PHARMACEUTICAL INDUSTRY
Introduction
Pharmaceuticals are the substances that are aimed to treat, cure, prevent or recognize diseases and relieve pains through their applications.
Deal in generic and/or brand medications Laws and regulations regarding the patenting, testing and marketing of drugs. Extracts from plants (such as ephedrine, caffeine, opium, quinine and hundreds of other biologically active compounds) Natural products were the basis for the pharmaceutical industry.
Introduction (contd.)
The formal start of the industry has been fixed to 1935 when sulfonamide antibacterial were introduced for general use. The primary goal of the pharmaceutical industry is to find, develop, and market new chemical entities (NCEs). Devotes huge resources to R&D
History
At the time of independence there were only two small units which were enabled to meet the local demand. The decision taken in 1972 to abolish brand names, restrict availability of essential drugs to 850, fix maximum retail prices across the board and freely allow local manufacturer of all the essential drugs was in fact the life line for the national segment of the industry.
History (contd.)
Inaccessibility of new researched medications this policy was ultimately reversed in 1976. Since 1999 the Govt. has invested US$ 133 million in the pharmaceutical industry. The last 10years was eventful for the Pakistan Pharmaceutical Industry . In 2006 there were 400 licensed pharmaceutical companies in Pakistan, including 30 multinationals who had over 53% of market share.
Pharmaceutical Industry in Pakistan
Pakistans pharmaceutical and healthcare sectors are expanding The value of pharmaceuticals sold in 2007 exceeded US$1.4bn, which equates to per capita consumption of less than US$ 10 per year and value of medicines sold is expected to exceed US$2.3 B by 2012. Per capita drug spending was rather low at around US$9.30 in 2007
Pharmaceutical Industry in Pakistan
Private spending accounts for 65% of total healthcare expenditure. Pharmaceutical spending accounts for less than 1% of the country's GDP, comparable to levels in some neighboring countries but above that in some of the South Asian countries.
COMPANYS GSK ABBOTTLAB HIGHNOON LABS GETZ PHARMA SANOFI AVENTS ROCHE
MARKET SHARE 11.6% 7.9% 6.3% 3.9% 3.8% 3.1%
COUNTRY DEMAND
80% of its domestic demand of medicines from local production 20% through imports. Market size is Rs. 70 Billion (US $ 1.2 Billion), approximately Market expanding at a rate of around 10 to15%
EXPORTS AND IMPORTS
Exporting its surplus drugs to a large number of countries particularly to the Asian and African regions with an expanding trade in the newly emerged Central Asian States. Share in exports has been reached to 4.04% that was 3.28% in 2008 Imports nearly 95%of the basic raw-material used for manufacturing from countries such as China, India, Japan, U.K, Germany
MAJOR SUPPLIERS
United States Germany U.K. Switzerland Japan Holland France
BASIC MANUFACTURES
There are five units operating in Pakistan for the Semi Basic Manufacturing of pharmaceutical raw material and still Pakistan has the capacity to absorb the significant investment in this field.
MULTI NATIONAL & LOCAL MANUFACTURERS
30 multinational pharmaceutical organizations 411 units are involved in local pharmaceutical manufacturing.
SOME KEY STATISTICS OF THE INDUSTRY
REGISTERED DRUGS REGISTERED MOLECULES R&D EXPENDITURES AVERAGE GROWTH RATE MARKET SHARE OF MULTINATIONAL COMPANIES MARKET SHARE OF LOCAL COMPANIES MARKET LEADERS 47000 1100 1% of the profit 11% 45%
55%
Glaxosmithkline
HEAD OFFICE
PPMA has its head office located at KARACHI with two Regional offices in Punjab & NWFP.
