PRESTON

UNIVERSITY

Final Project On
An Insight Report on Pakistani Pharmaceutical Industries

Submitted By
Khuzaima Bin Tahir
Registration Number. 2411-308016
BBA (Marketing & Finance)

Submitted To:
Prof. Ali Ahmed Dawood
MAY 2012
In partial fulfillment of the requirements for the degree of
Bachelors in Business Administration

1
 Preston University
North Campus, Karachi
PROJECT APPROVAL

Project Title: An Insight Report on Pakistani

Pharmaceutical Industries

Prepared By: Khuzaima Bin Tahir

Date of Submission: 24th MAY 2012

Supervisor: Prof. Ali Ahmed Dawood

The above project has been submitted by this student and

has my formal approval and can be submitted for
evaluation.

Approval:

11
Prof. Ali Ahmed Dawood
24th MAY 2012
(Project Supervisor)

LETTER OF AUTHORIZATION

24th MAY 2012

Khuzaima Bin Tahir

Please refer to your initial proposal for understanding the

study on. An insight report on Pakistani Pharmaceutical
Industries in the view of subsequent meetings and
discussions the initial proposal was finalized. Kindly
initiate the study on the finalized Terms of Reference.
(TOR)

Supervisor.

Prof. Ali Ahmed Dawood

11
 LETTER OF TRANSMITTAL

24th MAY 2012

Prof. Ali Ahmed Dawood

Final Project Facilitator

Preston University, Karachi.

Dear Sir,

I am submitting the final report on “Insights of Pakistani Pharmaceutical Industry”

As per your advice, the report includes objective of the study and a brief literature
survey. two different hypotheses were developed and SWOT analysis was taken.

I am grateful for your guidance and supervision without which this report could
have not been completed.

Yours Sincerely,

Khuzaima Bin Tahir

11
 Dedication

1st of all I like to dedicate this

report of mine to all mighty
Allah because without his
blessing I could not have
finished this report.
&
Then I would like to dedicate
this Report to my parents who
kept pushing me and
supported me always.

11
 -Khuzaima

ACKNOWLEDGEMENT

• First of all I would thank Almighty ALLAH

who has guided me the way for a bright
future without whose consent I would not
have been able to accomplish this task.

•My Supervisor Ali Ahmed Dawood who

helped me a lot in the questioning, data
collection and preparation of this report.
He was always full of energy and willing to
teach me the concepts about Research

11
 and Marketing with his working and
practical experiences and examples.

• My Family specially my parents who

believed in me and supported me both
financially and morally and for believing in
me that I can do this.

• And to all the management personnel of

pharmaceutical industries which I visited,
who helped me in gathering data and
answered so many questions on mine.

• To all of my friends and class mates who

always believed in me and uplifted my
spirits.

• And also to all the doubters who are

motivation to continue in order to prove
them wrong.

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• And also my soul mate who is always with
me and because of her I was able to
achieve everything which I am today.

Thank you all for your support..

-Khuzaima Bin Tahir

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 CONTENT

ABSTRACT

PART 1: INTRODUCTION
1.1: Brief history

1.2: Hypothesis

1.3: Objectives of study

1.4: Purpose of study

1.5: Limitation

PART 2: RESEARCH METHOLOGY/

RESEARCH DESIGN
2.1: Literature review

2.2: Designing the questionnaires

2.3: Personal/interviews

2.4: Data collection

PART 3: ANALYSIS
3.1: Porters 5 Competitive Forces

3.2: SWOT ANALYSIS

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PART 4: FINDINGS/CONCLUSION
4.1: Findings

4.2: Conclusion

PART 5: SUGGESTIONS/RECOMMENDATIONS
5.1: Suggestions.

BIBLIOGRAPHY

APPENDIX

REFRENCES

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 ABSTRACT
This report gives an insight into the Pakistan pharmaceutical industry, its
functioning, its strengths and weaknesses, current status and its potential.
The pharmaceutical industry contributes around Rs. 64 billion1 to the GDP of
Pakistan. It’s the single largest multinational investment of the country.
Multinational companies enjoy 54%2 of the market share whereas local
companies account for the rest of the 46%. Also, this industry provides
employment to 50,000 people who support around 300,000 dependants.

Pakistan lacks basic molecular research; its expenditures on research and

development are minimal. Even Bioavailability and bio equivalence tests are
not conducted which is fast becoming a hindrance to Pakistan’s already low
pharmaceutical exports of only 6% of total production 3. This is because the
FDA4 EU and now the emerging ASEAN5 countries require medicines only that
are Bioavailability tested.

However, the industry is also sufficiently supported by an excellent

distribution system, competent ancillary industries and the government that
has banned imports of 40-45 medicines and has taken many other steps
such as duty drawbacks and removal of general sales tax to encourage
exports.

1
Economic Survey Of Pakistan 2009-10

2
IMS health December 2011 Report

3
Economic Survey Of Pakistan 2009-10

4
FDA- Food and Drug Administration; subsidy of US Government

5
ASEAN- Association of Southeast nations.

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 PART 1: INTRODUCTION
Multi-national corporations, mostly owned by the United States of America,
Canada, Japan, Europe and Latin America, rule the world pharmaceutical
industry. Most of the research and development in the pharmaceutical
industry takes place in North America

Competition in the pharmaceutical industry is fierce, perhaps more so than in

any other high technology industry. For example, in the United Kingdom, of
the leading ten products in 1982, only one was placed in the top ten of 1992;
five in the top 50 were out of the top 80 positions. As a result, only five of the
top ten companies in 1982 remained in that group by the end of 1992. And
this trend continues till today.

Pakistan only forms 0.31% of the world pharmaceutical Industry. Being an

underdeveloped and underprivileged sector and the recent smuggling and
fraud cases in the international arena by Pakistani exporters, have lost
strong export avenues such as EU and USA. Today, Pakistan’s export
potential lies in the hand of the downtrodden devolving countries that
includes ASEAN. In Pakistan only 41.2% of the population that is above the
poverty line can consume medicine6.

6
Pakistan Business Review, October 2011 issue

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 1.1: BRIEF HISTORY
Pharmaceutical Industry in Pakistan has come a long way. At independence,
Pakistan had virtually no pharmaceutical industry in place with traders
mostly engaged in importing medicines from various countries. Reasons
were deficiencies of technical know how, shortage of raw materials and lack
of quality control. After identifying the significance of this industry the
Government of Pakistan established two units under the Pakistan Industrial
Development Board (PIDB) namely Khurram Chemicals Limited (near
Islamabad) and Antibiotics Private Limited (in Mianwali). The pharmaceutical
industry in the country experienced a growth stage from 1948 - 1971. The
year 1972 saw the introduction of Drug Generic Act, which implied
discriminatory and restrictive registration policy that hampered the growth of
national manufacturers who gradually lost their export market. Importation
of formulated drugs was allowed by the government that resulted in flooding
of domestic market with imported drugs. The competitive edge of the
pharmaceutical industry was shattered.7

CURRENT SITUATION 8

Today local companies have a share of 45% value wise as opposed to MNC’s
share of 55% of the local pharmaceutical market.

The federal health secretary Ejaz Rahim has recently announced in a press
conference at Karachi that Pakistan Health Ministry is making a committee
compromising of the World Health organization (WHO), Pakistan
Pharmaceutical Medical Association and Health Ministry to keep check on the
quality of products available in the market. Government of Pakistan had
invested Rs. 8 billion in the pharmaceutical industry since 1999 to guarantee
good quality products at competitive prices. 2500 new products have been
registered and 32 new drugs manufacturing units have started producing
since 1999. Most of the pharmaceutical units are concentrated in the
province of Sindh coming to 23 out of 30 MNCs. Second and third highest
with MNC dominance are Punjab and Balochistan with 5 and 2 units
respectively. Punjab I s having lion’s share in context to local companies

7
Source: Pakistan Pharma- Is it on the right path?- By: Kapil Parab-
www.pharmabiz.com
8
Source: Pakistan Business Review October 2011 page 56

11
presence in the country with 165 units preceded by Sindh (76), NWFP(37),
Balochistan(5) and Azad Kashmir(3)9.

1.2 HYPOTHESIS

H1o: We have seen that none of the companies are paying their taxes
completely.

H1A: We have seen that all the companies in the report are paying their
taxes.

H2o: Import for raw material is banned for pharmaceutical companies.

H2A: Import for raw material is allowed by the govt. for pharmaceutical
industries.

H3o: The pharmaceutical industry does not provide job opportunities to the
people of Pakistan.

H3A: The pharmaceutical industry have employed 50,000 people on whom

there 300,000 dependents.

