Iran is a developing country in Middle East which has experienced some political and economical turbulence during the past decades. Government of Iran, after the 1979 Islamic revolution, has devoted considerable resources on national health, including the pharmaceutical sector. As a result, health indicators have improved substantially over the past two decadesnd the availability and affordability of medicines have also been greatly improved. In order to fulfill the MOH mission in providing access to a sufficient quantity of safe, effective and high quality medicines that are affordable for all population, after the 1979 Islamic revolution Iran has adopted a full generic based medicine system and local production of medicines and vaccines has become one of the main goals of the national drug policy. Government of Iran has invested considerably on the pharmaceutical industry over the past decades. However, it seems that this investment, mainly due to the lack of R&D activities and unanimous subsidies, has not been proportionately fruitful for Iran’s health system. Iran drug market, especially in recent years, experienced a sharp growth and in 2004 the value of the market, including direct government subsidies to the imported medicines, became over USD1.2bn. The market has increased annually, on average more than 30% , during 1993-2003.
Acute and Subchronic Toxicity?of Teucrium polium Total Extract in Rats
Iranian Journal of Pharmaceutical Research (2006)
1: 1-7
Received: December 2005
Accepted: January 2006
Copyright ? 2006 by School of Pharmacy Shaheed Beheshti University of Medical Sciences and Health Services
Editorial
Iran Pharmaceutical Market
Abdol Majid Cheraghali
Abstract
Iran is a developing country in Middle East which has
experienced some political and economical turbulence during the past decades.
Government of Iran, after the 1979 Islamic revolution, has devoted considerable
resources on national health, including the pharmaceutical sector. As a result,
health indicators have improved substantially over the past two decades and the
availability and affordability of medicines have also been greatly improved. In
order to fulfill the MOH mission in providing access to a sufficient quantity
of safe, effective and high quality medicines that are affordable for all
population, after the 1979 Islamic revolution Iran has adopted a full generic
based medicine system and local production of medicines and vaccines has become
one of the main goals of the national drug policy. Government of Iran has invested considerably on the pharmaceutical industry over the past decades.
However, it seems that this investment, mainly due to the lack of R&D
activities and unanimous subsidies, has not been proportionately fruitful for Iran?s health system. Iran drug market, especially in recent years, experienced a sharp
growth and in 2004 the value of the market, including direct government
subsidies to the imported medicines, became over USD1.2bn. The market has
increased annually, on average more than 30% , during 1993-2003.
Keywords: Iran, local pharmaceutical
industry, drug market, local production.
Introduction
Iran is a country of over 68 million population, with
a substantially young population, located in Middle East. Although Iran is an oil rich country, most of its developmental indices has fallen into the ?middle
income countries? category (1). Despite this, Iran has fairly advanced primary
and secondary health care systems. Some of Iran?s demographic data are
presented in Table 1 (1- 3). After the 1979 Islamic revolution, Iran has adopted a full generic-based medicine system and local production of essential
medicines and vaccines has become one of the main goals of the national drug
policy (4, 5). Over the past decades, the government subsidized local
production of medicines in order to increase the availability and affordability
of the medicines. Essential medicines are available and affordable for more
than 90% of population (6).
However, convincing data exists that prescribing
medicines is excessive. Evidences of irrational use of medicines, high number
of medicines per prescription, as well as excessive high use of injectables and
antibiotics are present in prescibers? behavior (6, 7).
The first supervising law on the regulations of
pharmaceuticals in Iran was passed by the parliament in 1955. According to
current laws in Iran, Ministry of Health and Medical Education (MOH) is the
nodal agency for the regulation of the pharmaceutical sector, including
biological and herbal products. As stated in the national drug policy (NDP),
MOH's mission is to "provide access to a sufficient quantity of safe,
effective and high quality medicines that are affordable for all
population" (4). In light of new political and economical developments in Iran, MOH has revised the NDP and new version of Iran NDP has released on 2004. The main
characteristics of the Iran NDP are as follows:
?????? Regulation of drug market (production,
importation and distribution)
?????? Generic-based medicine policy
?????? Promotion of local production of medicines
?????? Price control
?????? Formulation-based national industry
?????? Herbal medicine industry
?????? Promotion of self-sufficiency in vaccine
production
?????? Licensing for all locally produced and
imported medicines.
