Pakistanis are increasingly spending more on health, with spending rising to a total of Rs665 billion in 2011, up 14.5% over the previous year, according a to research report released by Business Monitor International (BMI), a UK-based research and consulting firm.
Within the overall sector, the largest in terms of total spending was that of hospitals and other healthcare facilities, which saw their total revenues rise to Rs456 billion in 2011, up 14.1% from the year before. The fastest growing segment was medical devices, which saw sales rise 18.1% to Rs35.5 billion. Pharmaceuticals grew a little slower, at 13.1%, to reach Rs173 billion in gross sales in Pakistan.
There are also several developments taking place within the sector that are likely to allow for even further expansion, according to BMI analysts.
In August 2011, the Drug Registration Board (DRB) approved the registration of 30 medical devices and 210 medicines after a meeting was held at the request of the Prime Minister Yousaf Raza Gilani, who called for the uninterrupted provision of medicines to patients. Products approved for registration included vaccines, biologicals, cancer therapeutics, drugs for the treatment of blood disorders such as thalassaemia, and devices used in cardiac procedures.
BMI points out that there are many reasons why investors, particularly those outside the country may want to consider investing in this sector. “Pakistan has one of the most liberal foreign investment regimes in South Asia, with a commitment to low tariffs and 100% foreign equity permitted,” said BMI analysts in the report.
The analysts also note that Pakistan’s rapidly growing population – currently closing in on 190 million – should also be considered an asset. “A growing population is feeding increased demand for pharmaceuticals.”
There are, nevertheless, several challenges faced by the healthcare sector in Pakistan, which BMI cautions investors to be aware of. For the pharmaceutical sector, in particular, the analysts warn: “Counterfeit medicines, a lack of transparency in the government’s pricing mechanisms and an approval process that is biased towards domestic manufacturers are all factors depressing the market’s attractiveness.”
The opening up of free trade with India is seen as a bit of a mixed bag. On one hand, it would allow Pakistani firms to export their products to India more easily, allowing them access to a large and rapidly growing market which would help many of these firms scale up their capabilities and reduce overall costs for Pakistani consumers. On the other hand, many pharmaceutical manufacturers claim that they will not be able to compete with Indian companies and will likely be forced out of business by cheap Indian imports.
Pakistan’s overall business environment gets a poor rating from BMI, which ranks the economy 16th out of the 18 economies that it tracks in the Asia-Pacific region. The only two economies behind Pakistan are Sri Lanka and Cambodia. “The business environment still suffers from poor infrastructure and, most problematically, an uncertain security situation that has declined considerably since March 2007,” said BMI analysts.
In addition, there are several structural challenges to the Pakistani healthcare industry itself that have little to do with the external environment of Pakistan that they operate in. “Procurement processes are bureaucratic and often lack transparency, raising the risks of corruption,” said BMI in its report.
Published in The Express Tribune, May 27th, 2012.