Manufacturing of Pharmaceutical Products
Manufacturing of Pharmaceutical Products
Business Model Description
Invest in B2B models to establish or collaborate with local manufacturers in producing essential medicines. There is also an opportunity to develop a dedicated pharmaceutical zone and establish a facility for manufacturing. Other models such as turnkey projects and contract manufacturing models are also available. Examples of companies active in this IOA space:
Morison Ltd is a subsidiary of Hemas Holdings PLC, engaged in pharmaceutical manufacturing with over 80 years of experience. In May 2022, they commenced operations for General Oral Solid Dosage (OSD) and Oral Liquid Dosage (OLD) manufacturing facility with WHO GMP and EU GMP compliant infrastructure and quality management systems (14)
Navesta Pharmaceuticals is a leading privately owned pharmaceutical manufacturer in Sri Lanka, specialised in manufacturing of dry powder Beta Lactam injectables (antibiotics), and their objective is to provide affordable, high-quality, pharmaceuticals to ensure that anyone, anywhere has access to life saving drugs that they need. The company employs over 160 people and has a turnover of over USD 4.2 Mn (LKR 1.5 Bn). (15)
Astron Pharmaceuticals is a pharmaceutical manufacturing company incorporated in 1956 that set up its first pharmaceutical manufacturing facility in the country. It manufactures and markets several major pharmaceutical therapeutic drugs in a variety of dosage forms, strengths and pack sizes (16)
Interpharm (Pvt.) Ltd is a locally owned pharmaceutical manufacturing company established in 1995, with the objective of providing quality healthcare to the nation. This company is also an associate of Gamma Pharmaceuticals (Pvt) Ltd. (17)
GSK Pvt Ltd is a British Multinational pharmaceutical and biotechnology company with global headquarters in London. GSK has a manufacturing plant in the Western Province of Sri Lanka, specifically to manufacture their over-the-counter painkiller brand Panadol (18)
Expected Impact
Affordable and accessible pharmaceuticals to meet local market needs while also resulting in economic benefits through job creation, SME expansion and other ancillary services
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Sri Lanka: Countrywide
- Sri Lanka: Southern Province
Sector Classification
Health Care
Development need
Primary healthcare is state-funded and is accessible to all. Sri Lanka has the lowest maternal mortality ratio of 30.2 of 100,000 live births in 2020 in South Asia and has achieved elimination status in the control of several intractable communicable diseases, yet Non-Communicable Disease accounts for 83% for all death and rising. (1)
Policy priority
National Health Strategic master Plan 2016 - 2025 (1) is in place to ensure universal access to quality HC through proper planning and investment in both infrastructure and health personnel. National Medicinal Drug Policy for Sri Lanka (2) is there to ensure the availability and affordability of efficacious, safe and good quality medicines in a sustainable and equitable manner.
Gender inequalities and marginalization issues
Safe and reliable access of quality healthcare to elderly/ disabled/women is a challenge due to various socio-cultural (negative attitudes, being ignored, being judged, violence, low health literacy) financial (poverty, unemployment, high transpiration cost) and structural (inaccessible transportation facilities, lack of information) factors.
Investment opportunities introduction
Although Sri Lanka provides Universal Health Coverage there is a long wait for specialist and tertiary care and advanced procedures in the public sector. Reilable and affordable access to healthcare services still remains a challenge.As such there are opportunities in increasing the service capacity and quality especially in secondary and tertiary care.
Key bottlenecks introduction
Despite 51% of total health spending being financed out-of-pocket (4), catastrophic and impoverishing health expenditures have remained comparatively low because the public system still covers the bulk of inpatient care. Therefore, the burden on public expenditure and unmet needs are exceptionally high.
Biotechnology and Pharmaceuticals
Development need
Sri Lanka's pharmaceutical industry is heavily reliant on imports. In 2021, medical and pharmaceutical imports reached a value of USD 883 Mn, 4.3% of total imports. Currently, 85% of pharmaceutical needs are imported with 15 local manufacturing plants catering to the balance.Sri Lanka Pharmaceutical Manufacturers' Association is planning to meet 40% of domestic demand by 2024(3).
Policy priority
Promoting local manufacturing of essential medicines is a key objective of the National Medical Drug Policy of Sri Lanka. The Government has identified the industry with a view of attracting FDI and earning foreign exchange through exports. A pharmaceutical zone in Hambantota-Arabooka has been identified by the Board of Investment. (4)(5)
Gender inequalities and marginalization issues
Lack of availability of essential medicines at a right quality and at an affordable cost is a challenge that needs redress. Due to the economic crisis, the provision of essential medicines and medical supplies for inpatient and outpatient care through government health facilities has been challenging.
