The current economic crisis has resulted in severe shortages of vital medicines. Among demands for food, fuel, and power, is the clear public demand for a restoration of medical supplies within the country. But what if the problem runs much deeper than the present crisis? This article explores how a pricing system that lacks clarity and transparency has contributed towards the shortage of medicines.
Why do we have price controls?
Price control forms an essential part of Sri Lanka’s affordable healthcare system. Over the last five years, Sri Lanka began setting limits on the prices of priority medicines to ensure consumers can access these medicines with ease. For example, in 2016, suppliers of ‘Plavix’, a drug that helps prevent heart attacks and strokes were required to price 75 mg capsules at a maximum retail price (MRP) of Rs. 17.50. In the same year, the MRP of ‘Levothyroxine’, a drug taken for thyroid hormone related conditions, was set at Rs. 6.10 (50 mcg).
The MRPs of certain medicines are periodically revisited – each time with a new gazette. For example, the MRP of Plavix rose to Rs. 18.38 in 2017, Rs. 21 in 2019, and to Rs. 22.92 in 2021.
The lack of clarity and transparency in medicine pricing
Setting an MRP for important medicines is certainly necessary. But what was the actual method by which the price was fixed?
Each decision on medicine pricing is taken by the National Medicines Regulatory Authority (NMRA) – empowered to regulate, register, and fix the prices of medicines, as well as medical equipment and devices. The Authority aims to ‘ensure the availability of efficacious, safe and good quality medicines…to the general public at affordable prices’. Based on the advice of a Pricing Committee, the NMRA sets the MRP to maintain affordability.
But no stakeholder in the industry – consumer, doctor, pharmacist, or importer – has access to a procedure or guidelines that explain the NMRA’s pricing criteria.
While consumers have benefitted from the various price caps on medicines, an uncertain pricing structure has discouraged suppliers, and has created shortages and limited access to specific medicines. For example, in 2019, some patients dependent on ‘Levothyroxine’ had to switch to alternatives because the drug became unavailable. The alternatives involved increased dosage and unavoidable side effects. Similarly, a 27-year-old patient of hypothyroidism switched across three different brands of medicine over the last six years. “Your body gets used to a certain pill and you start seeing a trend in your medical readings, and every time I am forced to switch, I question if any effects are a result of the medicine or simply high Thyroxine levels. It’s hard to tell,” the patient explained. More recently, the combined effects of the economic crisis and COVID-19 restrictions have seemingly forced heart medicine Plavix out of the market as well.
According to medical practitioners, the lack of clarity and transparency has impeded the supply of quality drugs. “There seems to be some problem in our system,” general practitioner Dr. Susil Gajadeera mentioned. “The prices were not always an issue until the COVID-19 pandemic and the US Dollar crisis, but trying to import quality drugs has been an issue for a while.”
Sri Lanka imports around 85% of required medicines. With price limits set on priority medicines, its supply is dependent on a sustainable pricing system.
“We need price controls, and it is a suitable system for the consumer. But there should be a pricing formula to guide this,” All-Island Private Pharmacy Owners’ Association President Chandika Gankanda said. “If we have a proper mechanism to govern our costs, this can help us plan and predict, and distribute profit margins.”
Indeed, more than 48 medicines have been under price controls since 2016. Yet no effective and consistent mechanism was introduced to determine prices. The gazettes that set pricing limits have continuously changed with no identifiable reasoning. In an industry where mark-ups and margins guide pharmaceutical importers on which drugs to purchase – usually on letters of credit – the lack of an effective formula can impede supply and lead to shortages of medicines.
“Think about cancer drugs for example. These are brought down by a fewer number of importers. If sudden changes affect their margins, this can affect the overall supply of these drugs,” Gankanda added.
The supply of medicines is further impacted when the pricing system is not equipped to handle fluctuations in the global market. An unclear pricing formula adds to the existing difficulties of importing medicines during Sri Lanka’s ongoing economic crisis.
More recently, on 29 April 2022, the NMRA increased the MRP of medicines already under price controls by 40%. These pricing changes that will translate to a higher cost on consumers is established several months after the effects of the present crisis has set in, once again with no formula to guide the process.
The need for reform
The laws and regulations governing the NMRA do not include any protocol to follow when setting prices. On 24 March 2022, Ranil Angunawela and Malsirini de Silva, in an article titled ‘Pricing under NMRA Act: Does it impede access to medicines?’ explained these gaps in the law. They argued that the legal framework permits wide discretion to the NMRA to set the prices of medicines at the point of registration, and that no pricing formula is actually required by the law. Therefore, even medicines that are not listed in price control gazettes are subjected to arbitrary price controls at the point of registration with the NMRA. In these instances, the procedure is even more unclear and uncertain.
At a press conference on 2 March 2022, the Sri Lanka Chamber of the Pharmaceutical Industry (SLCPI) highlighted “unrealistic price regulations” as one key reason for the current shortages in medicines. The SLCPI claimed that “a sustainable pricing mechanism will help adjust for key input costs changes such as the exchange rate, fuel costs, interest, and inflation”, and added that the NMRA has been requested by courts to establish a price mechanism that is sustainable to both industry and the consumer.
The pharmaceutical industry also faces delays in registration and approvals. The NMRA can take up to six months to register a new drug, and over a year on medical equipment, Last year, the Authority faced a significant loss of valuable data that further affected their process of renewing, registering, and pricing medicines and medical equipment. The data breach forced a switch from online work back to a manual system, further contributing to ongoing delays. In this context, it is clear that the present system that guides availability of medicines, from manufacturer to consumer, is in dire need of reform.
The cost to the consumer
The effects of ad-hoc pricing policies and decision-making processes has worsened under the growing foreign exchange and economic crisis. With every added obstacle, the ability of suppliers to import certain drugs becomes heavily constrained. Doctors are then compelled to suggest the next best alternatives that can be found in the market. The consumer – patients in need of not only affordable but also effective and high quality medicines – bear the greatest cost, as they are deprived of options. The present unclear and opaque practice of price controls in Sri Lanka has deeply affected the consumer, and it is ultimately the consumer that has lost the most.
The writer is an independent researcher and writer, and currently works in Communications
Note: the drug names mentioned in the article are the brand names. The generic name for ‘Plavix’ is Clopidogrel and ‘Levothyroxine’ is Thyroxine.
The Sri Lanka Chamber of the Pharmaceutical Industry (SLCPI) did not comment. Additionally, the NMRA was unavailable to respond.