Nepal’s Pharmaceutical and Health System Under Strain: Structural Gaps, Regulatory Confusion, and Growing Public Discontent

Nepal’s pharmaceutical and healthcare system is facing mounting structural challenges, ranging from unhealthy market competition and regulatory ambiguity to procurement inefficiencies and growing public dissatisfaction with service delivery. Despite a domestic medicine market estimated at around NPR 65 billion annually, systemic weaknesses continue to undermine quality, affordability, and long-term sustainability.

One of the most pressing concerns is the prevalence of unhealthy competition within the pharmaceutical sector. Industry stakeholders point out that weak regulatory oversight and the absence of world-class testing laboratories have compromised quality assurance. Although laboratory facilities exist in Nepal, many lack modern infrastructure and skilled human resources, limiting their ability to conduct reliable drug quality assessments. This capacity gap has persisted largely due to the government’s inability to expand trained manpower in line with sectoral growth.

Currently, Nepal has 132 registered pharmaceutical manufacturing companies, of which only 86 are operational. Domestic production meets roughly 40 percent of national demand, while imported medicines account for the remaining 60 percent. The import system itself is fragmented, with two dominant models in operation: independent importers supplying retail pharmacies, and large pharmacy chains that import medicines directly for their own distribution. This fragmented structure, combined with competing interests of manufacturers, importers, and retailers, has created an environment where commercial influence often outweighs state authority.

Regulatory uncertainty further complicates the situation. There remains institutional confusion over whether pharmaceutical regulation should primarily fall under the Ministry of Health and Population or the Ministry of Industry, Commerce and Supplies. While the Department of Drug Administration is responsible for monitoring, its effectiveness has been constrained by chronic manpower shortages. Notably, the number of regulatory staff has not increased since 2002, despite a significant expansion in pharmaceutical imports, domestic production, and retail outlets.

Price control policies have also had unintended consequences. Medicines produced by state-owned manufacturers, such as Nepal Drugs Limited, are sold at extremely low prices. Essential medicines like paracetamol and oral rehydration salts have seen no price revisions for years, largely due to political sensitivity around drug price hikes. While this has ensured short-term affordability, it has discouraged investment and stunted the growth of domestic pharmaceutical industries. Critics argue that while fuel and food prices are adjusted in line with international markets, freezing medicine prices indefinitely is neither fair nor economically viable.

The issue of raw material imports adds another layer of vulnerability. Nepal relies almost entirely on foreign sources for pharmaceutical raw materials, mainly from India and China. However, manufacturers have been unable to guarantee uninterrupted supply chains, making it difficult for the government to offer long-term incentives such as customs duty reductions. Without assured access to inputs, any disruption in neighboring countries could halt domestic production, placing a heavy burden on the public health system.

As Nepal transitions from a least developed country to a developing nation, concerns have emerged about the gradual withdrawal of trade-related benefits. While this shift may increase operational costs for pharmaceutical companies, experts caution against alarmism. Economic graduation also enhances national value and credibility, requiring industries to adapt through modernization and efficiency. The government, for its part, has begun drafting a pharmaceutical master plan aimed at strengthening domestic capacity.

Procurement of medical equipment presents yet another systemic flaw. Although the federal government allocates budgets, procurement is carried out separately by provincial and local governments. This decentralized approach has resulted in significant price disparities, with identical equipment sometimes costing up to three times more at the local level than at the center. Attempts to introduce a unified procurement system have faced resistance, as provincial and local authorities fear loss of autonomy.

Moreover, the existing public procurement framework prioritizes cost competitiveness, often at the expense of quality. As a result, health institutions frequently receive substandard equipment that breaks down quickly, triggering public criticism and operational disruptions. Officials argue that the Public Procurement Act requires sector-specific amendments to accommodate the unique demands of healthcare, where reliability and performance are critical.

Beyond pharmaceuticals and equipment, public dissatisfaction with healthcare services is growing. Most government hospitals currently operating were built 20 to 40 years ago, based on population figures that no longer reflect present realities. Although bed capacity has increased in major hospitals such as Bir Hospital, Koshi Hospital, Bharatpur Hospital, and Narayani Hospital, demand continues to outpace supply due to rapid urbanization and population growth.

Compounding the issue is the outdated staffing structure. Many hospitals still operate under manpower ceilings established in 2001, making it nearly impossible to meet today’s service requirements. Doctors and nurses are expected to shoulder increasing workloads without proportional increases in resources, raising concerns about burnout and service quality.

While government hospitals remain the primary option for low-income populations, complaints persist regarding long waiting times, delayed appointments, and limited access to preferred specialists. Some patients allege that government doctors themselves recommend private facilities, further eroding trust. At the same time, private hospitals attract patients through better hospitality and faster service, albeit at significantly higher costs that are ultimately borne by patients.

Health policymakers acknowledge that replicating private-sector service models in public hospitals is unrealistic under current constraints. However, proposals are being discussed to allow doctors to provide paid services within public hospitals during fixed hours, potentially increasing both service availability and institutional revenue—without compromising free basic care.

Ultimately, Nepal’s healthcare challenges stem from deep structural issues: chronic manpower shortages, outdated legal frameworks, fragmented governance, and market distortions. Addressing these problems will require a fundamental policy rethink, coordinated institutional reforms, and sustained political commitment. Without such measures, the growing gap between public expectations and system capacity risks further strain on an already overstretched healthcare sector.