9
Source: Pakistan Business Review October 2011 page 56

11
 1.3 OBJECTIVES OF STUDY

Through this project we are trying to calculate the total import and export of
the Pakistan pharmaceutical industry and how does this industry works, in
this report we are also going to see the distribution system of the
pharmaceutical industries of Pakistan. We heard from several sources that
Pakistan is facing difficulties in bio availability testing so through this report
we are going to find out that how serious difficulties are being faced by the
pharmaceutical industries of Pakistan.

And also we are trying to find out that what is government’s role in this
industry is government taking any kind of initiatives to solve the problems of
the pharmaceutical companies working at the moment in Pakistan.

Government have made several new tariffs which are applicable on major
imports and exports of raw materials, so through this report we are going to
see that have those new tariffs made any kind of impact on the working of
the pharmaceuticals industry.

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 1.4: PURPOSE OF STUDY

We are going to study various portions of the new tariffs enforced by the
government of Pakistan on pharmaceutical firms working currently in
Pakistan; we are also finding the new and improved distribution methods of
pharmaceutical firms in Pakistan.

Through this report we are also going to find out that what are the strengths
and weaknesses of the pharmaceutical industries of Pakistan and how can
they expand their operations.

Main purpose of this report is to give some recommendation as how to

improve the working in Pakistan’s condition.

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 1.5: LIMITATIONS.

I faced various hurdles in achieving the material for this project, the biggest
problem which I faced was of getting personnel interviews as I had to visit
those doctors in person and as nowadays doctors are very busy and don’t
have time for struggling students like me, but still some doctors were kind
enough to lend me some of their precious time.

The biggest hurdle of all was to get correct statistics for my report as we lack
stats in all the fields and all the pharmaceuticals which I visited they refused
to share their data with me which made this project even harder for me.

Pakistan’s political conditions were also one of the reasons which made it
difficult for me to finish this project as it was kind of hectic for me, whenever
I used to visit and pharmaceutical firm there used to be a strike.

11
 PART 2: RESEARCH METHODOLOGY / RESEARCH
DESIGN
Exploratory research method to gather the information related to the types,
feasibility, and application of non-traditional Medias.

POPULATION:
All those people who are related to pharmaceutical industry and have
knowledge about the governments new policies.

SAMPLING METHOD:
We are going to use combination of “Non-Probability convenience and Quota
distribution sampling” in which anyone from population has equal chance to
be selected.

SAMPLING UNIT:

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The sample will be drawn on following basis:

• Educational Institutes and Executives

• Age group 18 above
• Users of any kind of medicines.
• Karachi based.

SAMPLING SIZE:
Our total sample size is of 200, which include 150 executives and 50
students above 18.

2.1: LITERATURE REVIEW

PAKISTAN PHARMACEUTICAL INDUSTRIES OVERVIEW

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 to around
3% of GDP10 and achieves little more than maintaining the status quo. Other
issues at the heart of the problem include the continuing prevalence of
communicable diseases, how health manpower levels and the
underutilization of primary health facilities. The pharmaceutical companies in
Pakistan compromise two distinct groups in terms of ownership – the
nationals and the multinationals.

Pakistan pharmaceutical industry is worth US$1.8 billion with an average

growth rate of 9.4%11. Pakistan pharmaceutical market is comprised of large
branded multinational companies which are producing and marketing
research products and also other big and small national companies which
predominantly produce and market generic products.

10
Pakistan Pharmaceutical Market Intelligence Report, Published by Espicom Business Intelligence

11
IMS Health Report 20011

11
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; patent law was officially tightened in December 2000. In 2002
further changes were made, making Pakistan’s IP laws even weaker.

Drug expenditure is growing slowly in Pakistan and should reach US$1.82bn

in 2015, with per capita spending expected to be only just over US$1100 by
2015. However, BMI’s recently released Pakistan Pharmaceuticals &
Healthcare report recognizes that the domestic drug sector is still striving to
modernize

BMI’s adjusted Business Environment Rankings for Asia reveal that Pakistan’s
position is unchanged in 14th place. This is primarily due to the country’s
poor regulatory system, which we rate as one of the worst in the region

PAKISTANI PHARMACEUTICAL INDUSTRY

Local (Pakistani) pharmaceutical companies started in the 1960s but their

growth increased in the 1980s. By providing quality medicines at economical
rates in this fashion, Pakistani pharmaceutical companies have contributed
substantially towards public health.

THE PAKISTANI INDUSTRY

SIZE AND TRENDS

Pakistan houses about 2.4% of the world population but its share in the
global pharmaceutical market is un-proportionately low at 0.31%. Despite
the low share, the Pakistani pharmaceutical industry is well developed not
only to meet local demands but to also export its products to over 90
countries.

1. Pakistan pharmaceutical industry can be classified under the following

heads:

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 • Multinational Pharmaceutical Companies

• National Pharmaceutical Companies

• Commercial Exporters

Statistic
INDICATOR
Total Market Size (Includes
prescriptions, sales to institutions, US$1.8 BILLION
vacancies, etc)

Growth Rate 12% to 13% (Q2, 2010)

Total number of companies 430 approx.

(manufacturers)
National Companies 400
(manufacturers)

Multinational Companies 30

Average growth rate of national 30% (2007-10)

companies

Average growth rate of 5.5% (2007-10)

multinational companies

Pharmaceutical export revenues US$ 80 million

Export growth rate 35% (Q2, 2007)

SOURCE: PPMA/PHARMA BUREAU (OCCI) 2010

THE DIVISION OF PHARMA UNITS IN PAKISTAN

Units Share (value wise)

National Units 400 46%

Multi 30 54%
Nationals

Source PPMA12

The top 20 pharmaceutical products are:

12
PPMA- Pakistan Pharmaceutical Medical Association 20011 Report

11
 S. No Brand Company name
Name13

Augmentin GSK

Amoxil GSK

Ponstan Pfizer

Velosef Merck

Septran GSK

Ampiclox GSK

Erythrocin Abbott

Neurobion Merck

Brufen Abbott

Lincocin Pfizer

Claforan Sanofi-Aventis

Flagyl Sanofi-Aventis

CAC 1000 Novartis

Xanax (Pfizer)

Myrin Wyeth

Lactogen Nestle

13
Refer to the appendix on page

11
 Betnovate GSK

Ventolin GSK

Calpol GSK

Methycobal Hilton

Source: Pakistan Medical Association 20011 report

SALIENT FEATURES OF THE PAKISTAN

PHARMACEUTICAL INDUSTRY TODAY
The pharmaceutical industry of Pakistan is a high technology industry with a
very sound infrastructure. Not many people know that the pharmaceutical
industry is only second to the textile industry in Pakistan.

Here are some key facts about the industry:

• Very highly “Regulated”, unlike any other industry

• Very strictly “Price Controlled” unlike any other industry
• ‘Essential’ hi-technology industry status, even strategically important
• High technology status, very well developed to international standards
• Overseas transfer of technologies takes place all the time
• Provides intensive training to industry personnel (skilled, semi-skilled)
• Is a vital source of information to the medical profession /pharmacists
• Provides extensive training to doctors to keep them abreast of latest
trends
• Significant, reliable and honest source of government revenues
• Has big export potential if right incentives are given
• Produces close to 80% of the domestic demand for medicines
• Employs over 50,000 persons, who support another 300,000
dependents
• Has helped to develop ancillary industries e.g. glass, packaging,
printing, etc.
• High quality manufacturers are a reliable source of consistent high
quality medicines
• Contribution to GDP is Rs. 64 billion 14
• Government public sector spending is only 0.84% of the total GNP
14
Sources: Wyeth Pharmaceuticals

11
 • About 70% of the population of 160 million people do not have ready
access to health care
• In 2010 the total market grew by 13%
• Multinationals enjoy 54% of the market share whereas the local
manufacturers occupy the remaining 46%
• MNC’s have a higher value share and nationals have a high volume
share
• There are 13500 registered medicines including veterinary drugs of
about 1700 in number
• About 2500 drugs are imported in finished form because they cannot
be made locally for a host of reasons i.e. too technical to make such as
vaccines and Serras.
• Direct employment provided by the pharmaceutical industry is 50,000.
Other than this employment is provided in the ancillary industries of
packaging, steel, glass etc
• The total pharmaceutical exports of Pakistan for the year 2004 were
$50.5 million
• The exports are only 6% of the total production

ECONOMIC DRIVERS IN PHARMACEUTICAL INDUSTRY OF

PAKISTAN

The economic drivers can be classified into the following external and
internal group

EXTERNAL ECONOMIC INTERNAL ECONOMIC DRIVER

DRIVERS
A very large population- 162 Availability of cheap raw material
million from abroad

The Government emphasis on Availability of Chinese machinery

providing health facilities for which is much cheaper as
everyone compared to other countries

An increase in per capita income Emphasis on greater field force

($1025) which has provided productivity
greater disposable income for
health related expenditures

General health awareness and New generation of educated

consciousness among the entrepreneurs in local companies
population

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 Approximately 56000 doctors-
both general physicians and
specialists-whose participation
are the main driver for the sale o
f the sector
Availability of trained manpower
of Multinationals, to national
companies, because of merger
related layoff in MNC’s

A cut in the government duties on Production processes

pharmaceutical raw materials and rationalization and improvements
packing materials

Export opportunities due to WTO An increase in sales and

implementation marketing spend

Manufacturing and marketing of More emphasis on market

new cheaper generic products by research data, especially in
national companies National Companies

Tax holidays for setting up new

pharmaceutical plants

Government setting up new

industrial estates specifically for the
pharmaceutical sector

GROWTH TREND OF THE INDUSTRY 15

Pakistan’s current pharmaceutical industry is of $1.8 billion worth and has
registered a growth of 11.67%. Out of more than 430 companies, leading 20
companies have contributed 61.4% of the pharmaceutical market. Market
share is showing downward trend versus last year for MNC’s.

