Pakistan Pharmaceuticals and Healthcare Report Q2 2010

Pakistan’s macroeconomic indicators have deteriorated significantly since Q110. The rupee has depreciated against the US dollar, GDP projections have been downgraded, inflation has increased and fiscal expenditure has contracted. Therefore, Pakistan’s US$1.61bn pharmaceutical market is now expected to post a 5-year compound annual growth rate of 8.95%, down from 9.39% forecast in the previous quarter.

BMI’s Burden of Disease Database (BoDD) reveals that number of disability-adjusted life years (DALYs) lost to communicable diseases - such as tuberculosis and measles - in Pakistan during 2009 was 19,369,492. This is significantly more than the number of DALYs lost to non-communicable diseases (15,255,144). However, as the country’s economy grows and life expectancy increases, this situation will reverse.

The pharmaceutical pricing regime in Pakistan is typical of an emerging market and far below international standards. Both generic drugs and patented products are subject to price controls. The maximum retail price (MRP) of a medicine is determined using a formula that incorporates manufacturing costs and retail markups. When pricing imported medicines, the cost of freight is also included.

In BMI’s Asia Pacific Pharmaceutical Business Environment Ratings (BERs) for Q210, Pakistan has improved both its position and score. The country’s rating has increased from 37.0 in Q110 to 40.0 in Q210, due to a positive re-assessment of the value and growth of its pharmaceutical market. As a result of this change, Pakistan has swapped positions with Bangladesh, which is now in 15th - and last - place. Pakistan’s scores for Country structure, Market risk and Country risk are unchanged from the previous quarter. Demonstrating the unattractive nature of the market, Pakistan’s component scores are all well below the regional averages.

Further evolution of the healthcare insurance sector was seen in November 2009, when the Aga Khan Agency for Microfinance (AKAM) established a healthcare insurance service in Pakistan. The First Microinsurance Agency (FMiA) offers three products in conjunction with an education programme. Due to improved access to healthcare, there will be some commercial upside for private hospitals and manufacturers of affordable generic drugs.

Healthcare spending in Pakistan is expected to increase from PKR226.5bn (US$2.76bn) in 2009 to PKR257bn (US$2.86bn) in 2010. Due to depreciation of the rupee, this equates to growth of 3.6% in US dollar terms and 13.5% in local currency. Spending on healthcare as a percentage of GDP is 1.73%, well below both the regional (5.12%) and global (7.14%) averages.