In spite of the fact that food and drugs are exempted from sanctions under international conventions, the impact of the western sanctions on Iran over its nuclear program has been overwhelming, affecting the lives of millions of people.
The health of thousands of Iranians was compromised due to the shortage of imported western medicines that were not produced locally. The Iranian Hemophilia Society (HIS) announced in August 2012 that “the lives of tens of thousands of children are being endangered by the lack of proper drugs due to international economic sanctions.”
Following the July 14 landmark nuclear accord between Iran and the P5+1, the sanctions imposed by the US, EU and UN Iran are expected to be lifted.
Financial Tribune conducted an interview with Dr. Ebrahim Hashemi, managing director of Ferdows Distribution Company – a leading private sector pharmaceutical distribution company– to see how sanctions affected the domestic pharmaceutical sector and what is anticipated in the post-sanctions era.
The sanctions were a big blow as they hit people hard when money transfers to European banks faced numerous challenges.”Foreign banks were loath to conduct business despite knowing that the financial transactions were for medicine imports,” Hashemi said.
Things went downhill when Iranian banks, including Tejarat Bank, were sanctioned in 2012. “Prior to the sanctions, we used to work with letters of credit, instead of cash, that do not require large sums of money to place orders. But we faced severe cash crunch during the sanctions; in addition, banks asked for a 20-40% guarantee commission, which made imports unaffordable,” said Hashemi, who is also a member on the board of directors of Iran’s Distribution Industry Association and secretary-general of the association’s Pharmaceutical Committee.
However, Hashemi believes sanctions alone weren’t responsible for the worsening economic situation. “Short-sighted domestic policies exacerbated the problem.”
Silver Lining
“After President Hassan Rouhani took office in 2013, things took a turn for the better as priorities were set right and foreign exchange was allocated to medicine imports.”
At present, the setbacks to medicine imports are negligible. Government policies are also in place to control imports in an effort to boost domestic pharmaceutical production.
The Food and Drug Administration has set a ceiling for import of foreign drugs with domestic equivalents, with a share of 10% for original brands and 5% for non-original brands.
“Another policy on the Health Ministry’s agenda is to prepare the grounds for multinational companies to return to Iran, either to produce or purchase our products,” Hashemi says. This will benefit Iranians once sanctions are fully lifted.
As one of the most populous nations in the Middle East, foreign investment in Iran’s drug industry “will be beneficial since the nation has a far more advanced medicine industry than regional states.”
Iran’s healthcare system is also advanced and in 2013 it was ranked the 45th most efficient Health Care System ahead of the United States and Brazil, by Bloomberg.
“Many of the surgeries conducted in Iran such as liver, bone marrow, or heart transplants are on par with developed nations; therefore, the quantity of medicine we use is far greater when compared to our neighbors.” A large portion of imported medicines are specialized drugs used only in specialty hospital centers.
This, Hashemi believes, makes Iran an attractive proposition which international firms can’t ignore.
Challenges
Another challenge is the debts owed by state-owned hospitals and insurance companies.
“I don’t think people realize the lengths we went to, to manage the situation so that they would incur the least harm possible. There was a time when the supply of chemotherapy drugs was far too low compared to demand. Sustaining cooperation between distribution companies, the Health Ministry, and insurance companies was a daunting task indeed.”
A number of strategies were employed to circumvent the sanctions, the toughest imposed on any country. “Drug imports were given to a single distribution company, for better management. We also had to register medicine under the patient’s name to prevent illegal trading.”
Future Scenario
Founded in 1976 as ‘Dow Chemicals of Iran,’ it was renamed Ferdows Distribution Company after the 1979 Islamic Revolution.
The biggest problem facing the pharmaceutical sector today is the government’s debt to the seven leading distribution companies, to the tune of $500 million (17 trillion rials), as well as disproportionate allocation of funds “to this vital pillar of the health sector.”
“The pharmaceutical industry is like no other,” Hashemi asserts. “Take away rice and people will eat bread. But what are they supposed to do when the only drug they need to survive is not available, particularly due to poor management?”
Once money transfers return to normal, local drug producers will breathe easy and increase their competitiveness, he says.
“What is sure to happen is that drug production for exports will receive an impetus from the government and international standards in manufacturing will be established as the norm, that should help the export of medicine.”
