Economic Update

29 Mar, 2018

Efforts to increase domestic and foreign investment in Sri Lanka’s pharmaceuticals industry are set to boost output and broaden the sector’s product range, bringing the country closer to the government’s goal of self-sufficiency in medical production.

In early January the State Pharmaceuticals Manufacturing Corporation (SPMC) announced it was joining forces with Malaysian investment firm Pharma Zone to develop a dedicated industrial centre for the manufacture of pharmaceuticals products.

Pharma Zone, a partnership of the Sultan of Johor and Malaysian property development company Equine Capital, will provide $10m for the construction of infrastructure necessary for pharmaceuticals production.

To attract investment to the 50-ha site, to be located in the Kalutara district, south of the commercial capital, Colombo, the state has offered a 15-year buyback guarantee to purchase pharmaceuticals from manufacturers operating within the zone at 20% above unit cost.

Lohitha Samarawickrema, the president of the National Chamber of Pharmaceutical Manufacturers of Sri Lanka (NCPM), told local media in January that at least 17 local producers had signed memoranda of understanding with the SPMC to establish manufacturing facilities within the zone, with each committing a minimum of $4m to secure blocks of 2-4 ha for development.

Manufacturing zones key to self-sufficiency strategy

The initial facilities in the zone are scheduled to come into operation in the first half of 2019, and by 2020 total output is expected to meet around 60% of domestic requirements, according to the NCPM. At present, locally manufactured pharmaceuticals account for just 12% of the market.

The increase in local production is expected to significantly reduce the sector’s annual import bill, which currently stands at $400m-500m.

The strategy is also being supported by other investments in the sector. In early February the government signed an agreement to construct a new LKR1.4bn ($9m) facility for the production of cancer-treating drugs using nanotechnology.

The plant, to be located in Payagala’s Malegoda district, is a joint venture between the SPMC and two Indian pharma companies, and aims to bring down the cost of cancer drugs, most of which are currently imported at prices of around LKR150,000 ($960) per item.

While the goal of producing 100% of pharmaceuticals locally is a long-term one, with industry officials estimating that it will be achieved by the end of the next decade, Sanjaya Jayaratne, chairman of Navesta Pharmaceuticals, said recent developments showed the sector is moving in the right direction.

“Sri Lanka is on the right track to achieving self-sufficiency in pharmaceuticals products,” Jayaratne told OBG. “Major companies in the sector have already set the pace by expanding production capacity to contribute to the country’s medium-term goal.”

Technological improvement needed to meet expansion targets

Although making progress, Sri Lanka still faces a series of challenges if it is to meet its goals for the pharmaceuticals sector.

One such challenge relates to sourcing raw packing materials such as sterile and industry-compliant packaging, which are not available locally and must be imported.  

Another relates to the provision of equipment and technology for medical production. At present, the necessary technological capacity for large-scale pharmaceuticals expansion is lacking, and although the local industry will benefit from development in this area, it will initially rely on imports.

Human resources key to longevity

With plans to significantly expand local pharmaceuticals production in the coming years, more investment will be needed in training and personnel development, according to Murtaza Esufally, managing director of local pharmaceuticals firm Morison.

“As the industry keeps developing, human resources need to grow with it,” he told OBG. “The country desperately needs more pharmaceuticals schools to ensure we have a skilled workforce.”

At present, some local firms either send staff abroad for training or bring in experienced industry personnel from overseas to assist with training. Given that the industry is set to expand in the next few years, developing infrastructure to support skills development will become an increasingly important necessity.

Steps have been made to improve human resources on a domestic level, however, with the universities of Colombo, Sri Jayawadenapura, Peradeniya, and Ruhana all initiating bachelor’s of pharmacy degrees in recent years, which it is hoped will sustain sector growth.