Finally, DRAP yields

EDITORIAL: Finally, the Drug Regulatory Authority of Pakistan (DRAP) has allowed pharmaceutical companies to increase prices – 14 percent for life-saving drugs and 20 percent for other drugs. Since the authority had earlier refused to entertain requests and then threats from the same companies, as the dropping rupee and rising input costs rendered their business models uncompetitive, this U-turn was inevitable.

As often mentioned in this space, this was a choice between expensive medicines and no medicines at all, considering the rapidly changing working environment as imports and other ingredients became progressively expensive owing to the shaky macroeconomic situation of the country.

And, indeed, as authorities took the seemingly politically correct position of refusing any price increases, medicines started disappearing from the shelf altogether; even life-saving ones, making that decision backfire and the government look silly.

Now, however, this approval is subject to certain conditions which include a one-time dispensation, enabling manufacturers and importers to increasing their existing MRPs (Maximum Retail Prices) of essential drugs and biologicals, excluding lower prices equal to a 70 percent increase in CPI with a cap of 14 percent; and MRPs of all other drugs and biologicals and lower priced drugs up to increase in CPI with a cap of 20 percent on the basis of average CPI for the current year. DRAP’s policy board will then review the situation after three months and make a recommendation for a possible price decrease to the federal government in case the rupee starts appreciating in value.

That’s a big ‘if’, especially as the IMF (International Monetary Fund) programme remains suspended and the money market continues to be gripped by uncertainty.

The main cause for the precipitous decline in the rupee is macroeconomic uncertainty, after all, especially loss of confidence triggered by the dangerously low reserves position in light of billions in debt repayment due every fiscal year. And it’s not just the pharma sector that is struggling and suffering.

The whole economy is in a tailspin, to the point of debating the possibility of sovereign default itself till the next tranche of the IMF bailout loan is secured.

That’s why the government, and also the people, would have been far better off if authorities had given more attention to the economy than the political slugfest that everybody is deeply engaged in; which, in fact, forced the government to act tough and disregard earlier requests for revising prices to the upside when the situation demanded it.

That also explains why the country’s political paralysis is just as much, if not more, to blame for its economic/financial troubles.

Considering that the country could well default and then experience savage hyperinflation, unemployment and economic breakdown, the most basic common sense would dictate that all parties put their differences aside, declare an economic emergency, and pledge to work together till the financial sector’s health is restored, at the very least, before taking their gloves off again. But such things clearly do not take priority in this Islamic republic.

For, some of the decisions that have hurt the economy and its most important sectors the most have stemmed from political imperatives.

The PTI (Pakistan Tehreek-e-Insaf) government’s decision to freeze petrol and electricity prices towards the end of its tenure, the PDM (Pakistan Democratic Movement) dispensation taking its sweet time to reverse that decision and also the decision to disallow industry prices to reflect market fundamentals, all have their roots in the political tit-for-tat and point scoring that is the number-one concern across the political spectrum; regardless of its impact on the state or the people.

As the pharma sector’s fortunes show so clearly, the only party that really loses in this contest is the people of Pakistan.

For now, they will be guaranteed medicines, although much more expensive ones, but there’s only so long the economy can accommodate such spirals. This is just a temporary solution, and it is the government’s responsibility to find one that works and sticks.

Copyright Business Recorder, 2023