- Lift VAT on imported packaging material
- Local manufacturing will grow sharply slashing forex outflow
Sri Lanka’s pharmaceutical industry is dominated by imported products meeting over 80% of market demand while local manufacturers are struggling to penetrate the private market. The Buy Back Agreement signed between the local manufacturers and the Ministry of Health has helped them immensely to develop the local industry. The current Buy Back Agreement has come to an end and extension up to 2030 will pay dividends to the country in the years ahead.
“By extending the buyback agreement the total market share of the local manufacturers will increase from the current 20% to 40% and meet the Government’s requirement of pharmaceutical products from the present 35% to 75% in the next five years,” Sri Lanka Pharmaceutical Manufacturers’ Association President Nalin Kannangara said.
He said the extension of the buyback agreement for five years will create confidence in investors to invest more in developing new medicines, set up new manufacturing plants and offer more employment opportunities to local graduates that will put a stop gap to the brain-drain in the country.
The buyback agreement of pharmaceutical products from local manufacturers which ended in 2024 was extended for two years by the current government via a EOI process. The pharmaceutical manufacturing industry is a highly capital intensive and a high-tech industry that traces its origin to the early 1960s. During the first five decades the industry recorded a very slow growth due to few manufacturers with fewer incentives to develop the industry and themselves.
A highly import-driven industry comprises a public (state hospitals) and a private (pharmacies) market. Local manufacturers account for 25 manufactures who manufacture around 500 products to treat cardiovascular and respiratory diseases, antibiotics, anti diabetes, intravenous injections (IVs) and saline.
“The market grew tremendously in the past 10 years from a 5% market share to around 20% due to the buyback agreement which is a public-private partnership initiated by the government,” Kannangara said, adding that the outflow of foreign exchange from the country could be stopped by increasing the market share and the supply to the Government.
He emphasised the need of a national policy that encourages and incentivises local manufacturing of pharmaceuticals where the country will be better equipped with pharmaceuticals and health needs even to face any pandemic in the future. India almost meets its medicinal needs 100% by local manufacture, Bangladesh is 95% self-sufficient and Pakistan is 70% self-sufficient.
“The Pharmaceutical Manufacturers’ Association wants the removal of the 18% VAT imposed on imported packing materials for local manufacture. There is no level playing field as imported medicines are exempted from taxes,” Kannangara said. Sri Lanka’s National Medicinal Drug Policy aims to ensure public access to safe, efficacious, quality and affordable medicines to all the citizens by focusing on rational use of medicines.
