NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, July 17, 2015

European and U.S. pharmaceutical companies have always been allowed to sell medicines and medical devices in Iran, even if they’ve been hesitant about doing so. But the nuclear deal reached Tuesday could be transformative, not so much by peeling back legal restrictions on the pharmaceutical industry, but rather by tearing down financial roadblocks that could make it significantly easier for companies to do business in Iran in a sector that analysts say is teeming with growth opportunities.

“It’ll be easier to get paid,” said Farhad Alavi, a Washington, D.C., lawyer who is an expert on sanctions law. “A lot of things will become logistically much easier.”

Under the deal reached after nearly three weeks of negotiations between Iran and the group of countries known as the P5+1 — Britain, China, France, Russia, Germany and the United States — Iran would receive billions of dollars in sanctions relief, including its banks being allowed to rejoin the global economy, in exchange for curbing its nuclear program. It could take months, however, for sanctions to be rolled back, and if Iran violates the terms of the agreements, the restrictions would “snap back” into place.

Foreign drug companies already doing business in Iran consistently face roadblocks, such as the unwieldy banking transactions that often prevent them from getting paid promptly. Sanctions against Iran in recent years have functioned almost as a deterrent, because these companies must find authorized banks and intermediaries willing to handle funds from Iran, even when doing so is legal.

“The financial component of lawful sales of pharmaceuticals into Iran is very difficult,” Les Carnegie, a partner at Latham & Watkins, a law firm in Washington D.C., said, referring to both U.S. and European pharmaceutical companies.

The United States has imposed increasingly severe sanctions on Iran since 1979. In the past decade, multilateral sanctions laid out in resolutions by the United Nations Security Council and the European Union extended those restrictions further as part of the broader effort to force Iran to roll back its nuclear program. They targeted Iran’s economy in particular, effectively cutting it off from global markets in 2012 by forbidding the purchase of Iranian oil or gas and banning international financial transactions with certain Iranian banks. The U.S., meanwhile, essentially gave international companies the choice of doing business with Iran or with the U.S. — not both.