E-drug: Drug Prices in Pakistan (cont)
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Dear Mr. van Mil,
I finally received your response to my review of prices in Pakistan,
together with your questions, from a colleague. You may have thought that I
automatically would have received a copy but I am not linked into the
E-drug network.....so my direct e-mail address is: watson_keith@lilly.com
for any future mailing.
Now, to turn to the points you made and your questions:
I don't think there is any question that the Multi-National companies
expect, nor even try to "transpose economic mechanisms from developed
countries into poorer countries...." as you imply they do. Quite clearly
the huge cost of research is being born by the wealthier countries of the
West and Japan, where the prices of pharmaceuticals are very much higher
than in countries such as Pakistan, India etc. A recent IMS survey looked
at a basket of drugs, including both branded and generic products in 39
so-called developing countries. Puerto Rico was indexed at 100 as being the
most expensive market, and Pakistan was ranked number 39 with an index of
12.7, meaning that on average the prices of drugs in Pakistan are 87% less
than Puerto Rico. In the same survey countries such as China, Russia,
Egypt, Malaysia and Poland were also low priced, although higher than
Pakistan. The annual TOTAL value of the Pharma market in Pakistan, for all
medicines both local and multi-national, at Trade Prices is only about $900
million.......Eli Lilly alone is investing over $1.2 Billion per annum in
Research, and all told the US Research-based companies will spend about $21
Billion this year. So the idea that huge profits are being made in Pakistan
to fund research and reward shareholders in far off lands is ludicrous -
I'll give you the figures in a minute. The reason that the prices of the
Multi-National companies are usually higher than the local companies is
because of a number of simple, practical factors - I say
"usually" because there is a growing number of high quality National
companies whose prices also tend to be on the higher side, for the same
reasons that ours are:
1) The cost of quality. Best quality raw materials, better quality control
and quality assurance, better packaging to protect the finished products
against a very hot and humid climate, state of the art manufacturing
facilities, better storage and transportation facilities.
2) Well staffed Medical support departments, providing medical information,
adverse event reporting processes
3) Scientifically qualified staff to represent the company to our physician
customers.
4) Large investment in high quality training.
5) Investment in education and training for medical professionals.
6) Investment in local clinical trials, conducted to GCP standards.
I could go on, but let me try to answer your specific questions, and put
into perspective the economics of trying to do business in the Pakistan
Pharma market place.
In answer to your first question. The data for all 23 multi-national
companies, who are members of the Pharma Bureau, for 1997 showed on
ex-factory sales of Rs.19.5 Billion (Approx. $488 million), operating
expenses of 22.1%, profit before tax of 5%, tax paid of 2.4% leaving a
profit after tax of 2.6% - some 497 million rupees (approx. $12.5 million).
This data was when the dollar rate was 40 rupees/$, it is now 50.3 and we
haven't had any price increases since November 1996, so you can be sure
that the results for 1998 will be appalling ! Of the 22.1% Selling, General
and Admin. expenses, about 5-7% is direct marketing expense.
In answer to question 2, about 71% of all registered drugs are manufactured
in Pakistan. Generally only low volume, specialised products are imported
fully finished, or, as in our case with Human Insulin, when the
manufacturing facility is extremely high tech. In pricing, there is no
formula to be followed, the MoH sets the price usually after reference
pricing to a number of countries.
In answer to question 3, as I've shown above, there's not enough profit to
share out to anyone. Most companies will be retaining whatever they can in
the business to fund ongoing activities, some have given whatever they can
to shareholders in the way of dividend.
I hope this gives you a little more data to consider. The Pharma Bureau has
compiled a "Fact Book" on the Industry for 1997, from which I took the
figures above. If you would like a copy, please give me your mailing
address.
Keith Watson
Email: WATSON_KEITH@Lilly.com
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