Pharmaceutical Industry: The Impending Collapse

By Khan, Jawaid Tariq | Economic Review, September 1991 | Go to article overview

Pharmaceutical Industry: The Impending Collapse


Khan, Jawaid Tariq, Economic Review


Pharmaceutical Industry: The Impending Collapse

The pharmaceutical Industry is a key industry. Unfortunately due to the flawed policies, based on ignorance of the importance of this vital industry on the part of past governments, the industry has faced and braved many a crisis. Scores of committees were formed by the previous governments to resolve the myriad problems but nothing has been done as result the Industry has reached the situation of near collapse. The present government, however, has taken notice of the crisis and made efforts to save the situation. Such efforts have been, however, half hearted and when the measures taken by the present government were about to give some lease of life to this dying industry, the implications of the Budget 1991-92 not only withdrew the life support system from this ailing industry but also added to its problems.

It is felt that in a year's time it will not be possible to get any genuine medicines in Pakistan as the genuine and licensed pharmaceutical manufacturers would have been forced to close down by then. The mushroom growth of clandestine factories making fake and spurious drugs may be due to the fact that many genuine medicines are not available in the market because these may not economical for the licensed manufacturers to manufacture.

On the one hand the government wishes that the manufacturers should provide medicines at economical rates to the common man while on the other, the government is doing all it can to obstruct its growth, treating this vital industry as luxury industry, burdening it with all kinds of taxes, restricting it with regulations, instead of providing the support to achieve the common goal of the cheap provision of medicines to peoples and at the same time ensuring fair return on investments.

Since the industry is price controlled, prices are not allowed to be revised keeping in view the inflation, fast depreciating Pak Rupee value, rising costs of production, management, administration, etc. At the same time this key industry is made to pay the same import licence fees, duty on import of machinery and spare parts, electric, water and gas charges like any other industry, i.e. cosmetics and other luxury goods. It is an established fact that if the prices of raw material cannot be controlled, value-added end cost cannot be reduced or controlled. The serious problems being faced by the pharmaceutical Industry are given below:

Price Control

The price of each medicine of each company is fixed by the government after long deliberations. Mostly these prices differ substantially from company to company for each formulation of exactly the same ingredients and size. Most painful is the fact that prices are not allowed to be revised according to ever rising costs of production, material, wages, power charges, continuing depreciating Pak Rupees thus causing loss to the manufacturers.

Suggestions:

1. The best solution is to deregulate the price control with exception of a few life saving drugs, a list of which shall be drawn in consultation with the PPMA, and let the forces of free economics play their role. Prices of some drugs may rise in the beginning but with free competition, the prices are bound to come down to realistic levels, or, the Self Regulatory Formula of pricing suggested by PPMA since many years be implemented. 2. Each licensed drug manufacturer be allowed the same price as given to any other manufacturer for the same formulation of same strength and contents.

Drug Act 1976

The Drug Act 1976 is full of anomalies. It requires to be revised immediately in consultation with PPMA.

Expenses on Promotion:

The restriction on expenses on promotion of drugs be removed totally or if at all the government is determined to fix it, it shall be done on a scale according to turnover of companies in consultation with PPMA.

Self Reliance:

h The success of self-reliance requires

that the multinational pharmaceutical

companies operating in Pakistan be

allowed to manufacture only the drugs

of their own research, or those manufacture

in their home countries. …

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