Iran, second innovation economy in central, southern Asia: GII

July 27, 2019 - 18:36

TEHRAN –Iran is the second innovation economy in central and southern Asia, according to the Global Innovation Index (GII) 2019 report.

The 2019 edition of GII report, published on July 24, dedicated to the theme Creating Healthy Lives—The Future of Medical Innovation. This edition sheds light on the role of medical innovation as it determines the future of healthcare in the next decades.

The GII 2019 is the result of a collaboration between Cornell University, INSEAD, and the World Intellectual Property Organization (WIPO) as co-publishers, and their knowledge partners.

Every year, GII ranks the innovation performance of nearly 130 economies around the world.

India and Kazakhstan ranked first and third in the region.

The GII ranking of Iran also moves up four notches in comparison with 2018, which was placed 65th.

The aim of the GII report is to provide insightful data on innovation and, in turn, to assist economies in evaluating their innovation performance and making informed innovation policy considerations.

Iran amongst most top science and technology clusters

According to GII 2019, the most top science and technology clusters are in Iran, the U.S., China, and Germany.

As in the previous two years, the GII 2019 includes a special section, which presents the latest ranking of the world’s largest science and technology (S&T) clusters.

The top ten clusters are the same as last year. Tokyo–Yokohama tops this ranking, followed by Shenzhen–Hong Kong.

The U.S. continues to host the largest number of clusters (26), followed by China (18, two more than in 2018), Germany (10), France (5), the UK (4), and Canada (4).

Australia, India, Japan, the Republic of Korea, and Switzerland all hosted three clusters each. In addition, there are clusters from five middle-income economies in the top 100—Brazil, India, Iran, the Russian Federation, and Turkey.

Ten best-ranked economies by income group

Iran ranks 9th among middle-income economies in the quality of publications and 12th overall in the quality of innovation among middle-income economies.

Regarding the quality of scientific publications (Citable documents H-index), among the top 5 in the high-income group, only the U.S. and Canada are non-European economies. In the middle-income group, China takes the top position. India is 2nd, as the only lower-middle-income economy in the top ranks.                                                                           

Role of government investment on research development

The report named the Iranian government as one of the factors for improvement of innovation in the country.

According to GII 2019, the government investment can help set up large funds to advance particular fields of research and to create health research centers or clusters, such as Iranian dedicated science and technology parks, the Thai Center of Excellence for Life Sciences, the Brazilian SENAI Innovation Institutes.

Iran’s experience in developing high-tech medical innovations

Over the last two decades, the Islamic Republic of Iran has made significant progress in the health and medical sector, expanding both in market size and coverage. The ever-growing medical innovation ecosystem is supported by ongoing policy framework developments, incentives, and regulatory bodies.

In addition, the emergence and development of the biopharma sector in Iran, which is a complex, high-tech sector, hosts several successful local export firms.

Advancement in health coverage, research, and innovation

Iran’s improvement in health-related indicators has been consistent and promising. According to the Human Development Index (HDI), the mean years of life expectancy in Iran has increased dramatically from 51.1 in 1980 to 76.2 in 2018, an approximate 25-year increase over the past three decades.

From a science, technology, and innovation (STI) perspective, Iran has boosted scientific production in areas such as nano-tech, biotechnology (biotech), biomedical engineering, bioengineering, biomaterials, and biophysics. For instance, rankings have improved from either non-existent or around 60th position in the late 20th century to 4th in nano-tech, 12th in biomedical engineering, 9th in bioengineering, and 8th in biomaterials, in 2017.

The medical innovation ecosystem—supported by over 19,300 faculty members from medical universities and research institutes, and responsible for roughly 37,450 scientific papers and 1,589 patent applications in 2018—has the capacity to host various research activities.

In 2018, the National Medical Device Directorate (NMDD), reported that the Iranian medical equipment market was worth US$2.5 billion, of which 30% belonged to over 1,000 domestic firms.

On a global scale, 56% of 500,000 medical equipment items available in the world market have Iranian-made versions.

In pharmaceuticals, around 70% of Iran’s US$4.5 billion markets are domestic products and, in 2018, 97% of pharmaceuticals consumed in the country were manufactured locally.

 Furthermore, in 2018, 67% of the active pharmaceutical ingredients (APIs) used to produce drugs in Iran were made locally.

The medical innovation policy framework

Iran has integrated its healthcare system with medical education to improve health conditions. Sixty-five medical universities, responsible for both health services and medical higher education, constitute a decentralized network of provincial healthcare bodies that are managed centrally by the Ministry of Health (MOH). This network has contributed to the creation of a strong healthcare system characterized by extensive and convenient access to medical services, both in rural and urban areas.

In each province, public medical universities provide medical services, administer vaccinations, and assist in fighting local diseases. Because of countrywide distribution, the network has the ability to undertake endogenous research and innovation and train medical cadres based on local demands and epidemic situations.

According to the MOH, 100% of urban and 98% of rural areas in Iran now have access to at least primary medical services.

When local products are available, public health insurances do not cover the costs of foreign drugs for patients, but they do cover from 90 to 100 percent of the total cost of the domestic equivalent.

Imposing high tariffs on foreign drugs and/or medical equipment, when an equivalent is locally produced and developed to meet domestic demand, is also a tool to support medical innovation.

In cases where the domestic equivalent is not available, low tariffs of 4% are set on foreign products. However, when the domestic equivalent is available and verified by the MOH, these tariffs increase from 4 percent to between 32 to 45 percent, and public health insurances will no longer cover patient medical expenses for these products.

Supporting the local production of drugs has successfully promoted domestic product share in the national pharmaceutical market, from 63.4% in 2009 to 78.6% in 2018.