Eg
the United Nations- backed- multisector international assistance of USD 47.2 Million was provided for three months of June-September, to assist with most urgent needs arising from the economic crisis including HC and essential medicines. A long term and sustainable solution by building domestic manufacturing capabilities for essential medicines will be key to avoiding such crisis in the future. (12)
Investment opportunities introduction
A zone in the Southern province has been identified with 200 acres each for zone development and manufacturers with foreign joint ventures and local companies. Investment can be made outside of the zone as well. Industry expects to manufacture 300 products (75% of essential medicines) by 2024 using 88 products.
Key bottlenecks introduction
High manufacturing cost mainly due to increasing cost of Active Pharmaceutical Ingredients (API), absence of pricing mechanism which enables adjustment with the movement of the currency, the continuance of buy-back agreement with State Pharmaceutical Corporation to ensure demand and supply predictability.
Biotechnology and Pharmaceuticals
Pipeline Opportunity
Manufacturing of Pharmaceutical Products
Invest in B2B models to establish or collaborate with local manufacturers in producing essential medicines. There is also an opportunity to develop a dedicated pharmaceutical zone and establish a facility for manufacturing. Other models such as turnkey projects and contract manufacturing models are also available. Examples of companies active in this IOA space:
Morison Ltd is a subsidiary of Hemas Holdings PLC, engaged in pharmaceutical manufacturing with over 80 years of experience. In May 2022, they commenced operations for General Oral Solid Dosage (OSD) and Oral Liquid Dosage (OLD) manufacturing facility with WHO GMP and EU GMP compliant infrastructure and quality management systems (14)
Navesta Pharmaceuticals is a leading privately owned pharmaceutical manufacturer in Sri Lanka, specialised in manufacturing of dry powder Beta Lactam injectables (antibiotics), and their objective is to provide affordable, high-quality, pharmaceuticals to ensure that anyone, anywhere has access to life saving drugs that they need. The company employs over 160 people and has a turnover of over USD 4.2 Mn (LKR 1.5 Bn). (15)
Astron Pharmaceuticals is a pharmaceutical manufacturing company incorporated in 1956 that set up its first pharmaceutical manufacturing facility in the country. It manufactures and markets several major pharmaceutical therapeutic drugs in a variety of dosage forms, strengths and pack sizes (16)
Interpharm (Pvt.) Ltd is a locally owned pharmaceutical manufacturing company established in 1995, with the objective of providing quality healthcare to the nation. This company is also an associate of Gamma Pharmaceuticals (Pvt) Ltd. (17)
GSK Pvt Ltd is a British Multinational pharmaceutical and biotechnology company with global headquarters in London. GSK has a manufacturing plant in the Western Province of Sri Lanka, specifically to manufacture their over-the-counter painkiller brand Panadol (18)
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
5% - 10%
Increase in domestic production of essential medicines is expected to grow from 15% to 40% by 2024
The local market size is estimated to be over USD 700 million comprising both local manufacturing and imports and is expected to grow at 8-10% CAGR. 2021 saw higher imports due to the importation of COVID-19 vaccines.
Due to the forex difficulties the country has faced, it has highlighted the need to be more self-sufficient in essential medicines and increase resilience by pursuing greater domestic production.
Indicative Return
20% - 25%
> 25%
Industry experts stated based on their manufacturing facilities the ROI and GP margin was within these ranges on an annual basis.
Investment Timeframe
Medium Term (5–10 years)
Industry stakeholders stated payback could vary between 5-10 years depending on the type of manufacturing facility.
Ticket Size
> USD 10 million
Market Risks & Scale Obstacles
Market - Highly Regulated
Market - Highly Regulated
Impact Case
Sustainable Development Need
The current epidemiological and demographic transition (in particular ageing population) of Sri Lanka is leading to an increase in the prevalence of diseases particularly of Non-communicable diseases (NCDs). Thus, there is a need for the domestic pharmaceutical industry to grow.
The country can save foreign exchange reserves by local manufacturing of essential pharmaceuticals and improve prospects of earning foreign exchange through exports. Last year about USD 700 million was imported.
Job creation and technology transfer will favorably impact the living standards of employees, output of firms and help drive domestic manufacturing and growth. Recent plant by Morrisons created 250 new skilled jobs(9).
