1

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PRESENTATION REVIEW

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 Contents INDEX
ABBREVIATIONS:................................................................................................................................................. 5
ABSTRACT................................................................................................................................................................ 6
INTRODUCTION:.................................................................................................................................................. 7
market HIGHLIGHTS:................................................................................................................................. 7
historical SIGNIFICANCE:......................................................................................................................... 9
factors of prodcution ,cost of production and machinery required:.........................................10
machine........................................................................................................................................................... 10
labour............................................................................................................................................................... 11
health care infrastructure statistcis....................................................................................................... 11
LITEATURE REVIEW....................................................................................................................................... 12
The Pharmaceutical Market:................................................................................................................... 12
ARTICLE:........................................................................................................................................................ 13
IMPACT OF WTO:..................................................................................................................................... 13
INTERNAL FLAWS................................................................................................................................... 14
METHODOLOGY................................................................................................................................................ 15
RESULTS.................................................................................................................................................................. 16
exports and IMPORTS: from ECONOMIC SURVEY AND OTHER ARTICLES................16
issues in 2009-2010: Pakistan Pharmaceuticals & Healthcare Report Q2 2010" Published
............................................................................................................................................................................ 17
FUTURE EXPECTATIONS...................................................................................................................... 18
CONCLUSIONS.................................................................................................................................................... 19
external factors............................................................................................................................................. 19
internal factors.............................................................................................................................................. 19
POLICY RECOMMENDATIONS.................................................................................................................. 20
APPENDIX.............................................................................................................................................................. 21

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 TABLE INDEX

Table: Global Pharma Industry………………………. 6

Table: major players in PPI…………………………… 6

Table: 1965-1990………………………………………7

Table: cost of production………………………………8

Table: health care infrastructure………………………9

Table: EXPORTS 2010………………………………….15

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ABBREVIATIONS:
Bn: billion

YOY: year on year

FJVs: Foreign Joint Ventures

IPRs: Intellectual Property Rights

LDCs: Least Developed Countries

MNCs: Multi National Companies

NC: National companies

PPEA: Pakistan Pharmaceutical Exporters Association

PPI: Pakistani Pharmaceutical Industry

TRIPS: Trade Related Aspects of Intellectual Property Rights

WTO: World Trade Organization

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ABSTRACT

This report provides valuable information on the PPI issues and prospects based on data 2005-2010.
Although this industry sector is relatively small, there is some potential for real growth. The report is
particularly useful because it provides comprehensive analysis of the industry .As an underdeveloped
country Pakistan is facing challenges in health sector and thus in its related PPI. Much of these
challenges have emerged from lack of interest by Government, internal and external problems faced
by the industry and finally the impact of WTO. Major health indicators compared with
neighboring countries indicate that existing situation is worst (Table 4, Page 25) and has to
be improved immediately. Although, various multinationals along with local companies are earning
a lot, there still remains a lacking in the regulation of this sector. By conducting secondary research
and using the information that falls in the years between 2005 and 2010, thus, our paper highlights
some of the challenges and the opportunities for all stakeholders in the pharma industry of Pakistan.

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INTRODUCTION:

MARKET HIGHLIGHTS:
In an era of cost containment and managed care, Pharma industry around the globe is expanding.
Global market size is approximately $ 770-780 billion with low growth of 3-4% in 2009 where
Canada and USA has 47.7% share. On the other hand Pakistan’s is just a $1.61bn market. If we look at
the chart below we can have an idea of the earnings of these MNCs.

Table: Global
Pharma Industry

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Where as major players in PPI can be seen the in the cart below

Table: major players in PPI

Market
Names Share

GSK : RS 703.4 crore (6 months 2009)

(http://www.gsk.com.pk/downloads/qtr2_report2009.pdf) 11.60%

Sanofi Aventis: RS 519 crore 9 months 2009

(www.sanofi-aventis.com.pk 4.10%

Getz Pharma 3.90%

Abbott Lab 3.80%

Roche 3.10%

Merck 2.90%

Overall, if we take a look at PPI. We see that there are currently over 400 pharmaceutical
manufacturing units registered in Pakistan. NC are 386 and MNCs Units are 30. Furthermore, its
significance in Pakistan can also be seen from that fact that it currently employs Contributes towards
GDP (0.16%) and generates employment (70,000 directly and 150,000 indirectly)

HISTORICAL SIGNIFICANCE:

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Looking back at the history of PPI, a quick glimpse at chart below shows a peep at the past.

