Will a Cabinet decree to increase pharmaceutical prices save the market?

Amany Aly’s newborn son has been sick twice in the last three months with a cough and cold, nothing out of the ordinary for a baby. But she was unable to find the medication prescribed for him by their doctor.

The first time he was sick the doctor prescribed Panadol syrup, a locally made common remedy, but Aly says it’s impossible to find in pharmacies. “I called at least five or six pharmacies. It’s crazy. As a grown up you learn to suck it up, you just take vitamin C and sleep it off. For a kid it’s insane and frustrating,” she says.

Her mother, who has a heart condition that necessitates daily imported Xarelto medication, was recently told by her pharmacist that she should stock up, as there is a very high likelihood it won’t be available soon.

“It’s very scary, I worry about my child, I worry about my mother. Thank God I don’t have anything I need medication for. If my mother stops taking her medication, it could be fatal,” explains Aly.

Maggie Salama takes imported anti-depressant Invega regularly, and says for the past eight months she’s had to search four or five pharmacies to find it. Like Aly, the shortages are starting to scare her.

“There is a risk of suddenly stopping the treatment, which is a problem with anti-depressants. So I started stockpiling whenever I find it to avoid a sudden shortage,” she explains.

Aly and Salama’s stories are typical of recent months. Basic medication, both imported and locally made, has been missing from many pharmacies, including simple flu medication as well as more serious drugs for things like cancer treatment.

Sabry Taweela, a representative from the Pharmacists Syndicate, says there are currently shortages of around 114 drugs, including cancer medication. A Reuters article in February reported 6,000 brands of medication missing from the market that have local equivalents, and 116 that are completely absent.

Taweela says the main reason for the shortages is the dollar crisis — as a result of low foreign reserves and a reluctance by the Central Bank to devalue the pound — which has raised the price of the active ingredients in many pharmaceuticals, causing difficulties for local producers.

The dollar crisis has also led to shortages in basic goods, such as subsidized cooking oil and gas shortages, with international airlines and businesses citing difficulties in repatriating profits. The crisis has had a particularly acute effect on small businesses that rely on imports.

The Central Bank made an attempt to deal with the crisis by finally devaluing the pound in mid-March to LE8.78 per dollar, although this still didn’t match the black market rate, which was around LE9.80 per dollar at the time. The black market rate has continued to rise, reaching over LE10 to the dollar in late March and above LE11 in April.

In the case of pharmaceutical shortages, as Taweela explains, local companies have been forced to reduce imports. As Mohamed al-Bahey, head of the Drug Manufacturing Chamber in the Federation of Industries, explains, companies have had to purchase dollars for imports from parallel markets, as the banks have been unable to provide them with hard currency, which also means they have to pay a higher exchange rate.

But the medication shortage also predates the dollar crisis.

While Heba Wanis, a researcher in pharmacies and public health, agrees with Taweela that price fluctuations have been partially responsible for pharmaceutical shortages, she adds this has been an endemic issue in Egypt and is related to the cost of many medicines.

“Some pharmaceutical companies claim that current pricing mechanisms do not guarantee a fair profit for their products. This is the reason why they may choose to discontinue production altogether. Imagine when this is combined with fluctuations in currency,” she explains.

There is an absence of established costing mechanisms for pharmaceuticals in Egypt, according to a paper sent to Mada Masr by Wanis. One common complaint from pharmaceutical companies is that the Health Ministry keeps many medicines at an artificially low price as part of its medical subsidies program. This means that the price of production does not match market rates, leading to large profit losses for many Egyptian companies.

Taweela, from the Pharmacists Syndicate, says that in many cases the price of production exceeds the selling price by a large margin.

While the Health Ministry has been unwilling to lower subsidies out of fear of public reaction to rising prices, the Cabinet issued a decree last week ordering a rise of 20 percent for locally-produced pharmaceuticals, which are usually sold for LE30 or less. The profits will be shared by both suppliers and pharmacists. This is seen as a positive step that favors local producers, but one that Bahey says was unexpected.

“The decision to change prices is a brave one, and is the first time the government has done so since they were set in the 1960s. Back then, the dollar was at 80 piasters, which means the cost of production and import of active ingredients has doubled several times without price increases to cover costs,” he tells Mada Masr.

“It’s true that the increase won’t be enough to completely stop the losses incurred, but this is the percentage the chamber has asked for,” Bahey says, adding that conducting research on the cost of production of each drug and amending its price accordingly will take time that neither the production companies nor the market can afford.

Bahey says 70 to 80 percent of locally produced pharmaceuticals currently cost LE30 or lower, and these are the drugs most likely to be impacted by the increases.

Bahey explains, “This decree effectively guarantees there will be cheap medicines on the market, as, in principle, companies will have to resume production within a year or lose their licenses.” 


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