KARACHI- While the Pakistan government prepares to implement the new drug policy, and freeze the prices of pharmaceuticals, the Pharma enterprises have issued a warning to close down their operations in the country, in case the authorities donot accept their demands for a softer pricing policy.
According to media reports, the representatives of the pharmaceutical sector, recently made a last ditch effort to convince the government officials of their stance at a meeting in Islamabad, but were told by officials that the draft of the new policy has already been finalized ahead of the next meeting of the Economic Coordination Committee (ECC) of the Cabinet.
At question is the government’s policy to disallow companies to raise prices on 318 molecules that form the components of hundreds of drugs and to force them to reduce some prices by as much as 30%.
In November 2013, the government’s Drug Pricing Committee (DPC), a division of the Drug Regulatory Authority of Pakistan (DRAP), went back on an earlier decision to allow pharmaceutical firms to raise prices by up to 15%. Pharma companies protested the move and sued the government, and were able to get a stay order from the Sindh High Court to keep their price increased while the matter was resolved.
According to industry officials, drug prices have been frozen by the government at levels last set in 2001 and DRAP appears inclined to continue with the current policy or even introduce an average pricing formula, which pharma companies insist will be detrimental to their financial health.
“I think the industry will again take the government to the court, the moment it approves the new drug policy,” said the spokesperson of Pakistan Pharmaceutical Manufacturers Association (PPMA), an association that represents domestic drug makers.
The foreign-dominated pharmaceutical industry is demanding an across-the-board revision in drug prices to cover the impact of rupee depreciation and the increase in taxes and power tariffs over the past decade. However, the government disagrees with the industry on the price increase formula. The DPC was set up in August 2013 as part of the attempt to create a pricing mechanism for pharmaceutical drugs in Pakistan. However, it does not appear to have worked and this impasse has now resulted in many foreign firms threatening to leave the Pakistani market.
“I am sure a number of multinational pharmaceutical companies will be forced to leave Pakistan within the next year if the new drug policy continues to harass the industry on drug prices,” said the CEO of a global drug maker, on the condition of anonymity.
Industry experts believe that the government’s tight regulations on pricing have hindered investment in the pharmaceutical sector. According to the State Bank of Pakistan’s 2014 Annual State of the Economy Report, the price control policy has made it unfeasible for companies to manufacture drugs locally, which creates market shortages for several essential drugs and contributes to smuggling. The SBP has identified the standoff between the government and the pharma industry as one of the critical inhibitors for growth in the healthcare sector.
DRAP – which was constituted in November 2012, after the functions of the federal health ministry were transferred to the provinces in June 2011 – is an autonomous regulatory body charged with regulating issues related to drug prices, licensing and inspecting drug manufacturers, and drug registration for local manufacturing or imported medicines.