World Bank Review Urges Deeper Strategy in IFC’s Generic Drug Sector Investments

The World Bank’s Independent Evaluation Group (IEG), drawing on insights from the Economist Intelligence Unit, the Global Private Capital Association (GPCA), USFDA databases, and research from the Financial Times, released a comprehensive assessment of the International Finance Corporation’s (IFC) investments in the pharmaceutical and life sciences sector. The clustered Project Performance Assessment Report (PPAR) analyzed six strategically selected projects committed between FY2017–18 across five countries. These projects aimed to improve access to essential medicines, strengthen manufacturing capacity, and expand the availability of generic and over-the-counter (OTC) drugs in emerging markets. While IFC’s financial contributions were significant, the report presents a more tempered verdict on its broader developmental and systemic impact.

Narrow Access, Big Potential: The Rise of Generics and Regulatory Barriers

The fastest-growing segment of the pharmaceutical industry, generic medicines, holds vast potential to meet the global demand for affordable healthcare. Generics offer a low-cost alternative to branded drugs and are vital for healthcare systems in low- and middle-income countries. However, the report underscores how severe fragmentation in national drug regulations continues to obstruct the sector’s growth. While developed markets enforce robust regulatory regimes through agencies like the USFDA or the European Medicines Agency, emerging markets often struggle with limited enforcement capacity and inconsistent quality standards. This patchwork of regulations creates steep barriers for local manufacturers to scale operations or enter export markets. IFC-backed companies with globally recognized certifications like EU-GMP or USFDA were better positioned to overcome these hurdles, but many others faltered due to compliance challenges, delays in approvals, or price caps that undermined commercial sustainability.

Financing Lifelines with Fragile Follow-Through

One of IFC’s most valuable contributions to the pharmaceutical sector was its provision of long-term patient capital, especially in contexts where domestic banking systems and commercial investors offered limited support. Most project financing came through debt instruments, with IFC also facilitating local currency financing and mobilizing co-investment from other development finance institutions and commercial banks. This enabled large-scale expansions and modernizations in places where equity or structured loans were not otherwise available. Still, currency risks persisted across the board. Because most Active Pharmaceutical Ingredients (APIs), the vital raw materials of drug manufacturing, are imported from India and China and denominated in foreign currencies, local manufacturers often found themselves squeezed when local currencies depreciated. Only projects with export capabilities and diversified revenue streams were able to hedge these risks effectively. Despite providing critical funding support, IFC’s nonfinancial additionality, intended to include knowledge-sharing, market intelligence, and policy influence, was inconsistently delivered. There were a few instances where advisory support or upstream engagement had tangible effects on business outcomes or regulatory frameworks.

Innovation, Inclusion, and Missed Data

The report finds encouraging examples of innovation and inclusivity within the portfolio. Some projects made investments in R&D and were able to introduce new drug formulations or venture into the biosimilar space, an area of increasingly strategic importance. Others expanded into specialized OTC product lines by capitalizing on cultural demand for traditional medicine-based consumer health products. A number of investee firms were praised for inclusive hiring, with many achieving gender-balanced workforces and promoting women across manufacturing, technical, and leadership roles. However, these outcomes were often not well documented or benchmarked. Most projects lacked robust monitoring and evaluation systems to track key impact indicators like affordability, access by income group, or market penetration of new drug offerings. Where affordability claims were made, they were often based on broad comparisons between generic and innovator prices, without adjustments for inflation, local purchasing power, or market alternatives. A clear conclusion of the report is that without standardized data collection and outcome monitoring, it becomes nearly impossible to validate developmental impacts.

ESG Gains and the Path to Greener Pharma

On the environmental and social governance (ESG) front, most IFC-financed projects demonstrated compliance with international norms and were found to have adequate management systems in place. However, some notable gaps remained in areas such as effluent treatment, chemical safety, and life and fire safety (L&FS), especially in facilities handling large volumes of flammable substances or sector-specific antibiotics. One standout project achieved IFC’s EDGE green building certification, becoming the first pharma facility in its country to meet that benchmark. Nevertheless, climate-related considerations were largely absent across the portfolio, and energy audits or greenhouse gas mitigation strategies were rarely applied. The report calls for stronger, more proactive engagement from IFC on climate mitigation and safety planning in the sector, emphasizing the need for standardized E&S action plans and peer-to-peer knowledge sharing across regions.

Rethinking Strategy for Deeper Impact

The report concludes with a set of forward-looking recommendations that urge IFC to revisit and refine its strategic approach to pharma investments. These include creating a centralized "industry knowledge bank" to consolidate insights and promote cross-regional learning, strengthening upstream and advisory work to support certification processes and regulatory reforms, and offering innovative quasi-equity instruments for high-risk projects where capital repayment is uncertain. For truly impactful development outcomes, the IFC must move beyond project-level finance and position itself as a systemic enabler, working hand-in-hand with governments, regulators, and regional manufacturers to close gaps in access, quality, and affordability. As the global push for “health for all” intensifies, particularly in the aftermath of COVID-19, the report makes clear that the path to inclusive and sustainable pharmaceutical development lies not only in money, but in smart strategy, deep partnerships, and sustained institutional support.