BUSINESS CONNECTIONS AND EFFICIENCY
Types of Pharmaceutical companies
Pharmaceutical companies are of two types
Manufacturing Franchising
Example
In pharmaceutical marketing you can easily get pharmaceutical products right to market at 20%-40% of trade price When the chemist receives this product on T.P (trade price) Rs.10, he will sell it at15% profit margin that is Rs.1.76 at one tab, so the customer has paid Rs.10+1.76=11.76 and the difference of cost and sales price is Rs.9, he is paying 9 rupees extra
In manufacturing concern the profit margin definitely will be higher. Pharmaceutical companies are investing heavily in promotional activities Leads to the price hike of the medicines. Apparently it sounds great rather necessary but in practice this fair trade is also marred with unethical practices
The law enforcing agencies should come forward and put a close check on this industry Pharmaceutical companies should also sit together and make decisions not to get involved in unethical practices Decrease their unnecessary promotional expenses The government should frame a law to set profit margin
ROLE OF GOVERNMENT
Independent Drug Registration and Pricing Authority Ministry of Industries decides about the drug pricing In the biotechnology sector, Pakistan has initiated many programs
Planning to set up biotechnology plant worth Rs.400 million
Some major public sector programs have been initiated to address the healthcare needs of the population. These include:
The National Program for Family Planning and Primary Health Care The Expanded Immunization Program National Program for Hepatitis Prevention and Control National Tuberculosis Control Program National Malaria control Program National HIV/AIDS Control Program Women's Health Program.
Ministry of Commerce has given 50% subsidy to pharmaceutical companies for registration of their exported products in foreign countries for export from 1998 to 2003 The government has also formed a policy recently allowing companies to produce raw materials locally. Since 1999 the government has invested US$ 133 million in the pharmaceutical industry
FLOW CHART OF PROCEDURE FOR LICENSING OF PHARMAECTICAL UNIT
FLOW CHART OF DRUG REGISTRATION
PEST ANALYSIS
POLITICAL FACTORS Political instability Tax policy (including tax rate changes, new tax laws and revised tax law interpretations) Employment laws Environmental regulations Trade restrictions and tariffs Current wave of terrorism in Pakistan ECONOMIC FACTORS Economic growth Interest rates Exchange rates Inflation rate
PEST ANALYSIS (cont.)
SOCIAL FACTORS Health consciousness Population growth rate Age distribution Career attitudes Emphasis on safety
TECHNOLOGICAL FACTORS
R&D activity Automation Technology incentives Rate of technological change
PEST IMPACT
NATURE OF CHANGE
IMPACT OF CHANGE
OPPORTUNITIES
THREATS
STRATEGIC RESPONSES
Political Forces Economic Forces
Price Fixation
Low Profits
Long Term Pressure on cost
Efficient Management Focus operational efficiency on
Inflation, Increase in cost Exchange Rates Fluctuations
Social Forces
Cross border Decrease in sales Relationship
Growth opportunities
Research product development Reduction Profits
&
Terrorism
Decrease in sales
in Strong business relationship
Global Alliances
Increase in Market Share Growth Opportunities
Focus on Market Capitalization
Political Forces
Advanced Technology
Economies of Scale
Competitive Advantage
Human Resource & Fund Allocation
PORTERS FIVE FORCES
PORTERS FIVE FORCES HIGH
MODERATE
LOW
Rivalry among the existing firms Bargaining power of suppliers
Bargaining power of buyers
Threat of new entrant Threat of substitutes
SWOT ANALYSIS
STRENGTHS Export potential Contribution to GDP Employment generation Advancement in technology WEAKNESS Price fixation No tax No R&D incentives Imported raw material lack of resources Registration process
SWOT ANALYSIS (cont.)
OPPORTUNITIES
Molecule development Market growth Global alliance (Highnoon laboratory with Solvay Pharmaceuticals in Germany) Incredible export potential (Central Asia states) Aging of the old population New diagnoses and new social diseases
THREATS
TRIPS (Trade Related Aspects of Intellectual Property Right) agreements Competition from MNCs High cost of R&D Low funds for plant up gradation Government policies (0.7% of GDP for health sector) High cost of inputs (95% import)
RECOMMENDATIONS
Govt. should increase pharmacy product prices Imports of adequate medicines should be banned Give special preference Incentive provided equally to multinational and national companies No more units Withdraw the duties and taxes imposed on their import. Govt. should also support or invest in R&D Biotech pharmaceutical plants should be installed
CONCLUSION
The pharmaceutical industry in Pakistan includes both multinational and domestic companies. Multinationals have an upper hand in a way that they possess worldwide advertising facility and can spend allot of money on their research programs. On the other hand local Pharmaceuticals basically rely on licensing for their core business, as they are unable to match the advertising budget and expertise of their multinational competitors. By following the above suggestions many problems of the pharmaceutical industry of Pakistan can be resolved.
