of the BDT 1.41billion new product Table 20: Top 10 Manufacturers by Sales
Revenue from New Product: 2004
market the top 10 manufacturers earned
Rank Manufacturer Sales (BDT 000)
revenue of BDT 1.06 Billion from their new Market 1,407,341
1 Incepta 207,934
products in 2004. Incepta ranked no. 1 in 2 Square 205,375
3 ACME 122,471
terms of revenue from new products with 4 Aristopharma 114,263
sales of BDT 208 Million. Square generated 5 Orion 86,492
6 Beximco 85,569
second highest revenue with sales of BDT 205 7 Renata 68,075
8 Opsonin 64,979
Million. The top 10 firms accounted for 75% 9 Eskayef 62,598
of the total new product sales revenue in 10 IBN Sina 37,611
Source: IMS
2004. BDT 168 Million worth of sales was
generated from the 5 leading new products of Incepta.

One notable feature of the new product market is that the top manufacturers are all
domestic manufacturers; the MNCs are not showing the sagacity in terms of introducing
new brands as the local manufacturers.

4.7.3 Top new Products 2004 by sales value

In 2004 among the Table 21: Top 15 New Products 2004 by Sales Value
Rank Product Manufacturer Sales (+000) Mkt Share
1,052 new products
Market 1,407,341 100.00%
the top 15 1 PROVITEN A-Z Incepta 93,143 6.62%
2 FILNEL-GOLD Square 69,822 4.96%
generated revenue
3 VERTEX Orion 46,777 3.32%
of BDT 487 4 NUTRUM-PN ACME 40,764 2.90%
5 OVEL Aristopharma 35,213 2.50%
Million, which is
6 TIXI Square 32,704 2.32%
around 35% of the 7 PROVITEN SILVER Incepta 20,839 1.48%
total new product 8 VALCOX Opsonin 20,247 1.44%
9 NUTRUM-SUPER ACME 20,168 1.43%
market size. As 10 PPI ACME 19,660 1.40%
shown in table 21 11 FIXOCARD Incepta 19,341 1.37%
12 GATLIN Renata 17,356 1.23%
among the top 15 13 OSARTIL-50 PLUS Incepta 17,339 1.23%
new products of 14 GATIFLOX Incepta 17,314 1.23%
15 CLOGNIL PLUS Orion 16,653 1.18%
2004 Proviten A-Z Source: IMS
of Incepta recorded the highest amount of sales of BDT 93 Million. Flinel-Gold of Square

-27-
was ranked 2nd with sales revenue of BDT 70 Million. This was followed by Vertex of
Orion with a sale of BDT 47 Million.

4.8 Consolidation
Though Bangladesh Pharmaceutical Market is yet to see any large scale mergers or
acquisitions among the top players, increased buy-outs of brand and manufacturing
facilities may be witnessed as 2016 approaches; however, it is unlikely that any large
value-comprehensive mergers among the top tier-Bangladeshi companies since most of
them are trying to be increasingly vertically integrated and taking initiatives for setting up
of raw material plants. MNCs are unlikely to acquire domestic firms owing to patent
infringement. Furthermore, the MNCs have increasingly begun to outsource manufacturing
hence unlikely to acquire further manufacturing capacity.

4.8.1 Toll Manufacturing

Nowadays, most of the companies are not interested to invest in manufacturing facilities.
Rather companies prefer to outsource their manufacturing to any low cost manufacturing
unit, which is called “toll manufacturing”. Considering the “cost-benefit” of their
investments, most of the companies use all of their resources and expertise in marketing.
With regards to manufacturing, most of the companies in developed markets are now going
for “toll manufacturing”. As Bangladesh has a very strong manufacturing base in
pharmaceuticals, other countries could get their products manufactured in Bangladesh
through “toll manufacturing”. Needless to mention that huge investment has taken place in
this sector during the last few years and a number of companies have already constructed
facilities as per USFDA and UKMHRA standard and are going for certification in the
regulated markets. It is probable that Global Pharmaceutical giants may consider
Bangladesh Pharmaceutical companies to be their outsourced manufacturing base.

4.8.2 Joint-Venture Opportunities

-28-
Since India and China have very good expertise in API and formulation R&D, they may
like to manufacture the APIs outside their countries as they cannot manufacture these
“patented” APIs in their countries after 2004. Because of cost advantage, large
pharmaceutical companies of highly regulated markets are now going for joint venture
projects. They have already signed several contracts with companies of India and China.
Bangladesh also has enormous opportunities to go for joint ventures with these large global
companies for manufacturing pharmaceutical finished products.

4.9 Marketing & Distribution

The Bangladeshi market is heavily focused on marketing due to a lack of differentiation in

product offerings. Most importantly, promotion of pharmaceutical products is also
restricted by the rules and regulations of Drug Administration Authority, namely
Directorate of Drug Administration (DDA). DDA has a detailed Code of Pharmaceutical
Marketing Practices (CRMP) to control the promotion of Pharmaceutical products in
Bangladesh. The code can be read in detail in www.ddabd.org. No media promotion is
allowed. TV, Radio and Newspapers or any other printed media cannot be used and no
direct advertising to the public can be done.

4.9.1 Promotional tools

The key to a pharmaceutical product success remains marketing and being among the first
three companies to launch the product. Largely doctor prescriptions in the case of ethical
drugs and retailers in the case of OTC products drive the end consumer demand. The main
promotion is done through gift items and Physician’s sample. Some companies are taking
innovative steps to attract chemists through gift items. Promotional discount is also a very
common tool to attract chemists in case of bulk purchase.

4.9.1.1 Medical Promotion Officers

-29-
By nature pharmaceuticals industry is quite aggressive in marketing their products and
personnel selling is the main marketing technique used. This personnel selling is done by
sales representatives/ Medical Promotion Officers (MPO) of the pharmaceutical
companies. These people are basically their sales persons and the sales department controls
them.

Doctors are provided with a lot of literature about all the products and samples are also
provided. In fact the company designs special packs for sample medicines. Apart from this,
the sales representatives develop a personal relationship with the doctors and giving small
gifts, wishing the doctor on his/her birthday etc. is very common.

4.9.2 Distribution

The Medical Promotion Officers (MPO) plays the key role in distribution channels of the
pharmaceutical industry.
Figure 11: Distribution
MPOs procure orders from Dynamics
the four broad categories of
Suppliers Distributors
customers as seen in figure
11 and places the same to Doctors/Chemists
Factory Depots
sales depots. Sales depots M
P
accordingly advise the Retailers
O
S
factory through the
Clinics/Institutions
centralized sales
Source: BAPI
department. Commercial
department procures the raw material from the supplier and feed the factory that produces
the formulations for supply to the Depots. MPOs use the delivery fleet to distribute to
different client segments. In addition to that the marketing and sales department procures
bulk orders from Govt. and institutional sales.

The overall pharmaceutical market consists of around 70,000 pharmacies/chemists

including unlisted ones, who mainly constitute the retail market for pharmaceutical
products. There are about 25,000 graduate doctors and Rural Medical Practitioners (RMPs)

-30-
who play a major role in sale of pharmaceutical products. To note, the Doctors and RMPs
generate 45% of total pharmaceuticals sales of the country. The institutional buyer segment
is represented by NGOs, hospitals that include Govt., private, specialized, Thana Health
complexes and clinics as well as other organizations, which procure medicines for their
own consumption.

4.10 New Investments in the last 5 years

The country's pharmaceuticals sector witnessed an investment boom in the last couple of
years as around BDT 25 billion have been ploughed into it alone. Investment worth BDT
20 billion is on way as the government has decided to set up an API Park in Chittagong
with the facility to house 20 plants. In the last few years as many 10 companies each
investing BDT 400 million or more have emerged. Some are already marketing their
products while others are in the process. The leading companies are also taking innovative,
forward-looking steps. They have set their eyes firmly on the WTO's TRIPS and Public
Health agreement, which promises Bangladeshi companies the opportunities to export
billions between 2005 and 2016.

• Both Square and Beximco have gone in for additional new modern manufacturing
plants in line with international guidelines for CGMP. (Current good Manufacturing
Practice)
• Square invested BDT 240 Crore in a plant at Kaliakoir, Gazipur, near Dhaka recently.
Commissioned in June 2002, it is built as per requirements of the US FDA (Food &
Drug Administration) code of Federal Regulations to ensure CGMP compliance is
being readied for UK MCA and US FDA approvals.
• In Beximco’s case, its new plant, meeting requirement of US and European markets,
has completed installed advanced and sophisticated manufacturing equipment. Both
these companies have planned the finest facilities of global standards with the
objective of getting into contract manufacturing for overseas companies in the near
future.

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• Other than Square and Beximco, other companies are also increasingly going for
international standard manufacturing facilities. Acme Laboratories ranking third has
one plant set up in 1983 and has spent BDT 70 Crore to refurbish its plant and has
invested another BDT 20 Crore for a separate plant. Opsonin will invest more than Tk
100 Crore to build up a new plant in Barisal. Orion also has a plan to set up a Tk 100
crore plant at Bhaluka, Mymensingh.
• Not only the big shots but also mid-ranking and new houses have also come up with
big investments. Renata bought 55 acres of land in Gazipur to set up a new plant at a
cost of Tk 70 crore.
• Incepta has built up a new plant at Ashulia, Dhaka with an investment of around Tk 70
crore. Aristopharma has bought several plots in Narayanganj BSCIC estate to set up its
new plant. At present, over 300 companies have licenses for producing drugs in the
country but only about 100 are in operation and 30-40 is active, industry sources said.

New and old pharmaceutical companies are making investments in a big way in the sector,
seeing immense export prospects of their products. Newcomers -- Silva, Mystic, Apex,
Rangs, Popular, Marksman and Healthcare pharmaceuticals -- have already invested
around Tk 40-Tk 50 crore each. An Indian company -- Sun Pharmaceuticals -- also made
its debut in Bangladesh early last year. It has become evident that to satisfy the market in
Europe there is no alternative to set up highly equipped plants, which are, environment
friendly, FDA and ISO certified. They should also have machineries imported from
European countries and use raw materials from the same source.

4.11 Cost Analysis

The three major cost heads for the Bangladeshi pharmaceutical industry are –
• Material costs
• Marketing and selling expenses
• Employee costs

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4.11.1 Material Costs
Material costs account for over 38% of the total cost of goods sold of the top 15
pharmaceutical firms. The share of material costs, however, increased between FY 2002-
03 and FY 2003-04 from 31.5% to 38.5%. The primary reasons for this reduction were –
• Increase of Raw materials price in international market
• Devaluation of Local currency against foreign currency during import of Raw
Materials.

4.11.2 Marketing and Selling Expenses

Selling, Marketing and Administrative expenses take away 65.2% of the gross margin
(GM). Because this industry is heavily dependent on sales persons and personal promotion
this cost is quite logical. The share of these costs decreased in the last two years from
67.4% to 65.2% of the GM. Domestic firms averaged at 62.3% of their Gross Margin in
2003, whereas MNC’s averaged at 70% in 2003. Historically MNCs always averaged
higher than their domestic peers.

4.11.3 Employee Costs

The third highest heading for costs in the Bangladeshi
Table 22: Typical Cost Structure of A
pharmaceutical industry saw an increase between FY Pharma Company
Sales 100.0%
2002-03 and FY 2003-04, from 30.4% to 37.8% of cost Excise duty/VAT -14.0%
of goods sold. The employee costs for MNCs were Net sales 86.0%
Cost of Goods Sold -60.5%
significantly higher than those of domestic firms at Gross Margin 35.5%

37% of COGS versus 24% for domestic firms. Salary, Operating Expense -20.0%
EBIT 15.5%
Wage and Allowance cost increased for both local and Other Income 4.0%
Tax -3.5%
multinational firms due to growth in the industry to
Net Income 16.0%
avail TRIPS benefit, which created higher demand for Source: Primary

skilled manpower.

There exists a high turnover rate in several segments of the pharmaceutical industry. The
entry of MNCs post-2005 is also likely to lead to a rise in the attrition rates in

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administrative and R&D segments in the short term. Companies are beginning to consider
ESOPs and performance linked bonuses as means to retain talent.

4.12 Margins
Figure 12: Trend in Profit Margin
The operating profit margins 25

(OPM) of the Bangladeshi

20
pharmaceutical industry have
15
shown a steady growth over the
past five years. Although there 10

were increases in material as well

5
as employee costs, decrease in
Selling, Marketing & 0
FY 1999 FY 2000 FY 2001 FY 2002 FY 2003
Administration cost as well as Operating Income Net Profit

efficiency in other production

factors e.g. overhead made this possible. Domestic pharmaceutical firms were able to
achieve better OPM s than their MNC peers on account of lower employee costs and lower
R&D cost.

The net profit margin has been showing a slow but steady improvement over the last five
years and remained over 13.5%. The attempt to lower the interest rate by Bangladesh bank
along with the promises in the industry helped lowering operating expenses. Although
consistent devaluation of BDT against Dollar increased the import cost which hampered
the profitability of the companies relaying heavily on import of basic materials.

The local firms are showing a better trend in profit margin as they are now focusing in to
export more than selling locally. This may significantly lower the marketing & selling costs
and thus resulting in better margins.

Still the volatility in currency rate and other external environmental factors are playing
significant role for the relatively low NPM. As the companies will concentrate more on
producing basic chemicals locally rather than importing, the margin will be better.

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4.13 Brief of Top Industry Players

4.13.1 SQUARE PHARMACEUTICALS LIMITED

Operation Started: 1985

Vision, Mission & Objective: The Vision statement of Square is “We see business as a
means to the well-being of the investors, employees and the society at large, leading to
accretion of wealth through financial and moral gains as a part of the process of the human
civilization.”
To achieve this vision their mission is described, as “Our mission is to provide quality
& innovative healthcare relief for people, maintain stringently ethical standard in
business operation also ensuring benefit to the shareholders and other stakeholders.”

Product Range: Tablets, Capsules, Suppositories, Injections, Liquids, Spray, Drops,

Ointment, Cream and Powder, Oral Dry Powders, Dry Powder Inhalers, Metered Dose
Inhalers

Exports: Square Pharmaceuticals Ltd. now Exports to 23 different countries.

