A simmering price dispute between Pakistan’s pharmaceutical industry and the Health Ministry has resulted in an acute shortage of critical medicines, forcing patients to rely on smuggled and potentially counterfeit drugs at increased costs.
Grappling with rising production costs owing to skyrocketing inflation and massive devaluation of the local currency in recent years, the industry demands a 38% increase.
The government, however, has rejected the demand, propelling pharmaceutical companies to either stop or go into a limited-scale production of scores of essential and non-essential medicines.
Adding salt to the injuries, the importers have stopped or drastically reduced the imports of about 100 crucial medicines related to general anesthesia, plasma-derived products, vaccines, oncology products, and biological products, causing a dearth of medicines across the country.
“Some of these medicines are either not being imported or are available in the market on a limited scale just because of the legal binding,” Abdul Samad, an office-bearer of the Pakistan Chemist and Drugs Association, told Anadolu, citing a government law that binds an importer to not completely stop importing medicine for which he has been granted a license.
“Most of the importers are nowadays importing a minimum quantity of dozens of essential and non-essential medicines just to keep their licenses intact. Otherwise, it’s no longer a profitable business for them due to a huge devaluation of the rupee against the dollar,” he said.
Samad cited the coronavirus pandemic and the Russia-Ukraine war as key reasons behind rising prices for products on the international market, primarily because of, and an unprecedented rise in global inflation
‘Worst is yet to come’
Increasing costs of fuel, electricity, freight charges, cold chain maintenance, packing material, and a cumulative 4% non-adjustable sales tax at the import stage, have “seriously” jeopardized the sustainability of the medicine business in Pakistan, according to Samad.
Farooq Bukhari, chairman of the Pakistan Pharmaceutical Manufacturers Association, defended the demand for an “inflationary price adjustment,” which, according to him, is a must due to a dollar-rupee disparity and skyrocketing inflation.
“The (local) pharmaceutical industry is on the verge of collapse because of no corresponding adjustment in pricing despite a 60% increase in the materials’ cost in recent years, ” he told Anadolu.
The rupee, in recent months, has hit an all-time low at 286 rupees against $1, becoming one of Asia’s weakest currencies. It was Rs 188 against $1 until April 2022.
Islamabad is reeling from an acute balance of payments crisis, desperately seeking to secure external financing, with foreign reserves falling to slightly more than $4 billion.
Following the sharp depreciation in the rupee, Pakistan’s consumer price inflation jumped to 31.5% in February, its highest since June of 1974.
“When we demanded a 38% raise, a dollar was Rs235. And now it’s Rs286, which means even this 38% increase will not be enough,” said Bukhari. “However, we are still open to any government offer in this regard.”
If the government does not bow to the manufacturers’ “logical” demand, he warned, pharmaceutical companies would be compelled to shut down their units in the country, risking more than 1 million jobs.
“We have only one month (left) to take a decision as currently, we are using the raw material, which we have in the pipeline to produce medicines, ” he said.
“Things will start going worse after one month if price adjustment demand is not met,” he said.
Accusing the government of Prime Minister Nawaz Sharif of “seeing this purely economic and logical issue through the prism of politics,” Bukhari said 1,300 local brands combined have communicated to the government that they cannot continue their businesses at the existing cost mechanism.
“There is a 200% increase in the prices of flour, oil, vegetables and other essential items. But the government is not ready to accept our legitimate demand just to gain political mileage,” he said.
Demand is ‘justified to an extent’
Sharif, who outright rejected the price hike demand in September, has set up a committee led by Finance Minister Ishaq Dar to thrash out the issue.
According to the 2018 pricing policy, there is a yearly 7% and 10% inflationary increase in the prices of essential and non-essential drugs, respectively.
Also, there is a three-year cap on the augmentation of medicine prices, which manufacturers and importers want “readdressed.”
Health Ministry spokesman Sajid Shah said the government is fully aware of the situation and will make a decision keeping the masses and the pharmaceutical industry’s interests in view.
“The ministry and the regulatory authorities understand the problems the pharmaceutical industry is facing due to the current economic situation, especially the dollar’s appreciation. But, simultaneously, we have to protect the interests of 220 million (Pakistan’s population) as well,” he told Anadolu.
Waqar Bhatti, an Islamabad-based writer, who frequently writes on health-related issues, dubs the pharmaceutical companies’ demand “justified to an extent.”
He told Anadolu the costs of production of 200 locally-produced medicines have already surpassed their maximum retail prices set by drug regulatory authorities.
Bhatti added that the maximum retail prices of 100 imported drugs are no longer economically viable due to the dollar-rupee disparity.
Nevertheless, he said the raw materials of “many” medicines have been cheaper in recent years due to global competition, which is earning huge profits for local manufacturers.
Government and industry should share burden
Pakistan Medical Association (PMA), a nationwide body of health professionals, is opposed to the idea of inflating prices, though it acknowledged problems with which the pharmaceutical industry is grappling.
“Some of their points are valid and we fully acknowledge them. But the PMA is a patient-friendly body, and it cannot support an increase in the prices of the drugs, considering the ongoing economic conditions of the masses,” PMA President Dr. Usman Mako, told Anadolu.
“We suggest that instead of increasing prices, the government and the pharmaceutical industry together share the burden of inflation and rupee devaluation,” he said.
Asim Rauf, the head of the Drug Regulatory Authority of Pakistan (Drap) did not respond to a request by Anadolu.
A senior Drap official, who did not want to be named, claimed that pharmaceutical companies are “not exactly in loss,” but their profits are shrinking.
“There is an estimated loss of 20% – 25% loss the pharmaceutical companies are currently enduring due to the dollar-rupee disparity and rising inflation. But if they say they are not in a position to run their businesses, it’s not true,” he told Anadolu.