Jane Wan is a freelance writer based in Singapore.

Jane Wan

Pakistan's ambassador to the Philippines, Muhammad Naeem Khan, recently invited an official of the Philippine International Trading Corporation to visit Pakistan to explore the possibility of selling pharmaceuticals to the country. The action drove home the point that Pakistan's pharmaceutical industry has become strong and affordable. 

Indeed, Pakistan's pharmaceutical sector has developed by leaps and bounds over the past few years. The sector is valued at $1.2 billion and has experienced recent annual growth rates of 10–15%. More than 400 local firms are engaged in pharmaceutical manufacturing, meeting 80% of domestic demand, according to the country's Drugs Control Organization.

Several local companies, including Karachi-based Hilton Pharma, have moved into the Middle East, Far East, Africa, Sri Lanka, and Latin America with strong support from Pakistan's Export Promotion Bureau. Getz Pharma (Karachi) has successfully partnered with companies such as Sicor (Vilnius, Lithuania), and E-Pharma (Ravina di Trento, Italy) in pharma licensing. The Pakistani government has forged international alliances as well, including signing a Memorandum of Understanding with Brunei that harmonizes surgical procedures, training, and the pharmaceutical industry. And in January 2004, the government gave the green light to allow imports from India and China through custom-duty concessions under the South East Preferential Trade Agreement, thereby allowing the population to access cheaper drugs.  

Despite stiff competition from neighboring China and India, Pakistan's local industry has actually eclipsed the presence of some 30 multinational companies (MNCs) in the country. Drug controller of Pakistan's Ministry of Health Dr. Fernaz Malik says that the market position of MNCs has dwindled from 80% to 45% during the past 20 years due to the growing domestic market. But this is not necessarily good news. 

There is more than domestic growth forcing MNCs out of Pakistan. "One of the biggest problems for our members is the inability to predict the direction of the Pakistani market," says Jonathan Kimball, associate international vice-president of the Pharmaceutical Research and Manufacturers of America (PhRMA). "The Pakistani government is interested in attracting pharmaceutical investments, but their policies have not promoted an environment that attracts them." 

Taxes, for example, have increased despite Pakistan's trade liberalization policy enacted in 2002. The government does not grant special tariffs or tax exemptions to firms that have started manufacturing on Pakistan's soil. In India, the tax and tariff component is 34.57% for a locally produced product. At that rate, manufacturers are incented to increase prices to secure desired profit margins. In contrast, after joining the World Trade Organization in 2003, China reduced tariffs by 60% from 9.6% to 4.2%.  

In addition, Pakistan increased charges on imports that remain competitive. And sales taxes on imported pharmaceutical packaging and raw materials are on the rise; firms are not allowed to pass the extra costs to consumers.  

Disputes over custom procedures are commonplace in Pakistan as well. Cases involving frequent and unexplained rate changes, granting of preferential tariff rates to locally produced goods, and bribery all have occurred. 

 Intellectual property (IP) remains a thorny issue for the Pakistani authority and MNCs alike. A 2007 PhRMA report, 

National Trade Estimate Report on Foreign Trade Barriers

, stated that IP rights in Pakistan are devalued because of new amendments to the country's 2002 Patent Act, which, among other things, restricts patent filings to single chemical entities for pharmaceutical and agrochemical inventions. The report recommended that Pakistan exercise and enforce protection of data as well as data conclusions so that an application cannot be made until a product's full term of protection expires, or until a party generates supporting data or obtains consent from PhRMA. In addition, the report suggested Pakistan put in place safeguards to prevent data leakage. Making matters worse, the US Trade Representative listed Pakistan on the United States' Priority Watchlist for 2008 because of its poor IP controls. 

With a poorly regulated market in which local firms have a free hand in introducing products, MNCs, therefore, have been discouraged from launching new brands in the country.  

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 

report. Other reports suggest that additional MNCs plan to exit Pakistan's market because of difficult market conditions 

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. 

