Is Pakistan running out of medicine?
The shortage of medicine is usually attributed to both a lack of incentives for local production on a competitive basis, and arbitrary import controls on inputs of various drugs. In Pakistan’s case, several other factors may also be at play including the falling value of the PKR. This has led to a hike in the imported cost of active pharmaceutical ingredients (API) and related raw materials. Import restrictions have also resulted in the shortages of some materials.
Data systems at Ministry of National Health Services, Regulations & Coordination and Drug Regulatory Authority of Pakistan certainly require attention. Instead of these organizations ringing alarm bells, it is usually the Pharma Bureau – a representative body of multinational pharmaceutical companies or Pakistan Pharmaceutical Manufacturers’ Association that has to come to Islamabad’s not-so-receptive corridors to explain the dire situation. Their message if understood is then communicated to the Economic Coordination Committee (ECC) which then takes their sweet time to decide the way forward. All the while, this laxness is costing lives.
More recently, the Drug Price Committee and ECC had divergent views in turn delaying important decisions which could have corrected essential drug prices. While the former wanted to allow a price structure for essential medicines which covers the cost of production and distribution, the latter still wanted to keep the prices at low levels in turn allowing an un-targeted subsidy which under the current macroeconomic milieu is not sustainable and not liked by the International Monetary Fund. On the trade side too, it is argued that customs duty exemptions often discourage local manufacturers but more importantly this culminates into those benefiting relatively more who could have easily afforded the standard customs rate if built into the maximum retail price.
There is a large Pakistani diaspora in the pharmaceutical sector abroad whose capabilities could be harnessed, and generic medicine could be a solution that can enhance the availability and affordability of medicine.
Dr. Vaqar Ahmed
Strictly looking at this problem from a consumer perspective, the pharma market is broken. Once the maximum retail price is fixed, the quality of drugs deteriorate. Manufacturers have an incentive to produce poorer quality as they know that price won’t be allowed to change with any variation in quality. Second, it has been pointed out in past features that health care, whether in private or public sectors will complete the tendering process, but they end up selecting the lowest bidder – further accentuating the seller’s incentives to lower quality to win the bid. In the medium to longer term, this deteriorates overall national health care standards.
Overtime, with declining quality of local produce, well-to-do customers started asking for imported substitutes of even the most common medicines. A market for imported medicines thrives on this societal class that never raises its voice for more affordable and quality medicine for the average citizen. Even this affluent class is now no longer insulated from drug shortages. Retailers in posh areas and urban centers have run out of imported supplies. Many have found it more profitable to charge a premium in the black market for lifesaving drugs.
Going forward, regulators should understand that un-targeted subsidies don’t maximize welfare gains. An approach used under the Benazir Income Support Programme of firstly identifying the deserving population and then transferring a targeted subsidy for health purposes (and that also for a fixed period) is a less distortive option.
Production in this sector mostly relies on raw materials or APIs imported from abroad. Policy makers will need to understand that liberalising trade with neighbors could result in lower and better quality inputs being imported. Currently, only limited trade in pharmaceuticals is possible with India- it was number 7 last year on the list of highest dollar value worth of medicines.
Literature on regional trade indicates that several Indian pharmaceutical items end up in Pakistani markets through informal channels. Some Indian medicines are even found over-the-counter. It is important for the Pakistani government to identify such items in the local market and allow for their exit from protective lists.
There is also a case for promoting investment cooperation between Chinese and Pakistani manufacturers. Gains in terms of technology and skills’ transfers by forming industrial research and development (R&D) alliances could offer dividends. Exploring innovative research such as process intensification technologies, nano-technology, alternative medicines, green manufacturing in pharma should come naturally for both countries.
There is a large Pakistani diaspora in the pharmaceutical sector abroad whose capabilities could be harnessed. For example, generic medicine could be a solution that can enhance the availability and affordability of medicine. Advancements in generic medicine and scaling up their production could be possible if the diaspora can help create linkages with foreign research and marketing channels.
- Dr. Vaqar Ahmed is an economist and former civil servant. He tweets @vaqarahmed