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As NMRA takes shape, drug companies go for the kill again
As nominations are finalised for the appointment of the National Medicine Regulatory Authority to regulate the pricing and prescription of medicines in Sri Lanka, multinational companies are pushing the Consumer Affairs Authority to bring back a price formula which was withdrawn two years ago.
It is learnt that drug company lawyers have had talks with the CAA to have a margin of 89 per cent on the medicinal drugs as agreed in 2013. Shiraz Noordeen, chairman of the Consumer Affairs Council (CAC) — the principal body which hears and determines applications for price revisions in terms of the Consumer Affairs Authority Act of 2003 – said former CAC Chairman Upali Kodikara had in 2013 decided on a pricing formula which added 52 per cent to the CIF value of medicinal drugs. He had taken into consideration transport, overhead costs and profits. However, following complaints from companies that the drugs were underpriced, the CAC after discussion with stakeholders, including pharmaceutical companies and patient rights groups, had decided on a pricing formula on the basis of the CIF value plus 89 per cent.
Mr. Noordeen said this pricing formula was ignored both by the then Trade Minister Johnston Fernando and the Pharmaceutical industry. Following this, a gazette notification was issued on April 04, 2014 declaring all drugs registered with the CAA as ‘specified goods’ in terms of the section 18 of the Consumer Affairs Authority Act no.9 of 2003.
This created a blanket effect on about 15,000 medicinal drugs – mostly imported — and enabled the companies to fix a high price for medicinal drugs, sometimes running up to profits of 250 per cent to 300 per cent. Under this pricing system, even an over-the-counter drug or a non-specified drug was priced exorbitantly.
Mr. Noordeen said the CAA made the mistake of not having the price revision under section 19 of the Act, which classified the essential and non-essential drugs in the market. This would have prevented the pharmaceutical companies from exploiting the market.
Recently, pharmaceutical industry representatives met Trade and Commerce Minister Rishard Bathuideen drawing his attention to the 2013 pricing formula and urging him to reintroduce it. The Sunday Times learns they even threatened to take legal action against the CAA if the old price formula was not reintroduced.
However, this meeting led to a rift between the minister and the Consumer Affairs Authority Chairman Rumy Marzook. The minister found fault with the CAA chief for not updating him on the existence of the 2013 price formula.
The Minister then summoned an urgent CAA board meeting sans proper board papers to arrive at a consensus on the pricing formula. The Sunday Times learns that towards the end of the meeting a proposal for a price formula based on the CIF value plus 85 per cent was put forward but the Board members refused to endorse it.
However, it is learnt that letters placing the profit margin of up to 85 per cent and signed by CAA Director General J.M.A. Douglas have been issued. But the board members claim that the letters are not valid because only the CAA Chairman can sign and issue letters regarding decisions made at board meetings.
The Director General told the Sunday Times he had issued the letters under his signature but explained they were long overdue because the pharmaceutical companies for the past 18 months had been pushing for a pricing formula of 198 per cent.
He said that before 2002 there was a pricing formula on the basis of CIF plus 65 per cent. But the United National Party Government abolished it and since then the pharmaceutical companies had been having a field day adding to the CIF value the costs of overheads, transport, commission to retail and wholesale outlets, perks to doctors and others expenses. As a result the price of essential drugs, including those prescribed to terminally ill patients, skyrocketed.
Mr. Douglas said a pricing formula based on CIF plus up to 85 per cent could be a reasonable compromise because the pharmaceutical companies were demanding a formula of CIF plus 98 per cent. He said the prices of the drugs would be decided by the CAA on a case by case basis and they would be marked accordingly.
Senior lawyer Faiz Mustapha, who represented the pharmaceutical industry, said: “We have asked for a price push and are waiting for a reply.” However, he denied any knowledge of the CAA director general’s letter informing the pharmaceutical companies of the new formula — CIF plus 85 per cent.
Meanwhile, Dr. Ananda Wijaywickrema, one of those who drafted the new national medicinal law and a member of the National Medicinal Regulatory Authority, said the NMRA would introduce a pricing formula. He said the authority was now studying the pricing formulas of neighbouring countries.
Dr. Wijayawickrema said there had been a delay in appointing the 13 members to the NMRA and but as soon as all members were appointed the authority would review all the drugs being imported, decide on the essential drugs and regulate the prices.
He said that at present there was no pricing formula and that pharmaceutical companies were deciding on the prices. But the NMRA when it started functioning would have complete authority in setting the prices so that consumers could get quality drugs at affordable prices.
Health Minister Rajitha Senaratne who pushed through the National Medicines Regulatory Authority law with support from President Maithripala Sirisena has repeatedly assured that prices would be reduced by as much as 50 per cent when the NMRA began its work.