1. Introduction Executive Summary Market Survey Evaluation of Product/Market Suitability SWOT Analysis...

Transcription

1 Date June 2014

2 1. Introduction Executive Summary Market Survey Evaluation of Product/Market Suitability SWOT Analysis... 6 The Trade Council is pleased to submit a brief report on Iran s health sector. The Executive Summary in Section Two highlights the overall findings of the market survey. In Section Three the detailed findings of the market survey are presented. Section Four refers to an evaluation of your products suitability to the market and section Five provides an analysis of the Strengths, Weaknesses, Opportunities and Threats (SWOT) of your company s market entry. The purpose of the market survey is to provide Danish companies with information offering a sound platform for decision-making in relation to developing further activities in the Iranian market. Following research of barriers to entry, competitor landscape, market size, distribution channels and price structure, as well as an evaluation of product/market suitability, The Trade Council has conducted an analysis of Strengths, Weaknesses, Opportunities and Threats (SWOT) with regard to the market entry of relevant Danish companies. The overall findings of the market survey are: Iran s Health Sector is a significant market in the Middle East with high potential despite the existing barriers. The Iranian government has focused on expansion of the healthcare system in the whole country by raising the number of doctors, public hospitals, small clinics, etc. and therefore more medical equipment, laboratory devices, drugs, and medical consumables are required. The health sector budget in 2013 was Rial 186,110,438 mn equal to USD 7.6 bn, but due to budget deficit only USD 4.5 bn was spent by the Ministry of Health. The share of the private sector in healthcare is twice as much as the public sector. A major social insurer organisation and a non-governmental institution, Social Security Organisation (SSO) provides 18 services, in the form of short term and long term obligations in insurance and medical services to the insurers and beneficiaries. Civil servants and the armed force have their

3 own insurance system, but 72% of the insured Iranians are under SSO coverage. Self-sufficiency is the government s main target and, consequently, local production in any field, including the health sector, is encouraged. According to information provided by the Iranian government, 294 medical devices as well as 90% of drugs are being manufactured locally General Sector Overview Iran s population is over 77 million and the country s basic healthcare is allembracing. This level of healthcare covers 90% of the rural population and almost all urban residents. Ten million of the inhabitants do not have any health insurance and the provided medical services to the rest are limited. Authorities confirmed that 70% of the health expenditures rest on the patient s shoulders. The annual budget of the Health Ministry rose by 39% in 2014, and a 44% increase in the healthcare tariffs is expected. This decision was made whilst the inflation in March 14 was recorded at 36.7% and in the best case scenario it would drop to 25% by March Moreover, the annual pay rise is always less than the inflation rate and this year it would be around 20%. In other words, the healthcare costs would again be a large financial burden on people. In 2013 foreign trade rose by 31% within general healthcare, and by 35.2% in pharmaceuticals in local currency, albeit the import value reduced in hard currency. The reasons were currency fluctuation and devaluation of the Iranian Rial (IRR) against the US Dollar. Iran's business environment received a substantially lower appraisal in Q1-14, with a score of 34.3 out of 100. The country fell four places in the regional rankings to 22nd out of 30 countries in the Middle East and Africa region in Q1-14 compared with 18th in the previous quarter. Its overall score of 34.3 is markedly below the regional average of Generally speaking, Iran benefits from a large and growing population and relatively widespread access to healthcare services. However, its regulatory regime - including intellectual property (IP) rights, political and economic situation - are highly questionable, and combine to create a low score for the risk variable. (Source Business Monitor) 3.2. Entry Barriers/Conditions a) UN, US and EU sanctions on Iran's banking and energy sectors are making it very difficult for foreign companies to undertake financial transactions with Iranian entities, and much riskier to invest in the hydrocarbon sector. In case the sanctions would be eliminated, Iran could turn into an attractive market.

