October 4, 2002	Friday	Rajab 26, 1423

KARACHI, Oct 3: The government will shortly issue a notification/SRO to permit the pharma industry to increase or decrease prices with a cap on maximum retail price (MRP).

A flexible pricing policy within MRP was taken at a meeting with representatives of pharma industry under chairmanship of Abdul Razak Dawood, Minister for Industries, held in Islamabad on September 28.

Under the new procedure, the prices can be reduced by informing the Ministry of Industries in writing. In such cases, the prices can be increased to the current level without seeking prior official approval.

The pharma industry has been told that it is also free to wait for the notification or reduce prices on the basis of the minutes of the meeting held with the minister for industries and production on September 28 and sent to representative trade bodies.

So far, the prices have been increased or decreased with the approval of the Ministry of Health. The decision signals the government’s cautious move towards a market-oriented price mechanism.

In the course of the next few weeks, sources in the Pharma Bureau (PB) say, the government would hold discussions with all stakeholders on the formula for determining drug prices. PB is a representative body of 26 multinational companies engaged in manufacturing of pharma products.

The stakeholders would be invited to present their ideas that would be discussed with the PB’s proposal on the official agenda that seeks annual price adjustment for registered drugs, based upon consumer price index.

PB sources say that the pharma industry seeks to link prices to a transparent index. The CPI rate of 3-4 per cent should serve as the index for the maximum retail price.

The MNCs are making handsome profits on some products, there is low margins on others and there are loss making sales. With price flexibility within MRP, “the prices of some products are likely to come down,” say PB sources.

The sources in PB indicate that the minister for industries has ruled out any price increase before December and has said the decision will be taken by the future elected government.

In a communication to the pharma industry, the Ministry of Industries has said: “Most likely, the current prices will stay as they are or may decrease during the next twelve months except for special circumstances if a general increase is allowed by the government.”

The multinationals are seeking annual price increases in December as the last increase was allowed on Dec 10, 2001. They are pressing that cases of loss making and frozen products, which have not received price increase in the last two years, should be considered on a priority basis.

On the other hand, according to the minutes of the meeting, Abdul Razak Dawood told the representatives of pharma industry that “in the next twelve months the prices should decrease, not increase.”

The pharma industry feels it cannot deliver. The best it can do is to keep the average price of entire range of products stagnant.

One of the stated objectives of the new policy is “not to increase prices but bring a policy mechanism, which will help reduce prices.” It combines with the aim of rapid growth of pharma industry.

PB sources say that to continue “ensuring availability at affordable prices, the industry should be freed from stifling restrictions and controls to attain rapid growth. A rapid expansion would also spur more competition that would force industry to cut costs, improve quality and reduce prices. This has happened in case of other industries in Pakistan, the same will be repeated in the pharma industry.

In rupee terms, the total gross capital employed by 26-odd companies have doubled over the past five years, from Rs7 billion in 1997 to Rs13.6 at the end of June 2002. About two-three companies in import business are also setting up manufacturing facilities. PB points outs that the Pakistani market is already very competitive, with no MNC having a share of more than 5.8 per cent of the local market and as many as 20 products of different companies offered for sale and competing with each other. It is very few products that do not face competition.

At present, the imported drugs are allowed to be registered for a period of two years with the conditions, it will be afterwards manufactured locally, otherwise the licences would not be renewed. The multinationals want the decision on manufacturing should be left to the market forces to decide. It is the sale volume and size of the market or export potentials that would persuade the companies to set up manufacturing facilities and there should not be any regulatory binding, PB sources added.