BMI View: Rising healthcare spending will support Sri Lanka's growing demand for medical treatment over a multiyear horizon, creating commercial opportunities for drugmakers and healthcare operators. However, while imported medicine will continue to account for a large proportion of the total market, cost control measures targeting pharmaceutical spending, a s well as low per capita drug spending , will keep a lid on the country ' s attractiveness to pharmaceutical investors. This is illustrated by the likely introduction of additional drug price caps in the coming quarters, which pose downside risks to our forecasts.
Headline Expenditure Projections
Pharmaceuticals: LKR82.88bn (USD609mn) in 2015 to LKR90.57bn (USD618mn) in 2016; +9.3% in local currency terms and +1.5% in US dollar terms. Forecast broadly in line with last quarter.
Healthcare: LKR276.91bn (USD2.04bn) in 2015 to LKR301.66bn (USD2.06bn) in 2016; +8.9% in local currency terms and +1.1% in US dollar terms. Forecast revised upwards from last quarter.
|f = BMI forecast. Source: National sources, WHO, BMI|
|Pharmaceutical sales, USDbn||0.575||0.609||0.618||0.642||0.682||0.727||0.771|
|Pharmaceutical sales, % of GDP||0.73||0.74||0.73||0.71||0.69||0.67||0.64|
|Pharmaceutical sales, % of health expenditure||29.7||29.9||30.0||30.0||29.9||29.7||29.5|
|Health spending, USDbn||1.939||2.036||2.059||2.141||2.282||2.447||2.617|
In Q117, Sri Lanka's Risk/Reward Index (RRI) score remains unchanged at 35.3 out of a total of 100, making it the fourth least attractive market to pharmaceutical investors out of 20 countries monitored in the Asia Pacific region. The main reason for the country's low score is the relatively small population size, which translates into modest business opportunities by regional standards, as well government efforts to encourage the use of generic drugs. On the upside, Sri Lanka observes relatively high sector value growth.
In November 2016, Biocad, a major Russian biotechnology firm, won a case against multinational drugmaker Roche in the Sri Lanka Court. The Swiss company sought to ban sales of anti-cancer drugs trastuzumab and bevacizumab (brand names Herceptin and Avastin, respectively), which are produced by Biocad, alleging violations in the procedure of registration of these drugs.
In November 2016, the government received approval from cabinet ministers to award a contract to increase the manufacturing of pharmaceutical drugs in the country, which will likely see improvements in the production capacity of the State Pharmaceutical Manufacturing Corporation (SPMC).
On October 21 2016, the Health Ministry issued a gazette notification setting a price ceiling on 48 drugs for common diseases such as diabetes, heart disease, high blood pressure and high cholesterol, among others. In practice, this represents a price reduction of 40 or 50% according to Health Minister Rajitha Seranatne. In addition, similar price caps are expected to target expensive drugs for treating tumours, benign lumps and cancers in the near future.
Although the Ministry of Health stated that the price ceiling mechanism introduced is in line with international standards, Sri Lanka's Ceylon Chamber of Commerce expressed concerns about the potential disruption it may cause to the supply of medicines, adding that the measure was copied from Indian policies that are not suitable for Sri Lanka's low level of domestic drug production.
BMI Economic View
Against a backdrop of weak performance in the agricultural sector and tighter fiscal and monetary policies, we have revised our real GDP growth forecast for Sri Lanka down to 4.6% for 2016, and 5.0% for 2017, from 5.2% and 5.4%, previously. However, a robust domestic services sector will support growth in the near term. Sri Lanka's long-term outlook remains positive due to healthy tourism spending and rising FDI in infrastructure.
BMI Political View
Sri Lanka's coalition government will continue to stall efforts to curb corruption and investigate war crimes that occurred during the civil war (1983 - 2009). The ability of powerful officials loyal to ex-president Mahinda Rajapaksa to resist these political reforms poses a risk to the country's political stability, and could prompt us to downgrade Sri Lanka's Short-Term Political Risk Score. Sri Lanka's heightened political uncertainty could dent investor confidence and reduce inflows of foreign direct investment and development funds.
The Sri Lanka Pharmaceuticals & Healthcare Report features BMI Research's forecasts for drugs and healthcare expenditure and imports and exports, focusing on the growth outlook for the prescription, OTC, patented drugs and generics market segments.
BMI's Sri Lanka Pharmaceuticals & Healthcare Report provides industry professionals, strategists, company executives, investors, analysts and sales/marketing heads with independent forecasts and competitive intelligence on the Sri Lanka pharmaceutical and healthcare industry.
- Benchmark BMI's pharmaceutical and healthcare market forecasts for Sri Lanka, to test other views - a key input for successful budgeting and strategic business planning in the Sri Lankan pharmaceutical and healthcare market.
- Target business opportunities and risks in the Sri Lankan pharmaceutical and healthcare sector through our reviews of latest industry trends, regulatory changes and major deals, projects and investments in Sri Lanka.
- Assess the activities, strategy and market position of your competitors using our company profiles (including SWOTs, KPIs and latest activity) and competitive landscape tables.
BMI Industry View
An at-a-glance perspective on the latest regulatory developments, key forecast indicators and major corporate developments, covering the prescription, OTC and generics markets. The pharmaceuticals and healthcare SWOT outlines strategic factors that affect the basic assumptions underpinning BMI’s forecast analysis, and taken together with BMI’s political, economic and business environment SWOTs, it gives a complete overview of market climate.
BMI Industry Forecast Scenario
Industry forecasts to end-2019 for all key indicators, supported by explicit assumptions, plus analysis of key downside risks to the main forecasts:
- Healthcare: Total healthcare expenditure (USDbn), healthcare expenditure (% of GDP), healthcare expenditure per capita (USD), hospital beds, doctors, and birth & mortality rates (all per ‘000 population).
- Pharmaceutical Market: Drug expenditure in USDbn, % of GDP and per capita (USD).
- Patented Drug Market: Prescription drug sales (USDbn & % of total sales).
- Generic Drug Market: Generic product sales (USDbn), generic sales (% of total sales).
- OTC Drug Market: OTC sales (USDbn & % of total sales).
- Macroeconomic Forecasts: Nominal and real GDP, % real GDP growth, % private consumption growth, % industrial output growth, % consumer price index, % GDP price deflator, exports, imports, trade balance, current account balance, foreign direct investment, exchange rate against USD, government expenditure and external debt.
BMI’s Pharmaceuticals and Healthcare Risk Reward Index
BMI’s Risk Reward Index provides investors (both national and multinational) looking for opportunities in the region with a clear country-comparative assessment of the market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.
A snapshot of key market characteristics, including total size of the pharmaceuticals and healthcare segments, growth drivers, leading therapeutic areas and the competitive landscape
A focus on government healthcare reforms, epidemiological trends, mergers and acquisitions, product launches, market entries, FDI activity, R&D, biotechnology, clinical trials and supply chain issues.
Details of the industry regulatory framework and key legislation covering the licensing of new products/services, pricing and reimbursements, intellectual property, taxation and advertising, as well as analysis of the overall regulatory burden.
The competitive landscape section provides comparative company analyses and index by USD sales and % share of total sales – for the total pharmaceutical sector, as well as the OTC, generics and distribution sub-sectors.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate Company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.