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July 14, 2020

Drug pricing dilemma


July 14, 2020

LAHORE: Our planners should realise that pharmaceutical business is not a philanthropic exercise, but is a commercial venture. Drug prices are regulated the world over under this concept, allowing fair margins to drug manufacturers to ensure sustainable supplies.

Successive governments manipulated drug policy as a public appeasing issue. They neglected the fact that there are millions of patients in Pakistan that depend on various life-saving drugs to survive.

The non-availability of these drugs is a bigger issue for them than the price. Regulating drug prices is in the interest of patients, but leaving it on sole discretion of regulator instead of a transparent formula strangulates the industry and forces it to discontinue vital drugs.

A consensus for setting the medicines prices was arrived on the order of the Supreme Court that directed the Drug Regulatory Authority of Pakistan (DRAP) to sit with the stakeholders to revisit and revise the Drug Pricing Policy 2015.

In June the 2018, drug pricing policy was notified, and was endorsed by the Supreme Court as a consensus policy between the stakeholders and the DRAP. Taking decisions without proper homework or logic is the hallmark of this regime. Drug pricing issue has taken centre stage again, as the federal government is amending section 7 of the 2018 DPP to do away with the drug pricing mechanism for automated, inflation adjusted price increase that was made after much deliberation with the stakeholders in 2018 on the orders of the Supreme Court of Pakistan.

This system allowed companies to make limited annual adjustments to offset the impact of inflation and devaluation. Reverting to an ad-hoc system which has previously encouraged graft, from this transparent and equitable mechanism, is questionable.

In past several years, a number of essential and vital drugs disappeared from the market when commercially viable price was denied to the manufacturers. After the 2018 drug policy, these drugs started reappearing as both local and multinational drug manufacturers restarted.

Still the operational hiccups at DRAP have created undue shortages not based on price but on delayed approval. DRAP has already struggled in the past without a permanent CEO of the authority.

It also failed to perform basic tasks like appointing federal drug analyst for release of biological products, who was later appointed after a month delay in back dates. The post is again lying vacant, as the term ended on June 19.

More than 400 drugs await approval since February 2019 despite having all the technical testing done by DRAP. Cabinet approval lingers on. It is no secret that essential vaccines such as MMR, varicella, rubella, rabies, typhoid, Hepatitis A, are either very short in supply or have disappeared altogether.

This has not only encouraged smuggling, but has literally left many patients with no recourse. The regulator is notorious for delaying registration of new molecules. Registration of some drugs is pending since 2014.

Toll manufacturing is common in India that produces drugs worth $36 billion through toll manufacturing. In Pakistan getting permission for toll manufacturing is an uphill task.

It is worth noting that there are 70,000 registered medicines in the country, but currently only 10,000 are being produced, as rest of the registered drugs are not commercially viable at the price approved by the regulator.

Both domestic and multinational manufacturers have stopped producing these drugs. The prices allowed to the domestic producers are generally less than their foreign peers. These manufacturers require small increase in rates to resume production. The denial deprives the patients of getting any treatment at all.

For the rich and affluent smuggled or imported drugs are available that cost up to three times the price approved for domestic manufacturers. On paper keeping a lid on drug rates is a public appeasing gesture, but in reality it is serving the elite and depriving the poor of any treatment.

Poor die of thyroid malfunctioning, breathing problems or even dog bites as the local production of the essential drugs has been discontinued. Without the annual price increase, numerous more locally manufactured products and imported products will disappear

An interesting fact about pharmaceuticals in Pakistan is that there are750 registered companies, including 21 multinationals. The domestic companies own 60 percent of the market share, while the rest is held by multinationals or catered to via imports.

Total medicine market in Pakistan is worth $3.1 billion. Ironically top 100 companies enjoy 95 percent market share, while the rest of the 650 companies own a meagre five percent of the market.

Another fact is that top 50 companies enjoy 89 percent of the market share, while the next 50 companies have six percent. Pakistan’s pharmaceutical exports are worth $211 million, while India exports $19 billion worth of pharmaceuticals.