Pakistan’s pharma sector can increase exports to $3bn in five years, but it ‘needs policy, govt support’

KARACHI: Pakistan’s pharmaceutical sector can increase its exports to $3 billion over the next five years, provided it gets policy support and a favourable business environment, according to a top official.

At a time when Pakistan is looking to create non-debt creating foreign exchange inflow, increasing exports is a low-hanging fruit, according to many experts.

India’s pharmaceutical exports are set to reach $28 billion in fiscal 2023-24, according to the Pharmaceutical Export Promotion Council (Pharmexcil), while Pakistan has only registered its personal best of $713 million during 2022-23.

However, the milestone will only be achieved if the government addresses the significant challenges facing the sector today, added the official.

Points to focus on

In an interview with Business Recorder, a former chairperson of the Pakistan Pharmaceutical Manufacturers Association (PPMA) highlighted the need for a more commercially aware drug regulatory authority and greater government support to boost exports.

The official emphasised that the Drug Regulatory Authority (DRAP) lacks commercial understanding, which hinders its ability to facilitate exports. The official also urged DRAP to collaborate with the Trade Development Authority (TDAP) and the Ministry of Commerce to address this issue. “DRAP is a technical department with technical people like pharmacists and doctors working in key positions,” said the official.

“Technically, they are doing a wonderful job, but they don’t have commercial understanding of the industry, which makes it difficult for them to facilitate exports.”

The official also stressed the need for increased liquidity to maintain foreign teams and promote Pakistan-made drugs abroad. “It’s a difficult task to increase market share in other countries, and companies have to develop brands. It needs full teams to be maintained outside the country, which requires a lot of liquidity,” the official added.

To address these challenges, the former chairperson proposed increasing the retention rate of foreign exchange from 15% to 35% to facilitate payments abroad. The official also advocated for a market development assistance (MDA) system similar to India’s Pharmexil to support the industry.

It was also highlighted that a technical issue is hindering the industry’s growth – the 20% protective duty on imported Active Pharmaceutical Ingredients (APIs).

While the duty is intended to support local API production, it is actually making drug manufacturing more expensive and rendering Pakistani medicines uncompetitive in foreign markets.

“Putting duties on imported raw material is making drug manufacturing expensive, which in turn is making Pakistan medicines uncompetitive in the foreign markets,” the official said.

“For instance, the API for paracetamol is more expensive in Pakistan than it is in China. It eventually makes Pakistani paracetamol expensive in the international market, therefore uncompetitive.”

The official suggested that the government should facilitate API manufacturers through subsidies and incentives instead of imposing duties.

“The government needs to gauge local API production capacity first and take policy decisions on that basis.”

Furthermore, the official emphasised the need for a stable supply chain and reliable raw material procurement, which is crucial for securing long-term agreements in foreign markets.

“Foreign markets have agreements of years – up to seven years. Companies, therefore, need a stable supply chain – procurement of raw material, and on that basis, relying on local sources for APIs is a gamble,” the official said.

The comments underscore the need for a more supportive regulatory environment and increased government assistance to unlock the full potential of Pakistan’s pharmaceutical exports.

With Pakistan desperately looking at creating sources of foreign exchange inflow, increasing exports has been highlighted as a key area. Despite massive rupee depreciation over the last few years, exports have not nearly shown the kind of growth needed for an economy as big as Pakistan’s. Hence, experts believe, there are several other avenues that need to be focused on as Pakistan looks to bring in non-debt creating foreign exchange.

Copyright Business Recorder, 2024