Abstract
Pharmaceutical industry in Pakistan represents one of the most promising industries with a substantial room for growth owing to various domestic factors. But government imposed regulations, especially refusal to grant price increases for pharmaceutical products, has had negative consequences for the industry and overall welfare as a whole. These include complete withdrawals from this market by firms to smuggling of drugs. In all, the welfare consequences have been overwhelmingly negative. The calculations for welfare losses made under the chosen criterion suggest that per year losses exceed Rs. 100 billion/-
