Iran’s pharmaceutical market was estimated to be worth IRR17,278bn (US$1.87bn). Over the five-year forecast period, we expect drug expenditure to grow by an average of 14.8% year-on-year (y-o-y) in local currency over the forecast period to reach IRR34,494bn (US$3.52bn) by the end of 2012. The high nominal growth is largely a result of high inflation, which we expect to average 18% y-o-y over the forecast period. Indeed, it masks our relatively poor assessment of the growth prospects in the market, which should be beaten by both inflation and nominal GDP growth. Despite relatively gloomy prospects for value growth, we expect strong volume growth in the market on account of an expanding population and strong government sponsored healthcare programmes. Indeed, we expect the use of generics to increase further over the forecast period, gaining a further three percentage points (pps) in terms of drug market share between 2008 and 2012.

In BMI’s updated Business Environment Ratings for Q308, Iran is ranked in ninth position out of 13 countries in the Middle East and Africa (MEA). Its large pharmaceutical market provides opportunities for drugmakers. However, a risky regulatory environment creates challenges for companies operating in Iran, especially foreign drugmakers. While foreign direct investment (FDI) in Iran’s pharmaceutical industry remains limited due to political uncertainty, a number of domestic drugmakers have demonstrated they are still capable of developing and manufacturing relatively sophisticated products. In May 2008, Exir began producing hepatitis C treatment interferon gamma under the brand name Gamma Immunex. Iran’s healthcare system is strong in terms of population coverage – with at least 90% of the population having access to healthcare. Rural access remains patchy at present, however strong investment in healthcare infrastructure, including 5,000 additional hospital beds in the country during 2006 and 2007 and a commitment to increase the number of doctors serving in rural areas should boost access to healthcare further over the forecast period.