Articles

Although its domestic market is on the rise, Pakistan's market conditions have not proved welcoming enough to keep foreign investors.

Report from: Pakistan

The forecast that the Chinese pharmaceutical equipment market will be "big and promising," should come as no surprise to industry players considering its brisk developments over the years, according to Wang YaJun, vice-secretary-general of the expert committee for the China Association for Pharmaceutical Equipment (CAPE). 

A planning and management system was consolidated after setting up the China National Medicine Supervision Bureau at the end of 1978. Realizing the growth potential of the sector, the Chinese government established CAPE in 1991 to set standards and oversee the sector's developments. By the end of 2006, it had drafted 123 standards at both the state and industry level, and with its market regulation, had cultivated a competitive environment among manufacturers. CAPE has participated in quality certification discussions and publicly recognized scientific and technological achievements.  

China's "Open Door and Reformation" policy also helped to pave the way for the pharmaceutical equipment sector to rapidly transform and progress. The sector was able to develop alongside Chinese traditional medicine and the country's pharmaceutical drug industry.  

Today, the country has more than 900 pharmaceutical machinery manufacturers armed with capabilities to fulfill 90% of domestic needs with an annual output of 200,000 units valued at RMB 8 billion ($1.2 billion). The sector experienced a 30% increase between 2007 and 2008. 

Even though China is the biggest importer in Asia, its domestic products have reached the shores of some 80 foreign countries, including India, Indonesia, France, and the United States. Leading Chinese equipment manufacturers such as Canaan Pharmaceutical Machinery (Wenzhou City, Zhejiang Province) and Zhejiang Hualian Pharmaceutical Machinery (Rui'an City, Zheijiang Province) have jumped on the bandwagon, establishing a presence in overseas markets such as Pakistan, Russia, and the US. 

Nevertheless, the progress of the Chinese pharmaceutical equipment industry is marred by problems. Weak innovation, lagging production, and low exports are just a few of the challenges the industry faces.  

For example, China's analytical instruments market is stranded between high-end and low-end products with no products available in between, according to German-based industry association Spectaris. As a result, foreign firms have moved into the Chinese market to meet unfulfilled market demand.  

One reason multinational companies are moving in has to do with their  business focus and clientele base. Jamie Davies, head of pharmaceuticals of Business Monitor International (BMI), explains, "Sector maturation has enabled local producers such as Jiangsu Mechanical Equipment (Changzhou City, Jiangsu Province), to cater to compatriot firms. The high-value end of the market will continue to be dominated by foreign firms including Italian-based IMA and US-based Edward Mendell due to their long-term commitment in research and development (R&D) investment." 

He adds: "Currently, Chinese pharmaceutical companies export their products to developed markets looking for lower costs and to emerging markets such as Egypt and Pakistan that do not have the necessary industrial capabilities. However, the country's export sector is tainted by a string of product scandals, and it is only with rigorous implementation of production standards that its image will improve." 

For example, it has been confirmed that the contaminant of the product in Baxter's (Deerfield,  IL) heparin was produced at Changzhou SPL (Scientific Protein Laboratories) in China. In response to the situation, the country's State Food and Drug Administration (SFDA) issued an immediate directive that heparin manufacturers should only purchase supplies from authorized suppliers and has stepped up efforts, including working with the US Food and Drug Administration, to strengthen quality control standards.  

Another challenge: intellectual property (IP). IP rights remain a thorny issue for foreign companies trying to do business in China. CAPE initiated an IP-strategy training program to educate industry players on various aspects of IP rights last year. But what remains to be seen is the level of confidence that investors have in China, which depends largely on the provisions that the government is willing to initiate in the future. 

