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The World Medicines Situation
(2004; 151 pages) View the PDF document
Table of Contents
View the documentContributors
View the documentIntroduction
View the documentChapter 1. World medicine production
View the documentChapter 2. Research and development
View the documentChapter 3. Medicines in international trade
View the documentChapter 4. World pharmaceutical sales and consumption
View the documentChapter 5. Global trends in medicines spending and financing
View the documentChapter 6. National medicines policies
View the documentChapter 7. Access to essential medicines
View the documentChapter 8. Rational use of medicines
View the documentChapter 9. Medicines regulation
View the documentConclusion
View the documentStatistical annex notes
Open this folder and view contentsStatistical annex
 

Chapter 3. Medicines in international trade

SUMMARY

• International trade in medicines grew rapidly between 1980 and 1999, from around US$ 5 billion in 1980 to almost US$ 120 billion in constant price terms.

• Trade is dominated by imports and exports among high-income countries. Industrialized countries are both the biggest individual exporters and the biggest importers of medicines. The biggest 10 exporting countries accounted for 80% of world exports, and the biggest 10 importers accounted for over 60% of all imports in 1999.

• This concentration grew between 1980 and 1999, with low- and middle-income countries losing their combined share of both exports and imports. However, several individual low-income countries, including India, Pakistan and Indonesia, expanded their export share during this period. Low-income countries manufacturing medicines produce predominantly for the home market.

• Major exporters among low- and middle-income countries export to other low- and middle-income countries. However China’s exports are mainly to industrialized countries. Imports by low- and middle-income countries come mainly from industrialized countries.

• Many countries both import and export medicines. The USA and Japan, the world’s two biggest producers, were also the biggest net importers in 1999.

• WHO recommends that medicines on a country’s essential medicines list should not be subject to tariffs. However, in the 10 developing countries with the highest tariffs on imported medicines, the average tariff adds almost 23% to the price of active ingredients and over 12% to the price of finished medicaments.

3.1 INTRODUCTION

In 1999, international trade in pharmaceuticals represented about 1.8% of global exports and imports.i Total exports and imports were each worth some US$ 104 billion (Table 3.1). During the 1990s, trade in pharmaceuticals grew substantially faster than production. Table 3.1 shows that, in constant price terms, the international trade in pharmaceuticals has expanded dramatically since 1980, growing three times faster than current prices indicate.

i Pharmaceuticals or medicines in this chapter are defined in accordance with Standard International Trade Classification (Revision3) code 54, which comprises medicinal and pharmaceutical products (541) and medicaments, including veterinary medicaments (542). This definition includes active ingredients, intermediate products, bulk products and finished items. Fuller details may be found on the United Nations Statistical Office website at: http://unstats.un.org/unsd/cr/registry.


International trade in pharmaceuticals is dominated by the high-income industrialized countries. In 1999, they accounted for 93% of global exports and 80% of global imports, by value. This concentration in trade has increased since 1980. Between 1980 and 1999, middle-income countries’ share of world exports fell, and the shares of both low- and middle-income countries in world imports dropped significantly.

TABLE 3.1 Global trade in pharmaceuticals, US$ billion, 1980 to 1999

Direction of trade

1980

1990

1999

Exports (current prices)

14.53

36.04

104.22

Exports (constant 1995 prices)

5.35

28.79

117.86

Imports (current prices)

13.54

34.64

104.80

Imports (constant 1995 prices)

4.98

27.67

118.53

 

Source: Commodity Trade Statistics Section, ITSB, United Nation Statistics Division, New York, US Pharmaceutical Price Index


With the notable exception of Japan, the countries which contribute most to world trade - both in exports and imports - are also the world’s major producers: the USA, UK, Germany and France. Japan, the world’s second largest producer, continues to produce primarily for the domestic market and since 1980 has reduced its share of the world’s pharmaceutical imports.

3.2 PHARMACEUTICAL EXPORT PATTERNS

Figure 3.1 shows the shares of countries by income level in world pharmaceutical exports from 1980 to 1999. The share of high-income countries rose from 90.5% to 92.9% of the world total while that of middle-income countries dropped from 8.3% to 4.2%. The export share of some low-income countries, such as India, Pakistan and Indonesia, more than doubled, from 1.1% to 2.9%.


