On Sept 22, the federal cabinet approved the increase in the prices of 94 life-saving and essential drugs. This increase ranged from 15 per cent to more than 100pc. These medicines included ones used for the treatment and management of cancer, blood pressure, heart diseases, diabetes and glaucoma.

In last decade, many pharmaceutical products became unviable to manufacture owing to increasing inflation, rising cost of operations and runaway exchange rate. Many products were discontinued, which created severe medicine shortages in the market.

In a statement, a representative from the pharmaceutical industry confirmed that the increasing cost of production and unrealistically low prices enforced by the regulator meant that the discontinuation of the production of some of the essential medicines had become inevitable. It is clear that the manufacturing costs have significantly risen in the last 10 years. The minimum wage for the unskilled workforce has also more than doubled in the same period. The cost of utilities and an increasing foreign exchange rate also independently created an outflow of capital. The value of dollar has gone up more than 50pc in the last three years and over 95pc in the last decade.

It has significantly impacted the cost of raw materials as 95pc of active pharmaceutical ingredients (APIs) and other raw materials used in the manufacturing of medicines in Pakistan are imported. This is a serious concern for the viability of any business. The void in the market created due to the unavailability of essential medicines encouraged the influx of smuggled and sub-standard products into the country. The decision to increase drug prices was based on these facts to ensure public safety and equitable access to medicines.

The unavailability of essential medicines encouraged the influx of smuggled and sub-standard products into the country

Does the latest price increase mean that medicines are now too expensive? Let’s take the example of a glaucoma medicine, acetazolamide, which received a price increase of 265pc. These medicines were sold at the rate of Rs2 per tablet before they were discontinued. Their unavailability to glaucoma patients could lead to blindness. Their discontinuation created a severe shortage of glaucoma medicine and encouraged illegal, unapproved or unlicensed products that were sold in the market for up to Rs100 per tablet.

Glaucoma is the second leading cause of blindness. It has been reported that there are more than 2m glaucoma patients in Pakistan. Almost half of them have already lost their eyesight permanently. Following the approval of a 265pc price increase, pharmaceutical manufacturers in Pakistan will now be able to produce and supply this product at the maximum retail price of Rs7.30 per tablet, which sounds reasonable.

Medicine prices are tightly regulated and controlled in Pakistan unlike many countries. The maximum retail price for any medicine is set by the regulatory authority after a vigorous scrutiny. The approval process also entails that manufacturers may raise the prices of essential medicines equal to the 70pc increase in the consumer price index (CPI).

The survival of the local pharmaceutical industry in Pakistan relies on balancing manufacturing costs with market prices. To keep the manufacturing costs low and avoid a significant price increase, the pharmaceutical industry has always urged the government to provide special subsidies on utilities and import duties on APIs, excipients, packaging material, machinery and equipment.

The Orphan Drugs Act in the United States and the Regulation (EC) No 141/2000 in the European Union are an example where governments ensured the supply of medicines for rare conditions or those which were not economical to produce. A similar process can be developed in Pakistan to identify medicinal products and diseases that can be assigned the orphaned status. The government can then take measures to ensure their uninterrupted supply and equitable access.

In response, the government should ensure that the pharmaceutical industry must introduce new products and increase exports to offset the costs.

The export market has become increasingly competitive over the past decade as pharmaceutical products are produced in India and China at a very low cost. It is indeed difficult for Pakistani products to compete in the international market particularly when such medicines rely on 95pc imported ingredients. The inability to produce drugs and other pharmaceutical raw materials locally has been a major limitation.

The pharmaceutical industry has traditionally focused on small molecule–based classic products. The only way to win over the export market is to leap into the next generation of pharmaceutical products. The industry should expand its infrastructure and acquire the capabilities to manufacture high-value pharmaceutical products such as functional materials, biopolymers and recombinant DNA technologies to produce therapeutic proteins, antibodies and vaccines. There is a huge export potential if Pakistan can locally produce and supply biosimilars and biobetters of high-value blockbuster drugs.

Covid-19 has been a great challenge globally, but it also offers an opportunity for Pakistan’s pharmaceutical industry to acquire the core capabilities for vaccine manufacturing. Even if the manufacturing formulae were given to us for free, we couldn’t manufacture the Covid-19 vaccine locally. The acquisition of vaccine manufacturing capabilities can, therefore, be a first leap towards the production of next-generation, high-value pharmaceuticals in Pakistan. n

Dr Merchant is a subject lead in pharmacy at the University of Huddersfield in the UK. Dr Hussain is the director of the Institute of Business and Health Management at the Dow University of Health Sciences, Karachi

Published in Dawn, The Business and Finance Weekly, December 7th, 2020