15
Source: Current market Overview 2011 by Mr. Farhan Qureshi

11
Compare to the pharmaceutical market, Novartis has achieved a better
growth of 12.07% market share and has also improved from 4.52% market
share in 2006 to 4.54% in 2007. As per previous years OTC has gain once
again excellent growth of 18.82%, market share for OTC also improved from
1.52% in 2006 to 1.61% in 2007. Other than Novartis, only four companies
among the leading 20-pharma companies of Pakistan increased their market
share. These include GETZ Pharma 59.93%, Hilton 22.44%, Roche 22.34%
and Searle 14.92%. Extended battles between MNC’s and national
companies continue. MNCs’ grew by 9.92% as compared to 50.81%. A recent
report by EU claims that market share of MNCs’ is 49.98% and national is
51.02%

)s Profit Ater tax of thetop five companies

n
o
lil
i GSK
m 1800
In
.s
1600 Abbot
1400
(R 1200
Wyeth
x 1000
a 800
T 600 Aventis
r
te
f 400
A 200 Searle
ti 0
f
o
r
P GSK Abbot Wyeth Aventis Searle
Company

Source: Financial statements of the companies of year 2010

TREND:

The top five companies approximately have 35% market share. Their Sales
Revenues are reaching records heights and so is the profit after tax.

ANALYSIS:

It is quite surprising that despite over four hundred companies in the sector,
the top positions are guided by only twenty nine MNCs that operate in
Pakistan. The data above show that the leading firm in terms of revenue has
been GSK. Although GSK has maintained its first position for more than a
decade, it’s now slowly losing its market share to other MNCs and local firms.
Its market share decreased from 12.02% in 2009 to 11.69% in 2010.

GROWTH TRENDS OF THE TOP FIVE FIRMS

ABBOTT

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ANALYSIS

Abbot Pakistan, which is one of the leading pharmaceutical brands operating

in Pakistan, showed a positive trend during 02-05. A deeper analysis of Abbot
sales indicates that although sales have been increasing at a rapid pace, our
exports seem to be stagnant. As shown by the chart below, sales during
2010 were definitely higher than 2009 but the percentage or share of
exports during 2010 and 2009 have remained the same to 3%. This is not a
good sign for the country. Exports are very important for every nation.

Local (Rs in Export (Rs in

millions) millions)

2009 5913 163

2010 6683 200

FUTURE OUTLOOK

Since Abbott is facing tough competition in Pakistan from local companies

and is posed with various threats we expect its sales to decrease in near
future. Also Pakistani exports are much expensive as compared to other
countries, therefore exports from Pakistan by Abbott is expected to
decrease. Also the profit after tax of Abbott will show a negative trend
because of the increase threats it faces.

GLAXOSMITHKLINE

ANALYSIS

GSK is the leading brand operating in Pakistan and the only pharmaceutical
firm to have its sales crossed the threshold of Rs10 billion which is surely an
outstanding achievement for GSK. Sales have only increased by 25% during
the period 04-06. GSK performance improved in 06-07 by 7% and it is
observed that its performance will improve but only by lesser limit.

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 Local (Rs in Export (Rs in
millions) millions)

2009 10025 214

2010 10668 220

FUTURE OUTLOOK

GSK is the leader amongst the pharmaceutical sector. It occupies the larger
chunk of the market share. However, it sales and profits are expected to
decrease in the near future because of rising competition and innumerable
threats and also because of GSK increasing cost of production

WYETH
Sales Growth Trend
ANALYSIS
2500
Wyeth Pakistan is also one of the
2000
leading pharmaceutical firm operating
in Pakistan. Wyeth performance had 1500

been disturbing. It sales showed Rs in 1000

millions
negative growth during 03-04 and in 500

04-05 it bear a loss of Rs1bn. It 0

looked then that Wyeth might have 2002 2003 2004 2005 2006 2007

been wiped out of market. However it

showed impressive growth in 05-07
with its sales reaching to all time high in 2006.

Local (Rs in Export (Rs in

millions) millions)

2005 1731 154

2006 1842 171

FUTURE OUTLOOK

Wyeth is also expected to well in near future because since Pakistan

accession to WTO it has been heavily investing to gain the market share.

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SANOFI AVENTIS
Sales Growth Trend
ANALYSIS

Aventis Pakistan is one of the

leading pharmaceutical brands in 2006
Pakistan. It sales has improved
positively during the period 02-07. 2004
Its sales improved by almost 48%
during this period. Aventis has no
what so ever record of exporting 2002
locally produced products abroad. 0 1000 2000 3000 4000 5000
This has affected its sales and
profitability. It has been taken over Rs in millions
by Wyeth and Searle in the top
pharmaceutical firms operating in Pakistan ranking.

FUTURE OUTLOOK

Its performance in the near future is skeptical because other MNCs and
locally set up firms are giving Aventis a tough time.

SEARLE
Sales G rowth Trend
ANALYSIS

Searle Pakistan has improved its

2500
performance drastically. It was among
2000
the top ten pharmaceutical firms
1500
operating in Pakistan in 2006 IMS
1000
rankings. However it has now jumped
Rs in
500
to the top five pharmaceuticals firms millions
operating in Pakistan. Searle 0
2002 2003 2004 2005 2006 2007
performance has been good during 02-
05 and it had performed positively.
After 2005, the company faced a loss
of about Rs400mn in 06-07 that was
reported as increase in cost of production and R & D activities.

Local (Rs in Export (Rs in

millions) millions)

2010 2149 151

11
2011 2577 175
FUTURE OUTLOOK

We expect that market share of Searle will decrease sharply in the near
future and its sales and profits will decrease owing to competition from local
companies.

GROWTH TRENDS: EXPORTS AND IMPORTS

An amount of Rs.11 billion has been invested in pharmaceutical industry

during past four and half years that showed a growth of 6-7 percent and
provided job opportunities to about 8,000 people. 65 companies have
already obtained ISO-certifications. More than hundred new units were
established during four years, and almost 80 units, will start operation within
six months or a year.

EXPORT 1 6

Pharmaceutical sector of Pakistan is capable to enhance its exports to the

tune of more than $600 million by 2010. Pakistan was exporting
pharmaceutical worth $85 million while the industry was aiming to expand
and this would only be possible when government puts a ban on the import
of medicine, produced by the country.

EXPORTS IN THE PHARMACEUTICAL SECTOR

Here is a graph showing the major exporting counties for Pakistan:

Major Exporting Countries

Nigeria
18%

Srilanka
Others 10%
16
Source: Economic Survey of 52%
Pakistan, www.finace.gov.pk

Afghanistan
8%
Philipines Sinapore
6% 6%

11
Nigeria Srilanka Afghanistan
Sinapore Philipines Others
Source: Ministry of Health Pakistan

IMPORTS

Approximately one-third of Pakistan's total consumption of pharmaceutical is

imported and the imports of finished drugs are expected to increase.
Currently, major pharmaceutical imports by Pakistan are from China.
Pharmaceuticals from India account for over 15 per cent of the total
pharmaceutical imports. The imports include medicines, raw materials and
machinery.

GROWTH IN THE INDUSTRY

Growth

20%

15%

10% Growth

5%

0%
2002-03 2003-04 2004-05 2005-06 2006-07

The graph shows a pit in the growth trend in 2004-05 which is because of
decrease in investments. The investors lost their confidence in the
pharmaceutical industry of Pakistan because in the global pharmaceutical
sector it just contributes 0.31%.

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 FACTORS AFFECTING SUPPLY

GOVERNMENT CONTROLS AND INTERVENTION

Pakistani government has been undertaking strict controls, with no price

increases allowed. This stifling price controls leads to market distortions;
cheaper drugs are often in short supply because of being controlled at

11
unrealistic and loss making levels. This has lead to the development of an
underground black market.

PROBLEMS IN REGISTRATION

Because of the higher degree of complexity in the registration of the newly

produced drugs, the discriminatory policy against Multinationals, make it a
two or more year’s long process. This hinders the companies, with new
products, from entering the market, thus, reducing the availability of
diversified products and, affecting supply. This has discouraged companies
from producing innovative, quality medicines and restricted their supply.

