A bitter pill

A bitter pill

By Tahir Ali

(The News, 19-04-09)

The global pharmaceutical industry has crossed over $700 billion and is on the rise. Similarly, the Pakistani pharmaceutical industry too is witnessing a surge. Sales of medicines in the country in 2008 were recorded at Rs105.86 billion, showing an increase of 18 percent over the preceding year. Of these, multinational pharmaceutical companies (MPCs) accounted for 49.98 percent of sales, pocketing Rs52 billion and showing a growth of 13 percent over 2007. On the other hand, the share of local pharmaceutical companies (LPCs) grew by 24 percent in 2008, and they pocketed over Rs53 billion.

Among the market leaders for the year, a Pakistani company is at the sixth number while another is at the tenth number. Twelve of the top 20 pharmaceutical companies are MPCs, while nine of 12 leading pharmaceutical products are marketed by them. Though the share of local industry has improved over the years, the country’s drug exports have not increased proportionately. Pakistan exports medicines to 29 countries. According to latest figures, the country’s total drug exports, growing by 23 percent annually, have increased to $128 million. The Pakistan Pharmaceutical Manufacturers Association (PPMA) plans to increase drug exports to $500 from the current $100 million by 2013.

Medicines can be either research-based patent drugs or generic brands. The former are costlier and are marketed by MPCs, while the latter are cheap and are marketed by LPCs. Branded generics account for an estimated 75 percent of prescriptions in terms of unit-wise sales in Pakistan. MPCs control the market in terms of patent rights. Interestingly, no LPC has patent rights over any of the medicines used in Pakistan. It may be reminded that companies that originate research and production of any medicine are given property rights over the products for 10 to 15 years. Other companies cannot repack and market these medicines in a given market during that period. After the expiry of the said period, other interested companies may produce same generic medicines but they have to sell them at much lower prices.

There are 692 pharmaceutical companies (though some put the figure as high as 1,000) in Pakistan. These include manufacturers, importers and promoters. Of these, 405 are registered / licensed drug manufacturers, including 28 MPCs. The rest are drug importing / promoting companies, most of which are local. Almost all the local companies are repacking and formulating industries that are dependent on the import of raw materials from abroad.

There are 60 pharmaceutical companies in the NWFP. Of these, 35 are located in Hayatabad, Peshawar, followed by 15 in the industrial estate of Gadoon, Swabi. The rest are scattered in other parts of the province. The province’s population, about 25 million, is 14 percent of Pakistan’s total population. However, the provincial share in the country’s total drug sales is as high as 25 percent and it is further increasing. In short, the NWFP has a huge market for medicines. Most of the people from the tribal and northern areas, as well as from the Pakhtun belt of Afghanistan, come to Peshawar for treatment. According to a rough estimate, medicines worth millions of rupees are traded daily in Peshawar’s Dubgari Garden’s medicine market, the biggest drug centre in the country.

However, the local pharmaceutical industry feels alienated. Several pharmacists told this scribe that MPCs are unduly facilitated and patronised, while local companies are discriminated against. “Though at least 70 percent Pakistanis use locally manufactured medicines, the government treats LPCs unjustly; we are offered half the price paid to MPCs on the grounds that our standard is low. Can the government allow a multinational to charge more for oil than the Pakistan State Oil (PSO), which is also a local company? Certainly not, so why this injustice is being done to the pharmaceutical industry?” a pharmacist asks.

The local pharmaceutical industry is against selective application of prices; it is for uniform rates across the board, because the labour, contents and raw materials are the same for both LPCs and MPCS. They also suggest leader-price-concept, which means that if an industry is allowed to sell a medicine, say, for Rs10, all companies making that item should be allowed to do the same. The price of a capsule of 250mg of Cephradine, for example, varies between Rs6.5 to Rs12 per capsule – the latter being sanctioned for an MPC. The local pharmaceutical industry wants this anomaly to be done away with, and stresses that prices should not be different for different companies.

