The relationship between performance of health sector and that of industry does not seem to be strong enough. Rise of drug industry in recent years has not improved the health of people in a significant manner.
The current Economic Survey acknowledges challenges faced by the country in the health sector. It admits that “Regardless of the important role of health in the socio- economic development of the people the progress so far made in this regard is dismal. Pakistan is still lagging behind in its human welfare indicators as compared to other regional countries”.
During the last three years, the public sector expenditure on health has increased by 11.7 per cent per annum. Currently it works out to be 0.5 per cent of the GDP against eight per cent average of OECD countries with 14 per cent of GDP spent on health by the US. In many developing countries the health spending ratio stands at five per cent of the GDP.
According to the latest data available life expectancy in Pakistan is 74 years which is comparatively good but the figures of infant mortality are high. Out of 1000 some 74 children die at the time of birth and 98 die before reaching the age of five. The current progress report on millennium development goals indicates that at the current pace of progress the country would miss most health related targets.
The health scene continues to be grim. How will the situation improve and what will be the agency of change if and when it will materialize is beyond the scope of this article. The fact that seems to be glaringly clear is that the demand for medicines exists and it will increase with time. As issues of accessibility and affordability resolve the local demand in fact will multiply many folds. Will more consumption of drugs actually lead to a healthier people is another issue.
The driving factor of expansion in the pharmaceutical industry, most private sector players agree, is surging domestic demand. Other factors such as high per unit rate of profitability, favourable public policy environment, good liquidity position, ready availability of trained manpower, advancement of local engineering, comparatively modest capital requirement contributed to create conditions that led to metamorphosis of domestic pharmaceutical industry.
Local businessmen with major stakes in the sector broke out of their petty business mindset and seem to be attempting to think global. Over the last ten years they modernised their plants through significant investment in capacity building. They hired MNC trained professionals at market rates and took a long -term outlook. They boldly invested in intangible assets such as training of their staff, etc. to compete for standards.
“Investors in this sector on the strength of a new crop of MNC trained professionals changed the scenario in the drug industry in the country”, says a pharmaceutical professional based in Karachi.
“It is not correct to attribute the turnaround to a single reason. A whole range of factors were matched like pieces of a jigsaw puzzle that led to reinvigoration of local pharmaceuticals. Appreciation of business potential by the investor, better managerial expertise, expanding local market, entry into new markets offshore, comparatively low capital requirement, etc. all played their part to make it what it is today”, said another ex-employee of a multinational who owns and operates a successful company today.
Currently there are 411 local companies and 30 multinationals operating in the country. Till 2000 total number of companies including local and foreign were around 350. There are approximately 63,000 pharmacies in the country.
The local market is estimated to be worth more than Rs70 billion or $1.2 billion today. Of which the share of local companies is said to be around 55 per cent.
In recent years drug exports have increased from $37.5 million in 2000-2001 to $50 million in 2004 up to $65 million in 2005.
According to sources in the industry, the government lived up to its promise of acting as a facilitator for the private sector in case of the pharmaceutical industry. It took a number of measures to promote the sector. Except for certain categories, the government brought into effect deregulation of prices permitting free play enabling local companies fixing prices at par with multinationals.
It also announced policy to allow companies to produce raw materials locally. Though most companies in Pakistan still rely heavily on China, India, Germany, UK and Japan for raw material imports.
The promulgation of Patent Ordinance as per WTO requirement further improved the image of the local industry in the globalised trade environment as the country steps into product patent era.
Some steps that reflect on the governments attitude towards the sector are: the government has given 50 per cent subsidy to pharmaceutical companies for registration of their export products in foreign countries for export from 1998 to 2003; in 2005 the government provided funds to the pharmaceutical exporters for the salaries of three medical representatives for a period of two years at the rate of $500 per medical representative per month.
No wonder today there are 125 categories of medicines produced locally. These include all kinds of vitamins, alkaloids, ointments, cough syrups etc. Many units are ISO certified and are adhering to US and UK Pharmacopoeia, according to a study by Frost & Sullivan.
High ranking official in the federal ministry were not available for comments but supportive policy in pharma sector aims at increasing the number of drug companies, increasing exports and earning foreign exchange. The intricacies of increased drug usage and issues of public health failed to attract the government attention thus far.
“In Pakistan pharmaceutical industry is all about making multi-colour tablets and capsules, packaging, marketing and advertising. The cost of the actual compound is sometimes as low as one per cent and the rest is either profit or cost of administration, capsule covers, packaging, printing and most of all expenses incurred by the companies on luring doctors to recommend their products”, said a senior health worker.