BMI View: Domestic generic drugmakers will be at a distinct advantage under Sri Lanka's proposed national medicinal policy. With directives boosting generic drug sales through generic substitution, local pharmaceutical companies will be further assisted as the government aims to use the policy to reduce medicine imports. We highlight that these changes will come at the expense of drugmakers in India and Bangladesh, which have been a key source of pharmaceutical imports into Sri Lanka.
Headline Expenditure Projections
Pharmaceuticals: LKR75.1bn (USD575mn) in 2014 to LKR82.6bn (USD612mn) in 2015; +10.0% growth in local currency terms and 6.4% in US dollar terms.
Healthcare: LKR282.9bn (USD2.2bn) in 2014 to LKR307.4bn (USD2.3bn) in 2015; +8.7% growth in local currency terms and 5.1% in US dollar terms.
Sri Lanka's Pharmaceutical Risk/Reward Index score for Q315 stands at 37.0 out of a total of 100, making it the seventeenth-most attractive pharmaceutical market out of 19 monitored in the Asia Pacific region. The main reason for the country's low score is the relatively small population size, which presents modest opportunities.
Key Trends And Developments
Sri Lankan President Maithripala Sirisena has assured to increase budgetary allocations for the healthcare sector in the country. The president in his election manifesto had proposed to increase budget allocations for the health sector from 1.8% to 3.0% of GDP to strengthen the sector. Development of the health service industry is a more important factor for a country's development than the development of physical resources such as roads and buildings, Sirisena stated. Sirisena also mentioned that Sri Lanka is now maintaining favourable and praiseworthy health indexes. In Sri Lanka, the National Medicines Regulatory Authority Act was passed in parliament by majority vote on March 6 2015. Part of the Senaka Bibile drugs policy to ensure quality, affordable drugs to the public, each medical practitioner, dentist or veterinary surgeon will now be required to prescribe only the generic name of drugs and particular brand names only if specifically required. Pharmacists need to also inform customers about the brand range available to them. Also, additional measures will be taken to prevent doctors from being influenced by pharmaceutical firms in the decisions and recommendations they make, according Palitha Abeykoon, a member of the Committee that drafted the Act.
Indian Union Health Minister J P Nadda, in his meeting on February 16 with Sri Lanka's Health Minister Rajitha Senaratne, sought the relaxation of import restrictions on biosimilar products by Sri Lanka, reports Asian Age. Nadda underlined the need for cooperation between the two countries and to provide a level playing field to encourage Indian pharmaceutical companies to participate in the Sri Lankan market. Under the restrictions imposed by the Lankan government on imports of biosimilar products, an exporter must be registered and have undergone clinical trials in a select list of developed countries such as the US, the UK, Australia, New Zealand, Canada and Japan. Indian pharma companies were unqualified under this criterion.
BMI Economic View
Sri Lanka's real GDP growth will slow in the coming quarters as low agricultural commodity prices and a relatively strong rupee continue to weigh on exports. Moreover, policy and political uncertainty will also keep growth subdued as investors adopt a wait-and-see approach. As such, we have downgraded Sri Lanka's 2015 real GDP growth forecast to 6.5% from 7.5% previously.
BMI Political View
Parliament's decision on April 28 2015 to reduce presidential executive power is positive for political liberalisation, but has underscored the weakness of the ruling minority United National Party. This will likely undermine Sri Lanka's short-term economic growth outlook, as investors wait for more political clarity via new parliamentary elections expected in June 2015.