"Providing welfare to patients is our priority", has long proven to be a false claim made by the countrys successive governments. More often than not, those hollow claims have been challenged and defied. Yet, the bureaucrats remain least bothered.
The questions laid down by Policy Research Institute of Market Economy (PRIME) in its recent research paper should serve as an eye-opener to the government. Titled "Pricing out welfare: the effects of government regulations on Pakistans pharmaceutical market, scholar Shahid Mehmood substantiates that the country loses a massive Rs112 billion every year on account of welfare costs.
These welfare costs appear in the various forms including distribution of counterfeit medicines, lower investment levels and hence lower FDI, government procurement and the associated unavailability of drugs in public hospitals and production underutilization by pharmaceutical companies. Lets take a quick look at the brief components of this welfare cost covered by the research paper.
First, poor drug quality control mechanisms and over-regulated pricing have made counterfeit drugs widespread throughout the country. With a prevalence rate of counterfeit medicines standing at 40 percent, the study implies that expenditure on counterfeit drugs have resulted in a monetary loss of Rs343 billion to consumers over the last five years, thus translating into an average annual loss of Rs68.64 billion.
Second, with little to no impetus provided to multinational pharmaceutical companies to invest in the country, investment levels have sunk over the years. The study deduces that the government has lost a considerable chunk of FDI, hence resulting in forgone flows for forex reserves to the tune of Rs8.6 million per year in terms of investment in this sector.
Third, welfare cost arises from the underutilization of government health facilities. Allotment of resources is one thing, but its utilization remains a mystery in Pakistan. Public hospitals are often faced with scarcity where output remains a critical issue. This government procurement and the non-availability of drugs has resulted in an aggregate loss of Rs154 billion during 2009-2013 or Rs31 billion per year, according to the study.
Besides, as the production capacity of pharmaceutical companies is often underutilized (estimated at 15-20 percent), these companies face an annual loss of Rs3.86 billion, the study highlights.
Mind you, the study has only focused on a few components of welfare losses. In a broker scope, delays in registration of drugs and pricing approvals, inadequate protection of patent rights, distribution of generic drugs, lack of patent protection rights, demand supply gaps are major issues that result in substantial losses for pharmaceutical firms.
Its a high time for the government to fathom that it is backing the wrong horse by over-regulating drug prices! By enforcing artificially low drug prices in the name of patients welfare, everyone is losing big; be it the government, the consumers or the companies.
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