According to Mumtazuddin, deputy chief executive of a local pharmaceutical company, there is an imbalance not only between market prices of MPCs and LPCs, but also between different companies of the latter type. “There must be price rationalisation between local and foreign companies. Intra-local companies’ price rationalisation is also needed. There should be balance between all. There should be standard criteria for price fixation. Quality control system, standard of production machinery, cleanliness, packing, experience of the company, cost of production, prices of raw materials and other things should be considered while fixing prices for a certain product. Ten percent differentiation between prices of different companies is justifiable, but it should not be left at the will of drug inspectors,” he stresses.

Mumtaz further says the cost of production had increased manifold due to costly power and gas tariffs. “Prices of all commodities have increased two to three hundred percent in the last couple of years. The prices of petrochemicals were stable until 2006. After that, the rupee devalued, thus packaging prices increased. Moreover, power rates went up, and cost of production and inflation also increased, during this period. As a result, now the cost of production exceeds the allowed retail prices, but the Ministry of Health (MoH) would not reschedule the prices. In fact, it has not done so since 2001. Therefore, we demand that the prices of medicines should be increased by at least 50 percent.”

It is pertinent to mention here that after the government declined to accept repeated demands for increase in the prices of medicines, pharmaceutical companies increased their prices by up to 143 percent in February. Now the matter is in the court. Market sources say the government recently accepted the demand and increased the prices of certain medicines. A dealer told this scribe that the price of 400mg Evian capsules has been increased to Rs440, from the old price of Rs225.

Before 1996, the Pakistani government controlled only life-saving medicines, but the second Benazir government opted for control of all medicines, a decision over which there is still widespread resentment. “The governments of India and Bangladesh control prices of 74 and 114 medicines, respectively. The Pakistani government should control only the life-saving medicines, and the rest should be left to the market forces of demand and supply,” a pharmacist says.

The pharmaceutical sector in Pakistan is strictly regulated. However, against common perception, drug cost in medical care accounts for only 15-20 percent, while the rest is incurred on consultation, laboratory services, imaging facilities and hospital costs. This means almost 80 percent of the health sector remains unregulated. Pharmacists believe that prices invariably come down when there is open competition in the market. Famotidine, for example, was sold at Rs29 per tablet 25 years ago, but now due to open competition its price has come down to less than Rs3 a tablet.

The PPMA wants an agreement with the government on a framework of policy implementation regarding for how long a policy and prices would be operative. “A long-term policy is badly needed, because arbitrary decisions and changes in policies spoil the confidence of investors. Moreover, the government should provide constitutional cover to the adopted policy,” suggests Zahid Saeed, chairperson of the PPMA.

Lack of official patronage for research and development, refresher courses for pharmacists, and interaction and exchange between the public and private sectors is also causing harm to the pharmaceutical sector. The MoH should include the PPMA in the formulation of the health policy, as well as involve it in related decision making. Support of the Ministry of Commerce, Federal Board of Revenue and the Planning Commission are also important for the sector.

Health is a provincial subject under the constitution. Thus, local pharmaceutical industry representatives demand of the government to immediately hand over the sector to the provincial government. “Currently, the MoH is overburdened. Matters such as price fixation and review, registration of companies and drugs and their renewal, and drug manufacturing license and its renewal are all handled by the ministry. As people from the entire country converge on the MoH, this causes delay. The authorisation of the provincial health department for these issues will not only lessen the MoH’s workload, but will also help in developing the pharmaceutical industry,” Mumtaz says.

The lengthy and complicated official procedure for drug license registration should be made easy, and unnecessary investigations about income of the prospective and intending industrialists should be avoided. Because medicines are highly sensitive to temperatures, storage facilities should be improved and air-conditioners installed at all pharmacies to avoid any loss to the efficacy of medicines. Illegal smuggling of medicines should be stopped forthwith and the trade should be regulated. The government should also slash duty on basic raw and packaging materials, build basic raw material manufacturing units, and ensure power availability or allow import of gas generators.

(Email: tahir_ali1971@yahoo.com)

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About Tahir Ali Khan
I am an academic, freelance columnist, writer and a social worker.

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