With a wide range of raw materials, diversified products and a 70-year history, Iran,s pharmaceuticals has been considered as the world industry hub. In Iran, pharmaceutical holdings are almost the main policy makers of the industry. Of the most important policies been taken into consideration is the licensing or cooperation with foreign investors. The market value of Iran’s medicine is 5,182 mn USD, with a share of 70% and 30% for domestic production and import, respectively.
- 26% growth in medicine export value in the year ended March 2017
- Foreign companies participation in the industry
- 28% growth of medicine market value
Being as one of the top ten pharmaceutical producers, 145 Iranian companies produces more than 97% of medicine an over 7,775 medicine brands, of which 2,189 items are generic.
The pharmaceutical productions were 38 bn units which fell up to 5.94% in the year ended March 2017, compared to the same period in the last year.
Domestic consumption & demand
Iran is among the top 20 medicine consumption countries in the world and 2nd in Asia after China. This is despite the fact that 20% of all medicines in Iran are consumed arbitrarily and without prescription.
The pharmaceutical market value has been 5,182 mn USD of which 70% were domestic manufacturers share and 30% were import in the year ended March 2017. Domestic medicine consumption per capita was about 64.8 USD and its numeric per capita consumption equals to 508 units.
The market value of pharmaceuticals has been rising, as the total market value of the all medicine grew by 21% in 2016 compared to the previous year.
Pharmaceuticals export value was 127.6 mn USD that experienced 26% growth in the year ended March 2017 in comparison to the previous year.
Because of the growth in medicine production and the decline in import, the volume of pharmaceutical export has increased.
Medicine import value was 1,100 mn USD, which indicates a decrease in the year ended March 2017, in comparison to the last year.
According to the rules of the Food and Drug Administration, pharmaceutical companies are not authorized to directly sell their products to pharmacies, so this task should be achieved by distribution companies. However, large medicine holdings have begun to establish pharmaceutical distribution companies to gain more share and connections with pharmacies and hospitals.
With the valuable resources of medicinal plants are in Iran that, if recognized developed and utilized properly, could play an important role to the employment, health and non-oil export. Iran has an approximate, 8,000 to 10,000 plant species, of which about 2,300 items include medicinal plants. In addition, 1,728 species are Iranian native plants that are domestically grown and considered as monopolized capacity.
Medicinal plants export was 9 mn USD in value and weighted 2,800 tons since April to August 2017, has not changed in value, but increased by a weight of 40% compared to the same period last year.
Challenges to medicinal plants sector
- Uncontrolled overexploitation despite the especial capacity
- Drought and the lack of planning for the medicinal plants cultivation
- Lack of integrated chain from production to export
- Lack of incentives for farmers
Sanctions & post-sanctions
After sanctions on Iran’s banking system in 2012, despite the fact that medicines are exempted from sanctions, the Iranian pharmaceutical sector tackles many challenges. The import of raw materials and finished products were affected by financial transactions, the value of the Iranian currency (Rial) declined and as a result, Iran suffered lack of medicine, rising prices and increased import costs. About two thirds of raw materials are imported in Iran, due to sanctions; import of pharmaceutical raw materials were mostly from China and India. However, Iran’s domestic pharmaceutical sector’s outlook is now promising. A large number of imported medicines are now produced internally. As a result of sanctions, domestic companies have gained more share of the Iranian pharmaceutical market. Under the light of post-sanction conditions, it seems that reducing the cost of financing, facilitating bank transfer, as well as the world’s largest pharmaceutical companies investment in Iran, cost of pharmaceuticals import has been reduced, thus creating drop in the market price , increase the medicines quality and import of technology.
Following the JCPOA, pharmaceutical industry was strengthened and major pharmaceutical companies were invited to invest in Iran such as Danish Novo Nordisk producer of diabetic medicines signed an agreement with Iran in September 2012. In order to strengthen its pharmaceutical industry, Iran has invested in foreign companies and has made extensive efforts to cooperate and attract investment from pharmaceutical companies. Several German delegations have expressed interest in increasing pharmaceutical cooperation; Iran and Russia have also signed an agreement to produce the flu vaccine.
French Sanofi, one of the world’s largest pharmaceutical producers, is also planning to produce certain medicines in Iran. Swiss CHEMO is one of the largest generic medicine producers in Europe, with a 65% investment in the Barakat Pharmaceutical group . The investment made in the first phase was more than 15 mn USD, which plays the main part of pharmaceuticals production. This is the first deal in pharmaceutical sector in the form of capital contribution.
