ISLAMABAD: Pakistan’s pharmaceutical industry has urged the government to abolish a newly imposed one percent sales tax and jack up prices of all medicines to overcome the shortage of over fifty life-saving drugs in the local market.

The new sales tax was included in Pakistan’s latest budget, approved by parliament this week. The government has been struggling to levy maximum direct and indirect taxes on different products and businesses to shore up its fragile economy and meet the conditions of the International Monetary Fund to revive a stalled $6 billion loan program.

“We strongly urge the government to withdraw one percent sales tax on medicines to keep the industry viable and overcome shortage of life-saving drugs in the market,” Qazi Mansoor Dilawar, chairman of Pakistan Pharmaceutical Manufacturers’ Association, told Arab News.

He said the supply of over fifty essential medicines had been disrupted in the market since manufacturers were importing the raw material to produce only those medicines that were profitable to them.

“Our input cost has escalated manifold in the last two years with the appreciation of dollar, increase in freight charges and international raw material, but the government is not willing to increase the prices of medicine,” he said.

The annual total pharmaceutical market in Pakistan is estimated to be around Rs700 billion. Pakistan imports much of the medicinal raw material from China and industrial experts say freight charges have increased around eight times since the onset of the COVID-19 pandemic.

In January, the country’s ousted premier Imran Khan’s administration imposed a 17 percent sales tax on the import of raw material, promising that the amount would be refunded to pharmaceutical companies after the consumption of their stock.

Prime Minister Shehbaz Sharif’s government has now withdrawn the 17 percent tax on the import of raw material, but levied one percent sales tax on all medicines.

“This one percent sales tax on medicines means the industry will be collectively paying Rs70 billion in tax this year,” Dilawar said.

Unlike other businesses, the pharma industry cannot increase medicines prices on its own since only the federal government is authorized to revise the rates of lifesaving drugs.

“We have a capping of every medicine and cannot increase their price on our own,” the association chief said, adding if the government failed to withdraw the sales tax and increase medicines prices, there would be a shortage of another two hundred drugs in the market within a couple of weeks.

The government has promised to look into the demands of pharmaceutical companies and address their concerns to ensure smooth supply of medicines in the market.

“We are well aware of the pharma industry’s demands and are trying to address them,” Sajid Hussain Shah, a spokesperson for the health ministry, told Arab News.

However, he warned that the ministry would initiate action in case medicines were hoarded to create an artificial shortage in the market.

“We are closely monitoring the medicine supply,” he said, “and won’t spare anyone who is found guilty of creating artificial shortage of medicines.”