Pharmaceutical Sector of Pakistan

PEARL
(Practical, Entrepreneurial and Reflective Learning)

Prepared for
Syed Zahoor Hassan
(PEARL Team)

Prepared by
M. Bilal (0002)
Hassan Aamir Khan (0028)
Madih Ali Ahmad (0017)
M. Aqeel Ashraf (0050)
Saad Masood (0047)
Yawar Aftab (0032)

DR#4

January, 2016

Table of Contents
1

List of Figures. 3

List of Tables... 3

Acknowledgements. 4

Global Pharmaceutical Industry ....... 5

Pakistan- Pharmaceutical Industry. 6

Companies
6.1 Comparative Strategy Analysis... 9
6.2 Comparative Financial Analysis.. 11

Conclusion
7.1 Challenges..... 11
7.2 Recommendations. 13
7.3 Opportunities 14

Page 2 of 15

1 List of Figures
Fig 1 Global Pharma Market............. 3
Fig 2 Disease Burden of Pakistan- 20158
Fig 3 Pharma Sector- Supply chain... 8
Fig 4 Product Portfolio.............. 9
Fig 5 Comparative Financial Analysis. 11

2 List of Tables
Table 1: Asia-Pacific Growth Trend in Pharmaceuticals ........ 7
Table 2: Spending on health percentage of GDP 7
Table 3: Top 20 National Pharmaceutical Companies. 8
Table 4: Top 10 Multinational Pharmaceutical Companies. 8
Table 5: Highest Selling Molecules in Pakistan... 9
Table 6: FDA Approved Plants13

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3 Acknowledgements

Authors are thankful to

Almighty Allah,
For His unlimited blessings and bounties,
And for keeping them sane, sound and successful;
Their parents and friends,
For all their support and trust in them and their aims;
Their teachers and guides,
For teaching them things they knew not;
PEARL Program Team,
For bringing this excellent learning and exposure opportunity;
And last but never the least
Management and Staff of Ferozsons Laboratories Limited, Remington Pharmaceutical,
Schazoo Zaka Pharmaceutical,
For their utmost help, guidance and time
Which made authors make most of this great opportunity;

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4 Global Pharmaceutical Industry

Today, global pharma market is estimated to be 10001100 US $ billion and growing annually at 5-7%. USA
has the largest share consisting of 400-410 US $ billion
with 4-6% annual growth, while Europe has a share of
155-165 US $ billion with a growth rate of 1-3%. Japans
share is 80-90 US $ billion and is growing at a rate of 57%. Emerging pharmaceutical markets like China,
Brazil, Russia, Mexico, Turkey, India, Indonesia, South
Africa, Ukraine, Egypt, Thailand, Vietnam, Romania,
Pakistan all collectively have a total pharma market of

Figure 1 Global Pharma Market

(Source: www.ppma.org.pk)

261 US $ billion which has registered a growth of about

11-13%. Rest of the world is estimated to have a market worth 120-125 US $ billion and is growing
at a rate of 2-4%1.

4.1 Industry Outlook

The pharmaceutical industry is characterized as a high-risk/high-profit industry. The research and
development process that leads to a drug being available on the market, generally takes 8 years on
average. The active ingredient first needs to be isolated and identified, and then this product needs
to be tested for its chemical stability and toxicity on animals or pre-clinical phase. The drug is then
administrated to sane volunteers and lastly to ill patients (clinical trials phase I and II respectively).
The final approval on whether or not that new drug is allowed in the market is upon regulatory
bodies such as FDA in the USA, SFDA in China or AFSSAPS in France.
4.2 Changing Dynamics New Pharmaceutical Order
The pharmaceutical dynamics at global level is changing as a result of the recent wave of patent
expiration that has hit several blockbuster drugs (Masi, 1991). These drugs were cash cows for big
pharmaceutical companies that were developed back in the time when few drug manufacturers had
1

http://www.ppma.org.pk

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the monopoly of drug developing and manufacturing thus charging a premium price for these
highly innovative drugs, having unlimited access to virtually every market on a global level and
protecting their products with a patent of 20 to 30 years2. This era is at its dawn now with the
patent cliff looming ahead for the Big Pharmaceuticals, which obliges them to rethink of their
business models. This business model on which Pharmaceutical MNCs used to rely on to yield
profits is no longer relevant, especially with the emergence of new contenders in the industry.
Players like China and India are leading the pack with huge market growth potential and new
power houses for drug manufacturing and innovation3. Big Pharmaceuticals as a result have to
reshape their organization structure to be more flexible and reactive to the changing environment.
The main measures Big Pharmaceutical companies have applied so far include restructuring of
their R&D facilities inducing massive layoffs in their Western plants and shifting manufacturing
facilities from France, Germany, UK, and US to countries such as China and India where labor is
cheap.