MOH operates a department specifically
responsible for medicines. The national regulatory system of Iran consists of two main sectors, which are the Pharmaceutical affairs and the national
control laboratory (8). All manufacturing distribution and importation of
medicines are supervised by the office of pharmaceutical affairs. The main
documents required for registration of medicines are Drug Master File (DMF),
health and free sale certificates and product sample. Registration is the main
prerequisite for marketing of medicines in Iran. However, the office register
products which are already on the Iran Drug List. New medicines have to be
first evaluated by the Iran?s Drug Selection Committee, for inclusion in the
list. The committee evaluates applications for new medicines, based on their
safety, efficacy and cost-effectiveness. Generally speaking, no
comparison on the safety, toxicity or cost- effectiveness of the medicine with
an existing therapy is required as part of this evaluation process (9). Registration, as in many
other developing countries, may take up to one year and even longer. However,
the registration process is not always clear and based on the announced
guidelines (10).
In developing countries,
medicine expenditures, in particular, account for 25%-65% of the total public
and private health expenditures, and for 60%-90% of out-of-pocket household
expenditures on health (11). Therefore, access is hugely facilitated by making
these medicines available as inexpensive as possible. Pricing regulation and
national policies on health insurance can provide a good basis for equitable
right of entry, if they are effectively enabled (12). In recognition of the
need for government assistance in the health care system, some countries
including Iran have adopted a subsidy mechanism for pharmaceuticals. In Iran, the national health insurance system is the main tool used by the government to
improve affordability of medicines. Once a product is approved for marketing
and added to the Iran Drug List, it may be prescribed but not automatically
subsidised. The medicines included in the Iran Drug List will be evaluated by
the Medical Insurance Council and if approved, would be included in national
health system and reimbursed by the national insurance scheme. More than 85% of the
population in Iran are covered by the medical insurance, which reimburse the
cost of medicines to the patients up to 90% for inpatients and 70% for
outpatients. Despite the presence of medical insurance scheme, some of the
imported medicines, mainly hi-tech pharmaceuticals, receive direct governmental
subsidies at the point of entry. This means that the government pays direct
subsidies to the importers of these medicines in order to reduce their costs. Although this may
improve accessibility and affordability of the medicines, it could cause
problems such as smuggling cheap medicines to neighboring countries, irrational
drug use and over purchasing of medicines within the country. Due to the price
control policy in Iran, prices of medicines are identical throughout the
country and both in private and public sectors.
Local Pharmaceutical Industry
Local production of
medicines aims to improve access to high-quality, and low cost medicines.?
However, a key challenge is to determine whether the circumstances for
successful local production of quality medicines are met. In Iran, the modern
pharmaceutical industry is about 80 years old and started with the production of
vaccines in Razi Institute in 1925 and Pasteur Institute in 1920. However, for
decades European and US pharmaceutical companies were the major players in the Iran drug market and importation was the main source of providing medicines for Iran?s market (14). Up to the 1979 Islamic revolution, substantial numbers of international
pharmaceutical companies were presented in Iran. By that time, the country?s
pharmaceutical sector had been transformed into a market worth 300 MUSD per
year. During 1970,s there were nearly 4000 brands of pharmaceutical products
available in Iran, 70% of which were imported and 30% formulated locally. There
was no substantial investment for local production of pharmaceutical products
(13-14).
Currently Iran, compared to other developing
countries, has a fairly well developed pharmaceutical industry. The chemical
pharmaceutical industry in Iran started its activity by licensing the products
and process from multinational pharmaceutical companies and then manufacturing
them locally. The operations mainly involved importing the raw materials of
bulk medicines and formulating them locally.
