MARIAM ALI BAIG: What is the background to Martin Dow?
JAVED GHULAM MOHAMMAD: Martin Dow was founded in 1995; the company started with a small manufacturing base in Lahore in 2000. The ‘Big Breakthrough’ came in 2010, with the acquisition of the manufacturing facility of Roche Pharmaceuticals in Pakistan. From a small base with a revenue of Rs 300 million, we acquired a company worth three billion rupees. It was a very bold move by our founding chairman, M. Jawed Akhai, and the largest acquisition in the pharma industry at that time. Then in 2016, we acquired the shareholding of Merck Germany in Merck Pakistan and we now represent Merck in Pakistan, which includes their chemical business as well.
MAB: Is Martin Dow a national company or a multinational company?
JGM: We started as a national company, but in 2017 we acquired two manufacturing facilities in France and we do contract manufacturing for pharmaceuticals as well as nutraceutical products for our clients in Europe. We have a proper manufacturing base in France and a French team running the two plants.
MAB: Moving to Pakistan’s pharma industry in general, why is innovation so rare?
JGM: Pharmaceuticals are divided into innovator companies and branded generics. Innovators develop a new chemical entity which is then patented for 15 to 20 years. Once the patent expires, the generic, which is a kind of ‘me too’, enters the market at a substantially lower price. Martin Dow is into generics, so from a commercial point of view, our reach is much wider in terms of distribution. Pakistan has a population of approximately 220 million people, yet the overall size of the pharmaceutical market is just three billion dollars. If you look at markets such as the Philippines, which has a population base of 100 million, the size of their pharmaceutical industry is six billion dollars. Same for Vietnam; a population of 80 to 100 million people and a market size of five billion dollars. The accessibility of medicine in Pakistan is very low. First of all, because the private market accounts for 80% to 90% of the share and 10% is supported by the government. So accessibility to patients is very low. Developing a new chemical entity requires a huge level of investment. Firstly, you need to carry out lots of experiments and once you arrive at a product, you have to perform massive clinical trials to establish the efficacy and the safety of the product. Those trials are extremely expensive as they involve multiple institutions, different countries, races and cultures, because you are not producing a product for a particular country or region and this is why most of the research comes from Australia, Europe, Japan and the USA.
MAB: Is India involved in this kind of research?
JGM: India is not doing the research required to develop a new chemical entity. However, research is not limited to finding new chemical entities. When the patent of the innovator expires and the generic product can be developed, the challenge is to ensure the product is equivalent to the innovator in all aspects. This is also a science; it involves arriving at the correct formulation based on research and development and in this respect India is quite strong. Once a patent has expired in the US, the Indian companies will move in; 80% of prescriptions move from innovators to generics, because generics have a price advantage of 50% to 60% of the cost of the innovator product and with a quality equivalency comparable to the innovator. Pakistan has over 700 pharmaceutical companies and we are basically a generic industry. If we improve our standards and prove that our products are equivalent to that of an innovator, we will have a huge opportunity to export.
"Health in Pakistan as a percentage of the GDP is one of the lowest in the world"
MAB: What percentage of the products manufactured in Pakistan are exported?
JGM: Our exports are worth 250 to 300 million dollars; that is the total 700 pharmaceutical companies Pakistan are generating, while potentially our exports can go up to five billion dollars.
MAB: What needs to be done to boost exports?
JGM: The Drug Regulatory Authority of Pakistan (DRAP) is coming up with more stringent standards and it is very important that they set the standards every company has to follow in order to produce quality products. The Pakistan Pharmaceutical Manufacturers Association as well as the Pharma Bureau are determined about the fact that we need to bring our quality to the level of international standards and export our products.
MAB: What do the pharmaceutical companies need to do to meet those standards?
JGM: They need to upgrade their technical their manufacturing facilities and their quality systems.
MAB: This will involve further investments?
JGM: Yes, although I think that the only thing that is stopping the pharmaceutical companies is the fact that prices in Pakistan are very low, even compared to Bangladesh or India. If all the manufacturers are able to make a reasonable return on their investments, they will invest in order to improve their standards to access a bigger market. At the moment, we have a highly fragmented industry consisting of 700 companies catering to a market worth only three billion dollars.
MAB: How are these companies surviving?
JGM: They don’t have the volumes; they are trying to manage their basic manufacturing facilities, and unless the overall market size increases or prices go up, they will not be able to invest in improving their standards. Health in Pakistan as a percentage of the GDP is one of the lowest in the world and this has to increase so that patients can have access to healthcare and the overall market size increases. With scale, profitability will increase, costs will go down and the patient benefits in the end. At the moment, the top 50 companies account for almost 90% of the total pharmaceutical market. In terms of exports, the highly regulated markets are Australia, Europe, Japan, Saudi Arabia, South Africa, the UAE and the US. Then there are semi-regulated markets and the low regulated markets. So far, our exports are targeted towards the semi and low regulated markets because we are unable to meet the standards of the highly regulated markets. Once you move into the regulated markets you get better prices for your products. We need to gradually improve our manufacturing standards to the level where we can penetrate the highly regulated markets.
MAB: Are you saying that at the moment pharmaceutical companies are manufacturing to a lower standard than what would be required in the highly regulated markets?
JGM: We are complying with the standards set by DRAP, but there are a few areas where we could improve. For example, bioequivalence studies, which prove that a generic product is equivalent to the innovator, are not a requirement in Pakistan, but they are the first requirement in order to export to Europe or the US.
MAB: It could be argued that DRAP have some credibility problems with respect to enforcing standards.
JGM: There has been a significant improvement in DRAP over the years. All international regulatory bodies require approval from the Pharmaceutical Inspection Corporation Scheme (PICS), so in order for DRAP to be approved by PICS, they will have to follow all the standards prevailing in the international markets and if DRAP is moving in that direction, all the pharmaceutical companies will do so as well. Exporting does not necessarily mean manufacturing and marketing products. Another attractive opportunity is Contract Research and Manufacturing (CRAM). If a pharma product is approved by the European regulatory body, then European companies will be able to manufacture that product in Pakistan. Our cost base is lower compared to any European country, we have the manpower and the talent pool and we can offer these advantages to European companies, which will then be able to invest more on innovation and marketing while we do the manufacturing for them at a much lower cost. The overall CRAM market is very big and Pakistan needs a strong manufacturing base to compete successfully; we cannot survive on trading because we need to cater to a population of 220 million people.
Mariam Ali Baig was in conversation with Javed Ghulam Muhammed.
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