OPINION
published: 02 August 2017
doi: 10.3389/fphar.2017.00504
The Crux of the Medicine Prices’
Controversy in Pakistan
Kah S. Lee 1 , Adnan Shahidullah 2 , Syed T. R. Zaidi 1 , Rahul P. Patel 1 , Long C. Ming 1, 3*,
Muhammad H. Tariq 4, 5 , Obaidullah Malik 5 , Muhammad J. Farrukh 6 , Ahmad Khan 7 ,
Siew M. Yee 8 and Tahir M. Khan 9*
1
Pharmacy, School of Medicine, University of Tasmania, Hobart, TAS, Australia, 2 Department of Pharmacy, University of
Peshawar, Peshawar, Pakistan, 3 School of Pharmacy, KPJ Healthcare University College, Nilai, Malaysia, 4 School of
Pharmaceutical Sciences, Universiti Sains Malaysia, Gelugor, Malaysia, 5 Drug Regulatory Authority of Pakistan, Islamabad,
Pakistan, 6 Faculty of Pharmaceutical Sciences, UCSI University, Kuala Lumpur, Malaysia, 7 Department of Pharmacy, Faculty
of Biological Sciences, Quaid-i-Azam University, Islamabad, Pakistan, 8 Faculty of Pharmacy, SEGi University, Kota
Damansara, Malaysia, 9 School of Pharmacy, Monash University, Sunway City, Malaysia
Keywords: consumer price index, drug costs, delivery of health care, health services accessibility, out-of-pocket
expenditures
CHRONICLE OF MEDICINE PRICING CONTROL
Edited by:
Iñaki Gutiérrez-Ibarluzea,
OSTEBA – Basque Office for Health
Technology Assessment, Spain
Reviewed by:
Sandor Kerpel-Fronius,
Semmelweis University, Hungary
Michael Hans Thiede,
Scenarium Group GmbH, Germany
*Correspondence:
Long C. Ming
ming.long@bath.edu
Tahir M. Khan
tahir.mehmood@monash.edu
Specialty section:
This article was submitted to
Pharmaceutical Medicine and
Outcomes Research,
a section of the journal
Frontiers in Pharmacology
Received: 14 March 2017
Accepted: 17 July 2017
Published: 02 August 2017
Citation:
Lee KS, Shahidullah A, Zaidi STR,
Patel RP, Ming LC, Tariq MH, Malik O,
Farrukh MJ, Khan A, Yee SM and
Khan TM (2017) The Crux of the
Medicine Prices’ Controversy in
Pakistan. Front. Pharmacol. 8:504.
doi: 10.3389/fphar.2017.00504
Drugs are regulated in Pakistan under the Drug Act 1976 and DRAP Act, 2012, under which the
sales, storage, and distribution of drugs are regulated at provincial level while the manufacturing
(licensing), registration, pricing, import, export, and monitoring of controlled drugs comes under
the domain of federal government. The Drug Regulatory Authority of Pakistan (DRAP) established
under the DRAP Act 2012 works under the federal government to regulate the aforementioned
matters including fixation of prices. Prices are fixed by the Federal government under Section 12
of Drugs Act, 1976 after a recommendation of the Drug Pricing Committee (DPC) constituted the
Statutory Regulatory Orders (SRO) on 6th August 2013 under the Cost and Pricing Division, DRAP.
DPC is comprised of representatives from provincial health departments, Ministry of Finance and
consumer bodies along with stakeholders as observers to proceedings of committee.
In retrospective, the Pakistani government, particularly Drug Regulatory Authority of Pakistan
(DRAP) in collaboration with provincial health departments are responsible for regulating the
medicine prices and has taken various regulatory measures to address the issue of medicines
accessibility, particularly on the medicines affordability and availability. Since 2001, there is a
moratorium on price increase on 821 and 108 medicines through statutory regulatory orders
SRO-100, SRO-328, respectively, before the establishment of DRAP. There are media reports
that between June and August 2016, DRAP has approved price increases for four times but
pharmaceutical companies were reported to have increased prices for at least five times (Chaudhry,
2016) but these reports are misleading. During the price moratorium, drug prices have not
been revised despite of multifactorial burdens including increase in dollar exchange rate, fuel
prices, inflation, material costs. Only with the exceptional cases of failure of a pharmaceutical
manufacturer to continue manufacturing at the fixed price and accessibility of that drug was not
ensured for general public. Moreover, some pharmaceutical companies increased prices of their
medicines and were able to get stay orders from a provincial High Court to keep their price
increased until the matter was resolved.
