Pakistan Pharmaceuticals and Healthcare Report Q4 2008

In BMI’s Business Environment Rankings for Q408, Pakistan is once again found last out of the 14markets assessed in the Asia Pacific region. While its business environment continues to be marred bylow per capita healthcare and pharmaceutical spending, regulatory shortcomings (including strict pricingcontrols) and an unsettled political situation, the rapid population increase does offer some potential forpharmaceutical market growth. However, even this positive is overshadowed by the fact that publicfinances are not sufficient to support healthcare modernisation if the population growth goes unchecked.

While the government has made efforts to shift some of the financial responsibility to the private sector, itis clear that such services remain out of reach for the majority of low-income and rural populations.In fact, according to the World Health Organisation (WHO), around 423,000 people in Pakistan arepresently in need of urgent healthcare. Flooding and violent unrest in the country have forced the peopleto relocate to temporary and overcrowded housing, leading to outbreaks of communicable diseases.

Additionally, efforts to improve healthcare are likely to be derailed by unsustainable rates of populationincrease. The present situation where every woman is having 3.8 children on average is putting a strain onhealthcare facilities, basic infrastructure as well as agricultural land. While Pakistan’s prime minister isastute enough to realise that two children per woman is an overly ambitious goal, he recently unveiled aplan to reduce annual population growth from 1.80% to 1.55% over the next five years. Welfare schemesare to receive the necessary budgetary support, with a focus being placed on education.

In order to improve access to medicines for the poor, the government also began working on a newessential drugs list, although the current period of political uncertainty will delay its introduction until atleast 2009. The publication, originally expected in October 2008, will contain only low-priced generics.The present National Essential Drugs List (NEDL) also includes patented products, which areunaffordable for most of the population. However, the list is likely to attract industry criticism, as bothdomestic and foreign producers continue to call on the government to allow a price increase, in the face offalling margins due to rising costs.

In the short term, the country will continue to face uncertainty regarding its political and economicenvironment. The economy has been buffeted by rising oil and food prices over the past year, resulting ina serious deterioration in the fiscal and current accounts, as well as rampant inflation and the contractionof foreign investment over the past few months. Stabilisation of the situation would have an overallpositive effect on Pakistan’s pharmaceutical market, especially in terms of multinational activities, but inthe immediate future, economic concerns will lead to decisions similar to the July 2008 ban on the importof Indian medicines, following protests by the local industry.