Pharmaceutical companies in Egypt are increasingly demanding to raise the prices of their products based on the high cost of imported production inputs, which represent 90% of locally manufactured drug inputs, after the liberalization of the exchange rate earlier this month, which raises questions about the fair price for the consumer amid rising inflation to record levels.
The official price of the pound against the dollar before its liberalization on March 6 was about 31 pounds, but hours after the Central Bank of Egypt’s decision, the price reached 50 pounds before falling to approximately 48 pounds, coinciding with Egypt signing various agreements with the International Monetary Fund and the European Union on Sunday. The latest of which is the World Bank’s announcement on Monday of a financing package worth $6 billion.
The head of the Medical Industries Export Council, Maged George Amin, defends the demands of Odia companies, saying, “Medicine is the only commodity in Egypt that is compulsorily priced without any support from the state. Food, for example, is not compulsorily priced.”
Amin says to the “Al-Hurra” website, “The last pricing for a certain medicine, for example, dates back four years, and the dollar at that time was 15 pounds. This means that the company that imports the pharmaceutical material from abroad at a price of 15 pounds to the dollar, now imports it at a price of 48 pounds to the dollar, that is, almost three times the price.” Previously, it is assumed that the Drug Authority is re-pricing based on the imported raw materials at today’s price.”
The production volume of pharmaceutical companies in Egypt in 2021 reached about 159.8 billion pounds. The sector’s sales jumped from 63 billion pounds in 2018 to 142.5 billion pounds in 2023. The number of licensed pharmaceutical factories in Egypt is 191 factories that own 799 production lines, according to data from the Egyptian Medicines Authority. It covers 92% of the local pharmaceutical market needs, while the remaining 8% is imported from abroad.
While the recent liberalization of the exchange rate succeeded in eliminating the parallel market, it led to an increase in the prices of some products.
Inflation is approaching record high levels (35.7 percent in February) and many Egyptians say they are finding it difficult to make ends meet.
What is the drug pricing policy?
According to the decision of the Minister of Health in 2012, there is no ceiling on the increases that patients will bear, with the continuous rises in the currency price.
Since 2012, drug pricing has been subject to the “external reference” rule, that is, the price of the drug in a group of other countries in which it is marketed. According to this rule, if the medicine is an original preparation that contains a new active ingredient or a new innovation, the Egyptian company seeking to register it must submit a survey of its price in 36 other countries, and then the lowest price for trading in the Egyptian market is approved.
As for medicines that contain the same active ingredient as the original preparation and are imported by the company as a whole, or are manufactured locally, they are priced at a rate ranging between 35 and 40 percent less than the price of the original preparation in other countries.
The price of medicines was moved by 20 percent in 2016 before the pound floated. The government then raised prices again at the beginning of 2017 to reflect the change in the exchange rate. Pharmaceutical companies’ requests for re-pricing are constantly being considered, with the price of many items rising with the continued decline in the value of the pound.
The head of the Right to Medicine Association, Mahmoud Fouad, said that there are 3,500 types of medicine whose prices have been increased since the end of 2022, at different rates ranging from 15 to 20 percent, and this pricing has increased beyond its limit, as before 2018 the increase in pricing did not exceed 10 types of medicine, according to what was reported by the newspaper “Sunrise“.
He pointed out that, during his participation in the national dialogue, he called for the necessity of reviewing medicine prices, as some medicines in the markets have three different prices, and this is something that has never happened before in the history of medicine, in addition to a severe shortage of some basic and necessary medicines for every Egyptian citizen, such as cold medicines. Antipyretics, diabetes medications, etc.
The Pharmaceuticals Division of the Federation of Chambers of Commerce called for prices to be raised by 50% to reflect the increase in cost after the recent liberalization of the exchange rate. These demands come after drug prices witnessed an increase of 20% on average during 2023 as a result of the high cost of imported production inputs, which represent 90% of locally manufactured drug inputs.
The Center for Alternative Policy Solutions at the American University in Cairo considers the drug pricing policy “unfair to the consumer and small producers because it is linked to the price in other countries without taking into account the differences in income levels of individuals and economic conditions in general.”
