Syrian pharmaceutical industry tanks due to war and sanctions
By By Lysandra Ohrstrom
Thousands of businesses have been destroyed over the course of the Syrian conflict. But few of the war’s economic casualties have had such immediate consequences for public health as the collapse of the country’s pharmaceutical industry. In the late 1980s, Syria’s pharmaceutical sector consisted of two state-owned plants whose combined production accounted for just 6 percent of the country’s needs. The annual expenditure on imported medicine averaged $700 million. By 2010, following a wave of government-led economic liberalization in the early 1990s, Syria boasted 70 privately owned pharmaceutical plants that mainly produced low-cost generic drugs and employed at least 17,000 people – 85 percent of whom were women – according to a survey conducted by the Syrian Health Ministry and the World Health Organization in 2011.
The market was valued at $620 million, more than $400 million of which served the local market and supplied 91 percent of the nation’s pharmaceutical needs. The remainder – which cost anywhere from 30 to 70 percent less than comparable products in neighboring markets – was exported to approximately 52 countries, making Syria the second-largest drug supplier in the region.
Heavily concentrated in Aleppo, the industry has been decimated by the fighting and its many side affects over the past two years. At least 25 Syrian pharmaceutical plants have been completely destroyed by the fighting or taken over by militias, and most of the others have been forced to suspend production due to sky-rocketing costs; the difficulties of transporting, distributing, and storing pharmaceutical shipments across the country; and the inability to access raw materials, according to a representative of one international non-governmental organization operating on the ground in Syria who spoke on condition of anonymity.
A handful of factories continue to operate sporadically at barely a third of their pre-crisis capacities, but overall pharmaceutical production in Syria has dropped 75 percent since 2010, according to the most recent Syria Humanitarian Assistance Response Plan released by the United Nations in June.
Demand for medicine has surged during the same period, and as a result, the country has experienced a critical shortage of pharmaceutical products since July 2012, the SHARP report said. Treatment for chronic diseases has been “severely interrupted,” vaccination coverage has dropped from 95 percent in 2010 to 45 percent in 2013, and pharmaceutical products that were once produced in Syria at affordable prices – such as insulin, oxygen, anesthetics, serums and intravenous fluids – are no longer available.
The aid worker said the government has been in talks with countries such as Iran, Belarus and Cuba about importing medicine, but transit difficulties were overcome by government health expenditures, and the purchasing power of the population has plummeted severely alongside the value of the pound.
“Even for a rich country, 500,000 injured is nearly impossible to cope with,” the aid worker told The Daily Star. “Around Homs you’ve started to see people selling traditional local medicines at the market because nothing else is available.”
According to interviews with managers or owners of four Syrian pharmaceutical factories that have continued to manufacture throughout the crisis at varying levels, between 10 to 15 such plants in the country are currently operating.
Three in Damascus are reportedly running at full capacity, though the Daily Star was only able to reach one of them for confirmation.
All the sources spoke on condition of anonymity and asked that the names of their companies not be revealed, because so many manufacturing facilities have been targeted in the conflict.
“Before the problems we were No. 7 in the market and still there is a lot of demand for our products,” said the owner of one pharmaceutical factory that is currently operating at 20 to 25 percent of capacity.
“The problem is getting raw materials and the cost of production.”
Before the crisis, drug manufacturers relied on raw materials imported to the port of Latakia or by air to Syria from Europe, Australia and the U.S., according to a joint report by the WHO and the Syrian Health Ministry. The company owner said he was currently importing raw materials through Lebanon, but was having difficulty clearing the shipments through customs because the Lebanese Health Ministry was “giving Syrian manufacturers a lot of trouble about clearing our shipments.”
When his company is able to obtain raw materials, he is forced to sell at a loss because the law requires pharmaceutical manufacturers to abide by prices set by the Syrian Health Ministry which have not been modified since the value of the Syrian pound was 48 to the dollar. “The ministry hasn’t changed the prices and they won’t, so we have to sell the products at a quarter of their market value,” the source said. “We stopped selling on the local market because we were losing money so we are trying to maintain exports because we can sell those in dollars,” he said.
Earlier this month, the Syrian government announced that it would resume financing imported raw materials again after the program was suspended in May. Though the source said the government opened a few new lines of credit for industrialists last week, they were still pricing the pound at 175 to 180 to the dollar, which is far below the black-market exchange rate of a minimum of 200 to the dollar that manufacturers have to buy supplies at, he said, so even with the state funds, he was producing at a loss. “We are trying to convince the prime minister and the health minister that they need to support the industry by raising the price we are allowed to sell medicine for,” the source said. “I cannot pay $5 for something and sell it for $1. I should be able to sell it at $5.50.”
The owner of a different Syrian pharmaceutical company that is currently producing about 40 percent of the medicine it manufactured before the war also cited the prewar medicine prices as one of the many obstacles facing the sector, along with the lack of transit and banking tools at their disposal. “There are problems everywhere in the cycle,” he told The Daily Star. “We are facing huge losses on production costs. Then there is the difficulty shipping within Syria. Then once we finish the transit, we don’t have a distributor. Then when we get shipments to pharmacists they don’t want to hold on to them for more than one or two days, because they are afraid they will get stolen and their stores would become targets.”
He singled out the inability to make and receive transfers through international banks as the single largest impediment to doing business. “Although pharmaceutical products are not subject to international sanctions, the banks don’t differentiate between medical and humanitarian goods and other products so they block us,” he said. “All of our credit lines have been terminated. Whenever we want to transfer money to someone to buy raw materials, they see Syria and they reject transfer. Most suppliers won’t deal with Syria, even if there is a humanitarian need.”
Despite these obstacles, the functioning factories are managing collectively to produce enough to meet between 5 and 10 percent of the nation’s pharmaceutical needs. “The best thing for us would be to stop completely, but for humanitarian reasons we can’t,” he said. “The only solution is for the U.S. to instruct all banks and companies to accept transfers to and from Syria for humanitarian reasons.”
A manager of one of the three factories still operating in Damascus at full capacity said that his company was negotiating with the government to increase the price pharmaceutical manufacturers are allowed to charge for certain essential medicines and expects the ministry to announce the new regulations in the near future. When asked whether the factory would still be operating at a loss after the new prices take affect he said, “We are not working at this time for profit.”
- Trouble getting them, trouble keeping them? Middle East firms challenged in attracting, retaining talent
- Does capitalism provide a solution to terrorism?
- No pain, no gain: Tunisian economy needs three years of tough love before rebounding
- How will MENA economies look in 2015?
- Sanctions face-off: Iran to unveil its corporate side in London next week