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Drug money

Untapped potential in Lebanon

by Thomas Schellen

What a difference in perception a year makes – especially this year of 2020, and especially in all matters concerning health, directly or indirectly. Let’s assume – very reasonably – that you were cleaning your hands a few times a day at about this time in late 2019. Were you to have been engaging in any lengthy hand washing and extensive sanitary exercise back then, it might have led an observer to suspect that you suffered from OCD – obsessive compulsive disorder. In 2020, the same diligent hand-washing and frequent use of hand sanitizers would likely be regarded by the same observer as best practice and responsible behavior.

Further altered behavior patterns in relation to health have emerged over the past months, such as increased acceptance of telehealth in developed economies; hesitancy of people afflicted by various chronic or age-related conditions to commit to elective surgery; and highly restrictive visitation rules by hospitals and old-age nursing facilities. 

This year’s behavior shifts have found their clearest early economic expressions in financial markets and specifically in stock values. Whether it is the biotech index of NASDAQ that is booming at the cutting edge of medical innovations or something as mundane as the share price of Malaysia’s Top Glove, the world’s largest manufacturer of latex gloves that has seen its profits soar even as it relies heavily on migrant labor. 

Even for both the economic strategist and the prudent investor who does not gamble on the flashiest and risk-prone outliers of the 2020 financial markets that are under the reign of the pandemic’s heightened awareness and fear, keeping a careful eye on hot pharmaceutical and personal care manufacturers is a no brainer. Although this year many investors and advisors were noted for adopting the strategy to – in Bank of America’s term – “sell the vaccine” and divest from volatile assets, the overall healthcare sector and non-cyclical consumer goods such as soaps and other personal care products have fortified their auras of being composed of defensive stocks. 

Within the conventional wisdom of global equities markets, this means that stocks in the healthcare and non-cyclical consumer care segments, from makers of pain relief drugs and medicines for chronic conditions to manufacturers of hygiene products and cosmetics, are values to hold onto in times of economic and/or political instability. Thus, healthcare and specialized or adjacent industries – such as biotech and organic cosmetics – promise wider and more intriguing opportunities than the top horses in the mad coronavirus vaccine race that are on the mind of every last stock market gambler who is chasing after high-risk biotech propositions such as Moderna Inc.

On a curious side note, news of vaccine developments are gobbled up and acted upon not only by fortune hunters but also by criminal-cyber-attackers or state-backed hacking organizations – over the last few months those very opposite interest groups have both been targeting biotech propositions such as Gilead Industries (earlier this year when the biotech firm’s Remdesivir drug was touted as potential Covid-19 treatment and, more recently, vaccine makers such as Astra-Zeneca and BioNtech

Such observations of global financial trends in health and beauty care have ramifications for daring and risk-loving investors even when looking to identify opportunities in Lebanese manufacturing niches – despite the lamentable absence of relevant stock market information on health sector companies. Moreover, anyone with an economic sense should assume that understanding the value proposition of local pharmaceutical and personal care productions in this country matters a great deal at this very moment. 

This is not just for the reason that securing the supply of medical drugs for domestic consumption is one of the country’s core needs and that the importation of pharmaceuticals translates into a huge drain on funds – according to Ghassan Hasbani, the former deputy prime minister and minister of health, an avoidable drain of some $500 million this year – under the current exchange rate subsidization policy. The value proposition of Lebanese capacity-building in the wider health sector is seriously under-acknowledged, if one looks closer at the national potentials and untapped opportunities in manufacture and exports.

“The healthcare industry in Lebanon, at least before the crisis, was quite advanced. It is one of the industries that can play a major role. [There also is] big potential for skincare and organic [products and exports] because of quality of manufacturing in Lebanon, quality of talent in pharma industry, and [the] relatively cost-effective R&D in the country,” Hasbani says.

The astounding value proposition of domestic generic drugs

In terms of pharmaceutical drugs alone, local quality manufacturing capacity exists to cover the majority of domestic needs in both volume and value. “The total value of the [pharmaceuticals] market is about $1.7 billion and of that total we are importing around $1.3 billion of brand and generic medicines, [whereas] around $350 million [worth] are locally manufactured,” Hasbani tells Executive. According to him, the output of Lebanese pharmaceuticals manufacturing companies has in recent years increased from satisfying about 7 percent of total market value to 19 percent, and 76 percent in terms of volume – the disparity between volume and value being so large because the generics made in Lebanon, while of high quality, are far cheaper than the imports.

