Drug shortages in State hospitals: Creation by interested parties?

There is more to drug shortages than what meets the eye

While the public sector utilises a formulary to restrict prescribing to around 850 items, the private sector historically has had a broader range of drugs available without formulary restrictions. It is reported that there isn’t a definitive, publicly available and enforced list specifying the exact number of drugs currently imported into the private sector. Based on what appears to be a very liberal and open-ended policy for the private sector when it comes to drug imports, the commercial interest of the private sector seems to be the beneficiary when more and more prescriptions are diverted from State hospitals to the private sector and the demand for drugs imported by the private sector increases

In a letter addressed to the Health Minister, Dr. Nalinda Jayatissa, the Association of Medical Specialists (AMS) pointed out that medical staff are increasingly being forced to request patients to obtain medicines, consumables, and laboratory investigations from external sources, an act that, in the absence of official guidance, has subjected them to public criticism and professional risk. The AMS questioned whether it is permissible for doctors to issue prescriptions for medical items not available in hospital pharmacies and whether they are allowed to direct patients to specific suppliers particularly when items are only available through a limited number of vendors and time-sensitive care is needed, such as in cardiology, orthopaedics, or trauma surgery (https://www.dailymirror.lk/ breaking -news/Drug-shortage-puts-medical-professionals-in-quandary/108-312277)

No doubt there are, and will be, diverse opinions expressed by many about drug shortages in Sri Lanka. The writer too expressed his views as noted in the following articles in December 2022 and again in January 2025.

n Drug shortages and impact on health outcomes: Is it only the tip of the iceberg? - https://www.ft.lk/columns/Drug-shortages-and-impact-on-health-outcomes--Is-it-only-the-tip-of-the-iceberg-/4-743137

n Drug shortages: Most serious symptom arising from several causes - https://www.ft.lk/columns/Drug-shortages-Most-serious-symptom-arising-from-several-causes/4-771685

In these, the importance of ensuring demand is calculated accurately for the supply side of the supply and demand equation to work effectively was highlighted. As was pointed out, demand computation cannot rely entirely on usage data, and the importance of corroborating this information with other data such as morbidity data and consultations with medical doctors about future trends and the impact these will have on demand was also highlighted in these articles. A suggestion was also made to manage the drug supply chain based on the concept of managing by objectives, or MbO. 

In this regard, a proposal was made to have as an objective, the vitality of ensuring availability of adequate stock of (a) essential items to meet the demand for them, by so categorising them, and estimating demand for them as accurately as possible issuing usage data, morbidity data and data based on medical officer consultations and impact on demand, and similarly categorising items that (b) items that cost a majority component of the expenditure on drugs using what is called the 80/20 rule. This rule says that approximately 20% of items cost around 80% of the expenditure, and the focus of management should be prioritised to ensure these two objectives (a) and (b) are achieved, of course not at the cost of ignoring the management of other items, but giving priority for the relatively fewer items that matter from a curative and financial perspective than trying to manage all items with equal time and funds. Considering the shortcomings in the overall supply chain, attempting to manage every item on a priority basis would render even critical items being out of stock as seems to be happening.

The other relevant factor particularly regarding objective (b) is the limited amount of funds that is available to procure drugs even if the demand estimate produces a higher need than the funds available to meet that demand, and where some high-level decisions have to be made by authorities in consultation with the medical profession on prioritisation. The need to further rationalise the drug formulary for the State sector and introducing a definitive formulary for the private sector was also highlighted as the proliferation of drugs in the private sector and the number of brands of the same drug imported by the private sector appeared to be feeding the commercial interests of the private sector rather than the welfare of the patients.

The Association of Medical Specialists (AMS) in Sri Lanka in their statement emphasised the potential for increased morbidity and mortality rates due to the crisis and urged the Government to take immediate action to address the situation and ensure the availability of necessary medical supplies. 

In the Daily Mirror article titled “Medical specialists warn of medicine shortages in hospitals” (https://www.dailymirror.lk/breaking-news/Medical-specialists-warn-of-medicine-shortages-in-hospitals/108-312437) in addition to what is quoted at the beginning of this article, it also says that “The AMS President further said that a group of medicine suppliers had written to the Health Minister, accusing the Ministry of giving special treatment to certain companies when selecting suppliers for essential medicines.” 

