By Ranshitha Kularatna The Sri Lanka Chamber of the Pharmaceutical Industry (SLCPI) has repeatedly called for a viable pricing mechanism for the industry from the Ministry of Health and the National Medicines Regulatory Authority (NMRA), with over 85% of all pharmaceuticals imported are hugely impacted by rupee depreciation. In an exclusive interview with The Sunday Morning Business, NMRA Chairman Prof. Asitha de Silva voiced his views on the matter and pharmaceutical pricing in general. Are the prevailing price regulations fair on the industry? The NMRA was established by an Act of Parliament and in that Act there’s a way in which price regulation of medicines can be implemented. We follow that legislation to the letter and regulate the pricing on pharmaceuticals in a fair manner. In the 2017 World Health Organisation (WHO) annual report, it says the single biggest victory for patients in this country has been the price regulation. Of course we’re emulating what India has done. The second biggest market for pharmaceuticals is Japan and they regulate prices too. They do that through an insurance system. Is the legislation vague? The Act is very clear. It says the Minister of Health shall decide on the price in consultation with all stakeholders. It doesn’t say in ‘agreement’, it says ‘in consultation’. My job is a technical one. We give a proposal and I, as a person make sure to my best ability the minister follows the procedure that is laid out; and in that process there are discussions of stakeholders including the Sri Lanka Chamber of the Pharmaceutical Industry (SLCPI). The first time we did the price regulation in 2016 we regulated pricing for 48 essential medicines; I had more than five to six meetings with other NMRA officers. The Minister too had several meetings with them. It’s done in a transparent procedure through NMRA’s pricing committee. The pricing committee is appointed in line with the legislative requirements. The pricing committee comprises of Doctors in Economics, accountants, Doctors in Medicine, representatives from health institutes and policy makers. Now, we follow WHO recommendations for low and middle income countries. In 2015 WHO published a guidance note for country pharmaceutical pricing and there are five scenarios they discuss, they recommend one and that is what we do. The chamber knows that. WHO recommends that governments all over the world do away with taxes and duties for medicines and that’s one recommendation. That recommendation has been practiced in this country for the longest period, way before NMRA came, and there are no taxes for medicines. Absolutely tax free, duty free, no port levies nothing. But in another report it is indicated that the government of Sri Lanka is not providing tax concessions on pharmaceuticals to patients. What you’re saying is that you can accept the Chamber’s point that profits are being eroded, but not that they can’t break even? Profits are being eroded, pretty sure about that. But if they’re not breaking even they will not sell anything in this country. The problem was excessive profit. The NMRA should actually increase patient access to quality assured medicines. You don’t worry about the survival of the industry? I do but access includes all that doesn’t it? If the industry is not there how can we access? My tagline is that; to increase ability to access medicine. Don’t forget 50% of patients in this country purchase medicine out of pocket. Our drug budget is $ 900 million. 50% of that is out of pocket. And that group we want to increase the ability to access quality assured medicine. When a country invests certain amount of percentage from GDP on healthcare we cannot have a massively high drug budget which is tilting everything against the favour of patients and prevents investments in things that are required in hospitals like scanners and infrastructure improvement. We can say we only want top notch products in this country, only innovators to come from here and there and we pay any price the supplier wants. We can’t do that. Basically you want the industry to function not to the profit motive? I’m pro profit. I’m a product of the open economy. Making profits but not profiteering. Self-sustain, buying a luxury vehicle I believe in all that and that’s what I’m used to. The thing is a patient is not independent. The patient is on leverage when they go to buy medicine because I’m prescribing it and when I prescribe it, I have my prejudices. With the prescription he/she goes to a pharmacy, the pharmacy is also leverage by suppliers. When that happens it’s not a free choice. When you’re told, ‘If you don’t use these particular intra-ocular lenses you’re going to be blind,’ you’re