FIGURE 3.1 Share of low-, middle- and high-income countries in world pharmaceutical exports

Source: WHO estimates based on data from Commodity Trade Statistics Section, ITSB, United Nations Statistics Division, New York


Figure 3.2 shows that the value of exports from high-income countries was relatively stable in the early 1980s, but began to increase steadily from 1986 onwards and rose steadily throughout the 1990s.


FIGURE 3.2 Pharmaceutical export trends in low-, middle- and high-income countries, current US$ billion 1980-1999

Source: WHO estimates based on UN Commodity Trade Statistics database


3.2.1 Leading pharmaceutical exporting countries

Table 3.2 shows that from 1980 onwards, over 70% of the world’s pharmaceutical exports originated in just eight countries. By 1999 this figure was 79.7%. Four of these countries are also among the top five pharmaceutical producers; only Japan is missing from the major exporter group. Figure 3.3 shows that Germany contributed the largest share of world pharmaceutical exports in 1980 and in subsequent years.

TABLE 3.2 Top exporting countries, current US$ billion, 1980 to 1999

Country (in 1999 rank order)

1980

1990

1999

 

Value

% world

Value

% world

Rank

Value

% world

Germany

2.272

15.6

5.8612

16.3

1

14.978

14.5

Switzerland

1.615

11.1

4.3595

12.1

2

11.452

11.1

USA

2.020

13.9

4.1032

11.4

3

11.071

10.7

United Kingdom

1.732

11.9

4.0404

11.2

4

10.053

9.7

France

1.497

10.3

3.6652

10.2

5

10.043

9.7

Belgium

0.670

4.6

1.6329

4.5

6

6.438

6.2

Italy

0.688

4.7

1.5169

4.2

7

5.607

5.4

Ireland

       

8

5.122

4.9

Sweden

       

9

4.010

3.9

Netherlands

0.619

4.3

1.3771

3.8

10

3.852

3.7

Top countries

11.113

76.4

26.554

73.7

 

82.626

79.8

World export

14.526

100

36.037

100

 

103.619

100

 

Source: WHO estimates based on database from Commodity Trade Statistics Section, ITSB, United Nations Statistics Division, New York


FIGURE 3.3 Trends in value of pharmaceutical exports in the top five countries, US$ billion, 1980-1999

Source: WHO estimates based on database from Commodity Trade Statistics Section, ITSB, United Nations Statistics Division, New York


Japan’s situation shows that a big producer is not necessarily a big exporter. Countries with a manufacturing base differ widely in their propensity to export pharmaceuticals. Japan exported only 2% of local production in 1985, 3% in 1991 and 4% in 1997.

The low-income manufacturing countries produce predominantly for the local market. Even in India, with over 20 000 pharmaceutical manufacturers, where the export share of local production has tripled since 1985, less than 20% of total production enters international trade.

Major pharmaceutical exports from low- and middle-income countries in 1998 have been analysed according to their destination, with the results shown in Table 3.3. China is the only country in this group to export most of its pharmaceuticals to industrialized countries; all the other exporters supply mainly developing country markets.

TABLE 3.3 Pharmaceutical exports from low- and middle-income countries, US$ million, 1998

Exporter

Exports to industrialized countries

Exports to developing countries

Exports to developing countries as % of total

China

1079

592

35.4

India

288

576

66.7

Mexico

304

410

57.4

Argentina

25

277

91.7

Korea, Republic of

85

204

70.6

Brazil

64

183

74.1

Colombia

10

173

94.5

 

Source: Adapted from H. Bale: Consumption and trade in off-patented medicines. Commission on Macroeconomics and Health, Working Paper WG4:3, May 2001. http://www.cmhealth.org/cmh_papers&reports.htm#Working Group 4.


