Hot on the heels of a nasty blow to the people by way of an increased Value Added Tax (VAT) including on services provided at private hospitals, the Health Ministry seemed to want to cushion the hit by imposing a MRP (Minimum Retail Price) on at least 48 popular drugs. Not a comprehensive list, but [...]


The quick-fix drug price formula is no cure


Hot on the heels of a nasty blow to the people by way of an increased Value Added Tax (VAT) including on services provided at private hospitals, the Health Ministry seemed to want to cushion the hit by imposing a MRP (Minimum Retail Price) on at least 48 popular drugs. Not a comprehensive list, but yet, they range from the common Panadol to life-saving drugs.

The Health Ministry’s intentions seem at first glance bona fide, but we will come to that later. The initial reaction from both the big pharmaceutical multinational companies and the end-user, i.e. the patient, has not been all that was expected from the move. While for the former it is a bitter pill to swallow, for the patient there are mixed feelings.

The widespread criticism comes from what appears to be a simplistic arithmetical formula that has been adopted in arriving at the MRP. The authorities concerned merely took the two ends of the price range at which a particular drug was sold in the market, i.e. the high end price for a brand name like Panadol and the low end of a similar drug with a slightly different name but with the same chemical ingredients (which are called “generic” drugs) and fixed a price in-between. Hence, a multi-national company manufacturing at Rs. 1.60 per tablet and selling it at Rs. 3 in the market making a near 100 per cent profit in the process, is now asked to sell at Rs. 1.20 which is less than the cost of production forcing the company to run into a loss.

No doubt, these multi-nationals make huge profits in selling pharmaceutical medicines to poor countries. They justify it by arguing that they have to spend chunks of these profits on R & D (Research and Development) for newer and more potent medicines – that will eventually benefit those in these very poor countries. Vast strides have been made over the years in pharmaceuticals, but others argue that no new radical breakthroughs have been made in recent years while people’s resistance to some drugs has increased with no solution to the problem.

The sudden gazetting of the new controlled prices has taken the suppliers by surprise. In some ordinary kades (boutiques) everyday use drugs like Panadol are in short supply while suppliers claim they have to change the price stickers according to Consumer Protection laws. In fact, some are creating an artificial shortage as they sulk at the Government’s move.

Should these drug companies react more vigorously even with the more costly drugs, there is the possibility of this country being taken back to the bad old days of the 1970s when people had to ask friends and relatives abroad to send life-saving or urgently required medicines through passengers coming to Sri Lanka. Then it was only the affluent class and the political elite who had this ability but nowadays with so many Lankans having someone known working or living abroad, the disadvantage to the poorer segment of society will be less. Nevertheless, it will be a retrograde step for a country looking to the future.

There is no easy fix for a pricing policy that must be acceptable to all — from the multi-nationals, to the importer and distributor and last but not least the doctor and the patient. The Chamber of Pharmaceutical Industry has drawn attention to the fact that the new pricing policy of the Government could run the risk of “innovator drug companies” (the multi-nationals) exiting the Sri Lanka market if they are asked to price their brands at the same price of a ‘generic’ product.

While some ‘generic’ products serve the same purpose of curing or proving relief at a lower cost, the quality of some products in the market is subject to question. The Chamber fears the worst if these big companies abandon Sri Lanka and patients are left with only cheaper, but sometimes spurious generic medicines.

The call is for market forces to play their role with the gentle hand of the regulator (the Health Ministry) playing its part rather than going to the so-called socialist era of price controls of yesteryear which however promising it sounds, only bred shortages of essential medicines, a ‘black-market’ and eventually, saw the uninfluential being deprived of medi-care.

Illegal, parallel imports and opening the door for unknown drugs entering the market are real fears. Cost is important, but it is not the only factor in a pricing policy. The overall benefit to the patient is what is paramount.

From all accounts the private sector was ignored in this seemingly quick-fix exercise. No window was given for transition to new prices. The dialogue between regulator and the regulated that prevailed when the President was Health Minister has been done away with. The formula then discussed to allow drug importers CIF + 85% (cost, insurance, freight of a drug plus 85 per cent for marketing and profit) has been jettisoned. This was the via media between manufacturers making sometimes unconscionable profits of up to 500% on a single drug, and remaining in the market.

The two arms dealing with the pricing policy, the National Medicine Regulatory Authority (NMRA) and the National Drug Quantity Assurance Laboratory (NDQAL) are competent institutions and well led, but there seems to be a political flavour to this hurried pricing policy. With thousands of drugs coming in from India (mostly), Pakistan and Bangladesh, the NDQAL simply cannot cope with testing the effectiveness of these imports.

Of late, who else but the Chinese have offered to build a bigger lab for NDQAL? However, rumour swirls in the health sector, spilling into the public domain, that this price control exercise is all about pushing the big pharmas out of the market and allowing new players with connections to VIPs in Government to fill the vacuum with their own agencies selling their own drugs.

This edging out the big players from the market can be achieved only in a closed, captive market. Such a policy goes against avowed Government policy advocated by the President and the Ministry of National Policies and Economic Affairs which is under the Prime Minister of Public-Private-Partnerships (PPP). Can a single Ministry then have its own policy that puts the Government’s bigger goals of attracting foreign investment into the country in jeopardy – and not necessarily benefits the patients at the same time? That is something the Government must ponder.

Idle promises have been made from the Health Ministry of building not one, but four Mount Elizabeth hospitals (the world famous Singaporean medical hub that serves the rich and famous in Asia and the Pacific region). This, when no cardiac surgery is performed in 20 of the country’s 24 districts; there are no stroke units in most base hospitals and people have to buy their medicines in the nearby pharmacy after being seen by a doctor in a state hospital.

Next week’s budget on the Health Ministry has been cut for 2017 by Rs. 14 billion from 3 percent of the total budget last year to 2.7 percent next year. The yawning gap between political rhetoric, populist moves, and the reality is simply widening.

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