going to use that lens selling your house. That’s not exactly true. We’ve regulated the intra-ocular lenses prices. There were some lenses coming from Germany, the CIA prices $ 25 and they’re being sold at Rs. 26,000. Now the prices are kept down, I think at Rs. 4,000 or 5,000 for those lenses. The so called, most widely used lenses, Alcon from US are Rs. 30,000. These are available at Rs. 16,500 have they gone under the market? Are they making losses? They’re here. So that excessive margin is what we’re working on reducing. Why is there no price formula in place? We spend too much on medicines in relation to the overall healthcare budget compared to first world countries. This is an anomaly. Sri Lanka doesn’t manufacture most of it, 90% comes from the outside. What are the importers expected to do? Their cost is distribution. We’re very grateful to the importers but there’s no scientific value addition. You can set up a company and do that, you’re just importing a product and distributing it. Of course it has to be handled in a different way because it’s medicine. How much do you want to keep them is the question. The problem is, because there is no tax duty or whatever at the point of entry is the CIF – cost, insurance and freight. You add your margin on top of that. So that gives us your CIF. The customs and everybody knows that the CIF is highly inflated. If it’s Rs. 100 for a tablet the CIF price will be put at about Rs. 400. That’ll keep your margins straightaway. Then they want to place a mark-up in addition to that. 85% mark-up is what they want. Tell me any business that gives you 85% mark-up? Countries like Saudi Arabia ask their pharmaceutical importers, ‘I want to see your CIF from the manufacturing company. I want this certified by the manufacturing country’s regulatory authority. Then I want you to take that document into our embassy in that country and get endorsed by it. Are you selling to other countries in addition to Saudi Arabia? Then I want you to give all your retail and CIF prices of those countries, authorized and endorsed by the regulatory authority of those countries and then go to the Saudi embassy representing those countries, get it as true and accurate then bring it to us. Then we accept your CIF.’ Perhaps the only country, according to the WHO report, that does a detailed evaluation of CIF is Saudi Arabia. The day SLCPI and all its members give verifiable, genuine CIF prices to this country; a proper equation for pricing can be arrived. Until then we cannot regulate the pharmaceutical pricing because CIF is the base. Will there be further price reductions? Of course, we will. Not only medicines but we’ll be looking at other products. There’s an essential list, we know what the essential medicines are and that list will be expanded. That’s not my choice. What you’re saying is there is no hope of a price increase whatsoever? You can’t say that because the 48 medicines that have been regulated in 2016 last year and early this year 5% increase was allowed. But the principal of regulating prices is here to stay and will be implemented aggressively. So you’re fine with increasing the prices of only regulated medicines? Yes, and I’ll explain why. Let’s say there’s a huge crunch on the price now. There’s a medicine used for gastritis and that was about Rs. 28, the price drop to Rs. 4.50. For that tablet if you’re the supplier and you’re the importer, you must be hit badly right? When the Dollar rate goes up to Rs. 170, we assume the supplier must’ve hit hard. But when we look at what’s going on in the market, in order to incentivise the pharmacy chain to promote your brand 40% bonuses are given to pharmacists; we have invoices. If dropping price from Rs. 28 to Rs. 4.50 is bad enough how can importers give away 40 free packs when putting 100 packs to sale. You have facts to back this up? Yes, because we work very closely with pharmacists. You ask any pharmacist and they get bonuses. CIFs are not accurate, we are reducing prices, dollar is increasing, and we’re also sensitive to these issues. There is a price regulated product for prostate enlargement. Prices reduced by 49% from August 2017. On 14 September this drug distributor gives it to a pharmacy outlet, 100 packs out of which 10 packs are free samples. So 49% reduction in price per tablets but still 10% bonus can be given. So any reasonable human being can understand that original profit margin has enough for three generations. I don’t succumb to that kind of rhetoric. We work within the data and evidence we have, and they support the decisions we’ve taken. I can tell that we follow a very transparent procedure; we follow the law laid out in the NMRA act to the letter.