Pakistan Pharmaceuticals and Healthcare Report Q1 2011

In BMI’s Asia Pacific Business Environment Ratings (BERs) for Q111, Pakistan remains 16th, having dropped one place compared with the previous quarter due to the addition of a more attractive market - Sri Lanka - to our proprietary ratings system. Globally, Pakistan ranks 75th of the 83 markets surveyed. While its fundamentals may sound attractive (large population and emerging economy), Pakistan is at risk of experiencing years of instability and militant activity, although an outright collapse of the state is unlikely unless the core province of Punjab becomes ungovernable. Meanwhile, due to its strategic importance, Pakistan's foreign allies will do everything they can to ensure its stability, although foreign drugmakers will continue to take a cautious stance regarding direct investment in the country.

We calculate that the total value of prescription drugs and over-the-counter (OTC) medicines in Pakistan will stand at PKR159.2bn (US$1.79bn) for the full-year 2010. The Pakistani pharmaceutical sector is expected to experience huge losses during FY10/11 as a result of uncertainty in the industry, according to Pakistan Pharmaceutical Manufacturers Association chair Mian Asad Shujur Rehman, reported the Daily Times in September 2010. He said the prevailing uncertainty is likely to hinder export earnings from the sector. Rehman's comments follow the enactment of the 18th amendment, under which powers have been transferred from the central government to the provinces. He said that the devolution of power would create ambiguity among drug manufacturers of all sizes and prevent local and foreign investors from investing in the sector, thus also affecting trade.

Through to 2014, the market’s value at consumer prices is expected to post a compound annual growth rate (CAGR) of 7.13% in local currency terms. Due to the weakening rupee, however, growth will be just 3.50% in US dollar terms, which will also act as a deterrent to foreign participation. The situation is forecast to improve somewhat over the ten-year forecast period, with CAGR rates coming in at 8.84% and 6.98%, respectively. Prescription drugs are expected to account for the majority share (at around 76- 78%) for the remainder of our forecast period (both five- and ten-year spans).

In the short-term, flooding and political unrest will remain key features defining Pakistan. From an economic standpoint, we are concerned that a decline in output and an aggravation of price pressures will exacerbate stagflationary concerns, while reconstruction efforts will drain public funds for years to come. From the healthcare point of view, malaria is expected to affect 2mn people in the flood-affected regions over the coming four months, according to the September 2010 statements made by Medical Emergency Relief International's (Merlin) malaria expert Naeem Durrani. He added that efforts should be immediately scaled up to fight the disease, with much of the pharmaceutical treatment as well as funds for reconstructions likely to come from foreign donations.