The Islamic revolution of 1979 was the first
turning point for pharmaceutical industry in Iran. After the revolution,
multinational companies left Iran and further political and economical
developments created difficulties for local pharmaceutical industry to access
new technology and the reguired raw materials. At this point, all the
pharmaceutical companies were nationalized and government took over control of
the pharmaceutical industry. The government then invested substantially in
maintaining and developing the industry and this was performed mainly through
the allocation of subsidized hard currency to purchase raw materials and
machineries. However, no substantial investment was made in the research and
development (R&D) field and therefore the technological capabilities of the
pharmaceutical industry were mainly limited to the areas of formulation.
After the 1979 revolution, the main importers of medicines
were also the state owned Iran Pharmaceutical Inc., Red Crescent Society and
Daru Pakhsh, a company belonging to the National Social Security Organization
(NSSO). The revolution changed many aspects of economic and political
development. Primary goals became self-sufficiency and non-reliance on foreign
intervention. The result was the departure of multinationals and a steep
decline in investment. Therefore in 1980?s this policy created a big hurdle for
introduction of some of the new pharmaceuticals into the Iran market (10). The responsibility for the nationwide distribution of pharmaceutical
products was also passed on to six state owned companies.
Despite the fact that Iran is one of the major
oil exporters of the world, since until recent years it did not have a well
developed petrochemical industry, it had to depend mainly on import of raw
pharmaceutical materials. Invasion of Iran by Iraq in 1980 and a subsequent
eight years war period (1980-1988) was also a major turning point for the
pharmaceutical industry in Iran. During the war period, an acute shortage of
resources caused shortage of medicines and this forced the government to move
towards the production of generic medicines only. The government was mainly
involved in the importation of medicines as finished products, raw materials
and machineries. Provision of local pharmaceutical companies with hard currency
at the subsidized rate was the most direct support of the government from
pharmaceutical system during the 1980-1993 period. All pharmaceutical
companies, private and public, were entitled to take advantage of this favored
exchange rate (14).
The obvious and inevitable implication of such
system was an absolute and heavily bureaucratic centralization in policy and
decision making within the pharmaceutical sector of Iran. Therefore, MOH was in
charge of making decisions on policies and resource allocation, particularly
allocation of subsidized hard currency. The price of pharmaceutical products
was also restrictly controlled by the government. Currently, in Iran the pricing system is based on cost analysis and rigid profit margins for producer,
distributors and pharmacy outlets.
Following the termination of the war, the
government started its first five-years development plan in 1984. The plan
introduced the first steps towards privatization of industry, including the
pharmaceutical industry (15). The privatization policy is given additional
emphasis on subsequent five-years development plans. However, some national
organizations, such as NSSO, National Retirement Organization, charity
foundations and banks purchased most parts of the pharmaceutical industry. At
the moment, NSSO alone owns more than 45% of the market share in Iran?s drug market.
At present, there is around 65 pharmaceutical
companies in Iran with 20 of them considered as large ones. However, the market
is fragmented among the companies in such a way that no one dominates the
market (14). In parallel with privatization, the government tried to reduce its
interference in the industry and provides a competional environment. In order
to control the price of medicines, the government provided the industry with
heavily subsidized hard currency. The government partitioned the national
pharmaceutical market between the companies and each company had a fixed share
of the market which was determined, based on the production capacity of the
company. Although this method may provide some degree of guarantee on
availability of the medicines, quality of the medicines could be compromised.
This was mainly due to the fact that any rejection of produced medicines by the
national regulatory authority could cause shortage of the medicines in the
market. The fact that the government subsidized manufactures to buy raw
materials and equipment, reduced the motivation to innovate. Therefore, the
government gradually removed subsidies from the industry. This trend started
since 1997 and in 2002 the subsidies completely removed from the local industry
and only a few imported medicines, such as blood factors and some of the
anti-cancer medicines, still enjoy government subsidy.
Local production of hi-tech biological products
is a new development in Iran?s pharmaceutical sector. In recent years some
private companies have started to produce biological pharmaceuticals, using
novel biotechnology methods. Among the biopharmaceuticals produced in Iran over the recent years are inteferons, growth hormone and erythropoietin (16). However,
still the overall technological capacity of Iran?s pharmaceutical industry
seems to be limited to formulation of the medicines.
