The Contribution of Multinational Pharmaceutical Companies

In the Development of Pakistan Economy

Chapter 1 – Problem And Its Background

PROBLEM AND ITS BACK GROUND

INTRODUCTION

Research and discovery are the essence of the pharmaceutical industry, and
its successes have, over the past forty years, played a crucial role in
maintaining the pre-eminent position of the pharmaceutical industry in the
world today. But such activities demand a sustained rate of huge investment
over a long period.

No other manufacturing industry devotes more resources to R&D annually

than the pharmaceutical industry. This rise reflects not only the long-term
commitment of the industry in maintaining a strong and competitive
research base world-wide, but also the growing intensity of R&D in the
human pharmaceutical sector. Recent figures show that while R&D intensity
in every major manufacturing industry has shrunk, those reported in the
pharmaceutical and the chemical sectors have risen notably.

Pharmaceutical research is essentially a highly risky business. Out of 5,000

or so compounds discovered and investigated, on average only one reaches
the prescription market. In many instances very large sums have been spent
only to have the research project abandoned subsequently.

The increasing sophistication of medical and research instruments and of

computers for molecular modeling has opened up important new medicine
developed opportunities. But they are expensive and have added to the

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 The Contribution of Multinational Pharmaceutical Companies
In the Development of Pakistan Economy
Chapter 1 – Problem And Its Background

overall research costs as well as volume of investigation being undertaken

by the pharmaceutical industry. It is estimated that it takes on average 12
years from parent filing to the launch of a major innovative medicine at a
total cost of around US $400 million, as compared with US $100 million
reported in 1985. Even so there is no guarantee of success in a highly
competitive market where novel products are constantly and rapidly made
obsolete or entirely replaced by new innovations - New Chemical Entities
(NCEs).

Competition in the pharmaceutical industry is fierce, perhaps more so than

in any other high technology industry. For example, in the United Kingdom,
of the leading ten products in 1982, only one was placed in the top ten of
1992; five in the top 50 were out of the top 80 positions. By comparison,
there were eight products remaining in the top 50 at the beginning. Within
major therapeutics group’s product competition has also intensified during
the past decade, with the great majority losing at least seven products out of
the top ten.

As a result, only five of the top ten companies in 1982 remained in that
group by the end of 1992.

Modern antibiotics, anesthetics, muscle relaxants and immunosuppressent

compounds have all made new surgery possible today, while successes in
pharmaceutical research have brought about effective treatment for such
diseases as diabetes, hypertension, bronchitis, asthma, mental illness and
arthritis. More significantly, the advent of novel medicines means that more
patients can now be treated effectively in the community without the need
for costly hospital treatment. Although such medicines are generally more
expensive than those they replace; they generate real savings that more than
pay for themselves by reducing other health care costs.

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 The Contribution of Multinational Pharmaceutical Companies
In the Development of Pakistan Economy
Chapter 1 – Problem And Its Background

Although pharmaceutical innovation has generated enormous economic

benefits, the real savings do not show up as a reduction in total health
spending. Rather, they released resources to increase the total amount of
treatment to be used elsewhere in the health services. But the long term
benefits of medicines to the national economy as a whole, in terms of
reduced premature deaths, sickness, absence and hospital admissions, are
generally ignored by those concerned only to limit overall pharmaceutical
spending. Health managers under pressure on costs often overlook the
impact of the shift away from improved health and avoidable medical
conditions that can be obtained by investing in an optimum level of
pharmaceutical expenditure today.

There can be no doubt that the continuing pharmaceutical revolution will, in

time, generate a wide range of eve more effective therapies for many
conditions which today are incurable or only partially treatable. Most of
these new medicines will probably be made available at the primary care
level. But the effective use of any new treatment is dependent on the
availability of comprehensive and cost-effective health care services to all
those in need. There is little purpose in achieving therapeutic innovations if
those who stand to gain most from new treatment (many of whom are older,
poorer, physically and mentally less able than the average person) cannot
gain access to them. By limiting the choice or even prohibiting the use of
modern medicines simply on grounds cost may not necessarily be in the best
interest of the taxpayer either, particularly if the short-term savings results in
a long-term cost burden to the average consumer.

