Panadol headache grows into a migraine

Panadol is short in the market and this has been catching eyes of media, politicians, all and sundry. Everyone has an opinion on it. Some believe the producer, in this case, the company (GSK Consumer Healthcare) is insensitive to reduce production of Panadol at a time when it is needed most with demand rising due to dengue outspread and other exogenous factors like floods. Some are blaming the government, as drug prices are regulated in Pakistan where the price revision of Panadol (and 40 other products) recommended by the Drug Regulatory Authority of Pakistan was rejected by the Federal Cabinet. Eventually that led to the declaring of force majeure on the production of three Panadol variants -Panadol Tablets, Panadol Extra Tablets, and children’s Panadol Liquid Range, by GSKHC who believe that they are unable to cover their costs based on current prices.

The company is making a commercial decision. One can argue with the timings and insensitivity of it to a product needed for children; but the issue is deeper and wider- much beyond one company or one generic product (paracetamol).

All the drug prices in Pakistan are regulated by the Federal Government and there is too much regulation. In the developed world – UK and US, particularly, there is no price fixing. Meanwhile, in countries like India and Bangladesh, only WHO essential list (130 odd products including Panadol Tablet – not other products) have price regulations. For long-term sustainable model, Pakistan needs to slowly deregulate the pricing.

Panadol (or generic paracetamol) is not the only company (or product) that is facing cost pressures. There are many other products. In August 2022, 35 products (including 3 Panadol variants) price increase proposal from health ministry as ‘hardship category’ was rejected by the federal government. Later, In September 2022, another 10 products under hardship category were also rejected by the PDM government.

Hardship category consists of products where there is an unusual growth in cost and where production becomes unviable. Their cost is being analyzed by the government before moving the summary. In these products, the production becomes unviable without price increase.

There are political pressures on the government to not increase the prices as Shahbaz and others fear strong backlash from PTI and masses on the price increase. And it appears all the government cares about is its political capital, all else is someone else’s headache. Having said that, the issue is being brewing over the last one year (if not more). The summary of price increase was sent to the then PTI government in January 2021. And then, PM IK was reluctant to increase the price. And then came VONC. And now the new government is getting cold feet. The issue is like petroleum prices where the efforts to save political capital by successive governments is doing the damage.

Panadol is a big brand and has wide visibility. A couple of months back, the company decided to reduce the production of a few Panadol variants to one third. That had created a shortage in the market. But the company’s decision was based on the rejection of government for price revision of hardship products. Now the company is going a step further.

According to GSKCH, In Paracetamol adult category Panadol variants share is 80 percent. And the company claims that many other producers of paracetamol have already shut operations. But these are hardly noticed. There are over 100 other brands that have market share of 20 percent. The API of paracetamol is being produced (rather assembled) locally and imported as well. As per channel checks from the local API producer (Citi Pharma), out of its average 460 tons monthly production, GSKCH usually buys 300 tons. Apart from that, GSKCH also imports API. The supply from Cit Pharma to GSK has reduced to 100 tons a month and supply to others had remained unchanged till the last month. There is some dip in the ongoing month.

This implies that other producers are still producing paracetamol – albeit there are signs of decline. The market intelligence suggest that local small companies are selling at higher than permitted price and the product is selling in black at higher prices. GSKCH being an MNC has to comply with the global ethics standards. Market intelligence also suggests that Panadol variants are selling at Rs70-100 per strip in different cities – 3-4 times the market retail price (MRP), in black. The bottom line is that overall paracetamol is being short, and the consumer is paying a higher price. That defeats the government’s purpose to have people buy the drug at an affordable price.

The company is in talks with the government. And the government is mainly focusing on the brand Panadol due to its media hype. The problem is much wider. The grapevine is that the government is thinking of giving subsidy to the brand; but not ready to increase prices. That is not a wise decision. The government is not thinking through the problem. This will open a pandora box.

First, there are 45 items in the hardship category. How can government merely provide subsidy to three variants of Panadol. As per GSKCH, the monthly gross loss on today’s cost, is Rs200 million for its adult Panadol two variants. This number will mushroom. And without solving the problem, many other products are going to be short in the market – already some are, but they haven’t gotten any media attention yet.

Moreover, the Pakistan Pharmaceutical Manufacturing Association (PPMA)has written letters to DRAP, health ministry and the PM on 38 percent increase in drug prices across the board on all drug products in the country. The government didn’t reply. The drug policy board is dysfunctional for the six months or so. That is a sad situation. And now the PPMA is routing through Islamabad High Court to get a reply from DRAP. If the issue is unsolved, sooner or later, many products would be short in the market; supplied at premiums in the black market. The Panadol case is just a trailer to a much bigger crisis in the making.