Nepal’s Pharmaceutical Industry Grows in Numbers but Struggles for Survival

Nepal’s pharmaceutical sector has expanded steadily over the past two decades, attracting new investment, creating thousands of jobs, and supplying nearly half of the country’s medicine needs. Despite this growth, domestic drug manufacturers say they are struggling to survive in an environment that favors imports over production and regulation over facilitation.

For the last 15 to 20 years, locally manufactured medicines have met around 45 percent of Nepal’s total consumption. The remaining 55 percent continues to be imported, mainly from India, China, Bangladesh, and other countries. While the number of pharmaceutical industries has increased, their share of the domestic market has paradoxically declined, raising concerns about the long-term viability of local production.

Industry leaders say rising investment has not translated into fair returns. Even companies with significant capital exposure have failed to earn profits proportionate to their investment. They argue that although pharmaceuticals are directly linked to public health and national security, the challenges faced by domestic producers remain largely ignored. Expectations that Nepal would become industry-friendly after the political changes of the early 2000s have not materialized, even after nearly two decades.

Manufacturers point out that Nepal’s policy framework has consistently made imports easier while placing heavier burdens on domestic production. As a result, the country has gradually evolved into a trade-oriented economy rather than a production-based one. In some cases, imported medicines are allowed to sell at higher prices than locally produced alternatives, even when domestic production costs are higher due to expensive raw materials, energy, logistics, and compliance requirements.

Rising costs have further intensified pressure on local producers. Prices of pharmaceutical raw materials, fuel, transportation, and foreign exchange have increased significantly in recent years. However, the prices of many essential medicines have remained unchanged for over a decade. Producers say this price freeze has made it nearly impossible to maintain profitability, invest in modernization, or expand capacity.

Regulatory practices are another major concern. Domestic manufacturers are required to go through lengthy and repetitive approval processes, often involving multiple licenses, annual renewals, and extensive documentation. Each raw material import requires fresh authorization, and each product must be approved separately, sometimes taking years. Industry representatives argue that such requirements are excessive and uncommon in other countries.

The difficulty of introducing new products has become a major deterrent to innovation. Obtaining approval for a new medicine can take two to three years, discouraging manufacturers from expanding their portfolios. At the same time, inconsistencies between laws and regulations—such as labor rules that contradict existing legal provisions—have created confusion and operational uncertainty.

These challenges are not limited to pharmaceuticals alone. Across industrial sectors, business leaders say there is a gap between political rhetoric and practical policy. While leaders frequently speak of industrialization, laws and enforcement practices are often based on mistrust of entrepreneurs. Strict penalties for minor compliance errors have fostered fear rather than accountability, making investors reluctant to expand or reinvest.

The pharmaceutical sector is also heavily regulated, often beyond necessity. Critics argue that Nepal claims to operate under an open economic system while imposing restrictions that prevent industries from functioning efficiently. This contradiction, they say, has left domestic manufacturers trapped between excessive control and unchecked imports.

Industry stakeholders believe Nepal could achieve self-reliance in pharmaceuticals if policies were aligned with production goals. However, current regulations do not allow domestic industries to scale up. Large-scale production, which is essential for cost competitiveness, has been discouraged, while smaller producers lack the capacity to replace imports effectively.

There is growing concern that if existing conditions persist, many pharmaceutical industries may be forced to shut down within the next few years. Entrepreneurs say the business environment favors importers, who face fewer procedural hurdles and enjoy faster returns, while producers are burdened with compliance costs and price controls.

The broader economic implications are significant. Weak industrial growth discourages domestic investment, limits job creation, and accelerates youth migration abroad. Entrepreneurs argue that Nepal lacks a clear industrial vision, with successive governments prioritizing short-term revenue collection over long-term capacity building.

Although Nepal has no shortage of opportunities, industry leaders say legal and policy barriers prevent these opportunities from being realized. Private sector representatives have repeatedly called for reforms, offering assurances that with a supportive environment, domestic production could expand, reduce imports, and even generate export revenue. However, meaningful policy change has yet to follow.

Critics warn that countries that consume more than they produce eventually face economic instability. Nepal, they argue, is moving in that direction by relying heavily on imports while neglecting domestic industries. The decline of industrial zones and manufacturing hubs has further weakened the country’s production base.

Pharmaceutical producers maintain that import substitution is achievable. If Nepal can manufacture tobacco and alcohol domestically, they argue, there is no reason it cannot produce essential medicines. Entrepreneurs say they are ready to invest, adopt new technology, and expand capacity—provided unnecessary regulations are removed and production costs are reduced.

They stress that stricter laws do not automatically lead to better governance. Overregulation, they argue, drives honest businesses away while failing to deter malpractice. What the sector needs, they say, is trust-based regulation backed by effective enforcement against wrongdoing.

Ultimately, industry leaders believe Nepal must undergo serious self-reflection. Job creation, economic growth, and industrial resilience depend on a supportive policy environment. If pharmaceutical manufacturing is encouraged through legal reform, fair pricing, and streamlined procedures, Nepal could reduce import dependence, strengthen public health security, and position itself as a competitive producer in the region.