5 Pakistan Pharmaceutical Industry

Today, there are around 386 (National: 356,
Multinationals: 30) manufacturing units in
the country. The Pharmaceutical industry
caters to almost 70-80% of the local demand
of finished medicines. 42% of this demand is
met by multi-national companies while 58%
is met by local companies. Total worth of
Pakistans

Pharmaceutical

industry

is

estimated at Rs. 3 Billion US Dollars

(September 2016). The sector is growing at
a rate of 12% annually and employs nearly
0.5 million people. Private sector and
2
3

Country
Market Size in US $ Billion
CAGR %
India
12
10 - 13
Pakistan
3
12 - 15
China
115
12 - 15
Vietnam
3
3 - 16
Indonesia
4
9 - 12
Table 1: Asia-Pacific Growth Trend in Pharmaceuticals
Source: http://www.ppma.org.pk/

Country
Govt spending on health as % of GDP
Pakistan
0.9 %
Jordan
5.2 %
Turkey
4.2 %
Malaysia
2.3 %
Egypt
2.2 %
Srilanka
2.0 %
Table 2: Spending on health percentage of GDP
Source: http://www.ppma.org.pk/

DiMasi, 1991
Calo-Fernandez, 2012

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government contribution to total health expenditure is 82.5% and 17.5% (1% of GDP)
respectively. This 17.5% contribution by government is considerably lower than other South Asian
countries. Pakistans health spending per capita is $37 which is below the minimum level of $44
prescribed by the World Health Organization
No. Company
No.
1.
Getz Pharma Pakistan (Pvt.) Ltd
6.
2.
Sami Pharmaceutical (Pvt.) Ltd
7.
3.
Ali Gohar Pharmaceuticals (Pvt.) Ltd
8.
4.
Werrick Pharmaceuticals
9.
5.
Hilton Pharma (Pvt.) Ltd
10.
Table 3: Top 10 National Pharmaceutical Companies

Company
Barrett and Hodgson (Pvt.) Ltd
Wilsons Pharmaceuticals
Ferozesons Laboratories Ltd
Schazoo Laboratories (Pvt.) Ltd
Remington Pharmaceutical Industries (Pvt.) Ltd

Source: IMS, Q2, 2015

No. Company
No. Company
1.
GSK
6.
Novartis Pharma (Pakistan) Ltd
2.
Sanofi Aventis
7.
Bristol-Myers Squibb
3.
Abbott Laboratories (Pakistan) Ltd 8.
Pharmacia and Upjohn (Pvt.) Ltd
4.
Merck Marker (Pvt.) Ltd
9.
Parke-Davis
5.
Roche Pharmaceuticals
10. Wyeth Pakistan Ltd
Table 4: Top 10 Multinational Pharmaceutical Companies
Source: IMS, Q2, 2015

Pakistans Pharmaceutical industry specializes in antibiotics, vaccines, tranquillizers, hormones,

anti-oxidants, cardio vascular, anti-cancer, cicatrix, contraceptives and birth control medicines.
Around 125 different categories of medicines are produced locally which include vitamins, antiallergic, ointments and cough syrups etc. The following table provide details of the highest selling
molecules in Pakistan.

No.
1.
2.
3.
4.

