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A critical situation
Published in Al-Ahram Weekly on 28 - 10 - 2015

Local pharmaceutical producers are suffering, and pharmaceutical products are disappearing from the Egyptian market, because of the lack of dollar liquidity needed for importing medicines, experts say.
According to pharmacists and industry experts, the lack of liquidity is a result of the Central Bank of Egypt's (CBE) recent decision to devalue the pound against the dollar from LE7.73 to LE7.93, which is the current official rate.
Due to the inability of local banks to meet the demand for the dollar, the black market price for the dollar has gone up to around LE8.30. Egypt imports most of the raw materials used to manufacture medicines sold in the domestic market.
“Many pharmaceutical factories have stopped producing medicines because of their inability to import raw materials and rising production costs due to the higher dollar value,” said Ahmed Al-Ezaby, head of the Chamber of Pharmaceutical Industries at the Federation of Egyptian Industries.
The pharmaceutical sector is one of the sectors most seriously affected by the latest dollar crisis as it imports about 90 per cent of the raw materials used in local production.
Al-Ezaby added that several foreign factories have decided to halt exports of raw materials to Egyptian pharmaceutical companies because of the companies' failure to pay their dues, as well as the accumulation of debts.
The CBE's decision in February to impose a limit on dollar cash deposits of $10,000 per day and $50,000 per month has affected imports, with companies unable to pay their dues to foreign customers and markets on time.
The CBE had promised to make exceptions for “necessary” import deals, but has failed to meet all hard currency demands and facilitate importers' banking transactions.
“Local pharmaceutical producers are burdened with debts that have reached about $300 million over the last four months,” Al-Ezaby said, blaming these on the lower value of the pound and the rising costs of raw materials.
Production costs have increased by 30 per cent while the prices of medicine on the local market have remained the same. This is because it often takes time before new prices can be approved for drugs sold on the local market since the government sets the price of drugs sold in Egypt.
Al-Ezaby believes that the burden has become unbearable for many local producers since their inability to import pharmaceutical raw materials has coincided with the increased production costs. “Some companies have limited their production rates, and others have not been able to handle operating at a lower capacity,” he said.
If the dollar crisis continues, local producers are demanding that the government cancel its mandatory pricing on drugs. The owner of a pharmaceutical company in Sixth October City, who requested anonymity, said that he does not believe that the problems facing imports of raw materials will end soon. The higher production costs, he continued, justify cancellation of mandatory drug pricing by the government.
This would enable the pharmaceutical companies to produce and price their products at a value that reflects their cost. “My company, along with many others, is suffering from continuous losses and extreme difficulties in importing raw materials. We can't keep operating like this for much longer,” he said.
Many types of drugs have disappeared from local pharmacies, some of them critical to patients. “About 90 per cent of the critical drugs used in operations and post-operation treatments are currently not available in hospitals or pharmacies,” said Adel Abdel-Maksoud, head of the Pharmacies Division at the Cairo Chamber of Commerce.
Other important medicines, including serums and vaccines, have also become scarce in the local market because of difficulties facing imports, he added. Abdel-Maksoud said the reasons behind the crisis are mainly the lack of hard currency at the banks and the rising production costs that have forced many local producers to stop both the manufacture and importation of drugs.
“There is even a shortage of some pharmaceutical products that are imported because of the inability to either find the needed quantities of dollars or to pay foreign suppliers on time,” he said, adding that there is a shortage of approximately 1,000 drugs on the local market. These include medicines used for blood and heart conditions.
Tarek Salman, an assistant to the minister of health, said in a press statement that blood drugs like factor VIII and human albumin are available on the market in quantities that cover three to four months of local consumption, and that such drugs cannot be imported in larger quantities because they require special storage conditions that are unavailable in Egypt.
However, Al-Ahram Weekly asked pharmacies in Cairo about the availability of the drugs and found the blood-treatment medicines were stocked at only a few of them.
Salman was quoted by Al-Shorouk daily as saying that there is a shortage of a total number of 182 drugs, with only 38 of these having no substitutes. “All critical drugs, especially those treating kidney and blood and heart conditions, are available in quantities that cover three to seven months,” he said.
Salman also said that the ministry is coordinating regularly with the CBE to provide the needed hard currencies, especially the US dollar, to import medicines and the raw materials required by the pharmaceutical companies.
The hard currency shortage has led the government to negotiate a $3 billion loan with the World Bank. Other government decisions to increase hard currency have included offering land for sale to Egyptians living abroad, who would pay in dollars, and limiting the importation of “unnecessary goods.” The latter has sparked a debate over which goods are “unnecessary,” leaving the problem unresolved.


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