Bhairahawa in south central Nepal is fast rising as a pharmaceutical hub, aided by its large population, high income levels, rapid urbanisation and apt environmental conditions.

Industry insiders say that the production of medications in Bhairahawa has swelled due to a surge in demand and an ageing population. As the pharmaceutical sector flourishes, eager investors are rushing in droves, they say.

Rupandehi district in Lumbini province now hosts 14 large pharmaceutical factories, half of them manufacturing allopathic medicines and half ayurvedic medicines. Most of their products are sold across the country.

Ganesh Pathak, coordinator of the Association of Pharmaceutical Producers of Nepal in Lumbini, said Lumbini tops all provinces in terms of pharmaceutical production and investment.

“As the pharmaceutical sector is growing, the flow of investment and employment opportunities is also increasing,” he said. The pharmaceutical industry in Lumbini has invested more than Rs7 billion in the past few years.

According to the association, the pharmaceutical factories in Lumbini produce medicines worth Rs15 billion annually and provide 2,500 jobs.

Most of the plants now employ local workers while a few years ago they depended on Indian employees.

"Almost all employees from workers to technicians are Nepalis," Pathak said, adding that the number of Nepalis joining the workforce in the pharmaceutical industry was rising because of the benefits and facilities.

One of Nepal's largest pharma companies, Asian Pharmaceuticals, is based in Rupandehi. Its factory is located in Omasatiya Rural Municipality-8. The company started manufacturing drugs in 1998, and currently brings out 280 different types of medicines.

Hutananda Khanal, chairman and managing director of Asian Pharmaceuticals, said the company's output is worth Rs2.75 billion annually.

The company employs 250 workers in its factory while another 375 workers are engaged in marketing and distribution, he said.

“Our medicines reach markets all over the country. We have so far invested Rs1.25 billion in the factory,” said Khanal.

"Investment has increased and the product range has widened because demand for medicines has gone up. Sales and profits are good in the medicine business.”

There are challenges too. "There is tough competition in terms of price due to imports," Khanal said.

Nepal imported medicinal drugs worth Rs30.66 billion in the fiscal year 2020-21 ended mid-July 2021.

Ayurvedic medicine factories are also proliferating in Rupandehi. Grace Pharmaceuticals, located in Tilottama, is one of the largest ayurvedic medicine producing companies in the country.

The company produces ayurvedic medicine tablets, ointments, syrups and oils. Its product range consists of 54 types of medicines.

Established in 2013, Grace Pharmaceuticals has so far spent Rs200 million. The factory employs 110 people.

Suraj Bhattarai, managing director of Grace Pharmaceuticals, said production could be doubled if the factory were to run at full capacity. "Demand for ayurvedic medicines has just started to pick up," he said.

Pharmaceutical companies have been investing in upgrading their factories with a view to achieving breakthroughs in the development of domestic products and sharpening their competitive edge against imports.

Investment and production have increased, but procuring raw materials continues to be a big challenge.

Companies producing allopathic medicines are totally dependent on imported raw materials. Nearly 80 percent of their requirement comes from India and the rest from China and Europe.

Even in the production of ayurvedic medicines, Nepali factories need to import 40 percent of their raw materials.

Drug manufacturers say that lack of self-sufficiency in raw materials is the biggest hindrance for the pharmaceutical sector.

"Importing raw material is a difficult task, and a surge in prices has added to the problems," said Bhattarai who is also the central advisor to the Ayurveda Medicine Producers Association of Nepal.

“We export herbs from Nepal, and we import the same herbs after they have been processed by weighing them in grams,” Bhattarai said. He said that the supply of raw materials should be increased if the country is to become self-sufficient in medicine production.

Pharmaceutical production started in Nepal in 1972. According to the Department of Drug Administration, 63 companies are currently producing allopathic medicines. Among the 140 registered ayurveda hospitals, 55 are in operation. They have a combined investment of around Rs26 billion.

Nepal currently produces 7,727 brands of medicines. The National Drug Policy 1995 had set a target of producing 80 percent of the country's requirement of medicinal drugs within 10 years, but half of its annual consumption is still fulfilled by neighbouring India.