Given the current state of development, some experts are urging the government to consider consolidating options in a move to overcome current challenges. Shanghai-based marketing program manager of Agilent Technologies China, Chen-Jie Zhuang, is optimistic that this move would be beneficial to the pharmaceutical equipment industry and would accelerate growth in a more competitive and healthy way. "Merger and acquisition activities will increase as foreign investment increases," he says. "Contract research and contract manufacturing organizations are booming. Global companies will continue to invest heavily in China R&D, manufacturing, clinical research, over-the-counter marketing and distribution channels. This cross-culture development will generate a win–win situation for the industry." 

BMI, on the other hand, believes mergers and acquisitions, along with the closure of inefficient operations will result in lower revenues as the number of drug manufacturers decreases. This can be mitigated, however, by the gradual introduction of high-tech machines that command higher prices, according to BMI. 

On the positive side, China's WTO (World Trade Organization) status benefits foreign firms in the form of reduced custom fees. In 2005, custom fees fell to 3.9%, which gave countries such as Germany the opportunity to export approximately €267.4 million ($378.2 million) worth of analytical and laboratory equipment, making it China's third largest importer after Japan and the US. 

To boost the sector's growth in China, CAPE has been encouraging cooperative exchanges and alliances. To date, many foreign firms have set foot on Chinese soil. The Italian-based IMG Group teamed up with Zibo IMA Xinhua Pharmatech (Zibo City, Shandong Province) to penetrate the machine- assembly market in 2003. Earlier this year, Tokyo-based Eisai established the subsidiary Eisai Machinery Shanghai to increase its sales and manufacturing support presence in China. 

As the market demonstrates, today's business environment clearly favors international firms. But does that mean that local companies in China will lose their market position in the face of competition?  

According to Zhuang, foreign firms are not even close to dominating the Chinese sector. "Over 700 foreign-invested companies serve only 20–30% of the China [pharmaceutical] market today although they manufacture 20 of the 50 most popular local brands. The top 10 pharmaceutical companies take a 20% share of the China market compared to 50% in Western countries," he says.  

So, all is not lost for local pharmaceutical equipment manufacturers. The introduction of good manufacturing practice (GMP) in China in 1998 was a turning point for the sector as it contributed to good standards and quality products. In fact, more than 3200 companies out of more than 5000 in the country passed the first round of GMP certification before the July 1, 2004, deadline. After July 2004, firms stepped up their game by ensuring that their equipment was upgraded to meet higher CGMP standards for exports. 

GMP certification of pharmaceutical machinery also brought about several market advantages for local firms in the areas of processing techniques and drug quality. The emergence of more enterprises and product varieties, according to Shi Qing, vice-president and secretary-general of CAPE, helped as well. 

For example, Hualian Pharmaceutical Machinery (Rui'an City, Zheijiang Province) received several accolades, including State Gold Medals and a State Star Plan for its research and design of packaging machines, and its traditional Chinese medicine extraction and concentrating equipment. It was also the first company to pass the ISO 9001 International Quality Certification. 

One important step may be for the government to establish a regulatory system to enforce market credibility. Says Zhuang, "Ideally, the system should be designed to minimize administrative burdens for both agencies and manufacturers. There is not a one-size-fits-all solution; it should be designed in a way that allows pharmaceutical experts to carry out their functions efficiently." 

With government support, China's pharmaceutical equipment sector is trekking ahead despite challenges regarding the country's overall perceived product quality.

Report From: China

The ink has barely dried on Vietnam's newly approved biotechnology plan, and the government already has given the green light to Irish property developer Paddy McKillen to develop the first phase of a $1-billion biotech park in Hanoi. The country's "General Plan for Developing and Applying Biotechnology in Vietnam until 2020" is part of its ongoing efforts to develop a profitable biotech sector that can contribute to economic growth. Under this plan, the government will play an instrumental role in establishing biotech business and creating favorable markets for foreign investors over the next several years, with the goal of being able to compete with its Southeast Asian neighbors by 2020. 

