Tell us about Bayer, how big is Pakistan's existing pharmaceutical market and Bayer's position in it.
Imran Ahmad Khan: Globally, Bayer has been operating for over 150 years. It started as a chemical company and later on, diversified. It is now a life science company—our focus is on healthcare and nutrition. In Pakistan, we started our operations in 1963 as a pharmaceutical company. In early 2000's when we acquired Aventis' crop science business, our agriculture footprint was established. Now with the acquisition of Monsanto, our business is sizeable in both segments. We are operating in three divisions: Pharmaceuticals, Consumer Health and Crop Science. Around 50 percent of our business is coming from healthcare while the rest is from agriculture.
Pakistan's pharmaceutical market is around Rs450 billion—growing at around double digits over the last few years. Primarily, this growth factor is being driven by the local pharmaceutical industry. Over the last 20 years, every year multinationals are losing 0.7-0.8 percent market share. They now have 30-32 percent share in the market while locals have the lion's share (68%) of the market. Within multinationals, Bayer has a good position. I would put our market share at 5 percent in this group—1.6 percent of the total. In agriculture space, we are operating further into two divisions: pesticides and seeds. In pesticides, we would have around 8 percent market share (with a market size of Rs40 billion as reported by CropLife. There may be many small players whose sales data is not reported), while in seeds business, we have over 40 percent share (market size: Rs10 billion).
Our consumer health segment is a little smaller. In Pakistan, 90 percent of our consumer health business comprises those products which, in other countries, are over-the-counter (OTC) non-prescription; this is somewhat unusual. Only 10 percent of our consumer health portfolio is non-prescription; the rest are prescription based which are regulated and price controlled by Drug Regulatory Authority of Pakistan (DRAP).
: Why has the market share for multinational pharmaceutical companies reduced consistently over the years in Pakistan?
IAK: One reason is that local companies are expanding. New product introduction by domestic players has been huge, which has contributed to their growing market share. Local companies are bringing more generic products.
Is price fixing by DRAP a consultative exercise? Walk us through the mechanism of price fixing in Pakistan—what factors go into determining and controlling the price?
IAK: It is an industry demand that there should be a proper pricing policy in Pakistan. The last price increase was in 2002 and after that, price increases were done on an ad-hoc basis for different products. Many were no longer financially viable to be locally manufactured. In 2015, a pricing policy was drafted and approved, and again in 2018, it was deliberated.
Pharmaceutical companies have to first go for product registration in Pakistan. There is a registration board which looks into different factors. Once the product is registered, it goes to the price fixation committee. The committee first looks at whether the product is available in India, Bangladesh and Sri Lanka. If yes, the committee takes the reference price from these countries. This sets a benchmark for the prices that are fixing for products here. The first rule of thumb is that the price cannot be higher than India's price of the same product. If this first reference from the three countries is not available, then the committee takes reference from a few other countries—including Philippines, Indonesia, and Malaysia.
These reference prices need to be attested (for proof) by one of the big four auditing firms or the relevant IMS of the country. They use the average of these references price and then look at the cost of the medicine. In the case of imported products, t
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