Pakistan''s pharma industry has been subject to sticky prices since 2001 for the bulk of the registered products, which has led to a combination of reduced profitability across the industry and reduced access to patients of low priced primary care therapies which are smuggled out of Pakistan to take advantage of the uneconomic prices.
Abbott''s margins, in relation to its peers, have fallen at a relatively slower pace due to diversification in its portfolio. Strong performances of its unregistered General Health Care Division and its Nutrition Business have helped restore profitability.
This is not to say that Abbott does not face the problems that others do, but it is the firm''s diversification of the product mix that helps it stay afloat. The firm''s revenue growth has outpaced that of the pharma industry by 8 percentage points, according to the latest numbers - an accomplishment that can be attributed to limited price adjustments on its vitamin products, of which Abbott has a large portion in its product mix.
"What we have done is reposition our vitamins segment as more of a well being product than just therapy. Leveraging our product range and consumer base, optimising it to the fullest form the core of our strategy," says Asif Jooma, MD Abbott Laboratories Pakistan, talking to BR Research.
While inconsistency of policies is cited as one of the major issues in the industrial sector, it is the consistently poor pricing policy that has choked the pharma industry. "The pharma prices have not been adjusted since 2001. There have been some adjustment through the hardship mechanism, but its total impact on the industry is about 3-4 percent", says Jooma.
Although, Jooma is not for complete deregulation of the pharma industry, he wants the market to decide the prices, which will increase competition. He terms Pakistan as "the most controlled and price-regulated pharma market in the region". Jooma is also critical of too much focus on holding the prices down, which takes the focus away from quality control, raising serious concerns for those who invest or want to invest to maintain international quality standards. The quality is compromised as "85 percent of the business is concentrated with the top 50 companies...if you are a company with a revenue of Rs 10-15 million, it is impossible to maintain standards," adds Jooma.
When asked about the ideal pricing mechanism that the industry wants from the government, Jooma stressed on ''need'' than ''want'' - adding that drawing lessons from the countries that have similar economies like Sri Lanka, Bangladesh or India is the way out, where the level of control is limited to 74 molecules in the case of India and around 100 in the case of Bangladesh.
Pakistan on the other hand regulates in excess of 1100 molecules. He stresses on the "need to look at healthcare costs holistically rather than just focussing on the cost of medicines that account for no more than 15 percent of the total expense which would include consultation, diagnosis, investigation etc.
Like his peers, Jooma considers spurious and counterfeit drugs a major issue in the industry and demands tough punishment for those involved. "People buy medicines on the basis that it will cure them, but the counterfeit drugs can actually kill people, so it should be treated as a criminal offense."
Jooma admits that the pharma industry should work to make it difficult for the drugs to be counterfeited but rules out the fact that the cost attached with it cannot be recovered in the prevailing stringent pricing scenario. Jooma presents a simple solution for the quality standards to be maintained and demands guidelines regarding the compliance of minimum standards in order to operate. "The idea should be simple - if you are not CGMP (Current Good Manufacturing Practices) compliant, you should shut the business," adds Jooma.
When asked why the pharma industry doesn''t join hands with universities to set up special institutes for the specific purpose, his argument goes back to the basic pricing issue which does not give them the economic might to carry out such projects. Quite alarmingly, the pricing issue is also squeezing the pockets of pharma employers, thereby the industry is failing to attract the best minds - a trend that can go a long way in harming Pakistan''s pharma potential.
"A lot of people do not want to come and work for pharma companies, because we cannot pay at par with other companies such as FMCGs or banks. Ideally I should be having the best people but the strict regulation works against us," Jooma explains. When asked about Pakistan''s weak pharma exports, Jooma links it with non-compliance of FDA-approved plants, without which it is tough to find big export markets. And guess what stops them from getting the FDA approval; yes, it is pricing again as the industry''s profitability and lack of predictability do not allow large throws of further capital. Also affecting export performance is the price constraint as importing countries benchmark the export price to the prevailing local prices.
This is not to say that the export potential is not there. "The pharma industry of Pakistan has been identified as one of the three industries with the potential of fast track escalation in growth in terms of the domestic and export market. We have very strong manufacturing capabilities but we lack the enabling environment", said an optimistic Jooma.
The way forward according to him could be bright as he believes that if right pricing ie transparent and predictable pricing mechanism is implemented, the industry "will double in value size in no time". Even the export market "can increase ten times from the current level." But then again, without the right pricing, pharma makers will have to continue taking antidepressants.
A discussion with Zuhair Abbasi