He, however, admitted that the increase in drug prices was caused by devaluation of the rupee against the dollar, thus pushing up the cost of imported raw material, besides increase in raw material prices in world markets.

“The government should check their margins first,” he said, adding that the medicine makers provide some chemists 15 per cent margin as per rule, while some chemist stores are being given 25 per cent margin, which is against the law.

He said PMA has always criticised the rising price trend in medicines. It is not involved in the mechanism exist between the manufacturers and the health ministry through which drug prices are raised.

Dr Aamir said that when a company, after taking patent right for 10 years, introduces a medicine at Rs10 in which Rs8 is included for research and development (R&D), which means that the actual cost is Rs2.

After end of 10 years of patent right, another company brings out same kind of medicine at a price of Rs9 or Rs10 despite not spending any money on R&D.

He said prices of various medicines had gone up in the last 20 days. Syrups like Brufen, Calpol, Mucaine, Polycrol and Motallium, injections like ringrloctate, dextrose water, normal saline etc have become costlier by 25-30 per cent.

He said various vaccines for children and other medicines are short in the market, which signals a possible rise in their prices.

Reacting on the issue of higher margins, chairman Pharma Bureau Tariq Wajid, told Dawn that the last across-the-board price adjustment of three to four per cent was granted to the industry in December 2001 and since then there has been no price revision. Inflation over the same period (up to fiscal year 2009) has been around 92 per cent. Energy, fuel, packaging costs and wages have soared resulting in a steep escalation of production cost. Added to this is the impact of a weakening rupee (42 per cent depreciation in value) on the import of essential raw materials.

He added that these factors combined create an unsustainable business model. That is the reason why several blue chip, Fortune 500 multinational pharma companies, have exited Pakistan over the last few years.

Mr Tariq said a transparent drug pricing policy based on comparison of prices with neighboring countries will eliminate misperceptions of higher prices and higher margins.

“Currently, the gross margins of pharmaceutical companies quoted on the stock exchange are lower than other segments operating in Pakistan, including certain companies in the public sector,” he added.

Drug prices are controlled by the ministry of health. Because of increase in raw material rates and other factors, prices of some 400 products were adjusted on an average by 10 to 15 per cent, which is hardly 1.5 per cent per annum.

There are about 45,000 registered products, out of which the prices of only 400 products have been adjusted, he said.

These adjustments are done under a process called hardship cases hearing by the ministry to improve access to these medicines and avoid acute shortages.

Mr Tariq claimed that medicine prices in Pakistan are amongst the lowest in the world. Today, more than 42 per cent of pharmaceutical products are less than Rs5 per dose, which is less than 2.5 per cent of the minimum daily wage.

The problem in Pakistan is that the government allocation to health is one of the lowest in the world (0.6 percent of the GDP) - because of this there is extremely low per capita medicine consumption in Pakistan, Rs500 per annum, he added.

On shortage of medicines he said that all pharma bureau member companies are continuously supplying their products to meet local demand. However, some of the essential drug list products prices are so low compared to other countries that they are smuggled out by “khepias” creating shortages for Pakistani patients and access problem leading to black marketing

Mr Tariq said it is extremely important to benchmark local prices with the prices in the region in the new policy framework.

The government should urgently develop a fair and transparent pricing policy. Otherwise problem of shortages will exacerbate creating acute problem of availability of medicines, he added.

On increase in multivitamin prices, PB chairman said due to extraordinary rise in prices of active raw materials for vitamins, all the vitamins products had become unviable for the manufacturers. Therefore, the government has provided the relief of adjusting prices upwards to a maximum of 25 per cent to all companies manufacturing vitamins. There are about 758 brands of vitamins registered in Pakistan.

In most countries prices of vitamins are not controlled, in fact this category is considered OTC (over the counter) and is, therefore, totally deregulated.

The government must look into this aspect as well in its new pricing policy. They should move towards partial deregulation of medicines, again benchmarking regional countries.

He further said spurious and counterfeit drugs are a very serious issue as the lives of patients are at risk. Controlling counterfeit, sub-standard and spurious drugs is the prime responsibility of the health ministry.

In this regard, the ministry has mobilised its team of drug inspectors and made few recommendations to the ministry of finance on increasing the number of drug inspectors and quality control labs. Also efforts are being made to build the capacity of this entire unit to enforce Drug Act rules and minimise the menace of counterfeiting and sub-standard drugs.

On the industry side, the pharma bureau has worked on some market-based mechanism e.g. creating awareness of counterfeit problems, incorporating holograms to make it difficult for counterfeiters, disseminating simple tips etc.

The companies are also engaged in educating the general public and retailers about the minimum standards to be maintained by supply chain in order to comply with Drug Act and rules in Pakistan. Much of this work is in process today.

On new drug policy, he said currently there was no predictable and defined drug pricing policy. In the absence of a policy and major changes in the market dynamics of the cost of doing business it has become imperative for the government to address this issue urgently. This will avert a major crisis in the pharma industry.

“We should not wait for the crisis to occur and then react. We have seen some early signals in Pakistan's investment climate three MNCs have divested in the last few years. These companies had been in the country for the last three decades and their exit from Pakistan does not help in bringing direct foreign investment to the country or building Pakistan's image,” he said.

Drug shortages provide perfect honey pot for counterfeiters and spurious manufacturers and sellers. In the new policy, pharma bureau is discussing measures to address these issues.

Some of the recommendations are partial deregulation of the pharmaceutical industry, while having an absolutely transparent, efficient and easy to implement mechanism of a controlled segment. This can be achieved by comparing prices in neighbouring countries; each and every member of the society and stakeholders will be able to verify the facts.