Starting in 2001, MOH lifted the compulsory
generic production of the medicines and encouraged pharmaceutical companies to
produce branded generic medicines. This policy tended to create a more competitive
environment for pharmaceutical companies, which eventually expectes to improve
quality of locally produced medicines (16).
Iran has a fairly well established herbal medicines
sector. It has a vast variety of flora and as a result, the government is putting
emphasis on developing herbal pharmaceuticals. The regulation and production of
this sector comes under the authority of MOH. Iran is one of the few countries,
which has regulation for herbal medicines. Regulation of the herbal medicines
started in 1994 in order to ensure that GMP is followed in this sector.
However, in contrary to the conventional medicines, there is not any subsidies
or direct support of herbal industry on the government side. At present, there
are more than 150 registered and hundreds of non-registered herbal medicines in
the market. Although registered herbal medicines do not have a substantial
share in the market, there is an increasing trend in sales of these products.
Iran?s Pharmaceutical Market
Although Iran is one of the largest markets in
middle east, chiefly due to the size of its population, it has one of the
lowest per capita spending on medicines which is about USD15 (13). As a result
of government?s policy to provide universal access to cheap healthcare,
involving the use of strict price control on pharmaceuticals, the market has
been characterized by low pricing levels and generics dominate the market. This
low cost status has made Iran a cheap source of medicines; hence export
activities have been an area of notable development (10). However, Iran drug market especially in recent years experienced a sharp growth and in 2004 the
value of the market, excluding direct government subsidies to the imported
medicines, became over USD1bn (Figure 1 and 2). The government annually pays
about 220 MUSD as direct subsidies for the imported medicines, which would
increase the overall value of market in 2004 up to USD 1.2 bn. As presented in
figures 1 and 2 Iran pharmaceutical market has experienced sharp increases both
in total value and per capita consumption. Although increasing consumption due
to an increased number of prescribers and population is a significant
contributory factor to this, most of the growth observed during the period of
1997-2003 is due to the removal of? government subsidies and devaluation of
national currency (13). The market has increased annually, on average more than
30% between 1993-2003
(Figure 1). However, the growth rate has substantially decreased (to 19% growth
rate) in 2004, which may indicate some degree of stabilization in the market.
Although price of some imported medicines is substantially subsidized,
sometimes up to 90% of its real price before entering into market, consumption
of imported medicines has shown a significant increase in recent years. This is
mainly due to the fact that local manufacturers do not produce novel and
hi-tech medicines and as a result a demand for imported medicines exists from
prescribers and consumers side.
Although prescription of medicines accounts for
the vast majority of sales, the distinction between prescription and OTC
medicines is not clear. A significant number of prescription only medicines are
available in pharmacies, without the need for prescription (10).
Out put of local manufacturing sector in Iran comprises predominately of cheap and basic medicines, and hence the market is reliant
on imports, in particular at the hi-tech end of the scale. The dependence on
imports places considerable pressure on national healthcare budget and allows
little reinvestment in industry. In terms of quantity/volume, Iran?s local pharmaceutical industry supplies more than 95% of the market needs. Only less
than 5% of medicines are imported as finished product. But in terms of cost,
these imports account for more than 50% of the pharmaceutical market value
(13). This is mainly because imported medicines are expensive. The government
of Iran encourages local industry to locally produce imported drugs. While it
may not reduce the overall drug bill, it will reduce the outflow of valuable
foreign currency and reliance on imports which could always be affected by
political turbulences.
Based on to the 3rd five-years
development plan, started in March 2000, the government is obliged to optimize
resources allocation, replace unanimous medicine subsidies with targeted
subsidies, support private sector activities and promote national and
international investment in pharmaceutical industry. Transfer of subsidies from
manufacturers to public insurance systems, along with the new policy of MOH in
promoting the use of branded generics for locally produced pharmaceuticals may
encourage competition and improve the quality of medicines. Such a transfer
will also reduce red tape and potential for corruption associated with direct
subsidies.
