“Analysis of Pharmaceutical Industry in

Bangladesh

By

Abu Nayeem Rizvi Hasan

2014010000150
Rizvi642@gmail.com
Pharmaceutical Sector Overview
Pharmaceutical Industry is rising at a very
amaging rate and contributing to the national
economy. The Current industry size with
prospective global standards & can emerge as
major revenue generating sector of the country.
Bangladesh is self-sufficient in meeting local
pharmaceutical product demand and Bangladesh
earned $82.11 mn by exporting pharmaceutical
product. This is a great sign of improvement.

Bangladesh domestic market of Pharmaceutical

products is increasing over the past few years and
currently the market stood at BDT 142 billion.
The demand for good-quality medicine increasing and it is expecting that local market will reach
BDT 160 billion by 2018. (Pharmaceutical Sector Overview, EBL securities LDT.).

Bangladeshi pharmaceutical companies provide generic product and able to charge premium for
its products. Top 10 companies hold approximately 70% market share. It is highly complicated
to enter into this industry because of huge investment requirement. Square Pharmaceutical is the
market leader having 21.15% market share followed Incepta, Beximco, Opsonin and Renata.
(Pharmaceutical Sector Overview, EBL securities LDT.).

Bangladeshi pharmaceutical companies exports is increasing over the time and according to
some reports, current export of pharmaceutical product is $ 82.11 mn which is 13.04% higher
thanbprevious period. Bangladesh export pharmaceutical products to 105 countries. Myanmar
imports the highest quantity of medicines worth $13.60 million followed by Sri Lanka with
$13.38 million, the Philippines with $6.10 million, Vietnam $5.32 million, Kenya $4.60 million,
Afghanistan $4.18 million and Slovenia $3.38 million. Bangladesh pharmaceutical export will
cross $ 1 billion landmark within 2018. (Pharmaceutical Sector Overview, EBL securities LDT.).
The External Environment : General Environment
Economic Factor
The economic factor in the country affects the development of pharmaceuticals industry.
Pharmaceutical industry of Bangladesh is growing fast and the country’s economic condition is
contributing more on this. Inflation rate of Bangladesh currently is 5.57% which results interest
rate 6.5% (Bangladesh Bank). If the inflation rate increases more than that the value of money
will decrease. It means that the value of money is decreasing and people will have to spend
more on medicine which is difficult for people. If the money losses its power then industry
growth will be decrease because firm interest rate also increase. Economic conditions also affect
the countries expenditure pattern. If there is economic crisis in the country or crisis in the world
people will try to spend less in their healthcare. Then the government will try to regulate the
price and pharmaceutical companies will lose their premium income. If the crisis is global than
the countries net export will decrease which will be a great barrier to reach the export goal of
Bangladesh.

Sociocultural
The sociocultural factor is very important in the context of Bangladesh. The most of the
Bangladeshi population is young and their immune system is much better than the older
population which is influencing the growth of pharmaceutical industry. We have social and
cultural factors like poverty, malnutrition which are an alarming rate right now. So the
pharmaceutical industries need to have a great concern to address the new trend of problems.
Pharmaceutical industry can do a great deal of work in the healthcare. Pharmaceutical industry
can reduce the unemployment rate specially the women in Bangladesh. Education is shaping the
pharmaceutical industry by providing quality employees. As the people of this country getting
health conscious it will pressure the pharmaceutical companies to provide quality product and
invest in research and development.

Global
Pharmaceutical industry is always influenced by global competition. Countries with better global
reach have advantage to succeed in the business. Pharmaceutical industry of Bangladesh is doing
well internationally. Bangladesh exported pharmaceutical products to 105 countries. Myanmar
imports the highest quantity of medicines worth $13.60 million followed by Sri Lanka with
$13.38 million, the Philippines with $6.10 million. Bangladesh set a target to explore 30 new
destinations and grab larger market share. Bangladesh pharmaceutical export will cross $ 1
billion landmark within 2018 (Pharmaceutical Sector Overview, EBL securities LDT.).
International law changes the pharmaceutical industry. For example Bangladesh will enjoy
patent free production till 2032. So we don’t need to spend our money and it will reduce
production cost. What Bangladesh needs is that maintain the growth. To maintain the expected
growth rate pharmaceutical companies needs to improve the quality of their product. To improve
their quality companies needs to invest in research and development to compete globally.
Bangladesh has tariff free export advantage in some and industry needs to capitalize the
advantage.

