Innovation over bureaucracy: Pharma sector seeks reform of 1% CRF policy

KARACHI: Pakistan’s pharmaceutical industry is making a clear and urgent policy demand: let companies directly use 1% of their net profits—currently mandated for deposit in a government-controlled Central Research Fund (CRF)—for their own in-house research and development (R&D) activities.

Under existing regulations, every pharmaceutical manufacturer in the country is required to contribute 1% of its annual profit to the CRF, originally created to support R&D across the industry. However, sector leaders now argue that this fund is largely being spent on administrative and infrastructural activities—such as regulatory systems, poison control, and pharmacovigilance—rather than the innovation and product development that can drive exports and competitiveness.

“The Central Research Fund is not being utilised purposefully for sectoral R&D, but for administrative purposes,” said Tauqeer Ul Haq, Chairman of the Pakistan Pharmaceutical Manufacturers Association (PPMA).

The PPMA and other stakeholders are urging the government to amend the rules and allow companies to directly invest that 1% back into their own R&D. They believe this policy revision would unleash targeted innovation, foster partnerships, support global certifications, enable the creation of advanced pharmaceutical products in the country, and position Pakistan’s pharmaceutical exports as a serious global contender.

While traditional export sectors like textiles, leather, and sports goods have long enjoyed policy support and subsidies, the pharma industry has made steady export gains with minimal government backing. In the past year alone, pharmaceutical exports have expanded into over 15 markets across Africa, the Middle East, Central Asia, South America, Southeast Asia, and the CIS region — proving the sector’s resilience and potential.

Pharma’s proposal: Redirect the 1% to innovation

Industry leaders are now urging the government to amend the CRF mechanism and allow companies to invest that 1% of profit directly into their own R&D programs. This, they argue, is the only way to truly build an innovative and self-reliant pharmaceutical ecosystem in Pakistan. According to them, the current centralized structure fails to fuel product innovation or deliver on the fund’s original purpose.

Instead of channeling funds into poison control centers, record-keeping systems, and administrative infrastructure, pharma firms want to use them for cutting-edge product development, biotech innovation, and technology transfer — crucial ingredients for competing in high-value global markets.

What the policy reform could unlock

According to PPMA and other experts, allowing companies direct control over their 1% R&D allocation could lead to:

• Product innovation: Focused R&D on market-ready formulations and modern technology platforms.
• Technology transfer: Adoption of advanced biotech and complex generics for large-scale import substitution.
• Academic collaboration: Stronger public-private R&D partnerships with local universities and research institutions.
• Domestic CROs & WHO labs: Development of Contract Research Organizations and internationally accredited labs to conduct clinical trials and bioequivalence studies — services that are currently outsourced abroad.
• Global certifications: Accelerated efforts for compliance with global regulatory bodies such as WHO, US-FDA, EMA, UK-MHRA, PICS, ANVISA, and Health Canada — essential for access to premium international markets.

Unlocking Pakistan’s global pharma potential

Despite the challenges, Pakistan’s pharma sector has shown that it can grow exports while meeting local healthcare needs. But stakeholders believe a shift from bureaucracy to innovation is needed to sustain and accelerate this growth.

“This isn't just about improving profit margins,” said one industry official, “it’s about transforming Pakistan’s pharma landscape through innovation that comes from within — not through a centralized, bureaucratic process.”

By reforming the CRF policy and empowering companies to invest directly in innovation, the government has the opportunity to catalyze a sector with immense export potential and growing international relevance.

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