The Lahore High Court’s decision to nullify the stay order against the deregulation of Maximum Retail Prices (MRPs) of non-essential drugs is positive news for the country’s pharmaceutical sector. 

Big news for pharma companies! 

Deregulation is set to shake things up. AGP Limited (PSX: AGP), Abbott Laboratories (Pakistan) Limited (PSX: ABOT), Highnoon Laboratories Limited (PSX: HINOON), and Haleon Pakistan Limited (PSX: HALEON) are expected to lead the way. They rely heavily on non-essential drugs, making up over 50% of their sales. Even GlaxoSmithKline and Searle, with less non-essential drugs in their sales, could benefit

In February, the government approved this move to help tackle supply issues. Now, companies can adjust prices independently, exempting non-essential drugs from certain regulations.

Under the new rules, drug prices are tied to the Consumer Price Index (CPI). This means companies can raise prices by notifying the Drug Regulatory Authority of Pakistan (DRAP) 30 days in advance.

Essential drugs have limits on price increases, while non-essential drugs can see higher hikes.

However, despite a revenue increase of 17% to Rs274.5 billion in 2023 due to price hikes, the earnings of Pakistan's listed pharmaceutical sector dropped by 42% to Rs7.9 billion, mainly due to lower gross margins and higher finance costs.