Asia: Bhutan, Cambodia, Malaysia, Maldives, Myanmar, Pakistan, Papua New Guinea,
Philippines, Nepal, Sri Lanka, Vietnam, Yemen.
Africa: Ethiopia, Ghana, Kenya, Libya, Mauritius, Mozambique, Sierra Leone, Tanzania,
Europe: Kosovo, Russia, Ukraine

Human Resource: Square has a total Human Resource of 1,962 employees with 56
managers, 195 executives and rest
Table 23: Financial Snapshot: Square Pharmaceuticals ( BDT M)
are either non-executives or field 2003-04 2002-03 2001-02 2000-01 1999-00
Turnover (Gross) 5,482,088 4,729,743 4,234,244 3,451,523 2,655,952
workers.
Value Added Tax 760,536 663,892 563,433 450,577 342,108
Turnover (Net) 4,721,552 4,065,851 3,670,811 3,000,946 2,313,844
Business Description: Square Gross Profit 1,906,592 1,466,282 1,435,655 1,081,340 826,978
Net Profit before Tax 1,151,636 929,604 905,736 691,636 505,100
Pharmaceuticals Limited, the Net Profit after Tax 970,044 764,885 759,448 573,677 418,152
Shareholders Equity 4,590,142 3,851,098 3,273,714 2,751,766 2,178,089
market leader, is the most Total Assets 5,870,261 5,164,320 4,526,115 3,810,860 3,233,586
Total Bank
981,510 1,070,163 1,098,874 938,371 792,505
Borrowings
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Total Current Assets 2,008,956 1,441,552 1,452,494 1,017,574 947,055
Total Current
1,243,575 1,247,967 1,181,473 708,993 568,432
Liabilities
Current Ratio 1.62 1.16 1.23 1.14 1.67
Source: Financial Statements
respected name in the industry and it is quickly spreading its fame beyond the horizon. The
long journey since the inception in 1958 was not a smooth path. After building a strong
base of enormous effort it has today burgeoned into one of the top line conglomerates in
Bangladesh. Square Pharmaceuticals Ltd., the flagship company, is holding the strong
leadership position in the pharmaceutical industry of Bangladesh since 1985 and is now on
its way to becoming a high performance global player.

Square Pharmaceuticals Limited is the largest pharmaceutical company in Bangladesh and

it has been continuously in the 1st position among all national and multinational companies
since 1985. It was converted into a public limited company in 1991. The sales turnover of
SPL was more than BDT 5 Billion (US$ 90 million) with about 15% market share (April
2003 – March 2004) having a growth rate of about 16%. Last Year Square declared Bonus
share in 5:1 Ratio and cash dividend per share was USD 1.19/ share.

4.13.2 RENATA LIMITED

Brief History: Founded in 1972 as a subsidiary of Pfizer Inc. Ownership transferred from
Pfizer Inc. to local institutions and the general public in 1993. Company name subsequently
changed from Pfizer Laboratories (Bangladesh) Limited to Renata Limited

Vision & Mission: The Vision of Renata is “To Establish Renata Permanently among the
best of innovative branded generic Companies” The Mission Statement of Renata Limited
is “To Provide maximum value to our customers, shareholders, colleagues and the
communities where we work and live”

Product Range: Antibiotic, Anti-hypertensive, Lipid lowering agent, Anti-parasitic &

anti-protozoal agents, Anti-fungal agent, Diabetic Care, Steroid, Cosmetic Health Care
Product (Anti-acne agent), Iron & Vitamins, Anti-allergic, Non Steroidal Anti-
inflammatory, Analgesic & Antipyretic, Expectorant & Anti-Asthma

Exports: Renata Exports Human Pharmaceutical Products to: Myanmar, Nepal and
Srilanka.
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Human Resource: Total Number of Employees is 1,177

Table 24: Financial Snapshot of Renata (In BDT) Business Description: Renata,
2001 2002 2003
Turnover 822,795,535 911,593,846 1,110,041,348 an ISO9001 (DNV) qualified
Cost of goods sold 482,924,357 531,953,504 591,142,479
Gross profit 339,871,178 379,640,342 518,898,869 company, is a Listed Public
Profit before taxation 105,844,217 94,594,207 150,434,885
Profit after taxation 69,344,893 72,564,245 105,561,208 Limited (Dhaka Stock
Property, plant and equipments 449,901,262 471,378,477 520,473,441
Total current assets 379,814,152 399,329,580 455,136,227
Exchange) company with an
Total assets 469,827,785 514,675,037 576,518,593
Share capital 46,488,700 46,488,700 46,488,700
annual turnover of US $18.5
Source: Financial Statements Million, Retained Earnings:
US $4.7 Million and Net Asset Value: US $10.6 Million. Renata is engaged in
Manufacture and Marketing of Human Pharmaceuticals and Animal Therapeutics of
Nutrition products (No. 1 in Market in terms of Sales.). The 120,000 Square Feet (11,150
m2) Plant is located in Dhaka on 12 Acres of Land. Last year the board of directors
recommends a cash dividend of Taka 50.00 per ordinary share of Tk.100 and they also
recommend for Stock Dividend (Bonus Shares) in the ratio of one Bonus Share for every
five shares held (1:5).

4.13.3 BEXIMCO PHARMACEUTICALS LIMITED

Brief History: Beximco Pharmaceuticals Limited (BPL) started its journey back in 1980
with manufacturing and marketing of licensee products of Bayer AG, Germany and Upjohn
Inc. of USA. After its initial years of struggle, it broke ground with the launching of its
own products in 1983.

Major Products: The Block Buster products of BPL include: Napa, Neoceptin R,
Neofloxin, Tycil, Aristovit M etc.

Exports: Presently BPL is exporting to: Myanmar, Kenya, Pakistan and Singapore. In the
near future they have planned to expand in Asian countries like: Philippines, Cambodia, Sri
Lanka and Nepal. In East: Africa Tanzania and Uganda.

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Human Resource: Total number of Employees of BPL is 1,328, which is consisted of 862
officer and 466 staff.

Business Description: Beximco Pharmaceuticals Ltd. is a member of the Beximco Group

- the largest private sector Table 25: Financial Snapshot of Beximco (In BDT M)
Particulars 2003 2002 2001 2000 1999
business conglomerate of Authorized Capital 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
Paid up Capital 508,875 442,500 442,500 442,500 442,500
Bangladesh. With a record of
Total Turnover 2,183,830 2,508,788 2,401,241 2,452,524 2,398,985
the highest growth rate in the Export Turnover 59,594 50,284 47,325 44,268 35,846
Gross Margin 828,081 888,295 942,133 895,783 816,089
history of Bangladesh Profit Before Tax 263,619 362,232 430,420 422,644 413,312
Net Profit 224,643 341,680 401,780 398,295 386,576
Pharmaceutical Industry, BPL Fixed Assets at cost 6,669,824 5,512,974 5,141,780 4,062,660 3,759,880
Shareholders'
4,643,615 4,441,096 4,165,791 3,764,011 3,454,217
has maintained its leadership Equity
Source: Financial Statements
position with consistent growth
over the years. BPL is the first pharmaceutical company in Bangladesh to receive such an
award. BPL was also awarded National Export Trophy Gold for two consecutive years
1998-1999 and 1999-2000. BPL has transformed its activities, culture, style and philosophy
to meet the demands of the new millennium. The Differential edges of BPL includes:
World class manufacturing facilities, Highest CGMP standards, Outstanding product
quality, Sophisticated formulation technology, Diversified dosage forms & products,
Significant investment in R&D, Excellent customer services, Responsible care for the
environment, Commitment to the people & the society. Last year BPL declared a 20%
dividend per share.

4.13.4 THE ACME LABORATORIES LTD.

Brief History: The history of The ACME Laboratories Ltd. dates back to 1954
when a proprietorship firm was founded to manufacture ethical drugs. It started with the
modest introduction of a few oral liquid products. The firm was converted into a private
Limited company in the year 1976. Commercial operation at the modernized plant
equipped with sophisticated and advanced facilities began toward the end of 1983.

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Mission & Vision: The mission statement of Acme is “Our holistic approach is to ensure
Health, Vigor and Happiness for all by manufacturing ethical drugs and medicines of the
highest quality at affordable prices and reaching out even to the remotest areas by
proper distribution network. We view ourselves as partners with doctors, our customers,
our employees and our environment.” The vision statement includes “Reaching out even
to the remotest areas of Bangladesh and improving lives with quality products at an
affordable price.”

Product Range: Analgesic & Antipyretic, Antacid, Anthelmintic, Antiamebic,

Antianginal, Antiasthmatic & Bronchodilator, Antibiotic & Chemotherapeutic,
Antidiabetic, Antidiarrhoeal, Antiemetic, Antifungal, Antihistaminic & Antiallergic,
Antihypertensive & Cardioprotective, Antihyperlipidamic, Antimigraine, Antispasmodic,
Antituberculous, Antivertigo, Anxiolytic and Antidepressant, Diuretic, Electrolytic,
Enzyme, Expectorant, Eye Product, H2 Receptor Antagonist, Hematinic,
Immunosuppressant, Laxative, Nasal Product, Nonsteroidal Anti-Inflammatory (NSAID),
Proton Pump Inhibitor Scabicidal, Steroid, Vitamin & Mineral.

Exports: At present, ACME is exporting medicines to several countries in neighbouring

South-East Asia, Africa, Middle East and the EU. The regular export market includes:
Myanmar, Nepal, Sri Lanka, Afghanistan, Hong Kong, Pakistan, Philippines & Vietnam.

Human Resource: Over 1,600

Table 26: Financial Snapshot Acme
energetic and highly motivated (Figures in 000 BDT) 2000 2001 2002
Net Sales 1,302,781 1,564,270 1,845,577
employees from diverse disciplines Gross Profit 559,073 686,407 803,618
are working untiringly with ACME in Operating Profit 180,640 224,486 254,029
Net Profit 89,176 116,112 141,672
Bangladesh and abroad. Sales Growth Rate (%) N/A 20.07 17.98
GP Margin (%) 42.91 43.88 43.54
NPAT Margin (%) 6.85 7.42 7.68
Total Assets 978,842 1,192,979 1,440,826
Business Description: Acme is an Net Worth 470,804 581,915 708,588
ISO 9001:2000 certified company Current Ratio (x) 1.74 1.76 1.71
Leverage (x) 1.08 1.05 1.03
with a Wide range of dosage forms & Return to equity (%) 18.94 19.95 19.99
Source: Annual Reports
products. This Sophisticated
manufacturing facilities in a state-of-the-art factory is exporting successfully to 11

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countries Worldwide. ACME continuously seeks to expand its production facilities, add
employees and increase its sales and marketing efforts. According to the latest statistics,
out of about 300 pharmaceutical companies in the country, The ACME Labs is one of the
top four. ACME has also endeavored to strengthen its network in international marketing
operations to export its products abroad.

4.13.5 SANOFI-AVENTIS

Brief History: On December 16, 1999 Hoechst Marion Russel of Germany and RPR
merged globally to create Aventis. Presently, Aventis is the 3rd largest pharmaceutical
company in the world after the merger with Sanofi. Operational integration of RPR and
HMR in Bangladesh has been completed. Production facility of HMR has been sifted from
Chittagong to RPR plant at Tongi. With a superb belongingness and teamwork mentality,
combined sales force of RPR, HMR and Fisons is one of the biggest sales teams in the
country.

Mission & Vision: The Mission of Aventis Pharma states “Our mission is to become the
best pharmaceutical company in the world by dedicating our resources, our talents and our
energies to help improve human health and the quality of life of people throughout the
world.”

Strategic and Important Products: Actonel, Clexane, Tritace, Amaryl, Taxotere, campto,
Nasacorf, Azmacof, Enocef, Sefradm Fimoxyl, Asinar, Flagyl, Fiprox, Fluxon, Oracyn-K,
Rova Mycine, Ficlox, Fisat & Fisat-DS, Ficlon Suppository, Flagyl Suppository, Profenid
Suppository, Doliprane Suppository, Inflam, Ficlon, Folfecap-CR, Retina, Macrocin-T

Exports: One of the Major Players and 3rd largest globally has business almost all over the
globe.

Business Description: As a global industry leader Aventis seek to conquer and prevent
disease by bringing to market innovative pharmaceuticals, vaccines, therapeutic proteins
and diagnostics. Aventis Pharma was created as a part of the 1999 business combination of

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Hoechst and Rhone-Poulenc to form Aventis SA, one of the world's leading life sciences
companies. In 2004 Aventis merged with Sanofi and became Sanofi-Aventis. It
concentrates its efforts on strategic brands that meet growing patient needs and contribute
to a long-term sales growth. With 2001 sales of 15.168 billion euro (excluding sales of
diagnostics), Aventis Pharma contributes three-quarters of the life sciences sales of Aventis
SA. The Aventis Pharma prescription drug business is investing about 2.98 billion euro a
year in Drug Innovation and Approval, one of the industry's largest R&D budgets. Sanofi-
Aventis Values for: Respect for people, Integrity, Sense of urgency, Networking,
Creativity, Empowerment, and Courage. Therapeutic developments and clinical trials have
brought innovation and resulted in medicines that can benefit patients in many key
therapeutic areas. Through its investments Aventis Pharma is well positioned to meet the
growing needs of patients in Bangladesh. The group is poised to take quantum leap with
their current plans of investing more in promoting their products and other medico
marketing activities. Aventis also has an exciting range of products in pipeline at short and
medium term in the near future.

4.13.6 ADVANCED CHEMICAL INDUSTRIES

Brief History: In 1973, the UK based multinational pharmaceutical company, ICI plc,
established a subsidiary in Dhaka, known as ICI Bangladesh Manufacturers Limited. In
1992, ICI plc divested its share to local management, and the company was renamed
Advanced Chemical Industries (ACI) Limited.
Mission & Vision: ACI vision is “to play a leading role in improving the quality of life and
well being of the people of Bangladesh through responsible application of knowledge and
skills.”
To realize the Vision ACI has the following missions:

• Endeavor to attain a position of leadership in each category of its business.

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 • Provide products and services of high and consistent quality ensuring value for
money to its customers.
• Attain a high level of productivity in all its operations through effective utilization
of time and adoption of appropriate technology.
• Contribute to the personal development, encourage empowerment and recognize
innovation of its employees.
• Ensure superior return on investment through healthy and sustainable growth of the
company.
• Encourage and support qualitative improvement of the services of its distributors
and suppliers.

Product Range: ACI produces a comprehensive range of about 120 formulations covering
all major therapeutic areas that comes in tablet, capsule, powder, liquid, cream, ointment,
gel and injection forms. ACI also imports products from world-class multinational
companies like ASTRAZENECA, UK; UCB, BELGIUM and ELI LILLY, USA and
markets world-renowned brands like Diprivan, Fluothane, Nolvadex, Humulin, Ceclor etc.
in Bangladesh.