Technological
Technological factor have always influenced the pharmaceutical industry. Pharmaceutical
technologies changes frequently so it is important to use up to date technologies. In
pharmaceutical industry new technologies or new information creates new opportunities for
companies. New technologies change the way companies communicate with their customer. The
use of new technology in the preparation of the drug is becoming most important and carries out
different development work that help the industry for improvement of medicines Customers

Political/legal
Government always tries to control the manufacturing of medicines and drugs to protect people
from illegal activities. Government tax rate affects the pharmaceutical industry. For example if
the government increase the tax on raw material then pharmaceutical companies will have to
charge more money from the customer. This will create dissatisfaction in the customers. If the
government put restriction on foreign medicine than local pharmaceuticals can grow.
Government can fixed the retail price of all medicine in the pharmaceutical industry. If will
affect the profitability of the company. For example if the government set the maximum retail for
medicine then the company will earn less. Most of the companies are publicly listed so the
company will not able to give dividend to their stockholder and invest in research and
development. Ultimately fall of production quality. So the political and legal environment plays
essential role in shaping pharmaceutical industry.
Demographic
Bangladeshi pharmaceutical companies produce all kinds of drugs. Some manufacturers are
producing world class quality drugs. Others are trying to reach their target. Peoples demand for
drugs is increasing and quality improving. Pharmaceutical industry is influenced by
Demographic factors like population size, age structure, geographic distribution, ethnic mix,
income distribution. For example if the population is very old or very young the pharmaceutical
industry will shape differently. Bangladesh has different kind of people and people are working
in the same factory that changes the work environment and production quality.
Internal Analysis (also called porter’s five forces model)
Bargaining Power of Customer
Bargaining power of customer for pharmaceuticals industry is low in Bangladesh, as customers
do not have any choice but to buy what their doctor prescribe for them. Most of the retailer are
scattered and they buy drugs from those producers who are being loyal to them. NPPA (National
Pharmaceuticals Pricing Authority) tries to control the price of all drugs but they cannot do it in
that much effective way as the market is very competitive.

Bargaining Power of Supplier

Bargaining power of supplier is low for our pharmaceuticals industry. Pharmaceuticals industry
is fully depend on organic chemicals and chemical industry is very competitive in Bangladesh.
So any producer can shift any time to another supplier to collect their required chemicals.

Rivalry among Competitors

Rivalry among competitors is very intense and the number of firms in the industry is very high
compared to other industries in Bangladesh. Most of the firms are same in case of their firm size.
Some firms use differentiation strategy to modify their product with general competitors’ product
and some use cost leadership strategy to reach with their product in mass population.

Threat of Substitute Products

Threat of substitute products is very low for the industry, as nothing can be a substitute for
medicines. Biotechnology firms can be a threat for pharmaceuticals industry but most of the
pharmaceuticals producers are collaborating their business with biotechnology firms. This
creates the industry to have almost zero threat of substitute products.

Threat of New Entrants

Threat of new entrants is very high as anyone can invest in this business with very least amount
of capital compared to other production related businesses. Creating a strong distribution
network is very easy if the producer knows his regional customers or retailer very well.
Competitor Analysis

Competitive analysis focuses on predicting the dynamics of competitors’ actions, responses and
intentions. Pharmaceutical industry of Bangladesh the market is captured by some major
pharmaceutical companies. In Bangladesh top ten companies hold approximately 70% of the
total market share. So the market is controlled by few companies only and that is why the entry
barrier is higher. To enter into the pharmaceutical industry firm needs large amount of capital
investment and expertise. According to report by EBL Security LDT Square Pharmaceutical is
the market leader having 18.8% market share and others are Incepta, Beximco, Opsonin and
Renata. We will focus on the future objective of the competitor in the industry and how to
response to competitor.

