PESTEL Analysis:

Political Factors:

The Pakistan Tehreek e Insaaf took charge in 2018 and had promised the nation to provide

affordable necessities of life including healthcare. They have launched the ‘Sehat Insaaf Card’

through which 3.5 crore deserving people (with less than 2$ earning per day) will be getting free

medical treatment.[CITATION Dawn20 \l 1033 ] With such programs, health awareness and

medicinal consumption is expected to increase which GSK can capitalize and make deals with

hospitals / medical centers.

In March 2020, the government is expected to provide a 5 year action plan for reformation of the

industry aiming to increase export volume through tariff rationalization, trade related investment,

institutional reforms and easing of business regulations [CITATION TheNews2020 \l 1033 ]. The

government wants to double its trade with African countries, which have a population of around

1.3 billion, and a GDP of $2.7 trillion and long term aim to boost current $300 million exports to

over $3 billion. With such friendly tariffs, GSK can envision increase in export demands.

Conflict with India is the gravest political risk to Pakistan. Around 50% of medicines made in

Pakistan use raw materials from India, according to the Pakistan Pharmaceutical Manufacturers

Association. However, pharma imports were exempted from the ban on bilateral trade with India

after New Delhi stripped the disputed Kashmir region of its special status. [CITATION Dawn19 \l

1033 ] Nevertheless, it still remains a risk, if relations further deteriorate, alternate / local

suppliers must be developed by GSK to avoid raw material scarcity.

During financial year 2018-19, Pakistan witnessed a growth of 3.29% against a target of 6.2%.

The slowdown in economic growth can be attributed to twin deficits on fiscal and external front,

high aggregate demand and inflationary pressures. Resultantly, SBP gradually increased the

policy rate to 12.25% from 7.5% in July 2018, and allowed greater flexibility in the exchange

rate adjustments in an attempt to curb excessive aggregate demand. The Pak Rupee devaluation

started in 2018 from Rs. 90, peaking at Rs 163 in June 2019 and now stable at Rs. 152, with an

overall change of 40~50% causing rise in imported raw material and machinery prices. High

inflation has decreased buying power of consumers and on other hand put pressures on GSK to

increase prices due to devaluation and rising utilities cost. High interest rates means increased

financial charges and ROI required for plant expansions based on loans.

Such economic pressures on industry are leading to rise in unemployment, layoffs and

implementing ‘right sizing’. The Economic Survey of Pakistan, unveiled in June 2019, reported a

slight drop in the rate of unemployment to 5.79% in fiscal year 2017-18, however Employers’

Federation of Pakistan (EFP) President states it is not less than 14-15%. [CITATION

BusinessRecorded2019 \l 1033 ]

Pakistan exported pharmaceutical products worth $211.6 million during the FY2018/19 as

against export of $194.910 million in 2017/18, showing an increase of 8.6 percent. Pharma

exports, however, accounted for small percentage of total exports of around $23 billion.

Pharmaceutical exports are unlikely to make any mark given the long lags in innovation of new

products, absence of research and development and increasing inflexibility in setting prices

[CITATION The19 \l 1033 ]. Given the financial crunch, GSK may be better off targeting products

for middle class segment whose buying power is decreasing.

Pakistan has a population of 212.2 million with a population growth rate of 2.1%. The country

has a relatively young population with around 50% of the population under the age of 30.

Currently, 34.9 % of the population of Pakistan is urban, while it was 33% in 2015. Health

indicators have gradually improved over the years including life expectancy beyond 65 years,

with men at 67 and women at 69 years. The infant mortality rate is 55.8 and deaths under 5 years

is 68.2 per 1000 births, a trend that has been decreasing. However, infectious diseases are

rampant and diseases such as tuberculosis and malaria, among others are a major challenge.

Noncommunicable diseases are increasing rapidly due to unhealthy lifestyle, rapid urbanization,

job / earning pressures leading to Diabetes, hypertension, coronary artery disease, and

malignancies [CITATION Qid17 \l 1033 ]. Large outbreaks of uncontrollable diseases have been

witnessed such as Dengue [CITATION WHO191 \l 1033 ] (between Jul-Nov 2019 total 47,120

confirmed cases with 75 deaths) all over Pakistan and HIV in rural Sindh (22,000 new cases,

with total 160,000 people in 2018) [CITATION WHO19 \l 1033 ]. Pakistan is still struggling to

control spread of Polio and moreover shortage of vaccines for hepatitis & rabies is widespread.

Recent outbreak of Corona Virus is putting more pressure on Pharma Industries to step up their

R&D pace for combating the threats.

