WTO Hopes Could Drive Iran Drug Sector Reforms

Much of the hope for liberalisation of Iran's drug sector surrounds the country's stated aspiration to join the World Trade Organisation (WTO). However, despite clear economic imperatives behind reform, the country's domestic and international political position could put paid to any meaningful change.

If Iran genuinely intends to pursue WTO membership, economic liberalisation will become necessary. This will mean dismantling the country's protectionist trade policies, which have heavily favoured the domestic pharmaceuticals sector. Iran would also have to review its intellectual property laws, which breach the terms of the WTO's Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement. The production of unauthorised generics is therefore likely to come under pressure.

With stagnating investment in domestic manufacturing, the government is likely to search for foreign partners to ensure that pharmaceuticals production is sustained. However, this is unlikely to substantially change output or the structure of the market in the forecast period, although imports are forecast to grow to 15% of the market by 2007. Total healthcare expenditure is forecast to reach US$13.6bn by 2007, a rise of 28.3% over 2004.

A key factor driving growth is also an increase in concentration of government attention on non-oil industries in the face of low oil revenues, as well as a possible move to unify the country's two currency rates. However, relations with the West are more likely to ultimately determine development of the pharmaceutical industry, and at present there appears to be little grounds for optimism.

Religious conservatives, who answer to the country's "supreme leader" Ayatollah Ali Khamenei, secured a victory in last year's parliamentary elections. The continuation and consolidation of hardline rule, as well as the effect on already strained relations with the West, does not bode well for the reform-minded development mentioned above. As such, industry modernisation appears set to be a casualty of an increasingly dictatorial style of rule.