Sector modernization, along with improving
healthcare awareness and access to medicines would lead to an increase in
demand for medicines. Sector modernization could be a catalyst for growth in
the branded products as the demand for the latest, more sophisticated medicines
rises.
While the present national medicine policy is
working well to serve the local health needs, it is not clear from this policy
whether the government plans to build a competitive pharmaceutical industry.
MOH?s main focus is health care and perhaps is not able to provide conditions
required for building up a competitive industrial sector. At present the
government of Iran heavily supports the local pharmaceutical industry through
imposing a high tariff on the imported medicines. Although the tariff is
imposed only on imported medicines, which are also locally produced by the
nation industry, Iran has the highest tariff on imported medicines in the world
(17).
Since 1925, Iran has set laws for protecting
patents and intellectual property rights. However, still there is no
comprehensive law to protect full protection of innovations, especially in the
pharmaceutical sector. Trade marks are registered for medicines and a separate
law governing the pharmaceutical industry mandate that along with the brand
name, the generic name of the product must be published on the labeling.
However, currently MOH licenses medicines from different producers and
importers. A pharmaceutical company can market or manufacture a product, only
after obtaining a license from the MOH. Such licensing is given to more than
one company in any case. The protection of product patents is an ongoing battle
for companies throughout the world?s emerging market and Iran is no exception. At present, there is no developed patent protection, especially for
imported medicines in Iran, and MOH will register ?copied? products based on
patent medicines (10).
As from mid 2005, Iran has become an observer
member of WTO. Although the joining process may takes up to 10 years, this
would have drastic impacts on pharmaceutical industry and pharmaceutical market
in Iran. In such a situation, due to restrictions on the presence of ?copied?
patent medicines in the health sector market of Iran, the government has to
allocate further resources for medicines, specially novel and hi-tech ones.
Conclusion
Although history of modern pharmaceuticals in Iran dates back to about one hundred years ago and started with the production of vaccines,
most of the activities in this sector over the past two decades, have been
carried out by the government. However, no substantial investment has been made
within the R&D field and therefore the technological capabilities of the
local pharmaceutical industry are mainly limited to the area of formulation.
Despite some new activities in producing new compounds, especially in the
biological field which could turn to some value added medicines in the future,
output of Iran?s pharmaceutical industry is limited to the formulation of cheap
and fairly old medicines. The pharmaceutical market in Iran is heavily dependent on the importation of new and hi-tech medicines and due to a significant
growth rate of the market, MOH should allocate new resources for providing
medicines at affordable prices to the population.
In the past two decades, the government of Iran has devoted considerable resources to the pharmaceutical sector as direct and indirect
subsidies. Although the present national medicine policy is working well to
serve the local health needs, it was not able to build a competitive
pharmaceutical industry. Transfer of subsidies from manufacturers to public
insurance systems, along with the new policy of MOH in promoting the use of
branded generics for locally produced pharmaceuticals may encourage competition
and improve the quality of medicines. Such a transfer will also reduce red tape
and the potential for corruption associated with direct subsidies.
Despite all deficits presented, Iran?s pharmaceutical sector, backed by its fairly advanced national industry, inexpensive labor
and energy, advanced petrochemical industry, as well as highly educated and
trained expertise, could have an optimistic future. However, the industry needs
an essential up-grading in its hardware and software. Iran?s industry have had a substantial progress in the production of biotechnology derived
medicines, and hence proper investment in this area will boost the national
biopharmaceutical industry.
Acknowledgement
The author wishes to
thank Dr Akbar Abdollahi Asl for providing valuable data
References
(1) UNDP, Human Development Report
2005, http://hdr.undp.org..
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http://www.cbi.ir
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Dr Abdol Majid Cheraghali
is currently working as a professor of Pharmacology in School of Medicine,
Baqiyattallah University of Medical Sciences. He has worked as senior manager
in the Department of Food and Drug, Iran Ministry of Health for several years.
He can be reached at mcheraghali@bmsu.ac.ir.
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