The AMS President had warned that if this continues, a few companies will control medicine prices and cause repeated shortages, as the Health Ministry will have to depend on just one supplier for some medicines. 

Commercial interests 

of the private sector

The AMS President has highlighted a few key issues that need further examination and clarification. It alludes to among other things, the commercial interests of the private sector taking priority over the needs of patients in public hospitals. In this regard, the following statement gives an indication of where the expenditure outlay for drugs is in Sri Lanka and the significant role played by the private sector.

• The Sri Lanka Medical Association says that the country’s total pharmaceutical expenditure covering both State and private sectors in 2022 was estimated at Rs. 163 billion per annum, and about Rs. 58 billion for the State sector and Rs. 105 billion for private sector (https://slma.lk/wp-content/uploads /2023/05/ newsletter_APRIL). As per this data, in Sri Lanka’s pharmaceutical market, private sector imports accounted for 60% of the total market share in 2024. Local manufacturing, primarily within the private sector, contributed only a small fraction, around 6%. The remaining 34% is attributed to the State sector. 
• Sri Lanka Imports of Pharmaceutical products were US$452.63 Million during 2024, according to the United Nations COMTRADE database on international trade. Sri Lanka Imports of Pharmaceutical products - data, historical chart and statistics - was last updated on June of 2025 (https://tradingeconomics.com/sri-lanka/imports/pharmaceutical-products)
• The Board of Investment says that the local pharmaceutical expenditure records a value of USD 750 million, with a projected five-year compound annual growth rate (CAGR) of 4.1%. At present, 85% of pharmaceutical needs are imported with local manufacturers providing 15% of the requirement. (https://investsrilanka. Com /medical-and-pharmaceutical/)
• According to Volza’s Sri Lanka Import data, Sri Lanka imported 6,916 shipments of Pharmaceuticals during Oct 2023 to Sep 2024 (TTM). These imports were supplied by 1,162 foreign exporters to 341 Sri Lanka buyers, marking a growth rate of 15% compared to the preceding twelve months. Within this period, in Sep 2024 alone, Sri Lanka imported 535 Pharmaceuticals shipments (https://www.volza.com/p/ pharmaceuticals import/import-in-sri-lanka/)

The data quoted by the SLMA, the United Nations Comtrade, and the BOI figure are vastly different and it would be in the best interest of all concerned if an actual verifiable set of data are provided by the Government to the public as much speculation could result if such information is not provided considering varying figures published by different entities. However, what is generally clear as per all statements is that the pharmaceutical market in Sri Lanka is a very sizeable one and that approximately 65-70% of this is accounted for by the private sector and 30-35% by the State sector. 

The dominance of the private sector in the pharmaceutical trade 

These statistics, in particular the major share of the pharmaceutical market held by the private sector (approximately 65-70%), and the statement by the AMA about the fate of prescriptions, quite widely known by the public about hospitals inability to provide their drug requirements and being given prescriptions to buy their drugs from the private pharmacies, and AMS statement that “a group of medicine suppliers had written to the Health Minister, accusing the Ministry of giving special treatment to certain companies when selecting suppliers for essential medicines. The President had warned that if this continues, a few companies will control medicine prices and cause repeated shortages, as the Health Ministry will have to depend on just one supplier for some medicines” seems to highlight a situation that is beyond the shortcomings of the State drug supply chain.

It is understood that in Sri Lanka, the private sector import of drugs is not limited to a specific, strictly enforced formulary in the same way it is in the public sector. While the public sector utilises a formulary to restrict prescribing to around 850 items, the private sector historically has had a broader range of drugs available without formulary restrictions. It is reported that there isn’t a definitive, publicly available and enforced list specifying the exact number of drugs currently imported into the private sector. 

Based on what appears to be a very liberal and open-ended policy for the private sector when it comes to drug imports, the commercial interest of the private sector seems to be the beneficiary when more and more prescriptions are diverted from State hospitals to the private sector and the demand for drugs imported by the private sector increases. 

Besides this, the contention by some importers that amongst 1,162 foreign exporters to 341 Sri Lanka buyers (as per Volza’s data quoted above), there is a move to divert a bulk of the imports to a select number of suppliers gives an indication of a possible breach in good practice in procurement and the possibility of a violation of the procurement law in the country. 