DRAP’s statutory power to regulate medicine prices were heavily opposed by the pharmaceutical
industries who struggle to optimize their revenues due to limited wholesale mark-ups, ranging
2% (Cameron et al., 2009) to 10% (Mendis et al., 2007). It was getting practically non-viable
for many companies including the multinationals to market their products in the same price
as approved in 2001. These factors also led to stock-outs of essential medicine in healthcare
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Lee et al.
The Crux of the Medicine Prices’ Controversy in Pakistan
Moreover, a depreciation of over 70% in the Pakistani currency
(rupee) against US dollar over the same period has hugely raised
manufacturers’ operational costs, having a domino incremental
effect across the medicine supply chain.
As mentioned in the previous section, Pakistani Drug Pricing
Policy, introduced in 2015, authorized the implementation of
medicine price fixation (Drug Regulatory Authority of Pakistan,
2015). It must be noted that fixing prices for medicines by
regulators is commonly practiced elsewhere. However, in any
price control regulation, the most difficult step is in the
determination of the fair price for each medicine. For instance,
South African pharmaceutical manufacturers are required to sell
their medicines at only one price, known as the maximum single
exit price (SEP) which determined by the Pricing Committee.
Medicine prices are revised annually based upon the CPI to
better reflect the cost of manufacturing. In the initial stage of
implementation in 2004, the SEP was set based on the average
2003 prices of medicine. In the case of Pakistan, the price increase
moratorium from December 2001 till June 2016 without taking
into consideration the annual CPI has rattled the pharmaceutical
demand and supply equilibrium, creating a shortage of essential
medicine in the market (Zaidi et al., 2013). Therefore, the
corrective measure taken by the DRAP to link the annual increase
in medicine prices with the CPI of the immediately preceding
financial year is viewed as a positive move to address this
conundrum.
In addition, it is vital to determine the starting point of the
base cost before mark-up are added to the final retail price.
Pakistan applied external reference pricing by benchmarking
with countries such as India, Bangladesh, UK, Australia, and New
Zealand, with a mark-up of 35 and 15% for the wholesaler and
the retailer, respectively. However, several consumer advocates
have claimed that Pakistan medicine price remains high and
unaffordable. Therefore, it is imperative to revise the choice
of countries as reference countries and the methodology
used. Referencing to incorrect choice of reference countries,
particularly using high-income countries and countries with
different market structure may lead to high medicine prices.
Before advent of Drug Pricing Policy 2015, allegations of
malpractices and mismanagement in DRAP were reported,
notably after taking cognizance against Drugs Pricing
Committee, DRAP by the National Accountability Bureau
(NAB) along with eight accused, and directors of several
pharmaceutical companies. They were charged of approving
illegal and unjustified drugs price hike of these particular
pharmaceutical companies (Yasin, 2016) based on controversial
documents submitted by these pharmaceutical companies.
Therefore it is vital for DRAP to improve the transparency in the
methods and processes under which medicine prices and other
functions would be regulated, in order to regain stakeholder’s
trust and confident. On the positive note, Drug Pricing Policy
2015 abolishes discretions in deciding medicine prices. Similarly,
DRAP website (http://www.dra.gov.pk/) features a spreadsheet
with a clear formula to calculate the annual medicine prices
based on the CPI. The automatic price revision without the
interaction with DRAP officials will reduce the likelihood of
corruption and increase the accountability of DRAP.
