1.

0SWOT Analysis of Pharmaceutical Sector of Pakistan

The below matrix demonstrates the SWOT Analysis of Pharmaceutical Sector of Pakistan.

Strengths: Weakness:
Large domestic market Weak Regulatory Framework
Composition of larges enterprises Limited innovation and R&D
Robust growth Import of raw material
Growing export Lack of capital
SWOT Analysis of
Pharmaceutical sector of
Pakistan Threats:
Opporunities:
Political instability
Investment in generic sector
High competition from neighboring
Technology transfer from MNCs countries
Value addition in the products Increasing cost of doing business
Development of APIs Price Freezing

SWOT Analysis of Pharmaceutical Sector of Pakistan

2.0 Characteristics
1.1.1 Large domestic market
The pharmaceutical industry of Pakistan estimated to be $3.29 billion, having 70% share held by
the domestic’s manufacturers and suppliers. The local market comprises of 215 million
consumers and number of pharmaceutical companies in the country are 759 as per TDAP. The
industry have shown significant growth rate for the last couple of years in terms of production,
exports and employment for the country reflecting mix performance averaging 10 to 12%
annually. 1
1.1.2 Composition of larges enterprises
The Pharmaceutical sector of Pakistan composed of large enterprises with the top 10 company’s
enjoying domestic market share of 45% which is much higher as compared to neighboring
country like India where it is 39%. Despite having largest number of the registered firms in the
pharmaceutical industry, the top 100 companies holds 97% share of market, while the remaining
500 companies which are small and medium enterprises only have 3% market share, moreover,
the top 50 companies accounted for 80% of the market share in pharmaceutical industry of the
country. 2
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TDAP Export Strategy of Pharmaceutical Industry 2022
2
PACRA Pharmaceutical Industry 2022
1.2.3 Robust growth
The pharmaceutical industry of Pakistan witnessed robust growth rate average 10 to 12 percent over the
last few years. The domestic pharmaceutical sales also shows increasing trends with 13.1% growth
compounded annually for the year 2018 to 2021. In aligning with the global growth rate of 9.34% CAGR,
Pakistan domestic’s pharmaceutical industry witnessed significant demand for the pharmaceutical product
in the country because of the growth in the population.3

1.2.4 Growing export

Pakistan pharmaceutical sectors is one of flourishing sector of economy, showing significant growth in
terms of contribution towards exports. During FY2022, Pakistan exported $268.94 million of
pharmaceutical products to 60 different countries. During 1 st Quarter of FY2022-23, Pharmaceutical
exported recorded $84 million witnessed growth of 14% in comparison with corresponding period of
same period last year. The Pharmaceutical exports of Pakistan is improving, with the pace of world
pharmaceutical exports, showing tremendous potential for growth in future. 4

1.2 Constraints and Gaps

1.2.1 Weak Regulatory Framework
The pharmaceutical industry of Pakistan is regulated by Drug Regulation Authority of Pakistan
(DRAP), responsible for the implementation of regulatory policies and monitoring of the
pharmaceutical industry of the country. The weak regulations, poor intellectual property rights
for local companies, and inconsistent policies are the biggest reason of lacking significant growth
and exports in the pharmaceutical sector. Because of weak regulations in terms of drugs
policies, control over the pricing and depreciating the local currency value, the market share of
the MNCs are declining over the last two to three years. The pharmaceutical companies in
Pakistan faces several other challenges in terms of registration and licensing of drugs because of
the poor regulatory controls and delay in approval of licensing for the testing of medicine which
result in bearing extra cost for the pharmaceutical companies. The delay in the registration of
new molecules because of poor regulatory channel leading to low registration of new molecule
by the local and MNCs putting impact on import of new molecules, because of the pending
approval of the molecules. 5
1.2.2 Limited innovation and R&D
The pharmaceutical industry of Pakistan still facing lacks of investment in R&D in terms of
adopting new innovation and novelty in the pharmaceutical product because of the limited
research and development in the industry. As per Drug Act 1976, the pharmaceutical companies
have to invest 1% of their profit before tax into the Central Research Funds for the R&D but the
amount ends up being used by the companies in their administrative expenses rather than in
R&D which result in lack of R&D in the sector. One of the reason for the limited innovation and
R&D is lack of 3-D printer because of ban on import due to security challenges, as many of the
developed countries increasingly use 3-D printer for drug trial duration and also improving the

