Dear Colleagues! This is Asrar Qureshi’s Blog Post #867 for Pharma Veterans. Pharma Veteransaims to share knowledge and wisdom from Veterans for the benefit of Community at large. Pharma Veterans Blog is published by Asrar Qureshi on WordPress, the top blog site. Please email to email@example.com for publishing your contributions here.
There are two countering narratives on the matter of ease of doing business in Pakistan. One view is that it is quite easy to do business here because the implementation of regulations is weak; the other view is that it is quite difficult to do business here because the regulations are adverse and business-unfriendly, and corruption among officials is rampant. The second view is more factual.
Pharma business in Pakistan is highly regulated at all stages, with regulations aimed at policing and control, rather than promoting business.
Most active pharmaceutical ingredients and packaging components have to be imported. Some concessions had been there which were gradually being taken away. For example, active pharmaceutical ingredients were exempted from import duties/ subjected to minimal duties, but gradually import duties have been slapped/ increased. Imported packaging materials are subjected to highest rate of GST though the import duty is not the highest. Injections glass vials are subjected to import duties and GST, and in addition, the manufacturer must submit consumption record to customs department, with calculation of IOCO – Input Output Coefficient ratio, which may lead to some relief in duties. The customs department installed an online system for filing import entries, which bypassed clearing agents and officials; it was soon abandoned. Another online system is in place now, but it is run by clearing agents, not the importers, and the usual practices are running full force. The importers must pay government dues and some personal money on top. True that the importers also indulge in illicit trade, save duties, do under-invoicing, and over-invoicing, but none of this could happen without the tacit consent of concerned officials.
Drug pricing has long been the most contentious issue in pharma business. The federal government has always kept pricing under its exclusive, tight control. However, between 1994 and 2000, price increases were allowed yearly, however, the government applied price-freeze for twelve long years from 2001-2013. Since the formation of DRAP in 2012, things have improved, but issues continue.
Industry owners/officials blame pricing issues as the most detrimental to business operations. The multinational companies have left the country steadily; the number going down from 40 to less than 20 over the years. Not all of them are manufacturing either.
Pakistan is not alone in strict price control of drugs; majority of countries are. Public regulation of drug pricing is based on two misplaced beliefs: one, that the government can enhance welfare through price control; and two, that the government has the ability and workforce to efficiently enforce price control. Both beliefs have been contested and negated over time. Price control leads to continuous drug shortages in public and private sector, thereby affecting public welfare adversely. Secondly, the government cannot control black-marketing of short drugs which are available at exorbitant prices.
Drug pricing has always been linked to politics. Any drug price increase tends to bring a negative response that casts the government of the time in a negative mode, something that could be politically detrimental in the context of populist politics. The tirade against price increases is blown up by the media, which usually reports the increase in percentages rather than nominal numbers to make it look substantial. A population- level backlash tends to follow, which more often than not leads governments to back out of any plans for increasing drug prices. Most recently, price increase has been tagged with federal cabinet approval, which is absolutely non-technical and can only take political decisions.
For manufacturing license, 19 major and minor steps are required to be met. DRAP shall approve the site, size, location, and layout of the new manufacturing unit. DRAP does not have qualified people to do it, but it is their mandate anyway. After the plant has been completed with all equipments in place, then DRAP team shall inspect the plant to grant Drug Manufacturing License. After the plant has been running for at least six months, DRAP shall do inspection to certify GMP – Good Manufacturing Practice status. It is a long arduous process which is fettered with delays also. The entrepreneurs suffer time loss and money loss. Licensing is critical but the system should be developed to handle work efficiently.
Since the introduction of CTD – Common Technical Document, it takes 1.0 – 1.5 years to develop a dossier for registration of a drug. It has a cost also which may even be a few millions. For generic versions of common drugs, this is too much time and cost. The registration shall take another one year at least. This process should only be applied to new products, not the umpteenth generic ones.
Drug Registration Board – DRB decides on the registration applications. The DRB comprises of DRAP officials, pharmacy experts, medical doctors, and industry representatives (as observers). The DRB meets for two days after 2-3 months, and the meeting agenda is over 250 pages with over 1,000 applications for registration. It is impossible for any Board to cover this agenda in two days, and therefore, many matters are either carried forward, or dealt with hastily: both causing distress to industry.
The DRB should only consider applications of New Chemical Entities – NCEs; for all other applications, DRAP should have an internal committee which should keep doing the work.
CONTRACT MANUFACTURING & MARKETING
Contract manufacturing by a manufacturer for another manufacturer is a huge part of business internationally. DRAP has issued a revised contract manufacturing policy, but it does not break new ground. DRAP does not intend to liberalize this segment which is important.
In most developed countries, several companies specialize in manufacturing of drugs while others focus on marketing and sales. Still others have taken up R&D as their specialty. This segregation has strengthened each segment. DRAP still insists on the ancient practices and supports it by approving establishment of small, inefficient, unviable manufacturing units which may later get involved in undesirable practices.
Since the inception of DRAP, the charges for various services have been revised upwards multiple times. Presently, the charges are many times more than what these used to be before DRAP. While DRAP is stringent in awarding prices, it is extremely liberal in charging for its services.
Pakistan was ranked 108th in terms of ease of doing business. This is World Bank ranking. Although Pakistan improved its rank from 136th to 108th in three years, even now it is very low in ease of doing business. The index is calculated on ten parameters and is a clear indicator of the policies, rules, regulations, and laws pertaining to starting and running businesses. It is not just about Pharma business; it is about all businesses. The myriad of policies and barriers feeds the corruption among officials, bureaucrats, and politicians. To strengthen economy and exports, governments must review and rationalize policies.
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