Pakistan Pharmaceuticals and Healthcare Report Q3 2009

Pakistan’s pharmaceutical expenditure was valued at PKR127bn (US$2bn) in 2008. Between 2009 and2013, BMI forecasts that the market should grow at a nominal CAGR of 12.7% in local currency to reachPKR230bn (US$3bn) in 2013, with population growth being a major driver. However, with inflationexpected to average 9.9% over the forecast period, drug market growth is likely to be negative in realterms. Our forecast has been downgraded for Q309 in light of the worsening global economic situation.We expect both prescription and OTC markets to be hit in Pakistan, since the majority of healthexpenditure continues to be financed out of pocket, leaving market growth vulnerable to deterioratingeconomic conditions.

BMI’s updated Business Environment Ratings for Q309 highlights the challenges faced bypharmaceutical companies operating in Pakistan. The country is ranked 14th out of 15 markets assessed inthe Asia Pacific region, with only Vietnam considered less attractive. The country’s unstable political andeconomic situation pose significant risks to the operating environment, while the pharmaceuticalregulatory situation, most notably patents, remain substandard.

Despite the challenges, Pakistan has a substantial pharmaceutical manufacturing industry, which islargely geared towards supplying the domestic market. According to the Pakistan PharmaceuticalManufacturers Association (PPMA), domestic manufacturing supplies 70% of the country’s demand forfinished products, a figure that is supported by trade data from the UN Commodity Trade StatisticsDatabase (Comtrade), which showed that imports only accounted for 20% of Pakistan’s pharmaceuticalconsumption by value in 2007.

In March 2009, the president of the PPMA, Zahid Saeed, claimed that the local pharmaceutical industryspent PKR107bn (US$1.3bn) on manufacturing facilities, which he equated to a saving of about US$3bnin foreign exchange on the import of medicines. The government is largely supportive of pharmaceuticalmanufacturing; however, it has recently reduced protectionist import tariffs in a number of therapeuticareas - recognition that domestic manufacturing is restricted to low-tech, high-volume production.

Pakistan’s health indicators are generally poor, particularly in rural areas, indicating that one of the majorchallenges for the government is to improve access to healthcare. Pharmaceutical expenditure remainslargely funded out of pocket, meaning generics are popular and expensive treatments are unaffordable formany on low incomes. Infectious disease remains a problem, as does malnutrition. However, noncommunicablechronic diseases such as diabetes and cancer are on the rise, especially in cities.