3
TDAP Pharmaceutical Industry Report 2022
4
PBS Foreign Trade Analytics 2023
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Unleashing the potential for Pharmaceutical Industry of Pakistan, PBC 2022
quality of drug. On the other hand, the weak legal enforcement regarding patent and intellectual
property rights in covering the cost of discovering new drugs estimated to be around $500
million to $2 billion, discourage the firms in the pharmaceutical sectors for spending on
development, introduction and marketing of the new products in the market.
1.2.3 Import of raw material
The production of the pharmaceutical products in Pakistan comprises of the raw material
imported from India, China, USA and European countries accounted for 95% of the total raw
material imported by the country. The imported raw material consisted of API (Active
Pharmaceutical Ingredients) make up to 5% locally produced by 6-7 manufacturers and 95%
imported result in increasing the cost of the pharma products for the companies. The highly
reliance on imported ingredients result in increasing the cost of manufacturing for the local
manufacturing companies, because of the excessive custom duties, shipment and transportation
charges lead to increase the cost of the production and also directly impact the foreign exchange
of the country6. Since banned on the import of raw material from India last year, the cost of the
raw material have significantly increased due to stuck at the Karachi port and also diversion to
other destination leading towards increasing the cost of transport and shipment charges.
1.2.4 Lack of capital
The local manufacturer in the pharmaceutical industry are not operating on the larger scale
because of the limited working capital, as DRAP have lack of the international accreditation
standard for the export of pharmaceutical product. The industry only import raw material instead
of development of the molecule on domestic level because of the lack of capital required for the
development of new molecule in the local industry. In order to meet the global and domestic
demand for the pharmaceutical product, the local manufacturing rely only on the imported API,
instead of making investment in the production of API, as its required intensive financial
investment, environment and human capital for the development of API because of lack of the
capital and investment from the MNCs.
1.3 Potential
1.3.1 Investment in generic sector
The investment in the generic sector of the industry provides new way of expanding the
international market. The manufacturing of the generic pharmaceutical drugs including, steroids,
vitamins, and antibiotics having highest demand since the covid-19 having significant growth
rate. Currently, Pakistan pharmaceutical companies focuses only on the small molecule based
classic products but there is huge potential for the next generation pharmaceutical products
having huge demand in the global market including antibiotics, steroids, blood thinners,
multivitamins, and vaccines through investment in those drugs domestic production on large
scale.

