EDITORIAL: The federal cabinet under the chairmanship of Prime Minister Imran Khan has decided to rationalize prices of drugs and while decreasing the price of a Remdesvir 100mg injection from 10,873 rupees to 8,244 rupees based on what is globally regarded as an assumption that it may be useful for treatment of Covid-19, it allowed increase in the prices of those drugs that are short in the market as their manufacturers have stopped their production due to losses because their manufacturers had not been accorded an increase in price since 2018.
Business Recorder fully supports this government move for three broad reasons. Firstly, as stated by Dr Faisal Sultan, advisor to the prime minister on health, in a press conference that he addressed jointly with the federal minister of information, Shibli Faraz; the decision of previous governments not to raise the prices of life-saving drugs in spite of steadily rising costs of pharmaceutical companies that operate on the overarching principle of profit and loss led to shortages on the market as a direct outcome of their decision to stop production of loss-making drugs – a natural financial decision of any private sector company under such circumstances. Secondly, Pakistani administrations have been directly responsible for raising input costs, specifically electricity tariff, a major input in the manufacturing process, attributed to multilateral support that is contingent on full cost recovery. Donor agencies ideally support improved governance to attain full cost recovery which none of the successive government, including the incumbent one has been able to implement, and instead have relied on raising tariffs to meet this condition. And finally, what is relevant at present is the massive rupee depreciation, a little under 50 percent in two years, which has led to a rise in the rupee cost of importing raw materials or active ingredients for the manufacture of those medicines reliant on such imports.
Dr Sultan added that when drugs are not available on the market patients are forced to rely on smuggled medicines, which he added were on average at 50 percent higher cost compared to what could be produced domestically, and/or through legal imports which are more expensive given the rupee depreciation. The Cabinet has also allowed import of life-saving drugs, including cancer and cardiac drugs not registered in Pakistan, exempting them from the ban.
Shibli Faraz revealed that the circular debt had reached 2.1 trillion rupees because “the previous government (PML-N) had directed power distribution companies not to charge electricity tariff from people in some parts of Balochistan to get their sympathies for the 2018 elections. When the present government started regularization it found the circular debt had gone up to this extent.” This is clearly an untruth: (i) the PTI government inherited a circular debt of 1.2 trillion rupees, however, the PTI must acknowledge responsibility for raising the circular debt by one trillion rupees in just two years; (ii) Balochistan is only one out of four major contributors to the circular debt – the other being massive transmission and distribution losses, high input costs of state-operated generation companies (Gencos) and the agreements with independent power producers that are currently being renegotiated.
To conclude, there is an urgent need to allow market forces to operate in those sectors where private sector is predominant or else there will be shortages that would negatively impact on the public; and where public sector operates the government needs to focus on improving governance rather than on raising tariffs and/or extending untargeted subsidies.
Copyright Business Recorder, 2020
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