EDITORIAL : THE DAWN, PAKISTAN

Vulnerable to fraud

THE healthcare fraud in the US involving the British drug-maker GlaxoSmithKline places before Pakistan a worrying picture of its own pharmaceutical industry. While the Glaxo fraud vindicates the worldwide scepticism regarding the operating of profitable pharmaceutical businesses, in the Pakistani context the concern runs much deeper. As the culture of not questioning the quality and purpose of medicines persists here, Pakistanis are dangerously exposed and liable to submit to unscrupulous agents of the market who are at their most efficient in places where public awareness and resistance are low.

GSK pleaded guilty to misdemeanour in the biggest such case in US history and agreed on a settlement. It will have to cough up $3bn — $1bn in criminal fines and $2bn in civil fines. The agreement “would resolve allegations that the British drug-maker broke US laws in the marketing of several pharmaceuticals”. The company was further accused of failing to provide the concerned US department with safety data about a drug and of underpaying money owed to Medicaid, the healthcare programme for the poor. Compare this with Pakistan where pharmaceutical companies have few checks to contend with. In the US case, doctors were bribed with spa treatments and meals for endorsing illegal drugs. This type of unfortunate marketing can almost be described as the foundation stone of the strategy adopted by pharmaceuticals that operate in Pakistan. There is no accountability of doctors who may not always have a good medical reason for prescribing or promoting a certain drug. Against a developed American system that is on trial for its failure to effectively check malpractice, Pakistan is still struggling to create a beginner’s guide on hauling up drug-makers whose products are questionable. One has only to recall the tragic deaths of 130 heart patients who were administered defective medicine by the Punjab Institute of Cardiology only a few months ago to gauge how grave the situation is.

The fake drugs racket thrives in a set-up where raw material quotas for qualified manufacturers are not that easy to come by and drug-makers are loosely regulated. Unhealthy marketing practices are routine with the federal government and provinces still attempting to define jurisdiction and responsibilities. Theoretically, the enforcement of many of the drug laws has been devolved to the provinces. But practically, there is utter confusion, which, among other things, makes the proposed Drug Regulatory Agency a distant dream. Given the examples at home and abroad, it is necessary to sound the alarm bells. An evaluation of the way medicines are manufactured, marketed and distributed is urgently needed. But can that happen without more clarity on devolution?

Lower inflation

THE annual inflation number has been released, and it is a moment for cautious optimism — with the emphasis being on caution. If official statistics are to be believed — and there is some concern that technical changes made this fiscal year now understate price increases — the consumer price index stood at 11 per cent this year, down from 13.7 per cent in 2010-11. Given the inflation in the mid-20s that persisted in the current government’s first year in office, the administration should be credited for bringing an alarmingly high number broadly under control. And in recent months it has successfully passed on reductions in global commodity prices to consumers. But the achievement also needs to be put into perspective. For one, much of the decline in inflation is due to global price declines, especially those of oil and certain food items, rather than improvements on the domestic front. And inflation still remains stubbornly in the double digits for the fifth year running, a reality borne out by the common complaint among citizens that even basic needs, including food, fuel, electricity and transport, remain hard to meet.

Even more worrying is the persistence of the fundamental issues behind this problem, which remain in place and are getting worse. The State Bank recently pointed out that inflation remains high because of continued, and continually increasing, government borrowing, itself a function of the growing fiscal deficit. And the new budget doesn’t inspire confidence that the required belt-tightening will take place, at least not before the next elections. The recent expansion of the cabinet and the hike in salaries and pensions of government employees are just a couple of indications of how politics continues to trump sound economic management, even as the fiscal deficit for 2011-12 will likely come in at nearly eight per cent. Add to that a low tax-to-GDP ratio, electricity and other subsidies, and the losses racked up by public-sector enterprises, as well as a precarious external accounts position that is weakening the rupee and making imports more expensive, and the outlook for inflation doesn’t look bright.

ATM charges

THE Competition Commission of Pakistan has found that the practice of charging the same rate (Rs15 per transaction) by 28 different banks for cash withdrawals by customers of rival banks from their ATMs represents an example of price collusion and an act of a cartel. The banks in question are members of an ATM network ‘switch’, 1-Link, itself a guarantee limited company created and owned by 11 of the member banks. 1-Link is one of two such ATM networks operating in the country. Having found 1-Link and its members guilty, the commission has fined all the offending parties Rs770m in total.

The problems with ATMs in Pakistan have been commonplace for some years now, with network outages and frequent shortages of cash being some of the commonly highlighted ones. Additionally, security problems in some places mean customers often have to worry when they go to withdraw funds from their accounts. While the banks and 1-Link claim that the CCP has wrongly applied competition law in fining them, customers may rightly wonder about the extra Rs15 they are charged every time they use an ATM of another bank — are they getting a service that is reasonably safe and efficient at a competitive price? While the State Bank of Pakistan has worked towards keeping the charges by networks such as 1-Link and its client banks in check and there has been some effort at improving the customer experience at ATMs — ensuring they are stocked with cash over weekends and holidays, providing brightly lit and more secure spaces, etc — there is still a long way to go. More broadly, as the CCP fine indicates, there are all manner of small fees and charges that banks bill customers in the hope they won’t notice or mind. More vigilance by the State Bank and entities like the CCP will help.