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Sri Lanka Pharmaceuticals and Healthcare Report Q4 2011
Business Monitor International, Oct 2011, Pages: 63
Business Monitor International's Sri Lanka Pharmaceuticals and Healthcare Report provides industry professionals and strategists, corporate analysts, pharmaceutical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Sri Lanka's pharmaceuticals and healthcare industry.
BMI View: The attractiveness of Sri Lanka’s pharmaceutical market is underpinned by the well-developed healthcare infrastructure and government initiatives with regard to the improvement of public health indicators. Nevertheless, funding pressures will continue to hamper the development of pharmaceutical values in the country, especially as less than 50% of total healthcare spending is provided by the state. In the medium to longer term, economic improvements will allow for wider-ranging patient participation in their own healthcare and medical expenditure.
Headline Expenditure Projections
- Pharmaceuticals: LKR43.60bn (US$386mn) in 2010 to LKR48.56bn (US$444mn) in 2011; +11.4% in local currency terms and +15.0% in US dollar terms. Forecast virtually unchanged from Q311.
- Healthcare: LRK225.42bn (US$2.00bn) in 2010 to LKR252.56bn (US$2.31bn) in 2011; +12.0% in local currency terms and +15.6% in US dollar terms. Forecast unchanged from Q311.
- Medical devices: LRK10.10bn (US$90mn) in 2010 to LKR11.09bn (US$101mn) in 2011; +9.8% in local currency terms and +12.0% in US dollar terms. Forecast marginally down on Q311 due to macroeconomic factors.
Business Environment Rating: Sri Lanka’s composite score for the quarter stands at an unchanged 38.2, out of the maximum 100 points. However, for Q411, Sri Lanka ranks 17th, down by one position quarteron- quarter (q-o-q) in the now 18-strong regional matrix, following the addition of New Zealand. Despite outstanding political issues and widespread corruption, the country’s risks profile is a more attractive proposition than its rewards profile, given the low per-capita levels of pharmaceutical spending and the high level of out-of-pocket contribution to healthcare expenditure.
Key Trends & Developments
- In August 2011, Health Minister Maithripala Sirisena was reported by Dairy Mirror as saying that patient referrals for private sector laboratory tests by government hospitals are now prohibited. The source indicated that the relevant circular was to be issued shortly by the Director General of Health Dr Ajith Mendis. The announcement is likely to cause a backlog in the processing of laboratory tests within the government hospital sector, as the majority of patients will not be able to afford private consultations.
- In September 2011, Sri Lankan President Mahinda Rajapaksa was seeking to increase the local production of drugs in a bid to lower the number of pharmaceutical items imported from foreign countries, reported Daily News. During a discussion held to obtain the observations of Health and Indigenous Medicine Ministries for the preparation of 2012 budget proposals, Rajapaksa emphasised the significance of offering better and more efficient health services to the public.
- In line with the above, an exclusive manufacturing zone for pharmaceutical industry investors is to be established in Kurunegala in the North Western Province of Sri Lanka. However, despite the creation of the manufacturing zone, BMI believes multinational drugmakers may be reluctant to invest funds to set up facilities in Sri Lanka, due to operating risks and modest returns. BMI believes that the manufacturing zone is more beneficial for Sri Lanka's domestic company needs than the needs of multinational drugmakers.
BMI Economic View: Over the long term, BMI believes that the increasing wealth of the Sri Lankan consumer presents a good growth opportunity for the wider economy and also for the consumption of pharmaceuticals. The quickening pace of GDP per capita growth and the secular improvement in the country's labour market bode well for overall consumer wealth. With this in mind, BMI expects real GDP per capita to more than triple over the present decade, hitting US$8,416 by 2020 from US$2,377 in 2010 – a staggering 254.0% increase.
BMI Political View: Despite improving economic conditions, the Sri Lankan government has been subject to severe criticism from Western capitals for alleged human rights violations during the war against the Tamil Tigers and the imprisonment of journalists reporting on the issue. The criticism has held back foreign aid to assist the reconstruction efforts in the country. In fact, in July 2011, the US House Foreign Affairs Committee voted in favour of a proposal to stop providing government funding to Sri Lanka unless the country addresses key issues concerning human rights violations and war crimes. Under the proposed measure, the US government would ban all its funding to Sri Lanka but would continue to provide funds for humanitarian aid, demining, and democracy- and governance-related activities, which could negatively impact the availability of medicines and medical services in the country.
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