The Bitter Pill of Regulations: Hindering Innovation in Pakistan's Pharma Industry

Pakistan has been facing persistent drug shortages since the beginning of its creation, when there was no pharmaceutical industry and all the drugs had to be imported. In other words, drug shortages is not a new or recent phenomenon. However, even now, when the pharmaceutical industry consists of 750 (or near about) firms, including two dozen MNCs, shortages of life-saving medicines are still a regularly occurring phenomenon. Recently, the shortage of Insulin and other life-saving drugs has been highlighted in the news.
Put simply, these shortages put lives at risk. This has been demonstrated/reported ample number of times. Besides the threat to lives, the shortages have a huge monetary and economic cost. Last year, in a first, an M.Phil thesis at PIDE calculated the monetary losses due to shortages to be at least Rs. 80 million (approximately). As stated, this has economy-wide repercussions too. For example, the current head of the World Bank, Kristalina Georgieva, calculated that a healthy workforce increases the GDP annually by 1.5 percent per year, implying that a healthy labor force brings its own positive economic spillovers. A healthy labor force, in turn, cannot be had in absence of availability of quality drugs and Medicare. Conversely, Remes et.al calculated that poor health around the globe causes significant reduction in potential GDP growth.[4]
In essence, not only do drug shortages put lives at risk, but they also have significant economic repercussions.
Government’s failure at addressing the issue
So what is the way forward? The following lines propose several solutions, based on the author’s understanding of the issue and complementing research.
Government’s regulatory role should be concentrated upon quality assurance, discouraging hoarding and checking unethical practices (false branding/misbranding, marketing same formulation drugs at higher prices by changing the brand name, etc.). The practice of fix drug prices, especially the process of Cabinet’s approval for price increases, should be done away with completely. The pricing issue should not go beyond the regulator, DRAP, to whom firms already submit details like costs of production, and which can negotiate pricing based on agreed upon criterion like reference pricing or costs of energy, which directly feed into overall costs of production
There should be continuity of policies once they are approved, without any injunction for SROs or court orders. Once a policy is approved in consultation with the industry (including both PPMA and PB), the Cabinet should have no role to play in it
In case of any dispute arising in terms of pricing, there should be an Appellate Panel consisting of eminent specialists in the field, who would adjudge the dispute within a month. Otherwise, disputes remain stuck in courts for years without any resolution.
As an incentive to produce cheaper versions of innovator brands at home, the insurance coverage for drugs should cover only generics and branded generics produced within the country.
There should be no bar upon domestic firms entering into agreements with foreign companies in terms of production of drugs, either for export purposes or for domestic sales. If a foreign company of repute is satisfied with the production facilities of a domestic company and agrees joint production/outsourcing production of a drug, the domestic company should not require any NOC from DRAP for production of that drug
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