RESEARCH AND DEVELOPMENT BY MNC’S

The research and development, carried out mainly by the MNC’s operating in
Pakistan is leading to various categories of life saving and crucial-for-healthy-
living drugs. This in turn leads to the availability of good quality medicine.

INVESTMENT BY MNC’S

MNC’s entered in Pakistan, right after its inception in 1947 and since then,
have not only made huge financial investments, but also are responsible for
the transfer of technology, maintenance of ethical standards, quality controls
and providing the consumers with innovative and excellent quality products.
In fact, MNC’s are the only companies responsible for providing life saving
drugs.

INFRASTRUCTURE

Although, the overall supply position of medicines is very good. Very seldom
there are shortages of certain products, but when do occur, they are because
of the lack of infrastructure. This mainly includes, power breakdowns,
machinery breakdowns etc.

IMPORTS

Supply of medicines is greatly dependent on the availability of imported raw

materials, packaging material and machinery. Pakistan, imports 95% of its
raw materials and almost all the machinery for packaging and manufacture
of medicines. Any fluctuations or delays in the arrival of imported materials
will have a direct impact on the supply of pharmaceutical products.

COMMUNICATION LINKS AND RURAL HEALTH CARE CENTERS

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Supply is affected by the deftness of the distribution system and its reach.
It’s understandable that when a country lacks communication links i.e. roads,
railway tracks etc. it’s difficult for medicines to reach every nook and corner
of a country, especially when medicines need to be kept at certain
temperatures to keep their potency intact.

Earlier medicines were only sold at few chemists in urban centers. People in
rural areas in need of medical help had to travel to nearest urban centers to
get medicines for themselves. Therefore, there was little availability of
medicines which had lead to a contracted supply.

Hence, the building of a dense network of roads and development in rural

areas has encouraged better supply of medicines. Also, the launching of
health care centers allowed greater accessibility to medicines which has
fuelled an increase in their supply. Pharmaceutical companies have to
ensure that they make their products at a greater number of places than
ever before.

EXCHANGE RATE

Pakistan purchases raw materials off competitive prices from India and
China. However, any depreciation in rupee with respect to the dollar makes
raw materials expensive. Supply is adversely affected in this context and can
even leads to retrenchment in some cases.

The distribution system of Pakistan in Pakistan is very good. There are a

large number of medical shops and pharmacies which are scattered all over
the country. In the rural areas, although not many doctors are present, the
shop keepers of these medical shops prescribe medicines to the people
because of the low literacy rates.

Pharmaceutical sector can be classified as one of the most organized sector

with respect to its institutional arrangements. About 200, both local and
multinational industries are operating in the sector in which the market sales
of the leading multinational companies are 50%. Most of the pharmaceutical
industries are located in Sindh and Punjab.

11
 DISTRIBUTION SYSTEM OF PAKISTAN
The distribution system of Pakistan in Pakistan is very good. There are a
large number of medical shops and pharmacies which are scattered all over
the country. In the rural areas, although not many doctors are present, the
shop keepers of these medical shops prescribe medicines to the people
because of the low literacy rates.
Total number of Pharmacies in Pakistan

Province No. of Pharmacies Major cities

Sindh 14942 Karachi 7600

Punjab 16966 Lahore 3625

NWFP 5690 Peshawar 1901

Balochistan 1265 Quetta 582

11
 PRODUCTION PROCESS IN PAKISTAN INDUSTRY
Pharmaceutical sector can be classified as one of the most organized sector
with respect to its institutional arrangements. About 200, both local and
multinational industries are operating in the sector in which the market sales
of the leading multinational companies are 50%. Most of the pharmaceutical
industries are located in Sindh and Punjab.

PRODUCTION

The production of pharmaceutical products can be broken down into three

main stages:

1) Research & development;

2) Conversion of organic & natural substances into bulk pharmaceutical
substances or ingredients through fermentation, extraction and/or
chemical synthesis; and
3) Formulation of the final pharmaceutical product.
In Pakistan, only the formulation of pharmaceutical products is carried out
and wide variety of chemical and pharmaceutical products are produced
which includes anesthetics, disinfectants, water soluble salt, muscle
relaxants, anti clotting agents, analgesic, anti-hypertensives, antibiotics,
diuretics, anti-infective, cardiovascular, central nervous system and vitamins.
In Pakistan no synthesis process is conducted, only formulation, filling and
packaging process is carried out via local and multinational industries.

TYPICAL PRODUCTION PROCESSES17

1. DISPENSING

Raw materials are sent from storage areas to the dispensing area, where
they are weighed prior to their dispatch to the manufacturing areas.

2. TABLETS MANUFACTURING

The manufacturing of tablets involves homogeneous mixing of input

ingredients, such that when compressed into tablets, each tablet should
contain equal amount of each raw material. The tablet manufacturing
process involves the following steps:

17
Mr. Akbar Khan, Head of Supply Logistics, Sanofi-Aventis Pakistan

11
 a) Sieving

b) Initial blending and Granulation

c) Drying and Milling

d) Final Blending

e) Compression

f) Coating and drying

g) Packaging

3. ENCAPSULATION

Encapsulation is the process in which medicine is filled in the preformed

capsules, on encapsulation machines. Ingredients pass through steps of
dispensing, sieving, and blending in the same way as in the tablets
manufacturing, prior to being fed to the encapsulation machine.

4. SYRUPS MANUFACTURING

Preservatives are dissolved in de-ionized water in a jacketed process vessel

at temperatures of the order of 90 0C. The solution is stirred continuously
and then cooled to a temperature of about 30 0C. After cooling, the active
ingredients are added and stirring is restarted. Flavors are added during the
process of mixing. The viscosity of the syrup is maintained by the addition of
de-ionized water. After specified period of mixing, syrup is taken out of
vessel, filtered and stored in large storage tank, before filling into the bottles
and packing.

5. MANUFACTURING OF ORAL POWDERS FOR SUSPENSIONS

Duly formulated, mixed and homogenized powders are brought to the

powder filling machines, where they are automatically filled in the bottles, in
required quantities.

6. CREAMS, OINTMENTS AND LOTIONS MANUFACTURING

Pharmaceutical industry is producing oil-bases and water-based creams,

ointments and lotions. The excipients are mixed in the jacketed process
vessels, equipped with stirrers and heating arrangements. During mixing the
active ingredients are added to the mixture. The prepared mixture is then
stored in containers. The mixture is fed to the purpose-built automatic filling
machines, which are different for different type of containers. The mixture is

11
automatically filled, in required quantities, into collapsible aluminum tubes or
bottles.

7. INJECTIBLES MANUFACTURING
Ampoules and vials are first washed with de -ionized water.

a. Sterilization of Primary containers (Ampoules/vials)

b. Autoclaving

c. Mixing and Filtration

d. Filling and Sealing

e. Optical Checking

f. Printing and Packaging

8. CAPSULE MANUFACTURING PROCESS

The basic process in capsule manufacturing is the preparation of gelatin

solution. Solution is processed in jacketed stainless steel melters equipped
with stirrer. For transparent capsules, solution comprises of gelatin, water
and some chemicals, whereas for the opaque capsules, titanium dioxide is
added in the same solution as prepared for transparent capsules.

Manufacturing of capsules is done in an electrically operated machine

equipped with all necessary auxiliaries. After sorting, the approved capsules
are released for packaging.

11
 2.2: DESIGNING THE QUESTIONNAIRES

A questionnaire has been prepared which will be filled by the samples selected for customers
residing in Karachi.

The data collection instrument used to collect the primary data is a structured questionnaire with
open and close-ended questions. Using questionnaires for gathering information allows the level
of flexibility required for this research. This has been done to collect accurate information with
the help of questions, which are relevant in the circumstance

11
 2.3 PERSONNEL INTERVIEWS

Our research on doctors was based on direct interviews with a number of

qualified doctors in which they were asked about certain questions
concerning to them and the industry. Two of the doctors were also the
members of Pakistan Medical Association. The issues are as follows:

DOCTORS PRESCRIBE MORE MNC PRODUCT THAN LOCAL PRODUCTS

“It is a general impression that MNC products are more effective

because of its better standard raw material and products quality
and result”

One of the doctors stated that the doctors practicing in middle class or lower
middle class population usually prefer economical, local pharmaceutical
products but the doctors practicing in upper class areas usually prescribe
more multinational products. General concept and observational studies
prove this point that multinational products are better and therefore, highly
prescribed. The manufacturing criteria are standard with MNC and drug
efficacy is believed to be better.

DOCTOR’S AWARENESS ABOUT DIFFERENT DRUGS AND THEIR

EFFICACIES

“Awareness comes through regular readings of journals and visit by

medical representatives of different pharmaceutical companies.
Their efficacy can only be judged through personal practice.”