Hasbani adds that under a recent plan of the Lebanese Forces (LF) political party that he is a member of, the share of domestically manufactured medical drugs of the total market should more than double. “Now they are almost at 20 percent [of the market’s value]. The objective is to take them up to more than 50 percent,” he says. 

As one practical step to curb potential abuse of the old subsidy system and reign in the danger of perverse incentives – which the international pharma industry has long been reputed to offer in various forms – by which physicians may be tempted to prefer imported drugs in their prescriptions, the LF plan for addressing the problem of unsustainable pharmaceutical drug imports entails a suspension of doctors’ authority to tick a “non-substitution” box when prescribing medicines.

In a stepwise approach to dealing with the wider supply and finance problems of the Lebanese pharmaceuticals market under the economic crisis, the vision promoted by Hasbani is to first switch from the current exchange rate subsidy, under which about 85 percent of pharma imports are subsidized with about $1 billion per year, to a subsidy process that is based on achieving the lowest possible subsidy cost while securing quality. 

This would mean to prefer subsidizing imports of raw materials and, if not locally available, generics from reference countries. At the same time, the plan calls for allowing subsidies of imported brand drugs if no substitution is feasible at near or equal quality, while also lifting subsidies from certain over-the-counter drugs. “In this way we would have reduced the currency subsidy of imported medicines from the $1 billion that it is today to just under $500 million,” the former health minister explains.

In the longer run, however, the  solution to the medical supplies problem – which according to Hasbani would address a humanitarian emergency, and thus, is not something that would be contingent on political reform agreements with the international financial community and multilateral institutions – could entail the creation of digital wallets for Lebanese families. 

These wallets could serve as the 21st century version of social safety cards and be funded by $2 billion [of foreign aid] annually as means of disbursement of healthcare and other essential needs subsidies to 55 percent of the Lebanese households to the tune of nearly $300 dollars per household. “This method could avoid the use of reserves to subsidize imports. It would be more targeted and be using international aid to create a social safety net for vulnerable families,” Hasbani enthuses. 

As a positive side effect, such a solution would require the implementation of something that Lebanon’s economic policy stakeholders have vainly been waiting for since the end of the Civil War: a general census.

Barriers to such a solution of course exist by both anecdotal evidence and long standing patterns in the Lebanese system of fragmented self-interests. The interest of drug importers, for example, is substantial and well documented through lobbying of public influencers and decision makers. Interests more powerfully expressed, to this day, than the interests of the – not yet five years old – Syndicate of Pharmaceutical Manufacturers in Lebanon (SPIL). From a dysfunctional landline phone number on the syndicate’s website to total absence of relevant industry data on the site, and office staff that appear to deal with media inquiries by the “don’t call us, we will call you” method of communication destruction, the SPIL syndicate and the 11 individual companies comprising it, have by all evidence yet to mature beyond generic PR messages and “news” that al wazir visited this or that new manufacturing facility and “expressed his pride of the Lebanese pharmaceutical industry”.    

This year’s behavior shifts have been most clearly expressed by changed in the financial markets.

The total value of the pharmaceuticals market in Lebanon is about $1.7 billion, of that total, Lebanon imports $1.3 billion worth of medicine.


According to data published by the International Federation of Pharmaceutical Manufacturers and Associations, (IFPMA), the global pharma industry employs well over 5 million people (5.07 million in 2014), about 70 percent of whom are located in Asia, including Western Asia. The global pharmaceuticals market amounted to $997 billion in 2014, representing a cumulative 8-year increase of approximately 53 percent when compared with 2006 according to the same source

The industry’s gross value added in the same year reached nearly $453 billion worldwide, of which $154 billion were generated in Asia. On the other hand, the market concentrations of pharmaceutical consumption were located in the developed countries of the United States and Europe. In 2016, of the estimated $1.1 trillion global pharmaceutical market, $613.5 billion, or ca 56 percent, were achieved in these developed countries, with overall upward expectations for pharma sales based on the combination of ageing populations in developed economies and market expansion in over 20 so-called “pharmerging countries” from China and India to Brazil, Mexico, Turkey and Saudi Arabia.  

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Thomas Schellen

Thomas Schellen is Executive's editor-at-large. He has been reporting on Middle Eastern business and economy for over 20 years. Send mail

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