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Government raises drug prices up to 15 percent

January 12, 2019 12:00 AM
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KARACHI: The government kicked off 2019 with drug prices raised by between 9.0 percent and 15 percent to provide much-needed relief to the local manufacturers after massive rupee devaluation in recent months, an official said on Friday.

Drug Regulatory Authority Pakistan (DRAP) said the current increase is due to 30 percent decrease in value of rupee against dollar in 2018, high cost of utilities and shortage of raw material supplies.

“DRAP, after consultation with all stakeholders, recommended 9 percent and 15 percent increase in MRPs (maximum retail price) of medicines. It shall be noted that DRAP is continuously ensuring availability of quality, safe and effective medicine in the country,” the regulatory body said in a statement.

The statement said local pharmaceutical companies fulfill 90 percent of medicine need of the country, “thus, recommendations were necessary to save the industry”.

Price increase of over 70,000 registered medicines has been notified by the DRAP but industry officials said prices of 10,000 available medicines will go up.

Zahid Saeed, chairman Pakistan Pharmaceutical Manufacturers Association (PPMA) said manufacturing cost of medicines in the country had surged 40 percent given the record devaluation of rupee and increase in duties and taxes on the industry.

“The notified increase would provide a little respite and the losses industry was incurring in producing medicines would be eased to some extent, but a reasonable return was still not there,” Saeed said.

"The cost of production has surged 40 percent, while higher utility rates and upcoming mini-budget would add to the industry's woes. At least a cumulative increase of 30 percent is needed to keep the industry viable."

Saeed said China, the key supplier of pharmaceutical raw material, had shutdown half of its plants due to environmental concerns and the industry was also facing shortage of raw material supplies.

"We are still in talks with the regulatory authority and urging them to come up with a formula to compensate the industry against inflationary pressures."

The listed pharmaceutical companies reported a sharp 18 percent fall in its profit to Rs10.7 billion during the financial year ended September 2018.

It may be recalled that last month pharmaceutical industry had warned that it would raise prices of medicines up to 40 percent by itself if the government dragged feet over new drugs pricing structure.

A previous notification issued on January 9, 2018 noted that maximum retail prices of drugs may be increased 9.0 percent over and above the maximum retail prices as determined under hardship category in 2018 while prices are increased by 15 percent over and above existing maximum retail prices determined under Drug Pricing Policy, 2018.

On January 03, 2018, DRAP notified prices of around 800 medicines under hardship case.

It may be mentioned here that Drug Pricing Policy 2018 has empowered pharmaceutical companies to increase prices on their own. According to the policy, the Consumer Price Index (CPI) is to be considered for increasing the prices. The prices can be increased by 50 percent of the CPI for scheduled/essential drugs also called life-saving drugs and the non-scheduled drugs by 70 percent of the CPI.

“Government announced the much awaited raise in drug prices to support the pharmaceutical industry that has been under duress owing to rising input costs and currency devaluation,” analyst Muhammad Sohail at Topline Securities said.

“We believe this is largely positive for the pharmaceutical industry of Pakistan as it will not only address the long due demand of pharma industry to raise drug prices, but will also provide some respite to the industry's margins which have lately come under pressure owing to Rupee devaluation of more than 20 percent in 2018,” Sohail added.


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