Boston, MA -- (SBWIRE) -- 10/08/2013 -- Iran's pharmaceutical market will become increasingly reliant on pharmaceutical imports over the next decade. In light of ongoing trade sanctions, increasing import reliance puts Iran at significant risk of long-term medicine shortages. Uptake of medicines in the short-term is further risked by currency depreciation and hyperinflation of local medicine prices. We believe the medicines market will contract in 2013, before the return of growth in 2014.

Headline Expenditure Projections

- Pharmaceuticals: IRR50,982bn (US$4.18bn) in 2012 to IRR64,851bn (US$1.85mn) in 2013; +27.2% in local currency terms and -55.7% in US dollar terms. Forecast broadly in line with previous quarter following confirmed currency devaluation.
- Healthcare: IRR353,626bn (US$28.99bn) in 2012 to IRR436,393bn (US$17.46bn) in 2013; +23.4% in local currency terms and -39.8% in US dollar terms. Forecast broadly in line with previous quarter following confirmed currency devaluation

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Risk/Reward Rating: Iran's position has improved by one place in Q413 compared with the previous quarter. The country's business environment now ranks 18th out of the 30 countries surveyed in the Middle East and Africa (MEA) region compared with 19th in Q313. Its overall score of 38.7 is slightly below the regional average of 42.4. 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 is highly questionable, and combine to create a low score for the risk variable.

Key Trends And Developments

- The exchange rate has been a major factor affecting drug supply. In July 2013, Iran raised the prices of its domestically manufactured drugs by 40% and that of imported drugs by 90%. The move comes after the increase in the exchange rate of the US dollar, which the country uses for importing raw materials. The government earlier allocated the US dollar at the official exchange rate of IRR12,260 for the import of drugs but now the rate has gone up to IRR24,000.

BMI Economic View: The Central Bank of Iran undertook a de facto devaluation of the rial in the official market on July 6. The value of the unit will likely drop in unregulated market transactions as a result, while food prices are likely to spike, ensuring that consumer price inflation remains elevated in 2013. In a sign of ongoing economic stress, the Central Bank of Iran (CBI) listed the price of the rial to IRR24,779/US$ on its website on July 6, compared to the previous official rate of IRR12,260/US$. The central bank did not issue any statement explaining the change. That said, Iranian Mehr and ISNA news agencies said that the rate would replace the previous official rate.

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