Industry sources in Pakistan fear that the increasing competition from India and China could force 60% of the country's domestic drugmakers out of business within the next two to three years, and have called for government action to help reverse this worrying trend.

Part of the problem is that Pakistan's drug sector suffers from a lack of adequate infrastructure, which discourages investment and impacts competitiveness. Also, the industry complains that it does not receive sufficient government support and is especially critical of the drug-pricing regime. In Pakistan, drug prices are fully controlled by the government, depriving drug producers of the financial resources they need to compete in global markets.

Further, the government has recently agreed to allow the import of vaccines and drugs to treat HIV/AIDS and hepatitis from India. This has opened a large market for Indian importers. The government is also planning a more liberal system for the import of finished drugs from India, in an attempt to reduce spiralling drug costs in Pakistan. Market observers fear that this could lead to a fully liberalised market, which would be detrimental to local industry.

Pakistan has around 400 local drug manufacturers, although, the majority of these are not profitable as there is no base for raw materials in the country and they are forced to rely on expensive imports. Recent government measures to alleviate this situation have included removing the sales tax from imported Active Pharmaceutical Ingredients (APIs). Meanwhile, the emerging patent regime in the country will help local industry develop in the long term as it attracts much needed foreign investment.