Monday,18 December, 2017
Current issue | Issue 1326, (5-11 January 2017)
Monday,18 December, 2017
Issue 1326, (5-11 January 2017)

Ahram Weekly

Drugs in the doldrums

The government’s recent economic policies may be making Egypt’s drugs shortages even more acute, writes Hayat Hussein

Drugs in the doldrums
Drugs in the doldrums

Siham’s mother has been suffering from diabetes for years. Her high blood sugar led to the amputation of one leg, and now she is at risk of losing her life if she does not take her daily dose of insulin. Siham, desperate to get her mother’s life-saving drug in the normal way, circulated a post on Facebook calling for her friends’ help in search of insulin.

The attempt paid off, and she managed to get a supply of the drug for her mother through friends in the pharmaceutical business.

But millions of other patients may remain in despair. Insulin is not the only drug in short supply since the outbreak of the 25 January Revolution that put an end to the rule of former president Hosni Mubarak. The drug crunch peaked earlier this year with shortages of the US dollar and the devaluation of the Egyptian pound. The floatation of the pound has also seemed to exacerbate the problem, as pharmaceutical companies have decided to suspend the production of certain drugs that they say will incur financial losses.

In the meantime, the plunge of the pound against the dollar has resulted in the inability to import certain drugs that do not have a local alternative due to their soaring prices and the shortage of funds. Although the floatation of the pound caused an immediate rise in the supply of US dollars on the official market, allowing pharmaceutical manufacturers to open lines of credit, that did not end the drug crisis, according to Mohamed Mabrouk, president of Pharmed Pharmaceuticals.

In an attempt to find a way out of the crisis, the Pharmacy Syndicate produced a list of 1,688 drugs that were lacking on the market on 2 December and presented it to President Abdel-Fattah Al-Sisi, Prime Minister Sherif Ismail and Parliamentary Speaker Ali Abdel-Aal, calling upon them to help solve the problem and save patients’ lives.

Pharmacists at the syndicate were also vocal in the media, telling TV talk shows that the number of unavailable medicines has doubled recently, jumping from some 900 last August to 1,688 currently.

Egypt has been suffering blows to its economy since the 25 January Revolution in 2011. There has been a shortage of US dollars since then due to the security and economic instability following the revolution. And this foreign currency shortage, which remains at the heart of the drugs shortage, peaked this year when the country’s foreign reserves further shrunk after tourism, a major source of foreign currency, was severely battered following the Russian plane crash in Sinai in October 2015.

The country’s foreign currency deficit has dealt severe blows to the Egyptian pound, which saw major drops against the dollar over recent months, hitting LE16 in the parallel market while the official rate remained at LE8.8. The Central Bank of Egypt (CBE) then decided to take the step of a currency devaluation in order to replenish its foreign currency reserves.

The need to secure a $12 billion loan from the International Monetary Fund (IMF) to fill the financing gap over the next three years meant that the government had to act on the exchange rate and lower domestic energy subsidies.

On 3 November, the CBE took the unprecedented step of allowing the pound to float freely against other currencies as part of a package of sweeping measures. These moved Egypt closer to securing the $12 billion IMF loan. Stocks jumped the most they have done in eight years, and the exchange rate against the dollar stabilised at LE17.75 at the national banks, a rate higher than that on the parallel market prior to the floatation.

 The pharmaceuticals sector was severely affected by the rise in the exchange rate as a result of the higher prices of imported raw materials and fixed drug prices in Egypt. Amr Mamdouh, vice-president and area head for Egypt and the Near East at Glaxo Smith Kline (GSK) Egypt, told Al-Ahram Weekly on the sidelines of a ceremony inaugurating a LE60 million new production line that the costs of pharmaceuticals production in Egypt had increased by at least 50 per cent, severely harming the industry.

“A solution to the problem must be found,” he insisted.

 

FAILED NEGOTIATIONS: An equally alarmed Chamber of the Pharmaceuticals Industry has been calling for urgent solutions to save the country’s drugs industry that depends for up to 90 per cent of its products on imported ingredients and is directly linked to the health of the nation.

The chamber suggested that the government either supply the pharmaceuticals sector with dollars at the exchange rate before the floatation of the pound (LE8.88) or allow a 60 per cent hike in the prices of pharmaceuticals. The suggested solutions were meant to cut losses made in importing the ingredients needed for the pharmaceutical industry. But the chamber has not received any official response.

Minister of Health Ahmed Emad was reportedly adamant in rejecting the suggested price hikes when he met with chamber members, saying that such increases would happen “over his dead body,” according to press reports. Emad said that the pharmaceutical companies wanted to increase their prices because they “cannot bear losing a small margin of the unimaginable profits they are making,” according to the same reports.

