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Pharmaceutical industry in crisis after pound flotation, industry heads lobby for resolution

Leading pharmaceutical manufacturers convened with Parliament’s Health Committee and the Ministry of Health on Monday to discuss solutions to the ongoing pharmaceutical crisis.

Egypt has been struggling with a medication shortage and rising industry costs, which have been exacerbated by the devaluation of the pound, as the industry is largely dependent on the importation of raw materials for manufacturing.

Earlier this month the Central Bank of Egypt (CBE) liberalized the exchange rate, which was previously pegged to the US dollar at a rate of LE8.8. Although the pound began at a guidance price of LE13, it weakened to almost LE18 to the dollar during the first week of inter-bank trading, before rebounding to LE15.8 on Monday.

Raw materials for pharmaceuticals and medicines, alongside basic commodities, were prioritized during the CBE’s regular foreign currency auctions prior to the liberalization of the exchange rate. Since the priority list has been removed, medicines are now imported at market rates.

Many are already feeling the effects of the medicine shortage. “I currently have a one month stock of insulin for my diabetic daughter,” Noha Sham Eddin told Mada Masr. She added, “I do not know if I will be able to find more in pharmacies after that.”

The Doctors Syndicate received complaints that companies were unable to import products at current prices, and increasing costs were threatening dialysis centers with closure, the privately owned Al-Masry Al-Youm newspaper reported earlier in November.

Ahmed al-Ezaby, head of the Federation of Egyptian Industries’ pharmaceutical division, asserted that the falling value of the pound is the primary reason for rising costs.

Ezaby attended Monday’s meeting with the parliamentary Health Committee and pharmaceutical manufacturers. Members of the committee were not immediately available for comment, and Ezaby declined to disclose details of the meeting.

However, he told Mada Masr, “the problem faced by the industry is mainly the hike in costs incurred after the flotation of the pound, especially as medicine is the only product with prices set by the government.”

Health Minister Ahmed Rady, however, claimed during a press conference last week that the pharmaceutical crisis is contrived, affirming that the “government is strong and fears nobody.” He told the press on Sunday that “medicine prices will remain fixed.”

According to Ezaby, the cost of importing drugs has risen 100 percent, while local manufacturers have seen production costs rise by 50 percent.

Alaa Ghannam, pharmaceutical policy expert and head of the Right to Health Program at the Egyptian Initiative for Personal Rights (EIPR), doesn’t believe the flotation of the pound is behind the pharmaceutical crisis. He contended that the limited availability of medication is not a result of the exchange rate crisis, but rather a policy crisis.

Ghannam highlighted that private companies primarily produce expensive medicines and specialized drugs. Due to patent rights, these companies are able to set the price of medication at their own discretion. 

He stated that “monopolies should not be left to control the market. It is the role of the Health Ministry to deal with them through a pricing scheme.”

According to Ezaby, locally-based private pharmaceutical companies make a profit margin of anywhere between 15 and 25 percent, depending on the company.

Conversely, the public sector manufactures basic drugs for lower prices and is currently struggling with accumulating losses due to higher industry costs, Ghannam stated, pointing out that approximately 80 percent of raw materials used in local manufacturing are imported.

The government currently sets pharmaceutical prices. However, Ghannam told Mada Masr he believes that these need to be raised in order to preserve the industry.

He added that to solve the policy problem and boost Egypt’s pharmaceutical industry there should be a third party to bear the burden of an increased selling price, on behalf of citizens. He concludes: “This party should be either the insurance scheme, or the state’s treasury.”

According to a report published by EIPR in 2013, Egypt’s current social health insurance scheme only covers 55 percent of the population. 

Although Ghannam maintained medicine shortages and price increases are a policy issue, Ezaby instead claimed, “The way to solve this problem is by returning to the discussion over balancing the economies of the companies and the availability of medicine to patients with appropriate prices. We are still in discussion and have not reached a final solution yet.”

Some companies have regulated the distribution of drugs to avoid shortages, by reevaluating procurement for pharmacies. According to Ezaby this situation is temporary, although it is not known when the next shipments of pharmaceuticals will arrive. Current stocks may only last another month or two, depending on the pharmacy.

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