The price conundrum
Medicine prices have gone berserk once again. There have been two earlier times this has happened over the last three decades. The first one was when the PML-N government “de-regulated” price control in 1993 and medicine prices as a result went through the ceiling – rising in some cases to more than 600 per cent. It happened again in 2000 under Musharaf’s regime and again the price increases knew no bound. This time it is the PPP government which raised prices beyond any rational and they have gone up to 600 per cent.
Is there anything more going on here than meets the eye? Oh yes. Every time this happened there was behind-the-scenes plotting and big bucks were made.
The prime beneficiaries of price de-regulation of 1993 were the 150 odd local manufacturing companies of pharmaceutical products. This new policy made so much money that the Ministry of Health insiders had alleged that the PML-N health minister bagged rupees 23 crores from these companies – from which the money went to fund the successful election campaign by the party.
The price de-regulation policy changed the pharmaceutical market’s composition and dynamics forever. The erstwhile multinational companies dominated the market where the multinational to local companies share of the market was 60:40 was turned around in favour of the local companies and in a couple of years time it became 40:60. Now local seths were calling the shots and had dominated the Ministry of Health policy. Over the years this ratio has further turned in favour of the local companies whose number has risen to more than 500.
Not that the multinational companies were the losers in the real sense and together with the locals they had made enough profits through price increase and hence did not make any serious attempt towards another increase for the next seven years.
Musharaf’s arrival in power, however, lead to flexing of the muscles again and this time the campaign was lead by the multinationals who were upset on having lost the market leadership. Huge price increases were allowed again in 2000 and along with it came the sales tax (15 per cent) on medicines. This lead to a massive civil society uprising against the increase and while the increase in prices was put on hold the sales tax was withdrawn. The prices continued to rise but in small number of medicines at a time so that there was no big civil society response against it.
Now with the change of the Musharaf’s government, pharmaceutical manufacturers started their act all over again and were crying themselves hoarse on their “huge losses” and threatening the government of massive medicine shortages, suspension of supply and reduction in investments if their demands for big price raise were not met. In the meanwhile, there was an almost complete breakdown in the pharmaceutical regulatory machinery.
There has been no drug regulation of any kind in the country now for the one year. A Drug Regulatory Authority was announced last year under a constitutional package but it has yet to see light of the day. Prices of some 350 medicines in Pakistan were increased recently up to 600 per cent in the wholesale and retail markets across the country.
While it would be difficult to tell who was at the helm of pharmaceutical industry affairs in the government, one thing is very clear – ‘they’ have succumbed to the industry’s threats and offers. Taking advantage of the expected increase in prices of medicines, majority of pharmaceutical companies had already stopped supply of their products to the markets – hoarder distributors made windfall profits overnight at the cost of helpless consumers.
The reality of the matter is that the pharmaceutical industry in Pakistan is far from making any losses – they have been reaping unprecedented profits with a very healthy 20 per cent growth in rupee terms last year. The Pakistani-owned component of the industry, which has been particularly active in the price increase campaign, has further consolidated its market share last year.
Table 1 shows the actual Rupee sales and increases over the last one rolling year in the leading therapeutic categories. These categories make bulk of the total turnover of the approximately USD 2 billion annual market.
Now compare this with the economic growth in the rest of the country as shown the Table 2 teetering at 2.4 per cent and it leaves no doubt in one’s mind that my pharmacy brethren are having the time of their lives reaping high yields and making money big time. But it is never enough and why not twist another arm and use your uncontested power to get more and more.
The economy figures and the industry complaints can’t both be true at the same time. Who is to be blamed for this: the industry which never misses an opportunity to make a quick buck, the ethereal regulator who is conspicuous by absence and collusion, or the consumer who does not even know how to properly complain? Perhaps all three of them?
Ayyaz Kiani is a public health specialist who travels widely to work on public sector health development.
The views expressed by this blogger and in the following reader comments do not necessarily reflect the views and policies of the Dawn Media Group.