Overview

With strong government support Bangladesh is developing a robust manufacturing and technically experienced industrial base in pharmaceuticals.  Investor incentives, quality infrastructure (including roads, ports, airports) and low cost inland transport have attracted investment and helped to generate growth in excess of 10% during most recent years.

There are exceptional opportunities for life science companies in Bangladesh:

• Market development opportunities
• Favored access to export markets
  • Low tariff and tariff-free agreements
  • Favorable regulatory environment
  • The World Trade Organization's (WTO) Trade-Related Aspects of Intellectual Property Rights (TRIPs) agreement permits Bangladesh to reverse-engineer patented generic pharmaceutical products to sell locally and export to markets around the world
• Abundant supply of skilled labor
• High quality, low costs for manufacturing

Market development opportunities

Bangladesh offers a business-friendly environment which is placed 15th globally for the protection which it affords investors in the World Bank’s “Doing Business” survey.

The rapid growth that is now taking place in Bangladesh in this sector is creating its own set of unique opportunities.

• Bangladesh currently imports around 80% of its Active Pharmaceutical Ingredients (APIs). As the domestic industry grows so too does the incentive to manufacture APIs* in Bangladesh.
• A dedicated APIs manufacturing park is due to open near Dhaka in 2010.
• Bangladesh companies with internationally certified manufacturing plants are actively looking for foreign partners. Opportunities exist to invest in local companies to allow them to undertake contract manufacturing of drugs, taking advantage of the flexibility permitted by TRIPS*.
• Research and development facilities located in Bangladesh can carry out research into the reverse engineering of patented drugs.
• In the longer term, Bangladesh is a market of growing importance in its own right. The population is already 150m and is predicted to overtake that of Russia by 2020.
• Strong domestic and international demand for pharmaceutical products.
• A demand-supply gap in pharmaceutical products.

As exports of pharmaceutical products to highly regulated markets must comply with strict regulations in the importing country, several firms in Bangladesh have acquired international certification, whether EU*, USFDA*, UKMHRA* or TGA*. The need to fulfill such requirements has driven investment in internationally compliant production facilities. For example, Square spent $50m on a new factory which has now achieved UKMHRA certification. Bangladesh already exports to medium-regulated markets including Russia, Ukraine, Georgia, and Singapore, and to less regulated ones such as Myanmar, Sri Lanka and Nepal. The presence of companies in Bangladesh with internationally-certified facilities opens up the prospect of contract manufacturing for export to highly regulated markets.

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Low tariff and tariff-free agreements

Outstanding opportunities exist for pharmaceutical companies through a combination of favourable regulatory and generous tariff schemes.

• There is extensive tariff-free access to the EU, USA, and Japan under the Generalized System of Preferences (GSP) and reduced tariffs for exports to India and China.

• As a least developed country (LDC), Bangladesh enjoys tariff and quota-free access under the Generalized System of Preferences (GSP) to the EU market for all its products (apart from arms and armaments) provided that they satisfy the EU rules of origin. These stipulate that manufactured products have to be “sufficiently worked or processed” in the exporting country in order to qualify as having originated there.

• Bangladesh also enjoys tariff-free access for exports of manufactured products to the USA and Japan under their respective Generalized Preference Systems. The GSP* therefore allows Bangladesh tariff-free access to a market of over 882m people for its pharmaceutical products. ^{(1, 2, 3)} Bangladesh will also benefit from membership of the South Asian Free Trade Area (SAFTA) which commits India to reduce its tariffs on a wide range of products, including pharmaceuticals. ⁽⁴⁾

• Furthermore, Bangladesh belongs to the Asia Pacific Trade Agreement (APTA) and therefore enjoys reduced tariffs on exports of certain goods to China. These include many pharmaceutical products. Of course rules of origin apply. (5)

Regulatory environment

The pharmaceutical sector in Bangladesh is not highly regulated by global standards. Legislation is aimed at encouraging the growth of the domestic pharmaceutical industry, but muti national corporations setting up joint ventures in the country enjoy the same benefits as indigenous companies. There are no restrictions on exports.

The 2005 National Drug Policy states that the WHO’s* current Good Manufacturing Practices (GMP) should be strictly followed and that manufacturing units will be regularly inspected by the Directorate of Drugs Administration (DDA).

