The State Bank of Pakistan (SBP) may depreciate the currency again in the coming months as the currency is likely to remain under depreciatory pressures with weaker external finances, expects Fitch Solutions. Fitch in its latest report ''Industry Trend Analysis - Pakistan government''s aim to increase medicine prices bodes well for domestic drug makers'' stated that revenue generating opportunities for local pharmaceutical companies in Pakistan will improve following the decision by the government to increase the prices of medicines, but will restrict patient access to vital medicines.
The report stated that drug makers will also benefit from a more stable medicine pricing system linked to the consumer price index. However, the government''s plan to increase medicine prices will restrict patient access to vital medicines.
Pakistan''s pharmaceutical market continues to face a number of headwinds that make it decidedly difficult for multinational drug makers. Besides several shortcomings in Pakistan''s regulatory and business environment along with endemic political instability, the country''s pricing environment continues to be an impediment to the pharmaceutical sector.
Medicine pricing in Pakistan remains uncertain posing a threat to the operations of multinational drug makers. This stems in part from the strained relations between the pharmaceutical industry and the Drug Regulatory Authority of Pakistan (DRAP) over drug pricing policy, maintained the report.
Further complicating the pricing environment in Pakistan is the significant political pressure facing the DRAP. Due to the limited public information available, there have been competing claims in Pakistan on the extent of medicine price increases announced by the DRAP. While the DRAP noted a 1.4% to 2.9% increase for pharmaceuticals in 2016, the Young Pharmacists Association alleged in August 2016 that drug makers increased the prices of pharmaceuticals by more than 100%. That same year, Pakistan Wholesale Chemist Association President Ghulam Muhammad Noorani noted that 80% of the essential medicines in Pakistan saw their prices increase by 300%.
The government''s decision to link medicine price increases to the consumer price index (CPI) starting from July 1, 2016 aimed to create a more stable system to manage the increase in medicine prices.
According to industry estimates, this translates into a more stable 4% increase annually for medicine prices in the country. The policy also helps address the inflationary pressures on the cost of inputs which have outpaced the rise in medicine prices, according to the Pakistan Pharmaceutical Manufacturers Association (PPMA). In 2017, it was announced that annual price increases for scheduled drugs (those that are essential for treating serious illnesses) will be limited to 50% of the increase by the consumer price index, up to a limit of 4%.
Price increases for non-scheduled drugs will be limited to 70%, with a cap of 6% and equal to inflation in case of low-priced medicines. In January 2019, the government raised the maximum retail price of medicines by 9-15% to provide much-needed relief to both the local and multinational drug manufacturers after considerable rupee depreciation in 2018, high cost of utilities and a shortage of raw material supplies.
"Our Country Risk team remains bearish on the Pakistani rupee as the currency is likely to remain under depreciatory pressures with weaker external finances. We, therefore, expect that the State Bank of Pakistan (SBP) will devalue its currency again in the coming months."
Chairman PPMA Zahid Saeed stated that the manufacturing cost of medicines in the country had surged 40% given the record depreciation of rupee and increase in duties and taxes on the industry. Given that the local pharmaceutical companies fulfil 90% of medicine need of the country, ''recommendations were necessary to save the industry.'' "We believe this is largely positive for the pharmaceutical industry of Pakistan as it will not only address the long due demand of the pharmaceutical industry to raise drug prices but will also provide some respite to the industry''s margins which have come under pressure owing to rupee devaluation."
However, the Pakistan Medical Association (PMA) and Pakistan Islamic Medical Association (PIMA) strongly reacted to the increase in drug prices. The associations warned the government that such step would cause further deterioration in the status of healthcare in Pakistan as people would not be able to afford drugs for themselves.
Secretary General PMA Qaiser Sajjad stated that painful aspect of this development is that the prices of lifesaving drugs have also been increased. In such conditions, when there is a scarcity of health facilities at the public hospitals, this increment of medicine prices will add to the miseries of the people.
The Pakistan Peoples Party and some of the stakeholders of the health sector criticised a sudden increase in the prices of various medicines and urged the government to withdraw the decision as middle and lower classes would suffer the most because of it.
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