institutions, especially public-funded hospitals. As a solution,
to ensure the sustainability of local pharmaceutical industries
and the accessibility of medicines, the first ever comprehensive
Drug Pricing Policy 2015 was introduced (Drug Regulatory
Authority of Pakistan, 2015). This new policy has laid down a
transparent mechanism for fixation and price adjustment with an
objective to help increasing availability of drugs at rational prices
and discourage hoarding. Moreover, DRAP has also devised a
monitoring mechanism with the coordination of the provincial
health authorities working under the Provincial Quality Control
Board to ensure that drugs are not sold in the market at prices
higher than the approved range. According to this policy, prices
of new drugs shall be fixed on the basis of average prices in India
and Bangladesh and if new drug is not available in these countries
price shall be fixed at the lowest level of the developing countries
which regulate drugs prices or wholesale prices in UK, Australia,
New Zealand. Moreover, a new concept of price reduction up
to 30% on originator brands has been introduced with three
staggered annual decrements.
Drug Pricing Policy 2015 links the annual increase in medicine
prices with the Consumer Price Index (CPI) as announced by
Pakistan Bureau of Statistics, Government of Pakistan, with a
maximum cap of 4% for scheduled drugs and 6% for nonscheduled drugs. For 2016, the proposed price increase in
scheduled drugs and non-scheduled drugs was merely 1.43% and
2.00% respectively, based on CPI. It must be noted that the price
hike is in fact unlawful as it had not been approved by Pakistani
Federal Government.
BALANCE BETWEEN AFFORDABILITY
AND PROFITABILITY
Freezing of medicine price does not entirely address the issue
of medicines accessibility. Given that 13% of the population in
Pakistan lives below the international poverty line of US$ 1.0 per
day, even simple analgesics such as aspirin can be unaffordable
for the low-income group for long-term consumption. A study
confirmed that even back in 2007, post-implementation of price
freeze, medicines were generally not affordable for blue-collar
workers: 1.7–7.7 days’ wages (for generics medicines), and 1.9–
36.4 days’ wage (for brand-name medicines) were needed to
purchase a 1-month supply of medication for certain chronic
diseases (Mendis et al., 2007).
Some scholars and news reports have brought up the issue
of high medicine price in Pakistan (Junaidi, 2014, 2016; Saleem
et al., 2016). These reports claimed that the prices of medicines
have been increased by more than 100%. Inadvertently, DRAP
is being positioned in a tight spot due to its delicate role
in balancing between ensuring medicine accessible to the
public and the sustainability of pharmaceutical industries. In
addressing the issue of medicine price, one should understand
its multifactorial process, including the importation cost of
raw and packaging materials, direct and indirect manufacturing
costs, transportation and port charges, payment of taxes and
duties, etc. In Pakistan, the CPI, which denotes the cost of
goods, has increased more than 230% over the last 15 years.
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The Crux of the Medicine Prices’ Controversy in Pakistan
Inevitable, DRAP and provincial health departments, without
much surprise, could not monitor effectively medicine pricing
in Pakistan because the ratio of population: officer is a far
cry from the 2,000:1 ratio recommended by the World Health
Organization (Table 1). Regulation of price control without the
adequate enforcement is not feasible. Thus, in 2016 DRAP has
appointed about 192 new regulators and doubled number of
Pakistani federal inspector of drugs in 2017. Similarly, respective
provincial governments had increased their human resources
in the field of drug regulation. All these measures undertaken
by DRAP and provincial health departments facilitate law
enforcement and keep corruption at bay. However, further
increase in human resource with proper training is needed to
ensure availability of safe, effective, and quality medicines at
affordable price. Basic training programs must be established to
train officers extensively in law, investigation, evidence handling,
and customer service.
However, to effectively contain medicine prices, a
combination of different pharmaceutical pricing policies
influencing the demand and supply should be adopted. Pakistani
policy makers should select policies that are aligned with the
objectives and suit the context of Pakistan healthcare system. As
newer and more expensive medicines become available, policy
makers can consider adapting other price control policies such
as manage entry agreement and value based pricing. Pakistan’s
fixed price regulation can be relatively inflexible and may fail to
take into consideration the fluctuating market dynamics. It is
high time for the fine tuning of medicine price control regulation
in Pakistan in light of national requirements, international best
practices, and guidelines of international health partners. DRAP
effectiveness in implementing these policies is crucial in ensuring
the compliance of these policies, along with the presence of
transparent pricing policies, process, and decisions.
In summary, it is a good sign that the health expenditure
of Pakistan has increased from US$ 13.5 per capita per year in
2001 to US$ 36.2 per capita per year in 2014; yet the publicly
funded healthcare facilities that supply free medication can
only cater for one-fifth of Pakistan’s population. To overcome
this, the government of Pakistan launched National Health
Insurance scheme on 31st December 2015 in 23 districts for
around three million lower income families (Abbasi, 2015).
Through the proposed insurance scheme offered in both
public and private sector hospitals, the needy would receive
subsidy and compensation as per the terms and condition
outlined by the insurance providers (Goverment of Pakistan,
2015). Essentially, a balance needs to be struck between
affordability (for the healthcare authorities) and profitability
(for the pharmaceutical industry) to ensure the growth of both
pharmaceutical manufacturing and affordable medicine pricing.
MEDICINE PRICING IN PAKISTAN: THE
WAY FORWARD
The impact of medicine price regulation on the availability
and affordability of essential medicines should be monitored
regularly. Affordability study and pricing survey, to date
are still lacking in Pakistan. The national affordability and
pricing survey conducted in 2006 (Network for Consumer
Protection, 2006), using WHO standardized methods
provides comprehensive information on pricing in both
the public and private sectors. Apart from this, there is little
research on pricing, and no attempt at periodic updating of
information.
TABLE 1 | The ratio of population: drug enforcement officer in Pakistan.
Provinces/Territories
Baluchistan
Population
(million)
7.9
Number of drug enforcement
officer (full time) in 2017
PDIs* 57
Ratio population:
officer
Difference in actual and WHO
recommended ratio (times)
136,448:1
68.2
604,790:1
302.3
1,211,428:1
605.7
1,000,000:1
500
200,000:1
100
Nil
–
507,777:1
253.8
287,500:1
143.7
FIDs** 01
Punjab
101.1
PDIs 159
FIDs 08
Sindh
42.4
PDIs 27
FIDs 08
Khyber Pakhtunkhwa
28.2
PDIs 27
FIDs 01
Gilgit–Baltistan
1.8
PDIs 08
FIDs 01
FATA
3.2
PDIs (Nil)***
FIDs (Nil)
Azad Kashmir
4.6
PDIs 08
FID 01
Islamabad Capital Territory
1.15
PDI 01
FIDs 03
*Provincial Drug Inspectors.
**Federal Inspector of Drugs.
***Federally Administered Tribal Areas (FATA) Drug inspectors (Total of seven appointments under process).
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The Crux of the Medicine Prices’ Controversy in Pakistan
AUTHOR CONTRIBUTIONS
ACKNOWLEDGMENTS
Conceived the conceptual framework: KL, AS, SZ, RP, LM, and
TK. Wrote the paper: KL, AS, LM, MT, OM, MF, AK, and
TK. Designed search strategies: KL, AS, LM, MT, AK, SY, and
TK. Critically reviewed the manuscript for important intellectual
content: KL, AS, SZ, RP, LM, MT, OM, MF, AK, SY, and TK. All
authors read and approved the final version: KL, AS, SZ, RP, LM,
MT, OM, MF, AK, SY, and TK.
This work was partially supported by SEGi University Research
Fund (SEGiIRF/2016-23/FOP-7/97). The authors would like
to express their gratitude to SEGi University and School of
Medicine, Faculty of Health, University of Tasmania for financial
support for this research. The funders had no role in study design,
data collection and analysis, decision to publish, or preparation of
the manuscript.
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Conflict of Interest Statement: The authors declare that the research was
conducted in the absence of any commercial or financial relationships that could
be construed as a potential conflict of interest.
Copyright © 2017 Lee, Shahidullah, Zaidi, Patel, Ming, Tariq, Malik, Farrukh,
Khan, Yee and Khan. This is an open-access article distributed under the
terms of the Creative Commons Attribution License (CC BY). The use,
distribution or reproduction in other forums is permitted, provided the original
author(s) or licensor are credited and that the original publication in this
journal is cited, in accordance with accepted academic practice. No use,
distribution or reproduction is permitted which does not comply with these
terms.
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