Welcome

to The Pharma Discussion

Pharmaceutical Industry Pakistan (A brief Overview)

A discussion with
& Students of Analysis Of Pakistani Industries
Presenters

Mr. Afaq Ali Khan

Kamran Shahid Bukhari (Sp06-bb-0042) Muhammad Danish Anwer (Sp06-bb-0056)

Agenda
Pharmaceuticals Historical Background Importance Of Pharmaceutical Industry Current Situation -------------------------------------------------------------------- Category of local production Linkages Pricing Growth Imports/Exports -------------------------------------------------------------------- Role of Government Health Sector Health Policy -------------------------------------------------------------------- Problems Impact of WTO Social Impacts -------------------------------------------------------------------- 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 (APIs)

(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.

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/Exports

Imports 2001-2005
Product group: 542 - Medicaments (including veterinary medicaments) Value 2001 US$ '000 Value 2002 US$ '000 Value 2003 US$ '000 Value 2004 US$ '000 Value 2005 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 US$ '000 Value 2002 US$ '000 Value 2003 US$ '000 Value 2004 US$ '000 Value 2005 US$ '000

106,020 95,863

119,236 120,238 141,359

Exports 2001-2005
Product group: 542 - Medicaments (including veterinary medicaments)

Value 2001 US$ '000

Value 2002 US$ '000

Value 2003 US$ '000

Value 2004 US$ '000

Value 2005 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 US$ '000

Value 2002 US$ '000

Value 2003 US$ '000

Value 2004 US$ '000

Value 2005 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 population.

0.73 physicians per 1000 population and 0.31 nurses per 1000

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; to improve effective access to healthcare Reduction in communicable diseases 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.

1. 2. 3.

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

Existing evidence indicates a need to equip physiciansin-training to handle interactions with the industry.

Recommendations (cont)

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