Gender & Marginalisation
With the current economic crisis (since 2021), the country experienced a severe pharmaceutical shortages by the first quarter of 2022 with UN including the requirement of financing medicine imports in its global appeal in June 2022.
Purchase of medical and pharmaceutical items account for 26% of out of pocket expenses this is anticipated to rise even further (13). As such affordable medical items will need to be produced at a time where economic distress might require diversion of savings expenditure to other items.
During the peak of the forex crisis in mid-2022, Hospitals in the country reported shortages of essential medicines and other health items, limiting the availability and access to lifesaving sexual and reproductive health (SRH) services.
Expected Development Outcome
The expectation is to reach 40% of self-sufficiency in the supply of medicines and to increase the number of products manufactured from 88 to 300 by 2025 (10)
Increase the skills employment opportunities and skills of existing workforce. There is opportunity for technology transfer in business models which involve contract manufacturing.
Building of export competencies for the pharma manufacturing companies beyond the captive domestic market.
Gender & Marginalisation
Improved access to high-quality, affordable essential medicines, to align with demographic shifts such as growth in the ageing population segment, an increase in NCDs, among others.
By securing the supply of essential medicine, basic healthcare provision is improved especially for marginalised communities through government hospitals which provides coverage. 25% of expenditure from the Health Ministry allocation is spent for the Medical Supplies Division between 2013-19.
Primary SDGs addressed
3.b.3 Proportion of health facilities that have a core set of relevant essential medicines available and affordable on a sustainable basis
3.b.3 Proportion of health facilities that have a core set of relevant essential medicines available and affordable on a sustainable basis
3.4.1 Mortality rate attributed to cardiovascular disease, cancer, diabetes or chronic respiratory disease
Availability of essential medicines and commodities(SARA) 2017- All public healthcare institutions and 95.3% of private healthcare institutions had more than 50% of the essential medicines specified. 82% of public health-care institutions and 80% of private health-care institutions had more than 75% of the essential medicines available.
Availability of essential medicines and commodities(SARA) 2017- chronic respiratory diseases - Only 21% and 53% of public and private healthcare institutions, respectively, had stock levels of more than 90% of essential medicines (9)
Mortality between 30 and 70 years of age from cardiovascular diseases, cancer, diabetes or chronic respiratory diseases - 2015 was 17.7%
Maintain at the same level (9)
Maintain at the same level (9)
25% reduction from 2015 level
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Corporates
Public sector
Outcome Risks
Risk around the quality of locally produced pharmaceuticals in comparison to imported products unless stringent regulations are put in place like they are for EU-GMP compliant medicines.
Effluents from pharma manufacturing facilities can cause pollution of ground and surface water if not disposed responsibly leading to high incidence of community health issues and environmental challenges. (5)
Due to the lack of raw material availability, it may not be possible to produce medicines at globally or regionally competitive rates in the first few years.
Gender inequality and/or marginalization risk: Incase buyback agreements are not sustained or other regulatory changes take place, access to medicine would be compromised, impacting consumers from low income segments the most.
Impact Risks
Uptake of locally manufactured pharmaceuticals may be limited at the beginning as health facilities and end consumers get used to medicines and drugs produced in Sri Lanka.
Impact Classification
What
Improved access to affordable and high quality pharmaceuticals including essential medicines.
Who
The public benefits from locally manufactured medicines and drugs with benefits for actors higher up in the value chain in the private and public sector through purchases.
Risk
Meeting international quality standards, and continued buyback arrangements is also a necessity for ensuring financial viability.
Contribution
Provide high quality pharmaceuticals at an affordable cost, and thereby maintain or improve health indicators, in particular NCDs.
How Much
According to BOI, investments would increase domestic manufacturing by 4 times leading USD 500 million in import substitution. Will also have cascading impact on Sri Lankans with more ubiquitous access to essential medicines
Impact Thesis
Affordable and accessible pharmaceuticals to meet local market needs while also resulting in economic benefits through job creation, SME expansion and other ancillary services
Enabling Environment
Policy Environment
National Health Policy 2016-2025 highlighted the need for developing strategic partnerships to promote local manufacturing of pharmaceuticals. The same policy stated that the local manufacturing of pharmaceuticals as an option for health financing.