Exports: To fuel the continuous growth of ACI, the company has started exploring
international markets. The quality of ACI products, strengthened by its ISO 9001
certification, has brought immediate success in Sri Lanka, Yemen and Myanmar.
Table 27: Financial Snapshot ACI Limited
(Figures in BDT) 2003 2002 2001 Human Resource: Total number
Sales 2,239,565,258 2,052,913,536 1,637,408,231
Cost of goods sold (1,600,211,511) (1,422,247,548) (1,184,074,252)
of permanent employees is 1181
Gross profit 639,353,747 630,665,988 453,333,979 out of which 778 are engaged in
Provision before tax 93,440,211 163,602,582 136,715,428
Provision after tax 85,413,760 109,180,668 91,715,428 sales and customer services.
Retained Profit 125,820,859 117,230,026 69,823,582
Share Capital 161,700,000 161,700,000 161,700,000
Tax Holiday reserve 2,187,562 2,576,385 1,439,661
At Cost/revaluation 488,071,274 415,289,749 367,122,500 Business Description: ACI as a
Investment 189,419,241 161,696,791 127,588,791
Net Current Asset 1,243,623,034 870,761,136 609,920,107 whole is a company with annual
Long term liabilities 152,776,863 192,222,033 206,400,779
Source: Financial Statements turnover more than BDT 2500 MM
where ACI pharma contributes 40% of the total sales. ACI is the first company in

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Bangladesh to obtain certification of ISO 9001 Quality Management System in 1995. ACI
is also the first Company in Bangladesh to get certification of ISO 14001 Environmental
Management System in 2000. ACI employees are proud of their work culture, business
ethics and environmental consciousness. ACI follows International Standards on Quality
Management System to ensure consistent quality of products and services to achieve
customer satisfaction. ACI also meets all national regulatory requirements relating to its
current businesses and ensures that current Good Manufacturing Practices (GMP) as
recommended by World Health Organization is followed for its pharmaceutical operations.
ACI is committed to maintain the harmonious balance of our eco-system and therefore
constantly seeks ways to manufacture and produce products in an eco-friendly manner so
that the balance of nature remains undisturbed and the environment remains sustainable.

4.13.7 ESKAYEF BANGLADESH LIMITED

Brief History: Eskayef Bangladesh
Table 28: Financial Snapshot Eskayef
Limited, a successor of SmithKline & (Figures in BDT
French in Bangladesh, is one of the MM) 2003 2002 2001 2000
Revenue 921,671 949,450 659,755 532,738
country's fastest growing top ten
Cost of goods sold 480,758 454,436 319,638 277,031
pharmaceutical companies. They Gross profit 440,913 495,014 340,117 255,707
Operating
manufacture and market a wide range of 281,707 293,173 190,089 146,419
Expense
therapeutic drugs, pharmaceutical raw Provision before
131,216 168,364 117,854 92,178
materials and animal health and nutrition tax
Provision for tax 49,750 65,812 46,221 28,693
products. They are one of the members of Provision after
75,218 102,552 71,633 63,215
the Transcom Group of Companies, a tax
Share Capital 42,321 42,321 42,321 42,321
leading conglomerate in Bangladesh. The
Net Property,
151,991 116,154 102,925 75,211
Plant & Equip
Net Current Asset 536,280 678,350 354,812 310,514
Total Net Worth 582,680 483,116 326,967 215,076
Current Ratio 1.644 1.413 2.251 1.979
Leverage
-43- 0.585 1.096 0.935 0.818
Interest Coverage 6.845 8.122 7.235 10.877
Source: Financial Statements
top management of Transcom has a long legacy of commercial and industrial enterprise
since 1886.

Mission & Vision: The enlightening vision statement of Eskayef depicts their strategic
plan as “Eskayef envisions a leading role for itself as a catalyst for improvement of the
healthcare environment.” To reach the destiny their mission statement is “The Company’s
mission is to maintain people's health and combat disease to enhance the quality of
human life so that people may live longer, healthier and more meaningful lives.”

Product Range: The well-diversified product range of Eskayef has two distinct: local &
imported classification. The imported products include: Betagan, Blephamide, Fml, Fml-
neo, Liquifilm tears. The local products include: Alben, Amboten, Anapril, Arocef,
Bromid, Carbazin, Carbolin, Cardon, Cardoplus, Celipress, Ceflon, Cloron, Cortider,
Cosat, Danamet, Dexpoten, Desodin, Dezide, Dialon, Dilator, Esoral, Etorix, Expoten, Ezy,
Ezy-r, Facid, Facid-hc, Feofol, Feofol-ci, Flucloxin, Flucoder, Folvit, Folvit ci, Gatinox,
Gelicon, Hi-c, Irbes, Kynol, Lamidin, Laxitol, Lipicon, Losectil, Mebidal, Metco, Milam,
Mupiron, Mycofin, Mycofin cream, Naprox, Neorex, Neosaline, Norium, Ontin, Oradin,
Ostocal, Parlox, Peptil-h, Perosa, Priocin, Priovit, Quinox, Reomen, Restol, Ridon, Roxim,
Sensit, Sidopin, Sk-cef, Sk-mox, Softi, Solvit-m, Solvit-b, Solvitone, Starin, Stoma, Stoma
gas, Tamen, Telazine, Toperin, Triject, Tuffox, Veron, Vincet, Vitrum gold, Xenoxin,
Xinc, Zeefol, Zeefol-ci, Zilvit, Zithrox,

Exports: Eskayef market their products in Nepal through exclusive agents. They are in the
process of establishing their presence in Myanmar, Sri Lanka and the Philippines.

Human Resource: The workforce of Eskayef consists of more than 1,200 appropriately
qualified, trained and skilled personnel who are drawn from different disciplines that have
a bearing on the pharmaceutical industry.

Business Description: Eskayef Bangladesh Limited is one of the fastest growing

pharmaceutical companies in Bangladesh and is engaged in the manufacture and marketing
of a wide range of therapeutic drugs, bulk pellets and animal health and nutrition products.

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With annual sales surpassing BDT 1 billion, the company’s rapid rise since its inception
has propelled it to a top ranking position among the pharmaceutical companies operating in
the country today. Eskayef envisions a leading role for itself as a catalyst for improvement
of the healthcare environment in Bangladesh. The company’s primary aim is to provide
people with effective drugs to combat the diseases that threaten them and thus enable them
to live healthier and more enriched lives.

4.13.8 GLAXO SMITH KLINE

Brief History: The epic began on 1715 when Silvanus Bevan establishes Plough Court
pharmacy, the forerunner of Allen & Hanburys Ltd, in London. Finally GlaxoSmithKline
formed through the merger of Glaxo Wellcome and SmithKline Beecham in December
2000. The Company has started business in Bangladesh in 1949 at Chittagong. The
Company was incorporated on 25 February 1974 AS A public Limited company and got
enlisted with DSE in 1976. Name of the company has changed from “Glaxo Wellcome
Bangladesh Ltd.” to “GlaxoSmithKline Bangladesh Ltd.”, effective from September 4,
2002.

Mission & Vision: GSK's mission is to improve the quality of human life by enabling
people to do more, feel better and live longer.

Product Range: GlaxoSmithKline's broad pharmaceutical product line includes antibiotic,

antidepressant, gastrointestinal, dermatological, respiratory, cancer and cardiovascular
medications. GSK has a wide variety of vaccine products, including hepatitis A and B,

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diphtheria, tetanus and whooping cough and influenza. They have brought oral healthcare,
over-the-counter medicines and nutritional healthcare products to millions of people.

Human Resource: The Company has a total of 640 employees with an efficient
management team. There is also a sakes team of about 200 across the country including
line managers.

Business Description: GlaxoSmithKline (GSK) is a world leading research-based

pharmaceutical company with a powerful combination of skills and resources that provides
a platform for delivering strong growth in today's rapidly changing healthcare environment.
Table 29: Financial Snapshot GSK Bangladesh GSK conducts their operations in
(Figures in BDT M) 2003 2002 2001 2000
Revenue 1298939 1208888 1105296 963224
Bangladesh with its own set-up
Less: Cost of turnover 937710 860144 790994 686532 of Manufacturing, marketing and
Gross Profit 361229 348744 314302 276692
Profit Before Taxation& Interest 94568 95877 81419 68083 distribution. The Principal
Provision for Taxation 15500 29000 35500 16500
Profit After Taxation 86819 72245 54349 63947 activities of the company are
Property, plant and equipment 259359 215714 220987 210322
Total Current Assets 849558 652297 597461 560899 manufacturing and marketing of
Net Assets 657924 624519 600460 591296
Ordinary shares 120465 120465 120465 120465 pharmaceutical, vaccines and
Capital reserves 64132 64541 64541 64552
General reserves 5000 5000 5000 5000
healthcare products. The
Retained earnings 468327 434513 410454 401279
Total shareholders' equity 657924 624519 600460 591296
Chittagong Factory site of GSK
Source: Financial Statements Bangladesh that was established
in 1967 has been considered as one of the Center of Excellence in Global Manufacturing &
Supply Network of the group. The Sales team makes about 2,000 calls daily to the target
Doctors. A strong team of distribution personnel serves about 12,000 customers every
month including retailers and wholesalers from own distribution centers located at 12
District Marketing Office through out the Country. The company enjoys leadership or
dominant position inkey therapeutic areas like: Respiratory, Dermatology, Anti-infectives
and Vaccines. Brand names of some major products of the company in Bangladesh include:
Ventolin, Seretide, Ceporex, Zinnat, Fortum, Parapyrol, Zantac, Piriton, Dermovate,
Bentovate, Engerix-B etc. The Projectes Sales for 2004 was 1,365 MM BDT with a Gross
Profit target of 409 MM BDT.

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4.13.9 INCEPTA PHARMACEUTICALS LIMITED
Brief History: Incepta is a leading Pharmaceuticals Company, which began their voyage in
1999.

Product Range: The Company produces various types of dosage forms which include
tablets, capsules, oral liquids, ampoules, dry powder vials; powder for suspension, nasal
sprays etc.

Business Description: Incepta Pharmaceuticals Ltd received the Enterprise of the Year
2004 Award. The company has a very big manufacturing facility located at Savar, 35
kilometer away from the center of the capital city Dhaka. The company specializes in value
added high technology dosage form like:
sustained release tablets, quick mouth dissolving tablets, barrier coated delayed release
tablets etc. It has established a modern research and development laboratory for the
development of new advanced dosage forms for various drugs and devices like poorly
soluble drugs, dry powder Table 30: Financial Snapshot Incepta
(Figures in BDT M) 2003 2002 2001 2000
inhalers, coated pellets, modified Turnover 832,086 614,124 102,018 4,566
Cost of goods sold 632,922 503,020 80,699 4,154
release products, taste masked Gross profit 199,164 111,104 21,319 412
Operating Expense 118,190 89,887 19,663 8,216
preparation etc. The company Provision before tax 80,974 21,217 1,656 (7,804)
Transfer to Tax Holiday Reserve 32,389 22,887 0 0
virtually covers every single Profit/Loss as per last Account 28,181 8,879 (7,804) 0
Net Profit 76,766 7,209 (6,148) (7,804)
corner of the rural as well as Share Capital 200 200 200 200
Net Current Asset 321,793 105,671 42,738 16,426
urban area of Bangladesh. It has
Current Liabilities 81,163 90,404 68,324 27,920
its own large distribution Fixed Asset 231,611 62,492 52,831 34,885
Source: Annual Reports
network having 13 depots all
over the country. The company is now expanding its activities beyond the geographical

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boundary of Bangladesh. The products are of high standard and therefore these will be
exported to both developed and developing countries. Incepta will continue to strive to
provide high quality medicine at affordable prices to the people here in Bangladesh and
other parts of the globe.

4.13.10 OPSONIN PHARMACEUTICALS LIMITED

Brief History: The heritage of 48 years 1956-2005 Integrates the visionary imagination for
basic industrial development in this country by the Founder Chairman Late Abdul
Khaleque Khan, which is enriched by the successors through establishing a number of
innovative & import substitute industrial units mainly in the pharmaceuticals and related
sectors. The seed that was planted in the year 1956 now has become a tree.

Mission & Vision: The Mission statement of Opsonin includes “Opsonin is committed to
improve its position continuously as a Leading Pharmaceutical company in Bangladesh and
strengthen its global presence.”

Product Range: The wide product range of Opsonin includes medicines of different
dodges and forms of: Antibiotics, cardiovascular, antidiabetic, Dermatological,
Antiulcerant, Antihistamins, NSAID, Antispasmodic, Antiasthma, CNS, Antiprotozal,
Vitamin, and Gastroprokinetic.

Exports: After flourishing and splendid pace in the home, Opsonin had extended their
marketing network to abroad since 1985. As of now, they are having overseas marketing
network in a number of countries- Myanmar, Mauritius, Nepal, Pakistan, Philippines, Sri
Lanka, Togo, Vietnam and Yemen.

Human Resource: Opsonin has more than 1500 employees along with an expert sales
team comprising of 425 people.

Business Description: Opsonin received its ISO 9001 certification in the year 2000. The
manufacturing facilities of Opsonin are situated in Barisal, which carries out the
manufacturing and packaging of all the products sold by the company. The production

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units are equipped with sophisticated machines made by world-renowned manufacturers.
To name a few are Tablet Compression Machine from Manesty of the U.K.; Tablet Coating
Machine from GS Coater of Italy; Advanced formatting Technology (AFT) Blisterpack
Machine from Horn Noach of Germany; Auto Cartoning Machine from Promatic of Italy
and many more. OPSONIN's Product Development Laboratory is the only fully equipped
facility in the country, which is solely dedicated for the purpose.

4.14 Foreign Trade in Pharmaceuticals

Bangladesh is yet to emerge as an export based Pharmaceutical industry. Local production
meets around 95-97% of local demand. Around 5% of local production is currently being
exported. Bangladesh Pharmaceuticals industry is still at its growth phase. However, the
export of Bangladesh Pharmaceutical industry is experiencing good growth rate. As we see
in table 31 below in 2004 Bangladesh exported medicines worth around USD 13 MM to 62
countries. The export is mainly in the area of formulations. The import scenario is quite
bright as Bangladesh can meet around 97% of local demand the import of formulations is
around 2-3% of the total Drug Demand. However our pharmaceutical industry is heavily
dependent upon imported Raw Material.

4.14.1 Export
The history of pharmaceutical export from Bangladesh dates back to late 80s. At that point
Table 31: Pharmaceutical Export in time, only one or two pharmaceutical companies of
from Bangladesh
Value in USD Bangladesh took proactive efforts to initiate export of
Year
MM
2000-2001 5.6
pharmaceuticals from Bangladesh. Despite the fact that
2001-2002 6.6 there was no support or incentive from the Govt., these
2002-2003 9.05
2003-2004 12.69 companies with their own initiative started exporting
Source: EPB finished formulations to some of the neighboring less-
regulated overseas markets like Myanmar, Sri Lanka and Nepal. After being successful in
these less-regulated markets, in early 90s few major companies in Bangladesh took
initiative to explore some of the more-regulated markets like Russia, Ukraine, Georgia and
Singapore. Success in registering and marketing the products in these countries was a
major breakthrough for Bangladesh pharmaceuticals industries.

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This was a clear testimony not only to the product quality, but also to capabilities to meet
stringent regulatory requirements. Today, Bangladesh pharmaceutical industry has
successfully started exporting its quality products to about 62 countries across four
continents. As we can see from figure 13 the trend in export is quite impressive. In 2004
Pharmaceutical export grew by more than 40% than the previous year.