Name
CEFTRIAXONE
CEFIXIME
CIPROFLOXACIN
DICLOFENAC

Description
Antibiotic; useful for the treatment of a number of bacterial infections
Antibiotic; useful to treat a number of bacterial infections
Antibiotic; used to treat a number of bacterial infections
Nonsteroidal anti-inflammatory drug (NSAID); taken or applied to
reduce inflammation and as an analgesic reducing pain in certain
conditions
5.
AMOXICILIN
Antibiotic; useful for the treatment of a number of bacterial infections
Table 5: Highest Selling Molecules in Pakistan
Source: Drug Regulatory Authority of Pakistan (2015)

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5.1 Pakistan Pharmaceutical Manufacturers Association (PPMA)

It is a non-governmental representative body of Pharmaceutical manufacturers in Pakistan. Main
purpose of PPMA is to place before Government
and other public and official bodies the views of
the pharmaceutical manufacturers.4
5.2 Drug Regulatory Authority of Pakistan
(DRAP)
Its aim is to provide effective coordination and
enforcement of the Drugs Act, 1976. DRAP
performs a wide variety of tasks which includes:
providing manufacturing licenses, protecting
patents, imposing price freezes, encouraging the
use of Good Manufacturing Practices and
registering Generic Drugs.
Figure 2 Disease Burden of Pakistan-2015
(Source: WHO Report- 2015)

5.3 Pharma Sector- Supply Chain

Figure 3 Pharma Sector- Supply Chain

http://www.ppma.org.pk

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6 Company Analysis
6.1 Comparative Strategy Analysis
Products
Ferozsons Laboratories manufactures allopathic drugs which include
Novapressin Injection, Filgen Injection, Eritrogen Injection 4000 IU,
Peg- INF Injection, INF -A Injection, Eritrogen Injection 2000 IU and
INF Injection. These products cater to various lethal diseases such as
hepatitis B and C, Anemia, Cancer etc. Ferozsons, also imports
products from partner firms and sells them in the country. Sovaldi
(pictured) has been the blockbuster drug of the past year and
contributed around 70% towards the companys topline.
Remington Pharma is a national company which besides having a
diverse product portfolio of generic medicines primarily focuses on
flu, ear, nose and eye care. The company has been reaching out to
global markets such as Africa, Middle East and South East Asia. In
addition to complying with cGMP, the company is aggressively
pursuing a WHO certification for its plant.
Schazoo Zaka is one of the oldest pharma companies in Pakistan and
has evolved over the years from being a company that was involved
toll manufacturing for six MNCs in the 1960s to developing its own
drugs to cater a niche market and further going on to export their drugs.
They are the market leaders in tuberculosis segments. Schazoo
previously had a TBs market share of 35 percent which is set to further
increase with Pfizer and Novartis decreasing their production.

Figure 4 Product Portfolio

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Strategy
Ferozsons main strategy is to collaborate with other multinational players to bring new high
quality generic drugs in Pakistan. Ferozsons partnered with Gilead to manufacture authorized
generics of Gileads products for Hepatitis. Sovaldi (A drug for Hepatitis C Treatment) is one of
those medicines. Ferozsons other strategy is to produce high quality drugs. They import the best
Pharmaceutical grade API (Active Pharmaceutical Ingredient). Government has set a minimum
requirement for API grade and most companies only aim to meet this level. However, Ferozsons
focus on drug safety pushes them to go beyond these minimum requirements which also costs
them more than their competitors. Because of high COGS, they have lesser reserves for marketing
and promotion expenditures. Their marketing strategy is to spend this fund on educating doctors.
Ferozsons, has one of the best sales force around and they take the scientific approach towards
marketing their product. The aim of their marketing activities is to educate the doctors about the
superiority of their drugs in terms of safety and efficacy.
In the highly-regulated industry wherein the prices are capped, Remington Pharma has been
actively implementing strategies that minimize costs of production and hence improve the bottom
line. Over the last three years, the company has been allotting a significant portion of its budget to
capital expenditures in order to shift from labor to capital intensive processes. They have further
implemented SAP for better management and control of the processes. Moving forward, the
company is vying for international collaborations and is on the verge of introducing new molecules
to improve the future sales of the company.
Schazoo differentiates its products by concentrating on producing high quality drugs and obtaining
international certifications for their production processes. Schazoo has brought some innovations
and one such example is that of the fixed dose combinations introduced in 1986, where five
different anti-TB drugs were combined into one. Schazoo primarily markets its drugs through chest
specialists and general practitioners who are operating at the bottom of the pyramid and are ignored
by the bigger companies. As a way around the pricing issue that has plagued the industry, the
company has involved the judicial system of Pakistan by taking their issues to the court and have
obtained stay orders on the prices that they have increased without authorization from DRAP.
Going forward the management of Schazoo foresees huge potential in exports. At present 25% of

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Schazoos sales revenue is generated from exports which are mainly to Afghanistan. They are
hoping enter other markets where TB is prevalent and the barriers to entry are not high.
Pakistans pharmaceutical industry is mainly driven by generics. All the companies that were
studied for this report, stated that in order to survive competition they had to bring in new
molecules that were being developed abroad. Lack of R&D within the country has made local
companies dependent on international players for new products.

