Drugmakers want to hike prices, citing soaring production costs

Highlights: 

• Drug prices were last hiked in 2022
• Pharmas now demand price hikes, citing 30% surge in production costs
• Raw material prices rose by 10-15%; energy and operation costs by 15-20%
• 97% of raw materials are imported, but pharmas struggling to open LCs

Pharmaceutical companies in the country are seeking government approval to raise drug prices, citing a surge in production costs attributed to factors like currency devaluation, a dollar crisis, the rise in raw material prices in the global market and rising energy costs.

During a courtesy meeting with Prime Minister's Private Industry and Investment Adviser Salman F Rahman on 18 January, leaders of the Bangladesh Association of Pharmaceutical Industries (BAPI) conveyed that drug production costs have increased by up to 30% in the past year. Despite this, the Directorate General of Drug Administration (DGDA) has chosen not to raise medicine prices.

Therefore, there is a need to adjust prices to offset the escalating costs and ensure the sustainability of businesses, they told the adviser.

In response, Salman F Rahman gave them assurance that he would discuss the issue with the prime minister.

BAPI leaders also intend to engage in discussions with the health minister regarding the matter soon, sources present in the meeting told TBS.

Pharmaceutical industry leaders also expressed concerns that the failure to raise drug prices could lead to potential shortages in the market and a decline in the quality of drugs.

SM Shafiuzzaman, general secretary of BAPI, told TBS, "We conveyed to Salman F Rahman that we cannot move forward without increasing drug prices. He said he would discuss the matter with the prime minister soon, but gave no assurances regarding a price increase."

"For an extended period, the dollar was priced at Tk84, but now it has soared to Tk130. The opening of import letters of credit [LCs] has become difficult due to the ongoing dollar crisis. We are in a dilemma here. If we request a price increase, the government would likely resist and if the medicine becomes unavailable in the market, there is anticipated pressure from the government as well," he said.

"We have not submitted a formal proposal for a price increase yet, just made a verbal request. We are planning to approach the new health minister as well," Shafiuzzaman said.

When asked if there is any shortage of medicines in the market now, Shafiuzzaman said, "Each of our companies has a three to four months' supply of raw materials. Thus, production has not yet experienced a decline, but there is concern that if this situation persists, production could dwindle, leading to a potential shortage. Given the essential nature of medicines, proactive measures should be taken before a crisis emerges."

According to DGDA data, a total of 308 pharmaceutical companies produce allopathy medicine in Bangladesh. More than 27,000 brands of over 1,500 drugs are produced in the country. Some 219 of these drugs are categorised as essential. The government regulates the prices of 117 of these essential medicines, while the prices for all other drugs are determined by the manufacturing companies.

Dr AM Shamim, the managing director of Labaid Group, said the production cost of each drug has risen by 20-25% due to the surge in dollar prices. Additionally, there has been a significant increase in gas, transportation, and operational costs. However, the prices have not increased at a comparable rate. Dollars are scarce now. Earlier an LC worth $100,000 could be opened at once, now it has to be done in four instalments.

"Without the approval of the DGDA, companies cannot raise prices. But If prices remain stagnant, companies may be compelled to compromise on quality and there could be a drug crisis in the market," he said.

Dr Shamim also mentioned that LabAid Pharmaceuticals experienced profitability in the years preceding 2023. "In FY22, we attained a profit of Tk16-17 crore but faced a loss of Tk18 crore in FY23, attributed to heightened production costs."

Echoing the same, Abdul Muktadir, the chairman and managing director of Incepta Pharmaceuticals Ltd, said without a price increase, survival will be challenging for pharmaceutical companies.

In 2022, the DGDA raised the prices of 53 essential drug brands across 20 generics used in primary healthcare, with increases ranging from 13% to 75%. However, pharmaceutical companies are asserting that despite the adjustments, they are experiencing financial losses.

Regarding the drugmakers' demand, Nurul Alam, the spokesperson for the DGDA, told TBS that they are aware of industry association leaders meeting with Salman F Rahman to discuss the price hike. However, no written application has been received from either the association or the adviser. Any official application would undergo the standard process for a price hike.

"Our committee will determine the validity of the request by assessing whether the production costs have risen due to factors, including the dollar crisis, as claimed by the traders," he added.