The pharmaceutical manufacturing sector, consisting of 12 factories, three of which specialized in the production of intravenous (IV) solutions, is expanding its share on the local market. The sector’s output surged by 63 percent in 2020 in terms of units and 30 percent in 2021 as patients have been increasingly using locally manufactured drugs which are now 30 percent cheaper than similar imported originator drugs and 20 percent cheaper than imported generics. The local currency collapse and the lifting of the exchange rate subsidy on imported medicines have made imported drugs much more expensive than their locally manufactured substitutes. As a result, pharmaceutical imports dropped by 24 percent to $901 million in 2021. In parallel to the growth in their output, pharmaceutical makers are also expanding their capital expenditure which has increased to almost $1 billion from about $500 million two years ago, according to Carol Abi Karam, Chairperson of the Syndicate of Pharmaceutical Industries.
Growing demand for local drugs
At the time when demand for local drugs is rising, overall demand is contracting. “The local pharma market, which was around $1.3 billion, is shrinking by at least 30 to 40 percent in terms of quantity and also due to lower prices. The overall market is contracting as a result of the sharp weakening of purchasing power. In parallel, the share of local drug makers is growing at a fast pace and will expand further. Ironically the crisis has created an opportunity for local industry,” said Bernard Tannoury, Chairman of Benta Pharma Industries. According to Ruwayda Dham, Deputy Chairman at Arwan Pharmaceutical Industries Lebanon, local demand is very high. If the government bans the importation of drugs that compete with their products, the size of the local market for the kinds of drugs manufactured by Arwan will surge to around $86 million. “Demand would increase further and we would have to meet it. We are preparing ourselves for this eventuality and we have set different scenarios for potential investments but we are careful not to take risks unless something concrete materializes. We might also bring new partners since we need financing in order to be able to grasp this opportunity,” Dham said.
Foreign competitors are exiting the market
The economic crisis, which is in one of its aspects is favorable to local manufacturers, has adverse effects on foreign pharmaceutical companies selling their products on the domestic market. “Before the crisis, foreign companies had a competitive edge. They were selling larger quantities than local firms and at higher prices and higher margins. They were tapping this competitive edge to increase their investments with local stakeholders, but this advantage does not exist anymore. So local businesses are gaining the position lost by foreign drug makers,” Tannoury said. According to Tannoury, foreign companies started to exit the local market after the outbreak of the crisis when it dawned on them that the, CEO of Serum Products.
