Al-Ahram Weekly Online   16 - 22 June 2011
Issue No. 1052
Published in Cairo by AL-AHRAM established in 1875

Cheaper drugs?

Ahmed Kotb finds out how the sale of pharmaceuticals at international prices on the domestic market will affect Egyptians

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Will drugs be sold for less if they are tied to international prices?

The final court ruling endorsing a 2009 ministerial decree to tie drug prices in Egypt to international prices has stirred debate over the repercussions on the market and the patients.

The current criterion upon which selling prices of locally produced drugs are determined includes identifying production costs and adding a profit margin. In the case of imported medicine, the price is negotiated between the Ministry of Health's Pricing Committee and the producing companies.

In 2009, former minister of health Hatem El-Gabali decided to tie the selling prices of drugs to those on the international market, believing this would bring prices down. Under this decision, prices of patented drugs as well as generics, which are drugs produced and distributed without patent protection or have outlived their patent protection, will be determined according to the lowest selling prices in any country the ministry chooses to compare prices with.

Additionally, the decision stipulated that the selling price of any new medicine will be 10 per cent lower than the lowest selling price in the other country. Moreover, the prices will be revised every three years or if the exchange rate fluctuates by 15 per cent.

But the former minister's decision was challenged in court by some pharmaceutical companies and pharmacists shortly after it was taken in 2009. The ruling, which was issued recently by the Supreme Administrative Court, approved the former minister's decision amid speculations of whether or not it will be beneficial.

"Some pharmaceutical companies fear that the new pricing system will affect their profits since it is going to bring down the prices of the drugs they sell," said Makram Mehanna, head of the chamber of pharmaceutical industries at the Egyptian Federation of Industries. He added that the decision will only affect patented drugs and will not be applied on the existing 8,000 generic drugs on the market.

Since the pricing system will be applied on newly produced drugs, fears also mounted that pharmaceutical companies will now neglect the quality of the drugs they produce and the active substance will be affected as a result. "Medicinal products can never be produced without insuring their effectiveness. It either conforms to the international specifications or it does not," Mehanna stressed.

However, there are pharmaceutical companies that praise the decree saying it has a clear pricing system. "Companies had to go through negotiations when pricing any new drug, but now they know the prices upfront even before thinking about introducing the medicine to the market," said Peter Makram, vice president of Global Pharmaceuticals, an Egyptian company. He also believes that the prices will go down following the implementation of the decree, adding that even if this means less profit, it is still better to have a clear pricing system.

The General Syndicate of Pharmacists (GSP) totally opposes the court ruling because they claim it is not in favour of the patients. "Prices of new drugs will go up unlike what the Ministry of Health is promoting," said Ahmed Rami, treasurer of GSP. The Ministry of Health announced that in the next few months, prices of medicine will go down by approximately 40 per cent, but GSP says this not going to happen.

"The problem is that according to the decision, prices will be 10 per cent lower than the lowest international prices at the time of setting the prices only. When the international prices of drugs go down again, they will not follow in Egypt because the prices will be revised after three years, thus the patients will not benefit from the price drop," Rami said.

Moreover, Rami stressed that the pricing committee used to negotiate prices of expensive drugs introduced to the Egyptian market by international companies and convince them to lower the prices. After the implementation of the court ruling, he added, expensive drugs will enter the market with no one to negotiate the prices.

"In addition, tying the local selling prices to international prices should only take place when the income of citizens is similar to international incomes. Also, most of the countries that Egypt will tie its medicine prices with have health insurance systems that benefit the majority of the public, unlike in Egypt," Rami noted. "Prices will increase and the patients are the only losers," he said. Rami stated that GSP has called upon the current minister of health, Ashraf Hatem, to ignore the El-Gabali's decision for the sake of the patients.

Meanwhile, the decision will not affect generic medicines which are sold at prices that are much lower than international prices, and they are available to patients in a wide variety of choices.

According to the Ministry of Health, total investments in the pharmaceuticals sector in Egypt reached LE12 billion in 2010.

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