Pricing medicine

11 Jul 2020


THE drug-pricing issue has once again taken centre stage in the debate on affordable healthcare triggered by the Covid-19 crisis. The government is reported to have approved a proposal to amend the Drug Pricing Policy 2018 to do away with the existing mechanism that allows pharmaceutical manufacturers an automatic, inflation-adjusted increase in their prices. The suggested change may appear innocuous as it doesn’t alter the CPI inflation-based pricing formula. But it isn’t. It stops pharmaceutical firms from enhancing prices by just informing the health ministry 30 days before implementing the new rates. In other words, the drug regulator Drap will get back its arbitrary powers to decide if and when to increase the prices. The present drug-pricing policy was developed on the orders of the apex court, which was hearing several hundred hardship cases filed by drug manufacturers seeking an upward revision in their prices. Thus, the amendment is likely to reopen the floodgates of litigation, besides increasing bureaucratic interventions in purely business decisions, and spawning corruption. More important, the failure of the regulator to notify the price increase in a timely manner would make production of certain life-saving medicines and vaccines unviable, resulting in their disappearance from the market as was the case for several years because of a 13-year freeze on drug prices.

Drug pricing has always been a political issue in Pakistan. There is no denying the fact that medicines are a public good. But at the same time drug manufacturing is a ‘for-profit’ business for investors, who would have to earn enough margins on their products to stay economically viable. No government can expect medicine producers to bear the burden of healthcare costs for it. While it is important for the government to control the prices of essential life-saving drugs, as is the case in Bangladesh and India, the blanket application of such a policy can be detrimental to new investments where capacity expansion, new technology, quality assurance and exports are concerned. Little wonder that several foreign companies have already exited Pakistan and the industry lags far behind its regional counterparts. Unlike Bangladesh, we don’t have a single FDA-approved firm in Pakistan and only one out of over 600 manufacturers has been able to secure certification to sell its products in Europe and the UK.

To ensure affordability, the government should improve its oversight of the market to encourage fair competition, improve Drap’s capacity to make quick decisions on, say, drug approval, and help the industry reduce its cost of doing business rather than denying manufacturers their legitimate inflation-based price hike. Further, the authorities also need to create a market for generic drugs, the formulations sold under their original chemical name at a massive discount compared to branded ones. The government needs to learn from the regional industry and follow best practices instead of suffocating manufacturers through price control for short-term political gains.

Published in Dawn, July 11th, 2020