The medical representatives of pharmaceutical companies brief the new

drug to the doctors when the company introduces any new drug in the
market. They tell them about its benefits, cost and convince them to buy the
drug. Also, the consultant level doctors go through the medical Journal,
papers, seminars etc. Few doctors also perform the drug therapeutic trial to
determine its effectiveness.

11
 DIFFERENCE BETWEEN MNC AND LOCAL MEDICINES IN QUALITY,
EFFECTIVENESS AND PRICE

“MNC products are better than the local medicines generally but
certain local drugs are as good as MNC drugs”

Qualitatively MNC is better but MNC and some local brands are similar due to
similar benefits, results and effectiveness. When talking about the price,
there is marked difference between the prices of the two. MNC are costly
drugs as compared to local drugs. Local aspirin is of Rs.1 and MNC aspirin is
of Rs.5. This is not reasonable but is actually due to the difference in quality
of such drugs which can be determined by inspecting the tablet which
crumbles in powder after sometime. The prices are high due to their import
expenses as they have to import quality raw materials and then the drug is
produced here.

PRESCRIPTION TO PATIENTS

“Some doctors decide it on the buying capacity of the patients while

others go for standard medicines whether it is local or MNC”

The patients who afford to pay for the costly MNC medicines are prescribed
MNC drugs and those who belong to lower and lower middle class are
prescribed local medicines. In other cases it is decided on the past personal
observation. If a local medicine’s efficacy is observed in past effectively then
doctors usually prescribe it. Some of the educated patients themselves
demand MNC product because of the general impression that they are better
than the local product. One of the doctors stated, “In my practice, I rather go
for standard medicines because it shortens the length of recovery and
ultimately turns out to be cost effective.”

PATIENT’S OPINION ABOUT THE PRICES OF LOCAL V/S MNC DRUGS

“If the doctors concerned convince the patient about the product
they even buy costly medicine”

The doctors were of the view that patients have no awareness about the
medicines. They don’t know whether a particular prescribed medicine is
produced by a multinational company or by a local company and why it is
expensive. They usually don’t think about the price when it concerns their

11
health but if they belong to a low economic group they request for cheaper
medicines because of their non affordability.

AVAILABILITY OF SMUGGLED (FAKE) DRUGS

“Such drugs are also available in the market but not many chemists
keep them”

Smuggled drugs are also available but usually doctors don’t prescribe them
because it is against the principles of a doctor. It is unauthentic and
unethical to prescribe them as they are not registered with the government
of Pakistan. The government health authorities take serious action against
the doctors and hospitals involved in the prescription and sale of fake
medicines.

2.4: DATA COLLECTION

We are using “Survey Method” because there is no current data available that provide
information about the non-conventional media habit of the consumers.

MEASUREMENT TECHNIQUE:
The measurement techniques that are being used in this research survey are questionnaires that
helped us in eliciting reports of the consumer preferences about different personal care and non-
traditional media that were selected for this particular report.

11
 PART 3: ANALYSIS

3.1: PORTERS FIVE COMPETITIVE FORCES

BARRIERS TO ENTRY

Entering of the potential industrialists is easy, if they have the necessary

finances, because the cost of obtaining the permit and start operations is
very high. However, there is stiff competition among the companies, which
have not only expanded their scope of operations and distribution through
mergers and acquisitions, but also have the necessary know how and long
experience to combat any new entrant.

The lengthy and cumbersome registration process, spanning up to two years

or more, whereby the new companies have to provide the Certificates of
Free Sale, (which confirms the approval for the sale of products in US,
Europe, Japan etc) ensure the sale of product in the parent company (in case
of MNC).

The pharmaceutical industry is a very capital intensive industry. This

requires large amount of investment, and since, we lag behind in the capital
industry, and it has to be imported. Thus, limiting new entrants.

With no stress and emphasis on research and development in our country, it

is most likely that the new entrants will produce a new form of the generic

11
type, already being produced in abundance. Thus, the absence of any
differential advantage over their competitors will further reduce their
chances of survival in the industry.

The risk aversive nature of the industrialists works as a major hindrance to

entry. With the absence of required finances, lack of economies of scale and
stiff competition, the prospective pharmaceuticals manufacturers find the
chances of flourishing in Pharmaceuticals industry very grim.

Only the companies with satisfactory quality and the ability to export their
products will be able to carve a place for themselves. Therefore, the new
entrants must keep in mind the necessity of producing quality controlled
products.

Government is also providing support to the local potential entrants;

incentives, lowering of import duties and relaxation in patent laws being
some.

THREAT OF SUBSTITUTES

The major threat faced by Pakistan’s pharmaceutical industry is that of WTO.

The fast approaching deadline resulting in the removal of trade barriers will
cause an influx of medicine and other Pharmaceutical goods from Korea and
European countries. These products are not only of lower price, but also of
good quality, and will prove to be a good substitute for our locally
manufactured products.

Pakistan’s drug industry is greatly threatened by the presence of smuggled

products in the market. These products, smuggled from Burma, China, India,
Bangladesh etc, in ever increasing quantities, are not only cheap, but also
make wild claims of increase in physical strength in just two days, or
reduction in weight in just five days.

The presence of the following types of drugs also threatens the sale and
popularity of good quality, ‘genuine’ drugs:

Spurious drugs: are drugs by unscrupulous manufacturers, who use the

name and same packaging as that of the copied product, but with low quality
material inside, thus, hampering sales of the original product, and negatively
affecting its image.

Counterfeit drugs: are the ones, which look exactly like the original and also
contain the raw materials used in the original drug, but in a lower quantity.

Substandard drugs: these are the drugs which mislead or misguide the
consumer. For example; by writing on the label that this drug contains 250g

11
of isotonic solution and 150g of sorbic acid, but in reality in contains only,
perhaps, 120g of isotonic solution and 50g of sorbic acid.

Localized drugs: these include all the alternative localized methods of

treatment, example, Homeopathic, Ayurvedic, the genuine maulvis- giving
charms(taweez) and Quranic verses to recite, the fake maulvis, asking for
large amounts of money and claiming to neutralize the effect of ‘supposed’
spells of devil and its magic and Unani.

BARGAINING POWER OF SUPPLIERS

Since the market is highly competitive and there are a large number of
suppliers both locally and abroad for packaging materials, glass bottles and
vials, cartons etc, suppliers have little power to dictate their own terms and
conditions to the buyers.

When it comes to raw material suppliers, the locals cannot bargain due to
their low quality. More so, raw materials other than starch and sugar are not
produced locally and hence have to be imported from either competitive
markets in China and India mainly, or acquired from the parent companies of
MNC’s. 95% of raw material for the pharmaceutical industry in Pakistan is
imported.

BARGAINING POWER OF BUYERS

LOCAL BUYERS:

Only government buying agencies have the buying power when they tender
for medicines in large quantities. Direct consumers however, have little
bargaining power due to their limited income and buying power. Local
pharmaceutical companies compete on the basis of price; however MNC’s
compete on the basis of quality and are usually highly priced. An individual
can only devote a certain part of his income to medicines depending on his
financial status. Hence, he has to compromise on either quality or price.

Another issue of prominence here is the illegal, unlawful black market

created when there’s a shortage in supply of medicines and sellers take
advantage of this opportunity to sell at triple times the price of their product,

11
just to make some quick money. This shows that local buyers have little
bargaining power in the pharmaceutical market.

INTERNATIONAL BUYERS:

Exports for the pharmaceutical industry amounted to around $ 50 million

registering a negative growth this year. Pakistan’s main market constitutes
Nigeria, Kenya, Africa, Srilanka, UK, Russia, Canada etc. In most of these
countries stringent quality control exists. Medicines need to be high in
quality and efficacy to be cleared by the FDA and EU medicine regulatory
bodies. Export rebates given to exporters to allow them to make their
medicines cheap as well as the recent upliftment of GST on medicines have
made our products more desirable in the international market.

3.2: SWOT ANALYSIS

STRENGTHS

INDUSTRY DYNAMISM:

The Pharmaceutical industry of Pakistan has an annual turnover of around 18

billion dollars and it registered 13% growth in 2007, and the industry is
expected to grow by 12-15% in the next 2-3 years.

EXPORTS GROWTH:

11
Exports of locally manufactured medicines have surged to $80 million during
the last few years, which is 6 percent of the total sales of $1.6 billion in the
country. It is the pursuance of better and effective marketing strategies by
the pharmaceutical companies and competitive prices of their products
compared to neighboring countries, pushed the exports figures up.

LOWER PRICES BY LOCAL INDUSTRIES:

Our local industry is marketing products that are researched products of

foreign companies; they just pack the old molecule with new brand name.
But one impact of this is that the prices of such medicines are very cheap as
compared to the brand leader.

