Iran represents a promising market for international pharmaceutical companies
- Study by Roland Berger and ILIA Corporation: Lifting of sanctions opens the Iranian market to international pharmaceutical firms
- Economic growth topping 12 percent per year; population numbering 80 million with another 400 million in neighboring countries
- Pharmaceutical market currently worth some 2 billion dollars and growing at 6 percent per annum, with total healthcare spending set to reach 40 billion dollars by 2020
- 100 Iranian pharma firms and 60 production sites offer potential for partnerships
Munich, January 2017: Since most of the international sanctions against Iran were lifted a year ago, the country has become a promising place for foreign firms to do business. International pharmaceutical companies are no exception: With some 100 Iranian pharma firms on the ground, there is plenty of potential for attractive partnerships. A local involvement holds ample promise: With Iran’s pharmaceutical market currently worth some 2 billion dollars and growing by about 6 percent a year, the country’s annual spending on health is set to reach approximately 40 billion dollars by 2020. Added to that, pharmaceutical companies operating out of Iran will have the opportunity to develop a sizable market of 400 million consumers in 15 neighboring countries.
“International sanctions considerably impeded the development of Iran’s pharmaceutical sector over the past several decades,” said Morris Hosseini, Partner at Roland Berger. “As a result, the opportunities for growth are even greater now.” That said, the Iranian market brings more than just impressive growth potential for pharmaceutical companies. It also holds certain risks for newcomers, according to the recent study by Roland Berger and Iranian consultancy ILIA Corporation entitled “Iran’s pharmaceutical market – Rediscovering a sleeping giant”.
Opening up to the global market guarantees fast growth
The conditions for the pharmaceutical industry in Iran are good, with a booming local economy and gross domestic product (GDP) likely to grow by 12 percent per annum in the coming years. Having previously been cut off from the global market, the country boasts some 60 pharmaceutical production sites, which are currently being refitted with state-of-the-art technology. Not only that, but it also has a well-functioning healthcare market featuring about 100 competing companies, some of which already offer significant expertise in areas like biosimilar manufacturing.
Pharmaceutical companies will find large numbers of highly qualified workers in Iran as well, notwithstanding the fact that the country has experienced a certain brain drain in recent years. And Iran’s geographic position and good relations with many neighboring countries – with whom they share trade agreements and special economic zones – serve to make the country an ideal export hub for developing a market of some 400 million people, in Central Asia in particular. “Politically, it’s all looking good, too,” said Marlon Jünemann, Managing Partner of ILIA Corporation. “Since the end of the sanctions the Iranian government is taking active steps to ensure a stable and open market and is seeking foreign investment.”
First in is best placed
As far as the experts are concerned, now is the right time to secure a competitive edge by getting in to the Iranian pharmaceutical market early. But companies should not rush in ill prepared. The move needs to be well planned: “The Iranian healthcare market has certain specific features which pose both an opportunity and a threat for new market entrants,” said Jünemann. Having been cut off from the world market for so long, the country has established a well-functioning and self-sufficient system spanning licensing and regulatory institutions, including the body that decides whether or not health insurers can reimburse the cost of individual drugs, as well as drug manufacturers, prescribing physicians, state-run and private pharmacies, and patients.
“Foreign firms coming in to the Iranian pharmaceutical market for the first time can benefit from these structures, but they could present problems too,” said Hosseini. “It is therefore crucial to start with an in-depth understanding of the way the local market works, what the regulatory framework looks like, how the corporate culture is expressed and who the competitors are in the domestic market.” Further steps for pharma firms include deciding between exporting their products to Iran or producing them in-country, and seeking promising market niches and suitable partners locally.
All in all, the experts’ study concludes that Iran presents a lucrative playing field for multinational pharmaceutical companies: “Well-planned and forearmed, firms that enter the market soon will undoubtedly have very good opportunities for growth,” concluded Thilo Kaltenbach, Partner at Roland Berger.
You can download the study here: