PAKISTAN – The pharmaceutical sector in Pakistan Pakistani government has imposed heavy taxes on active pharmaceutical ingredients (APIs) and other raw materials which has led to a spike in production costs, Economic Times has reported.

Consequently, it is no longer viable for manufacturers to produce drugs and sell at a price below the cost of production and several foreign pharmaceutical multinational corporations (MNCs) are planning to move out of the country.

According to the Dawn newspaper, the multinational exodus in Pakistan has accelerated in recent years.

Earlier, pharmaceutical companies only paid tax on packaging materials. They did not pay sales tax on active pharmaceutical ingredients (API) or other raw materials.

However, the taxes imposed by the government led to a 45 percent increase in production costs. As a result, around 60 essential medicines, including suicide-prevention drugs, have vanished from the market.

Hundreds of patients are suffering due to a shortage of important medicine as particular brands are not available in the market.

For instance, Sanofi Aventis Pakistan has left the country and sold its plants to local companies, and Bayer is closing up shop as well, Pharma Bureau Executive Director Ayesha Tammy Haq of the Overseas Investors Chamber of Commerce & Industry said.

Pakistan is now perceived by international investors as a country with high default risk amid the ongoing economic crisis.

“Sales tax has not been reduced, sales tax has been imposed,” Haq said.

“Previously, the pharmaceutical industry was exempted from sales tax. In January this year, Pakistan Tehreek-e-Insaf (PTI) imposed 17 percent sales tax solely for documentation purposes that was to be refunded in its entirety,” she added.

The 17 percent refundable tax was reduced by the government to 1 percent non-refundable tax which is imposed at different stages. As a result, there was a 6 to 9 percent spike in their cost, local media reported.

Owing to the restrictions of Drug Regulatory Authority of Pakistan (DRAP), which determines the maximum retail price of the medicine, the cost could not be transferred to the consumers.

There was a 4-fold increase in the shipping charges and the Pakistani rupee continued to witness a downward trend. This led to a rise in the price of APIs and other materials.

Pakistan is now perceived by international investors as a country with high default risk amid the ongoing economic crisis.

The cost and freight (C and F) of imported finished medicines is 90 percent of its total cost.

The pricing formula for finished medicines is C and F plus 40 percent which gives the material requirements planning (MRP) of a drug, the report said citing a local manufacturer.

The 17 percent discount to the retailers, transportation costs, warehousing, staff roll, among other is included in the MRP.

The margin is only 5 percent. As a result of the currency fluctuations, the retailers have to increase the prices.

“People weep and cry about shortages but nothing changes,” Haqi said.

Qazi Mansoor Dilawar, the Chairman of the Pakistan Pharmaceutical Manufacturers’ Association (PPMA) said unless the prices of the medicines are increased by 30 to 40 percent by the government or prices of medicines are deregulated, the unavailability of medicines would continue and feared that more companies could stop manufacturing several more medicines in the days to come.

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