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 The Contribution of Multinational Pharmaceutical Companies
In the Development of Pakistan Economy
Chapter 1 – Problem And Its Background

THEORETICAL FRAME WORK

The researcher has primarily targeted the concern towards the following
bifurcated points to evaluate and analyze the multinational pharmaceutical
companies their standings, comparison, problems, advantages and influence
towards customers.

This study is targeted on the working, production and serving rendered to

the customers based on the above mentioned points. For that we must keep
in mind a critical point that the role of multinational pharmaceuticals
towards the Pakistan’s market and economic.

The pharmaceutical industry in Pakistan includes both multinational and

domestic companies. Multinationals have an upper hand in a way that they
possess worldwide advertising facility and can spend allot of money on their
research programs. On the other hand local pharmaceuticals basically rely
on licensing for their core business, as they are unable to match the
advertising budget and expertise of their multinational competitors.

Competition in pharmaceuticals industry is fierce, perhaps more so than in

any other technology industry. No other manufacturing industry devotes
more resources to R & D than the pharmaceuticals industry. Pharmaceutical
research is essentially highly risky business. Out of 5000, or so compounds
discovered and investigated, on average only one reaches the prescription
market.

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 The Contribution of Multinational Pharmaceutical Companies
In the Development of Pakistan Economy
Chapter 1 – Problem And Its Background

STATEMENT OF THE PROBLEM

The study is focused to discover the “ The contribution of Multinational

Pharmaceutical companies in the development of Pakistan economy” (A
Feasibility Study)

The researcher attempt to answer the following questions:

• What is the scopic value of pharma industry in terms?

Sales value
Market demand (Current & future)
Expenditure on health
Per capita consumption of drugs and medicines

• What are the exports and imports values of pharma products?

• What are the government incentives for pharma industry?

• What is the competitive structure?

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 The Contribution of Multinational Pharmaceutical Companies
In the Development of Pakistan Economy
Chapter 1 – Problem And Its Background

SIGNIFICANCE OF THE STUDTY

The research study is catered to provide acumen to those who are directly
and indirectly related to pharmaceutical industry. Therefore, researcher had
to work hard so as to gets different opinions from directors and executives
of major pharmaceutical companies. Furthermore, different written materials
pertaining to the study also extends a great help for not only understanding
the problems faced by the industry but also coming up with different
valuable suggestions to solve them.

Hence, after studying this thesis the reader would easily be able to
understand the following points:

1. To make the confirmation for the growth of multinational

pharmaceuticals.
2. To evaluate the comparison of the well-known multinational
pharmaceuticals.
3. To find out the problems faced by the multinational pharmaceuticals.
4. To find out the future for the multinational pharmaceuticals.

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 The Contribution of Multinational Pharmaceutical Companies
In the Development of Pakistan Economy
Chapter 1 – Problem And Its Background

LIMITATIONS OF THE STUDY

Researcher has faced very serious constraint in gathering of published

material regarding Multinational pharmaceutical companies. Since much
research work has not been done on this particular field. Therefore, author
relied and considered the only published material of multinational
pharmaceutical companies as a reference, although almost all companies
didn’t cooperate in disclosing the required information for this research
study because of their policy matters.
.

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 The Contribution of Multinational Pharmaceutical Companies
In the Development of Pakistan Economy
Chapter 1 – Problem And Its Background

DEFINATION OF TERMONOLOGY

NCEs New chemical entities

Immunosuppressent A type of drug

MNCs Multinational companies

BMR Balancing, modernization and replacement

ECC Economic coordination council

Essential Drugs Life saving drugs

BHUs Basic health units

RHCs Rural health centers

MCHCs Maternity and child health centers

TB Tuberculosis

Trimethoprim A drug used to treat infections

O.I.C.C. & I Overseas investors chamber of commerce &

industry

Semi-essential Drugs Antibiotics

Non-essential Drugs Vitamins and food supplements

Vial Injection (liquid drug)

Agri-business Agriculture business

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