Spot Of Pharma Industry

SPOT Analysis:

PHARMACEUTICAL INDUSTRY

INDUSTRY OVERVIEW

The Pakistan Pharmaceutical industry is a high technology, essential and even strategically important industry that numerically represents the single largest collective multinational investment in Pakistan i.e. 28 dedicated and fully committed foreign companies.

It is an industry which manufactures wide range of research based life saving and life enhancing medicines. It is a major contributor to that health of the Pakistani people, and to the economic well being of the country.

Without a strong domestic pharmaceutical sector, which directly supplies 75-80% of our nations total pharmaceutical needs in value terms, Pakistan would have fewer resources to pay for adequate health and social care resources.

The pharmaceutical industry in Pakistan has developed considerably in large measure due to the collaboration of major multinationals in the field. Today, the industry provides vital support and supply to the health care needs of a large population. All leading brands of prescription and nonprescription drugs are manufactured to strict quality control. Many of these medicines are manufactured for export as well.

But healthcare in Pakistan is still in the early stages of development. Widespread poverty and a weak health system underlie the poor health status of the population. Government funding continues to be minimal, equal and achieves little more than maintaining the status quo, while the problems of poor nutrition and sanitation are compounded by Pakistan’s large and fast growing population. Other issues at the heart of the problem include the continuing prevalence of communicable diseases, low health manpower levels and the under utilization of primary health facilities in Pakistan.

The pharmaceutical market remains beset with difficulties. Strict government control over pricing has made many drugs uneconomical, with the result that they either become available only on the black market at inflated prices, or disappear completely. This is not helped by a regulatory system best described as rudimentary. There is virtually no public drug reimbursement or IP protection.

The pharmaceutical industry is considered the backbone of public health services in Pakistan. This is strategically important both for the well being of the population in general and for the provision of good yet affordable healthcare in particular. The low cost of production and the huge potential of this sector has attracted major multinationals to establish their operations and production facilities in Pakistan.

The total market size of Pakistan’s pharmaceutical industry has crossed the mark of US$ 1.5 billion (Q2,2006) and is now estimated to be US$1.6 billion and is further expected to increase as drug expenditure in Pakistan has shown an upward trend and is anticipated to reach US$1.82bn in 2010. Currently, there are 441 firms approximately, out of which 411 are local companies and 30 are MNCs. Foreign drug-makers account for the majority of the drug market in value terms, with a 53% share, although domestic companies are dominant in volume terms.

TOP FIRMS IN THE INDUSTRY

5 Top Firms In Terms Of Revenue

NAME REVENUE (Rs. in billion) ASSET SIZE(Rupee�000)

Glaxo SmithKline 10.1 7,740,000

Abbott Laboratories 6.1 4,552,537

Sanofi-Aventis 3.8 2,298,867

ICI Pakistan 3.2 2,821,597

Searle 2.8 2,324,366

GROWTH TREND OF THE INDUSTRY

Looking at the history of pharmaceutical industry of Pakistan, it is obvious that the industry has passed through 03 main phases. First phase is from 1948 to 1971. After independence, Pakistan had no pharmaceutical industry and traders primarily based in India were importing most of the medicines. Recognizing the importance of this industry, the Government of Pakistan established two pharmaceutical units named “Khurram Chemicals limited” (near Islamabad) and “Antibiotics Private Limited” (in Mianwali) through the Pakistan Industrial Development Board (PIDB). The growth of pharmaceutical industry started from 1948 and continued till 1971. At that time, due to the conducive policy and the right entrepreneurial spirit, the pharmaceutical industry reached its peak and had a leadership position in Asia.

In the second phase (1972 to 1991) due to the discriminatory and restrictive registration policy (Drug Generic Act, 1972), national companies suffered a lot so that earlier created export markets were lost. In addition to that, completely manufactured drugs and medicines were imported largely with thepermission of the government, which resulted in large scale flooding of imported drugs.

Third Phase is from 1991 to now. In this period, the government followed a policy of de-regulation in prices that resulted in free play where the national companies could fix the same price as multinational companies. Due to this policy framework, the market share of national companies grew as compared to multinational companies. The national companies grew in size and also exploited possibilities in other regions (UNCTAD / WTO 2004).

Annual Growth

The growth in the industry is recognized as between 12% - 13% on an annual basis. Following is a graph of the recent growth trend:

Export Profile Of Pakistani Pharmaceuticals

The Government has generally extended its support to the pharmaceutical sector, resulting in continuous growth in pharmaceutical exports. Unlike the textile sector, the country’s major export revenue resource, pharmaceutical exports, is not dependent on the weather or other uncontrollable factors. Pharmaceutical exports are based on the manufacturing process and operations to convert APIs and raw material into finished medicines. For the past 10 years, the nation has been establishing its drug-manufacturing units, infrastructure and export capabilities.

At present Pakistan is exporting medicines to Sri Lanka, Vietnam, African countries