PHARMACEUTICAL INDUSTRY

Introduction
³Pharmaceuticals are the substances that are aimed to treat, cure, prevent or recognize diseases and relieve pains through their applications.´
‡ Deal in generic and/or brand medications ‡ Laws and regulations regarding the patenting, testing and marketing of drugs. ‡ Extracts from plants (such as ephedrine, caffeine, opium, quinine and hundreds of other biologically active compounds) ‡ Natural products were the basis for the pharmaceutical industry.

Introduction (contd.)
‡ The formal start of the industry has been fixed to 1935 when sulfonamide antibacterial were introduced for general use. ‡ The primary goal of the pharmaceutical industry is to find, develop, and market new chemical entities (NCEs). ‡ Devotes huge resources to R&D

History
‡ At the time of independence there were only two small units which were enabled to meet the local demand. ‡ 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 the life line for the national segment of the industry.

History (contd.)
‡ Inaccessibility of new researched medications this policy was ultimately reversed in 1976. ‡ Since 1999 the Govt. has invested US$ 133 million in the pharmaceutical industry. The last 10years was eventful for the Pakistan Pharmaceutical Industry . ‡ In 2006 there were 400 licensed pharmaceutical companies in Pakistan, including 30 multinationals who had over 53% of market share.

Pharmaceutical Industry in Pakistan
‡ Pakistan¶s pharmaceutical and healthcare sectors are expanding ‡ The value of pharmaceuticals sold in 2007 exceeded US$1.4bn, which equates to per capita consumption of less than US$ 10 per year and value of medicines sold is expected to exceed US$2.3 B by 2012. ‡ Per capita drug spending was rather low at around US$9.30 in 2007

Pharmaceutical Industry in Pakistan
‡ Private spending accounts for 65% of total healthcare expenditure. ‡ Pharmaceutical spending accounts for less than 1% of the country's GDP, comparable to levels in some neighboring countries but above that in some of the South Asian countries.

COMPANY¶S GSK ABBOTTLAB HIGHNOON LABS GETZ PHARMA SANOFI AVENTS ROCHE

MARKET SHARE 11.6% 7.9% 6.3% 3.9% 3.8% 3.1%

COUNTRY DEMAND
‡ 80% of its domestic demand of medicines from local production ‡ 20% through imports. ‡ Market size is Rs. 70 Billion (US $ 1.2 Billion), approximately ‡ Market expanding at a rate of around 10 to15%

EXPORTS AND IMPORTS
‡ Exporting its surplus drugs to a large number of countries particularly to the Asian and African regions with an expanding trade in the newly emerged Central Asian States. ‡ Share in exports has been reached to 4.04% that was 3.28% in 2008 ‡ Imports nearly 95%of the basic raw-material used for manufacturing from countries such as China, India, Japan, U.K, Germany

MAJOR SUPPLIERS
‡ ‡ ‡ ‡ ‡ ‡ ‡ United States Germany U.K. Switzerland Japan Holland France

BASIC MANUFACTURES
‡ There are five units operating in Pakistan for the Semi Basic Manufacturing of pharmaceutical raw material and still Pakistan has the capacity to absorb the significant investment in this field.

MULTI NATIONAL & LOCAL MANUFACTURERS
‡ 30 multinational pharmaceutical organizations ‡ 411 units are involved in local pharmaceutical manufacturing.

SOME KEY STATISTICS OF THE INDUSTRY
REGISTERED DRUGS REGISTERED MOLECULES R&D EXPENDITURES AVERAGE GROWTH RATE MARKET SHARE OF MULTINATIONAL COMPANIES MARKET SHARE OF LOCAL COMPANIES MARKET LEADERS 47000 1100 1% of the profit 11% 45%

55%

Glaxosmithkline

HEAD OFFICE
PPMA has its head office located at KARACHI with two Regional offices in Punjab & NWFP.