Technological Factors:

The prime minister recently launched the “Digital Pakistan Vision” that claims to give internet

access and connectivity to every citizen due to which the scope of e-commerce and e-

government services is improving in Pakistan with expanding mobile internet and broadband

coverage [CITATION Exp19 \l 1033 ]. This has opened doors to online and mobile app based e-

Pharmacies such as [Link], [Link], [Link] etc. hence establishing partnerships

as Daraz, FoodPanda, EatMubarik, [Link], Cartpk from industries ranging from fast

food, grocery, house hold shopping etc have captured a fair share of the market.

Telemedicine is another concept gaining acclaim whereby Doctors and Patients will be

connected online through mobile applications. One of the platform Sehat Kahani has been

launched and another CallDoc is underdevelopment [CITATION Dai19 \l 1033 ]. With use of

technology, health awareness will be increased, indicating rise in demand and further more

avenues for pharmaceutical partnerships with Doctors. The advertisement paradigm has also

shifted from Paper / Print and TV to more on social media platforms such as Facebook, Twitter,

Youtube and websites through google ads. Adoption to these changing marketing channels is

necessary.

Environmental Factors:

The climate is changing due to global warming and Pakistan witnessed swear temperatures in

winters of 2019 increasing the rate of people catching colds and viruses. Moreover, the Northern

Provinces of Pakistan have experienced dense fog & smog for most of the winter last year,

leading to irritation in eyes and breathing problems. The air quality index for Lahore topped the

global ranking of worst air quality as it went up to ‘hazardous’ with an AQI of 400 [CITATION

Exp191 \l 1033 ] . The events were so drastic that schools were forced to be closed for a few days.

Similarly, with poor solid waste management, sanitary conditions and clean drinking water

provided by the government, the country is experience unprecedented rise in Pollution and thus

diseases.
To counter global warming, GSK is targeting a carbon neutral value chain by 2050 with

ambitious goals to reduce carbon, water and waste in the meantime. GSK is also making a

contribution to environmental challenges by sharing knowledge and resources through

participation in the UN Caring for Climate Initiative and the UN CEO Water Mandate, a

business-led movement to advance water stewardship and sanitation.

Legal and Regulatory Factors:

Drug Regulatory Authority of Pakistan (DRAP) is responsible to maintaining check on the

pharma industry. Due to devaluation of Pak Rupee (upto 40% since 2018), increase of 40-100%

in prices of medicines was observed in January 2019, as compared to DRAP’s instruction of

only 15% increase, which took strict action against violators [CITATION The191 \t \l 1033 ]. With

only 7% indigenous raw material and remaining 90% imported, increase of utility prices

especially gas (70% increase from 2015-19), the profit margins have significantly reduced and

the regulator always takes time in incorporating these factors in pricing. Unfortunately, many

manufacturers have also given up on producing lifesaving drugs as it not viable to produce them

at the prices determined by DRAP [CITATION Daw20 \l 1033 ]. GSK, along with the PPMA and

other industries must lobby and justify their price demands.

The Narcotics Control Board allocates quota against controlled substances such as Ephedrine

used for cough medicines. Delays in the allocation of quota causes production behind schedules

leading to shortages in the market. Again, GSK must convince the government on efficient

practices by regulators.

Apart from this, DRAP has also begun benchmarking the country’s pharmaceutical units to

check if they are following current good manufacturing practices (CGMP), conforming to

international standards. Companies that are classified in lower categories could be closed. GSK
although already complies to International Standards, it needs to remain vigilant during these

audits. Moreover, with the closure of low category industries, the production demand is expected

to shift to big names such as GSK [CITATION Daw201 \l 1033 ].

Poor policy and an inefficient regulatory structure is denying life-saving breakthrough

technologies to patients in Pakistan. New products and molecule approvals require months of

deliberation. Secondly, the price approval process is also time taking. Thousands of price

adjustment applications are still pending with the DRAP [CITATION Bus19 \l 1033 ].

In-order to boost exports, Pakistan requires membership of Pharmaceutical Inspection

Convention/Cooperation Scheme (PIC/S). PIC/S provides cooperation in the field of good

manufacturing practice and it can allow Pakistan’s medicines to have access to at least 60

countries. There are no FDA or EMA approved facilities in Pakistan and there are only a couple

of WHO certified facilities. The costs involved in obtaining these certifications are considerable

and there is no incentive for companies to do. FDA and EMA certifications would allow

Pakistani pharmaceutical company’s access to US and EU markets [CITATION Dai17 \l 1033 ].

There is a lot of work at the regulator end to provide a conducive local and international

environment for manufacturers.

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