6.2 Comparative Financial Analysis5

Figure 5 Comparative Financial Analysis

7 Conclusion
7.1 Challenges
As per our analysis, pharmaceutical industry of Pakistan is currently facing following challenges.

Pricing: Drug manufacturers in the country were not allowed any price increases for the period
2001-2015; not even for inflation. Only recently has the Government lifted the caps in line
with the recent CPI index. Prolonged price freezes had caused a lot of drugs to become
economically unviable and as per official estimates over three hundred essential drugs are not
being manufactured in the country.

Companies Annual Reports- 2016

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Restriction on Toll manufacturing: With respect to pharmaceuticals, toll manufacturing refers

to a situation where a company has registered drugs but does not have adequate manufacturing
facilities so they request other manufacturing units that have the capacity and license to
manufacture their registered drugs (against pre-determined fee), so that they can meet the
market demands. This is restricted in Pakistan but allowed in other regional countries like
India, Turkey, Jordan. This restriction has limited the cost cutting potential and exports of the
sector.

Lack of intellectual property and patent protection: Weak patent protection deters
breakthrough medicines from coming to Pakistan. Recently, Ferozsons entered into a
collaboration with Gilead, through its Global Access Program, for the sale of Sovaldi at very
low prices. This breakthrough shifted the treatment of Hepatitis C virus from injections to oral
medicines. However, due to loopholes in the intellectual property laws of the country, the
product could not be patented and various local companies have started selling a generic
version at a much lower price. This would not have been possible under a strict patent regime
and for this reason, global companies are hesitant to invest and introduce new products in the
country.

Counterfeit medicines: Various reports estimate that 30-50 percent of drugs in Pakistan are
counterfeit. According to the Pakistani Pharmacist Association, there are approximately 4,000
licensed pharmacies in Pakistan, but also as many as 100,000 other illegal merchants selling
medications. Surprisingly, a lot of these medicines are being produced out of single room
factories under poor conditions. This menace of fake drugs is killing the pharma sector.

FDA

and

WHO

approvals:

Pharmaceutical

manufacturing plants in Pakistan may be FDA

compliant, but to obtain the stamp of US FDA there
needs to be a regulator (Govt) level agreement with the
FDA for a central laboratory and other quality
assurance mechanisms. Companies exploring export
markets are often required to carry these certifications

Table 6 FDA Approved Plants

in order to add credibility and differentiate their products. As of today, Pakistan does not have
a single FDA approved plant while the DRAP has been unable to live up to its promise of
achieving FDA and WHO certifications for its Central Drug Laboratory by Dec2016.

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Human resource: There is significant lack of trained human resource in this sector as there is
no formal institute in the country where people can be trained. Thus, pharmaceuticals are
unable to find right kind of technical support. Institutionalization of pharma training is essential
for ensuring continuous supply of technically sound human resource.

Transfer Pricing: One factor contributing to the high costs of production is that of transfer
pricing. MNCs instead of importing raw materials at an internationally competitive price from
the world market, import raw materials from their parent companies who charge higher prices.
Not only does it increase their cost of production, it also has a negative effect on Pakistans
balance of payment account. As per our analysis of financial statements, the corporate tax
burden in Pakistan (32%) is higher than India (14%) and Bangladesh and is one of the primary
motive for transfer pricing.

7.2 Recommendations
As per our analysis, following are the recommendations to solve the current challenges:

Pricing: All stakeholders must come up with a mutually agreed pricing mechanism. In our
opinion, there must be an across the board price increase after every two to three years.
This is to compensate for the global rise in prices of commodities, rupee devaluation and
the resulting increase in the prices of raw materials and finished medicines.

Regulated vs Non-regulated drugs: Only prices of vital drugs recommended by WHO

should be controlled and regulated as opposed to regulating all drugs. This deregulation
will encourage more investment in the sector as currently price controls are directly
affecting profitability and growth process in the sector. Furthermore, those essential drugs
which are currently not viable to produce in the country and thus imported, will begin to
be made locally.