3.3 PHARMACEUTICAL IMPORT PATTERNS

Figure 3.4 shows the shares of countries, by income level, in world pharmaceutical imports from 1980 to 1999. The share of high-income countries rose from 69.9% of total imports to 79.3%. The shares of both low- and middle-income countries fell over the same period from a combined 30.1% of the world market to 20.7%. As with exports, trade became increasingly concentrated among the high-income countries in these two decades.


FIGURE 3.4 Share of low-, middle- and high-income countries in world pharmaceutical imports, 1980-1999

Source: WHO estimates based on database from Commodity Trade Statistics Section, ITSB, United Nations Statistics Division, New York


Figure 3.5 shows the value (in current prices) of pharmaceutical imports in each year, confirming the relatively weak growth of middle-income and particularly low-income country imports.


FIGURE 3.5 Share of low-, middle- and high-income countries in world pharmaceutical imports, 1980-1999, by value

Source: WHO estimates based on database from Commodity Trade Statistics Section, ITSB, United Nations Statistics Division, New York


Table 3.4 identifies the principal importing countries, which include the five principal producers. The combined imports of these 11 industrialized countries accounted for 54% of world imports in 1980 and 66% in 1999. Germany was the world’s leading importer in 1980 and 1990. Japan’s position as an importer has fallen since 1990.

TABLE 3.4 Leading pharmaceutical importing countries, current US$ million 1980-1999

Country (in order of 1999 ranking)

1980

1990

1999

 

Value

% world

Value

% world

Rank

Value

% world

USA

803.1

5.9

2540

7.3

1

13649

13.0

Germany

1291.0

9.5

3396

9.8

2

8669.6

8.3

France

700.8

5.2

2646

7.6

3

7748.7

7.4

United Kingdom

516.9

3.8

2064

6.0

4

7746.6

7.4

Italy

652.6

4.8

2817

8.1

5

6195.8

5.9

Switzerland

411.0

3.0

1193

3.4

6

5050.5

4.8

Belgium

654.9

4.8

1510

4.4

7

5023.6

4.8

Japan

1074.2

7.9

2836

8.2

8

4593.4

4.4

Netherlands

568.9

4.2

1447

4.2

9

4174.6

4.0

Spain

245.2

1.8

975.7

2.8

10

3509.0

3.3

Canada

356.2

2.6

860.3

2.5

11

3237.6

3.1

11 top pharmaceutical importing countries

7274.8

53.5

22286

64.3

 

69599

66.4

World imports

13543.2

100

34636

100

 

104801

100

 

Source: WHO estimates based on database from Commodity Trade Statistics Section, ITSB, United Nations Statistics Division, New York


Figure 3.6 shows that, in addition to being the world’s main exporter, Germany was the most important importer until 1996, when it was overtaken by the USA.


FIGURE 3.6 Import trends, top five pharmaceutical importing countries, 1980-1999

Source: WHO estimates based on database from Commodity Trade Statistics Section, ITSB, United Nations Statistics Division, New York


Bale (source for Table 3.3) also identifies the leading developing country importers of pharmaceuticals and the origin of these, summarized in Table 3.5. Pharmaceutical imports from other low- or middle-income countries account for a minority share in each of these countries. Import data from the 10 leading African countries (Table 3.6) show that Uganda and Tanzania were the only two countries which imported more from other developing countries than from industrialized countries in 1998. A possible explanation for this is the presence of strong essential medicines policies favouring generic imports in both countries. However, other factors, such as import prices and the marketing policies of manufacturers, may also contribute.

TABLE 3.5 Pharmaceutical imports by low- and middle-income countries, in US$ million, 1998

Importer

Industrialized country sources

Developing country sources

Imports from developing countries as % of total

Brazil

1325

263

16.6

Mexico

955

109

10.2

Argentina

638

139

17.9

Korea, Republic of

463

92

16.6

China

423

103

19.6

Colombia

294

202

40.7

 

Source: H. Bale, op. cit.


