‘Drug policy to spur sales growth’

KARACHI: Sales of drug companies are likely to increase further if the new pricing policy, approved early this month, is properly implemented, said a stock analyst on Monday.
The new policy is a win-win proposition for government, pharmaceutical companies and patients, said Tahir Saeed, analyst at Topline Research.
“Our rough calculations suggest that compared to 13 percent sales growth during 2008 and 2014, listed drug firms can post a much better sales growth if the current policy is properly implemented,” Saeed added. “Thanks to price increase allowed by government in November 2013, profitability of pharma companies grew 21 percent in the last four quarters.”
In the newly approved policy, companies are required to maintain prices to Oct 31, 2013 levels till Jun 30, 2016.
Local firms were allowed to raise prices between six and eight percent in early November 2013.
According to the new policy, the drugs prices will be linked to consumer price index from Jul 1, 2016. Saeed said: “If we assume that CPI will average eight percent in line with historical trend then companies will increase their drug prices by up to four percent.”
The Sindh High Court suspended the section 7 of the policy of the price freeze to Oct 31, 2013 levels till Jun 30, 2016.
He added that the court ruling will provide a sigh of relief to local firms as they don’t have to reduce prices to Oct 31, 2013 levels.
Pakistan pharmaceutical companies were trying for ‘referencing pricing formulae’, which could create political tension for the government if approved.
Drug and Regulatory Authority of Pakistan wanted to implement ‘average pricing formulae’, which could have resulted in closure of several companies or that may have forced companies to stop producing many products.
Pakistan’s $2.3 billion pharmaceutical sector has seen difficult times in the past as government did not allow increase in controlled drug prices.
Resultantly, many companies stopped their operations in Pakistan.
Pharma companies were not allowed to increase their prices across all the products since 2001, though prices of certain controlled medicines had been increased through hardship allowance.
In November 2013, the regulator allowed 10-15 percent price increase for those products whose prices were seized since 2001 but magnitude of the increase was adjusted by any hardship allowance previously received.
For example, if a product has previously received hardship allowance of 10 percent then price increase for that product was only five percent. Thus, actual price increase for all the medicines was six to eight percent.