The beneficiary of both issues of course is the private sector as they will increase their imports and their profits, in supplying the demand that has increased on account of shortages reported in public hospitals. It is also possible that some prescriptions issued by some doctors are for drugs that are outside the National Formulary and not stocked in public hospitals, and are available only in private pharmacies, although the media publicity alludes that to shortages in hospitals. Drug shortages in public hospitals should be considered from this context as well as it would not be speculation but a fact that the beneficiary in case of both types of shortages, genuine shortages as well as what are reported as shortages, is the private sector. 

It is not an impossibility that both types of shortages may be deliberately created to provide more business for the private sector. The Government should undertake an assessment of shortages in the public sector from this broader perspective to rule in or rule out any possible connivance by some doctors as well as public health sector officials with the private sector, or whether the shortages are entirely due to shortcomings in the public sector drug supply chain, and possibly due to funding shortfalls or a combination of both.

The statement by the AMS that some suppliers had complained of a few suppliers having a monopoly when it comes to supplying the Sri Lankan market needs to be examined. As contended by these suppliers, it is not an uncommon corrupt practice to deliberately divert most procurement of drugs to a few suppliers for price fixing and profit where that profit is shared by those responsible for procurement and the suppliers. While it is true that private sector procurement is entirely the responsibility of the private sector and they are governed by their company rules and procedures and how they compete amongst other private sector entities, it is also a social and ethical responsibility on their part to provide drugs at the most economical price to their customers. 

Creation of shortages through deliberate manipulation

The public sector practice is governed by State procurement procedures which are developed based on the procurement law of the country. Violation of these are punishable offences. However, creation of shortages through deliberate manipulations such as usage of inaccurate demand data for procurement of drugs, which then results in shortages as what is procured is less than what is actually needed is not uncommon. This leads to emergency procurement to bridge the shortfall, with such procurement invariably being done through a few suppliers at very high prices.

Sri Lanka which has held an honourable universal healthcare system that has been the envy of countries in the region, needs to ensure that no public hospital patient is deprived of his or her drug requirements, and the public health sector must operate within the approved drug formulary. Besides this, no public sector doctor should be permitted to issue prescriptions for drugs outside this formulary for patients seeking outpatient services or inpatient services in public hospitals accept under specific circumstances where an approved process is followed for obtaining a formulary exception or initiating a prescription for a non-formulary medicine, where the patient’s clinical needs are not adequately addressed by drugs within the formulary. 

In Sri Lanka, reports indicate that the public healthcare sector handles the majority of patient care, with 643 public hospitals providing 86,589 beds. In 2019, public hospitals facilitated 7.477 million inpatient admissions. The private sector, while growing, is more accessible to those who can afford it. Private hospitals, nursing homes, and maternity homes increased from 800 in 2015 to 1432 in 2019, but only 111 are hospitals, nursing homes, and maternity homes. While private hospitals account for a smaller percentage of beds (5.41% of public sector bed capacity in 2017), they play a significant role in specific areas. 

These statistics and the expenditure on pharmaceuticals seem to be at odds with the patient numbers treated, as an overwhelming majority of patients are treated in public hospitals, although the value of State imports as a percentage of the total value of imports is around 35%, while the private sector which is responsible for less than 10% of inpatients and at most 50% of outpatients (patients in private hospitals, nursing homes, maternity homes, patients seen by private practitioners and patients who are issued drugs without prescriptions) accounts for 65-70% of the imports. 

Numbers do not add up

The conclusion one can draw is that (a) a substantial number of State hospital prescriptions are directed to private pharmacies (for items included in the National Formulary which are stocked in public hospitals, and also items outside it which are not stocked), and/or (b) the private sector imports and sells many items outside a formulary as they are not bound by one. Fundamentally, based on available data, the numbers do not add up and one cannot but feel that the move towards private sector imports is deliberate and not accidental.

In conclusion, it could be said that there is more to drug shortages than what meets the eye, and the minister of health should investigate the issue more deeply in order to ensure commercial interests do not stand in the way of patients in public health hospitals being deprived of their drug requirements on account of the possible self-interest of others. The Budget allocation for the public health sector drug needs to be critically analysed, an enforceable formulary introduced for all private sector drug imports and the public sector medical practitioners barred from issuing prescriptions for items outside the national formulary except in clearly defined circumstances.