Sri Lanka’s pharmaceutical industry speaks out on burning issues

Amidst the pandemic and foreign exchange crisis most citizens are currently wondering whether there will be a shortage of essential medicines in the country and whether there will be any change in the price of the medicines that they use on a daily basis. The Sri Lanka Chamber of the Pharmaceutical Industry (SLCPI), a member of the Ceylon Chamber of Commerce, in this interview responds to some of these questions as well as current issues facing the industry.

Q:  Is there a shortage of medicines in the country?

Yes, there is. This is not to say that all medicines are in short supply, but certain medicines will be unavailable for a period of time and may become available again. Unfortunately, the situation is going to get worse and these shortages are going to be longer and will affect more and more products as time goes on.

Q: What are the reasons for these shortages?

The reasons are many, they are interconnected and each needs a little explanation.

 Dollar shortage

There is an acute shortage of dollars available to the banking sector. All drug imports are paid for by US dollars. As such, the banks find it difficult to honour the Letters of Credit (L/C) that are opened to import drugs. Therefore, banks delay opening of L/Cs until they have sufficient dollars. This results in shipments being scheduled according to the availability of Dollars and not according to the needs of the country.

Effects of the pandemic on the manufacturers and the supply chain

Almost all the manufacturers have been affected by the pandemic and have found it difficult to maintain usual supply levels. Delays from our end in payments have exacerbated these problems. 

Increase in manufacturing costs

The cost of Active Pharmaceutical Ingredients (API), the most important component of any medicine, have increased exponentially during the pandemic period as have the other associated costs. Since the maximum Retail Price (MRP) of medicines in Sri Lanka cannot be increased due to Government regulations, manufacturers have found it non-profitable to export to Sri Lanka. This has mostly affected the higher quality manufacturers. 

Regulatory bottlenecks

The pharmaceutical trade in Sri Lanka is governed by the National Medicines Regulatory Authority (NMRA). The constraints imposed by the pandemic as well as lack of staff and bureaucratic inertia has brought the activities at the NMRA to a near standstill. It has become extremely difficult for the industry to obtain and renew registrations as well as get permission for importation from the NMRA resulting in exacerbating the supply problems. 

The absence of a pricing mechanism which enables adjustments with external changes

Currently all essential drugs are under price control from October 2016. This is without a pricing mechanism. What does a pricing mechanism do? It helps adjust when key input costs change, like exchange rate, fuel, interest and inflation. For the last five years the regulator has not done this. Any country which has price control, a few countries do, have an effective pricing mechanism which enables the industry to operate without losses.

Today the essential drugs are price-marked at Rs. 194 per US$. Even to get the price adjusted to the official rate of Rs. 203 it takes months.

Currently when the exchange rate is between Rs. 205-240, importers have reduced the imports of essentials simply to reduce the losses. 

Q: Would there be a price increase in medicines?

The answer to this question is quite simple. If there is no price increase, there will be no medicines.

The current prices of medicines have been controlled and regulated when the US dollar was trading at around Rs. 170. Currently the official rate is Rs. 203 and is expected to go much higher in the event of the dollar being allowed to float. No industry, even one as powerful as the pharmaceutical industry can absorb that kind of loss of profit. If the MRP of medicines are not allowed to be adjusted in accordance with the exchange fluctuation, no importation of medicines will be possible in the future. This will have an immediate and irreversible effect on the health of the entire population as more than 85% of all medicines used in the country are imported. 

Q: What is the solution to the pricing problem?

 The industry has always had the interests of our patients as the foremost consideration. In consequence the industry is against a haphazard price increase which will leave the patients at the mercy of unscrupulous elements. What the industry suggests is a Pricing Mechanism that is equitable, fair and easy to implement. It should take into consideration the rising costs and exchange fluctuation but should still have patient welfare at its core.

The industry has actually taken legal action requesting such a pricing mechanism and the judiciary has dictated that the authorities must discuss this with the stakeholders and arrive at such a mechanism. Unfortunately, the industry has not yet been consulted and a mechanism has not materialised. 

Q: Since the prices are controlled, does that mean that all brands of a medicine are of the same quality?

This is a question that can only be answered by the NMRA. The only way such an assurance can be given is if all medicines are analysed by an accredited analytical laboratory on registration and followed up with random analysis of market samples. As far as the industry is aware, such laboratory facilities do not exist in the country and such testing is not carried out by the authorities.

The industry is aware that in other countries, pricing control has resulted in a proliferation of counterfeit medicines flooding the market where analysis by state authorities have been lackadaisical. 

The same situation can take place in Sri Lanka. 

Q: Have the importers of medicines profited unfairly from the pandemic?

The answer to this question is an emphatic No! On the contrary the industry has had to face many problems other than the ones listed above. Our staff members have been unable to visit the hospitals and other health institutions. Many of the field staff have been affected by COVID themselves. 

The rising fuel costs have hampered the field work. The State purchases have dwindled and their payments have become erratic. The purchasing power of the people has decreased dramatically due to the economic condition. All these along with the major problems listed above have contributed to make these two years extremely challenging for the industry

It must be mentioned here that the entire vaccination program has been in the hands of the state and that the industry played no part in this program. 

Q: Is there monopoly on medicines?

 The answer is no – all essentials have multiple options from the originator, and also brands from many countries which are generics. They are at different price points.  

Q: If prices are increased what would the public do?

 Sri Lanka has a mixed health care system which is unique, we have a very good and effective public health system. The private market is there for people who want to purchase the brands they want, then there are the SPC outlets that offer more affordable generics. There are also public hospital clinics which give the medicines for free. Hence the poor man has choices. 

Q: Is there a pharma mafia?

 When the private market is regulated, how can there be a mafia? However, State procurement has always been open to manipulation, and depending on which Government is operating some are more influential than the others.