Pakistan Pharmaceuticals and Healthcare Report Q3 2010

Pakistan's US$1.62bn pharmaceutical market is the 10th largest in Asia Pacific, behind the Philippines (US$2.58bn) and ahead of Vietnam (US$1.53bn). Annual per-capita spending on medicine is US$10, which is far below the regional average of US$142. Market access is challenging and operational risks are high.

A key feature of Pakistan’s pharmaceutical market is the low price of medicine. In April 2010, Khawaja Shahzeb Akram, the vice chairman of Pakistan Industrial and Traders Association Front (PIAF) and convener of LCCI Standing Committee on Pharmaceuticals, ruled out any increase in medicine prices. He said the health ministry, rather than the Pakistan Pharmaceutical Manufacturers Association (PPMA), is authorised to increase prices. He added that, while the Ministry of Health has frequently considered price increases, they have remained the same for the last 8-10 years.

Healthcare is not a priority in Pakistan, as demonstrated by the country’s low expenditure as a percentage of GDP. However, recent legislation suggests to BMI a change in attitude towards the benefits of medical services on society. In April 2010, members of the National Assembly in Pakistan introduced three healthcare bills on Private Members Day (March 30). The new bills are ‘The Pakistan Private Hospitals, Clinics and Other Private Healthcare Units Regulatory Authority Bill 2010’, the ‘Foreigners (Amendment) Bill 2010’ and the ‘Constitution (Amendment) Bill 2010’.

As seen in most developing countries, counterfeit medicines are major problem in Pakistan. In January 2010, Pakistan's Interior Minister, Rehman Malik, announced at the National Assembly that 50% of the total medicines available in the country are considered either fake or of unacceptable quality. Malik added that the government requires effective legislation to punish the offenders and control the threat that counterfeiting and sub-standard manufacturing poses. The house approved two resolutions that necessitate the government undertaking action against the sale of these drugs in the country. BMI does not expect many foreign firms to enter Pakistan's pharmaceutical market over the mediumterm. Aside from the precarious political situation, the rupee is projected to weaken further over the next five years. Our Country Risk team expects the US$:PKR exchange rate to deteriorate from 1:88 in 2010 to 1:110 in 2014.

This means prospects for local players are much more promising than those for companies that repatriate revenues. BMI's pharmaceutical expenditure forecast model reveals that medicine sales will increase from PKR132bn (US$1.62bn) in 2009 to PKR196bn (US$1.78bn) in 2014. This equates to compound annual growth rates (CAGRs) of 8.25% in local currency terms and 1.96% in US dollar terms. By 2019, we expect the pharmaceutical market to reach a value of PKR290bn (US$2.12bn).