The Crux of the Medicine Prices' Controversy in Pakistan.

Abstract

Drugs are regulated in Pakistan under the Drug Act 1976 and DRAP Act, 2012, under which the sales, storage, and distribution of drugs are regulated at provincial level while the manufacturing (licensing), registration, pricing, import, export, and monitoring of controlled drugs comes under the domain of federal government. The Drug Regulatory Authority of Pakistan (DRAP) established under the DRAP Act 2012 works under the federal government to regulate the aforementioned matters including fixation of prices. Prices are fixed by the Federal government under Section 12 of Drugs Act, 1976 after a recommendation of the Drug Pricing Committee (DPC) constituted the Statutory Regulatory Orders (SRO) on 6th August 2013 under the Cost and Pricing Division, DRAP. DPC is comprised of representatives from provincial health departments, Ministry of Finance and consumer bodies along with stakeholders as observers to proceedings of committee. In retrospective, the Pakistani government, particularly Drug Regulatory Authority of Pakistan (DRAP) in collaboration with provincial health departments are responsible for regulating the medicine prices and has taken various regulatory measures to address the issue of medicines accessibility, particularly on the medicines affordability and availability. Since 2001, there is a moratorium on price increase on 821 and 108 medicines through statutory regulatory orders SRO-100, SRO-328, respectively, before the establishment of DRAP. There are media reports that between June and August 2016, DRAP has approved price increases for four times but pharmaceutical companies were reported to have increased prices for at least five times (Chaudhry, 2016) but these reports are misleading. During the price moratorium, drug prices have not been revised despite of multifactorial burdens including increase in dollar exchange rate, fuel prices, inflation, material costs. Only with the exceptional cases of failure of a pharmaceutical manufacturer to continue manufacturing at the fixed price and accessibility of that drug was not ensured for general public. Moreover, some pharmaceutical companies increased prices of their medicines and were able to get stay orders from a provincial High Court to keep their price increased until the matter was resolved. DRAP's statutory power to regulate medicine prices were heavily opposed by the pharmaceutical industries who struggle to optimize their revenues due to limited wholesale mark-ups, ranging 2% (Cameron et al., 2009) to 10% (Mendis et al., 2007). It was getting practically non-viable for many companies including the multinationals to market their products in the same price as approved in 2001. These factors also led to stock-outs of essential medicine in healthcare institutions, especially public-funded hospitals. As a solution, to ensure the sustainability of local pharmaceutical industries and the accessibility of medicines, the first ever comprehensive Drug Pricing Policy 2015 was introduced (Drug Regulatory Authority of Pakistan, 2015). This new policy has laid down a transparent mechanism for fixation and price adjustment with an objective to help increasing availability of drugs at rational prices and discourage hoarding. Moreover, DRAP has also devised a monitoring mechanism with the coordination of the provincial health authorities working under the Provincial Quality Control Board to ensure that drugs are not sold in the market at prices higher than the approved range. According to this policy, prices of new drugs shall be fixed on the basis of average prices in India and Bangladesh and if new drug is not available in these countries price shall be fixed at the lowest level of the developing countries which regulate drugs prices or wholesale prices in UK, Australia, New Zealand. Moreover, a new concept of price reduction up to 30% on originator brands has been introduced with three staggered annual decrements. Drug Pricing Policy 2015 links the annual increase in medicine prices with the Consumer Price Index (CPI) as announced by Pakistan Bureau of Statistics, Government of Pakistan, with a maximum cap of 4% for scheduled drugs and 6% for non-scheduled drugs. For 2016, the proposed price increase in scheduled drugs and non-scheduled drugs was merely 1.43% and 2.00% respectively, based on CPI. It must be noted that the price hike is in fact unlawful as it had not been approved by Pakistani Federal Government.