A Cry for Desperate Remedies

There is a need to revise the medicine prices. Any delay on the part of the government could lead to closure of the pharma industry. The government should ensure timely opening of letters of credit for the import of raw materials

Amjad Ali Jawa

Wilshire Group of Companies chairman

The prices of active pharmaceutical ingredients (API), i.e., raw materials used in the manufacturing of medicines, have increased exponentially in the international markets since the outbreak of the pandemic

Ayesha Tammy Haq

Pharma Bureau executive director

The workers’ wages and prices of petroleum, electricity, gas and other inputs have increased considerably but there is no revision in the prices of drugs. If the situation persists, it will be unviable for the industry to continue production

Umar Masood

Chiesi Pakistan CEO

As the cost of doing business was already on the higher side due to an increase in the petroleum prices, gas and electricity tariffs, high landing costs of raw materials have made it difficult for the pharmaceutical sector to continue manufacturing

Osman Khalid Waheed

Ferozsons Laboratories CEO

High input costs pushing pharmaceutical industry towards closure

LAHORE: The pharmaceutical industry is on the verge of closure due to a considerable surge in the input costs, owing to unprecedented rupee depreciation and high inflation, stakeholders claim.

The local and multinational pharmaceutical companies have demanded immediate and across-the-board price adjustment to deal with the impact of the massive depreciation of the local currency against the greenback and high inflation.

High gas and electricity tariffs, increase in the prices of the petroleum products’ and wages had already caused considerable hike in the production costs.

At least 95 per cent of the raw materials have been imported and the freight charges had already increased from $1,000 to $9,000 due to the Covid-19 pandemic and the Russia-Ukraine war.

Now, many pharmaceutical companies are unable to import raw materials due to high landing costs in the wake of unprecedented rupee depreciation and global inflation.

Pakistan is facing a 40 per cent shortage of daily use medicines, including life-saving drugs. The cash-strapped pharmaceutical companies have run out of raw materials, which will lead to worsening the situation in the near future.

The stakeholders have demanded price adjustments, as all the items, except medicines, had already become dearer because of the inflation.

Osman Khalid Waheed, chief executive officer of Ferozsons Laboratories Limited, said that the rupee depreciation and the high freight charges have considerably enhanced the landing costs of imported raw materials.

“As the cost of doing business was already on the higher side due to an increase in the petroleum prices, gas and electricity tariffs, high landing costs of raw materials have made it difficult for the pharmaceutical sector to continue manufacturing,” he added.

“We are facing difficulties in continuing producing medicines, as all input costs have witnessed multifold increases due to the rupee’s depreciation and increasing raw materials prices globally. We will have no other option but to stop manufacturing, if the prices of drugs are not adjusted accordingly,” he remarked.

These companies are vital, as they not only produce specialist medicines such as oncology drugs, critical care and life-saving medicines but bring innovation and investment to the country.

“The current circumstances are beyond the control of the pharmaceutical industry and it has become unsustainable to manufacture medicines and ensure their availability,” Waheed said.

Umar Masood, general manager and chief executive officer of Chiesi Pakistan, said that the workers’ wages and prices of petroleum, electricity, gas and other inputs have increased considerably but there is no revision in the prices of drugs.

“If the prevailing situation persists, it will be unviable for the industry to continue production,” he added.

The Pharma Bureau, a representative body of the multinational companies, has written a letter to the federal health minister, secretary and the Drug Regulatory Authority chief executive and requested an increase in the medicine prices.

In a letter, Ayesha Tammy Haq, executive director of the Pharma Bureau, said they are well-aware of the terrible economic conditions.

“This has impacted every single segment of the economy, owing to a massive rupee depreciation, runaway inflation and a huge shortage of foreign exchange. All this has a disastrous impact on the local pharmaceutical industry, which relies on the import of raw materials to manufacture and ensure the availability of medicines in the country.”

“The prices of active pharmaceutical ingredients (API), i.e., raw materials used in the manufacturing of medicines, have increased exponentially in the international markets since the outbreak of the pandemic. This coupled with unprecedented increase in all the factors of production such as fuel, electricity, freight and packing materials and the recent massive rupee depreciation of over 67 per cent against the dollar has made it difficult to produce drugs at the existing prices,” the letter said.

The letter also said that the pharmaceutical industry has, at significant cost to itself, played a very responsible pivotal and patient-centric role during many public health crises and disasters by ensuring the uninterrupted supply of life-saving medicines.

“The Pharma Bureau, together with other representative industrial bodies, including the Overseas Investors Chamber of Commerce and Industry (OICCI), have continuously and repeatedly engaged with and requested the federal government and DRAP to take this matter seriously and to make all-out efforts necessary to ensure the continuous and uninterrupted supply of medicines, including but not limited to, an across-the-board price adjustment,” the letter said.

“The impact on the public and the industry cannot be undermined. Several member companies, as a result of this apathetic attitude of the government, have shut down their operations in Pakistan. This means the withdrawal of foreign direct investment, massive job losses; following the closure of plants and, as our member companies are completely documented, huge losses in taxes and other revenue to the federal and provincial governments.”

According to Haq, the pharma industry in Pakistan is overregulated and as a result is not being able to function and do business in accordance with the fundamental right to do business guaranteed under Article 18 of the Constitution.

The letter also mentioned that the rupee has been depreciating at an alarming rate and the Consumer Price Index (CPI) has been steadily rising. In January, it rose 27.6 per cent, compared with the same period of the last year.

“Despite all our representations to the government, meetings with the prime minister and the members of the Cabinet, absolutely nothing has been done to deal with the matter. This complete and frightening apathy on the part of the government and the DRAP will only result in the industry being forced to shut down production, which will result in massive shortages in the market,” the bureau warned.

Amjad Ali Jawa, chairman of the Wilshire Group of Companies, said that the increase in the petroleum prices, gas and electricity tariffs and high cost of imported raw materials due to the global inflation and the rupee depreciation have made it impossible to provide medicines at the existing prices.

“The input costs have increased considerably due to these factors. There is a need to revise the medicine prices,” he said, adding that any delay on the part of the government could lead to closure of the pharma industry.

“There is a need to take immediate measures to save the industry. The government should revise the prices and ensure timely opening of letters of credit (LCs) for the import of raw materials,” he said.

The government should adopt a long-term strategy to reduce the input costs by facilitating the local production of raw materials, he added.

“The contribution of 10 local companies in the provision of APIs to the pharmaceutical industry is merely 5 per cent. The pharmaceutical firms import 95 per cent of the APIs from China and India,” he said and suggested the government to facilitate the local manufacturing of APIs to give some relief to the under-stress pharmaceutical industry.

He also suggested the government to facilitate setting up naphtha cracking plants for the local production of chemicals.

“Pakistan can build its own naphtha crackers like other non-hydrocarbon countries, including India, Singapore, Thailand, Malaysia, Indonesia and Turkey.

The cost of setting up and making naphtha crackers and allied infrastructure functional is $10 to $12 billion. No local company can make such a huge investment. Pakistan can seek either Chinese investment under the China-Pakistan Economic Corridor (CPEC) or foreign direct investment to set up the first naphtha cracking plant and allied units at the oil refinery.

The project will help reduce the import of chemicals through the local manufacturing and generate the much-needed direct and indirect employment opportunities. The import substitution and export of excess quantities will help reduce the trade deficit, he added.