TECHNOLOGY:

The Pharmaceutical Industry of Pakistan is a high technology industry, with

many multinationals investing in the industry as well as in the research and
development. Technology is widely available and most of the companies are
ready to import the machinery if it is not locally produced.

MEETING DOMESTIC DEMAND:

The industry is able to fulfill 80% of the domestic demand for medicines; this
saves a lot of foreign exchange of the country

CHEAP RAW MATERIAL:

There is an availability of cheap raw material sources from abroad.

QUALITY OF THE RAW MATERIAL:

The quality of the raw materials and the packaging materials that are
imported are of very good quality.

WORKING CONDITIONS:

The working environment of the pharmaceutical industry is very good. The

working conditions of the industry are very supportive, clean and satisfactory
for the employees. The employees are provided with all necessary
equipment to save them from health hazards and harmful working
conditions. Even the wages given to the employees are very high as
compared to the other industries of Pakistan.

SOUND DISTRIBUTION SYSTEM:

11
The distribution system of Pakistan is very good. There are more than 63,000
pharmacies around the nation (as per Dawn, EBR, Jan 11 2007). Other than
this there are many retailers, hospitals in the rural areas and general stores
in small towns provide medicines to the people there. This excellent system
is able to provide medicines to many parts of the country.

OTHER FACILITIES:

The industry enjoys a very well managed and maintained all round
transportation, packaging and warehousing system.

SKILLED LABOR:

Although there is a lack of PhDs in Pakistan, still there are many skilled
labors working in the industry. Multinationals and good local companies
enjoy a very good pool of skilled managerial and medical professionals. In
fact there has even been the emergence of the new generation of educated
entrepreneurs in local companies.

SUPPORTING INDUSTRIES:

Pakistan has a very good and well-developed ancillary industry. These

industries include the packaging material industry, the glass and aluminum
industry and other products for manufacturing.

QUALITY MAINTENANCE:

There is a reliable nucleus of 75 quality conscious, ethically dedicated

companies. The national industry has improved its basic infrastructure by
strong endeavors, and is now reaching internationally accepted levels of
quality in terms of Good Manufacturing Practices (GMP), quality assurance
standards, efficient modern production systems and tremendous upgrading
of specialized machinery and other plant equipment. Most of the products
are ISO approved. One of the major strengths of our industry is our
consistent quality. This aspect is lacking in many other industries of Pakistan.

RECENT FBR SUPPORT:

Currently Pakistan is exporting its products to over 100 nations. Incentives

given by government that were put into effect gave a boost to the industry.
These incentives come in the form of duty drawback by the revenue division
of the Federal Board of Revenue in 2005.

11
According to the notification, duty drawbacks were allowed at a rate of:

1. 4.15 per cent of the fob value on tablets or capsules;

2. 2.50 per cent of the fob value on liquids or syrups or suspension or

drops or granules in bottles or sachets;

3. 2.62 per cent of the fob value on creams or ointments;

4. 3.31 per cent of the fob value on injections or inject able.

5. 2.04 per cent of the fob value on intravenous solutions.

CHEAP MACHINERY:

Availability of Chinese machinery which is much cheaper as compared to

other countries.

SEVERAL RECENT DEVELOPMENTS WITHIN THE INDUSTRY THAT MADE IT

STRONGER:

Production processes' rationalization and improvements. Over the last ten

years the local companies modernized their plants through significant
investment in capacity building.

1. An increase in sales and marketing spend

2. More emphasis on market research data, especially in National

Companies

3. The driving factor of expansion in the pharmaceutical industry, most

private sector players agree, is surging domestic demand

4. Other factors such as high per unit rate of profitability, favorable

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. –(Dawn, EBR, Jan 22 2007)

5. 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”, an ex-employee of a
multinational who owns and operates a successful company today.
(Dawn, EBR, Jan 22 2007)

11
 IMPROVED IMAGE:

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. This can also be
an opportunity for future.

VARIETY OF PRODUCTS:

The pharmaceutical industry is capable of producing a vast range of

medicines and there are 125 categories of medicines produced locally. These
include all kinds of vitamins, alkaloids, ointments, cough syrups etc.

ISO CERTIFICATION:

Many units are ISO certified and are adhering to US and UK Pharmacopoeia,
according to a study by Frost & Sullivan.

WEAKNESSES

HIGHER PRICES CHARGED BY MNCS:

Foreign drug-makers account for a large part of the drug market in value
terms, with almost half the share, although domestic companies are
dominant in volume terms. This shows how MNCs are able to exploit the
market with higher prices.

LOW EXPORTS:

The small-scale nature of the pharmaceutical manufacturing sector and the

fact that production consists mainly of basic medicines has meant that
Pakistani drug exports are relatively minimal. This leads to the low export
ratio of Pakistan’s pharmaceuticals as compared to total sales, which is just
6%.

COMPETITIVENESS:

Prices of Pakistani products are considerably higher than those of the Indians
and the Chinese products. This undermines the competitiveness of our
pharmaceutical industry. Although a silver lining in the dark cloud can be the
fact that the quality of Pakistani drugs is a lot better than the Indian and
Chinese products.

LIMITED ROLE OF NATIONAL INDUSTRY:

11
The national pharmaceutical industry has suffered from various restrictions
limiting them to just packing and marketing. Multinationals have not
developed new drugs in Pakistan neither have shown any interest in
establishing factories for processing raw material.

IMPORTS OF PHARMACEUTICALS:

Approximately one-third of Pakistan's total consumption of

pharmaceuticals are imported Pakistan is not proficient in the manufacturing
many life saving drugs and there exists a good potential market for many
medicines such as antibiotics, vaccines, drugs for the treatment of
psychiatric conditions, tranquilizers etc. which have to be imported.

RAW MATERIAL AND MACHINERY IMPORTS:

Pakistan can only produce basic raw materials such as corn starch or sugar.
It lacks basic manufacturing facilities. Currently, most companies in Pakistan
still rely heavily on China, India, Germany, UK and Japan for raw material
imports. Although Government has announced a policy to allow companies
to produce raw materials locally, the situation is changing very gradually.
95% of our raw materials are being imported. Even the machinery has to be
imported.

REGISTRATION PROCESS:

The lengthy and unreasonable process of registration is hampering the entry

of many new producers and thus, affecting the progress of industry.

LACK OF R&D FACILITIES:

Lack of research and development in country, together with, absence of

bioavailability facilities and proper labs and technicians make the chances
for growth and diversity in this sector very meager.

HIGH REGULATION:

Over regulation of the industry, with the government following strict price
control policies, is a serious hurdle in the expansion of Pharmaceutical
industry. The pharmaceutical industry happens to be the most highly
regulated industry of Pakistan. The previously made decision to link price
increase with inflation is not being followed, leading the producers of low
priced products to bankruptcy and hence, forcing them to resort to mal
practices. Moreover, many companies also claim that the government is very
interfering and hence not allowing them to develop to their highest potential.

11
 SHORTAGES:

The other major weakness of the industry is the acute shortage of medicines
from time to time. This results from people engaging in black marketing, who
sell the products at many times the original price

POLICY INCONSISTENCY:

Inconsistent government policies are preventing investors from planning

ahead and investing in plant extension, modernization, balancing which are
the essential requirements of this industry.

QUALITY CONTROL:

Lack of any quality control teams and assurance tests, to check on the
quality of the products and making the system more transparent and
effective is another unfavorable trend prevalent in our pharmaceutical
industry.

LACK OF FACILITIES:

Lack of proper storage facilities at chemists and pharmacies exist. Although,

there is arrangements for cold storage at the Pharmaceutical manufacturing
companies, the absence of them at the chemists, which are the final
distributors of medicines, affect the potency of the drugs, and hence,
rendering the process of quality control ineffective.

PACKAGING:

The packaging of our drugs is done locally, which costs very high.

ILL-EQUIPPED PHARMACIES:

The pharmacies and the medical store are neither owned nor operated by
qualified pharmacists. In spite of the law of the country that each medical
store has to have the services of a qualified pharmacist at its disposal,
there’s no implementation of the law.

DISCRIMINATION:

There is a lot of discrimination between domestic and foreign investors,

mainly in the registration.

TRANSFER PRICING BY MNCS:

11
The practice of ‘transfer pricing,’ whereby the multinationals, instead buying
it off the competitive market, purchase the raw materials from their parent
company at significantly high prices. This results in the cost of production to
increase around ten times.

SMUGGLED GOODS:

No government control on the flow of smuggled goods in to and out of the

country.

PATENTS:

There’s no proper understanding and implementation of patents. Even valid

patents are not respected and generic copies are readily available.

Kenya, also provides an investment market to the Pakistani investors, three

or four of those are keen to produce medicines in the country. At present,
$200-225 million two-way trade is going on between both the countries.

OPPORTUNITIES

PROMISING ENVIRONMENT:

The business environment is highly promising, with the liberal government

policies, the industry has plan for expansion. Consistent economic policies
have increased the investor's confidence and various new projects and
expansion plans being undertaken.