The National Medical Drug Policy of Sri Lanka stated that preference should be given to local manufacturers in supply of medicines to the public sector. There should be a private/public mix of suppliers to the private sector (4)
Financial Environment
Investment in the pharma zone in Hambantota will be provided with special incentives such as corporate income tax holiday of a minimum of 5 years to maximum of 10 years based on a pre-defined criteria for income generated through exports.
Investment in the Pharma zone will see importation of Construction, capital and raw material and production related consumables exempted from all taxes and levies ( such as customs duty, PAL, CESS and VAT)
Other incentives: For investment in the pharma zone in Hambantota, the export tax rate will be applicable for sales in the local market for a minimum of 5 years and up to a maximum of 10 years based on a pre-defined criteria.
Regulatory Environment
The State Pharmaceutical Corporation (SPC) is the procurement agency for drugs and medical supplies for the Ministry of Health. It follows the national procurement guidelines and other stringent procedures for evaluation and selection as laid down by the Ministry.
NMRA physically inspects and conducts good manufacturing practice audits annually at all local manufacturing plants prior to approving/renewing manufacturing licenses. The regulator can conduct periodic market surveillance quality checks on the locally manufactured products relative to imports.
Investment in the pharma zone in Hambantota will be guided by the Strategic Development Project Act and status. There is pre-cleared environmental approvals for all products and facilities
All manufacturers must have a Good Manufacturing Practice (GMP) certificate. Compliance with standards is assessed annually.
All essential medicines have been put under price control since October 2016 with ad-hoc price revisions.
Marketplace Participants
Private Sector
Pharmaceutical Manufacturers, Sri Lanka Pharmaceutical Manufacturers' Association, Sri Lanka Chamber of Pharmaceutical Industry
Government
Government: Ministry of Health,, National Medicines Regulatory Authority (NMDRA), State Pharmaceuticals Corporation (SPC), State Pharmaceuticals Manufacturing Corporation (SPMC), Medical Supplies Division
Multilaterals
World Health Organization, World Bank
Target Locations
Sri Lanka: Countrywide
Sri Lanka: Southern Province
References
- (1) Family Health Bureau https://fhb.health.gov.lk/index.php/en/statistics
- (2) National Medicinal Drug Policy of Sri Lanka http://www.health.gov.lk/moh_final/english/public/elfinder/files/publications/publishpolicy/8_Medicinal%20Drug.pdf
- (3) Board of Investment of Sri Lanka https://investsrilanka.com/medical-and-pharmaceutical/
- (4) National Medical Drug Policy of Sri Lanka http://www.health.gov.lk/moh_final/english/public/elfinder/files/publications/publishpolicy/8_Medicinal%20Drug.pdf
- (5) The Future of Pharmaceutical Manufacturing in Sri Lanka https://www.slcpi.org/wp-content/uploads/2020/10/Stax-Report-for-SLCPI_Local-Pharma-Manufacturing_FINAL_08252020.pdf
- (6)National Health Strategic master Plan 2016-2025 http://www.health.gov.lk/moh_final/english/public/elfinder/files/publications/HMP2016-2025/Health%20%20Admin%20-%20%20HRH.pdf
- (7) Pharmaceutical Manufacturing Zone: https://investsrilanka.com/pharmaceutical-zone-arabokka-hambantota/
- (8) Regulatory and Market Profile of Sri Lanka https://pharmexcil.com/uploads/countryreports/Sri_Lanka.pdf
- (9) Ministry of Health (2019). Annual Health Bulletin 2019.http://www.health.gov.lk/moh_final/english/public/elfinder/files/publications/AHB/2020/AHB%202019.pdf
- (10) Information received through stakeholder consultations
- (11) Availability of Essential Medicines https://sdg-tracker.org/good-health
- (12) Sri Lanka Humentarian Needs and Priorities Plan https://srilanka.un.org/index.php/en/185471-sri-lanka-humanitarian-needs-and-priorities-plan
- (13) Sri Lanka health system review. New Delhi: World Health Organization Regional Office for South-East Asia; 2021.https://apo.who.int/publications/i/item/sri-lanka-health-system-review
- (14) Morisons PLC https://www.morison.lk/
- (15) Navesta Pharmaceuticals: http://echelon.lk/ne100/sanjaya-jayaratne/
- (16) Astron Pharmaceuticals: https://www.astron.lk/index.php/pharmaceuticals
- (17) Interpharm: https://www.lusha.com/business/b12c15a7ed98d539/
- (18)GlaxoSmithKline Pharmaceuticals Ltd: https://www.gsk.com/en-gb/locations/sri-lanka/