MORE FDI REQUIRED TO ADDRESS HEALTH ISSUES

Out of 350 MNCs only 30 are engaged in pharmaceutical industry

KHALIL AHMED, Senior Correspondent
Sep 04 - Sep 10, 2006

Along with keeping focus on other matters that the authorities perceive to be pressing concerns of the citizens, Pakistan should concentrate on having a strong and competitive pharmaceutical industry. It is said that competitiveness drives innovation and innovation saves lives.

We need to comprehend that advances in medical and pharmaceutical science have helped humans live longer and healthier lives, which at the end of the day help the economy of a country both directly and indirectly, as health is crucial to raising the activity level of the population.

According to informed sources, direct spending on health amounts to almost 10 percent of GDP across Europe whereas education and health sectors have not been the top priority of the budget makers in our country. The total outlay on health sector is budgeted at Rs 40 billion which shows an increase of 5.3 per cent over the last year and turns out to be 0.51 per cent of the GDP.

We need to fathom that a healthy population contributes positively to the economic and social development of a country. Poor health can directly influence an individual's earning capacity, performance at gaining education, ability to care for others, participation in community activities, etc.

According to Pakistan Medical and Dental Council (PMDC) there are 1,00,131 doctors registered until 28th February 2006. There are also 18,029 doctors registered as specialists making the total number of available doctors to 1,18,160. There may be a significant number of doctors not registered. One source quotes that though there is annual output of around 5,000 medical graduates from both private and public medical colleges, the current ratio of one doctor per 1,310 persons is below the recommended ratio of one doctor per 1,000 persons. Out of 5,000 medical graduates produced every year, I think more than 3,000 doctors go abroad to avail better prospects which helps our country in terms of remittances but affects our country in terms of health of the population owing to the dearth of doctors. I must reveal that according to foreign sources, Pakistan has the highest rate of breast cancer in Asia.

According to the recent developments, along with leather, engineering, etc. sectors, pharmaceutical sector is also one of the preferred sectors of the government. I think excellent developments are likely to take place in the days to come. Budget deficit was 4.2 percent in the last fiscal year, exports were merely of $ 16.5 billion and trade deficit grew to $ 12.1 billion. Though the economic growth was robust, yet there are numerous problems to be tackled and the problem of trade deficit can be tackled by increasing our export. We are undoubtedly capable of achieving targeted export worth $ 40 billion. This can be attained by attracting huge foreign direct investment (FDI). Incase we are able to attract huge FDI in pharma sector, this will help reduce the medicine prices which at present are beyond the affordability of the masses.

Huge FDI in health sector will reduce subsequent costs for our economy as a whole. The future economic growth and sustainable development of our country depend on investment in health. Our neighboring country, India, is the focus of attention by the USA and European pharma companies and in due course huge FDI is being made in India. It is believed that after attaining number one position in information technology, India is going to lead the world in pharma sector. Positive developments have taken place recently in Pakistan as well but the pace seems to be somewhat slow. There seems the renewed interest of the US multinational pharmaceutical companies to increase investment in Pakistan. During last September, a five-member delegation of leading US pharmaceutical companies told our Commerce Minister that one of the factors discouraging them in Pakistan was long registration period. It was known that investment in Pakistan will increase and it will also benefit the citizens of Pakistan in terms of access to latest medicines, which will also bring down the prices of previously registered older medicines.

There are over 350 pharmaceutical manufacturing units, including 30 multinationals. In India, the domestic sector is much larger as compared to the MNCs whereas in Pakistan over 65% market share is occupied by MNCs. Sources quote that the market is either dominated by imported drugs or drugs manufactured by multinational companies such as Glaxo, Roche, Rhone Poulenc, Bayer and Merck.

Let me quote one of the best practices made in our Pharma sector recently. Ferozsons Laboratories Limited and the Bago group, Argentina's largest pharmaceutical group has signed an agreement to set up Pakistan's first biotech pharmaceutical company with a total investment of Rs 600 million. This plant will manufacture medicine for cancer and hepatitis C in accordance with EU standard. This biotech plant is being designed by one of Europe's leading pharmaceutical design and engineering companies which has global client list that includes companies as Aventis, Novartis and Roche. This joint venture would put Pakistan on the map of select few industrial countries which do have the biotech pharmaceutical manufacturing capacity. This plant would start production of biotech products by 2007 in Lahore and would be in full compliance with EU's Good Manufacturing Practices (GMP)

It is believed that the pharmaceutical industry in the country experienced a growth stage from 1948, which continued till 1971 but after that there was not a kind of robust growth.

The growth rate of the pharmaceutical industry in Pakistan at present is estimated at 15 per cent and during 2004 Pakistan's pharmaceutical market grew at 16%. The average import of drugs in Pakistan grows with every passing year. Sources quote that there has not been a corresponding development in the manufacture of basic raw materials needed to support the manufacture of pharmaceuticals. Nearly 92% of basic raw material is being imported in large quantities from USA, UK, Germany, Japan and China at relatively high cost in comparison to India. It is said that currently, Indian companies export drugs to Pakistan via Dubai or London to escape the high duty levy. Thanks to the South Asian Free Trade Agreement (SAFTA) which may facilitate India's pharma trade with Pakistan.

Since the raw material cost is high, the production cost has risen leading it to higher consumer prices. I interviewed a medical store owner. He said that there was upsurge in prices and he revealed that once prices were increased by 15%, at other time by 20% and once even by 33%. According to him, a product sold by him at Rs.07 a decade ago is priced at Rs.19 at present. One more source quoted that it has happened many times that government directed to sell products at the controlled prices which led to non-availability of the products such as Tedral (for asthma patients) and Ventolin (for asthma patients). This led to patients paying higher prices in the black market. The only solution to the problem is to attract FDI in the production of both raw material and the finished products which will help us save our foreign exchange and by exporting medicine to foreign countries, we would reduce trade deficit. At the same time, huge FDI will help reduce the prices of the medicine and it will lead to pure competition.

The instance of telecom boom is before us. Telecom industry is growing at 94% against 15% annual growth in pharma sector. Due to huge investment in telecom, prices have plummeted and quality has improved. We need to concentrate on robust growth in pharma sector for economic growth, better health of the nation and lower prices.