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The Pakistan Business Council (PBC) 2021
1.3.2 Technology transfer from MNCs
The pharmaceutical industry of Pakistan have negligible amount of FDI because of absence of
the MNC mediate investment due to weak intellectual property laws and patent protection, and
also low profitability among arises of poor quality in terms of drug control and regulation. The
technology transfer through Multinational companies, in adopting the experience of several other
countries in success of the sectors such as Argentina, Jordan, Indonesia and Bangladesh, suggest
that, technology transfer will accelerate the production and development of new drugs through
improving the domestic capabilities. MNCs contributes innovation, consolidation, industrial
competitiveness and also improve the standard of local drugs manufacturing in meeting the
international standards as well. Through providing supportive business environment and
improving the intellectual property and patent rights attract FDI from the MNCs to gain higher
growth rate of the pharmaceutical industry of Pakistan.
1.3.3 Value addition in the products
Pakistan has been unable to add value to the pharmaceutical products despite being located next
to the world two largest API producers such as India and China. The restriction on the regional
trades with the neighboring countries result in impacting the development of innovation practices
in the pharmaceutical industry of Pakistan. China and India more focuses on the innovative value
added pharmaceutical products capturing the patent right of generic drugs while Pakistan is
facing issues in meeting the international standard because of the lack of innovation, and value
addition in the drugs formulation. Due to lack of FDA, WHO approved laboratories and testing
equipment, the local manufacturer couldn’t able to meet the export standards which directly
driving the local manufacturer in importing drugs ingredients or generic medicines.
1.3.4 Development of APIs
Active Pharmaceutical Ingredient (APIs) are considered as backbone for the pharmaceutical
industry use for the manufacturing of the formulated drugs. The global market for the APIs
worth $170.8 billion having CAGR of 5.8% till 2025. The global APIs market dominated by US,
UK, Switzerland, China, India and Israel. Pakistan imports 95% of the total APIs from India,
China, Japan and Spain, while local pharmaceutical industry contributes only 5% producing over
30 APIs as the sector is weakly developed in Pakistan. The API sector required long-terms
investment and consistent government policies for at least 10-15 years for the API
manufacturing. The local sector of API manufacturing facing several issues including higher
prices because of the lower scale of production, low quality and also pricing regime because of
the imported APIs meeting 88 percent of the total APIs in the pharmaceutical industry of
Pakistan.
Pakistan have potential of manufacturing local API to meet the industry demand as Wahun,
china is one of the largest API exporter across the globe. The pharmaceutical industry of
Pakistan through importing the API and start domestic production of API through investment
will beneficial for the country in terms reducing the dependency on import of API and also
reducing the import of raw material for Pharmaceutical product.
1.4 Challenges
1.4.1 Political instability
Political instability is one of the major challenges for the Pharmaceutical industry because of
lack of continuation in the industry policies and excessively regulated value chain, operating
under the political economy environment and impact of the government policies. The favorable
and unfavorable ad-hoc regulations by the DRAP impacts the small and medium enterprises in
the industry. The implementation progress of the drug policies and institutional strengthening are
hampered by the political instability due to lack of the permanent board members arises due to
turnover of the top management in the DRAP7. The politically charges management structure in
Drug regulation authority significantly impact the pricing regime in the industry because of the
political influences by the dominant groups, in promoting interest of their own through using
their political powers and access in decision making.
1.4.2 High competition from neighboring countries
High competition from neighboring countries such as India, Bangladesh and China are the major
challenges for the survival of the pharmaceutical industry of Pakistan as these countries have
trade connection with the our selected target markets. In order to export pharmaceutical products
to developed countries, product certification from Stringent Regulatory Authorities (SRAs)
accredited by WHO is necessary for the exporters. The local drug exports unable to meet the
SRAs requirement, as there is no internationally recognized facilities in Pakistan to approve the
certification for exports standard. On the other hand, India have more than 200 US FDA approve
plants and Bangladesh have 4 approved plans, capturing the largest market share in the region
because of highly certified drugs manufacturing facilities in those countries. On the other hand,
Pakistan is still facing challenges in competing with the competitor including India, Bangladesh
and China, where the pharma companies invest huge amount in product research to support their
industry.
1.4.3 Increasing cost of doing business
The cost of doing business is also biggest threat for the pharmaceutical industry of Pakistan. The
significant surge in the petroleum prices in the international oil market impacted the economy in
terms of petroleum prices and devaluation of the local currency against dollar. The impact of the
petroleum prices result in increasing the cost of electricity, production and transportation for the
Pharmaceutical companies in the country. On the other hand, the companies have to pay cost for
the registration of the drugs and also approval from the DRAP through paying huge fees and
charges in the whole process of gaining license. Because of the highly bureaucratic nature of the
management, companies have bear high cost of doing business, especially for the SMEs.
Because of increase in the fuel price, most of the pharmaceutical companies have to face
additional cost on the subsequent stages of their value chain especially in formulations of drugs,
discounting on the bulk sales, packaging and distribution and also incentivizing the doctors as
well.

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Unleashing the Potential of Pharmaceuticals in Pakistan, PBC 2022
1.4.4 Price Freezing
The pricing mechanism in the pharmaceutical sector of Pakistan is also biggest threat to the
industry, as the DRAP have complete control over the pricing of the drugs set by the
Government of Pakistan. The input cost including the fuels, electricity, labors and raw material
have gone up 100% in last two years which result in putting huge impact on the survival of the
industry. The pricing is one of the top challenges for the pharma companies impacting the local
pharmaceutical manufacturing companies to serve the local market only because of the existing
price regime set by DRAP instead of increasing the production input cost. Furthermore, the high
inflation rate and largely import dependency of the country leading towards high utility cost for
the pharmaceutical manufacturers as well. In such circumstance, the price freezing by the DRAP
impacts the profit margin and the industry attractiveness, and also result in exit of the
multinational companies because of the low margins.8

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Pakistan Export Strategy Pharmaceutical TDAP 2022