Table: 1965-1990

Growth Indicators (Rs. crores)

  1965-66 1999-00

Capital Investment 140 2,500

Production:
  Formulations 150 15,960
  Bulk Drugs 18 3,777

Import 8.20 3,441

Export 3.05 6,631

R&D Expenditure 3 320

At the time of independence there were two small units which were unable to meet the local
demand. The rest of the medicines were imported. The decision taken in 1972 to abolish brand
names, restrict availability of essential drugs to 850, fix maximum retail prices across the board and
freely allow local manufacturer of all the essential drugs was in fact a life line for the national
segment of the industry. Due to several reasons, especially inaccessibility of new researched
medications this policy was ultimately reversed in 1976. Since 1999 the government has invested US$
133 million in the pharmaceutical industry. The last 10 years have been eventful for Pakistan
pharmaceutical industry as they have developed a large number of domestic manufacturers. In 2006
there were over 400 licensed pharmaceutical companies in Pakistan, including 30 multinationals who
had over 53 percent of market share. Today, the industry has developed technology, production and
an infrastructure of imports. It's a well regulated industry. It has Domestic companies which are quite
confident of doing good business.

FACTORS OF PRODCUTION ,COST OF PRODUCTION AND

MACHINERY REQUIRED:
Table: cost of production

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MACHINE
To set up an Pharma Plant, it very costly as the above table clearly shows. Similarly the machinery
required by the industry is : Mixing and blending vessels

• Granulating machines

• Drying chambers

• Autoclaves and ovens

• Tablets Compression Machines

• Tablets Coating Machines

• Capsule Manufacturing Machines

• Encapsulation Machines

LABOUR
PPI provides employment to about one million skilled and semi‐skilled personnel
it directly employs about 162000 personnel with large number of science graduates
The manufacturing side requires its employees to have a minimum of a bachelors degree
It indirectly employees 1 billion people

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HEALTH CARE INFRASTRUCTURE STATISTCIS
From the chart below we can see that all the factors have shown an increase. However , the number
has not increased as it should have been. This may be due to emergence of new professions with the
passage of time and also that improved opportunities in this sector by MNCs may be cause of this
display.

Table: health care infrastructure

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LITEATURE REVIEW
To analyze PPI comprehensively, dominantly, four papers have been studied for the preparation of
this report. All of which lie between the years 2005 and 2010.

THE PHARMACEUTICAL MARKET: PAKISTAN (JANUARY 31ST,

2010)
The Pakistani pharmaceutical market has slowly evolved over the years, from one that was largely
dominated by multinationals around 20 years ago, to one that is now almost evenly split between
local and multinational companies.Increased competition, low drug prices, rising raw material costs,
poor intellectual property rights and generally weak market conditions brought on by economic and
political instability has made the country somewhat less attractive to some multinational companies.
In 2008, Merck Sharp & Dohme Pakistan (Karachi) sold its business to Karachi-based Organon
BioSciences based on declining sales and profits. Another multinational company, Bristol-Myers
Squibb, quit its Pakistan operations in December 2008, but its rival GlaxoSmithKline bought out the
former’s operations in a bid to consolidate its position.In February 2009, it was announced that
Ferozsons Laboratories Limited of Pakistan and the Bago Group of Pharmaceutical Companies of
Argentina entered into a joint venture agreement to build what would be the country’s first biotech
pharmaceutical manufacturing plant. The domestic pharmaceutical industry serves an estimated 80%
of the market, with around 20% served by imports. There are a large number of local producers, but
there is virtually no investment in R&D for new drugs. The local industry comprises manufacturers of
generics, who import around 90% of raw materials used to make drugs.

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ARTICLE: WWW.SHVOONG.COM/MEDICINE-AND-
HEALTH/1810555-IMPORTANCE-PHARMACEUTICAL-
INDUSTRY 2005-2006
This article shows the role of government in PPI.