Currently, Bangladesh is exporting a wide range of pharmaceutical products covering all

major therapeutic classes and
Figure 13: Pharmaceutical Export Growth 2000-
dosage forms. Beside regular 2004
50%
brands, it is also exporting high-
tech specialized products like 40%
% Growth

inhalers, suppositories, nasal 30%

sprays, injectables and infusions. 20%

Apart from overseas retail 10%

customers, the country is 0%

00-01 01-02 02-03 03-04
supplying to world-renowned
Year
hospitals and institutions like
Raffles Hospital of Singapore, Jinnah Hospital of Pakistan, MEDs of Kenya, SPC of Sri
Lanka and KK Women & Children Hospital of Singapore. The product quality, packaging
and presentation of the products have been highly appreciated in all the countries.

The USD 13 MM export earning in 2004 includes formulation & Bulk drugs both. The
leading local exporters of the country are Square, Beximco, Jayson, Opsonin and ACME.
By 2004 Bangladesh companies were able to expand their export reach to around 62
countries including Kenya, Korea, Brazil, Netherlands, Myanmar, Pakistan, Yemen, USA,
India & South Africa.

Top export Destinations

Out of the total export market in 2003-04 the top 10 destinations accounted for around 66%
of total export. Brazil was the top ranking destination with an export of BDT 111 Million.
Belzium & Srilanka ranked 2nd & 3rd respectively.

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 Figure 14: Top 10 Export Desinations 2003-04
Others B razil
36% 15%

Yemen
3%

B elgium
10%
Iran
3%

Spain Sri Lanka

T he Netherlands
6% 7%
7% M yanmar
IndonesiaP akistan
4% 5% 7%

Source: EPB

4.14.2 Import
According to the pharmaceutical import policy of Bangladesh, drugs, which are produced
locally in sufficient amount, cannot be imported. Around 5% to 6% of the medicines sold
in Bangladesh are imported. In Bangladesh the import of pharmaceutical products inclusive
raw materials and finished drugs has increased from BDT 6,609 million to 11,000 million
during years1999 to 2004.

Table 32: Formulation Import 4.14.2.1 Formulation Import

BDT MM
1999-00 896.10 Bangladesh meets around 97% of domestic demand for
2000-01 1,118.56
2001-02 1,236.69 medicine or formulations. Finished formulation imports,
2002-03 1,319.23 mostly constituting vaccines, latest anti-diabetics and anti-
2003-04 1,432.72
Source: Bangladesh Bank, BAPI cancer drugs, account for about 5 per cent.

4.14.2.2 Bulk Drug Import

Table 33: Bulk drug Import
Bangladesh Pharmaceutical Industry is heavily dependent
In BDT MM
upon imported raw materials for producing drugs. Almost 80% 1999-00 5,712.77
2000-01 6,512.56
of the raw materials are imported from abroad. Raw materials
2001-02 7,424.31
for the pharmaceutical sector are mostly imported from India, 2002-03 8,463.72
2003-04 9,648.64
China, France, Switzerland, Germany and Italy. Most of
Source: Bangladesh Bank, BAPI

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the small and midsize companies procure nearly 90% of their raw materials from India and
China for convenience and cheaper rate. But the export oriented companies at the upper
end import mainly from the European and notified sources to satisfy customer needs both
in local and global context. Price of the medicine varies mainly due to difference in
packaging and the sources of raw materials used. Some very large players of the market
like Beximco, Acme, and Square have their own API plants which are again not sufficient
to meet the demand.

4.15 Export Future Prospect: TRIPS

For discussing the future export prospects for Bangladeshi Pharmaceutical products we
need to look into the issues related to TRIPS (Trade Related Intellectual Property Rights)
that have come into effect globally in 2005.

The US pharmaceutical industry generated domestic sales of over USD 70 billion during
1995. However, it was quite apparent that the growth was declining due to threats of drug
pricing by most of the exporting countries and patent expiration which was allowing for
inroads of generic drugs. This had already proven to be one of the most profitable
businesses in the world, however, if the trend continued the US giants were liable to lose
ground. It, therefore, became essential for the US to bring about an international change in
the industry and gain back what they felt was rightfully their (Briende 1993). The result
was TRIPS agreement under the umbrella of GATT (General Agreement on Tariffs &
Trade). This was negotiated as part of the international trade agreements during the
Uruguay Round trade negotiations of the GATT during 1986-1994. As one of the World
Trade Organizations (WTO) agreements it was totally binding for all WTO member states.
The most important provision of TRIPS with respect to pharmaceuticals, Article 27,
requires that "patents shall be available for any inventions, whether products or processes,
in all fields of technology. In general the major provisions included as part of TRIPS are
summarized below:

1. Patents shall be available and enjoyable without discrimination as to the place of

invention; whether the product is imported or produced locally.

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2. Product patent shall be protected for a period of 20 years from the date of filing and
then can be extended for another 20 years subject to the condition that the
manufacturing process is new. Once a product patent has expired, other manufacturers
can also manufacture a given product. However, if the manufacturing process is still
under protection, the new entrant needs to develop an alternative production process.
The burden of proof will remain on the secondary manufacturer to prove that the
process is in fact different from the previous one.

3. Compulsory licenses or other “official licenses” are only to be permitted after

consideration of the individual situation in which such license is requested and except
in cases of national emergency, the grant of compulsory license is subject to a number
conditions, including the following:

a) The party requesting the license must have used the best efforts to obtain a
voluntary license on reasonable commercial terms.
b) The compulsory license must be terminated if the circumstances leading to
its grant have ceased and are unlikely to recur.
c) The Holder of the compulsory license must pay adequate compensation of
the right to use inventions.
d) The determination of the amount of adequate compensation must be subject
to independent review.
e) Where such a license is granted in order to enable use of a subsequent
patented invention, a license shall only be granted if the later invention is an
“important technical advancement of considerable economic significance” relative
to the dominant patent and the owner of the dominant patent is entitled to cross
license under the secured patent.

4. The only types of inventions that countries can offer excluded from patentability are
those whose exploitation would prejudice public order or morality. In such cases a
grant of 1 to 10 years, starting from the date on which the new version of GATT

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 becomes applicable to it (i.e., occurs after January 1, 1995 or the date on which the
country deposits its instruments of rectification if this occurs after January 1,1995). The
above is subject to the economic status of the country in question.

5. Product patent shall be granted to any invention, whether it is a product or process, in

all fields of technology, provided they are capable of industrial application.

4.15.1 TRIPS Impact & Bangladesh Pharmaceutical Industry prior 2002

As discussed above under the provisions of TRIPS, no company can produce, sell or
market patent products other than the companies to whom the patent rights belong after
2005. Generally the patent period is for 20 years for a particular patent product and over
this period the patent holders are taking a premium price from the consumers. The impacts
of TRIPS Agreement on local pharmaceutical sector in Bangladesh were thought to be
devastating during the late 90s. As a signatory to GATT, Bangladesh was bound to
implement TRIPS provisions in all the industries. The probable impact of TRIPS
agreement on Pharmaceutical industry was identified to be the following:

 Government would be compelled to open the domestic market for multinational

companies
 Local companies had to face an unequal competition in selling medicines with the
foreign companies. As a result big national companies would face an economic
repercussion and many mid-sized and small companies would be locked causing lose
of job of thousand of this sector
 The price of essential drugs would increase, moreover people would be bound to buy
patented drug at a higher cost
 No new local plant would be established and due to no technology transfer and as
under TRIPS Agreement multinational companies would export finished goods,
therefore, there was no chance of establishing new plant in developing countries.
 Traditional medical care systems such as Unani, Ayurbedi and homeopathy would be
at stake due to patent rule.

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4.15.2 2002: Special Provision for LDCs like Bangladesh
Though TRIPS was applicable both for the developed and the developing countries, in view
of the special needs and requirements of the least developed countries (LDCs); their
economic, financial & administrative constrains; and their need of flexibility to create a
viable technological base, WTO council in 2002 decided LDCs shall not be required to
apply the provisions of the TRIPS for a period of 10 years i.e up to 2016 from the date of
application as defined under paragraph I of article 65. The WTO council responsible for
intellectual property, on 27 June 2002, approved a decision extending until 2016 a
transition period during which least-developed countries (LDCs) do not have to provide
patent protection for pharmaceuticals. It also approved a waiver for LDCs on exclusive
marketing rights for any new drugs in the period when they do not provide patent
protection.

In addition, the council of TRIPS may, upon duly request by a least-developed country,
can accord extension of this period mentioned under article 66.1 of the TRIPS Agreement.

Right after this special provision was passed there was a sigh of relief among the
Pharmaceutical manufacturers of Bangladesh. In fact this special provision has opened
a vast window of opportunity for the Pharmaceutical industry of Bangladesh, a Least
Developed Country (LDC) as defined by WTO in their list of 49LDCs.

Most importantly this 2002 provision has allowed Bangladesh to produce & Export
patented drugs freely till 2016.

4.15.3 Opportunity for Bangladesh

However, among the least developed WTO member countries, Bangladesh stands out
clearly as the leader in terms of the pharmaceutical industries, which opens a gate of
opportunity for the Bangladesh pharmaceutical industry to prepare itself to cater to the
needs of the rest of the least developed member countries in terms of supplying medicines,
mostly the patent generics until 2016.

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4.15.3.1 Bangladesh only LDC with strong Manufacturing Base

Among the LCDs Bangladesh is the only country which is almost hundred percent
dependent on drugs produced locally and the country has huge potential to export drugs to
over 50 new countries after 2005. The WTO agreement on drug has opened huge export
opportunity for LDCs after 2005. Only 49 LDCs, including Bangladesh, will be able to
export their patented drugs. Other countries, including India and China, will not be able to
export their patented drugs, as the facility will be reserved for LDCs until 2016.

So, in this scenario, the Pharmaceutical industry players are considering the following
options:

 Take the advantage of loophole of TRIPS Agreement such as to consider product

patent and process patent separately
 Take the advantage of transition period on delaying pharmaceutical patents for
LDCs. Take advantage of compulsory licensing and parallel import.
 Raise voice in proper body of UNO (WTO, WHO) to the proposal for "exclusion
of essential and life-saving medicines from patentability"
 Raise voice to establish the right to 'freely exercise' legal options in an
unrestricted manner to exercise the option to take measures (such as compulsory
licensing and parallel imports) already available under the TRIPS Agreement to
ensure access to essential medicines.
 Go for manufacturing of specialized patented drugs and supply the low cost drug
to the LDCs that requires low cost medicine.

4.15.3.2 Proposals for broad-based research

The TRIPS agreement can be used to ensure access to innovation, invention and
affordability of pharmaceutical products and processes even by developing nations, if they
desire so. Therefore, as a LDC, Bangladesh has to consider all options for
multidimensional research on new drug development (and also on other fields of science
and technology) before 2016. In the existing infrastructure now available in this country, it
is possible to successfully implement such a project for finding new drug molecule.

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4.15.3.3 Active Pharmaceutical Ingredients (APIs): Huge Opportunities

In API or basic raw material for pharmaceutical products, there are huge opportunities in
the overseas markets. It can be mentioned here that 76% APIs (Active Pharmaceutical
Ingredients) for US drug industry are imported. For API, there is no stringent registration
requirement and the operational as well as promotional costs are also nominal. Bangladeshi
firms like: Beximco, Square already has the experience of exporting APIs. This experience
can be utilized to boost the export of APIs.

4.15.4 Formulations Export

In formulation, there are 3 types of overseas markets according to regulatory requirements.
Firstly, there are Highly Regulated Markets like USA, UK etc. that require various
certifications from USFDA, UKMCA etc. and need huge investment in facilities and
documentation. Then there are the Moderately Regulated Markets like Russia, Singapore
etc. that usually require bioavailability, bio-equivalence, clinical trials etc. Third category is
the Less Regulated Markets like Myanmar, Sri Lanka, Nepal, Kenya, and Yemen etc.
Bangladesh can look into al these markets for exporting the high quality drugs produced
locally. In this regard, some of the major companies have already made millions of dollars
of investment in their manufacturing and R&D facilities, and are going for certification in
the highly regulated markets. Square has already started operating their new state-of-the-art
facility.

Beximco has commenced manufacturing in their world class MDI plant and is going for
certification in the regulated markets. A leading MNC, Novartis has also started
manufacturing in its new facility for exporting to Europe. Beximco has already made a US
$ 50 million investment on a new plant conforming to USFDA standards. A few major
companies have also invested in R & D.

High value addition from export: Bangladesh can also ensure huge value addition by
pharmaceutical export since the export price is much higher than the local price. For
example, in Bangladesh the price of one Fluconazole capsule is Taka 8 whereas

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Fluconazole is exported to Pakistan at a price of taka 38. Similarly, the price of
Paracetamol syrup in Bangladesh is taka 13 but it is exported to Russia at a price of taka
100. This scenario ensures huge rise in profit margin if firms can increase their volume of
exports.

BDT.10, 000 Crore Export Market: Taking the advantage of the TRIPS as discussed
earlier Bangladesh can export Drugs worth Tk. 10, 000 crore each year as predicted by the
leading Pharmaceutical players of the country. Apart form the existing 62 countries
Bangladesh can export Malaria, tuberculosis and HIV/AIDS drugs that are in great demand
in Africa. In fact Bangladesh can be number one manufacturer and exporter of the drugs in
those countries. It is worth mentioning that companies like Beximco, Square are already
producing high quality Anti-HIV, Anti-Breast Cancer drugs, which are world class, and are
being exported.

Price Advantage even in Developed countries: Because TRIPS provisions are not
applicable for Bangladesh till 2016 Bangladesh can still produce and export patented drugs
around the Globe. In Bangladesh the cost of producing drugs is much lower than that of
Large MNC’s operating in Developed countries. This will give our products a price
advantage in developed markets as well. Especially in LDC’s like African countries our
relatively cheap medicine both specialized and Generics will have price advantage over the
patent holder brands produced by parent companies.

4.15.5 Challenges to export Growth

4.15.5.1 Raw Material Challenge for producing specialized patented Drugs

The biggest challenge that confronts Bangladesh Pharmaceutical Industry is that it does not
have the basic domestic sources of raw materials to manufacture finished medicines. The
raw materials, especially the patent generics are presently imported either from the
developing or the developed countries. But now that the patent law has come into force, no
developed or developing country can sell or supply raw materials to any concern for
production of patent medicines other than the patent holder companies. This clearly puts
the industry in such a situation that either it shall have to remain confined with the generic

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market or have to be self sufficient in manufacturing of the Active Pharmaceutical
Ingredients (API). If Bangladesh can have API plants, then it can always source out for the
intermediate chemicals to produce API. As the intermediate chemicals are not patent, they
can very well be sold to or bought by any country. But the question remains whether
Bangladesh is really prepared with any API plant. A very few number of pharmaceutical
companies currently have their own API plants. The leaders of the Bangladesh Association
of Pharmaceutical Industries (BAPI) have had several meetings with the relevant Govt.
ministries highlighting the immediate need to provide them with an industrial park for
manufacturing of API that will meet the demand of the local formulation market. Along
with the required API plants, it is also essential to set up the Effluent Treatment Plants.

