The pharmaceutical industry in Pakistan, predominantly led by national companies, is experiencing rapid growth and holds significant export potential. However, the country faces a critical supply chain risk, as approximately 85% of its Active Pharmaceutical Ingredients (APIs) are imported from China and India.
This dependency not only affects the prices of medicines and their availability but also significantly increases the import bill. The challenges became particularly evident during the COVID-19 pandemic and have continued into 2023, exacerbated by foreign exchange shortages and restrictions on the opening of Letters of Credit (LCs), which have directly impacted drug pricing and access.
Our recent case study, “API Manufacturing in Pakistan,” highlights that the local API industry currently produces 16 key APIs, including widely used ingredients such as paracetamol, ibuprofen, moxifloxacin, cefadroxil, azithromycin, and amoxicillin.
Despite this production, the API industry in Pakistan is still in its early stages. The Drug Regulatory Authority of Pakistan (DRAP) has issued 23 licenses for API production, but only seven companies are operational, together meeting just 15% of national demand.
These companies mainly manufacture APIs using intermediates and are not involved in true basic manufacturing, despite five licenses being granted for the production of 39 APIs. Additionally, 117 APIs are licensed for semi-basic manufacturing. The existing API companies also face challenges, including limited quality testing facilities and a heavy reliance on external vendors for research and development (R&D).
This situation underscores the need for significant investment and support to develop a more robust API industry in Pakistan. The local API industry grapples with numerous challenges, including regulatory hurdles, delayed approvals, a cumbersome licensing process, limited DRAP capacity, an antagonistic regulatory environment, a shortage of bioequivalence labs, operational discrepancies, a disparity in the tax regime, and the absence of a national policy for the API sector.
Furthermore, issues related to global competitiveness and international accreditation add to the difficulties. In 2022, Pakistan introduced an API Promotion and Growth Policy aimed at addressing these issues, yet two years later, only 20% of the policy’s initiatives have been implemented. To move forward, there is an urgent need for a dedicated committee to oversee the full implementation of the 2022 API policy, with a focus on enhancing quality and production capacity in the local industry.
Despite these challenges, progress is achievable. For instance, Bangladesh successfully shifted from 97% API imports in 2016 to achieving 30% in API exports by 2022. The country ramped up local API production from 41 molecules in 2017 to an expected 370 by 2032, fostering competitiveness in its market. Bangladesh’s domestic API market is projected to reach USD 1.4 billion by 2025, up from the current USD 730 million.
This example underscores the potential for Pakistan to develop its API industry if similar strategic efforts are implemented. The global API (Active Pharmaceutical Ingredients) market, valued at USD 216 billion, presents a significant opportunity for Pakistan to expand its export potential. Currently, India supplies 20% of the world’s generic drugs, but as it shifts focus to high-value APIs, a gap opens for Pakistan to step in.
Furthermore, patents for high-value APIs worth USD 380 billion are set to expire in 2025, creating an additional market opportunity. By developing its API industry, not only can Pakistan capitalize on these export prospects, it can also address its local pharmaceutical needs.
Investing in this sector is vital for boosting economic growth and ensuring a stable supply of essential medicines for the country. The success of India in capturing the API export market and Bangladesh’s recent entry can be attributed to a supportive ecosystem that includes API mega parks and strong government backing.
Both countries have established API research centers, FDA-approved facilities, and adhere to international quality and compliance standards. In contrast, Pakistan lacks this essential ecosystem and does not have FDA-approved facilities, resulting in challenges with quality and compliance.
To compete effectively and tap into the API export potential, Pakistan must develop its infrastructure and strengthen support for the industry. To effectively develop the API industry in Pakistan, establishing a national policy is essential.
A committee of stakeholders from the pharmaceutical, API industries and DRAP should be formed to oversee the implementation of the API Policy 2022, prioritizing quality and accreditation to boost the acceptability of APIs both locally and internationally.
Engaging the six pharmaceutical companies that constitute 40% of API imports in local sourcing and vertical integration will be vital for building capacity within the industry. Furthermore, transforming DRAP’s role from a policing authority to a facilitator can enhance support for API development.
Additionally, funds from the pharmaceutical industry’s R&D should be allocated to create an independent API research and development center, managed by representatives from industry, academia, and research institutions. This center should focus on developing APIs and off-patented APIs. By fostering collaboration and investing in research, Pakistan can strengthen its API sector, enhance exports, and improve the quality of local pharmaceuticals. The time is ripe for action, and with strategic initiatives, Pakistan can set a clear path for future growth in the API industry.
Copyright Business Recorder, 2024
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