COMPETITIVE EDGE:

There are around 92 countries in the world today which do not have even a
single pharmaceutical manufacturing plant. The exports of Pakistan are only
6% of the total production of the industry. Pakistan has huge opportunities to
cater to the world market with its pharmaceutical products. Pakistani
Companies have very good quality products and they are currently exporting
their products to more than 100 countries around the globe. Pakistani
products are even being exported to USA and UK, which have the highest
quality assurance standards in the world. Major exports of Pakistan are to
Asia and Africa, which are still relatively untapped.

PAKISTAN TO SET UP JOINT VENTURES WITH UZBEKISTAN:

11
Pakistan and Uzbekistan have recently on 8th March 2007 has agreed to
establish joint ventures in pharmaceutical industry, manufacturing of
medical equipment and exchange of technology in health sector.

KENYA:

Kenya, also provides an investment market to the Pakistani investors, three

or four of those are keen to produce medicines in the country. At present,
$200-225 million two-way trade is going on between both the countries

COOPERATION WITH IRAN:

An agreement was reached between the Pakistani health ministry and

Iranian health ministry for cooperation in the health sector on January 12
2007. Priorities include the pharmaceutical industry and pharmacies. It will
encourage investment in health sector especially in the field of
Pharmaceuticals, biomedical and surgical equipments and vaccine
manufacturing.

LOCATION

Pakistan enjoys a very unique geographical position which gives it a

strategic position for the market access to Afghanistan, Middle East,
Africa and Asian states.

CHEMICAL ENGINEERS:

Involving chemical engineers specializing in biochemical engineering will

infuse life in the pharmaceutical industry.

VICTIMIZED NATIONS:

The recent war on terrorism in Afghanistan and Iraq presents an

extremely viable prospect for the Pakistan pharmaceutical industry. War in
any country, area or state tends to highly affect the demand for
medicines due to the high incidence of casualties and injured people.

THE PURCHASE OF MEDICINE UNDER GENERIC NAMES:

The Health Ministry has finalized a list of 1,000 types of medicine to be

purchased under their generic names instead of brand names. The list was
prepared by the ministry in consultation with all stakeholders. Medical

11
experts and people in the pharmaceutical industry said the substitution from
medicines’ brand name to its generic name could also lower the drug prices.
The official claimed the government would save 50 to 60 percent of the total
current cost of the purchased medicine.

PAK PHARMA EXPO 2007:

The Pak Pharma Expo 2007 is one of them. It is the first integrated
exhibition focused on Pharmaceutical Industry. The exhibition will
provide a rare opportunity to both local and international manufactures and
suppliers of equipment and service to have in direct contact with the
Pharmaceutical Manufactures in Pakistan.

OBJECTIVES OF THIS EXHIBITION:

1. Serve as a source of providing business opportunities to the various

stakeholders in Pharmaceutical Industry of Pakistan.

2. Coordinate to generate a conducive business environment to facilitate

sales promotion and presentation, technical discussions, business
negotiations, contract signing.

3. Assist foreign companies to participate in the well being of

Pharmaceutical industry in Pakistan. Serve as a knowledge sharing
forum and impart technical know how for Pharmaceutical Industry.

4. Enhance the exposure of local manufactures to the international

participants and visitors to the exhibition.

5. Generate export opportunities and enhance business potential for the

participants.

6. Enhance the country image as the business and investment friendly

state.

HUGE DOMESTIC MARKET

A very large population 152 million people provides the pharmaceutical

industry with enough consumers to target and markets to tap. This is 2.4 %
of the world’s population.

The Government's emphasis on providing health facilities for everyone

ECONOMIC GROWTH

11
An increase in per capita income which has provided greater disposable
income for health related expenditures while general health awareness and
consciousness among the population has increased over the years.

DOCTORS AS PRESCRIBERS

Approximately 56,000 doctors both general physicians and specialists whose

prescriptions are the main sales drivers for the industry

WTO

Export opportunities due to WTO implementation

THE RISE OF THE LOCAL INDUSTRY

Manufacturing and marketing of cheaper new generic drugs by National

Companies has started while : "Products of over 20 multinational companies
are being manufactured by national pharmaceutical units through toll
arrangements.

LOCAL PRODUCTION OF RAW MATERIALS

If Pakistan is able to develop the NAFTA cracking plant it will be able to

produce most of its raw materials locally, which can significantly decrease
the cost of production.

DEMOGRAPHICS

Percentage of the aged population is increasing around the world. This is

resulting is more medicines being consumed and greater dependence on
drugs such as energy supplements, life saving and enhancing drugs.

COVERAGE OF HEALTH ACTIVITIES

Health care facilities and also health and medical insurance coverage are
increasing. This proves to be a huge opportunity for the industry to expand.
Companies are increasingly including health and medical services in their
packages. This is encouraging pharmaceutical companies who are now
increasing their supply to meet the growing demand.

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 NATURAL DISASTERS

The recent earthquake in Northern and Baluchistan areas with its

devastating effects have proved to and will in future also prove to be a major
opportunity for the Pakistani pharmaceutical industry.

HERBAL MEDICINES

One of the major opportunities lies in the area of herbal medicines. Pakistan
has huge intellectual property in this area. The world market for herbal
medicines is increasing day by day and currently it is around $63 billion.

FAVORABLE GOVERNMENT POLICIES IN RECENT TIMES

Tax holidays for setting up of new pharmaceutical plants have been

announced as well as a cut in Government duties on pharmaceutical raw
materials and packing materials. Government is also setting up new
industrial estates specifically for the pharmaceutical industry. It actually took
a number of measures to promote the sector. Except for certain categories,
the government brought into effect deregulation of prices permitting free
plays enabling local companies fixing prices at par with multinationals.
(Dawn, EBR)

MINISTRY OF HEALTH

The Ministry of Health is giving various incentives to the local manufacturing

to develop and to engage in exports. These include export rebates, lifting of
the general sales tax of 15%.

UNTAPPED MARKETS

Many of the areas in Pakistan do not have access to quality medicines.

Therefore they have an opportunity to tap those untapped markets.

THREATS

SPURIOUS, COUNTERFEIT AND IMPOTENT DRUGS

The markets are flooded with products that are bogus and forged, not only
putting the human lives at stake, but also affecting the sales and image of
products that are genuine and unadulterated. Availability of these products
in the market not only bring bad name but also deprives the industry from
revenue- the income from counterfeit products goes to faceless cheaters
who are playing with the lives of innocent people.

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 PATENTS

Today, patent protection is negligible proving that "pirate" is using the

same process as the inventor is a cumbersome and tedious process which is
practically impossible in the current Pakistan legal environment. Piracy
continues to inflict losses on the research-based pharmaceutical industry,
now estimated at $15 million to $20 million per year.

PRODUCT REGISTRATION

Product registration is becoming increasingly difficult in foreign countries.

FDA and EU are carefully scrutinizing drugs before approving them.
Hence, our already low quality products are having a difficult time in
getting clearance in the foreign market. The biggest reason for this is the
lack of bio availability testing in Pakistan, a process by which the potency
and effects of a drug are tested.

COMPETITION WITH INDIA:

India has a market of US$ 1 billion and is Pakistan’s most serious competitor
with respect to the pharmaceutical industry. India with over twenty three
thousand drug manufacturers has a much stronger base and a much-
developed manufacturing industry in comparison to Pakistan. Moreover, the
Indian pharmaceutical industry is aided by government support and
presence of basic raw materials produced locally

PAKISTAN’S BMI POSITION:

BMI’s (Business Monitor International-A market research agency) adjusted

Business Environment Rankings for Asia reveal that Pakistan’s position is
unchanged in 14th place. This is primarily due to the country’s poor
regulatory system, which is rated as one of the worst in the region. This
might tarnish the image of Pakistani Pharmaceutical industry

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 PART4: FINDINGS AND CONCLUSION.

4.1: FINDINGS

The recent upsurge in raw material costs has severely impacted the
Pharmaceutical sector profitability. Though the companies like Abbott, GSK,
Novartis, Aventis (being amongst the top companies in pharmaceutical
sector) are investing significant amount in new technologies to improve
manufacturing efficiencies, they are now very limited in absorbing the
impact of further cost increases. Prices of Pharmaceutical products have not
risen since Dec’01, despite rapidly increasing costs for most of the active
pharmaceutical ingredients and of overheads, thus hindering the expansion
of even the big fishes in the market.

But on the other hand, decision makers are of the viewpoint, that keeping in
view the recent trends during the last two years, where the growth in the
pharmaceutical sector continued in line with the GDP of the country, with
over 400 manufacturing and importing companies competing in a highly
genericised market, having a size of over Rs.70 billion (US$ 1.2 billion),
Pakistani government has started taking the pharmaceutical industry as a
rapidly emerging, export-oriented and most beneficial sector.