- Appropriate research and development projects
- Domestic production of 96% of medicines
- Iran’s pharmaceutical industry with 100 and 70 years experience in vaccination and chemicals, respectively
- The largest biogenic medicine portfolio in Iran
- Supplying more than 96% of the pharmaceuticals demand domestically
- Complete medicine supply chain
- Numerous pharmaceutical schools
- Unfair competition between domestic companies
- Governmental pricing
- Majority of production is dedicated to palliative and vitamins
- Iran in need of raw materials import
- No plans for export
- Government intervention in all levels
- Lack of clear supervision
- Lack of proper branding compared to foreign companies
- The abundance of raw materials and herbs
- Suitable geographic location for the cultivation
- The capacity and strength of domestic companies
- The high profitability of domestic companies in comparison with foreign companies
- The rising costs of health care in the world
- Significant success of knowledge-based industries
- Neighboring countries are far left behind compared to Iran pharmaceuticals and are suitable export destinations
- Strict rules and standards of environmental and quality
- Increasing competition level
- High rate of development products
- Import of similar medicines
- Government’s different attitude to domestic and foreign medicines
- Risk of exchange rate fluctuations: Given the high need for foreign currency of this industry in the raw materials, increase in the exchange rate and cost of finished products, the margin profit of pharmaceutical production of companies are affected.
- Risk of financial facilities interest rate fluctuations: Interest rates have a direct impact on the cost of pharmaceuticals production, interests on liquidity will reduce the profitability of pharmaceutical companies and it also increases the cost of raw materials.
- Liquidity risk: Due to the economic conditions and application of government contraction policies, the problem of liquidity has been a major concern for the managers of industrial and industrial units.
International factors and changes in government regulations: Due to the fact that most of the raw materials, new parts and machineries are imported, any changes in domestic and international laws and regulations could lead pharmaceutical companies slump.
- Risk of production input prices: raw materials account for 50-70% of pharmaceuticals production cost and will be affected by any changes in the price of raw materials.
- Other risks: include lack of sales policies, offering non-programmed cash discounts, outdated machineries , low GMP standards, the lack of high quality products to export.
Investment advantages & incentives
Iran’s pharmaceutical industry, with a wide range of raw materials, products and a 70-year history, is now operating as one of the world’s pharmaceutical hubs.
Under the influence of the Rial weakening, medicine production in Iran has been growing dramatically in the coming years. Iran’s pharmaceuticals are becoming more competitive in international markets, which will naturally provide good incentive to Iranian producers. Also, with a population of 80 mn as a market, it is an attractive destination for large pharmaceutical companies.
Iran has a long history in herbal medicine and with appropriate investments, can launch the pharmaceutical industry on a massive scale.
Opportunities & investment priorities
- Research and development and production of generic and brand medications
- Research and development and production of biochemical medicines and new products
- Renovating the pharmaceutical industry to meet international standards
- Plasma refinery and derived products
- Anticancer medicines
- Biotechnology medicines (recombinant, monoclonal antibodies, peptides)
- Thalassemia medicines
- New combined insulin
- Supercritical Fluid Extraction (SFE )
- Packaging and processing of medicinal plants
Laws & Regulations
-Medicines that enter the pharmaceutical market should be registered by the Food and Drug Administration. Only registered medicines are allowed to be produced, imported, distributed and supplied. Medicines will be registered for a period of time and if necessary, will be renewed periodically.
-Only companies approved by the Food and Drug Administration and based on GMP regulations are allowed to apply for registration.
Availability of pharmaceuticals
According to the law of medical, pharmaceutical, edibles and potables (1995) and subsequent amendments, which is among the oldest integratedlaws related to medicines in Iran, importing, exporting, selling and purchasing medicines without acquiring a license from the Ministry of Health (MOH) is considered as a crime (3rd clause).
Quality related regulation
The Act of production and importation of pharmaceuticals and subsequent amendments (1989) provide one set of regulations to assure the quality of pharmaceutical products in the market. According to Article 12 of this Act, the establishment of a pharmaceutical manufacturing company must be licensed by both the ministry of industry and the Ministry of Health (MOH).
According to the Foreign Investment Promotion and Protection Act (2002) approved by the parliament, to promote the attendance of foreign investors in Iran’s market, the total value of goods and services provided by foreign investment must be limited to 25% of the total values in that economic sector and 35% of subsector. Nevertheless, the foreign investments for export purposes (for industries other than oil) are exempted from this limitation.
Pharmaceutical industry in Capital Market
The Pharmaceutical group as one of the major industries and owning 40 companies has 3,436 mn USD market value, equivalent to 3.3% of the total stock market value with the P/E ratio of 6.24.