Experts explain rise in prices of pharmaceuticals, others

• Only Four Pharmaceutical Firms Have Accessed N10b OutOf N100b CBN Stimulus Package
• Fears Rife That Loans Will End Up In Hand Of Importers
• Blame COVID-19 Pandemic, High Forex Rates, Ban On Export Of Drugs, Raw Materials From China, India
• Cost Of Personal Protective Equipment, Including Facemasks Rose By Over 100%

The Coronavirus disease (COVID-19); soaring forex and inflation rates; ban on export of products from China and India; ban on international flights, which has increased freight costs associated with importation of Active Pharmaceutical Ingredients (APIs), excipients and finished products are among factors that have pushed up prices of essential and prescription drugs, and medical/pharmaceutical products lately.

Other factors, which have contributed to this include slow uptake of the Central Bank of Nigeria’s (CBN) N100b stimulus package, and bottlenecks and disruptions in worldwide supply value chain.

A market survey has shown that the price of essential and prescription drugs, and medical/pharmaceutical products have gone up between December 2019 and June 2020. For instance, surgical facemask, which stood at N50 in December 2019 is now N500; disposable gloves (x 100) moved from N500 to N1, 500; Amoxicillin Clavulanic Acid (625mg) moved from N85/tablet to N142, and cough expectorant jumped from N250 per bottle to N400.

Also, antimalarial- Artemether- Lumefantrine tabs D/S (x6) moved from N400 to N600; Artemether Lumefantrine (x24) jumped from N500 to N700; average bottle of blood tonic (per bottle) moved from N350 to over N500, while an anti hypertensive drug, Methyl dopa tablets (x10) is now N300 as against N200, and Metformin (anti diabetes) x14 now goes for N250 from N200.

According to medical experts, Personal Protective Equipment (PPE), especially facemasks, which jumped to about N400/N500 depending on the location remains one of the worst affected medical essentials.

The experts, who expressed deep concerns over the slow uptake of the CBN’s N100b intervention fund said only four companies have so far received a total of N10b, just as outstanding applications were been processed. The funds are meant for capacity expansion and working capital at single-digit interest rate.

The National Chairman, Association of Hospital and Administrative Pharmacists of Nigeria (AHAPN), Dr. Kingsley Chiedu Amibor, who also admitted that prices of essential medicines have skyrocketed since the outbreak of COVID-19, blamed the development on difficulties encountered in importing finished products from China.

Amibor said India placed a ban on export of APIs from their country at the onset of the Coronavirus outbreak. “These factors seriously affected our capacity to produce locally, as well as import finished products.”

He added that as far back as last year, the Pharmaceutical Society of Nigeria (PSN) had warned of drug insecurity in the country, and now the society has been vindicated by current developments.

He, however, said the COVID-19 pandemic is not solely to blame for the rising cost of pharmaceuticals products, noting that the exchange rate of the naira has been a source of concern to pharmaceutical importers because by the time they are able to source foreign exchange and bring in the finished products, the final cost to the consumers would have gone quite high.

He said this is why the PSN has been asking for import waivers for pharmaceuticals to make the prices competitive. “Unfortunately, that has not been the case,” the pharmacist said, adding, “to answer your question directly, the lockdown and difficulties in importation of pharmaceuticals brought scarcity and price increase with it.”

Regarding access to the intervention funds made available by the CBN, Amibor said few pharmaceutical companies have accessed the funds as at today. “Some others have collected offer letters and are waiting for disbursement of funds. The bulk majority are still at negotiation stage,” he said.

He further explained that: “The CBN intervention fund is meant for the development of the pharmaceutical industry, a special fund for manufacturers to expand their facilities. The fund is not for importation of COVID-19 products, but to cushion the impact of the pandemic on the industry.”
Commenting on the rise in prices, the President, Pharmaceutical Society of Nigeria (PSN), Mazi Sam Ohuabunwa said it was inescapable for the cost of drugs to rise.

“First, is the fact that inflation is rising, this phenomenon pushes up the prices of most products and services in any economy. That is why the primary role of the CBN is to keep inflation down,” he said.

“Secondly, the break in global supply chain occasioned by COVID-19 lockdown in China, India, UK and elsewhere has led to supply gaps for raw materials and finished pharmaceuticals. This in turn creates scarcity and in any economy scarcity leads to price increases.”

Ohuabunwa said the money being provided by CBN for the pharmaceutical and healthcare industry cannot immediately translate to improved product supply as much of the money is for industrial capacity output enhancement.

He said even if the money is released today, it would take some time for it to be used to build factories or buy equipment and install and then begin to produce. “Only perhaps working capital for raw materials importation will benefit the economy in, maybe three months time. Otherwise the impact will begin to kick in six months to one year at the earliest. And yet only very few of those who applied for the CBN loan have received approval,” he said.

