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Topline Flash Note: Pakistan Pharmaceutical: Government amends Drug Pricing Policy 2018

• The federal government has notified amendments to the Drug Regulatory Authority of Pakistan’s (DRAP) Drug Pricing Policy 2018. DRAP is the drug regulator in Pakistan.
• The changes have been after, as per news reports, cabinet had shown reservations regarding the price increase of medicines by the pharmaceutical companies. The amendments in the policy now allows DRAP to review the calculated price increase of the manufacturers within the 30 days of its submission by the manufacturers.
• The pharmaceutical companies will take heart from the fact that if DRAP does not intervene within 30 days of the submission, the price increase as submitted by the manufacturers will be made effective. We believe this development is positive, as DRAP is time bound to review the price changes and given that there are more than 100,000 medicines, it seems practically very difficult to do so within the 30 days period.
• We expect price increase to go through as earlier envisaged. Few weeks back there was a fear that government may take away the pricing power from the pharmaceutical companies on all medicines.
• Most of the companies had already submitted their price increase calculations to DRAP prior to these amendments. DRAP has asked all companies to (re) submit their calculations as per a new format, which may result in 15-20 days delay in price increase. We do not expect that pharmaceutical companies, at large, will challenge the retrospective nature of these amendments as these changes have mostly been discussed with the industry.
• The government has added a provision where the federal government may create a category of drugs (with reasons to be recorded), which can be excluded from the price changes mechanism. Our discussions with the industry suggest that the federal government may add highly critical life saving medicines in this list, if required. The price increase for these products may be taken up by the government on a case to case basis, similar to hardship cases.
• The government has also lowered timeline for decisions on hardship cases to 120 days from 180 days, which is also a positive for the pharmaceutical companies.
• The companies will continue to calculate price increase in Minimum Retail Price (MRP) of essential drugs (excluding lower priced) equal to 70% increase in CPI (with a cap of 7%) and MRPs of non essential drugs up to full CPI (with a cap of 10%).

The CPI for FY20 clocked in at 10.74%. We believe companies will be able to claim price hike of 7% on portfolio of their essential drugs and 10% on portfolio of non essential drugs.