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The increasing drug prices

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The high drug prices have also resulted in increased smuggling of drugs

By Syed M. Aslam
May 08 - 21, 2000

Talking about Pakistani pharmaceutical industry remains incomplete without addressing the core issue of drug prices which never fails to draw a thunderous public resentment on the one hand and the demand for price increases by over two dozen multinational companies which still enjoy the leading share of the market.

Prior to 1969-70 there were no statutory controls on the prices of drugs in Pakistan. The price controls were first introduced the same year and were eventually incorporated into the Drug Act of 1976. The responsibility of regulating drug prices lies with the Federal Ministry of Health.

From 1971 to 1990 no across-the-board price increases were allowed by the government. In May 1991 the government allowed a 9.5 per cent increase and also constituted a committee to examine, among other things, the then existing controls on the pharmaceutical industry. In October, 1992 the committee presented its report which recommended the classification of drugs into three categories — Category A, the life-saving drugs; Category B, the widely used though not life-saving, and Category C, the remaining drugs which did not fall in the first two categories. It was also recommended that the prices of life-saving drugs should continued to be controlled, a check on the prices of leading brand's market dominance, and deregulation of prices for the third category.

The Committee's recommendation was referred by the Economic Coordination Committee of the Cabinet (ECC) to another committee heading by the then Deputy Chairman of Planning Commission, A.G.N. Kazi and comprising federal secretaries. The Kazi Committee recommended that the drugs under categories A and B should be grouped together for the purpose of price control. It also recommended that the retail prices of leading brands in each group of product, almost every single one of which were produced by the multinational pharmaceutical companies, be fixed as the lead price. The prices were also allowed to be treated as the ceiling up to which all manufacturers, including local companies, can increase the prices of their comparative group.

In June 1993 the then government revised the prices of drugs in the controlled category, or essential, and removed price controls from the remaining products like baby milk, the prices of which have shown drastic increases since. A 5 per cent increase in the prices of the controlled drugs was announced simultaneously. It also allowed a maximum increase of 50 per cent for the prices in the decontrolled, the non-essential, drugs but asked the industry to limit price increases to 20 per cent for next three months, till September 30, 1993. While many multinationals only increased their prices on an average by 25 per cent price increases in many products was much higher.

This created problems for the ECC which felt that once the prices of decontrolled drugs had stabilised a proper adjustment be made in the prices of controlled drugs to adjust inflation and devaluation. In January 1994, the pharmaceutical industry agreed to roll back the prices of the those decontrolled products which were above the 50 per cent increase allowed in June 1993. Since then the prices of essential drugs have been increased three times — 7.5 per cent in November 1994, 6.5 per cent on January 1, 1996, and 6 per cent on November 1, 1996. The prices of non-essential drugs were increased by 15 per cent in July 1995 and November 1, 1996.

The MNCs lead local pharmaceutical industry had been much vocal to demand price increases in the recent past. The MNCs has been demanding for price increase due to the devaluation of the currency and increasing input costs which have pushed their production costs. However, between 1997 to 1999 the prices of 69 drugs have been reduced by the Ministry of Health by 4-28 per cent primarily as the retail prices of the same in the neighbouring countries are much lower. For instance, the price of 10 pack Zentac 150 mg tablets, produced by GlaxoWellcome Pakistan has come down from Rs 130 to Rs 85 at present. The same drug made by the same company in India retails for Rs 15 per 1-tablet pack of still less than one-fifth the price it retails for in Pakistan.

Talking to PAGE, the president of Wholesale Chemists Council Pakistan, Hanif Blue, said that the multinational pharmaceutical companies have adopted an strategy to force the government increase the prices of the drugs in the country. Some of these companies have find ways to create an artificial shortage of life-saving drugs to achieve the desired result.

For instance a 30 tablet pack of Angasid, a life-saving drug for heart trouble care produced by GlaxoWellcome, has been in acute short supply. The drug which retails for Rs 6.80 per 30 tablet is only available in the black at nine-fold price of Rs 50. The similar is the case of imported Suftec 2.6 and 3.6 drug, for controlling blood pressure and heart ailments. The deliberate shortage of the product by Searle, another MNC, has resulted in the black marketing of 20 tablets for Rs 250 for 2.6 variant and Rs 350 for 6.4 variant which carry a retail price tags of Rs 141.65 and Rs 175 respectively, he claimed. The Suftec substitute imported by a local company retails at a much lower price of Rs 194 per 60 tablets but the doctors don't seem inclined to prescribe it for obvious reasons, he added.

Another life-saving drugs like Kemadrine and Thyroxine, both products of GlaxoWellcome, are only available in the black for Rs 100 per hundred tablets and up to Rs 50 per 30 tablets. The retail price of Kemadrine and Thyroxine is Rs 35 and Rs 8, he added. The high drug prices have also resulted in increased smuggling of drugs by the multinationals in India, Iran and Bangladesh, many by the same multinationals operating in Pakistan, he added.