Later, however, other reports said that the minister had met with some foreign pharmaceutical companies outside the chamber and suggested that they identify 10 medicines every six months and increase their prices by 50 per cent starting next November, on condition that they make the drugs available in Egypt.

The companies, however, have reportedly turned down the suggestion, claiming that the mechanism is not clear, and this despite getting further promised privileges regarding reduced tariffs on electricity and water. It has been reported that the companies wanted to raise their prices every three months instead of six, in order to increase the prices of all their drugs over a short period.

Sources have told the Weekly that the recent floatation has cost foreign companies losses to the tune of 80 per cent and that many of these companies are now considering ending their businesses in Egypt. It has been reported that one foreign pharmaceutical company has started cutting its employees as a step in that direction.

The failure of the negotiations between the government and the pharmaceutical companies may deal a further blow to the drugs market, causing a further three-month crunch in diabetes and hypertension drugs which do not have local alternatives made in Egypt. The Head of the Pharmaceuticals Sector at the Egyptian Trades Unions Federation, Ali Ouf, expressed such concerns during a phone call to a talk show on the CBC satellite TV channel.

These concerns were not totally unfounded. Recent government statements have revealed that the cabinet intends to approve an average of a 30-50 per cent increase in the prices of all local and imported pharmaceuticals in order to meet the shortages of drugs. Many of those working in the field have told the Weekly that they now depend on finding the drugs they need in stores since there have been almost no supplies of drugs over the past few months and that shortages in supplies now even apply to cheap types of medicine like paediatric anti-inflammatory suppositories.

In the meantime, the Pharmacists Syndicate has announced it will go on partial strike in the middle of this month in protest at the government’s intended increase in pharmaceuticals prices.

According to official statements, pharmaceuticals which cost over LE100 will see a 30 per cent (of their original price) increase; those costing less than LE50 will be increased by 50 per cent while those priced in between will see a 40 per cent rise. Some sources say that the increases will probably apply to 15 per cent of the products of local companies and 20 per cent of those of foreign pharmaceuticals producers and that they will be applied to drugs produced after the relevant decree is issued. Any hoarding of pharmaceuticals, officials say, will be punishable by law.

Egypt follows a fixed-price policy for medicines under which the state sets pharmaceuticals prices in the Egyptian market within certain limits, guaranteeing a margin of profit for both the producer and the pharmacy in order to maintain the prices of medicines within the limits appropriate to the modest purchasing power of the vast majority of the population.

The last time drug-price shifts were made was in 2015 after they had remained stagnant for a decade. At the time, all drugs priced at less than LE10 had a 20 per cent price hike. The shift resulted meant that many drugs had their prices doubled twice, which was blamed on some pharmacists who had reportedly been withdrawing some types of drugs so that their prices would soar when they became scarce as a result.

Nabil Abdel-Aziz, a professor of paediatric medicine at Cairo University and the former director of the Abul-Reesh Paediatric Hospital in Cairo, told the Weekly that “misconduct has also been to blame for exacerbating the crisis.” Some customers hoard stocks of medicine for fear they may not be able to get it later, which makes the crunch when it comes even more acute, he said.

Hossam Ali, a teacher and the father of a six-year-old diabetic child, insists that “people have every right to hoard stocks of medicines at home. I, for one, do this because insulin has been in short supply recently and I’m scared of losing my child as a result of not being able to get it.”

Hala, the mother of two children, says that a drug she used to buy for LE3 for her daughter is now sold at LE15, if she is lucky enough to find it in the first place. “Let them increase the price and make the drug available again,” Hala said.

Not everyone is ready to pay more, however. Sawsan, who works as a domestic help, has refused to take the antibiotic she has been prescribed for an inflammation of her gums because its price has doubled from LE35 to LE70. “Drugs have become a luxury for me,” she grumbled.

 

WHO’S TO BLAME? Many observers blame the current inflation, including in drug prices, on the government’s inadequate oversight of the markets. Others blame the pharmaceutical companies for their alleged greed and reluctance to reduce margins on “the skyrocketing profits they have been making,” as the health minister put it.

“They would not have remained in the business had they not been making immense profits,” the minister argued, adding that those who disbelieved him should look at the profits of the companies over recent years.

The Arab Drug Company may be a case in point. The company’s profits went up by 372 per cent during the first five months of this year, despite the drop in the value of the pound against the dollar. The company made LE9.6 million in profits, compared to only LE2 million in the same period last year, according to data provided by the stock market website. 

