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The Pharma
Discussion
Pharmaceutical Industry
Pakistan (A brief Overview)

A discussion with

Mr. Afaq Ali Khan


&
Students of Analysis Of Pakistani Industries

Presenters
Kamran Shahid Bukhari (Sp06-bb-0042)
Muhammad Danish Anwer (Sp06-bb-0056)
Agenda
 Pharmaceuticals
 Historical Background
 Importance Of Pharmaceutical Industry
 Current Situation
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 Category of local production
 Linkages
 Pricing
 Growth
 Imports/Exports
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 Role of Government
 Health Sector
 Health Policy
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 Problems
 Impact of WTO
 Social Impacts
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 Recommendations
 Questions?
Pharmaceuticals

 Pharmaceuticals are substances that


are aimed to treat, cure, prevent, or
recognize diseases and relieve pains
through their applications.

 Industry producing pharmaceutical


products is called pharma industry.
Historical Background
 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.
Historical Background

(Cont)
There were only 3636 registered drugs in 1977. The number,
however rose to 6228 in 1981,and almost 9900 were reported in
1999.

 In 1993, there were 256 national pharmaceutical units and 38


Multinational Companies .

 Pakistan pharmaceutical industry was valued at $900 million


which grew @ 20% in 1996

 At the end of 1999 more than 75,000 medicines were being sold
in the market.

 At the end of 1999, according to the Ministry of Health, there


were 300 registered units producing medicines and other
pharmaceuticals.
Historical background (Cont)
 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.
Importance Of Pharmaceutical
Industry

 Produces medicines and life saving drugs

 Contributes towards GDP (0.16%)

 Generates employment (70,000 directly and


150,000 indirectly)

 Supports Health facilities


Current Situation
 Pharmaceutical industry of Pakistan is aromnd
US$ 2 billqwn with an annual growth rate of
12.9% per annum .

 The 600 firms (over 400 domestic


manufacturers and approximately 200 major
importers) together produce 40,000-odd
formulations in the country. Despite high
competition and price wars ,drug prices are
controlled by a strict regulatory policy.
(Thursday, September 13, 2007)
Current situation
 The pharmaceutical market comprises of large
Multinational Companies which are producing and
marketing research based products and also
other big and small National companies which
pre-dominantly produce and market generic
products.

 Out of total market of US$ 2 billion, 53.3% is


captured by Multinationals and 46.7% is taken up
by National companies. The top 50 companies
enjoy more than 80% market share. There are 20
multinationals in the top 50 companies, while the
top 100 companies have 94.0% market share.

 Only 2 manufactures are involved in the


manufacture of raw materials.
Current situation
 Having no recourse to a single price increase since December
2001, the pharmaceutical sector will be under pressure to
maintain its profitability in the face of inflationary pressures
and currency devaluation

 The total outlay on the health sector is budgeted at Rs.38.0


billion, which has increased by 15.8 percent over last year.

 The existing network of medical services consists of 12,260


hospitals, 113,000 doctors practicing, 4582 dispensaries,
5301 Basic Health Units (BHU), 552 Rural Health Centers
(RHC), 906 Maternity and Child Health Centers (MCH) and 289
Tuberculosis Centers (TBC). total expenditure on health has
increased from PKR 4.37 billion to PKR 6.04 billion, which is
31.86% higher than the last year.( as of 2006)
Any Questions till now
We have discussed

 Pharmaceuticals
 Historical Background

 Importance Of Pharmaceutical
Industry
 Current Situation
Category of local production

Market potential of Pakistan is good for


 Antibiotics, Vaccines, Analgesics, Tranquilizers
Hormones, Anti-hypertensive, Anti-ulcer ants,
Cardiovascular, Anti-cancer, Psychiatric,
Contraceptives and birth control drugs.

 There are close to 125 categories of medicines


produced locally including all kind of vitamins, anti-
allergic, alkaloids, ointments, cough syrups, etc.
Many of the manufacturing units are ISO certified
adhering to UK and US Pharmacopoeia, according
to a study by Frost & Sullivan
Linkages
 Backward Linkages
Active Pharmaceutical Ingredients (API’s)
(Alkaloids, Amino Acids, Antibiotics, Hormones, Peptides, etc)

 Forward Linkages
Glass bottles
Plastics
Paper
Printing
Packaging
Engineering
Pricing
 Prices of many pharmaceutical products are much
higher in Pakistan as compared to India. The main
reason behind this is that most of the basic
pharmaceutical raw materials are imported.
Growth
 Total population of Pakistan is approximately 161
million (2006 statistics) and the population growth
rate is 2%.

 Pharmaceutical industry in Pakistan is at PKR 70.89


billion and growing at 12.9% per annum ($ 2
billion ) and showing a positive trend hence
attracting local and foreign investment in Pakistan.

 Since 1999 , 2,500 new drugs have been registered


Growth (cont)
 Although it registered a fairly robust growth
during 2006-07, the total market in Pakistan
remains small in relation to our population
size. If the industry maintains this growth
rate, it is projected to reach 2.2 Billion in the
next for years.
Imports/Exports
 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.