4.15.5.2 Absence of Effluent Treatment Plants (ETP)

Bangladesh also does not have any centralized liquid and solid waste disposal mechanisms.
Currently it is being done by the individual manufacturers, which is raising their product
cost significantly. On the other hand in India and China there are government incinerators
and Effluent Treatment plants to dispose off liquid and solid waste respectively. Such
facility has reduced production cost for individual companies significantly.

4.15.5.3 Relaxed Registration Requirement

Most of the countries like India, China and Singapore have already upgraded their
registration requirement of imported drugs. On the other hand, registration requirement for
imported products in Bangladesh is extremely relaxed. If proper attention is not given,
there is a possibility that Bangladesh pharmaceutical market will be flooded with spurious
and substandard products from neighboring countries.

4.15.5.4 Deficiency in Central Drug Research Laboratory (CDRL)

The primary responsibility for drug quality control lies with the manufacturers. However,
the government's drug testing laboratories (DTL) and the Directorate of Drug
administration (DDA) have the monitoring and supervising role. At present there are two
government drug-testing laboratories. DTL at Dhaka is in the Institute of Public Health and
the regional DTL at Chittagong is under DDA. Drug administration is responsible for
registration of drugs for marketing in Bangladesh and for inspection of premises and

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licensing. With its present set up and inadequate strength, DDA often finds it difficult to
carry out its very large volume of assigned work. Regulatory procedures are like any other
country. Bangladesh does not have many fixed-dose combinations approved by DDA.
Though some combinations are approved and marketed in recent times, restriction on
import is going up as the number of drug companies is increasing significantly.

4.15.5.5 Unfavorable Government Regulations

The government is so far apathetic to export; it does not give the exporters any kind of
incentives. The government authority i.e. The Drug Administrative Authority has made the
procedure complicated. For example, our neighboring country Myanmar has a certain
format in which all the export proceeds and procedures are taken care off. But recently the
Drug Administration refused to follow that format and imposed their own format over the
exporting company. As a result the consignment of exporting to Myanmar was cancelled.
Our Government has banned sending free samples to foreign countries. Around 27% to
30% export incentives are given in India; Where as Bangladeshi exporters are not permitted
to get even the incentives or the VAT refunds. Though according to law, these exporters
are supposed to get these refunds. Moreover drugs stealing, tampering the sealed carton and
boxes from under supervision of customs authority is burning examples of inter
departmental corruption.

Stringent Export Promotion Expenditure: Currently the government has put a ceiling on
the office expenses of local companies operating in foreign countries to be $ 2,500 per
month. They are not allowed to remit more than that. However this amount is far lower
than the required amount. Apart from that companies also need to spend huge sums of
money to register their products in foreign countries. The cost of registering a product with
the drug administrations of a foreign country may even go up to $ 22,000. And to reach a
break even level of business a company must register for at least 20-25 drugs in a single
country. In any way the $2,500 ceiling is extremely low and a big impediment for
exploring and capturing export markets.

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4.15.6 Steps for Development
4.15.6.1 Joint effort of Pharmaceutical firms and Academies

The pharmaceutical sector needs patent on new molecules and academicians need good
research. Therefore, there can be an excellent collaboration between the academician from
pharmacy, pharmacology, physiology, chemistry, biochemistry, microbiology,
biotechnology, bioengineering and allied science departments. Academicians from related
disciplines are to be taken into full confidence to conduct research in the respective
laboratories of the respective institutions with financial and technical support from the
pharmaceutical sector, which will in turn give the companies the new drugs that will allow
them to dominate the market as well as survive post 2016.

4.15.6.2 Intra-firm and inter-firm research

Big national companies can either individually or jointly run research works within their
own 'Research Wings'. Currently existing in the pharmaceutical industries "Research and
Development (R&D)" sections can be instrumented for this purpose. Both academic and
industrial pharmacists should have to be involved in research into new chemicals and
natural substances with potential medicinal value and also research into new dosage forms
of medicines.

4.15.6.3 Research on Non-Traditional Medicines

Traditional or alternative medicines system have been approved by the WHO and in the
National Institute of Health (NIH) USA, a new department on traditional/alternative
medicines has been opened. These traditional medical care systems have withstood the
upheavals of time and have emerged as time-tested therapy because there are demand, logic
and scientific grounds on which these disciplines are based on. Ex national professor Dr
Nurul Islam started a medical treatment system combining "Allopathic, Unanai & Ayurvedi
and Homeopathy" and it is known as Three Systems Together (TST). Hamdard is one of
the leading institutions in Unani medical care system and they also do research on
traditional medicines. So, scientists/experts/ scholars from all these disciplines can be
involved in research to find good alternative treatment system. Bangladesh has a long

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history of these traditional medical practices. That experience can be used to boost this
sector.

4.15.6.4 A suitable world-class journal

To publish research findings (only new/novel findings, innovations, new ideas, new
designs) timely and regularly will be the demand of time if a broad-based research project
is undertaken.

4.15.6.5 Modernization of Drug Testing Laboratories

The government owned laboratories at Dhaka and Chittagong should be modernized to
perform the activities of CDRL. Also some space of BCSIR, better known as science
laboratory, can temporarily be used for this purpose. The research activities of ICDDRB
and BIRDEM can be coordinated with proposed CDRL.

4.15.6.6 Government Support

For the development of any industry Govt. Support is essential. Considering the
opportunities and challenges in post WTO era the Bangladesh Government is also coming
up with proposals to support the pharmaceutical industry. Bangladesh Govt in line with
discussion with the top industry players and trade bodies are currently considering the
following proposals:

 Commerce Ministry of Bangladesh is going to establish a 'API Park' in Chittagong

with all necessary infrastructure and facilities like effluent treatment plants (ETP),
incinerators etc. The govt. has made a plan to spend around Tk. 20 Billion for this
purpose. The API industrial park will house 20 plants.
 Relax promotion expenditure restrictions in foreign countries to boost export.
 Provide cash incentives for exporters of Generic specially Bulk drugs.
 Establish a Central Drug Testing Facility,
 Take stern measures to ensure the removal of Customs hassles.
 Allow duty free import of Capital machineries for setting up API plants.

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4.16 Regulations/legal environment
Bangladesh Pharmaceutical Industry is regulated by the Drug Act of 1982. The Directorate
of Drug Administration (DDA) working as an independent wing of The Ministry of Health
& Family Planning, Peoples Republic of Bangladesh is the main regulatory body
overseeing the industry.

4.16.1 Historical perspective

The pharmaceutical industry, like all other sectors in Bangladesh, was much neglected
during Pakistan regime. Most multinational companies had their production facilities in
West Pakistan. With the emergence of Bangladesh in 1971, the country inherited a poor
base of pharmaceutical industry. For several years after liberation, the government could
not increase budgetary allocations for the health sector. Millions of people had little access
to essential life saving medicines. The scenario more or less remained same till 1982. The
modern booming Industry of Bangladesh has its root in the year 1982. Before 1982 the
Drug Act of 1940 was in place. In the year 1982 the Drug Act of 1982 was passed which
replaced the previous one.

4.16.2 The regime before 1982 ordinance

Before 1982, 8 prominent multinational companies - Glaxo Bangladesh, Pfizer, Hoecst,

BPI, ICI, Fisons, Cynamite and Wheet, basically controlled Bangladesh pharmaceutical
Table 34: Bangladesh Pharmaceutical Market Prior 1982
industry. Almost 80% of the business Government spending BDT 1,500 million per year.
Number of brands 3,500
was controlled by these MNCs. Some
Number of manufacturers 177
small local companies held the rest Multinationals 8
Retail pharmacists 16,000
20%. Today’s local giants like Wholesales 1,300
Government utilize 10% available drugs
Beximco or Square were totally Private sector 90% available drugs.
Source: BAPI
unknown at that time.

There were about 3,500 brands of drugs in the market including necessary, unnecessary and
even harmful drugs. No structured national committee or regulatory body was present to
regulate the business in this sector and no price control was maintained. Using the brand

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and corporate image, the multinational companies charged as much as possible and used
aggressive selling campaign to grab market share from the counterpart MNC’s and local
companies. Local companies were a bit down as they were unable to compete under the
situation of superfluous production. Misuse of drugs was another common phenomenon of
that period. Compared to the developed countries there was almost no control over drug
selling stores in this country.

4.16.3 Drug Ordinance 1982

As the misuse of drugs increased day-by-day, and to help the Local Pharmaceutical
industry grow, the then government felt the need to impose some legislation on the
production and selling of drugs. Out of this necessity the Bangladesh Pharmacy Council
was established with members from concerned community of doctors and social workers.
They brought a major change in the earlier drug act of 1940 and named it as Drug
Ordinance 1982. It took the boldest step to ban production of drugs out of a prescribed list
with an immediate order. It also imposed some legislation on the formulation of different
drugs in the list and their pricing. Most importantly this ordinance prohibited the import of
Drugs locally produced and also Restricted the multinationals from producing some
essential medicine like, Antacid & vitamins. (The Drug Ordinance of 1982 is available at
http://www.dda.org)

The main objectives of this policy were to:

 Increase availability and accessibility of good quality essential drugs;

 Eliminate useless, non-essential and potentially hazardous drugs from the market.
 Encourage local manufacture of drugs and raw materials, particularly essential drugs;
and
 Develop appropriate legislative and administrative mechanisms.

4.16.4 Effects of 1982 ordinance

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After 1982, production of drugs was limited to 150 essential drugs provided by WHO. As
an after effect of the 82 Ordinance, today nearly 85% of the market share is controlled by
the local companies. Around 25% of the market share in the pharmaceutical industry is
owned by the two local companies- Beximco and Square. These two companies had no
significant presence in the Pharmaceutical Industry before 1982. Currently Beximco and
Square both have started exporting their products in more then 20 countries and thus
contributing toward the foreign exchange earning of the nation. Currently Government has
given a price ceiling for 117 necessary drugs. As mentioned earlier till now production of
Vitamin and anti-biotic by the multinationals are banned. Only the local firms are
authorized to produce these. But still multinationals like Glaxo and Novartis are competing
on the basis of better-formulated drugs. Apart from 150 drugs, every year 100 new drugs
are added to the list.

The key essence of the 82-drug act was the prohibition of many drugs, which were the core
of the product span of the foreign pharmaceutical companies. This has put the foreign
companies into an unfavorable position in terms of competitiveness. The 1982 Drug Act
classified the drugs into three types of drugs:

 Harmful
 Useless
 Non-essential/not importable

Under the new Act, the harmful category was to be destroyed within 3 months. The useless
category was to be reformulated within 6 months and the non-essential category was to be
finished within 9 months. The enforcement of the 1982 ordinance was bestowed upon one
central regulatory body named the Directorate of Drug Administration.

4.16.4.1 Drug administration

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 The Pharmaceutical Industry is monitored and guided by the government under the
ministry of health. Under the ministry of health the director of Drugs Administration
Figure 15: Drug Administration supervises various key tasks. The
drug administration deals with
Ministry of Health both internal and national factors
relevant to Pharmaceutical
Industry.
Director Drugs Drug control
Public health
Administration committee

Drug testing Drug testing 24 zonal offices

laboratory laboratory

4.16.4.2 Internal activities of the Drug Administration

Among the internal factors controlled by the Drug Administration the major ones are:
 Import evaluation and monitoring
 Price approval
 Price control
 Drugs promotion
 Recipe approval
 Block list approval
 Registration and inclusions
 Enforcement of “Drug laws and rules.”
 Enforcement and checking of GPMP recommended by WHO
 Control 72 officers in 64 districts

Source: Ministry of Health & Family Planning

 Collect opinion on a drug from DDC on safety, efficiency and usefulness

 Get the report on special program
 “National survey on quality control of essential drugs.”

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The broad activities of the drug administration can be divided into 3 broad categories

1. Administration.
2. Import monitoring.
3. Locally manufactured drugs control.

The essential features of these activities are stated below:

Administration

 Director is the only regulatory body under the direct control of health ministry, who
has the responsibility of implementing the drug laws.
 The structure has 211 number of posts out of which 72 is officers.
 Presently there are 33 zonal offices around the country.
 All officers are employed as ‘Drug inspectors’ pursuant to drug laws.
 There are two laboratories, one at Chittagong under direct control of drugs
administration. There is also one at Dhaka under direct control of the institute of
public health.
 Presently, two laboratories can handle about 5,000 samples.
 GMP as recommended by WHO, which must be followed for production and quality
control .Permission for production or renewal of license is given when facilities,
created by manufacturing are found suitable enough for GPM, by the inspection
team.
 An expert committee, named ‘Drug Control Committee’ (DCC), evaluates the safety,
efficiency and usefulness of drugs and makes recommendations to the licensing
authority for registration or cancellation.
 Recently, steps have been taken to validate the sources through which finished
medicines and raw materials are to be imported.

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Import Monitoring

 There is no bar asking the registration of any drug.

 If the particular drugs are manufactured by leading companies, based here, which
meets the requirement of the country, those drugs is not permitted for import.
 If the particular drug is a new introduction, this has to be passed by DCC. And the
technical data must be submitted through a standard format.
 For finished imported medicines, submission of three free sale certificates is
required, one from the country of origin, and other two are from two developed
countries.
 The evaluation fee is BDT 1,500.00.
 Drug control committee has about 19 members in which almost all departmental
heads of various medical fields are included.
 If passed, the sample can be procured after getting NOC.
 Samples are to be submitted for analysis.
 After registration, the bulk is importable.
Details of Import duty fixation by GOB are provided in the Annexure.

Locally Manufactured Drugs Control

 Once the recipe is approved the active ingredient cannot be changed. Ingredient can
be changed with approval from drugs administration.
 If the active ingredient is changed, the matter will be treated as new recipe.
 After approval of recipe, the inspection team is supposed to come to inspect the
manufacturing, QC facilities and GMP.
 Then the annexure of item/draft copies of packaging materials must be submitted for
approval.
 Applications must be submitted with treasury “challan” of Tk. 6,500.00 as inclusion
fee. Inclusion fee must be given every 5 years as renewal.
 Retail price must be approved as per guideline of the drugs administration.
 Final printed packaging material must be submitted for approval.

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  Commercial production can be undertaken. But sample of the product must be
submitted within 7 days of commercial production with the treasury challan of TK.
1,500/as testing fee.
 After all these formalities full pledged production and marketing could be continued.
 Companies must follow the Government’s guideline of Code of Pharmaceutical
Marketing Practices while promoting drugs.

Over the last decade the Drug Policy has gone some way towards meeting many of its
objectives. These successes include:

 Increased local production of essential drugs;

 Stable drug prices;
 Encourage greater share of production by national companies;
 Less dependence on imported products and increased savings;
 Less waste of resources on non-essential or useless products; and
 An improvement in the quality of drugs

According to some analysis, the drastic policy-change in 1982 changed the scenario of the
pharmaceuticals sector. Foreign companies that had earlier controlled 75% per cent of
market share and as the allegations had run, “drained out major share of their earnings”
have lost their profound position.

