Drug prices
The health ministry has announced that citizens will be getting a temporary reprieve from escalating drug prices. The ministry has reached an agreement with pharmaceutical companies to defer any price hikes until after the first quarter of the financial year. The agreement means that consumers will not see any price increases until the end of the year, at the earliest. This is because new prices only apply to drugs produced after an increase is approved. The government was at pains to remind that it was also able to convince drug companies not to increase prices during the previous quarter.
The current announcement was technically another deferral of the increases that manufacturers wanted to implement earlier. Under the current rules, pharma companies are allowed to increase the prices of essential drugs by 7% and non-essential medicines by 10% in line with the official inflation rate. On paper, any increases are also subject to government approval. The process has come in for some criticism because, as we mentioned, the government’s authority to block increases is only on paper. An adequately documented application to increase prices is virtually bulletproof, whatever the circumstances. This is because the incumbent federal government amended drug pricing rules. Now, if a price hike request is not approved within 30 days, the new prices will become effective anyway.
On the other hand, pharma manufacturers said they were on board with the price freeze in light of the Covid-19 coronavirus pandemic, but they also gave a straightforward reason for why they need to increase prices, and why the government may have to ease the restrictions on maximum increases. That reason was devaluation. The rupee has fallen by about 9% against the dollar since March, and there is little proof that the decline will be reversed anytime soon. That 9% is a significant dent for manufacturers. Given the already-high inflation rate, the price increase restrictions just won’t cut it for many manufacturers. This presents a major headache for the government. Continue to push for a public-friendly price freeze and risk bankrupting local manufacturers, or risk letting pharma companies go rogue?
Published in The Express Tribune, August 25th, 2020.
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