Salman Burney has been the Managing Director of GlaxoSmithKline Pakistan Limited since SmithKline Beechams merger with GlaxoWellcome in 2001. A graduate from the University of Cambridge, Burney also has regional management responsibility for Iran & Afghanistan. He has extensive experience in a number of businesses including Chemicals and Fibres both locally and internationally. Burney has been President of the Overseas Investors Chamber and the Chair of the Pharma Bureau.
PHARMA INDUSTRY LACKING DIRECTION Burney is bullish on Pakistans pharmaceutical industry, but he is equally sure that the sectors potential will not be realised unless regulatory woes are resolved on an immediate basis.
"Very few countries today are blessed with a strong pharma industry and Pakistan is fortunately one of them. We have the quality, competence and the local market to sustain, whereas there are several countries bigger than us which do not have quality manufacturing pharma industry," Salman Burney told BR Research in a recent interview.
Another key factor that makes Burney optimistic about Pakistan is the countrys potential to attract fixed investment in the sector. "Today the pharma industry is not expanding in terms of the number of countries because the cost of putting up a factory has gone up exponentially. This is where Pakistan has the advantage of having a large population with a well-established industry," says Burney.
McKinsey & Company - a global business and management and business consulting firm - has identified Pakistans pharma industry as a sunrise industry, Burney says the need of the hour is to improve manufacturing quality "to boost our export to the level of Jordan and India and get our plants approved by the FDA".
And for that we need a good regulation focussing on quality and standards instead of being solely price focussed, he said. Pakistans pharma policy has mostly been centred around pricing with the prices of several drugs capped since 2001.
"The government has not come with a pricing policy that safeguards the consumer and the industrys interest. We have been asking for a pricing policy since 2001 but nothing substantial to speak of has been done," says Burney.
Burney asserts that Pakistan is missing on a strategic opportunity of having FDA-approved plants "which allow the country to have exportable pharma products". Even Bangladesh today has FDA approved plants, he added.
"There are several regional success stories in countries of lesser potential," he said while emphasising on the need to have a clear vision, courage and most importantly political will.
Does this mean that Burney is for complete deregulation? "I am not asking for complete deregulation - oversight for the benefit of society is fine," says Burney.
"We can have regulation in the sense that they can allow us inflation-linked price increases or incorporate the rupee depreciation. The current pricing formula is based on weighted average of inflation and rupee depreciation, but that has not been applied in practice," he explained.
But pricing is just one leg of the problem, as a lot of foreign players have also shied away from Pakistan due to infringement of intellectual property rights.
"Counterfeit protection and patenting in line with the global norms should be allowed. Pakistan is a patent TRIPS signatory, but we have massive IPR violations, which badly hurt the industry," he said adding that the laws in Pakistan on both counterfeits and patents are not in complete compliance with the international benchmarks.
"We invest an enormous amount of money in protecting our products because it is in the consumers best interest and it also carries a reputational risk. But the issue arises when it comes to application of laws - we have a large number of laws in place but the penalty on them is ridiculously low. There is no law for counterfeits, which is why it is massively abused," he said. Eventually the rigid pharma pricing that is aimed to bring respite to the consumers fails to deliver the purpose.
"The current scenario encourages smuggling out of the country because there is no market based mechanism. The manufacturer will stop producing such drugs at prices which do not even cover the raw material cost (prices for some essential drugs have been frozen for ten years!). In that case, consumers end up paying higher prices due to shortage or importing drugs at higher cost," says Burney.
Burney believes that an enabling regulatory environment would help bring larger investments, which in turn would not only help bring economies of scale but will also lead to improvement of quality and economic growth.
"There are about 200 companies with a turnover of less than Rs200 million; you cannot sustain global standard manufacturing with such low turnover," says Burney, who suggests that these problems can be addressed by having a good drug regulatory framework, which is empowered to gradually clean up the industry of sub-standard manufacturers.
So how quickly do we need the reforms, BR Research inquired of Burney? "We are already facing a disinvestment scenario in Pakistans pharma industry....some companies have packed their bags and left. If we delay the reforms any further, the businesses and investment both from global and also local companies might start migrating to other countries and other industries at a greater speed."
Interview by Zuhair Abbasi