4 b) Transfers of funds to and from Iran: If you wish to transfer an amount equal to or above EUR 10,000 to or from Iran, special rules apply. You must either notify or apply for authorisation to transfer the funds. Temporarily relaxation of the limits for transfers of funds: With effect from 20 January 2014 the EU has temporarily raised the limits for transfers of funds for when one has to apply for an authorisation. Until further notice this applies for a period of 6 months. For further details about export control and the sanctions against Iran, please visit the website of the Danish Business Authority: c) Imported products must be registered at the Ministry of Health and this could be done only via local agents. d) Import duty on pharmaceutical drugs is 4%, but if a generic form of a drug is being produced locally, the importers have to pay 64% customs duty. According to a new regulation this levy may be reduced to 34%. Customs tariff of medical equipment varies from 20% to 45% Competitor Landscape According to the Global Competitiveness report , Iran ranked 66 among 144 countries and scored 4.22 in a range of 1-7. The detailed pillars of the reports show Iran s ranking in health and primary education as 46 with the score of 5.97; which is the highest score amongst the other indices in Iran such as institutions (3.98 score), infrastructure (4.03 score) and macroeconomic environment (4.83 score). Iran has over 200 pharmaceutical plants, importers, as well as manufactures of relevant industries including raw material, packing, etc. The main focus is on the production of generic medicines Customers Pharmaceutical and medical equipment customers are comprised of manufacturers (basic materials/equipment are being imported for local manufactures), importers of finished products and distributors to the medical centres, pharmacies and hospitals Distribution Channels The distribution frame of the medical equipment is being organized in the Medical Equipment Department. The end-users are either wholesalers of the healthcare centres, or sales agents of the goods, and the third one is singleprescription centres.

5 3.6. Price Structure Pricing regulation for any imported or locally manufactured drugs and biologic products are being set by the Ministry of Health, the Pricing Commission based on the ratifed articles and laws. In the light of this fact, the importers or manufactures have to provid detailed costs to the pricing commission at the Ministry. Those drugs that have been exempted from genral drug s pricing regualtion are being evaluated under Iran s General Pricing Regualtion, and during this procedure all the involved criteria and policies are being considered. The drugs that are registered in the Food & Drug Organsiation list are not subject to VAT. For a further detailed analysis of your product evolution, market research, and tailor-made report/data please contact the Danish Embassy in Tehran.

6 Strengths Weaknesses Large market supported by large population Increase in health expenditure Government commitment to self-sufficiency Wide-range public healthcare Strict regulations on drugs/equipment registration Free of charge antiretroviral Up to date health care methods shortage of hard currency difficulty in money transfer Reluctance to FDI (Foreign Direct Investment) Low per capita spending on healthcare Government controls prices of pharmaceuticals Long and bureaucratic official procedures Shortage in R&D (Research & Development) centres Intellectual Property (IP) support is not strong Opportunities No VAT Low tax on local products Low tax on imported products that has no similar local ones Demand for generic form of medicines High demand for well-known and high tech medical equipment (in both hospitals and laboratories) Modernization trend in health facilities Regulatory circumstances make IP more approachable Threats Barriers in import due to sanctions Shortage of hard currency as a result of sanction on oil sector Contraction in economic growth Stagflation Government pushes toward indecency and local production. Patents issue OTC (over the counter) drugs removed from the list of priorities Sources: Business Monitor (BMI), FDO, Iran medical equipment dept., Iranian media

7 The Trade Council is a part of the Ministry of Foreign Affairs and is the official export and investment promotion agency of Denmark. The Trade Council benefits from around ninety Danish Embassies, Consulates General and Trade Commissions abroad. The Trade Council advises and assists Danish companies in their export activities and internationalisation process according to the vision: Creating Value All the Way. The work in the Trade Council follows specific procedures and quality guidelines. In this way our customers are secured the best possible quality under the varying working and market conditions at any given point of time. Ministry of Foreign Affairs of Denmark Danish Embassy Tehran No. 10, Dashti St, Hedayat Alley Sadr Bridge, Dr. Shariati Ave, Tehran thramb@un.dk