The center said in a report on Monday: “While Turkey adopts the same pricing system, its drug prices are affordable for citizens because they subsidize the cost of essential medicines or cover them completely for certain categories of patients.”
He added, “The Turkish government’s policy of supporting the development of the pharmaceutical industry and increasing the production network contributes to reducing drug prices. The decrease in the value of the Turkish lira relative to the currencies of the countries with which prices are compared has made drug prices cheaper.”
“Demolishing the industry”
For his part, Amin criticizes those who demand maintaining the price of medicine, asking: “Is it supposed that the private sector pays from its own pocket, or does the government have to support the citizen just as it supports him with fuel prices?” Considering that demanding pharmaceutical companies to keep the same prices is “destructive to the industry in Egypt.” .
Some pharmacists attribute the current shortage of medicines in Egypt to companies trying to pressure the government to accept raising the prices of their medicines.
In a briefing request submitted by MP Sayed Hanafi Taha, earlier this month, he said, “There is a large number of patients suffering from a shortage crisis and an increase in the prices of medicines, especially those needed by those with chronic diseases, as some reports indicated that there were increases that ranged from Between 70 to 200 percent in the prices of a large number of types of medicines and treatments, and despite this, the patient may not find them,” according to what Al-Masry Al-Youm newspaper reported.
“For example, a box of colchicine was worth five pounds ten years ago. Its price has increased several times and now it costs 120 pounds,” according to citizen Khaled Ramadan, who takes this treatment.
Amin says: “How does a company sell a medicine that cost it 15 pounds and sell it for 20 pounds, and now it costs 48 pounds and wants it to sell the medicine for 20 pounds? If some are talking about patriotism in this matter, then in reality this is a kind of suicide for this industry.”
Localization of industry
The Solutions Center calls for the localization of the manufacturing of raw materials for medical preparations “so that the price of medicine does not remain vulnerable to exchange rate fluctuations and disruption of supply chains.”
George says: “There are no local raw materials. All the raw materials, including the active ingredient and the powder in particular, are imported from abroad, and the local factory combines a number of ingredients, puts them in one tablet, and packages it.”
He added that Egypt imports most of its raw materials from the cheapest places in the world in China and India, “which are companies that produce in huge quantities, and if we try to compete with them, our production cost will be greater than the cost of importing them.”
How do we reach a fair price for medicines?
The Solutions Center believes that “pricing must be negotiated with pharmaceutical companies to reach a fair price, provided that the Egyptian Pricing Committee has the necessary scientific mechanisms to evaluate the pharmaceutical product and determine its actual cost.”
For his part, George suggests two directions that the state can take, “by re-pricing all medicines based on the cost of raw materials after liberalizing the exchange rate or launching drug price trading and the state’s work on health insurance.”
He explains that “the state owns a group of factories owned by the public sector and the army, such as the Cairo, Nile, and Memphis Egypt Pharmaceutical Companies. The government can support the patient by obliging him to obtain his medicine through health insurance through these companies with subsidized medicine, but those who do not have health insurance pay the real price of the medicine.” “.
He points out that the second solution is to “launch the freedom to trade the price of medicine like any commodity in the country. This will make factories in Egypt compete and will make some medicines’ prices decrease and others will rise. Instead of two or three companies producing a specific medicine and they can agree on a specific price, it will make the competition greater.” Through other companies, they can produce the same medicine and reduce the price for sale.”
The Solutions Center calls for “activating the comprehensive health insurance system to reduce the percentage of personal spending on medicine, and allowing national companies to enter into tenders to supply medicine to the insurance system in a way that guarantees them real profitability and fair pricing.”
The center indicates that Egyptians spend 35 percent on medicine out of the total they spend on health care, which amounts to about 10 percent of their salary.
Pharmacist Asma Gamal says, “The state already applies health insurance in some governorates, but it has not yet implemented it in Cairo and Giza, and people get their medications at reduced prices.”
She believes that “the state will certainly raise prices because our medicines are among the cheapest in the world, and it wants to export to other countries with the good reputation of our companies in this field and its expansion.”
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