“A farmer takes about 40 decisions during a crop cycle. If he is better informed, he can take better decisions and improve his productivity,” says Dr Imran Ahmad Khan, CEO and managing director of Bayer Pakistan (Pvt) Ltd.
As a supplier of maize seeds to farmers, Bayer’s crop science division was largely cushioned during the pandemic since about 75 per cent of seed sales take place in the Dec-Feb period. The other two divisions of Bayer, pharmaceuticals and consumer health, were not as lucky.
“Since clinics of general practitioners were closed during the lockdown, antibiotics were not being prescribed. And we have a Rs1.5 billion turnover of antibiotics Ciproxin and Avelox alone. Then there was a loss in sales of acne treatments and hormonal treatments that impacted the health care division, but things are better now,” says Mr Khan who did not have to resort to layoffs during the pandemic.
Pakistan’s per-capita spending on pharma is about $10-25, amongst the lowest in the region, and the spending has not improved significantly in the last 13 years at least. Health has not been a priority for any government. Even during the pandemic, the focus has been on the coronavirus and not the health factor, asserts Bayer’s CEO.
The usual reasons hold from weak and inefficient policymaking to the lack of basic infrastructure and unavailability of raw materials locally. Government spending is stagnant and is mostly for administrative expenses. With the health insurance card introduced in Khyber Pakhtunkhwa and Punjab, there is some hope but it depends on how its performance evolves over the next few years.
Flight of pharma MNCs
Price is the only factor when it comes to government purchases. “I may have a product available at Rs50 but someone else may be producing it at 50 paisas,” says an aggrieved Mr Khan, regretting the lack of quality benchmarks. Across the world, there are studies to assess the equivalency of the differently priced products but here the rate is the only factor in the decision-making process.
“It is hard to convince our principals to stay in this country because of a lack of consistency, uncertainty and unpredictability. An SRO tonight could change business tomorrow. Furthermore, our cost of doing business is higher because the tablet being produced in Pakistan is the same as the one in Germany.” Local businesses are not obligated to meet international quality benchmarks.
“I don’t see much future for multinationals in the drug sector”
Another hurdle for international pharma players in Pakistan is the necessity to have an operational plant. While finished products can be imported, local production cannot take place through third parties or local manufacturers. Not only are global players reluctant to invest without having an existing critical mass for the product, but this approach also prevents the technological transfer from multinational corporations to local manufacturers.
“I don’t see much future for multinationals in the drug sector unless the regulatory framework and policymaking provide some guaranty to at least the foreign multinationals. The currently $3bn market is growing at 12-14pc. It’s a huge market with a lot of untapped potential,” said Mr Khan. The frequently touted pricing grievances of the pharma sector were listed as one of the reasons MNCs find staying in Pakistan unpalatable.
Agri technological reluctance
“The latest technology is reluctant to come to Pakistan,” said the CEO while explaining that Bt cotton technology was not introduced through official channels, which is why there is no ownership of it. While Bayer has been attempting to introduce genetically modified maize, they were thwarted at the last stage by the Ministry of Science and Food Securityafter fulfilling all regulatory requirements.
“We were not given the go-ahead based on pressure tactics of vested interests. Political ties of different ittehads and forums have critical mass in power corridors and prevented the new technology of corn seeds from coming in.”
If the product had been approved on time, the yield would have increased from the current six million tonnes to 19-20m tonnes. Since 70pc maize is used by the poultry sector that has the compound annual growth rate in double digits, the increase in corn supply would have kept pace with the forecasted growth of the chicken industry. Previously, Bayer’s introduction of hybrid seeds in the late 1990s enabled maize production to increase three to four times in the last two decades, giving a boost to the poultry sector.
Small farm holdings
Farmers with land measuring less than 25 acres are critical. Around the world, there are 550m small-holding farmers and it is one of Bayer’s global objectives to improve knowledge and innovation access to at least a 100m by 2030.
“What I have seen so far is that Punjab’s farmer is more progressive than Sindh’s. The size of farms may be one reason but there are more successful examples that have been showcased properly in Punjab. It is just an observation but the general mindset in Punjab is more progressive; the response to our programmes is stronger there than in Sindh,” said Mr Khan in response to a question.
The contraceptive challenge
Based on a regulatory requirement, Bayer has a dedicated hormonal facility in Lahore, which requires a huge investment. Hormonal production is tricky from a technical aspect as well.
Population growth is around 2-2.5pc a year and there is a task force headed by President Arif Alvi to tackle it. “We are very strong in contraceptives and have tablets, injections and implants. We requested permission to import one tablet and one implant at a certain price. An implant for five years will cost Rs1-2 per day. So once an implant is there, it will offer contraceptive protection for five years at the price of Rs2,500. But the case was rejected.
“Why should I produce implants locally when I can give it to you for a rupee or two per day by importing it? The focus should be on availability to control the rising population because it will take years to have domestic production whereas through imports it will be available tomorrow. We can only speculate that imports have become such a taboo that they take precedence over population control. I don’t think domestic production is happening based on my experience.”
Published in Dawn, The Business and Finance Weekly, October 19th, 2020