4.16.5 Price Control

The Drug Control Committee sets the price for drugs, which is executed by the Drug
Administration Authority. The Drug Administration makes a block list of drugs in which
both essential and non-essential drugs are included. The essential drug list is done
according to the WHO list of essential drugs and their guidelines. Also, the non-essential
drugs are considered in the same way. The Drug Administration has a list of 117 drugs
price of which are fixed by the DCC. For all other non-listed drugs, prior price fixation is
subject to DCC’s approval.

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The price of listed drug is fixed considering three costs. These are cost of raw materials, the
cost of packaging materials and conversion cost. According to 1982 drug ordinance,
without prior approval of the licensing ordinance no raw materials can be imported. The
companies at the start of the year have to submit a block list to DCC (Drug Control
Committee) mentioning the source, price and quality of raw materials it needs to import
that year. DCC approves this list before materials can be imported. If during any time of
the year the companies need to change the source, price or quantity they need to consult
DCCF regarding the change. With the price of raw materials, the cost of packaging
materials and conversion cost for the drug is added. The fixed factor varies according to the
type of product. For injections it is 2.4, for coated tablet it is 2.3 and for plain tablets it is
2.25. For pricing, overhead expenses are not considered.

For non-listed drugs the company can set its own price. It needs to consider the market
Table 35: Basis of fixing price produced Locally forces before fixing the price. Care should
Mark-up on
Product groups
RM+PM
be taken to see the price is reasonable so that
a) Repacking from bulk pack eg. DCC approves it.
150%
Dextrose, Sod.
b) All orally taken medicine and
topical preparation with the 225%
exception of antibiotic The price fixation is done on the basis of C
c) All orally taken antibiotics 230%
d) All sterile preparations (all & F price stated in the bill of entry and by
280%
steriod preparations included)
the following process:
e) All products involve aseptic
340%
technique
Source: Drug Administration
• For duty free product such as anti TB
(Isoniazid, Ethambutol, etc.), Anti-malarial (Mefloquine), Anti-leprosy (Dapsone), and
Anti-cancer etc. mark-up is 1.525.

• For 7.5% duty on product such as Antibiotics (Amoxycillin), Ciprofloxiacin etc.),

mark-up is 1.625.

• For 7.5% duty and 15% VAT on all other products excluding 1 & 2 such as NSAID
(Ketoprofen), Vitamin (Vit E, B+ etc), Anthihistamine (Mebhydroline), Analgestic-

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 antipyretic (Paracetamol), Cough preparation (Dextromethorphan) etc. mark-up is 1.85.
(Details of Pricing of Imported Medicine are provided in the Annexure.)

Drawbacks of Controlled Pricing: One of the major constraints the industry continuously
faces is price control. Pharmaceutical is the only private sector industry in Bangladesh that
is subject to price control. The industry appreciates the rationale for price control of
pharmaceutical products however, it is of the utmost importance that any pricing policy
while protecting the consumer interest must also ensure adequate return to industry for its
investment on quality assurance, expansion and modernization and research and
development. On the contrary, the present pricing policy, which again is an inheritance
from the past, is counter productive to the production of quality medicines. The present
pricing policy is based on giving a fixed mark-up on material cost. A pharmaceutical
product consists of

• Active ingredients …. Block list

• Excipients…. Standardized
• Packing mat… Standardized

At present, in order to determine material cost, prices from various sources are averaged,
thereby penalizing companies who procure from good sources. In any case market forces
determine price. Therefore a long-term solution to the entire pricing issue is required.
Certain products should be de-controlled while others could be subject to voluntary control
and the remaining could continue to be controlled. At present, the prices of locally
produced basic chemicals are being fixed on a case-to-case basis. A proper guideline for
fixing the price of basic chemicals is required as well.

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4.17 Future industry Trends
Increase in Healthcare Expenditure
• The per-capita annual drug expenditure in Bangladesh remains extremely low at $4
compared to $9, $28, $191 and $412 for China, Mexico, United States and Japan
respectively [Source: WHO]. This is expected to increase as healthcare awareness
rises and as increasing urbanization leads to sales growth of the more expensive
lifestyle segment drugs.

Increased Government Support to the Health Sector

• Bangladesh Govt. is increasingly coming up with plans to improve the healthcare
situation in the country. The per capita expenditure of Govt. for public health is
gradually increasing and stood at USD $ 4 in 2004. In the health sector, Govt has
made an allocation of BDT 3,732 crore combining revenue and development in the
budget of 2004-05, which is around 59% higher than the previous year.
• Significant measures for overall development of the Table 36: Per Capita Govt
Expenditure On Health (USD)
health sector include: establishing new hospitals,
199-2000 2.5
increasing beds in the existing hospitals, filling up all
200-2001 3
vacant posts of doctors, nurses, medical technologists
2001-2002 3.2
and health assistants along with all other vacant
2002-2003 3.8
posts; creating new posts and increasing supply of 2003-2004 4
medicine and medical equipment to the hospitals. Source: ADB

Postgraduate courses in 6 medical colleges and two institutions have been

introduced by the government for increasing the number of specialist doctors in the
country. Steps have been taken to establish a Medical University at the national
level and approval has been given to establish 7 new medical colleges and 8 health
institutes in the private sector.
• Implementation of a three-year Health, Nutrition, and Population Sector Programme
(HNPSP) has started with an outlay of BDT 9,410 crore with the objective of
reaching health services to the doorsteps of the people and aiming at overall
improvement of health services. Through successful implementation of this project,

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 steps will be taken to reach health services on a priority basis to the poor and to the
areas, which are comparatively deprived of health services.
• A new programme has been launched from July 2004 to reduce maternal mortality
by 75 percent with government's own resources in line with the Millennium
Development Goal. Under this pilot programme, pre and postnatal health services
are being provided to poor women of
21 Upazilas by government and private hospitals free of cost through voucher
system.

Volume Growth
• The industry is estimated to grow at a rate of 10-15% over the next five years
driven primarily by new products and volume growth (increase in healthcare
coverage). Volume growth (including new products and that of high value products)
is estimated at 10-11% pa over the next 4 years. Overall this remains a stable
industry and is unlikely to see any significant volatility.

New Product launches

• New brand launches have become the success formula of all domestic
pharmaceutical companies. The launch rate has stepped up over the years. The most
active players in domestic markets like Beximco, Square, Incepta, and Acme have
been launching an average of 50 brands yearly, over the past three years. In the
current year, over a 1,052 new products were launched.
• Companies are going all out to grab a share of the burgeoning new therapeutic
segments: anti-rheumatic, oral anti-diabetic, cephalosporin and heamatinics
markets.

Shift In Demand towards Lifestyle Drugs

• The growth rate for various therapeutic segments will vary significantly with almost
70% of the sales still coming from the more traditional therapeutic segments. With
a shift towards a western lifestyle, a rise in consumption of lifestyle drugs in
Bangladesh is expected. The lifestyle segment is high value, high margin and low

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 volume segment. However Anti-infective including Antibiotics will continue to be
the largest segment,

Sales Pattern: MNCs vs. Domestics

• MNCs are expected to retain their current position and the industry growth is
expected to come from the domestic players through a combination of exports
growth and increasing domestic pipeline. Given the relatively small size of the
Bangladeshi Market even if the MNCs post 2005 launch new products; the range
and the value will not be so significant.

Export as a % of total sales to Increase for Domestic Companies

• On an average Export size is increasing for the Bangladeshi companies, and as we
have entered the post TRIPS era this is expected to increase manifold. As
Bangladeshi companies focus on exports because of better margins, exports, as a %
of total sales will increase to over 50% in the next 5 years.

Generic Export Opportunities: Globalization of Bangladeshi Companies

• Setting up a subsidiary abroad or enter strategic alliances to exploit the tremendous
opportunity in the generics market arising in the next five-ten years will be seen.

Opportunities in OTC and Ayurvedic/Herbal drugs

• An increasing focus is seen on the Over The Counter (OTC) market for products
that can be purchased without a doctor’s prescription. The success of OTC products
is marketing/brand driven in urban markets and largely word of mouth/cost driven
in rural markets. Pharmaceutical companies are actively promoting these products
with the aim of expanding the market for conditions that are primarily self-
medicated using household remedies.

API/ETP Plants:
• As post TRIPS era has opened a vast window of opportunity for Bangladeshi
companies to accelerate their export, more and more firms will be focused to

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 establish own API plants to ensure raw material access. To ensure international
standards for exporting drug to regulated markets companies will also move to set
API/ETP plants more and more.

Research and Development opportunities

• Mainstream companies will be increasingly focused on higher R&D spends and
efforts, as it would be essential for survival after 2016. However, it would be
advantageous for smaller players to focus on this opportunity also. Bulk drug
manufacturing is expected to continue migrating from US and Europe to
Bangladesh due to its inherent advantages.
• Technological advances like Genomic research, Bio-informatics, Combinational
Chemistry and High Throughput Screening may lead to more drugs getting
developed in less time and at a lower cost. Bangladesh will have an additional
advantage due to its strong manufacturing history.

Declining Margins for Domestic formulations manufacturers:

• The industry is expected to see further pricing pressures on the domestic
formulations business due to competition in the high growth lifestyle segments,
declining market share of the anti infective business and competition from the
generic businesses. The profitability is expected to come from the high margin
exports and new innovative product launches.

Export of Specialized products:

• To reap the advantages from TRIPS effect Bangladeshi firms will focus more and
amore on manufacturing and exporting specialized drugs like anti-cancer, anti-
AIDS drugs. Because of significant cost advantage Bangladeshi export of
Specialized drugs like these to African countries are likely to increase manifold
over the next 10 years.

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 Chapter 5
INDUSTRIAL NORMS

5.1 Industry Risks

The Pharmaceutical Industry of Bangladesh is prone to certain kind of risks. The first is the
impact of GATT. A major portion of basic materials of this industry are imported, therefore
dependency of pharmaceutical companies on imported material is another threat. Moreover
after 2016, the companies that can come up with new – more advanced drugs will survive,
in this context the current low national expenditure on medicine can also impede the
sustainable growth of Bangladeshi companies.

5.1.1 Impact of GATT

Implications of the provision of TRIPS (Trade Related Aspects of Intellectual Property
Rights) under the GATT accord are by far the biggest challenge facing the domestic
pharmaceuticals industry. Bangladesh, as a signatory to the GATT accord, was supposed to
come into the framework of TRIPS effective from year 2005. However, ‘Doha declaration’
on Trade Related Intellectual Property Right (TRIP) has extended the time frame for LDCs
(like Bangladesh) up to 2016.The provision calls for strict patent protection (20 years),
which is favorable to the MNCs with strong R&D capabilities.

Mitigants: The changes will be applica7ble only to those products that are not yet present
in the market of that country on 1st January, 2016. Therefore, it will affect a very small
proportion of the market in the medium term. Moreover, in absence of Pipeline protection
Act, the molecules patented before and 2016 will not get any protection until the Patent
laws of the country is changed. The price of homogenous products of the local
manufacturers are relatively low compared to the products of MNCs who have tighter
overhead costs and are also involved in transfer pricing. Moreover, investment in modern
capacity, strategic Tie-ups with MNCs, which are currently, not present in Bangladesh and
registration of new series of new products by 2016 will mitigate the risk to great extent. On
the top of the above, the generic brands (products for which patent has already expired)

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will not be affected by implementation of TRIPS provisions. By 2016 a lot of branded
generics will go off patent.

5.1.2 High Dependency on Imported Raw Materials

A major portion of the raw materials are imported for the industry, making it vulnerable to
international price movements and specially to the continual downward adjustment of
BDT.

Mitigants: The local manufacturers have started hedging foreign exchange import
payments. The major players in the industry are also trying to develop export market for
their products, which will help manufacturers to absorb exchange losses as well as to
establish product quality image to survive after 2016. Moreover, the large players are
gradually reducing their dependence on imported materials by setting up a chemical plant,
which should be capable of catering a sizable portion of their basic raw materials.

5.1.3 Low National expenditure on Medicine

With public spending on healthcare less than 2% of GDP, Bangladesh has one of the lowest
Govt. per capita expenditure in medicine (US$ 4) due to lower purchasing power of the
majority of the population.

Mitigants: The low level of consumption i.e. per capita expenditure on healthcare and
medicine in Bangladesh has a positive element in itself for potential for growth.
Government is taking up programs to ensure “Health for all”. NGOs are playing a vital role
with the help of International Donor Agencies, which are keen to fund projects related to
health, and are also working towards social awareness of using scientific medicines instead
of spiritual or other mode of treatment. This has an advantage for local manufacturers and
thus poses an inherent barrier for products of MNCs, which are generally more expensive
than that of local manufacturer.

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5.1.4 Smuggled Goods:
Probable consumption from spurious smuggled drugs

Mitigants: These are relatively active in the broader areas of North Bengal where in the
major manufacturers has lower concentration of sale. Moreover, the doctors do not feel
comfortable in prescribing those drugs for untested track record and irregular supply of the
same. In 1999, smuggled Indian medicines adversely affected the market, however, due to
the lack of steady supply (which is very difficult to control in case of unofficial trade), the
trend has already reversed from 2000 onwards.

In addition the Government recently has taken some stern measures to stop the inflow of
Smuggled Spurious Drugs. The steps are detailed below.

• The Drug Administration (DA) has put all drugs imports under pre-customs
inspection at all ports in a crackdown on substandard drugs and fake packaging.
• The DA also decided to deploy drugs superintendents at Zia International Airport,
Benapole Land Port, Chittagong sea- and airport and Mongla seaport for the
inspection and put the decisions into immediate operation.
• Backups from a special police force would support the superintendents.
• The DA sought cooperation of the inspector general of police (IGP) for surprise
raids on drugstores to seize contraband drugs.
• Drug superintendents will collect samples at random and send them to laboratories
for verification of their properties through chemical analysis
• Only after satisfactory quality clearance, imports will get a nod.

5.1.5 Rising generic-generics business impairs growth in specialized

segments

The rapid growth in the generic-generic business is expected to slow growth of branded
formulations. The rising demand for low priced generic drugs in the LDCs after 2005 will
also accentuate the situation.

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Mitigants: Bangladesh has a very strong base for manufacturing Generic drugs. And with
the enforcement of TRIPS from now onwards-cheap generic demand will become acute in
the global market. Bangladesh with its cheap generic class will be in a unique position to
increase its generic export manifolds. As a matter of fact at the end of 2004 in a meeting at
UN Bangladesh was recognized as a source of Generic Drugs.

5.1.6 Country and currency Risk – Exports

Bangladeshi companies sell to a large number of countries outside the developed world.
More importantly Bangladesh companies are desperately trying to capture a big chunk of
the market of African LDCs. Volatilities in terms of country specific risks affect the
receivables from these countries. Companies in order to grow sales may take higher risks
and increase the exports to such countries and regions. This also exposes companies to
currency risk especially against non-benchmarked currencies.

Mitigants: Risks are alleviated if the exposure is diversified across countries and currency
benchmarking is done against single currency in the company. In fact since Bangladeshi
currency is showing a depreciating trend against all currencies, currency volatility will be
advantageous for local exporters.