Manufacturing plants must also comply with environmental legislation, e.g. regarding the disposal of waste streams. There are two drug testing laboratories run by the government. Other key features of regulation are restrictions on imported drugs (where these are produced by four or more local firms); a ban on the production in Bangladesh of around 1,700 drugs which are considered non-essential or harmful; and strict price controls, affecting some 117 principal medicines.

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TRIPS*

The World Trade Organization's (WTO) Trade-Related Aspects of Intellectual Property Rights (TRIPs) agreement permits Bangladesh to reverse-engineer patented generic pharmaceutical products to sell locally and export to markets around the world. The 1994 WTO agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) requires signatories to implement patent protection for almost all products, including pharmaceuticals. However, article 66 provides LDCs* with a breathing space before introducing full product patent protection.

Bangladesh is therefore exempt until 2016 from the requirement to observe patent protection on reverse-engineered generic products destined for the local market, and also enjoys a range of privileges with regard to exporting such products.

For example, Bangladesh can export generics to markets where the patent owner has not filed for protection or to other LDCs or non-WTO* members which have not implemented product patent protection, for example Myanmar. Bangladesh can also export to a country which has issued a compulsory drug license and awarded the production contract to Bangladesh. Such licenses are usually issued by developed countries and override the rights of the patent holder. It may do all of this without paying royalties to the patent owner. China and India, the world’s largest suppliers of generic drugs, do not enjoy these advantages. ⁽⁶⁾

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Skilled workforce, competitive labor costs, and linguistic skills

The pharmaceuticals sector is the largest white collar employer in Bangladesh. Around 35,000 people work in the industry. Of these, roughly 50% are pharmacists, chemists, biochemists and microbiologists. The remainder is involved in marketing. As the industry expands, so too does the pool of skilled labor. Bangladesh enjoys a significant advantage over India with regard to wage costs, which are estimated to be 20-30% below that of its neighbor. For example, a machine operator in a pharma manufacturing plant typically earns $75 per month. ⁽⁷⁾ English is widely spoken in Bangladesh, especially at the managerial level, where 90% of staff is fluent.

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Training programmes

Six public and 16 private universities offer BSc and MSc courses relevant to the pharmaceutical sector. The total number of graduates each year in each discipline is as follows:

• Pharmacy - 660
• Chemistry - 360
• Microbiology - 150
• Applied Chemistry - 120
• Chemical Engineering - 210

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Manufacturing costs

High quality, low cost resources are a key aspect of many investment decisions:

• Abundant supply of educated labor including skilled pharmacists, bio-chemists, micro-biologists, and chemists.
• Costs estimated to be 20-30% below those of India.
• Widespread use of English, especially at the managerial level where over 90% of Bangladeshis are fluent English speakers.
• Low utility costs, especially natural gas. The price of natural gas is by far the lowest in the region.

The cost of manufacturing one million tablets is estimated to be $18,000 in the USA, $8,000 in India and $6,500-7,500 in Bangladesh. ⁽⁸⁾ This is accounted for by Bangladesh’s highly competitive labor and energy costs. For example, the cost of natural gas in Dhaka is only 25% of what it is in Shanghai; while labor costs in the pharma industry are 20-30% lower than in India. Bangladesh also benefits from cheap inland transport, while the cost of exporting a container is $970, compared with a regional average of $1,339. ⁽⁹⁾

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*TRIPs=Trade-Related Aspects of Intellectual Property Rights

APIs=Active pharmaceutical ingredients

USFDA=United States Food and Drug Administration

UKMHRA=United Kingdom Medicines and Healthcare Product Regulatory Agency

TGA=Therapeutic Goods Administration

GSP=Generalized System of Preferences

LDCs=least developed countries

WTO=World Trade Organization

WHO=World Health Organization

EU=European Union

References

1. European Commission: http://ec.europa.eu/trade/issues/global/gsp/index_en.htm

2. Office of the US Trade Representative: www.ustr.gov/Trade_Development/Preference_Programs/GSP/Section_Index.html

3. Japanese Ministry of Foreign Affairs: www.mofa.go.jp/policy/economy/gsp/index.html

4. South Asian Association for Regional Cooperation – SAARC. www.saarc-sec.org/main.php

5. UNESCAP. www.unescap.org/tid/apta.asp

6. WTO: http://www.wto.org/english/tratop_E/trips_e/trips_e.htm

7. Bangladesh Bureau of Statistics. www.bbs.gov.bd

8. Reference 2, page 21, and information supplied by BAPI in October 2008.

9. World Bank: Doing Business in Bangladesh, 2008.