Pakistan Pharmaceuticals and Healthcare Report Q2 2011

Pakistan’s pharmaceutical expenditure was estimated to be PKR152.97bn (US$1.79bn) in 2010. The country’s pharmaceutical market is moderately large by Asian standards, ahead of more dynamic markets such as Vietnam (US$1.67bn). However, annual per-capita spending on medicines stands at just US$10, which is far below the regional average. Furthermore, market access is challenging and operational risks are high.

Combined sales of prescription drugs and over-the-counter (OTC) medicines in Pakistan are forecast to return to growth and increase to PKR167.82bn (US$1.89bn) in 2011, mostly due to the knock-on effects of the humanitarian assistance programme and pricing pressures. Inflation is expected to pick up compared with the previous year (13.5% in contrast to 11.7%, respectively). This equates to growth of 10% in local currency terms and 5% in US dollar terms.

BMI forecasts that Pakistan’s drug market expenditure should increase at a compound annual growth rate (CAGR) of 9.5% between 2010 and 2015, reaching a value of PKR241.06bn (US$2.41bn) by the end of the period. Reflecting our view that, with a stable political and security situation there is potential for significant pharmaceutical market expansion, our longer-term forecast is for growth to pick up further and for the market to reach a value of PKR412.76bn (US$4.13bn) in 2020. However, with inflation expected to be around the 7% mark over the forecast period, real pharmaceutical expenditure growth will be much lower.

In BMI’s Asia Pacific Business Environment Ratings (BERs) for Q211, Pakistan remains second last, ahead of only Cambodia according to our proprietary rating of the pharmaceutical industry operating environment. In terms of both operating rewards and operating risks, Pakistan considerably lags the regional average. The country’s greatest asset in the context of the BERs is arguably its high birth rate: a growing population is feed into increased demand for pharmaceuticals.

Access to adequate healthcare for much of Pakistan’s rural population is a major barrier to the development of the pharmaceutical market. According to an article in the Pakistan Journal of Medical Education published in October 2010, Pakistan urgently requires more than 3,000 nurses and paramedics and at least 1,000 trained midwives to strengthen its healthcare system.

Multinational firms dominate Pakistan's pharmaceutical market, both directly and indirectly and the country has a significant negative pharmaceutical trade balance. Local industry is focused on basic generics. However, there are signs that the larger domestic companies are looking to move up the value chain. The country’s largest local player, Getz Pharma, recently announced plans to invest in the domestic production of pegylated interferon as part of its strategy to produce high value hard-to-make generics.