Dear Colleagues! This is Asrar Qureshi’s Blog Post #606 for Pharma Veterans. Pharma Veterans welcome sharing of knowledge and wisdom by Veterans for the benefit of Community at large. Pharma Veterans Blog is published by Asrar Qureshi onWordPress, the top blog site. Please email to asrar@asrarqureshi.com for publishing your contributions here.
Opening Note
February 2022 marks my completing 47 years of working in Pharma Industry. Allah be praised. I am still working. The first half of my working career was spent in Multinational companies, and the latter half in the Local Pharma, making me well-versed with both innovators and generics markets. I also had the opportunity to work in business as well as operations.
My journey of near half century is also the journey of Pharma Industry in Pakistan. Great changes have occurred in this time and a lot could be written about it. In my blogs, which were started about four and a half years ago, I have covered several topics related to Pakistan Pharma Industry. This multi-part series shall do and review the SWOT – Strengths, Weaknesses, Opportunities, Threats – of the Pharma Industry.
SWOT – WEAKNESSES……
As mentioned in the introduction of SWOT, Strengths and Weaknesses are internal while Opportunities and Threats are external.
Another point to mention is that my focus is mostly on Local Pharma which is dominating the Pharma Industry since many years.
- Pricing – Thanks to pricing policies of MoH and later DRAP, drug prices awarded to branded generics vary greatly. Generally, earlier registered brands got higher prices while prices slid down for later registrations. This has caused disparity and disadvantage among competing companies. The older generics have better gross margins and have more money to spend in the market as compared to later generics. This is also a reason why bigger brands are getting bigger and smaller brands are struggling to survive. There is apparently no justification for such price differences except that DRAP says it now considers a basket price of several market for that molecule, particularly for new products. For older products, price is already fixed, and all new entrants shall receive the same. For example, if a company wishes to get a brand of paracetamol tablets registered now, it will get the price which is already fixed. But if a company wishes to register a new molecule such as Remdesivir or Eculizumab, DRAP shall collect prices prevalent in the basket countries and then decide the price. This practice certainly gives advantage to DRAP in fixing the prices, but not to the companies. Older prices, however, are left untouched, hence the disparity.
- Division/Discrimination – As mentioned in the beginning of this series, the Pharma companies are divided into higher end and lower end. The severely uneven distribution of market share impacts how the companies will work in the marketplace. Top 50 companies have about 90% share of the 625-billion-rupee market, which comes to about 585 billion rupees. At such huge volumes, these companies are still growing at a higher than market rate, thereby increasing their share further. The inequality cannot be seen in the limited sense of inequality of wealth; it has much broader implications. Some of these are given below.
- More resourceful companies pay better and therefore attract better talent which gives them greater competitive advantage
- Being preferred employer, bigger companies have less turnover of employees which affords greater stability and continuity.
- New entrants get trained in smaller companies and move to the bigger ones on the first available opportunity, unless they have a personal limitation which stops them from moving. Smaller companies are therefore mere training houses for the larger companies. Their turnover is high, they cannot control it, and they have big problem with continuity and stability.
- Greater resources of larger firms give them the opportunity to improve quality standards further, strive for international certifications, open new market segments, and work on long-term plans.
- Smaller companies struggle to survive on a day-to-day basis, cannot work on long term plans, cannot execute capital intensive projects, and cannot change their league.
- Larger companies have greater clout in the marketplace, and owing to their larger business volumes, they do not have to offer extra discounts, and they pay less service charges to their distributors. It improves their profitability further.
- Smaller companies offer discounts, pay more to distributors, and compromise on their profitability to stay afloat.
- Larger companies are stronger in higher end market and good in the lower end also.
- Smaller companies are compelled to work only in the lower end of market
- Customers are more comfortable with the products and services of larger companies. The customers are not so satisfied with the products and services of smaller companies.
- Due to huge differences, larger and smaller companies do not see each other eye to eye. They cannot agree on similar rules of business and regulations.
- Finally, money begets money is the adage. Rich shall keep getting richer.
- PPMA – Pakistan Pharmaceutical Manufacturers Association, the only representative body of Local Pharma is a weakness, rather than strength of the industry for the following reasons.
- The entire industry does not subscribe to PPMA. Some say it is due to cost factor, some say it is due to politics; whatever the reason, PPMA has not been able to unite the entire Local Pharma.
- Different tiers of industry have different needs which cannot be reconciled. PPMA therefore cannot rally for joint causes forcefully.
- PPMA has to make compromises for the posts of office bearers, there is no election; selection is reached through negotiations. The concept of representing legitimately is lost.
- Questions may be raised on the capability of some of the office-bearers entrusted with the task of leading the industry. Not only precious time is wasted, but the direction is also lost.
- Questions may also be raised when some ‘leader’ goes ahead and gets some very individual benefits.
- True, there are some stalwarts in PPMA who are giving their best to this organization, but these are in minority and their vision alone shall not take it very far.
- The entire Local Pharma, or at least a major part, does not stand behind PPMA, does not share a common vision, and does not pursue common objectives.
- Self-Regulation – The best strategy for improvement is self-regulation. Our usual intent in Pakistan is to flout the rules till we are captured. When we get captured, we pay the penalty and do the same thing again. Some of the Local Pharma owners carry the same attitude. They would violate rules as far as they could. DRAP shall never be able to regulate it completely. Presently, it does not have adequate resources, but even if the resources are increased, these will never be sufficient for policing the industry. Regulators like DRAP are supposed to regulate and develop the industry under it at the same time. DRAP officials need lot more training on this subject. They need more knowledge and better interpersonal skills.
Pharma Industry must agree to self-regulation to improve its working and image. The industry, Local Pharma, must improve its working and image to build sizeable business at home and abroad. No amount of external pressure shall bring desired changes; the change would come with ‘willingness to change’. Self-regulation is part of the willingness to change.
To be Continued……
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