The total outlay on the health sector is budgeted at Rs.38.0 billion, which increased by 15.8 percent
in 2006 over last year.Government of Pakistan had invested Rs.8 billion in the pharmaceutical
industry since 1999 to guarantee good quality drugs at competitive prices. Pakistan Health Ministry is
considering to constitute a committee comprising of the World Health Organization (WHO),
Pakistan Pharmaceutical Manufacturers Association (PPMA) and Health Ministry to keep check on
the quality of drugs available in the market. According to statistics by Ministry of Health 41.2% of
the Pakistani population cannot afford procuring medicines due to high prices in the country. The
government has set up an independent Drug Registration and Pricing Authority. In Pakistan the
Ministry of Industries decides about the drug pricing.In the biotechnology sector, Pakistan has
initiated many programs. It is planning to set up biotechnology plant worth Rs.400 million to meet
the growing needs of quality medicines in the country. The move is being taken in the field of
medicine by the private sector in collaboration with investors The plant would start production
within the next few years. Several countries have expressed keen interest to invest in Pakistan due to
the pro-active policies of the government. The public sector health development expenditure
increased from PKR 4.3 billion in 2003-04 to Rs.6 billion in 2004-2005, and Rs.9.5 billion in 2005-06.
While these increases are impressive in percentage terms (40% and 58% respectively), they remain
low when placed in the context of the country's population size. The government has also formed a
policy recently allowing companies to produce raw materials locally. Companies in Pakistan rely
heavily on China, India, Germany, UK and Japan for raw material imports.The Ministry of Commerce
has given 50% subsidy to pharmaceutical companies for registration of their exported products in
foreign countries for export from 1998 to 2003.

IMPACT OF WTO:
HTTP://WWW.EFROTECH.COM/PORTFOLIO/WP/WTO.PDF
WWW.WTO.ORG
This study shows how WTO has affected PPI in various aspects.

 Patents

To comply with WTO standards the product should be patented

 Prices

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 Increased competition lowers the price which would result in low profitability for local
manufactures.

Due to product patents rights new drugs could be unavailable or unaffordable.

 Competition

When there would be equal opportunity for other nations to trade their Pharmaceutical
products in Pakistan. The competition in the local industry would rise. (India alone can attain 25% of
the Pakistani Pharmaceutical market).

• Development of Health Sector

• Harmonization of standards

Globally recognized standards will become the benchmark of the Pakistani Pharmaceutical
Industry, which would require intensive capital expenditure.

• TRIPS (Trade-Related Aspects of Intellectual Property Rights) Agreement

The TRIPS agreement will push Pakistani companies out of the competition in the new high
value generating products. Where Pakistani industry which is a generic manufacturing industry
would not be able to bring generic copies of new products for at least ten years.

 Research & Development

Increase focus on patent rights will force companies to come up with newer better products which
would require R&D Local companies cannot justify the cost due to already high cost structure.

INTERNAL FLAWS
(HTTP://WWW.ISSUESINMEDICALETHICS.ORG/PDFS/NB
C2005SH.PDF) BY DR SARA
Industry is only interested in producing profitable medicines and there is a severe shortage of
essential drugs in the country. Physicians are known to accept gifts . Only 35% of general
practitioners consider it unethical to accept gifts from pharmaceutical).Irrational prescribing habits
and prescriptions for costly drugs continue unchecked. Poor consumer protection by the government.
Poor implementation to ethical codes of pharmaceutical promotion and poor implementation of Drug
Act 1976 and the National Drug Policy 1999. Medicine is also wasted due to incorrect dispensing
practices. There is no mechanism to monitor drug promotional campaigns. Drugs are freely available
without prescription and a study in one of the districts showed that only 19% of the pharmacies meet
the licensing requirement.

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METHODOLOGY
 Out of so many so many multinationals available we studied annual reports of
Sanofi aventis (www.sanofi-aventis.com.pk) and GSK (http://www.gsk.com.pk)
 Took information from Latest Dawn archives related to PPI
 Analyzed the four comprehensive papers mentioned above
 2 interviews , one with Pharmacist and one with a general Physician.
 Competitive analysis from economic survey of Pakistan

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RESULTS
Following our methodology and what we have learned through our sources in the section literature
review , we have found the following results relating o exports and imprts,current issues of PPI and
about health policy 2010.

EXPORTS AND IMPORTS: FROM ECONOMIC SURVEY

AND OTHER ARTICLES
Table: EXPORTS 2010

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Our YOY growth has been doubled .All out buyers have bought much more units then the last year.
Afghanistan alone has shown an increase of 34,992 followed by India with the second highest growth
in this sector by 6029.However the least number of improvements was seen in our united kingdom
market where there is a rise of only 809.

On the other hand , Nearly 95% ( Approx $ 450 million) of the basic raw material used for
manufacturing is imported from countries like China, India, Japan, UK, Germany and others.
These raw materials are very much expensive to develop. Pakistan does not have the technology to
reduce these chemicals.Raw materials for the purpose of packaging are purchased from the local mark
et such as glass bottles, plastics and paper.