Future objectives of competitor

The major pharmaceuticals companies have a great advantage in the industry. They have a huge
variety of product portfolio and they are expending their product range. By increasing the
product range of product they are trying to maintain their market position. The major
pharmaceutical firms like Incepta, Beximco, Opsonin knows that there is a huge market
possibility in the internationally. So they are trying to expend their reach and go globally. It will
help them to invest more in quality product.

Current strategy of competitor

The current market strategy of competitor is to maintain their market share. To maintain their
market share firms focusing on sales promotion in the market. The pharmaceuticals companies
know that if they don’t promote their product or firm they cannot stay in current position.

Competitor’s beliefs about the industry and capabilities

Competitor beliefs vary from competitor to competitor. For example Square Pharmaceutical ltd
is the market leader in the pharmaceutical industry. They will try to maintain their status que by
producing premium quality medicine. On the other hand incepta will try to increase their
production capacity to reach the market leader. We believe that pharmaceutical industry has a
great future in Bangladesh. So investment in pharmaceutical industry will not go in vain.

Response to competitor
By analyzing the competitor it seems that pharmaceutical industry has a great prospect. To grab
the opportunity firm needs to be quality conscious and invest in hi tech machines. It needs huge
amount of money. But enough money is available then firm the advantage.
SWOT Analysis
SWOT analysis analyzes four factors of an industry: Strength, Weakness, Opportunity and
Threat. The first two factors are internal and last two factors are external factor for an industry.
Here, we did this SWOT analysis on the pharmaceuticals industry in Bangladesh.

Strength
1. Bangladesh pharmaceutical producers are one of the lowest cost producers of drugs in the
world. Bangladesh manufactures can produce drugs at 40% to 50% lower cost than any
other pharmaceutical industry in the world.
2. Most of the companies have their own premises and large factory base where they can
produce a huge number of drugs at one single production.
3. Some of the companies have a good reputation in the domestic and global market like
Square pharmaceuticals Ltd., Beximco Pharmaceuticals Ltd. etc. there are basically the
well-known brand in the market.
4. Bangladesh pharmaceutical industry possesses excellent chemistry, skilled workforce and
process reengineering skills. This creates competitive advantages for the industry and
helps them to develop process, which is cost effective.
5. Most of the pharmaceutical companies follow the relationship selling method. At first the
companies’ representatives make a good relationship with doctor and then try to convince
them for prescribing their medicines by giving the trial facility first.
6. Our pharmaceutical industry has the loyalty of customers and vendors which is a big plus
point for the industry.
7. This industry has some competitive advantages over other industries in the country. Most
of the companies have strong manufacturing capacities all over the country.
8. All companies have quality control system where the employees are committed to
formulate and supply drugs in a qualified manner.
9. Some companies have got the license of global brand. Such as Healthcare
Pharmaceuticals company manufacture the brands of the Hoffman-La Roche Limited.
10. Latest technologies are installed most of the companies in Bangladesh. Some companies
have got the technical guidance from the globally reputed pharmaceuticals company.
 11. Beximco Pharmaceuticals Company has introduced the Metered Dose Inhalation
Aerosols for the first time in Bangladesh by setting up a MDI plant. They design their
MDI plant in such a way through which they can ensure highest possible quality of drugs.
12. To ensure all the quality, a highly dedicated academically sound and professionally
competent team is using most modern and sophisticated equipment to serve best quality
to customers.
13. Some of the company dominates the pharmaceuticals market in Bangladesh. 65% of the
drugs used in Bangladesh are produced in Bangladesh and the other 35% of drugs are
imported from form countries.
14. Our companies have strong distribution system all over in Bangladesh. Most of them
have their own depots through which they distribute their products all over the 64
districts in Bangladesh.
15. Some companies have strong research and development department. For example
Beximco pharma employs a significant part of its resources in R and D department.
16. Some of the company export medicines in many countries of the world. Some of those
are Bhutan, Germany, Iran, Malaysia, Myanmar, Nepal, Pakistan, Russia, Singapore,
Thailand etc.

