The pharmaceutical manufacturing sector of Pakistan, which numbers in +750 units, is facing a crisis. This industry is heavily regulated by the Government of Pakistan. The pharmaceutical industry is very important for Pakistan because it ensures availability of latest medicines at low rates, all year round, to the people of Pakistan and more importantly to the Armed forces of Pakistan. The industry imports its raw material from abroad, which are priced in US dollars, since local chemical manufacturing sector is still very small.
While the exchange rate of US dollar has increased by 278% since 1996, the Government of Pakistan has not allowed the increase in price of medicines. Even after much delay, when in 2013 the Drug Regulatory Authority of Pakistan (DRAP) allowed a modest 15% increase in medicine prices, the Prime Minister Nawaz Sharif had to intervene and stop this order the very next day. He was probably under pressure with mass protests against high inflation in Pakistan and ever increasing exchange rate of US dollar.
This stalemate has already reduced the production capacity of the Pharmaceutical industry and threatens to completely destroy the entire industry.
But there might be a short term solution for the Prime Minister. The PM can allow the increase of 10% to the manufacturing companies, without increasing the price of medicine to the people of Pakistan. This 10% increase can be made in the difference of the “Retail Price” (RP) and “Trade Price” (TP) that are specified by the Government of Pakistan.
The Trade Price is what the manufacturer gets, while the Retail Price is what the consumer has to pay. The difference, fifteen percent, is the profit of the pharmacy shop. The pharmacy sector is superficially regulated and get all their products on credit from the manufacturers. Since the sector does not create employment, pay taxes or even invest in Pakistani industries, therefore they should not be flagrantly allowed a 15% profit on all medicines sold in Pakistan. Instead the difference between the TP and RP should be brought down to 5%, which would effectively give the manufacturing industry a 11.7% increase in their product price, while not increasing the price of medicine in Pakistan.
This is a short term solution, as the Prime Minister still has to deal with the real issue of upto 278% increase in raw material cost for pharmaceutical industry in Pakistan. The PM has to eventually allow actual increase in medicine prices in Pakistan and believe that the same people who pay 10-20 lac Rs more for new cars since 1999, will be able to afford high quality, higher priced medicines for their health.
SHAHRYAR KHAN BASEER
Peshawar