TABLE 3.6 Top 10 pharmaceutical importing countries in Africa, in US$ million, 1998

Importer

Industrialized country sources

Developing country sources

Imports from developing countries as % total

South Africa

565

36

6.0

Tunisia

164

8

4.7

Nigeria

79

39

33.1

Kenya

78

27

25.7

Uganda

20

34

63.0

Senegal

49

2

3.9

Tanzania

19

22

53.7

Mauritius

32

6

15.8

Madagascar

13

3

18.8

Togo

13

1

7.1

 

Source: H. Bale, op. cit.


3.3.1 Net pharmaceutical exporting countries

Many countries are both importers and exporters. Figure 3.7 shows the principal net exporter countries (exports minus imports) in 1999. Switzerland and Germany were the biggest net exporters, and India and China both appear in the top 10 net exporter group. The USA and Japan, the world’s two biggest producers, were also the biggest net importers in 1999.


FIGURE 3.7 Medicines in countries’ international trade - Exports minus imports - 1999

Source: ITC database


3.4 TARIFFS AND OTHER CHARGES ON IMPORTED MEDICINES

WHO recommends that medicines on a country’s essential medicines list (EML) should not be subject to tariffs,1 and many countries comply with this. While a source of revenue for governments, tariffs are also a barrier to trade. Governments may also use tariffs to protect a domestically-owned manufacturer against foreign competition. Whatever their purpose, tariffs raise the retail price of imported medicines and are therefore a potential barrier to access. Other aspects of fiscal policy, such as corporate taxation, can also affect the price to consumers, thus reinforcing the need for a risk-pooling approach to medicines financing as part of an overall health system strategy.2

In his review of consumption and trade in off-patent medicines, Bale assembled data up to 1999 on tariffs on active ingredients and on finished medicaments for highest and lowest tariff developing countries.3 In the top 10 developing countries in the highest tariff group, the average tariff was 22.67% for active ingredients and 12.34% for finished medicaments. In the lowest tariff countries, the corresponding rates were less than 1% or zero.

The highest tariff rates observed may have a measurable influence on the final price to the consumer, and are clearly a potential threat to public health objectives. However, many countries exempt medicines from this form of trade tax. Other forms of domestic price “add-on”, such as import, wholesale and retail margins, are likely to be more substantial components of final price - often adding 50%-80% to the factory gate or landed import price. Table 3.7 summarizes data for 10 countries on mark-ups, margins and other charges on pharmaceuticals.

TABLE 3.7 Percentage additions to manufacturers’ CIF price on pharmaceuticals in 10 countries

 

Sri Lanka 2000

Kenya 2000

Tanzania 2000

South Africa 2000

Brazil 2000

Armenia

Kosovo

Pune, India

Nepal

Mauritius

Import tariff

0%

0%

10%

 

11.7%

0%

1%

0%

4%

5%

Port charges

4%

8%

1%

     

4%

0%

   

Clearance and freight

 

1%

2%

         

1.5%

5%

Pre-shipment inspection

 

2.75%

1.2%

             

Pharmacy board fee

   

2%

             

Importer’s margins

25%

         

15%

25%

10%

 

VAT

     

14%

18%

20%

0%

     

Central govt tax

             

4%

   

State govt tax

       

6%

   

9%

   

Local town duty

             

1.5%

   

Wholesaler

8.5%

15%

0%

21.2%

7%

25%

15%

10%

10%

14%

Retail

16.25%

20%

50%

50%

22%

25%

25%

15%

16%

27%

Total cumulative mark-up

64%

54%

74%

74%

82%

87.5%

74%

82%

48%

59%

 

Data refer to 2002 except where indicated. Source: Levison4


REFERENCES

1 How to develop and implement a national drug policy. 2nd ed. Geneva, World Health Organization, 2001.

2 World health report 2000: health systems - measuring performance. Geneva, World Health Organization, 2000.

3 Bale H. Consumption and trade in off-patented medicines. Commission on Macroeconomics and Health, Working Paper WG4, 2001. Http://www.cmhealth.org/cmh_papers&reports.htm#Working Group 4

4 Levison, L. Policy and programming options for reducing the procurement costs of essential medicines in developing countries. Http://dcc2.bumc.bu.edu/richard/IH820/Resource_materialsWeb_Resources/Levison-hiddencosts.pdf

 

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