5.1.7 Low Expenditure on R&D

Bangladesh Pharmaceutical companies are yet to get into the culture of spending high on
R&Ds which is essential for survival in the Pharmaceutical market

Mitigants: Bangladesh is very much into the business of generic drugs and not focused on
the market of specialized drugs. Till 2016 Bangladesh will not be affected by patent laws.
As a consequence Bangladesh can replicate and sell specialized drugs. And for generic
drugs Bangladesh is also safe from the risk of import of better drugs as the existing law
prohibits the import of drugs already available in the local market. In addition to that the
existing drugs enjoys the benefit of being low price drugs. It is highly unlikely that other

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developed countries can provide cheaper drugs, as the manufacturing cost is higher
elsewhere.

5.2 Critical Success Factors

The pharmaceutical sector in Bangladesh is prospering, but deregulatory environment after
2005 and the expiration of patent law overriding option after 2016 currently enjoyed by
local manufactures; the industry will face various changes. In this context, the major
opportunities and success factor for the Pharmaceutical Industry of Bangladesh must be
analyzed.

5.2.1 Access to Products / Research & Development / Innovation

• Access to products is crucial to ensure sustainable growth in revenues. Bangladeshi

companies will require capabilities to develop new molecules to keep their product
portfolio young. MNCs will require the support from their parents in terms of access to
their portfolio
• Expanding therapeutic reach through new products in the high margin segment, thus
enhancing the product portfolio (helps in convincing the medical fraternity) and
increasing the critical mass.
• Export growth will come from export of generic drugs and branded formulations for
which reverse engineering R&D skills are required with Bangladeshi companies.

5.2.2 Product portfolio - Therapeutic coverage

• A Company with a diversified product portfolio in varied therapeutic segments is likely

to be successful in capturing a larger market share. The portfolio will determine
whether the company has a presence in segments that are expected to grow in future.

5.2.3 Export Focus

• Regulatory Experience: One of the major challenges in developing a successful export

business is fulfilling and successfully tackling the regulatory requirement in the
overseas market. Most of the developed countries have stringent regulations and there
are high costs associated with these processes. The cost of an ANDA filing is USD
$300M–$500 M.
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• Legal capabilities and ability to fund cumbersome legislation: Most of the
companies wanting to enter the generic market face stiff competition from both the
original patent holder as well as other generic companies. Most of the ANDA filings
are challenged in courts. This might put the domestic companies at a disadvantage and
make the entire process cumbersome.
• Manufacturing Facilities: Along with regulatory filings, minimum standards in
manufacturing like good clinical and manufacturing principles need to be accomplished
in order to export to the high margin but highly regulated developed markets of Europe
and the US. Upgrading facilities will help to get approval from agencies like the FDA
in the US and MCA in the UK.

5.2.4 Marketing and Distribution strength

• Distribution infrastructure: Availability and accessibility are critical for

formulations. Rural penetration could enhance a company’s sales, as rural markets are
largely untapped and relatively free of competition.
• Increasing market penetration: through enhanced distribution channels like E-
pharmaceutical retailing and direct sales channels for repeat consumption drugs like
Insulin. This will increase the geographical reach and will facilitate licensing of
products from MNCs in the post product patent regime.
• Sales force strength and specialization: Key to selling branded formulations in
Bangladesh is doctors and their prescription habits. The companies need to have a
strong and dedicated sales force to educate and convince the doctors to prescribe to the
products.
• Cordial trade relations with dealers: Cordial trade relations with dealers is crucial for
a company’s success as the retailers have power to push consumers to buy alternate
products and the political strength to boycott products.
• Sales tie-ups: Co-marketing has become increasingly important in the international
market. Tie-ups with marketing firms in foreign markets are essential as firms seek to
increase exports.
• Marketing partner for MNCs: MNCs not having a presence in the Bangladesh
market might seek to introduce certain products post-2016. They are unlikely to invest

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 in a marketing infrastructure and would prefer to partner with a domestic firm for
marketing. Firms that capitalize on this opportunity stand to gain a significant extra
revenue line.

5.2.5 Financial Strength and Costs Efficiency

• Strong financials are important to pursue acquisition opportunities, increase R&D focus
and be in a position to aggressively launch new products and meet the associated
marketing expenses.
• Cash flow accruals will be extremely important for domestic firms that wish to pursue
increased coverage of export in international market. To establish and sell branded
formulations in international market involves many kinds of costs, like registration,
promotion etc.
• The expanding generic market will shift the global industry's manufacturing base to
low-cost countries like Bangladesh. While pursuing contract manufacturing/sourcing
base for supply of bulk drugs for MNCs, local companies must keep the future
consequences in mind. A breakthrough in contract manufacturing will help increasing
global acceptance in terms of quality and credibility.

5.2.6 Management

Given the changing environment and the rapidly changing ground rules, the quality of
senior management becomes a crucial factor. The management must exhibit the ability to
successfully execute well thought out strategies and retain key people.
- R&D Personnel are extremely important to the future growth of the firm. Those
firms able to identify and retain talent in this area are likely to succeed.
- Intellectual Property Rights and Regulatory experts will become increasingly
important as the firm forays into exports to regulated markets after 2016.
- Financial experts for risk management, especially for companies that are pursuing
export based strategies that result in fractured, volatile growth.
- International liaisons to become vital as companies seek to expand into foreign
markets.

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5.2.7 Ensuring Government Support
• Every industry requires government support for flourishing. In Bangladesh
Pharmaceuticals is an extremely regulated sector. Firms must have close interaction
with the Govt. through forming trade bodies to ensure suitable Govt. control.
• Govt. support will also be required in the areas of support to build basic infrastructures,
access to low cost financing, policies suitable to get into the export markets through
diplomatic channels etc.

5.3 Industry triggers

5.3.1 Industry Specific
5.3.1.1 European / US: Trade barriers

Though at present Bangladesh Pharmaceutical market is not dependent on export but

increasingly companies are focusing on export markets and expanding the infrastructures
with that goal. An imposition of trade barrier due to political / economic event would
adversely impact many of the local players having/ investing with a view to achieve high
exports.

5.3.1.2 Political Unrest

In the past it has been observed Bangladesh suffered due to some massive political unrests.
If we experience any such unrest like prolonged strikes extended for months the
Pharmaceutical Industry’s production and profitability will be affected.

5.3.1.3 Full Deregulation of the industry

Currently Bangladesh Pharmaceutical market is highly regulated. The entry of large-scale

foreign players is quite restricted. Heavy restriction is also placed on the import of drugs
locally produced. If this sector is deregulated the local players may face stiff competition
from the foreign Pharmaceutical giants.

5.3.1.4 Tax holiday withdrawal

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Currently Pharmaceutical industry enjoys Tax holiday facility. If this is withdrawn the
profitability of the companies will be affected.

5.3.1.5 Devaluation of BDT

With any abrupt devaluation of the local currency the local manufacturers will suffer due to
the increase in their raw material expenses, since most of the Raw materials are imported.
This will lead to a decrease in profitability.

5.3.2 Obligor Specific:

Cancellation of certification: For export-oriented companies international certification
standards like GMP is very important to remain in the export business. International
Buyers’ representatives periodically review the exporting companies’ operation here and
the certifications are renewed. If for some reason the company fails to pass through the
periodical reviews export performance will be seriously affected.

5.4 Capital Market Performance

5.4.1 Return behavior of Listed Pharmaceutical Companies
Twenty listed companies of the pharmaceutical Table 37: Capital Market Performance
Pharmaceuticals Beta Alpha
sector registered a good earning and dividend in the
Ambee Pharma 1.39 0.0069
recent years. To evaluate return behavior, Square Pharma 4.20 0.0053
ACI Ltd 1.61 0.0083
measuring risk is a must. Historical data is used to
Beximco Pharma 1.63 0.0006
measure risk. Using Stock returns (Rit) of the Glaxo SmithKline 2.51 0.0168
Orion Infusion 0.79 0.0108
individual Pharmaceutical Companies & Market Renata Ltd 1.16 0.0051
return (Rmt), the DSE index return of 36 months a Source: Primary

linear regression according to the Rit = αi + βi*Rmt formula was run. The slope of the
regression line is taken as the historical beta (β) or systematic risk component of the return.
The Y axis intercept of the regression line is regarded as the company specific risk or
unsystematic risk alpha (α). The Beta and alpha value of selected Pharmaceuticals can be
seen in table 37.

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The average daily return of the enlisted pharmaceuticals companies for the last eight

Figure 16: Avg Daily Return of Pharma Stocks in DSE (Aug,04-March-05)

0.80%
0.70%
0.60%
0.50%
Return

0.40%
0.30%
0.20%
0.10%
0.00%
Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05

Average Daily Return

months is found as below: in figure 14.

The capital Market performance of the selected Pharmaceutical companies in the Dhaka
Stock Exchange can be seen in table 38 below.

Table 38: Capital Market Performance of the selected pharmaceuticals Companies in DSE:
2005
Current
Share %
Ca Face 52 52 Price
Capit Di
Name of the te Value/ Week Week EPS (BDT)
al PE vi
Companies go Marke High Low BDT (As on
List (BDT de
ry t Lot (BDT) (BDT) 21/04/05
ed MM) nd
)
Square 199 100/2 269.4 16.4
A 4500 1713 432 70 3569.75
Pharmaceuticals Ltd. 5 0 6 5
198
Beximco Pharma A 10/50 108 32 560 4.41 5.12 10 85.5
6
AGM
197 27.8 (160
Glaxo SmithKline A 10/50 249 108 120 7.21 40
6 3 Last
Traded)
197 15.0
ACI Limited A 10/50 96 61 162 5.28 40 89.7
6 3
197 227.0 14.0
Renata Limited A 100/5 3380 1222 56 50 3500
9 7 9
AGM
198 100/1 24.0 (670
The Ibn Sina A 899 402 90 32.28 20
9 0 9 Last
Traded)
198 18.2
Ambee Pharma A 10/50 68 41 20 2.95 25 59.9
6 6
199 100/2 14.8 17
Libra Infusions Limited A 899 283 13 43.3 560
4 0 1 .5
199 100/2 38.6
Orion Infusions Z 181 70.25 204 3.61 nil 170.5
4 0 6

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 198
Pharmaco International Z 100/5 54.75 30 20 -22.86 0 nil 34
7
Source: DSE

The picture gives a strong foothold of Pharmaceuticals in the Capital Market.

5.4.2 Market Capitalization

The market capitalization of ordinary Table 39: Market Capitalization (Value) of ordinary
shares of Pharmaceutical companies is Shares of Pharmaceuticals and Chemicals
also consistent with the growth of the Companies Listed in the DEC
industry. As we can see from the table 39 Year BDT MM
the market capitalization of the ordinary 1999-00 10,814.30
2000-01 10,980.00
shares of the Pharmaceutical companies
2001-02 9,406.00
Doubled in 2004 and reached BDT 24
2002-03 11,202.00
Billion.
2003-04 24,017.00
Source: Bangladesh Bank
Figure 15 below shows a healthy trend in
the Market capitalization trend for the Pharmaceutical companies over the years.

Figure 17: Market Cap of Pharma Companies 1996-2004

30,000

25,000

20,000

15,000

10,000

5,000

0
1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04

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5.5 Conclusion
The pharmaceutical sector in Bangladesh has come a long way to become a self-sufficient
sector in meeting local demand. If the TRIPS advantage can be properly utilized this
industry has huge potential for earning foreign exchange and can emerge as the top export
earning industry in Bangladesh. But with the expiration of patent law overriding option
after 2016 currently enjoyed by local manufactures, the industry will face various changes.
The smaller firms will most likely be unable to compete against large local corporate and
foreign competitors. The amalgamation, joint venture and strategic alliance in various
forms are likely to be taken place among the industry players. Large firms, which have
taken initiatives to carry out research and development program to produce and develop
raw materials locally, develop strong brand image and export goods to abroad, have strong
prospect of being able to survive in the competitive industry that will evolve primarily after
2005 and finally after 2016. In brief it can be said that Pharmaceutical Companies which
focus as per their individual strategy in a balanced manner on the various drivers of growth
namely exports to regulated markets, new products, volume growth, marketing
infrastructure and pricing mechanism are expected to post high growth rates and will be the
market leaders of the future.

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 Chapter 6
CITIBANK STRATEGY
6.1 Portfolio Overview
As of April 2005, Citibank had 8 Table 40: Citibank Portfolio Overview
pharmaceutical companies in its Name of the TFA (USD OSUC USD' MM
sl ORR
Pharmaceuticals MM) (13/04/2005)
portfolio. All these are the top Locally Approved
1 Square Pharmaceuticals 5+ 10 3.07
players of the industry. Among 2 Beximco Pharmaceuticals 10 0.78 0.78
the clients Square and Beximco 3 EDCL 6+ 3.38 0
4 ACI 6 3.98 0.519
are the top 2 players of the Approved Else Where
5 Glaxo Smith Kline 2- 2.94 0.27
industry. 6 of the customers are
6 Novartis 2+ 6 4.86
among the top 15 players of the 7 Sunpharma 4- 3 1.58
8 Organon 3- 0.79 0.767
industry. TFA amounted to
Total 30.87 11.846
USD 30.87 MM including
locally approved & Approved Elsewhere.

6.2 TM Norms
Table 41: Citibank TM norms for the Pharmaceutical Industry
Management/
Industry Financial Profile/Norms Other /KS Factors
Ownership
Pharmaceu Sales >= USD 15 MM History >= 8 years Within the top 10 players
ticals PBT >= 7.5% of net (unless GRB/MNC) Close monitoring of impact of WTO and
sales Evidence of sound changes in Govt. policy i.e. Industry
Current ratio >= 1.20 management Regulation, Duty, VAT etc.
Interest cover >= 3.00 control and
Leverage <= 2.25 supervision KS Factors
Existence of strategic Reputation (internationally accredited
Minimum 10 distribution centers plan for business production)
Minimum 75 products unless beyond 2005. Product Mix
captive market exists. Distribution network and or captive
market

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6.3 Risk Acceptance Criteria (RAC)
Exposure to names that pass our TM criteria, or are approved exceptions, will be subject to
the following terms and conditions:
6.3.1 Amount
Maximum TFA of $ 5 MM, equivalent of TNW of obligor (in case of guaranteed exposure,
guarantor’s net worth to be considered) or 3 months of sales, which ever is lower and
subject to Bangladesh Bank guidelines (i.e. 50% of our capital of which funded exposure
not to exceed 25%) to a single borrower or in aggregate to different companies under
common ownership. Incremental amounts may be allowed on cash covered basis.

6.3.2 Tenor
Generally up to 1 year. Exposures up to maximum 5years will be considered only for
obligors with DRM ratings of 5- or better. (a) Term exposure only to obligors with “High”
corporate governance scores and secured. To be used as a tool for relationship defense,
penetration and retention strategy. (b) “Medium” scores will require term exposures to be
supported by structures such as assignment of export receivables to reduce reliance on the
goodwill of owners for repayment. Term loan should be capped at 25% of the total TFA for
any individual obligor.

