The current domestic prices seem to be compelling top Pakistani pharmaceutical manufacturers to explore export markets in a bid to improve their revenues in order to finance future technology up-gradation and expansion plans.

“If a pharmaceutical company is looking for growth and wishes to grow larger, it has to venture into foreign markets where it can fetch a minimum five times higher price for its products than what it is currently getting in the domestic market,” contends Amjad Ali Jawa, chairman of Wilshire Laboratories, one of the country’s top 50 pharmaceutical firms that share over three quarters of the local market.

At present, Pakistan’s pharmaceutical exports stand at around a paltry $200m compared with India’s $13bn during the financial year ended March 31, 2016.

The country’s drug exports, according to manufacturers, could jump to $1bn in less than five years if the government provided the necessary regulatory and financial assistance to the industry.

Mr Jawa, whose company has recently sent its first export shipment to Vietnam and is planning to enter markets in the Far East, Africa and Central Asia; pointed out that a company normally takes two years to enter, get orders and establish its supply and distribution channels in a new market. “The cost of establishing your footprint in a market varies from one country to another.”

Interestingly, the American and European markets remain off-limits for Pakistan’s national companies because of exorbitant costs and documentation involved in getting approvals from their drug regulators.

“With the right, industry-friendly regulatory framework and a competitive drug pricing policy, Pakistan is ideally located to attract investment in the industry and become a major exporter of finished pharmaceutical products”

“It is the size of upfront investments on documentation that is keeping our firms from entering into Europe and America and not the quality of our products.

“In the US, for example, it costs around $2.2m to obtain FDA (US Food and Drug Administration) registration,” said Mr Jawa, who started his business from a very small scale before venturing into branded generics in the early 2000s.

While Pakistan has no FDA-approved company, the number of such plants in India has risen to more than 500 and in Bangladesh to four. “Their (Indian and Bangladeshi) governments help their industry obtain these approvals to increase their exports. In Pakistan we get no assistance from our authorities.

“Our pharmaceutical industry has a lot of potential if the government lets it become competitive, implements consistent policies, and improves the Drug Regulatory Authority of Pakistan’s efficiency and regulatory system to make it industry-friendly,” the Wilshire chairman noted.

In spite of ‘lower’ margins, national pharmaceutical companies have flourished during the last decade or more, with many having invested heavily in new technology and quality at a time when multinationals were packing up and exiting the Pakistani market.

Of 36 MNCs that operated here in the early 2000s, only 16 are left because of the freeze on drug prices enforced in 2001, mergers of parent companies and the needs of business consolidation at home.

Out of 650 or so pharmaceutical manufacturers in the country, the top 100 control more than 98pc of the market.

Over the years, the market share of national or local companies has surged to 66pc while MNCs decreased to 34pc. National firms also work as vendors for the MNCs and account for almost 40pc of their sales.

Although the domestic drug market has more than doubled, to around or 1pc of GDP, or $3bn (compared with global trade of $1.1tr) from $1.4bn in 2007, and is projected to rise to little less than $4bn by the end of 2018, the growth in sales is driven mainly by rise in volume on the back of a higher population growth rate, increased life expectancy, improvement in household income, etc, rather than in prices.

“Low drug prices are a major issue for pharmaceutical companies,” according to Financial Analyst, Fahad Irfan. “The shares of the multinationals and national firms listed on the stock exchange are considered illiquid and the volume of trade in them is negligible. “Though the local companies pay better dividends to their shareholders than the MNCs, foreign investors show more interest in foreign companies because of their familiarity with the companies’ names.”

Mr Jawa candidly conceded that the pharmaceutical manufacturers were making profits despite drug pricing issues. But, he said, the industry wouldn’t be able to realise its true potential, improve technology and quality, become sustainable in the long-term and boost exports unless the government deregulates the market.

“At the current prices, it is not possible for us to reinvest in our operations. The quality of pharmaceutical products depends on creating a ‘controlled atmosphere’ and adoption of Good Manufacturing Practices (GMPs). It involves continuous investment that is difficult for most to bear.”

He was of the view that the government should continue to control the prices of the essential molecules but free the rest of the market from its control for the benefit of the industry as well as the consumers, and to boost exports.

“In Philippines prices are regulated by market competition. In India, the prices of only 74 molecules are regulated. Bangladesh deregulates a product being manufactured by five companies and lets competition take care of the prices.”

Moreover, he said, the government should start giving the same prices for the same molecule (or active ingredients) to both the multinational and national firms.

“At present there is a huge gap between the price given to an MNC and a local company for the same molecule on the pretext that MNCs have higher overhead expenditures. This isn’t a fair practice and must be changed.”

Last, but not the least, Mr Jawa asserted the drug regulator should stop taking years to approve molecules and therapies depriving patients of the benefit of the latest remedies.

The government should also keep from maligning and harassing quality manufacturers in the name of enforcing GMPs.

“With the right, industry-friendly regulatory framework and a competitive drug pricing policy, Pakistan is ideally located to attract investment in the pharmaceutical industry and become a major exporter of finished pharmaceutical products.”

Published in Dawn, Economic & Business, March 13th, 2017