Pharmaceutical multinational corporations (MNCs) and their exit from low and middle income countries (LMICs): analysing the causes and consequences

ABSTRACT

The Pakistani pharmaceutical industry cannot ignore the contribution of pharmaceutical multinational corporations (MNCs) in terms of innovation and access to advanced treatments. The sale of a pharmaceutical manufacturing plant by an MNC to a Pakistani company has again sparked a debate on why MNCs are closing manufacturing operations in the country. National firms are currently giving MNCs a tough time in Pakistan. Besides competition, MNCs face mergers and acquisitions that hinder the expansion of existing facilities. In the recent past, there has been a noticeable shift in the market shares of multinational corporations (MNCs) and local companies. The market share of national firms has gradually increased, reaching 74.51%, while the market share of MNCs has decreased, falling to 25.49%. These local companies have increasingly partnered with foreign companies through joint ventures, which has had a positive impact on their growth and market share. Nevertheless, the federal government recently deregulated prices for non-essential medicines, so it is expected that MNCs will show their commitment to Pakistan by investing in the country. Investing in new molecules and infrastructure is necessary for MNCs in order to maintain their position in the market. Infrastructure investment is crucial for the smooth operation of pharmaceutical firms. This includes the construction of state-of-the-art manufacturing facilities, the establishment of research and development centres, and the upgrading of technology.

1. Introduction

Pfizer Pakistan has recently closed its pharmaceutical manufacturing operations and sold the unit to a local firm, Lucky Core Industries (Pvt) Ltd (Business Recorder, 2024). Despite the closure of its local manufacturing operations, Pfizer will continue its presence in the country through its imported products. However, this decision has sparked a debate among individuals asking why some global pharmaceutical firms have closed their manufacturing processes in Pakistan.

DRAP has licenced more than 650 pharmaceutical units (Khan & Rauf, 2024). Today there are 21 multinational companies manufacturing and marketing human pharmaceutical products, of which 20 are members of Pharma Bureau (representative body of multinational pharmaceuticals in Pakistan) (Table 1) (Pharma Bureau, 2024). The majority of these multinational firms in Pakistan are primarily involved in the importation and marketing of pharmaceutical products. Only four companies owned their manufacturing plants in Pakistan. These companies are Abbott, Glaxo Smith Kline, Haleon, and Reckitt Benckiser. However, after the implementation of the Drugs Act in 1976, there were around 40 foreign pharmaceutical firms present in the country or that had already established operations (Table 2). The presence of a number of multinational firms has played a significant role in technology transfer and capacity building for the local pharmaceutical industry. These firms entered Pakistan due to various reasons. The primary factors driving their establishment in the country include attractive market opportunities, strategic location, favourable regulatory policies, and government support. Pakistan holds significant potential for pharmaceutical products due to its large population and growing healthcare needs.

Table 1.

List of MNCs – current members of Pharma Bureau.

S. No.	Name of firm	Merged / acquired firms / plants
1.	Abbott Laboratories (Pakistan) Limited	Abbott Laboratories Knoll Pharmaceutical Pvt. Ltd
2.	B Braun	Importer
3.	Barrett Hudgson	Formed after Wellcome pharma withdrew from Pakistan, products licenced and acquired by Barrett Hudgson which acquired the plant
4.	Bayer Pakistan	Medipharm AG Sharing Bayer
5.	Chiesi	Importer
6.	Elli Lilly	Importer
7.	Fresenius Kabi	Importer
8.	GSK	SKF (retained Manufacturing Facility DML 000017) Beecham (retained Manufacturing Facility DML 000233) Bristol Mayer Squibb (retained Manufacturing Facility DML 000248) Stiefel (Sold facility to Martin Dow) UCB (was importer) Wellcome (manufacturing facility acquired by Barrett Hudgson) Glaxo (shut down manufacturing facility at Lahore) GSK split in to two firms, i.e. GSK Pharma and GSK consumer which later changed its name to Haleon (acquired plant of Novartis at Jamshoro)
9.	ICI (Currently Lucky Core Industries (LCI)),	ICI gave products on licence to Lucky Core Industries (LCI) which is now a local company LCI acquired Cirin Pharma (a local pharmaceutical firm having plant in Hattar) Recently acquired manufacturing plant of Pfizer Pakistan
10.	Lund Beck	Importer
11.	Martin Dow (formerly Merck AG, Germany)	Merck Germany sold Quetta Plant to Martin Dow
12.	Novartis	Ciba – Left Pakistan Sandoz – Left Pakistan Closed its local production & Sold its Local plant at Jamshoro to Haleon. Now operating as importer in Pakistan
13.	Novo Nordisk	Importer
14.	OBS	MSD (sold manufacturing plant to Searle) Organon (retained manufacturing plant at Karachi) Vifor pharma (importer) Shering Plough Johnson & Johnson (now Aspin), initially shut down its Stent manufacturing facility in Pakistan and later its other pharma production. Acquired AGP Acquired Bayer plant in Lahore. Acquired products of Pfizer + Novartis
15.	Otsuka	Manufacturer, plat at Hub
16.	Parazelsus	Pharma Distributor
17.	Pfizer	Pfizer Upjohn (Left Pakistan) Parke Davis (Left Pakistan) Wyeth (Left Pakistan) Sold products to OBS and other firms
18.	Pharmatec	Acquired products of Winthrob pharma which left Pakistan
19.	P&G	FMCG – Pharma Distributor
20.	Reckitt Benckiser	Converted in to FMCG firm
21.	Roche	Sold its plant and licenced products to Martin Dow, Karachi. Now operating as importer
22.	Servier	Manufacturer plant DML 000472
23.	Sanofi	Avantis (retained plant) 000007 Russel – Left Pakistan Hoechst – Left Pakistan May & Backer (Rhone Paulanc Rore Wah) Left

