In early 2008, Merck Sharp & Dohme Pakistan (Karachi) sold its business to Karachi-based Organon BioSciences based on declining
sales and profits. Bristol-Myers Squibb (Karachi) is planning to close its subsidiary's (Karachi) doors because of Pakistan's
worsening economic conditions and inflationary pressures, according to a recent Economist Intelligence Unit report. Other reports suggest that additional MNCs plan to exit Pakistan's market because of difficult market conditions
WTO gone wrong.
Pakistan's ascension to the World Trade Organization (WTO) in 1995 was supposed to provide better opportunity for MNCs to
enter the country's market. For example, the WTO's 20-year patent period allows firms to produce drugs in a noncompetitive
environment at high prices and dominate the market. It also presents an opportunity for outside firms to gain authority within
Pakistan in research and development, especially in biotechnology as Pakistan's progress in this area is in its infancy.
WTO membership, unfortunately, has not delivered the desired results. According to Kimball, "Pakistan's WTO membership demands
a certain level of predictability and protection for foreign companies and their products. However, it does not necessarily
police market-oriented standards. This is where pharmaceutical companies in Pakistan run into problems, especially with issues
related to IP protection for pharmaceutical test data."
To counter the exit of MNCs, Pakistan's government has pledged to form a task force comprising Ministry of Health and industry
representatives to formulate short- and long-term policies. In addition, a committee will be established to promote and educate
the public on the significant role in the country's public health played by the pharmaceutical industry.
The government is actively promoting Pakistan and its large patient population as a place to carry out clinical research.
Moscow-based Synergy Research Group partnered with Metrics Research (Karachi), Pakistan' first multinational contract research
organization, to establish a foothold in the country's untapped market and to compete with global organizations. And local
giants SAMI Pharmaceuticals and Hilton Pharma announced plans to merge. This is the first time a merger is taking place between
two top-10 companies in the country, which may spark a trend in local consolidation.
The government is also paying attention, in part, to local firms' requests. Although it did not grant industry representatives
the price adjustment of 15–20% that they requested in May 2008, the government has granted concessions to companies to maintain
prices at current levels. In addition, the Pakistani government reduced by 5% custom-duty fees on pharmaceutical ingredients
and packaging materials, and exempted life-saving drugs and medical supplies from import duties and sales tax.
Domestic companies are trying to make the best of the current economy by exporting their products overseas. Pakistan is expected
to export more than $600 million worth of pharmaceutical products by 2010 compared with $85 million in 2008, according to
Kaiser Waheed, a senior member of the Pakistan Pharmaceutical Manufacturers Association. He recommends that exporters be granted
cost-sharing for registration of products in overseas markets that will enhance these exports. The government lowered the
import duty from 15% to 10% in September 2007, to allow domestic producers to manufacture finished drugs at lower costs.
Even though Pakistan's market environment is not very appealing compared with those of China and India, industry players believe
the country's ideal geographical position and low-cost base will help it succeed. "I strongly believe that if issues such
as IP rights are adequately protected, and government policies are geared to rewarding innovation [as well as transparency],
then the industry can emerge as a regional leader," says Kimball.
Jane Wan is a freelance writer based in Singapore.