Even state-owned companies affiliated to the Holding Company for Pharmaceutical Industries have been making profits over the last fiscal year, as was revealed in a data sheet presented by the public-sector business discussed in its general assembly held in November.

However, a member of the President’s Advisory Council who spoke on condition of anonymity refuted some of these claims, saying that the government wanted to subsidise drugs for the vast majority of low-income and poor families, but since it could not afford to do so it was laying the burden on the companies instead.

Mandy Elba, former chair of the Pharmaceutical Industries Chamber, corroborated that view in a previous interview with the Weekly.

According to figures from the Ministry of Health, there are 154 pharmaceutical companies in Egypt with a total investment of LE120 billion. In addition, there are hundreds of other so-called “toll” pharmaceutical companies (an arrangement under which a company processes raw materials or semi-finished goods for another company), whose sales reached LE40 billion last year and are expected to hit LE50 million by the end of this year.

The private sector owns 96 per cent of the industry, while only four per cent of drug manufacturers are state-owned. There are 1,400 registered pharmaceutical trademarks listed at Egypt’s Ministry of Health.

Although pricing policies stand at the heart of the drug industry crisis, registration of drugs remains an equally prominent issue since this dictates whether or not a drug makes it onto the market. The registration process can be slow, and many products are denied registration.

The Egyptian Drug Authority (EDA), the regulatory body of the Health Ministry, was established recently to regulate the registration of drugs in order to ensure public safety under decree 425/2015 issued by the minister of health. But EDA regulations, according to a recent statement by the Authority for the Protection of Competitiveness and Prevention of Monopoly Practices (APCPMP), have put hurdles in the way of foreign and private investments in the pharmaceutical field, and they can discriminate against some companies while allowing for the monopoly of others over the drugs market.

The regulations define a set of only 12 companies licensed to make each drug, and some of those seeking registration may not find a place as a result. This immediately denies such companies access to the market. “How can Egypt both encourage investments and restrict the entry of new companies into the pharmaceutical industry at the same time,” demanded the APCPMP statement, which was forwarded to the Ministry of Health.

The statement was equally critical of ministerial decree 944 of 2012 which regulates pharmaceutical pricing policies. These policies, according to the statement, are discriminatory as they allow for two international pricing references for the same kind of drug according to the priority of the drug’s registration. The top five drugs on the list for registration are priced at 65 per cent of their international equivalent, while the remaining seven may stand at only 60 per cent of the international price.

Pharmed Pharmaceuticals Mabrouk argued, however, that this inflexibility had not caused a drop in pharmaceuticals investments, which he said had increased since the revolution despite the economic instability.

An employee at GSK Egypt, whose Egyptian investments have been to the tune of $800 million over the years, also told the Weekly that the company would “remain in business” in Egypt and even planned to pump about LE350 million in investments into the Egyptian market over the coming four years.

Mabrouk blames pharmacists for the current crisis, saying that they make “large profits, which does not happen in any other country.” The government sets profits for pharmacists and distributors selling drugs listed on its essential drugs list, and it has recently increased the pharmacists’ margin to 25 per cent (instead of 20 per cent) of the distribution costs.

 

SOLUTIONS: Elba suggested the implementation of a comprehensive insurance system, with priority given to the most impoverished areas, as a solution to the chronic pricing problem.

In the same vein, Mabrouk suggested that the government draft a law that would control the supply of medicine in the comprehensive insurance system while liberating the prices of drugs on the private market for those outside the system.

“It would be like the ration cards system: those who can financially afford to go to private clinics would get their medicine on the free market and would not qualify for subsidies,” he said.

The government has recently designed a medical insurance bill that would provide free medical treatment for the poor, as well as ensure the availability of medicine for those in the insurance system. But the proposed bill has not been passed because of the lack of the LE80 billion needed for its implementation.

The system has also been met with opposition from civil society on the grounds that it would “privatise” the health sector, putting more financial burdens on people outside the insurance network who would then have to shoulder the burden of private medical bills. The Ministry of Health and the Ministry of Finance are currently considering a new comprehensive medical insurance bill and parallel experiences in other countries such as France.

Egypt has a dilapidated healthcare system that leaves many people struggling to bear 70 per cent of their medical costs, as has been shown in recent reports by human rights organisations. Although Egypt’s 2014 Constitution stipulates that 10 per cent of GDP should be channelled to health, education and scientific research during the three years following its endorsement, the state budget has remained too squeezed for this to happen. 

The former deputy ministry of finance has also told the press that Egypt “cannot afford” the percentage stipulated in the constitution because of the country’s generally low income and high expenditure.

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