Consumer Price Index (CPI) and Pharma Industry – Blog Post by Asrar Qureshi

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Monthly Review on Price Indices – June, 2019 (Base 2007-08)

Government of Pakistan
Ministry of Planning, Development and Reform Pakistan Bureau of Statistics Islamabad

GOP has recently issued the CPI report for June 2019.

As Investopedia defines it – ‘The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them1.’

How to calculate inflation using CPI?2

  1. Step 1: Calculate- How Much has the Consumer Price Index Increased? …
  2. Step 2: Comparing the CPI Change to the Original CPI. …
  3. Step 3: Convert it to a Percent.

Some excerpts from Government documents are given under.

  1. CPI inflation General increased by 8.9% on year-on-year basis in June 2019 as compared to an increase of 9.1% in the previous month and 5.2% in June 2018. On month-on-month basis, it increased by 0.4% in June 2019 as compared to an increase of 0.8% in the previous month and an increase of 0.6% in corresponding month i.e. June 2018.
  2. Core inflation measured by non-food non-energy CPI (Core NFNE) increased by 7.2% on (YoY) basis in June 2019 as compared to an increase of 7.2% in the previous month and 7.1% in June 2018. On (MoM) basis, it in- creased by 0.3% in June 2019 as compared to an increase of 0.4% in previous month, and an increase of 0.3% in corresponding month of last year i.e. June 2018.
  3. Core inflation measured by 20% weighted trimmed mean CPI (Core Trimmed) increased by 7.3% on (YoY) basis in June 2019 as compared to 7.5% in the previous month and by 5.4% in June 2018. On (MoM) basis, it in- creased by 0.4% in June 2019 as compared to an increase of 0.4% in the previous month and an increase of 0.2% in corresponding month of last year i.e. June 2018.
  4. SPI inflation on YoY basis increased by 10.6% in June 2019 as compared to an increase of 10.8% a month earlier and an increase of 1.9% in June 2018. On MoM basis, it increased by 1.6% as compared to an increase of 1.2% in the previous month and an increase of 1.8% in corresponding month of last year i.e. June 2018.
  5. WPI inflation on YoY basis increased by 12.7% in June 2019 as compared to an increase of 14.0% a month earlier and an increase of 7.6% in June 2018. WPI inflation on MoM basis increased by 0.3% in June 2019 as compared to an increase of 1.4% a month earlier and an increase of 1.5% in corresponding month of last year i.e. June 2018.

The bottom line is that the CPI increase, and inflation are significantly high. Inflation works in a spiral, just like a twister. Everything that comes its way is lifted up. While CPI and SPI monitor only selected commodities, it is understood that overall prices will be increased.

Pharmaceuticals are regulated business and price is controlled by DRAP. No what is the rate of inflation, drug prices will not change without authorization.

DRAP had issues a policy linking CPI with drug prices increase. It was applied for 2016, 2017 albeit retrospectively.

The following message is circulating on social media since yesterday. Apparently, it is from PPMA.

“Dear Friends,

As you all know that cpi for this year is declared by state bank of Pakistan 7.34%

There are some questions by the members how to implement this. On behalf of the Chairman today discussed with drap officials, instructions are as follows:

For non-essential products, you can add 7.34% and for non-essential products 5.13%

You are required to inform pricing section through a letter about this, attached with this letter should be detail of product to product and final price after adding cpi. Once you send this information you can increase prices on the batches manufactured accordingly after 30 days.

This is for your information.

Best Regards”

The authenticity of this message is yet to be finally established. If it is true, it is a welcome step. It is a decision taken promptly and can be aptly termed ‘a stitch in time’.

One other point demands consideration.

Recent, rapid changes in exchange rate has caused extra expense of millions in a short time. The dollar price being the same, but the payment in Pak rupee had been 30-40% more. In addition, a higher rupee value caused automatic increase in import duties and clearing charges.

The aftershocks of this event will still be felt even after the prices are adjusted based on Consumer Price Index.

Concluded.

  1. https://www.investopedia.com/terms/c/consumerpriceindex.asp
  2. https://inflationdata.com/inflation/Inflation_Articles/CalculateInflation.asp

 

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I, during my career spanning over 42 years, have mostly been a full time senior line manager by role and a passionate strategist/ mentor by role model; and have been well regarded as both. My management practices are driven by innovative strategy, solid team building and pursuance of short term and long term objectives simultaneously. Mentoring is my passion. I have run numerous full length sessions on Strategic Planning, Management, Team Management, Sales and Marketing Management, Communication, Interpersonal Relations, Effective Presentations and Corporate Values. I am an avid reader, keeping myself abreast of the latest ideas in my subjects of interest which are fairly diverse. I have always been keenly interested in all forms of expression. I staunchly believe in the absolute power of communication and its role in all areas of self development and professional management.

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