Biotechnology is a priority in Vietnam due to its wide range of biological resources and heavy reliance on agriculture. The country's green biotech sector has been quite successful to date, with products such as year-round pineapples and high-yield rice varieties, according to Jamie Davies, analyst and head of pharmaceuticals at Business Monitor International (BMI). Compared with neighboring Malaysia, another agriculturally focused country with a population of 27 million, Vietnam has the added advantages of a population of 80 million and close proximity to the Chinese market.

Building on its agricultural success, Vietnam is now exploring the development and application of biotech to new areas. These areas include forestry, fishery, food processing, hygiene, health, the environment, and of course, pharmaceuticals and medicine.  

Foreign investors are beginning to notice Vietnam's biotech development. Many have expressed interest in setting up facilities in Saigon Hi-Tech Park, established in 2002. NuGEN (San Carlos, CA), a manufacturer of medical equipment and diagnostic rapid-test devices, has committed $1 million to establish a 14,435-ft

 facility in the premises. The first major foreign-invested biotech project in Vietnam, NuGEN is collaborating with Pasteur Institute and HCM City Pasteur Institute (Ho Chi Minh City) to develop the rapid-test technology. Other companies such as Canadian-based Novatek and Malaysian-based Teguh Pharma are joining forces to leverage their knowledge and expertise of current good manufacturing practices and software to increase clientele in the country. 

In the longterm, Vietnam hopes to manufacture a new generation of vaccines with a target of producing 80 million doses per year by 2010. Hanoi-based Vabiotech is already making headway with a vaccine, currently in human clinical trials, to cope with a potential bird flu epidemic instead of seeking treatments such as Tamiflu (Roche, Nutley, NJ) which would prove too costly for Vietnam's huge population.  

Davies points out, however, that support from the private sector is essential to grow the country's biotech sector and to avoid state funding and intervention. "The next milestone is for local firms to diversify from small-molecule generics into affordable biosimilars, which may result in innovative biopharmaceuticals," he said. "However, this is extremely high value [in terms of profit margins] and may take 15 years" to see any progress.

Other obstacles stand in Vietnam's way as well. The country is plagued by poor infrastructure; a lack of regulations, incentives, and scientific talent; as well as intellectual property and biosafety issues. Dr. Bui Ba Bong, vice-minister of agriculture and rural development, emphasizes the need to implement intellectual property rights, biosafety regulations, and controls as they are essential to promote the use of modern biotechnology in Vietnam. Compared with its Asian counterparts, the country has been slow in setting up a biotech framework because of a lack of knowledge and expertise.

In addition, Vietnam does not have a strong capital base as does Singapore, or the huge talent pool of India and China. The country has yet to come up with an attractive palette of tax incentives to woo foreign investors the way Thailand has in the form of an eight-year full tax holiday and another five-year 50% tax break.

Despite these limitations, Vietnam's biotechnology sector remains a beacon of hope for the nation, and for Asia, as the government strives for improvement. Part of the general plan for 2020 includes formulating regulations for safe research, management, production development, and imports and exports of genetically modified organisms. To ensure safety in laboratory testing, the government has further enforced regulations in institutions such as the Institute of Biotechnology and Institute of Tropical Biology.

The nation is expanding its talent base in two phases: The first aims to have more than 8000 scientific graduates and postgraduates between 2006 and 2010; the second involves training another 12,000 scientists between 2011 and 2015. The government is increasing funding for research as well. The Ministry of Science and Technology has committed nearly $15 million to be distributed equally to five national laboratories. 

In addition, Vietnam is setting up a network of high-capacity research organizations for technology development at the Association of Southeast Asian Nations level. Under the 2020 plan, the government has devised programs that involve extensive research and application into areas such as gene-, cell-, enzyme-, protein-, and micro-biotechnology.

On the whole, Vietnam's biotech sector is poised for growth given its current state of planning and development. Without a doubt, its progress will boost the economy in terms of job opportunities and foreign investment as the government commits to increase the sector's competitiveness and global market access.

Surrounded by competition, Vietnam's 2020 vision focuses on building a biotech sector worthy of its Asian neighbors-as well as the growing global biopharmaceutical market