Also, the installation of a small manufacturing plant requires around 2 million rupees
most of the manufacturing machines are imported from foreign countries.

ISSUES IN 2009-2010: PAKISTAN PHARMACEUTICALS &

HEALTHCARE REPORT Q2 2010" PUBLISHED
• rupee has depreciated against the US dollar

• GDP projections have been downgraded,

• inflation has increased and

• fiscal expenditure has contracted. volatile political and security situation.

• low per-capita spend on pharmaceuticals

• year compound annual growth rate of 8.95%, down from 9.39% forecast in the previous
quarter

• Pakistan's ambition to become a significant exporter of pharmaceuticals came under threat in

September 2009, after a Ugandan drug maker sued a Pakistani pharmaceutical manufacturer
for supplying substandard goods

• Both generic drugs and patented products are subject to price controls. The maximum retail
price (MRP) of a medicine is determined using a formula that incorporates manufacturing
costs and retail markups. When pricing imported medicines, the cost of freight is also
included

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FUTURE EXPECTATIONS
Healthcare spending in Pakistan is expected to increase from PKR226.5bn (US$2.76bn) in 2009 to
PKR257bn (US$2.86bn) in 2010-2011. Also PPI market value is expected to grow to PKR206.9bn
(US$2.3bn) in 2014 .

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CONCLUSION
EXTERNAL FACTORS

After implementation of WTO regime since Jan 1st 2005, The WTO regime may fortify the
monopolies of MNCs and make the access of medicines difficult to the poor patients.
Government can tackle such problems by using compulsory licensing and parallel import.

Industry needs strong point of “low priced medicines” and on the other hand it could draw more
technology, research & development and foreign direct investment by providing better
protection to the patents.

Industry should go for unusual options such as foreign joint ventures, contract manufacturing
and approach towards acquisition of compulsory licensing of patented

INTERNAL FACTORS

Existing evidence indicates a need to equip physicians-in-training to handle interactions with the
industry. The need to introduce early and ongoing trainings in ethical concepts, moral reasoning and
development of skills necessary to address these issues.

Registering and regulating authorities in Pakistan have must ensure inclusion of the existing Code of
Ethics in undergraduate and postgraduate curricula and should regulate industry collaboration with
teaching institutes; developments that are necessary to raise the standard of clinical practice and
improve patient welfare

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POLICY
RECOMMENDATION
• Strong health insurance scheme similar to India's insurance scheme for the poor shall be
established

• To attract foreign patients to the country, encourage the private sector to administer
advanced treatments

• healthcare in Pakistan will drive the overall tourism market, resulting in increased national
wealth

• November 2009, when the Aga Khan Agency for Microfinance (AKAM) established a
healthcare insurance service in Pakistan. The First Microinsurance Agency . More such
efforts shall be made.

• Collaborations with the Indian companies that are already looking to enter the market 
would be another opportunity that can be cashed by local pharmaceutical companies.

• Pakistani exporters also need to focus on African regions, and develop markets in these
regions

• An aggressive promotional campaign identifying Pakistan with quality products in the intern
ational market, is the need of the hour.

• Pakistani manufacturers should keep themselves abreast of the expired patent medicines in or
der to manufacture drugs with lower cost.

• The local pharmaceutical companies need to shift their focus towards developing communicat
ion channels with multinationals, to form strategic alliances and also benefit from their 
technological advancements.

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APPENDIX
http://www.finance.gov.pk/admin/images/survey/chapters/Indicator%2008-09.pdf

Pakistan Pharmaceuticals & Healthcare Report Q2 2010" Published

://southasia.oneworld.net/todaysheadlines/lesser-allocations-for-health-and-education-in-pakistans-
budge

http://www.issuesinmedicalethics.org/pdfs/NBC2005SH.pdf
Dr Sara Hussain fron Agha kahn

Economic survey of Pakistan

http://www.efrotech.com/portfolio/wp/WTO.pdf
www.wto.org

http://www.shvoong.com/medicine-and-health/1810555-importance-pharmaceutical-industry

http://www.pharmabiz.com/article/detnews.asp?articleid=28358&sectionid=50

http://www.pharmaceutical-drug-manufacturers.com

http://www.dcomoh.gov.pk/pharma/multinational.php

http://www.economywatch.com/sector-watch/us-pharmaceuticals.html

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