Strangled Potential

A couple of months ago, Dawn quoted Drug Regulatory Authority of Pakistan (DRAP) CEO, Dr Asim Rauf, as having claimed that Pakistan was aiming to boost pharmaceutical exports by five billion dollars in the next five years.

“Since the pandemic we have begun manufacturing and exporting remdesivir injections… the demand for drugs and personal protective equipment (PPE) has increased across the globe and we are exporting these items… We have decided to capitalise on the opportunity created because of the pandemic and plan to increase the country’s pharma exports by one billion dollars annually to five billion dollars in five years.”

Indeed, Pakistan’s pharma exports have been increasing for the last couple of years. Pakistan shipped drugs and other pharmaceutical products worth $214.5 million during the last fiscal year, up by 6.2% from $202 million in FY 2018-19. Furthermore, according to the State Bank of Pakistan, pharma exports also escalated by a whopping 27.2% to $162.7 million during the first seven months of the ongoing fiscal year, during the period between July and January – from $127.9 million a year ago.

Conversations with several top executives of multinational and local pharmaceutical companies reveal that several factors, including higher costs of production, shortage of scientists and engineers, lack of R&D facilities and, more importantly, excessive government controls over drug prices, are impeding investments in the modern plants and equipment needed for global quality certifications and exports.

Yet, how realistic is it to expect pharma exports to spike by five billion dollars in just five years, riding on the temporary ‘opportunity’ created by the global health crisis? Not in the least, everyone, except Dr Rauf, will tell you, terming the claim as ludicrous.

As the CE of a pharmaceutical company (requesting anonymity) put it: “What kind of magic wand does DRAP have? The pandemic offers limited and temporary opportunities, if at all, to increase exports and that too only in unregulated markets, where price matters more than quality. If Pakistan has been able to manufacture and export remdesivir injections and PPE, it was because of a one-time sudden increase in global demand, owing to the pandemic. Once the demand peters out, our exports will decline.”

Out of almost 750 pharmaceutical companies currently operating in Pakistan, none have their plants certified by the US Food and Drug Administration (FDA), the foremost requirement to increase pharma exports from any developing country to strictly regulated markets worldwide. Only one company, Pacific Pharmaceuticals, has so far been successful in obtaining the MHRA (Medicines and Healthcare Products Regulatory Authority) of the UK and CGMP (Current Good Manufacturing Practices) certifications to ship some of their products to the UK and Germany.

According to Dr Qurutul Ain Irfan, Vice President, Pacific Pharmaceuticals, “We are the first and only Pakistani company exporting our products to Chile, Germany, Peru and the UK, because we have obtained the required certifications. It took nine long years of hard work and heavy investment in our plant to obtain the certification.”

Most industry sources say pharma companies are not interested in acquiring expensive FDA and MHRA certifications because the government does not offer them any incentives, nor does it facilitate them in such an endeavour.

“No one bothers to put in so much effort, time and money to get these certifications. Besides, it is easier to ship medicines to unregulated markets like Afghanistan, Africa and Central Asia,” says Dr Irfan. She adds that the government does not keep its word. “It has not given our company the price rise of 10 to 15% it promised to give the companies which obtain international quality certifications as an incentive. So why should anyone bother about exporting to the US or the UK or Europe?”

Conversations with several top executives of multinational and local pharmaceutical companies reveal that several factors, including higher costs of production, shortage of scientists and engineers, lack of R&D facilities and, more importantly, excessive government controls over drug prices, are impeding investments in the modern plants and equipment needed for global quality certifications and exports. “There is huge potential for exporting finished pharmaceutical products from Pakistan to regulated markets. But for this to happen, the government must provide incentives,” Dr Irfan concludes.

Osman Khalid Waheed, CEO, Ferozesons Laboratories, blames strict government controls over drug pricing and weak regulation of the industry for the stunted growth of the country’s pharmaceutical sector and its low level of exports. “If we have not been able to develop our export potential, it is because of the weak regulatory environment and government controls over drug pricing. Government regulations are limited only to controlling drug pricing, instead of ensuring quality or encouraging competition. Only the provision of a stable and predictable price regime for the industry will trigger new investment and growth and position the industry for improved exports. In order to export our products to the regulated, quality conscious markets, we need to invest in our plants, which is not possible in a regulatory environment where the regulator does not differentiate between high-quality products and inferior products.”

Waheed is of the view that DRAP should focus on regulating the industry to ensure quality and deregulate drug prices except in cases of essential, life-saving medicines, to create competition.

The drug price controls have also forced many multinationals to sell their assets and leave the country, many of which then consolidated their operations in Bangladesh, where regulations and price controls are less stifling and the cost of production is lower. This has resulted in a significant reduction in foreign direct investment in Pakistan’s pharmaceutical industry and badly affected technology transfer, crucial to adopt CGMP.

According to him, India is a major exporter of pharmaceuticals because it deregulated drug pricing in 1982. As a result, India is the largest supplier of generic drugs globally and its pharmaceutical industry provides over 50% of the global demand for various vaccines, 40% of the generic demand in the US and 25% of all medicines in the UK. Currently, over 80% of the antiretroviral drugs used globally to combat AIDS are supplied by Indian companies and its pharmaceuticals exports stood at $16.3 billion in FY 2020-21. In recent years, even Bangladesh has made significant strides in modernising its pharmaceutical industry by liberalising its drug pricing mechanisms and is now exporting drugs to Australia, Canada, Europe and the US as well as to low- and middle-income nations.

The drug price controls have also forced many multinationals to sell their assets and leave the country, many of which then consolidated their operations in Bangladesh, where regulations and price controls are less stifling and the cost of production is lower. This has resulted in a significant reduction in foreign direct investment in Pakistan’s pharmaceutical industry and badly affected technology transfer, crucial to adopt CGMP.

Imran Ahmad Khan, CEO and MD, Bayer Pakistan, for his part, pointed out that government policies are vital to increase exports. “In the pharma sector, we hope for a more pro-business regulatory regime, where ease of doing business is improved. More dialogue and consultation with industry stakeholders on vital matters, such as drug pricing would help move things in the right direction. Processes can be simplified and expedited and it would be beneficial for companies to have greater visibility of these processes. Contract manufacturing or toll-manufacturing requirements can also be reviewed to allow for better utilisation of existing plants. Such measures will enable corporations, particularly MNCs, to sustain their operations in Pakistan, open up opportunities for further investment and boost exports.”

Clearly, unless the government creates a supportive regulatory environment, where investment and innovation can flourish, it would be better to forget about sustaining the present pharma export shipments, let alone increase them.

Nasir Jamal is Chief Reporter, Dawn Lahore. nasirjamal65@gmail.com