Abstract
In BMI’s Business Environment Rankings (BER) matrix for Q409, Pakistan
slightly improved its
position, now ranking joint 13th out of the 15
markets assessed in the Asia Pacific region. While Pakistan
offers more
positives than some smaller markets that are not included in the BMI’s
matrix, its
fundamentals are clearly far from optimal. Despite the massive
potential provided by the population of
over 160mn (and rapidly growing),
key drawbacks to involvement in the Pakistan’s drug market include
deficient pricing and regulatory environments and low per capita spend on
pharmaceuticals. Out-ofpocket
spending represents the largest source of
drug expenditure, making the whole market vulnerable to
the current
economic climate. Nevertheless, while somewhat downgraded, our forecasts
stipulate that the
market will experience a compound annual growth rate
(CAGR) of 12.37% in local currency terms,
taking the value from PKR126.8bn
(US$2.02bn) in 2008 to PKR227.1bn (US$2.52bn) in 2013.
While the
government remains reluctant to fulfil its international regulatory and patent
obligations, a
recent development has seen drugs registered in two major
advanced markets (with the list including the
US, the UK, and Japan)
processed through a fast-track mechanism in Pakistan. This system avoids
the
need for expert review and can therefore significantly improve
registration times, which are currently as
long as two years. Still,
Pakistan remains on the 2009 Priority Watch List of the Special 301 report
published by the United States Trade Representative (USTR) following input by
the Pharmaceutical
Research and Manufacturers of America (PhRMA) –
evidence of the considerable difficulties facing
foreign companies
operating in the market.
In the meantime, the domestic drug industry
– which is largely dependent on foreign-sourced raw
materials
– has welcomed the July 2009 news that the government had slashed rates
of duty on imports of
some chemicals and active pharmaceutical ingredients
(APIs). Custom duties have been reduced from 25
and 10% to 5%, covering
APIs such as aspirin, amlodipine and loratadine, with the potential of
boosting
producer margins as well as exports. Additionally, customs duty
on four types of diagnostic kits
(including those for detection of breast
and blood cancers) has also been lowered from 20 to 5%, while
duties on
import of stents and a number of other items has been removed completely.
In the same month, local experts warned that more effort is needed to educate
the public about hepatitis,
given that type C and B, respectively, affect
some 4.7% and 2.6% of the population. Annual cost of
hepatitis treatment
is estimated at over PKR250bn (US$4bn). However, public healthcare funding
is
limited, making Pakistan vulnerable to outbreaks of various infectious
diseases, especially in the face of
frequent flooding and other natural
disasters. The role of international aid agencies in providing
healthcare
to the population during such times is significant, although the existence of
parallel healthcare
systems exist makes their operations more
difficult.
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