THE PAKISTAN PHARMACEUTICAL INDUSTRY

Living amongst global giants

NIGAR ZEHRA
June 04 - 10, 2007

The majority of global pharmaceutical sales originate in the 'Triad' (US, EU countries Switzerland, Germany Belgium and France). The US has been by far the largest pharmaceutical market by volume and value ($11,340 million in 2005), with the strongest growth among key markets, contributing 65 per cent of global market growth. In 2002, the US accounted for a staggering 70 per cent of blockbuster sales, compared with only 12 per cent from the EU. Projecting out to 2007, the US was predicted to increase its share of the global market, while the shares of EU would decline. Non-Triad countries were expected to retain around 11 per cent share between them. Overall, the world market was set to become even more US-centric, leaving the industry heavily exposed to fluctuations in that market.

Europe makes up the second part of the Triad, with the top five markets (Switzerland, Germany, Belgium and France) predicted to continue contributing around three quarters of EU sales out to 2007. During the year 2005 export of Switzerland was worth ($ 9,435 million), followed by Germany ($ 9,039 million), Belgium ($ 5,366 million) and France ($ 3,586 million).

European markets each have their own unique operating environments but they are generally characterized by strong payer pressures and consequently lower prices than the US. Expansion of the EU, however, provided opportunities for growth, especially in Poland and central Europe, but also brought new challenges from generics and low-priced parallel imports.

TOP FIVE EXPORTERS OF WORLD FOR PHARMACEUTICAL PRODUCTS

UNITED STATES OF AMERICA

Switzerland

Germany

Belgium

France

11,340

9,435

9,039

5,366

3,586

OVERVIEW OF PHARMACEUTICAL INDUSTRY IN PAKISTAN:

The pharmaceutical industry in Pakistan plays an important role in the economic development of the country. Total local production/consumption of pharmaceuticals is presently estimated at $2.0 billion. There are about 316 pharmaceutical manufacturing companies including 30 multinationals (47 percent share), which are meeting around 80 percent of the country's requirement. Almost 95 percent of the basic raw materials used for manufacturing of medicines are imported from China, India, Japan, United Kingdom, Germany, Netherlands and others. Pakistan needs to develop capacity of the essential ingredients especially where local resources are available. Other production inputs, i.e. technology, labor, packaging materials, power and raw materials are easily available and the Government provides good incentives for importing raw materials and technology. Pharmaceuticals are specific types of fine chemicals; i.e. materials responsible for giving the products a specific property in terms of treating a particular disease or physical condition. World-wide, pharmaceuticals add up to an industry with sales of about $130 billion a year, 75% of which is accounted for by sales within the developed countries of Western Europe, North America and East Asia. About $100 billion of these sales are from prescription-only drugs; that is, pharmaceuticals that can be obtained only on the prescription of a doctor. The rest of the sales are derived from non-prescription or over-the-counter medicines, which are recognized therapeutic agents, but which can be obtained from retail outlets, mainly pharmacies. The drugs industry can be divided up further into hundreds of different product classifications depending on the particular ailment (such as heart disease, arthritis, cancer and bacteria -borne infections) being treated. The pharmaceuticals are mainly derived from: Organic chemical, Inorganic chemicals, Phytochemicals, Fermentation products, and Products of animal origin.

Categories of pharmaceutical products: The leading categories of pharmaceutical products manufactured in Pakistan consist of systematic anti-infective, anti-rheumatic, non-steroidal and broad-spectrum penicillin.

Export of pharmaceutical products: This industry is growing rapidly in Pakistan, currently our export is $ 82.6 million and $1000 million export target had been set for 2010.

However, to boost up exports, there is dire need to improve quality and for modern technology and experts. Twenty five to thirty new pharma units are being established in the country.

YEAR

VALUE IN MILLION $

2004

50.3

2005

63.6

2006

82.6

Exports of Pharmaceutical products have grown by 64.2% from $ 50.3 million in 2004 to $ 82.6 million in 2006 with per annum growth of 21.4%.

IMPORT OF PHARMACEUTICAL PRODUCTS

YEAR

VALUE IN MILLION $

2004

179.4

2005

187.8

2006

226.7

Import of Pharmaceutical products increased by 26.3% from $ 179.4 million in 2004 to $ 226.7 million in 2006 with per annum growth of 8.7%.

PROBLEMS OF PHARMACEUTICAL SECTOR:

While the market is increasing at a rate of about 20% per annum with a relatively high level of per capita consumption of pharmaceuticals, about 50% of the population has no access to modern medicine. In the last few years the number of registered pharmaceutical preparations has shown an unprecedented increase in Pakistan. However, size of the market places constraints on the domestic industry's ability to compete in the export market, especially in the area of bulk drugs, where competitiveness is almost purely determined by economies of scale. The bulk drugs market is characterized by intense competition. Most of the patent molecules are primary commodities rather than value-added products.

Globalization is a major challenge for the domestic pharmaceutical industry. The intellectual property rights will formulate the rules. Due to merger and acquisitions, the large international pharmaceuticals would become even larger. A serious effort is required to build up formulation sector as a leading source of export earnings for Pakistan in the future to face all the challenges of post WTO regime.

Several other factors such as inconsistent and discriminatory policies, lack of funds for upgrading the plants, high duties in the formulation industry, lack of R&D facilities, unavailability of sophisticated machinery, high cost of inputs, and stringent price controls have affected production in the pharmaceutical industry. However, there has been a substantial increase in investment in the formulation industry to improve quality and to increase capacity.

Strict government control over pricing has made many drugs uneconomical, with the result that they either become available only on the black market at inflated prices, or disappear completely. In this environment, manufacturers, both local and foreign-owned, have proved unable to generate the profits needed for capital investment. This is not helped by a regulatory system best described as rudimentary. There is virtually no public drug reimbursement or IP protection; patent law was officially tightened in December 2000, although the effectiveness of this has been questioned. In 2002, further changes were made, making Pakistan's IP laws even weaker. Drug prices are officially controlled, although the government lacks the capacity to enforce its policies in this area. Some price rises have been allowed since 2000, but the current government shows little sign of enacting any serious reform of the pharmaceutical sector, preferring to allege profiteering on the part of the pharmaceutical industry. An import law allowing Indian-made drugs to enter the market was signed in June 2005, although after several months, not one permit has so far been issued.