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Pricing Mechanism – Fixation of drug prices has been a cause of bad blood between the industry and DRAP/Government, besides politicization. Few years ago, many companies went to high court to seek relief. The cases kept on piling and the defendants (DRAP/Govt) kept on delaying proper response. The cases were closed finally after instructions to formulate a new Drug Pricing Policy while taking all stakeholders on board. That took another quite some time and there are still grey areas in interpretation and implementation. Government does not want to leave even a tiny part of discretionary control on price fixation, hence the issues.

Drug Pricing Section has a Drug Pricing Committee (DPC) which fixes the prices of new drugs and also reviews prices of existing drugs. DPC is supposed to meet frequently and dispose of cases requiring decisions. Ground situation is different. Sometimes the process is inordinately delayed and may take several months.

DPC claims to collect prices from a basket of several countries for the same products and determines the price in Pakistan in the light of this information. The wisdom of this process can be questioned. For example, India produces a lot of raw materials and makes it available to their industry at cheaper prices. Pakistan imports from India at higher prices, pays import duties on all items and then produces medicines. For those handful of materials which are produced locally, a higher tariff of import duties is already applied on the pretext of protection for local industry. The fact is that local industry produces few raw materials and the capacity to produce those is insufficient as compared to local demand; import at even higher cost is therefore inevitable. Cost of utilities such as electricity is much higher in Pakistan. In most cases, power generation has to be done by the industry itself, the cost of which is even higher. Almost all packaging materials are imported and the rate of import duties on packaging materials is higher, plus GST etc. is also applied. In the light of these factors, fixation of Pakistan prices on the basis of basket prices is not reasonable.

For many drugs, prices are highly variable based on when the price was granted. Those companies who registered earlier, got higher prices while latter registrants got lower prices. If DPC seriously feels that the prices should be lower now due to any number of factors, it should ask all manufacturers to bring the price to same level. It does not do that and therefore we have variable prices for same drugs.

The industry has been asking to take into consideration the manufacturing practices and arrangements while fixing the prices. The logic is that larger, more complex, upgraded facilities have higher cost of production while smaller organizations may have lower costs due to less staff and simple structures. It is not a direct reflection on quality, and no one can say with authenticity about differences in quality if any. The industry however desires that the companies may be graded on standard parameters and pricing be awarded accordingly.

Another concern raised by generic manufacturers is the huge difference between prices given to innovator multinational companies and the local generic companies. It is felt that the MNCs are unduly favored for pricing.

These are some of the areas of concern about pricing mechanism of drugs. The list is not complete though.

Issues like these keep simmering because stakeholders do not interact with each properly. The government departments usually hide behind curtain of vain authority and refuse to talk. If we consider that the government is elected to power by the people and is mandated to work for people, this attitude becomes unacceptable immediately. Practically however, all government departments consider themselves above public scrutiny and prefer to issue instructions only; not get into discussion. This is what leads to creation of pressure groups, of which we have many. Bigger industries like textile, cement, consumers and so on display their power and get things done their way; Pharma industry does not wield this kind power.

Pakistan Pharma industry is small and divided. MNCs stay away from Local Pharma; Local Pharma is again divided into big, medium, and small size companies. Local Pharma may sit with each other on the platform of the only representative body, PPMA, but do not necessarily work together as their interests are different.

To be continued……

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