Pharmaceutical: Medicine industry sickened by concerns

Pricing issues prove to be bitter pill to swallow for manufacturers

LAHORE:

Pakistan will likely lose the potential to produce medicine if the concerns of pharmaceutical companies are not resolved urgently as these entities are considering importing items rather than producing them locally.

After the closure of the production facility of Johnson and Johnson Pakistan – a Fortune 500 company – and initialising imports of hep C drug Sovaldi by Ferozsons, industry executives are pondering over mass imports as it is easier to operate than manufacturing locally. Undue intervention from the Drug Regulatory Authority of Pakistan (DRAP) is also causing micro issues, according to executives.



Millions of patients, who want cost-effective medicine, will be deprived of drugs due to more and more companies following the footprints of multinationals that have rolled back their investments and are relying majorly on imports.

The executives highlighted that the strategy of DRAP with regards to price control of medicine in Pakistan is ill-conceived and short-sighted.

“The members currently sitting in DRAP don’t have any experience and knowledge of what the drug act is and what their actual powers are,” said former chief drug inspector Saleem Isharat, while talking with The Express Tribune. “The pharmaceutical sector claims are based on reality as since 2001, the consumer price index (CPI) has risen many times but the drug prices have remained the same.”



The average global profitability of this industry is 30%, while the average margin of profitability in Pakistan is less than 12%, making it hard for companies to recover fixed costs. Hence, low margins for companies are making Pakistan a less attractive destination for scarce investment funds. This has contributed to a loss of share in the global market, as neighbours India and even Bangladesh are moving ahead.

The issue of price mechanism

The sector is looking for a price mechanism preferably recommended by the World Health Organization (WHO), which is called the reference price mechanism. WHO suggest drug price mechanisms as per the neighbouring countries, whereas with the cost-plus system used at the moment, DRAP has to get involved with each manufacturer, which could result in price discrimination of the same product.

“DRAP doesn’t want to end this deadlock because that will reduce their authority with every manufacturer following a set mechanism,” said Isharat. “They listen to complaints of whoever they want and decide on their own.”

The industry executives said that no relief has made it impossible to manufacture medicines locally as price hike and prices of other input variables necessary to produce the drug are now out of their constraints. Isharat said that WHO already recommended to link price increase of medicine with CPI with some agreed formula, so the price hike or decrease may be justified.

The increasing difference in the cost of production and the selling price of the medicine will damage the industry. The closure of plant has not been taken seriously although it can prove devastating through high prices, reduction in employment opportunity, no transfer of technology and depriving patients of medicine.

Published in The Express Tribune, November 8^th, 2014.

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