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Al-Ahram Weekly 13 - 19 April 2000 Issue No. 477 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 13 - 19 April 2000 Issue No. 477
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Books Features Travel Living Sports Profile People Time Out Chronicles Cartoons Letters No spoonful of sugar
By Aziza SamiWith less than five years remaining before GATT regulations are enforced, the pharmaceutical industry faces a complex of problems that could seriously restrict its ability to compete globally.
A two-tiered policy governing the pricing and registration of drugs has distorted the market and is acting in favour of imported products.
And whilst the government will stand firm behind its refusal to open the pharmaceutical sector to global competition before 2005, it has yet to formulate a coherent policy that will help the industry compete after that date.
Last week's announcement by the Minister of Health prohibiting the registration of medicines advertised without government approval may appear innocuous at first glance. It is, though, the tip of an iceberg, an official acknowledgement that drugs are entering the local market without the government's prior knowledge. The scam, industry insiders estimate, is costing the local industry LE1 billion annually - which means that one quarter of the domestic pharmaceutical market's needs is currently met by dumped medication that manages to by-pass customs procedures.
The influx of imports which began in 1977 with the open door policy has now reached unprecedented levels. And while, in theory, imports are allowed only when local alternatives are not available, registration procedures are applied so haphazardly that large numbers of products enter the market in a variety of guises - the most common being the appellation "food supplement" to any old vitamin pill.
No regulatory mechanism has replaced the now defunct Drugs Association, which supervised the activities of pharmaceutical companies in the sixties, while Ministry of Health pricing decisions, which used to be announced in a circular sent to all pharmaceutical companies, are now impossibly opaque.
In principle the market is allowed to set the price of imported and privately manufactured drugs while the government controls the price of public sector produced drugs under the mandatory pricing regulations set out in the investment incentives and guarantees law of 1997.
The Holding Company for Pharmaceuticals covers 14 public sector companies which produce LE1.3 billion worth of drugs, meeting 50 per cent of current demand. The public companies operate with a price ceiling in place - meaning that in many cases they sell at a quarter of the price charged for imported equivalents.
The picture is further complicated by the emergence of sub-manufacturers - small factories manufacturing drugs on behalf of private sector companies. The unregistered drugs are then sold cheaply - a form of piracy that is hindering the industry's attempts to prepare itself for the time when IPR laws on pharmaceuticals must be enforced.
The recent initiative by the Holding Company for Pharmaceuticals to found a company for research in concert with the private sector has not born fruit and in an industry heavily dependent on imported raw materials little is being done to scout potentially abundant local alternatives.
At a time when multinational pharmaceutical companies are pressuring Egypt to open up the sector even before 2005, a number of questions are gaining increased urgency.
Are conditions current in the local market likely to enhance the industry's capacity to compete globally when the time comes? Are government laws regulating pricing, imports and manufacturing enhancing the industry's competitive capacity? Are levels of research and development sufficient to prepare local manufacturers for an environment restricted by stringent patent laws? Can the pharmaceuticals sector cover the royalties it will pay to multinational pharmaceuticals companies once GATT is implemented? The answer to each of the questions, today, is likely to be a resounding no.
The market is in urgent need of reconstruction and regulation. Agreements between local manufacturers and multinationals must be renegotiated as current manufacturing licences terminate. For fifty years Egypt's pharmaceutical industry met local demand at low prices. The next few years, though, will determine whether the industry will survive at all.