In addition, exporting medical innovations is strongly encouraged by recent policies, such as the law for supporting knowledge-based firms (KBFs). This law, approved by Parliament in 2010, was introduced as a mechanism to encourage the supply side of technology and innovation in high-tech firms, benefitting the health sector.

The Vice-Presidency for Science and Technology (VPST) administers this law and the Iran National Innovation Fund channels funds to the innovative and technological activities of eligible KBFs. Eligible firms include private entities that produce high-tech products, require in-house R&D and skilled employees, are high value-added, and are difficult to imitate. In early 2019, US$85 million had been allocated in the form of low-interest rate loans to fund 474 medical innovation projects by the IPF. Additionally, the VSPT supports 4,300 KBFs, of which approximately 1,100 KBFs are private health and medical sector firms.

Medical innovation ecosystem and its key actors

A community of vibrant young entrepreneurs in Iran has pioneered state-of-the-art medical innovations. Their efforts are reinforced by evolving government support in the form of tariff barriers, tax exemption, and guaranteed purchase.

The law for supporting KBFs has played a key role in empowering the medical innovation ecosystem. There are four dedicated Science &Technology parks, 78 incubators, and 739 research centers in a variety of medical fields affiliated with the MOH.19 Furthermore, 68 incubators, and 27 S&T parks, under the supervision of the Ministry of Science Research and Technology (MSRT), specialize in supporting medical and pharmaceutical sectors.

Accelerators and innovation centers are the most recent mechanisms used by the government and, in particular, the VPST to expand and increase the efficiency of KBFs. To date, 29 accelerators and 79 innovation centers are operational and open to medical innovators and entrepreneurs.

The major funding institution, IPF, supports medical innovation mainly by granting loans—US$85 million to date—to facilitate KBF efforts in developing medical equipment, biotech, and advanced drugs. Another active funding body, the Iran Biotech Fund (IBT), was founded in 2015 by the Biotech Development Council, an affiliate to VPST, and is supported by joint investment from the private sector. At the end of 2017, IBT had invested US$4 million in venture capital (VC) in 24 innovative ideas and, from its inception, has granted 350 loans—total of US$11.7 million—to a wide range of innovative biotech ideas and projects.

Biopharma in Iran: a unique and advanced sector

Over the last two decades, Iran’s STI efforts, accompanied by policy support, in biotechnology and pharmaceuticals has resulted in a rapid increase in biotechnology scientific publications—ranking 9th in bioengineering, 9th in applied microbiology and biotechnology, and 13th in biotechnology in 2017.

Currently, there are 20 Iranian biopharma firms, seven of which are KBFs supported by the VPST. Of the 22 drugs that these firms produce, at least 10 are considered state of the art. The local development of biopharma products has resulted in savings of US$980 million annually, created over 4000 quality jobs for Iranian scientists and researchers, and is accountable for roughly US$60 million of Iran’s pharmaceutical exports—of which a sizeable share is exported to Europe.

Although the quantity of biopharma products sold in the local market is not comparable to conventional drugs, three of the top five pharmaceutical manufacturers—in terms of total sales in 2017—are CinnaGen, ExirPharma, and AryoGen. These three manufacturers hold 11.2% of the pharmaceutical market share.

National necessity, foreign currency saving, self-reliance, ambition, public incentives, and public policies have afforded Iranian medical researchers and entrepreneurs the opportunity to design and develop medical equipment and advanced drugs.

Despite the sizeable share of local medical products in the Iranian market, further domestic innovation requires economies of scale that cannot be attained solely by tariff barriers and market protection. To achieve economies of scale, local firms must export their products. It is imperative that the government systematically continues to facilitate and monitor the export of medical products.

Even with many successes, Iranian firms face barriers to continued innovation, such as lack of customized public support, branding, international acceptance, and standards.

Overcoming these barriers would require establishing a coordinated policy framework and creating synergies between current policies. Several policy recommendations to strengthen medical innovation and increase economic impact include:

• The scale of the domestic health market is not large enough to justify the development of costly and long-lasting medical innovations. To deter exclusive reliance on the domestic market, strong policy measures should be established to encourage local firms to export their products.

The export process can be lengthy, which suggests that enhancing accreditation infrastructure and standardization facilities would encourage exports more than, for example, access to low-rate loans.

• Government support of local firms has proved to be beneficial; therefore, the government should increase trust and encourage local firms to engage in high-end medical innovations.

• As leading firms play an important role in the economy, the government should adequately support them in the development of medical innovations and the creation of a dynamic knowledge regime. This would entail enforcing fewer formalities on leading firms, facilitating medical exports, and assisting with the import of raw materials and production equipment.

To this end, the Vice-Presidency for Science and Technology has devised Pioneer KBFs, a direct communication line to gather information about the needs and challenges of leading firms and to address these in the shortest time possible. The Ministry of Health is encouraged to adopt a similar approach to facilitate and support leading firms.

• According to local firms, some foreign firms that import medical equipment do not face the same difficulties experienced by locals, specifically in obtaining permissions and certifications needed to launch their product in the market. Giving procurement and tender priority to domestic products and firms over the foreign equivalent should be reinforced by the Ministry of Health. In other words, the government should take measures to limit foreign medical imports, especially products of lower quality, as a means to encourage local firms to engage in medical research and innovation, as is the case with many other countries.

• Current funding systems that support medical innovation are largely risk-averse. Although institutional mechanisms— such as the Iran Biotech Fund and the Innovation and Prosperity Fund—have helped to mitigate innovation risks, there is a need to enhance efficiency and availability of funding, particularly venture capital. Formulating a comprehensive technology and innovation funding system in the health sector by socializing some of the inherent risks—for example, through guaranteed public procurements and grants in the medical innovation process—could be the starting point to attract more private funding.

SB/MG

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