Free trade agreements and the pharmaceutical industry

An FTA is a settlement between two or more countries to lower or eliminate tariff and non-tariff barriers for the purpose of enhancing welfare through trade and investment. Free trade negotiations with the US are often criticized for inclusion of TRIPs-plus provisions that, for example, increase the de facto patent term beyond 20 years, thus hampering production of and access to generic medicines (Babar et al., 2011).

Pakistan is a signatory to the South Asian Free Trade Agreement (SAFTA, 2012), which is an extension of the South Asian Association of Regional Cooperation (SAARC) Preferential Trading Arrangement into a free trade area among SAARC members (Bangladesh, Bhutan, India, Nepal, Maldives, Pakistan and Sri Lanka). The South Asian Free Trade Area's framework agreement envisages a reduction in tariffs to 0-5 per cent and removing quantitative barriers to trade within ten years by its LDC members—Nepal, Bhutan and Maldives—and between seven to eight years in the case of India, Pakistan, Bangladesh and Sri Lanka. Negotiations are ongoing for signing FTAs with Bangladesh, Turkey and Kenya. In April 2005, during Chinese Premier Wen Jiabao's visit to Pakistan, the two countries announced the launch of negotiations on a free trade area, and a FTA was entered into in November 2006, taking effect in July 2007 (China FTA Network, 2012). The impact of these FTAs on access to medicines, pricing and public health is unknown because research-based studies and empirical evidence are scarce. It is, therefore, vital that in the midst of all the concessions and flexibilities the impact of each FTA on the domestic pharmaceutical industry is carefully analysed.

In 2009 Pakistan's Ministry of Health approved the importation of lifesaving drugs from China and India under respective FTAs, regardless of threats to the development of the domestic drugs market or local production. The Ministry also allowed the importation of finished products, such as anti-cancer vaccines and thalassaemia medicines not manufactured in Pakistan. The government, more recently, has agreed in principle to grant 'most favoured nation' status to India, although there is a need to consider the implications of this for the local pharmaceutical industry (Zaman, 2011).

There are two dimensions to the wave of FTAs and most favoured nation status between neighbouring countries, including China and India. First is the likely effect of these agreements on the pricing of medicines in the local market: drug prices are higher in Pakistan than in India, so importing medicines from India could pose challenges for local manufacturers, who have repeatedly opposed extension of both types of agreements to include pharmaceutical imports. Second, there is the issue of illegal importation of medicines from India: Pakistan shares a long border with India and the Pakistani government has so far been unable to control smuggling of medicine from India. It is likely that, if the government includes medicines in the list of imports from India, prices of locally manufactured generic medicines will significantly decline and illegal imports will be curbed (Government of India, 2011). In addition, this will be a new challenge to the multinational pharmaceutical companies, which are selling similar products at comparatively lower prices in India than in Pakistan (Laskar, 2011).

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