BUSINESS CONNECTIONS AND EFFICIENCY

Types of Pharmaceutical companies
Pharmaceutical companies are of two types
‡ Manufacturing ‡ Franchising

Example
In pharmaceutical marketing you can easily get pharmaceutical products right to market at 20%-40% of trade price When the chemist receives this product on T.P (trade price) Rs.10, he will sell it at15% profit margin that is Rs.1.76 at one tab, so the customer has paid Rs.10+1.76=11.76 and the difference of cost and sales price is Rs.9, he is paying 9 rupees extra

‡In manufacturing concern the profit margin definitely will be higher. ‡Pharmaceutical companies are investing heavily in promotional activities ‡Leads to the price hike of the medicines. Apparently it sounds great rather necessary but in practice this fair trade is also marred with unethical practices

‡ The law enforcing agencies should come forward and put a close check on this industry ‡ Pharmaceutical companies should also sit together and make decisions not to get involved in unethical practices ‡ Decrease their unnecessary promotional expenses ‡ The government should frame a law to set profit margin

ROLE OF GOVERNMENT

‡ Independent Drug Registration and Pricing Authority ‡ Ministry of Industries decides about the drug pricing ‡ In the biotechnology sector, Pakistan has initiated many programs
‡ Planning to set up biotechnology plant worth Rs.400 million

‡ 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.

‡ 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 ‡ The government has also formed a policy recently allowing companies to produce raw materials locally. ‡ Since 1999 the government has invested US$ 133 million in the pharmaceutical industry

FLOW CHART OF PROCEDURE FOR LICENSING OF PHARMAECTICAL UNIT

FLOW CHART OF DRUG REGISTRATION

PEST ANALYSIS
POLITICAL FACTORS ‡ Political instability ‡ Tax policy (including tax rate changes, new tax laws and revised tax law interpretations) ‡ Employment laws ‡ Environmental regulations ‡ Trade restrictions and tariffs ‡ Current wave of terrorism in Pakistan ECONOMIC FACTORS ‡ ‡ ‡ ‡ Economic growth Interest rates Exchange rates Inflation rate

PEST ANALYSIS (cont.)
SOCIAL FACTORS ‡ ‡ ‡ ‡ ‡ Health consciousness Population growth rate Age distribution Career attitudes Emphasis on safety
TECHNOLOGICAL FACTORS

‡ ‡ ‡ ‡

R&D activity Automation Technology incentives Rate of technological change

PEST IMPACT

NATURE OF CHANGE

IMPACT OF CHANGE

OPPORTUNITIES

THREATS

STRATEGIC RESPONSES

Political Forces Economic Forces

Price Fixation

Low Profits

Long Term Pressure on cost

Efficient Management Focus operational efficiency on

Inflation, Increase in cost Exchange Rates Fluctuations

Social Forces

Cross border Decrease in sales Relationship

Growth opportunities

Research product development Reduction Profits

&

Terrorism

Decrease in sales

in Strong business relationship

Global Alliances

Increase in Market Share Growth Opportunities

Focus on Market Capitalization

Political Forces

Advanced Technology

Economies of Scale

Competitive Advantage

Human Resource & Fund Allocation

PORTER¶S FIVE FORCES
PORTER¶S FIVE FORCES HIGH
MODERATE

LOW

Rivalry among the existing firms Bargaining power of suppliers

Bargaining power of buyers

Threat of new entrant Threat of substitutes

SWOT ANALYSIS
STRENGTHS ‡ ‡ ‡ ‡ Export potential Contribution to GDP Employment generation Advancement in technology WEAKNESS ‡ ‡ ‡ ‡ Price fixation No tax No R&D incentives Imported raw material lack of resources ‡ Registration process

SWOT ANALYSIS (cont.)
OPPORTUNITIES
‡ Molecule development ‡ Market growth ‡ Global alliance (Highnoon laboratory with Solvay Pharmaceuticals in Germany) ‡ Incredible export potential (Central Asia states) ‡ Aging of the old population ‡ New diagnoses and new social diseases

THREATS
‡ TRIPS (Trade Related Aspects of Intellectual Property Right) agreements ‡ Competition from MNCs ‡ High cost of R&D ‡ Low funds for plant up gradation ‡ Government policies (0.7% of GDP for health sector) ‡ High cost of inputs (95% import)

RECOMMENDATIONS
‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Govt. should increase pharmacy product prices Imports of adequate medicines should be banned Give special preference Incentive provided equally to multinational and national companies No more units Withdraw the duties and taxes imposed on their import. Govt. should also support or invest in R&D Biotech pharmaceutical plants should be installed

CONCLUSION
‡ The pharmaceutical industry in Pakistan includes both multinational and domestic companies. Multinationals have an upper hand in a way that they possess worldwide advertising facility and can spend allot of money on their research programs. On the other hand local Pharmaceuticals basically rely on licensing for their core business, as they are unable to match the advertising budget and expertise of their multinational competitors. By following the above suggestions many problems of the pharmaceutical industry of Pakistan can be resolved.

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