Iran Pharmaceuticals and Healthcare Report Q4 2009

We expect the total drug market to increase in value from US$2.17bn in 2008 to US$3.21bn by 2013, representing a compound annual growth rate (CAGR) of 8.2% in US dollar terms. Pharmaceutical spending will comprise 0.65% of GDP, and US$41.60 per capita spending by 2013. We believe that growth will be driven by population growth and the rising disease burden for respiratory diseases caused by air pollution.

According to BMI's Burden of Disease Database (BoDD), the number of disability-adjusted life years (DALYs) lost to communicable diseases in Iran is expected to increase from 1,764,459 in 2008 to 1,235,709 by 2013. DALYs lost to non-communicable diseases will rise from 6,934,158 in 2008 to 9,475,354 by 2013.

The presence of 'copy' drugs is usually a deterrent to foreign direct investment (FDI) and highlights regulatory shortcomings within the government and its ability to draft and implement transparent policies.

This leaves domestic drugmakers, which produce legitimate generic drugs, in an unfavourable position for exports, exacerbating the existing difficulties with the trade embargo. Like many emerging markets, the key to boosting local production and indeed pharmaceutical spending is to have clear regulatory guidelines for research and development (R&D), manufacture and commercialising a drug.

This is particularly true in Iran's case, and in our view, seems unlikely to improve in the medium term.

The main issues arise from a lack of legislation or law enforcement in line with both patent protection and counterfeit production and distribution. Counterfeiting of other products outside the pharmaceutical industry is relatively well known. Until the production or supply of counterfeit goods is controlled more rigorously, little progress will be made in curbing fake drugs. Notably, it has been recognised that fake medicines are a danger to health; however, establishing whether a drug is counterfeit will involve regulatory checks within all registered manufacturers.

Recent elections held in Iran have been the subject of intense media coverage. The aftermath and public disquiet is still unresolved with many peaceful protestors remaining detained in jail. The manner in which the government responded underlines key concerns for its approach toward its economic growth with respect to industrial progression. Iran has a highly skilled, educated and young workforce which is undermined by the lack of investment in the domestic pharmaceutical sector. The trade embargo aside, the lack of interest in attaining international accreditation in manufacturing practices for drugs is not constructive.