Government spending: Government must increase its spending on education and health
from current 0.8% and 0.5% of GDP6 to 2% on education and 3% on health respectively.

Central Research Fund (CRF): Currently each pharmaceutical company is paying one
percent of their profit before tax to the governments Central Research Fund (CRF). Since

State Bank of Pakistan,2015

Page 13 of 15

inception, CRF has not contributed in any way towards R&D efforts. Government must
utilize this fund to build an R&D environment in the country along with proper
accountability.

Eliminate Counterfeit medicines: Regulatory Authorities needs to cut the supply of

counterfeit drugs in the market by creating a no corruption set up within the authorities
and through strict policy implementation. The purchase licensing scheme must be enforced
to crack down the illegal manufacturers. Manufacturers should be provided with
holograms stickers that cannot be copied, thus enabling the consumers to differentiate
between counterfeit and the actual products. In addition to this, the companies should also
integrate anti counterfeit solutions with packaging suppliers. The cost of such measures
should be shared by the Government.

API (raw material) Manufacturing: All local companies with a sales base of more than Rs.
500 million should be asked to create a consortium and setup a large-scale manufacturing
facility for APIs (raw material) to cater for industry needs. Once the quality of locally
produced APIs reaches an acceptable level, protective duty should be imposed on the
import of the APIs. (API= Active Pharmaceutical Ingredients)

Eliminate Transfer pricing: Ministry of Health should carry out a survey of all the products
being marketed in Pakistan, and determine the realistic cost-component for the raw
material. These should be compared with the prices of raw materials abroad and all
companies, whether MNCs or national, engaging in such practices should be issued notices
and cracked down.

7.3 Opportunities
As per our analysis of the sector, following opportunities exists:

Contract Research Organizations (CROs): A contract research organization (CRO) is an

organization that provides support to the pharmaceutical industries in the form of research
services outsourced on a contract basis. A CRO may provide such services such as
biopharmaceutical development, commercialization, preclinical research, clinical research,
clinical trials management. Earlier clinical trials used to be conducted in North America
and Europe but because of the changes that had transpired, most of the trials were now

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global with regional representation from all over the world. With 200 million people from
South Asia having certain kind of a genetic set-up, there is an enormous opportunity of
setting up CROs in Pakistan. Pharmaceutical industry of Pakistan and entrepreneurs need
to explore this option of becoming a part of the global effort of running clinical trials.

Shifting to Biologics: In Pakistans pharmaceutical industry, huge opportunity lies with

regards to biologics (a biologic is a medicine that is manufactured in a living system such
as a microorganism, or plant or animal cells). At present the portfolios of pharmaceutical
companies of the country had been heavily lopsided towards chemical drugs due to less
emphasis on biologics. Pakistan pharmaceutical companies can easily jump on biologics
trend with minimal investment.

Combination therapies: Combination therapy is using two or more drugs that interact
favorably, to affect a disease via multiple routes. This produces a powerful effect when
combined. A broad range of investors globally have expressed interest in this trend. Large
pharma companies have started looking for early stage therapeutics that they can combine
with a drug from their own portfolio in order to make a more powerful therapy. This widens
the market for their own assets, and in some cases, may extend the patent life of an older
drug by allowing the firm to register a new combined drug. Pakistani drugs manufacturers
can gain by embarking on this new trend as this does not also do require very heavy
investment.

Product Portfolio- OTC vs Prescription drugs: There is huge opportunity lies for national
companies with regards to OTC (over the counter) drugs. As OTCs are unregulated drugs
so there is no price cap imposed on them by government. With right product mix,
companies can improve their top line and bottom-line figures. This will not only enable
them to sustain but also to grow in such tough environment.

Bibliography
2016, S. B. (n.d.). Retrieved from www.sbp.org.pk.
Drug Regulatory Authority of Pakistan (DRAP). (n.d.). Retrieved from www.dra.gov.pk/.
Masi, D. (1991). ABC.
Pakistan Pharmaceutical Manufacturers Assosiation. (n.d.). Retrieved from www.ppma.org.pk.
World Health Organization- Helath Report 2016. (n.d.). Retrieved from www.who.int\.

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