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Pharmaceutical pricing system in need of reform: Novartis Vice Chairman

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Restoring security and amending registration and pricing rules are vital to attracting investments, says El Sharkawy

Salah El Sharkawy, Vice Chairman of Novartis Egypt (AlBorsa Photo)

Salah El Sharkawy, Vice Chairman of Novartis Egypt
(AlBorsa Photo)

New regulations for pharmaceuticals registration and pricing are needed to revitalise the sector, according to Salah El Sharkawy, Vice Chairman of Novartis Egypt, adding that “reasonable profits and security are the main conditions for attracting investments.”

“The pharmaceutical industry suffers from three major problems obstructing its speed growth and further investments attraction,” he said.

Low pharmaceuticals prices, which have not been raised in over 10 years, tops these problems, he said, followed by a registration process that takes at least three years, and finally, the absence of any intellectual property rights for invented medications.

El Sharkway cited pricing and registration as the main sector’s problems, since they are the determinants of pharmaceutical production, with most of the sector’s problems resulting from these two root causes.

“The pharmaceutical Industry was the most negatively affected with the exchange rates rise due to increase in imported inputs prices simultaneous with fixed drugs’ prices,” he said.

He went on to stress the importance of responding to the Chamber of Pharmaceutical Industries’ request to change medication prices by less than EGP 10, in order to support companies in maintaining production, while expanding the production of new and invented pharmaceuticals. This would save the patient from using alternative expensive drugs should there a shortage of cheaper alternatives.

“The Ministry of Health may adopt a new procedure for moving the pharmaceuticals’ prices, through asking the companies to decide on just 10% of its medications that need a price change,” El Sharkawy said. Ten years’ of static prices has come alongside a continuous increase in production costs, he added, with foreign companies’ production of several medications incurring further losses.

In regards to registration, El Sharkawy called on the Ministry of Health to draft a clear system for registration guaranteeing access for new pharmaceuticals as soon as possible and at reasonable prices. He suggested a “Fast Track” system of registering important invented medications, lasting no more than six months, while setting an upper limit for ordinary pharmaceutical registration of not more than 18 months.

According to El Sharkway, “the system suggested by the Ministry of Health is good in theory.”

He also asserted that “foreign and private pharmaceutical companies in Egypt contribute to social justice, since they offer medication at high quality and efficiency as well as reasonable pricing.”

“Reasonable pricing does not mean cheap,” he added, since it must take into acount both the producer and the patient, in order for the former to offer the new pharmaceutical at a price accessible to the latter. Drugs prices in Egypt are some of the world’s lowest, he said, with Novartis a prime example of this.

El Sharkawy said the Egyptian healthcare system and its legal framework does not protect property rights for invented pharmaceuticals despite its existing property rights legislations. “Egypt signed the TRIPS Agreement without enforcing it,” he added.

El Sharkway said he believes the health insurance system is the main solution for protecting companies’ property rights without affecting patients’ access to pharmaceuticals at competitive prices. Through this system, the state would cooperate with the companies to subsidise the price differences, especially since newly-invented pharmaceuticals incur high costs and have worldwide pricing limits that cannot be violated in any country.

El Sharkawy explained that foreign companies receive the patent from the Ministry of Scientific Research, this patent grants the company the right to produce this pharmaceutical for twenty years since the discovery of the pharmaceutical material, which is equal to ten years since pharmaceutical production. “What happens in practice is, no enforcement of the patent protections laws and all pharmaceuticals are even” he said.

Although important in curing new diseases, El Sharkawy said newly-invented pharmaceuticals reach the Egyptian market three to five years after invention and production in international markets.  Applying a speedier registration procedure could help curtail this period, he said, especially for pharmaceuticals that were registered in other countries using the same system.

El Sharkawy also called for the establishment of a special system allowing the most important pharmaceuticals treating incurable diseases to access the market as soon as possible, highlighting the example of cancer pharmaceuticals that use the speed registration system because of its importance.

El Sharkawy criticised the failure of the healthcare system to deter the spread of counterfeit medications, calling on the Ministry of Health to enforce the laws and tighten supervision to address the issue.

He went on to call for the founding of an independent authority for Egyptian pharmaceuticals encompassing all the industry’s participants and directly reporting to the prime minister. The authority would be aimed at solving the problems facing this sector and form a part of the new health insurance system.

In a related context, El Sharkawy said the current economic situation has prompted some multinationals to consider exiting the Egyptian market, especially those without local factories. Such companies, he said, would be “open to options since they are still, at the end of the day, investment entities.”

Novartis Egypt would not rule out such a market exit, he said, in the case of further economic or security deterioration, and should its parent company deem the current situation sufficiently unfavourable, it may shut down its plants and convert them to a scientific office.

Novartis Egypt has experienced several major crises since entering the Egyptian market, such as the 1967 and 1973 wars, El-Shawarky said, but the company has remained.

The parent company has the ability to cover its branches in Egypt depending on local companies regardless of the latest economic conditions, he added, having maintained the supplies of required pharmaceutical material and imported medications on schedule.

El Sharkawy noted that the shortage in the Egyptian market came from local companies, while foreign companies continued providing treatment services.

In regards to the impact of the ongoing clashes throughout the country between protesters and security forces on the pharmaceutical sector, El Sharkawy said “the sector was highly impacted and production fell by 20%, sales were upset and some drugs disappeared.” In the recent months this was the case as unrest deprived local companies of raw materials supply facilities, which were granted to raw material companies based credit payments. The current situation requires payment of 90% of imported material before shipping, resulting in severe difficulties for companies due to the foreign exchange liquidity crisis.

El Sharkawy added that the pharmaceutical market features an annual growth in sales reaching 13%, despite the increase of production by only 2%. He justified this on patients’ switching to more expensive drugs due to a shortage of cheaper alternatives, as well as the development of the healthcare centres, which have raised sales and production.

“Raising prices of cheap drugs would balance the growth of sales and treatment units, leading to increasing availability of cheap drugs,” he said.

Meanwhile, El Sharkawy expressed his optimism for an improvement in the investment climate alongside progress in Egypt’s political situation.

Concerning the implementation of the minimum income, El Sharkawy stated that “the private sector is linked to production” highlighting the link between productivity and wages. He called the private sector to maintain transparency and equality in profits distribution, saying that “connecting work to good productivity may raise the worker’s salary to EGP 1,200”.

When questioned about his assessment of El-Beblawi government, El Sharkawy said it was still too early to decide, especially the interim government is working in difficult conditions, but “the situation is more optimistic than before.” He added the government should be allowed a grace period until the end of the transitional period.

Translated from AlBorsa newspaper


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