6.3.3 Security / Support

(a) All exposure to TTLC’s will be secured. (b) ‘Clean’ facilities to be extended to GRB /
MNC’s under appropriate support arrangement and / or strength on standalone basis. (c)
Clean facilities to the target TTLC names will be for making an entry, upto a maximum
period of 6 (Six) months or 1 (one) year on case to case basis considering the bureaucratic
process involved in charge creation with RJSC. However, the facilities need to be backed
by at least personal guarantee(s) of sponsor Directors and Corporate Guarantee(s) of other
Corporate(s) in the same group, corporate guarantee of other companies in the group on
best efforts basis. No inferior lending.

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 6.4 Citibank Bangladesh: Business Level Strategy 2005
• Increase the existing TFA of USD 31 MM to USD 50 MM
• Increase the existing Outstanding from USD 12 MM to USD 35 MM
• Pursue some of the top players of the industry like Incepta, Opsonin, Aventis, Acme,
and add them in our portfolio, provided they fulfill our TM norms.
• Extending Relationship to Sister Concerns: The promoters of the Top Pharmaceutical
companies have other interests beside the pharmaceuticals industry more commonly in
real estate, healthcare including hospitals and diagnostics, FMCG companies. The
pharmaceutical concerns would like to typically extend the relationships beyond the
flagship company where this study would focus on. The banking requirements could be
with or without the main company support. In most of the cases the promoter would like
to insulate the main company for its group requirements. Opportunities would be there
for the bank in doing short term funding and other funded/non funded transactions
essentially benefiting from the corporate in able to source funding at the main company
credit spreads. There may be less than full support in most of these cases.
- The pharma industry typically being cash surplus, opportunities would exist in
the peripheral group companies on various occasions and extend beyond to the
main company. The companies/promoters would like to see our involvement in
the group companies as much as in the main company.
• Long tenor facilities for new companies: We aim to focus on the innovator
companies, export led growth companies, API/Generics companies and the relatively
small but niche domestic players. These would include rapidly emerging players like
Incepta Pharma.
- The majority of the industry – well-settled domestic formulation companies are
cash rich and are able to meet its long-term requirements though internal cash
accruals. However a large segment, which is the growing pie, is looking to expand
and grow aggressively. These are the companies who would typically seek long-
term finance for around 3-5 years. The funds are to be used for setting up research
capabilities and GMP/FDA approved manufacturing facilities, API/ETP Plants.
- We in order to expand penetration into the industry need to look at a strategy for
long-term facilities to this sector given the growth and the requirements in the

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 industry. In the absence of a seasoning of the relationships with the corporate group,
such long-term facilities may become difficult; however we need to have a clear
strategy across these names.

Table Of Contents – Part B (Project Part)

CHAPTER 1.........................................................................................................................1
PROJECT PROFILE..........................................................................................................1
1.0 INTRODUCTION..........................................................................................................1
1.1 ORIGIN OF THE REPORT.........................................................................................1
1.2 BACKGROUND OF THE REPORT...........................................................................1
1.3 OBJECTIVES OF THE REPORT...............................................................................2
1.4 SCOPE OF THE REPORT...........................................................................................2
1.5 METHODOLOGY & SOURCES OF INFORMATION...........................................3
1.6 LIMITATIONS..............................................................................................................3
CHAPTER 2.........................................................................................................................4
PHARMACEUTICALS INDUSTRY................................................................................4
2.1 HEALTHCARE AND PHARMACEUTICALS.........................................................4
2.2 BULK & FORMULATION DRUGS...........................................................................4
2.3 MAJOR DISEASE CLASSES......................................................................................5
CHAPTER 3.........................................................................................................................6
GLOBAL PHARMACEUTICALS....................................................................................6
3.1 REGIONAL PERFORMANCE ..................................................................................7
3.2 LEADING THERAPY CLASSES ..............................................................................8
3.3 LEADING BRANDS 2004..........................................................................................10
3.4 TOP 10 COMPANIES BY SALES: 2004..................................................................11
3.5 RETAIL DRUG SALES IN 13 KEY PHARMA MARKETS IN 2004...................11
3.5.1 New Products 2004.............................................................................................13
CHAPTER 4.......................................................................................................................14
BANGLADESH PHARMACEUTICALS INDUSTRY.................................................14
4.1 HISTORY OF PHARMACEUTICAL INDUSTRY IN BANGLADESH..............14

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4.2 BRIEF OF BANGLADESH HEALTH SECTOR....................................................15
4.3 MARKET STRUCTURE............................................................................................15
4.3.1 Geographic Concentration.................................................................................16
4.3.2 Demographic Concentration..............................................................................16
4.3.3 Major Disease Classes.......................................................................................16
4.3.4 Modern & Traditional Pharmaceutical Market.................................................16
4.4 PHARMACEUTICAL MARKET SIZE BANGLADESH......................................17
4.4.1 Bulk & Formulation Market..............................................................................18
4.5 FRAGMENTATION...................................................................................................19
4.5.1 Top Pharmaceutical Companies by Sales Value 2004......................................19
4.5.2 Top Pharmaceutical Companies by Unit Sales 2004........................................21
4.5.3 Top Pharmaceutical Companies by Number of Products.................................22
4.6 THERAPEUTIC SEGMENTS...................................................................................23
4.6.1 Top 10 molecules...............................................................................................24
4.6.2 Top 10 brands 2004...........................................................................................24
4.7 NEW PRODUCT.........................................................................................................25
4.7.1 New Product Launch Top 10 Firms..................................................................26
4.7.2 New Product Revenue Top 10 Firms 2004........................................................26
4.7.3 Top new Products 2004 by sales value..............................................................27
4.8 CONSOLIDATION.....................................................................................................28
4.8.1 Toll Manufacturing............................................................................................28
4.8.2 Joint-Venture Opportunities..............................................................................28
4.9 MARKETING & DISTRIBUTION...........................................................................29
4.9.1 Promotional tools..............................................................................................29
4.9.2 Distribution........................................................................................................30
4.10 NEW INVESTMENTS IN THE LAST 5 YEARS..................................................31
4.11 COST ANALYSIS.....................................................................................................32
4.11.1 Material Costs.................................................................................................33
4.11.2 Marketing and Selling Expenses ....................................................................33
4.11.3 Employee Costs ..............................................................................................33
4.12 MARGINS..................................................................................................................34
4.13 BRIEF OF TOP INDUSTRY PLAYERS................................................................35
4.13.1 SQUARE PHARMACEUTICALS LIMITED...................................................35
4.13.2 RENATA LIMITED..........................................................................................36
4.13.3 BEXIMCO PHARMACEUTICALS LIMITED.................................................37
4.13.4 THE ACME LABORATORIES LTD................................................................38
4.13.5 SANOFI-AVENTIS..........................................................................................40
4.13.6 ADVANCED CHEMICAL INDUSTRIES........................................................41

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 4.13.7 ESKAYEF BANGLADESH LIMITED ............................................................43
4.13.8 GLAXO SMITH KLINE...................................................................................45
4.13.9 INCEPTA PHARMACEUTICALS LIMITED..................................................47
4.13.10 OPSONIN PHARMACEUTICALS LIMITED................................................48
4.14 FOREIGN TRADE IN PHARMACEUTICALS....................................................49
4.14.1 Export..............................................................................................................49
Top export Destinations.............................................................................................50
4.14.2 Import..............................................................................................................51
4.15 EXPORT FUTURE PROSPECT: TRIPS ..............................................................52
4.15.1 TRIPS Impact & Bangladesh Pharmaceutical Industry prior 2002...............54
4.15.2 2002: Special Provision for LDCs like Bangladesh .......................................55
4.15.3 Opportunity for Bangladesh............................................................................55
4.15.4 Formulations Export.......................................................................................57
4.15.5 Challenges to export Growth...........................................................................58
4.15.6 Steps for Development.....................................................................................61
4.16 REGULATIONS/LEGAL ENVIRONMENT.........................................................63
4.16.1 Historical perspective......................................................................................63
4.16.2 The regime before 1982 ordinance..................................................................63
4.16.3 Drug Ordinance 1982......................................................................................64
4.16.4 Effects of 1982 ordinance................................................................................64
4.16.5 Price Control...................................................................................................69
4.17 Future industry Trends.......................................................................................72
CHAPTER 5.......................................................................................................................76
INDUSTRIAL NORMS.....................................................................................................76
5.1 INDUSTRY RISKS......................................................................................................76
5.1.1 Impact of GATT.................................................................................................76
5.1.2 High Dependency on Imported Raw Materials.................................................77
5.1.3 Low National expenditure on Medicine............................................................77
5.1.4 Smuggled Goods:...............................................................................................78
5.1.5 Rising generic-generics business impairs growth in specialized segments......78
5.1.6 Country and currency Risk – Exports...............................................................79
5.1.7 Low Expenditure on R&D.................................................................................79
5.2 CRITICAL SUCCESS FACTORS............................................................................80
5.2.1 Access to Products / Research & Development / Innovation............................80
5.2.2 Product portfolio - Therapeutic coverage.........................................................80
5.2.3 Export Focus.....................................................................................................80
5.2.4 Marketing and Distribution strength ................................................................81
5.2.5 Financial Strength and Costs Efficiency...........................................................82
5.2.6 Management......................................................................................................82
5.2.7 Ensuring Government Support..........................................................................83
5.3 INDUSTRY TRIGGERS.............................................................................................83

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 5.3.1 Industry Specific................................................................................................83
5.3.2 Obligor Specific:...............................................................................................84
5.4 CAPITAL MARKET PERFORMANCE..................................................................84
5.4.1 Return behavior of Listed Pharmaceutical Companies ....................................84
5.4.2 Market Capitalization........................................................................................86
5.5 CONCLUSION............................................................................................................87
CHAPTER 6.......................................................................................................................88
CITIBANK STRATEGY..................................................................................................88
6.1 PORTFOLIO OVERVIEW........................................................................................88
6.2 TM NORMS.................................................................................................................88
6.3 RISK ACCEPTANCE CRITERIA (RAC)................................................................89
6.3.1 Amount...............................................................................................................89
6.3.2 Tenor..................................................................................................................89
6.3.3 Security / Support..............................................................................................89
6.4 CITIBANK BANGLADESH: BUSINESS LEVEL STRATEGY 2005..................90

Annexure

COUNTRYWISE PHARMACEUTICAL EXPORT 2002-2004............................................................93

LIST OF GENERIC DRUGS PRODUCED IN BANGLADESH.................................................................95
LIST OF 150 ESSENTIAL DRUGS...............................................................................................99
LIST OF SUPPLEMENTARY DRUGS...........................................................................................102
PRICING MECHANISM FOR IMPORTED DRUGS...........................................................................103
DUTY ON IMPORTED DRUGS..................................................................................................104
LIST OF ALLOPATHIC DRUG MANUFACTURERS OF BANGLADESH.................................................104
LIST OF AYURVEDIC DRUG MANUFACTURERS OF BANGLADESH..................................................106
LIST OF HOMEOPATHIC MANUFACTURERS OF BANGLADESH.......................................................107
LIST OF UNANI MEDICINE MANUFACTURERS............................................................................109

List of Tables

Table 1: Major Disease Classes Worldwide 05

Table2: Global Pharmaceutical Sales, 1997 – 2004 06
Table 3: Pharmaceutical Sales by Region, 2004 (in USD Billion) 07
Table 4: Leading Therapy Classes by Global Pharmaceutical Sales, 2004 08
Table 5: Leading Products by Global Pharmaceutical Sales, 2004 10
Table 6: Top 10 Companies by Sales (in $ Billions) 11
Table 7: Key Country Drug Purchases - Retail Pharmacies 12
Table 8: Retail Sales by Therapeutic Category 13
Table 9: Demographic Concentration of Population & Disease 17
Table 10: Veterinary Pharmaceutical Industry Overview 18
Table 11: Domestic Pharmaceutical Market Size: 1995-2004 18

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Table12: Ranking of the top Pharmaceutical players 2004 (Sales Value). 20
Table 13: Ranking of the top Pharmaceutical players as per IMS
4TH Quarter Report (In terms of Unit Sales) 22
Table 14: Top 10 Manufacturers by Total no. of Products 2004 23
Table 15: Top 10 Therapeutic Class (TC) 2004 24
Table 16: Top 10 Molecules 2004 25
Table 17: Top 10 Brands in terms of Sales Value 2004 26
Table 18: Top 10 Brands by Sales volume 2004 26
Table 19: Top 10 Manufacturers by No. of New Product Launch: 2004
27
Table 20: Top 10 Manufacturers by Sales Revenue from New Product: 2004 28
Table 21: Top 15 New Products 2004 by Sales Value 28
Table 22: Typical Cost Structure of a Pharmaceuticals Company 34
Table 23: Financial Snapshot: Square Pharmaceuticals (BDT M) 37
Table 24: Financial Snapshot of Renata (In BDT) 38
Table 25: Financial Snapshot of Beximco (In BDT M) 39
Table 26: Financial Snapshot Acme 41
Table 27: Financial Snapshot ACI Limited 44
Table 28: Financial Snapshot Eskayef 45
Table 29: Financial Snapshot GSK Bangladesh 48
Table 30: Financial Snapshot Incepta 2003 49
Table 31: Pharmaceutical Export from Bangladesh 51
Table 32: Formulation Import 53
Table 33: Bulk drug Import 53
Table 34: Bangladesh Pharmaceutical Market Prior 1982 65
Table 35: Basis of fixing price produced locally 2002 72
Table 36: Per Capita Govt. Expenditure On Health (USD) 74
Table 37: Capital Market Performance 80
Table 38: Capital Market Performance of the selected pharmaceuticals
Companies in DSE: 2005 87
Table 39: Market Capitalization (Value) of ordinary Shares of
Pharmaceuticals and Chemicals Companies Listed in the DEC 88
Table 40: Citibank Portfolio Overview 90
Table 41: Citibank TM norms for the Pharmaceutical Industry 90
List of Figures

Figure 1: Global Pharma Sales 1997-2004 06

Figure 2: Regional Sales Performance 08
Figure 3: Market share of Top 10 companies 11
Figure 4: Bangladesh Non Traditional Pharma market 17
Figure 5: Bulk and Formulation Market Bangladesh 1989-2004 (BDT MM) 19
Figure 6: Market Share of 231 Pharma companies 2004 19
Figure 7: Market share of Top manufacturers by sales value 2004 21

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Figure 8: Market share of Top 15 in terms of unit sales (2004) 22
Figure 9: Top 10 Therapeutic class Market Share 2004 25
Figure 10: Market share of New and old Products 2004 27
Figure 11: Distribution Dynamics 31
Figure 12: Trend in Profit Margin 35
Figure 13: Pharmaceuticals Export Growth 2000-2004 52
Figure 14: Top 10 Export Destinations 53
Figure 15: Drug Administration 68
Figure 16: Avg Daily Return of Pharma Stocks in DES (Aug 04- March 05) 87
Figure 17: Market cap of Pharma companies 1996-2004 88

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