Weakness
1. The pharmaceutical industries are marred by the price regulation. This regulation has
reduced the pricing ability of companies. The DGDA (Directorate General of Drug
Administration) is the authority to decide the various pricing parameters, sets prices of
different drugs, which leads to lower profitability for the companies. The companies,
which are lowest cost producers, are at advantages while those who cannot produce have
either to stop production or bear losses.
2. Bangladesh pharmaceutical sector are marred by lack of product patent, which prevents
global pharmaceutical companies to introduce new drugs in the country. This discourages
our innovation and drug discovery.
3. Bangladesh pharmaceuticals market is one of the least penetrated markets in the world.
As a result, most of the companies are relying on export for growth.
 4. Some of the pharmaceuticals companies are in low financial position. Due to this low
financial position, they are not able to install latest technology in their premises.
5. Some companies have unskilled workforce. As a result these companies cannot minimize
their cost of production.
6. Due to low barriers to entry, Indian pharmaceuticals industry is highly fragmented with
about 250 large manufacturing units and about 18000 small spread across the country.
This makes our industry vulnerable.
7. Most of the companies do not up to date their machineries. So it is difficult for them to
maintain high quality with traditional machineries in production.
8. Some of the companies have rented premises. This increases the cost of production and
also selling price of drugs.
9. Innovative effectiveness is low in our country, due to lack of sophisticated equipment,
lack of capital and lack of skilled manpower.
10. Sometimes per unit cost of the medicines are higher than the buying price of imported
medicines. These creates unbalance situation in domestic market.
11. Most of the time, the industries have to depend on foreign experts, technology and raw
materials. Also due to the lack of proper guidelines and proper infrastructure facilities,
the industry faces problem in marketing the products.

Opportunity

1. Our government approves some facility for pharmaceuticals industry under which
companies can gather finance for themselves with a least cost of capital. This is
increasing our overall market expansion opportunities.
2. We have many reputed company in Bangladesh and they can produce drugs at
international standard. This facility helps us to become globally reputed too.
3. Some companies have achieved huge loyalty in our local market and their market share is
growing day by day.
4. The interest of obtain degree in pharmacy is getting high day by day. This can be a good
opportunity for the companies to get skilled and well knowledge employees.
 5. Our government recently gave some facility to them who wants to install advance
manufacturing base in their production premises. This helps the company to become self
efficient in making international standard drugs.

Threat

1. The competition in the pharmaceuticals industry is increasing day by day. For this all the
companies are facing huge competition in the market which is decreasing their market
share.
2. Rising cost of wages, salaries increases the total cost of drugs production. For this selling
price of drugs is increasing day by day.
3. Increasing interest rate decreases the opportunity for drugs companies to expand into
huge market.
4. Country like china can produce drugs with a very low cost. This situation can hamper
overall market share, reduced our differentiation capacity.
5. As the competition is huge in the market, some companies are trying the bad selling
practices or producing below standard drugs to expand their market share.
6. Depreciation of taka also creates a negative impact by increasing the price of raw
materials, companies import from abroad.
Recommendation and Conclusion

Bangladeshi drug industry to manufacture drugs is well established. Many pharmaceutical

companies trying their best to contribute in the economy. To do so they are trying to utilize the
current resource. Bangladeshi pharmaceutical industry can grow more if the government
liberalize the rule and provide loans. Pharmaceutical companies needs to produce their own raw
material and to do so government should help. Bangladeshi pharmaceutical companies needs to
expend their business globally. It will help this country to be a develop country.
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