Zahid Saeed, Vice Chairman, Pakistan Pharmaceutical Manufacturers

Association (PPMA), shed some light on the development and future
prospects of the pharmaceutical sector. He stated that,” India and China are
two low-cost drug manufacturers. Pakistan, unfortunately, is located between
these two countries. But now, Pakistan is all set for the action. For the past
10 years, the nation has been establishing its drug-manufacturing units,
infrastructure and export capabilities”.

The business improvement initiatives undertaken in the last few years have
contributed towards improved operational efficiencies and cost savings for

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the companies. The beneficial impact of these enhanced business
efficiencies is, however, eroding and will continue to do so unless the
government implements, in a timely manner, the existing notified policy of
allowing price adjustments to offset inflation and devaluation.

4.2: CONCLUSION.

All of the companies I visited have a positive outlook for the industry in
Pakistan and also believed that there is a big room for development.

The industry is reengineering itself to survive and compete in the face of

high costs and no significant price increases. This was supported by the
Abbott interviewee ‘With government not increasing its prices, we have only
one option that is to effectively and efficiently reengineer our processes. Like
for example, we are tying to be cost efficient. All pharma industry has
stopped hiring professionals now. In fact the companies have adopted a new
system of contract bases and automation. In contract basis we pay less and
can fire individuals without issuing notice. In automation, we have heavily
invested and reduce the individuals in our company. For example: a
packaging process in a unit usually involves 30 women, it has now been
replaced with automatic machinery. We are laying off employees. This is
wrong for the economy because standard of living is decreasing as jobs are
decreasing but we have no other option.’

The MNC’s were of the view that large pharmaceutical companies are looking
for effective ways to meet their growing needs and prefer outsourcing R&D
and IT services to low-cost, high output countries.

On the other hand, some recent surprising developments in the

pharmaceutical industry are worth to be mentioned which might be the basis
of key future progress and development in regard to the MNC’s operating in
Pakistan concerned with the pharmaceutical sector.

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It is believed that such decisions have nothing to do with the issue of trust
deficit of the corporate sector on the capability of a democratic government,
rather the companies thinking of wrapping up because their profit margins
and volumes plummeted due to emergence of an efficient local industry in
the country, and the weak Pakistani currency adding to their woes.

This scenario can serve as an opportunity window for the blooming local
pharmaceutical industries to capture the larger chunk of the local market
with quality local drugs, and being cost-effective. On the bigger picture,
these local companies can extend their horizons and penetrate into the
international market at relatively competitive pricing.

Pakistan can still be a major player in this game. We recommend that with a
slight orientation in our mindset, we can bring a change whereby local
companies can go into alliances with international companies willing to do
contractual outsourcing arrangements and establishing local subsidiaries to
utilize our strong intellectual potential in Pakistan. As the PCSIR interviewee
said ‘Companies don’t want to spend the money in R & D hence they buy
patents. They have got to understand that it is not about making profits but
about making products within the reach of everyone.

PART 5: SUGGESTIONS AND RECOMMENDATION.

I recommend that a long-term solution backed by legal should be formulated

to overcome the delays in product registration. The current procedures
should be simplified in such a way that in the cases where the molecule has
already been registered, the new product applicants should be accorded fast
track registration.

In case of the registration of new molecules, the registration processes

should be made fast if the molecule applied for registration has already been
approved by other respectable registration authorities.

My other important recommendations include:

1. Well-equipped, high technology laboratories for bioavailability tests

should be established to make our products international viable.

2. In Pakistan there are only a few raw materials manufacturers, and

even they are finding it very difficult to compete with the international
suppliers. Pakistan should try and develop its own raw materials and
expand its own raw materials manufacturing base by developing or

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 importing high technology capital goods. So it no longer has to depend
on the foreign supplies for essential raw materials

3. Pakistan should seek to invest in research and development. Currently

only 1% of our total revenue is being spent on research and
development. The government should collaborate with pharmaceutical
manufacturers to setup research and development centers which will
facilitate innovation and make our industry more competitive

4. There should be exhibitions to promote and market Pakistan

pharmaceutical products at home and abroad. Participation in foreign
trade fairs is imperative for the success of our industry because this
will improve Pakistan’s image in the foreign market and make people
aware of its products.

5. The government should provide incentives to encourage exports to

foreign countries. These could be in the form of rebates, concession in
duties and the lifting of other kinds of taxes. The government should
encourage people to send their representatives abroad for relationship
building as well as to project a positive image of Pakistan abroad

6. The Government must commit to honoring annual price adjustments

for controlled products in the future, according to an acceptable
formula that will enable the industry to plan for the future with some
confidence

7. Pakistan enjoys a very unique geographical position that gives it a

strategic position for the market access to Afghanistan, Middle East,
Africa and Asian states. For example, Stiefel interviewee informed us
that they had plans to import to Thailand in the near future.

8. Market forces should be allowed to determine the price. If free market

forces are allowed to work freely in this highly competitive market,
companies in order to attain a higher market share in their respective
therapeutic segments, are bound to reduce prices for the direct benefit
of the consumers.

9. To protect consumers' interests the initial price of NCE's (new research

drugs) must also be subject to review of the Price Regulatory Authority.

10. A long-term solution backed by legal should be formulated to

overcome the delays in product registration.

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11. A far greater efficiency needs to be achieved in implementing a
patent examination process and for implementing data exclusivity by
the Ministry of Health. This step will augur well for Pakistan as it will
lead to renewed and expanded overseas investment in Pakistan.

12. Pakistan Government should have long term plans in the field of
health and pharmaceuticals. It should concentrate on preventive
measures rather than extinguishing the fire when it erupts. The
unhealthy and unfriendly regulatory climate

13. The people of Pakistan should be educated so that the issue of

counterfeit drugs should be handled.

14. If some unit is not producing quality drugs it should not be given
a manufacturing license.

15. Pakistan should try and develop its own raw materials and
expand its own raw materials manufacturing base by developing or
importing high technology capital goods.

16. Well-equipped, high technology laboratories for bioavailability

tests should be established to make our products international viable.

17. There is a dearth of qualified experts and PhD’s in our country.

Also there is a scarcity of trained lab operators and pharmacists.
Companies should engage in human resource training to provide the
employees with the relevant expertise to carry out their tasks
efficiently.

18. Pakistan should seek to invest in research and development.

Currently only 1% of our total revenue is being spent on research and
development.

19. There should be exhibitions to promote and market Pakistan

pharmaceutical products at home and abroad.

20. The government should provide incentives to encourage exports

to foreign countries. These could be in the form of rebates, concession
in duties and the lifting of other kinds of taxes.

21. Pakistan should conduct quality assurance and quality control

tests on its drugs. This ensures consistency in the standards of the
product and improves its image.

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22. Countries like Uganda and Ethiopia send their teams to inspect
the drug manufacturing facilities in Pakistan before they’re allowed to
sell drugs to them. Therefore Pakistan should also formulate a system
of control for imports of drugs into the country. This should be done to
inspect and ensure that the imported drugs are of satisfactory quality.

23. A special police team should be made to prevent the illegal

activities of smugglers. These people should be reprimanded
accordingly so that this menace is completely eliminated from the
society.

24. The drugs act should be more business friendly. The drugs act
should become less harsh and less rigid.

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 BIBLIOGRAPHY:

1. Dr. Aqeel Baig

MBBS , FCPS ,M.phil, PhD.

Baqai University

2. Dr. Tajuddin Patel

MBBS , MS , M.Phil.

National Institute of Cardio Vascular Diseases

3. Mr Zahid Saeed
Vice Chairman, Pakistan Pharmaceutical Manufacturers Association

4. Nadeem Khan
Owner Brick Pharma- Pakistan

5. Dr. Mohammed Ashfaq Sheikh

MS(Pshych) – Pshychologist.

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 APPENDIX

Mr. Akbar Khan, Head of Supply Logistics, Sanofi-Aventis Pakistan

Source: Economic Survey of Pakistan, www.finace.gov.pk

Source: Current market Overview 2011 by Mr. Farhan Qureshi

Sources: Wyeth Pharmaceuticals

Source: Pakistan Medical Association 2010 report

PPMA- Pakistan Pharmaceutical Medical Association 2011 Report

Pakistan Pharmaceutical Market Intelligence Report, Published by Espicom Business Intelligence

IMS Health Report 2009

Source: Pakistan Pharma- Is it on the right path?- By: Kapil Parab-

www.pharmabiz.com

Source: Pakistan Business Review October 20011 page 56

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 REFERENCE.

www.finace.gov.pk

www.pharmabiz.com

www.google.com

www.scribd.com

www.pakbizreview.net

Pakistan business revies 2011 october edition.

MMS – Medical annuall magazine. (2010)

www.wikipedia.com

www.statguru.com

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