Nepal must allow foreign investment in pharmaceuticals

When President Joe Biden announced last month that the United States was waiving vaccine patents temporarily in response to the Covid-19 pandemic, it was first seen as a major boost to the battle against the coronavirus worldwide.

However, the hard reality quickly set in that it is not enough to just waive patent rights, the major bottleneck is technology transfer to countries that have the infrastructure in place for vaccine manufacturing, like Bangladesh, India, Thailand in our neighbourhood.

For countries like Nepal which do not even have that capability, news of the US patent waiver made sense only insofar as the help it could provide for India’s manufacturers to boost production, and develop new vaccines to keep up with the emergence of new strains.

By itself, Nepal’s pharmaceutical industry – despite all the strides it has taken in the past decade -- lacks the ability to benefit from any future patent waivers or technology transfer on vaccines. 

The pharmaceutical industry in Nepal has yet to show innovation, or the ability to undertake research and development of drugs and interventions that the country needs. 

There are about 100 pharmaceutical manufacturers in the country, and they are all competing with each other to produce only generic drugs, whose dosage form and formulation have been in the public domain for years. 

Even before the Covid-19 pandemic, none of these industries were producing the kinds of vaccines that Nepal needs the most: for example, against measles, typhoiddiphtheria, tetanus and pertussisrabies, or even an emergency life-saving product like snake antivenom.

The reason Nepal’s pharmaceutical industry sector limits itself to generic manufacturing is purely due to the lack of investment in research and development. A brand name medicine comes in the market after years of innovation, pre-clinical studies and clinical trials of the novel dosage form of the drug molecule. 

Nepal’s imports of medicinal and pharmaceutical products in ,000 USD. It peaked at nearly $50 million in 2018.

The world’s big pharmaceutical companies recoup their investment in research and development through patented sales. Some spend as much as 20% of their revenue on researching new drugs.

When the exemption period for any particular brand lapses, other industries can make a copy of the generic drug and offer it at significantly lower prices, since clinical findings are already established, and there is no need to emulate costly trials. 

India is the largest manufacturer of generic drugs in the world and supplies them to the US and Europe, with 2% of the global export market share. However, India is now going into manufacturing branded medicines as well in collaboration with multinational companies, and in so doing, gains technological knowhow. Bharat Biotech’s development of its own Covid-19 vaccine brand COVAXIN is an example of innovation.

Nepal is ideally placed to be a base for the production and export of pharmaceutical drugs and vaccines. With 30 million population, it is not a ‘small’ country and has a sizeable domestic market. The total turnover of Nepal’s pharmaceutical sector is Rs55 billion a year, and medicines make up more than half of the out-of-pocket spending of Nepalis.

But with the right policies for foreign direct investment (FDI) it can also be a base for exports for companies collaborating with international pharmaceutical companies. Right next door, China and India are prime examples of what can be achieved with FDI technology transfer. Nepal’s biennial investment summits have yet to seriously offer the pharmaceutical sector as being a priority for FDI.

Nepali scientists have collaborated with international researchers in trials for various vaccines, and the country is recognised as a developing country that has been one of the most successful in tuberculosis treatmentHIV/AIDS and vaccine immunisation programs  

Nepal’s international brand equity in this field can therefore be exploited in kick-starting investment in the pharmaceutical sector to set up a base in the country to meet our domestic demand, as well as for export. The benefits will be multi-faceted: easy availability of cheaper and latest medicines, reduction of imports, infusion of biotech knowhow, job creation, and increased revenue for the state. 

The proportion of FDI in Nepal’s GDP is only 0.2% -- one of the lowest in the world. Nepal’s own pharmaceutical companies can only meet half the domestic demand for medicines. This alone should make business sense for foreign pharmaceutical firms. 

There are different kinds of foreign investment. The Foreign Investment and Technology Transfer Act, 2019 allows the direct establishment of industry in Nepal and technology transfer to the industry or branch here. These provisions are tailor-made for FDI in the pharmaceutical sector.  

In theory, the Act also allows a one-window service centre to streamline the investment process so that foreign companies are not spooked by our bureaucracy. Apart from this, a draft of National Medicines Policy (2007) also already allows collaboration between Nepali and foreign pharmaceutical companies. 

But, as with everything else in Nepal, laws and rules alone do not make it easier for foreign companies to do business here. Instead of implementation, the state is better at creating impediments.

With Nepal graduating to developing country status in the next five years and striving to achieve the UN’s Sustainable Development Goals (SDGs) by 2030, the country will lose access to Gavi, the global vaccine alliance supported through WHO. For a country to be eligible for Gavi support for immunisation, its annual per capita income must be less than $1,630 over the past three years

Gavi today subsidises 60-70% of Nepal’s vaccine purchases. What we get for just $28 with Gavi support for fully immunising a child with all 11 WHO-recommended childhood vaccines would, without that subsidy, cost $1,200 -- close to the current annual per capita income of Nepalis. 

What this means is that Nepal has to start preparing now to be vaccine self-sufficient by upgrading its pharmaceutical industry. And since we have to start from scratch, foreign investment in the pharmaceutical industry will be crucial for innovation. The laws are in place, the Nepal government just needs to show some initiative.

The geopolitics and nationalism that has characterised the current Covid-19 vaccine rollout across the world has proven how medicines and vaccines can have strategic significance during a global pandemic. Nepal has to end its over-dependence on the outside world for essential drugs and vaccines by making it easier for foreign pharmaceutical companies to invest here. 

Samrat Baral has a Masters in Pharmacy from Wonkwang University in Korea and is a technical adviser in Nepal’s health sector.

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