Everyone is anxious about the recent increase in the price of some medicines. Reem Leila investigates the causes The cost of vital drugs and medicines has risen dramatically, causing people to resent the move and insisting that medicinal drugs are strategic commodities which affect social aspects. The news came when Health and Population Minister Hatem El-Gabali decided to raise the price of 265, of the 7,860 registered pharmaceutical products, by eight per cent. A report prepared by El-Gabali himself and presented to the People's Assembly on 29 December explaining the reasons behind the price hikes of 3.4 per cent of Egypt's medicines, noted that only 60 drugs on the list belong to international companies. "Pricing is the hottest issue and this is a social constraint," stated Abdel-Rahman Shahin, spokesman for the Ministry of Health and Population (MHP). Traditionally, MHP works on keeping the price of medicine down since it is a national policy to provide affordable medicine to all citizens. "Most of the people have very low income," admitted Shahin, "and we are keeping this in consideration." According to MHP's report, the government's firm grip on pricing policy helps keep the price of medicine among the lowest in the region. This moderation is also the result of a robust local pharmaceutical industry, which is able to produce generic drugs at a fraction of the cost of imported brands. But some production costs have increased and certain products need to be re-priced altogether. The cost of 53 per cent of antibiotics and blood derivative drugs has increased due to an international crisis after prices of raw materials rose dramatically. "The Egyptian government cannot do anything except raise the price of these pharmaceutical products," explained El-Gabali. But the minister assured that there will be no changes in the prices of essential drugs, citing that the prices of 24 pharmaceutical products were cut in 2007, the highest quantity since 2003. "The price of more than 60 per cent of drugs is still below LE10, and all together 75 per cent of drugs are less than LE20," insisted El-Gabali. Registered drugs costing less than LE50 comprise 13.6 per cent of overall pharmaceutical products. According to Shahin, there was a necessity to increase the price of certain drugs as there are at least 134 products of the 265 which have carried the same price tag for at least 10 years. This increase will encourage companies to continue production, especially that several local and international firms have threatened to stop manufacturing these drugs if the profit margin is too little. "It was essential to hike prices in order to keep these drugs available on the market," explained Shahin, adding that only six per cent of the 1,676 essential have increased. Drug manufacturers are divided into three basic categories: the public sector represented by the Holding Company for Pharmaceuticals, Chemicals and Medical Appliances whose 12 subsidiaries control a total of 23 per cent of the market share; the Egyptian private sector companies; and, finally, a group of eight multinationals. According to the report, 7,600 drugs are locally manufactured and account for about 93 per cent of domestic consumption. At the same time, Egypt is the largest producer of pharmaceutical products in the region, with output estimated at some LE9 billion. Drug manufacturers say one of their biggest challenges is that the government's pricing policy has failed to keep up with the rising cost of imported raw materials. Unable to raise the price of their products, pharmaceutical firms have been forced to absorb skyrocketing input costs. "There is definitely a need to modify the pricing system, "agreed El-Gabali, despite the government's tight-fisted drug pricing policy. There is mounting pressure by many companies who view this policy as unsustainable in the light of the Egyptian pound's devaluation. Multinationals are calling for an increase in patent protection, as they complain that generics are entering the market before the patent has expired. Hit by the devaluation of the pound, the industry profit margins have contracted, undermining profits for both multinationals and local companies. Since most of the raw materials and production components are imported, production costs rose between 20 and 25 per cent. As a result, the government, which considers pharmaceutical drugs an essential commodity, is reluctantly calculating the political and social consequences of raising drug prices. Meanwhile, in a bid to offset the rising overhead costs of imported materials, pharmaceutical companies have petitioned the government, which has always controlled medicine prices, even in the private sector, to increase retail prices on another 523 drugs by 20 to 25 per cent. El-Gabali refused this petition, while Shahin stated prices are controlled and "we cannot just haphazardly increase prices." Member of Parliament Farid Ismail, who presented an information request to the People's Assembly regarding drug pricing, claimed that this system favours international companies at the expense of local ones. Shahin countered that the drug registration system has traditionally been convoluted and bureaucratic, although this is set to become a thing of the past when authorities streamline the process. Currently, foreign drug makers can wait up to three years to gain marketing approval for a drug. By speeding up the registration system, it is hoped that legitimate drugs will gain a greater share of the market, with the trade in fake and sub- standard products subsequently falling.
