Forex crisis and companies being unable to open their letters of credit affecting supply of medicine Consumers already complain of unavailability of certain drugs and stark price hikes   The forex crisis and an inability to open Letters of Credit (LCs) are just the tip of the iceberg affecting the supply of medicines to Sri [...]

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A bitter pill to swallow

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  • Forex crisis and companies being unable to open their letters of credit affecting supply of medicine
  • Consumers already complain of unavailability of certain drugs and stark price hikes

 

The forex crisis and an inability to open Letters of Credit (LCs) are just the tip of the iceberg affecting the supply of medicines to Sri Lanka. Stakeholders noted that market deficits will only get worse as the economic crisis hits an already mismanaged medicine procurement system.

Consumers told the Sunday Times that access to daily medical requirements was becoming increasingly problematic due to unavailability and stark price hikes.

“It will cost a fortune!” said one Sunday Times inquiry respondent – Ajita Kadirgamar. She needs to stock up on 4 medicines. “Even if I manage to get a few months’ supplies, what about the average man?” she asked.

Drugs like Panadol were now unavailable even in well-established pharmacies – local alternative brands of paracetamol, however, were found in some places.

But alternatives weren’t always a safe option noted a 39-year-old private sector employee who had been unable to obtain Thyroxine anywhere a few months ago. “You can’t switch brands of Thyroxine due to the nature of the drug and because the local one had quality failures before.”

“The common factor is the forex crisis and companies being unable to open their letters of credit,” said Sri Lanka Chamber of Pharmaceutical Industry president Sanjeewa Wijesekara. Procurement is an ongoing process so if companies can’t establish LCs this clashes with the varying stockholding policies that manufacturers have.

“Shortages are only going to get worse because companies don’t really have a lot of alternatives beyond liaising with banks to open their LCs,” Mr. Wijesekara warned.

“80% of the pharmaceutical industry is import-dependent,” said an owner of a pharmaceutical company Kavinda Makalanda, He held that meeting the current demand for pharmaceuticals and nutraceuticals without imports was impossible. Because of the lack of dollars, the approvals for said imports are given based on the importance of the product.

Banks have to go through a long process of combing through product information and literature before making their case to the Central Bank The tenuous approval process involved in getting CB approval for LC openings would take up to four months. “Nobody is going to hold stocks for that long,” Mr. Makalanda noted. Inventory systems today are technologically advanced enough to coordinate deliveries and production lines for “just-in-time” delivery systems.

Apart from that, he also added that despite the fixed rate per dollar being Rs. 203, the final cost per dollar for companies comes to about Rs. 233 with bank charges and LC charges.

“The regulatory side has a whole lot of problems of its own,” he continued that he had personally experienced the inconveniences of the arbitrary tax policy. He claimed that the NMRA did not have a clear policy on tariffs of certain products. “I had a product that had been coming into the country for three decades being held at the customs until I made a ‘tax’ payment I hadn’t even heard of.” It took the entrepreneur three months and continuous letters that kept getting misplaced at the NMRA until the issue was cleared up.

The impact on the supply chains was worsened by the tediousness of the logistics. “Vessels don’t come here anymore and even the ones that do cost ten times more.” Airfreight is completely out of the question because of how expensive it is. The common practice now was to collect multiple shipments at another port and send them over. But this adds to the already prolonged time periods before goods hit the market for consumers to buy.

The increasingly expensive operational and logistical costs were putting significant pressure on the companies. “Most companies are adopting lean operations and this will inevitably result in staff layoffs.”

With pharmaceutical supply chains being highly affected companies held that medical devices supply issues were not far off. “Manufacturers have already made medical devices and spare parts more expensive from the outset because of the pandemic,” said Maruthai Ravindhiran General Manager of a medical devices company. But goods weren’t coming in on time which was crucial especially for devices. Apart from delayed LC openings, longer Documents against Acceptance were also affecting delivery times. Documents against Acceptance refer to payments related to the acceptance of shipping documents pertaining to each consignment from the buyer’s bank.

The procurement process for January 2022 would generally begin in January – February 2021 when hospitals would generally begin calculating their requirements. This estimate then comes to the Medical Supplies Division and from there they estimate the total drugs requirement of hospitals island-wide and give these figures to the State Pharmaceutical Corporation. The SPC then calls for tenders and offers the tender to a supplier in a process that takes about three months. Once a company is selected that company will have to place their order with the mother company and then get the packing order approval which takes another three weeks. Then the process of raw material acquisition, raw material quarantining, production, product quarantine, will happen before it is imported.

This whole process begins when an LC is opened.

“To receive the drugs we need for January we have to open LCs in August at least,” said College of Medical Laboratory Sciences, president Ravi Kumudesh, adding that as of now there are about 90 drugs that were needed immediately whose LCs haven’t been opened yet. He estimates that this is a requirement of roughly USD 40 Mn.

“This time-consuming process is something that every stakeholder in the industry understands but everyone’s taking it easy because COVID has pushed a lot of other medical concerns to the back burner,” he noted cautioning that a debilitating shortage would hit in about two months unless swift action was taken. “Something needs to be done before it’s too late for the patients.

“We communicated our requirement values to the finance ministry,” said SPC General Manager Dinusha Dassanayake. LCs are being opened in accordance with a list of drugs that the SPC has marked in order of prioritisation they had recognised. He assured further that the supply of essential medicines would not be affected.

However, respondents to the Sunday Times also noted that they were unable to procure medication like Ventolin salbutamol inhalers for asthma.

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