Pharmaceutical Manufacturers Seek Green Light for In-House R&D Investment

As the government intensifies efforts to bolster exports for sustainable economic advancement, pharmaceutical manufacturers are requesting permission to allocate 1% of their earnings to internal research and development (R&D). This proposal suggests a shift from the existing practice of contributing profits to a centralized government fund, aiming to foster the creation of export-oriented products.

Tauqeer Ul Haq, Chairman of the Pakistan Pharmaceutical Manufacturer Association (PPMA), stated that the Central Research Fund (CRF) is not being strategically deployed for sectoral R&D, instead being used for administrative functions.

While traditional export sectors in Pakistan, including textiles, carpets, leather, and sports goods, have historically received preferential treatment through subsidies and policy incentives, the pharmaceutical manufacturing industry has been steadily progressing, despite minimal state support.

Expanding Pharmaceutical Exports

Over recent years, pharmaceutical exports from Pakistan have seen consistent growth across critical international markets, spanning Africa, the Middle East, Central Asia, South America, Southeast Asia, and the Commonwealth of Independent States (CIS), among others.

Industry representatives suggest that with government backing in the form of export incentives and focused funding for innovation, performance could be substantially improved. They highlight the untapped potential for strategic growth within the pharmaceutical sector, which is currently hindered by policy limitations.

A key issue is the mandatory 1% contribution from net earnings that pharmaceutical manufacturers are obligated to deposit into the CRF. While initially intended to stimulate research and development, the fund’s actual application has faced scrutiny. Industry stakeholders report that the majority of the CRF is allocated to administrative and infrastructural expenses—such as improvements to laboratories, pharmacovigilance systems, poison control centers, antimicrobial surveillance cells, and digital record-keeping—rather than essential R&D focused on product development.

Although infrastructural support is crucial for upholding regulatory standards, it does not necessarily foster the innovation or global competitiveness required to boost exports, attract investments, or facilitate technology transfers. The sector is now advocating for a policy change that would enable pharmaceutical companies to directly invest this 1% into their individual R&D programs, which they believe could positively transform the industry.

Potential Benefits of Policy Revision

The pharmaceutical industry argues that permitting the use of 1% of their profit for in-house R&D would yield several key advantages:

  • Targeted investment in product innovation, resulting in market-ready formulations and technological adaptations.
  • Easier technology transfer for cutting-edge biotech and complex pharmaceutical products, allowing for significant import substitution and a stronger global market position.
  • Enhanced public-private R&D partnerships, including collaborations with academic institutions and research centers.
  • The growth of Contract Research Organizations (CROs) and WHO-accredited laboratories within Pakistan to support clinical trials and bioequivalence studies—services that are currently outsourced to countries like India, Indonesia, Malaysia, and Jordan.
  • Improved capacity for adhering to global regulatory standards, including readiness for Current Good Manufacturing Practice (CGMP) certifications and approvals from WHO, PICS, ANVISA, US-FDA, UK-MHRA, EMA, and Health Canada. These accreditations are essential for accessing high-value markets, and are already being pursued by competitors in India, China, Turkey, and Bangladesh.

Over the past year, the pharmaceutical sector has succeeded in expanding its exports while fulfilling domestic healthcare demands, a performance that could be further enhanced with government support.