The PSN President said despite the best effort of the industry to ramp up production and minimise supply gaps, there will inevitably be some supply gaps that will create shortages and scarcities, resulting in normal market upward price adjustments.

Specifically, a former President of PSN, Olumide Akintayo said the major issues promoting rising costs of essential and prescription drugs, and medical/pharmaceutical products include high forex rates; ban of export of products from China and India, and the ban on international flights, among others.

He said even though increased freight costs associated with importation of APIs, and excipients and finished products are also contributory factors, the CBN’s intervention funds, which about N10.5b has so far been released would, to a reasonable extent, help in addressing challenges in the sector that require urgent attention.

The Chairman, Pharmaceutical Manufacturers Group of the Manufacturers Association of Nigeria (PMG-MAN), and CEO/MD of Fidson Healthcare Plc, Dr. Fidelis Ayebae reiterated that: “Like other commodities, prices of medical essentials have gone up across board, and this is due to bottlenecks and disruptions in worldwide supply value chain. It is also due to the unavailability of forex and CBN’s devaluation. Of course, you also know that inflation is rising and companies are trying to recoup those costs. So, it is increase across board by about 12 per cent. The CBN provided N100b as intervention fund, but only four companies have received a total of N10b and outstanding applications are been processed. The funds are meant for capacity expansion and working capital at single-digit interest rate.”

The pharmacist, who said that countries were beginning to open up and import raw materials and packaging materials among others, added that the CBN’s intervention, coupled with the availability of forex would be very helpful in easing the price increases.

Ayebae expressed optimism that things can only get better, but sufficient supply was required quickly to make this happen, adding that the stimuli would ensure that manufacturing remains stable while only minimal job losses would be recorded, “otherwise it would have been worse.”

“You are aware that we have been clamouring for access to finance to members – we advocated for N300b in 2018 at nine per cent rate for members.

Now, the Federal Government, through the CBN rolled out an intervention fund of N100b to the healthcare sector, which is a laudable initiative, close to what we have been advocating for at five per cent rate.

“My worry here is whether the lending banks are on the same page with the CBN, as this is a rare opportunity to develop the Nigerian pharmaceutical manufacturing sector, which is very critical, not only in closing the gap in access to medicine, but also to ensure economic growth and sustainable development. For us as a country not to miss out on this opportunity, lending banks should look at the local manufacturing sector, which is a long-term capital intensive investment from the perspective of building a socially inclusive pharmaceutical sector, not from absolute capitalist perspective in lending.

“The intelligence we are gathering is that these loans will end up in the hands of importers whom their returns on investment cannot be compared to that of local manufacturers – of which the reasons are obvious. I therefore urge the lending banks to ensure that they reduce the many administrative bottlenecks that will hinder members from accessing these funds. Members look forward to use these funds to repurpose their facilities to meet international qualification and standards, expand their product lines, upgrade their machineries, and build new factories.”

He continued: “Access to forex, as you are aware, is core to our members, as much as repurposing our facilities, putting up new production lines, purchase of new machineries for facility expansion, purchase of raw materials, and upgrading of our facilities to meet WHO certification. These involve huge forex, as they are all import-dependent. In view of this, a special consideration for the sector on access to forex will support the utilisation of the intervention funds in achieving its intended goal.

“Policy inconsistency could be a potential threat to the proposed CBN intervention, example; giving a blanket waiver on finished pharmaceutical products imported into the Nigerian market. If the many clamours, from drug marketers as being peddled in the media, are granted, the aim of the CBN’s intervention will be defeated. In addition, Nigeria will become a dumping ground for pharmaceuticals and these in turn will lead to underutilisation of the capacity that the group has developed over the years towards achieving self-sufficiency and attaining medicine security.

The Fidson Healthcare Plc boss said, in 2016, the government of President Muhammadu Buhari, instituted a 20 percent – on Import Adjustment Tax (IAT) for categories of finished essential medicines, amongst which is antimalarial-commodities for which incontrovertible evidence suggests that local pharmaceutical manufacturing companies have excess capacity for its production.

He said this landmark policy supported the sector to scale up capacity in production of these essential products.

The pharmacist, however, said it should be noted that any reversal of these policy in any way will destroy all the capacity the sector has developed overtime, and in addition, accessing the CBN intervention will be counterproductive as the good intention would be defeated.

Ayebae lamented that member-companies were being owed by Ministries Departments and Agencies (MDAs) in the last 10 years and the total amount runs into billions of naira.

“As you are aware some member companies have gone under due to these bad debts owed by the government institutions. It would be a great relief to members if these debts are recovered. Going forward, these institutions should faithfully buy from us, not only buy from us as stipulated by Executive Order 003, but also pay us timely,” he said.