Pakistan Pharmaceuticals and Healthcare Report Q1 2009

For this quarterly update, BMI has extended its forecast for the Pakistan pharmaceutical market throughto 2013. Over the next five years we expect sales of patented products, generic drugs and over-thecounter(OTC) medicines to increase from US$1.8bn to US$3.6bn.

To reduce sub-standard medicines reaching the market, the government announced in June 2008 that itwas planning to establish the Drug Regulatory Authority. With start-up funds of PKR4.3bn (US$55mn),the body will issue production licences and monitor the quality of medicines.

It was revealed in October 2008 that Hilton Pharma would merge with Sami Pharmaceuticals. The dealis significant because it is the first time that two local companies ranked in the top ten have merged.While foreign firms can ride out difficulties in Pakistan by drawing on resources from head office, localplayers are seeing their margins evaporate and contemplating going into the red. The main problem is therising cost of production. Electricity tariffs have been increasing, the cost of raw materials - mainlysourced from China - has grown, wage bills have expanded and transportation charges are escalating.

Relief cannot be found through exports either because the rupee has devalued against the dollar.The Pakistan Chemists Retailers Association (PCRA) categorically opposed pharmaceutical companies’demand to raise drug prices in November 2008, calling it ‘ruthless cruelty to be meted out to the poorpatients’. It also demanded the establishment of a commission to review all previous rises in drug pricesallowed by the government.

To combat meningitis and pneumonia, Pakistan launched a Hib (pentavalent) vaccine scheme in July2008. The preventative agent will be administered free of charge to every newborn child as part of theExpanded Program on Immunisation, which saw vaccination drives against polio, measles, diptheria,pertussis and tetanus in 2007.

The operating climate is deteriorating. In October 2008, Pakistan’s Daily Times quoted ‘well-informedsources’ within Pakistan’s pharmaceutical industry that had seen confidential papers circulated byBristol-Myers Squibb, which stated that the company is seeking a buyer for its local operations.