 Aided by the conducive policy initiatives, Pak


firms have emerged successful in the export
front, as well. According to reports, Pakistan
exported drugs worth fifty million US dollars
during the year 2004. Middle East, Far East,
Africa, Ceylon and Latin American countries are
other locations where Pakistani drugs are now
being exported.
Imports 2001-2005
Product group: 542 - Medicaments (including veterinary medicaments)

Value 2001 Value 2002 Value 2003 Value 2004 Value 2005
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000

24,518 128,259 154,605 151,269 193,174

Product group: 541 - Medicinal and pharmaceutical products, other than


medicaments of group 542

Value 2001 Value 2002 Value 2003 Value 2004 Value 2005
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000

106,020 95,863 119,236 120,238 141,359


Exports 2001-2005

Product group: 542 - Medicaments (including veterinary medicaments)


Value 2001 Value 2002 Value 2003 Value 2004 Value 2005
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000

33,815 35,066 41,642 46,691 57,146

Product group: 541 - Medicinal and pharmaceutical products, other than


medicaments of group 542
Value 2001 Value 2002 Value 2003 Value 2004 Value 2005
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000

7,350 3,535 8,742 11,082 20,547


Any Questions till now
 Category of local production
 Linkages

 Pricing

 Growth

 Imports/Exports
Role of Government
 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.
Role of Government (cont)
 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.
Role of Government (cont)
 While substantial increases in public sector spending have
been witnessed in recent years.

 Some major public sector programs have been initiated to


address the healthcare needs of the population. These
include:
 The National Program for Family Planning and Primary Health Care
 The Expanded Immunization Program
 National Program for Hepatitis Prevention and Control
 National Tuberculosis Control Program
 National Malaria control Program
 National HIV/AIDS Control Program
 Women's Health Program.
Role of Government (cont)
 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.

 Tariff protection is generally allowed to encourage local


manufacture of APIs.

 Federal Government is working on the important subject of


DRA and will make sure that it accommodates the
expectations and objectives of the local pharmaceutical
industry without compromising on good standards
Role of Government (cont)

 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.
Health Sector
 The stockiest operates at 4-5% margins while
distributor's margins are around 10%. The margins
for retailers are fixed upon industry standards on
maximum retail price which can be 10-12%.
Retailers enjoy greater margins on drugs which
can be as high as 20%. There also exists provision
of free samples and cash discounts to channel
members by manufactures The margins vary for
different participants in the supply chain.

 Only 0.7 percent of the GDP is being allocated to


the healthcare sector in Pakistan
Health Sector (cont)
Some Major Causes of death in Pakistan

 Infectious diseases
 Malaria
 Tuberculosis
 Accidents, poisoning and violence
 Heart and circulatory system diseases
 Diabetics
 Tumors
Health Sector (cont)
Other Issues:
 Poor quality of available health services in both sectors.
 High focus on curative, rather than preventive, health and medical care.
 Most facilities located in the urban areas.
 Access to health and facilities determined by wealth and income.
 Huge Private Sector
 Poor delivery of health services and no accountability.

Pakistan has 0.73 physicians per 1000 population and 0.31 nurses
per 1000 population.

 The annual per capita expenditure on human priority areas of basic


education, primary health care, family planning , safe drinking water, and
nutrition programs is just $3 in Pakistan.


The total health expenditure on per person is approx Rs.4.5.
Health Policy

 Ministry of Health along with Government of The Pakistan is


working on health policy 2010 for planned enhancements in
overall health sector by the way of promoting and upgrading
healthcare facilities.

 Features Of The policy are;


1. to improve effective access to healthcare
2. Reduction in communicable diseases
3. Good governance at both directorate and agency level

 Drug Act 1976

 Another weakness of the National Medicine Policy is the lack of


appropriate human base and expertise in the field of health and
pharmaceutical policy.
Any Questions till now
 Role of Government
 Health Sector

 Health Policy
Problems
 The pharmaceutical industry in Pakistan needs to
catch up on the problems faced like
#. Pricing of drugs
#. Private public partnerships at government
ministries
 The Patent Ordinance, which has been brought to
ensure intellectual property protection and data
exclusivity as per the WTO norms has recognized
provisions for pre-grant opposition, compulsory
licensing etc.

 There are 28,000 registered drugs in the country of


which 70% are unnecessary or harmful.(2005)

 Counterfeit drugs
Impact of WTO
 Pakistan, on its part, signed the contract in 1994. At that time,
the industry standards did not comply with the WTO standards.

 The WTO era brings about the law of the jungle where only the
fittest shall survive – and IT will be a critical factor in determining
that.
Impact of WTO (cont)
 Patents
To comply with WTO standards the product should be
patented

 Prices
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).
Impact of WTO (cont)
 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.
Impact of WTO (cont)
 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.
Social Impacts
 With increased production of medicines, there are more chances
of aggressive marketing as 70% of patients in Pakistan are
treated with antibiotics, although the majority of them don't need
these medicines

 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.
Social Impacts (cont)
 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 companies

 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
Any Questions till now
 Problems
 Impact of WTO

 Social Impacts
Recommendations
 Initiatives for business opportunities:
#. API business
#. Research based products
#. Generics
#. Pharmacists role in community
#. Strategic alliances for exports
#. Diversification of Pakistan local companies
In all these initiatives, India can take a leading role
to assist in developing pharma market of Pakistan.
Recommendations (cont)
 Other than just producing more medicines, the
government needs some decisive actions to
promote public health and wellness through
education and information.

 An approach to establish a balance between


economic interests and public health objectives is
required. The government should focus on how the
innovative capacity of the industry can be increased
without compromising on public health.

 The need is now unavoidable to create awareness


among lawmakers, healthcare professionals, and
economic managers and among concerned citizens.
Without these steps the objectives of equity, access,
safety and affordability seem hard to be fulfilled

Recommendations (cont)
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.

 Right to live is the most basic human right


Thank You

Any Questions