Health
 
Pharmaceutical industry walking a tightrope
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February 18, 2011
Pharmaceutical industry in Pakistan faces several grave crises; the major one is caused by the strict government control over pricing. Another crisis is the absence of an effective IP protection system. A patent law was officially tightened in December 2000 but its effectiveness is open to question. What aggravated this crisis was that for reasons that defy logic the IP laws were made even weaker through some changes made in 2002. The drug inspection teams investigating the manufacture and sale of fake drugs have failed to perform their duty effectively, largely from lack of resources and bureaucratic complications. Drug prices are officially controlled, though the government lacks the capacity to enforce its policies in this area. Some price rises have been allowed since 2000, but the current government shows little sign of enacting any serious reform of the pharmaceutical sector, preferring to allege profiteering on the part of the pharmaceutical industry
Beset with multiple difficulties, pharmaceutical industry in Pakistan faces several grave crises; the major one is caused by the strict government control over pricing.

Another crisis is the absence of an effective IP protection system. A patent law was officially tightened in December 2000 but its effectiveness is open to question. What aggravated this crisis was that for reasons that defy logic the IP laws were made even weaker through some changes made in 2002.

The drug inspection teams investigating the manufacture and sale of fake drugs have failed to perform their duty effectively, largely from lack of resources and bureaucratic complications.

Drug prices are officially controlled, though the government lacks the capacity to enforce its policies in this area. Some price rises have been allowed since 2000, but the current government shows little sign of enacting any serious reform of the pharmaceutical sector, preferring to allege profiteering on the part of the pharmaceutical industry.

The basic facts about the country’s pharmaceutical industry are:

• The pharmaceutical industry exceeds $1.4bn which equates to per capita consumption of less than $10 per year.
• Provides direct employment to more than 70,000 and indirect employment to around 150,000 people across the country.
• It has made it possible for the country to become self-sufficient in medicines. Today 90 per cent of the country’s medicine demand is being met by local manufacturing, both by the MNCs and local companies.
• Strong export potential: More than $100m foreign exchange earned annually for the country.
• One of the strictest price and regulatory controls in the world. Prices of all 50,000+ drugs controlled unlike other countries where the prices of only essential drugs are controlled and the rest are competitively priced.
• Last across-the-board price increase allowed by the Ministry of Health was in December 2001 (3-4 per cent).
Drug prices

We tend to compare our status with that in the neighboring countries, and specifically with India. The general perception is that drug prices in Pakistan are higher than in India but the reality reveals a different picture:

• When like-for-like comparisons are made, prices of Pakistan’s top 30 medicines are on aggregate 53 per cent lower than India saving Rs 6 billion annually
• In addition, medicine prices in Pakistan are invariably lower than any regional country.
• As many as 42 per cent drugs are priced under Rs 5.
• Countries like India and China possess economies of scale and are endowed with superior technology and human capital, therefore, price comparison with Pakistan is inappropriate
• Only a few WHO-listed essential drugs are price controlled in India. All other drugs are free to compete and set prices at competitive rates. In Pakistan, the controlled and decontrolled lists are not separate. Each and every drug is controlled by the Ministry of Health.

Threats to survival

Since December 2001, the Pakistani pharmaceutical industry has not been allowed an across-the-board price increase in their products. Since then several crucial changes have occurred such as:

Devaluation of Pak rupee: 30 per cent against US dollar;

Inflation soaring at more than 20 per cent Exorbitant increases in fuel and energy prices, increase in transportation and labour costs, etc, have all resulted in the escalation of production costs.

The prices of the Active Pharmaceutical Ingredients (APIs) used for the manufacturing of drugs as well as of the other raw materials such as paper, plastic, glass, rubber, etc, have increased manifold since 2001. The cost of oil, gas, electricity, transportation, and labour has all gone up dramatically.

Besides, the cost of compliance to the progressive GMP and environmental standards; power and water filtration requirements and sophisticated machinery for quality drug manufacturing have also increased manifold during the last seven years.

All the factors mentioned above have seriously eroded the profit margins of drug manufacturers. Several local pharmaceutical companies face the threat of closure if immediate remedy is not provided.

Pakistan Pharmaceutical Manufacturers Association (PPMA) has underlined difficulties through the media and has been campaigning rigorously for the last few weeks to move the authorities concerned to come to the pharma industry’s rescue.

Many MNCs, including Roche, MSD, and BMS have pulled out from the Pakistani market due to this scenario. There are more to follow suit.

In this environment, manufacturers, both local and foreign-owned, have been unable to generate the profits needed for capital investment, and now face the threat of closure or considering pulling out of this country. On the other hand, the Indian pharma industry has been experiencing major growth after de-regularization.

What the government can do

To avert this crisis, the government must come into action. It must realize that if the prices of medicines are not allowed a rational increase then it would not be possible for pharmaceutical companies to manufacture them at all. Under the present poor controls it would not be possible to stop smuggled drugs to flood the market. This will hurt the patient and also the country’s economy, further worsening the problem of corruption which is eating into the roots of this country.

Media’s role

The media in Pakistan is awake to every crisis situation and highlights it, bringing the government machinery into action. It is time for our media to understand sympathetically the problem faced by the pharma industry and play its role for a sustainable and win-win model for drug pricing which is acceptable to the pharmaceutical sector and the patients. It must be realized that if the industry closes down, the ultimate loss will be of the poor patients who will be forced to buy imported alternatives at much higher prices.

The focus of news reports should be made on the real issues hurting our society. These include shortage of essential drugs; rise in smuggling of Pakistani medicine to the neighbouring and African countries; role in the illegal khaipiya trade under the nose of authorities, counterfeit and spurious drugs (WHO estimates 20=25 per cent counterfeit penetration in Pakistan market), no checks by the government; black-marketing of essential and OTC drugs such as Thyroxine; Angised and Ventolin which are sold at prices many times higher than their actual MRP by many chemists; artificial shortages created by drug hoarders to sell the medicines at exorbitant prices.

Without a concerted effort of the government, the media and the pharma industry, the impending drug crisis cannot be averted.

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