Table 2.

List of MNCs operated in Pakistan before mergers / acquisitions.

S. No.	MNC Name	S. No.	MNC Name
1	Abbott Laboratories (Pakistan) Ltd.	2	B Braun
3	Bayer Pakistan (Pvt) Ltd.	4	Beecham (Pakistan) Ltd.
5	Bristol Mayer Squibb	6	Cheisi (Importer)
7	Eli Lilly Pakistan	8	Fresenius Kabi
9	Glaxo Pakistan Glaxo Laboratories (Pakistan) Ltd.	10	Hoechst Pakistan Ltd.
11	ICI Pakistan	12	Johnson & Johnson Pakistan Ltd.
13	Knoll Pharmaceuticals (formerly Boots Pharmaceuticals)	14	Lund Beck (Importer)
15	May & Becker (Rohne Paulanc Rorer)	16	Medipharm
17	Merck AG, Germany Merck Sharp & Dhome of Pakistan Ltd.	18	Merck Sharp & Dhome of Pakistan Ltd.
19	Novartis Pharma (Pak) Ltd.	20	Novo Nordisk
21	Organon	22	Otsuka Pakistan Ltd.
23	P&G	24	Parazelsus
25	Parke Davis & Company Ltd.	26	Pfizer Pakistan Ltd.
27	Reckitt Benckiser Pakistan Ltd.	28	Roche
29	Russel	30	Saitex Pakitan
31	The Searle Pakistan Ltd.	32	Servier Research and Pharmaceuticals Pakistan (Pvt) Ltd.
33	Sharing AG Pakistan	34	Shering Plaugh
35	Smith Kline and French of Pakistan Ltd.	36	Stiefel
37	UCB Pakistan	38	Upjohn Pakistan Pharmacia & Upjohn (Pvt) Ltd.
39	Vifor Pharma	40	Welcome Pakistan
41	Winthrop	42	Wyeth Laboratories (Pakistan) Ltd
43	Farley	44	Sandoz Pakistan Ltd.
45	*see list below
*List of Multinational firms whose manufacturing plants were acquired by local parties.
1.	Searle International	Left Pakistan and sold its products to IBL which later retained company name of Searle-Acquired plant of MSD
2.	Saitex Pharma DML 284	Left Pakistan and sold its plant to Getz Karachi

2. Major concerns and challenges

2.1. Price control

A number of countries in the world regulate and fix the maximum retail price of medicines, including Pakistan. The prices of medicines have been fixed under the Drugs Act, 1976 by the federal government (Government of Pakistan, 1976). In 2018, the Drug Regulatory Authority of Pakistan (DRAP) formulated a pricing policy, which was approved and implemented by the Government of Pakistan (Government of Pakistan, 2018).

The Pharma Bureau has consistently advocated for the government to prioritise the control of quality over prices (Hussain, 2024). This has long been a position they have advocated for, specifically in relation to fixing the prices of essential medicines and allowing for a free market for the rest. However, in 2024, the government approved the deregulation of drug prices not included in the National Essential Medicines List (NEML), on recommendation from the Ministry of National Health (Government of Pakistan, 2024). This represents a significant shift from the previous Drug Policy 2018, under which pricing was linked to the annual Consumer Price Index (CPI).

2.1.1. Mergers and acquisitions

Mergers and acquisitions (M&As) within the global pharmaceutical industry are a common occurrence. These transactions are conducted with the objective of reducing costs, enhancing efficiency, and acquiring new technologies and processes (Danzon et al., 2007). Furthermore, medical M&A can be utilised as a means of reducing redundant processes and personnel, which ultimately leads to cost savings by reducing overhead expenses. It is evident from Table 2 that the number of MNCs has reduced after large M&A in Pakistan.

2.1.2. Local competition

One of the major challenges faced by multinational pharmaceutical firms in Pakistan is intense competition from local pharmaceutical firms. These local firms have established a strong presence in the market, capturing a significant portion of the business share. This competition poses a significant threat to multinational firms and necessitates innovative business strategies to attract and retain customers.

According to IQVIA Pakistan, Pakistan pharmaceutical retail market is a Rs.917.61 billion ($3.2 billion) market, with a growth rate of 22.3% and national firms are growing faster than the MNCs. During the last five years, the National firms CAGR was 19.57% while the CAGR of MNCs was set at 14.33%. Among the top 10 corporates that are growing at double digit, 7 are national. 9 out of the top 10 new products belong to the national firms. Out of 78 corporates that holds 96% of the market share, more than 60 firms are national. Similarly, during the last 12 months national pharmaceutical firms have sold more units than MNCs. From 2020 to 2024 the national firms are continuously dominating the MNCs. The market shares of National firms increased from 70.96% to 74.51% while the market share of MNCs declined from 29.04% to 25.49% (IQVIA, 2024).

3. Discussion

The exit of an overseas firm from a country undeniably results in a significant loss. There are individuals who experience the negative impacts of this situation, whether it be the loss of business opportunities or employment prospects. It is not that the foreign investment has stopped in Pakistan, but Ferozsons set up a biotech plant in joint venture (JV) with Bago Group of Argentina (Waheed et al., 2022). Pakistani Active Pharmaceutical Ingredient (API) manufacturing companies are also making JV/partnerships with Chinese companies (Citi Pharma, 2024). Some local firms have acquired the brands from MNCs (Business Recorder, 2023; Pharmatec, 2023; The Pakistan Credit Rating Agency Limited, 2024; VIS Credit Rating Company Limited, 2023).

Multinational corporations have multiple times expressed their concerns about the price controls and a volatile economic landscape. The pricing policies, which limit the ability of pharmaceutical firms to adjust prices in response to rising costs, have particularly strained profitability, making the market less attractive for international players. Under the new regulation, the prices of medicines, other than essential drugs, will be exempted from section 12 of the Drugs Act, 1976 (Government of Pakistan, 2024). This provision grants pharmaceutical companies autonomy to set their own prices for non-essential drugs. DRAP will initiate the necessary amendments to the last Drug Pricing Policy 2018 to reflect these changes. It can be hoped that now the existing pharmaceutical firms shall expand their operations and bring new investments.

Mergers and Acquisitions have also reduced the number of MNCs in the country. During such transactions, corporates closed their manufacturing operations at multiple units to save cost. However, when multinational enterprises (MNCs) encounter diminishing business opportunities in their respective countries, they often find themselves compelled to leave. This phenomenon can be observed in India, where certain firms choose to end their operations after the expiration of their patents. Reports indicate that Novartis, a Swiss company, is currently reviewing its business activities in India, while AstraZeneca is exiting the manufacturing sector (Pharmaways News, 2024).

Global firms always look to enter new markets and reach diverse customers. When the MNCs arrived in Pakistan the local pharmaceutical industry was almost non-existent. The MNCs were taking almost 95% share of the market. Now the situation is reversed. The MNCs share has reduced to 25.49% (IQVIA, 2024). This is probably one of the major challenges faced by the MNCs to maintain their operations in Pakistan.

Multinational pharmaceutical firms are one of the sources to provide the skilled and trained workforce to local firms, providing training, technology transfer. The withdrawal of these companies is already having a noticeable impact on Pakistan’s healthcare system. The skilled pharmaceutical workforce will be affected if MNCs leave for any reason.

In recent years, a few multinational pharmaceutical companies have closed their manufacturing operations. However, this has resulted in an opportunity for national firms to acquire these plants, ensuring an uninterrupted supply of essential medicines in Pakistan. This arrangement not only supports the local industry but also strengthens the position of Pakistan in the global pharmaceutical market. Several notable examples in Pakistan include: LIC acquired the Pfizer and ICI, Marin Dow acquired Merck Germany, Roche and Stiefel, Herbion acquired Pharmacia Upjohn etc., Getz acquired the Saintax Pharma. The acquisition of these manufacturing operations by national firms has several key benefits for Pakistan. By taking over the operations of these multinational firms, national firms contribute to the growth and sustainability of the healthcare system, ultimately benefiting the well-being of the population.

4. Conclusion

Pharmaceutical MNCs play a crucial role in the Pakistani pharmaceutical industry, and their contributions in terms of innovation and access to advanced treatments cannot be overlooked. In order to maintain their position in the market and align with the evolving needs of the market, MNCs must prioritise investment in new molecules and infrastructure. The MNCs operating in Pakistan are currently facing intense competition from national firms. In addition to competition, the MNCs face challenges in the form of mergers and acquisitions that hinder the expansion of existing plants. However, the federal government has recently decontrolled the prices of non-essential medicines, and it is expected that the MNCs demonstrate their commitment to Pakistan. Furthermore, investment in infrastructure is crucial for the smooth functioning of pharmaceutical firms. This includes the construction of state-of-the-art manufacturing facilities, the establishment of research and development centres, and the upgrading of technology.

Authors’ contributions

MAAK conceptualised the idea, conducted the literature review, and wrote the final draft.

Disclosure statement

No potential conflict of interest was reported by the authors.