CAIRO: Ministry of Health decree 373, which quietly came into effect in September, may be the Egyptian government’s sternest test yet of the palatability of economic reform it has been pursuing since the 1980s.
The decree introduces a significant change to the way that medicines are priced, by linking prices of both imported innovator brands and generic products to prices in the international market.
This is a huge step within the politically-sensitive pharmaceutical sector itself – one of few sectors in Egypt where prices are government-controlled. An estimated 68 percent of Egypt’s 80 million population, pay for medicines out of their own pocket and the average per capita annual income is $1,800.
The American Chamber of Commerce estimates that the Middle East pharmaceutical market will surpass $21 billion by 2010. Egypt is the third largest market in the region after Turkey and Saudi Arabia. Private sector sales constitute 92.4 percent of this market.
The decree introduces two new pricing regimes, one for innovator brands, and another for generics.
Egypt is one of the few countries in the region where generics are widely sold, partly as a result of strict governmental pricing controls that have kept the prices of locally produced generics artificially low.
Under the Cost Plus system that was applied before the introduction of decree 373, medicines were priced on the basis of the cost of the raw materials used to produce them, with production and overhead costs calculated as a percentage of this cost.
Generic medicine manufacturers contend that this produced anomalous results, because production and overhead costs for a drug produced using expensive raw materials may be the same as any other cheaper drug.
Decree 373 prices generic drugs according to the cost of the innovator brand they are based on.
It introduces three categories of generic manufacturers: factories run by companies licensed by the Ministry of Health and which are either certified by a agencies such as the European Medicines Agency or are prequalified with the World Health Organization (WHO); factories licensed only by the Ministry of Health; and lastly companies that do not own factories licensed by the Ministry of Health but instead rent factories to manufacture their drugs.
The generic is priced according to percentage reductions on the cost of the innovator brand the generic imitates, and vary according to category: 30 percent, 40 percent and 60 percent respectively.
Producers of generic medicines listed in the second and third categories of decree 373 have until 2020 to obtain either certification with any of the regional regulatory agencies recognized by the decree or WHO pre-qualification. Companies that fail to do so must stop drug production.
Opponents of the decree argue that this system is an admission by the Ministry of Health that it lacks the capabilities to uphold quality standards itself, and that it is unacceptable for Egypt to depend completely on foreign agencies rather than developing its own internal capacities.
“The decree presupposes that low prices per se mean poor quality. This underlying assumption is untrue and can have very serious consequences on the patient and on the generic producers that sell at low costs, leading people to trust only highly priced medicines, Egyptian Initiative for Personal Rights (EIPR) researcher Dina Iskander says.
A generic drug by virtue of its definition means that it is identical in its efficacy to the originator brand; and it is the responsibility of the regulatory authority – the Ministry of Health – to ensure that. By allowing a generic drug to be registered, the ministry takes responsibility that this drug is indeed identical to the originator brand in terms of efficacy.
“By virtue of this decree the ministry on the one hand admits that it is not fulfilling its responsibility of ensuring the quality of medicines; on the other hand, it places the burden on the patient to pay the companies the price of their qualification licenses.
Osama Rostom, commercial director of Egyptian International Pharmaceutical Industries (EIPICO) – the region’s largest generics manufacturer – views the matter from a different perspective.
“You cannot be a center of excellence if you’re not applying international guidelines. The minister has all the right, in order to ensure that Egyptian products are accepted outside Egypt, to put in place regulations to make sure that everybody applies the international standards.
“It’s not acceptable any more that you build a factory and then don’t do anything [to upgrade it] for 20 years.
Rostom acknowledged that getting certification with an agency like the US Federal Drugs Agency is “difficult and expensive but added that WHO pre-qualification is free.
The Pharmacists’ Syndicate in a statement issued last month says that generic drugs are currently on average priced at no more than 42 percent of the cost of the innovator brand, and that some generics only cost 10 percent or 20 percent of their innovator equivalents.
Under the new system, the syndicate alleges, generic prices will increase: up to 60 percent or 70 percent of the innovator brand cost, which itself, EIPR says, will have already gone up under the new pricing system for innovator brands.
EIPR gives the example of Plavix, a drug taken by patients with heart conditions to prevent blood clots. One Plavix tablet costs LE 12. Its generic equivalent costs LE 2 – 83 percent less than the innovator.
If the new decree was applied to the generic, and if it is supposed that the factory producing the drug was only licensed by the Ministry of Health, one tablet would cost LE 7.2, only 40 percent less than the cost of the innovator drug and a 360 percent increase on the current price.
Rostom described to Daily News Egypt the problems that generic manufacturers in Egypt face.
Rostom said that EIPICO is making losses on around 65 generic drugs still sold for prices set 15 years ago. “EIPICO is still producing them because of patients’ needs, he said.
He added that the company has requested that the minister of health bring the price of drugs for non-chronic conditions currently priced at around LE 1 or LE 1.50 up to at least LE 7.
An issue at the heart of contention surrounding the decree is whether or not its provisions will apply to drugs registered before it was issued.
Article 8 of the decree states that the prices of preparations priced “according to [its] provisions will be reviewed every three years. Its Article 1 provides that the decree applies to innovator brands “that contain a new active ingredient or invention and generics which imitate a new active ingredient.
Both Assistant Minister for Pharmaceutical Affairs Kamal Sabra and Rostom are adamant that the decree’s provisions prevent it from being applied retrospectively, Sabra adding, “I’d love to backdate it because it would bring prices down.
“I think it is misleading to think that drugs that have been registered before this decree will not be subjected to review [under it], Iskander explained.
“According to the old regime drugs prices are reviewed every two years and secondly, because all companies have the option of withdrawing their products from the market, changing slight details, and re-registering them on the basis of the new decree, she said.
Disagreement about a fundamental issue such as this is in part attributable to a feeling on the part of NGOs and Pharmacists’ Syndicate that the Ministry of Health failed to consult them before the decree was issued, at the same time as it was discussing the issue with pharmaceutical companies.
EIPR say that they have attempted to meet Sabra three times, unsuccessfully.
Sabra defends the decision not to consult the syndicate.
“It’s purely about prices of medicine, so we discussed it internally. The syndicate has nothing to do with prices, which are decided by the Minister of Health. [Pharmacies] have no choice. They cannot sell for over that price
or under that price. Pharmacists’ margins have not been affected by the new ministerial decree, Sabra commented.
Despite their problems with aspects of decree 373, pharmaceutical company representatives say that in Sabra they have a minister of health representative who “for the first time is leading “a different approach from the ministry, an approach which is trying to look into the interests of the two sides, as Rostom put it.
Right to Health
This feeling is not shared by Right to Health activists who argue that the decree has shifted the balance in favor of big businesses; protecting patients’ access to medicine is no longer the priority, they argue.
“The government has been under pressure to restructure its pricing system to the benefit of multinational companies. It is only natural that when such restructuring is carried out, it would address the concerns raised by them; which is further confirmed by the fact that they were the only stakeholders consulted during the drafting of the new pricing decree, Iskander says.
The decree has been passed at the same time as the People’s Assembly considers the draft health insurance law currently before parliament, which, if it comes into effect, will make patients pay to receive treatment in hospitals. A double whammy of policies, EIPR says, which “threaten to deprive many Egyptians of their right to healthcare.
While El-Hakim acknowledges that “patients need to get medicines available to them, he says that this is “not the obligation on any firm. It’s the government’s responsibility.
Rostom, while regarding the move towards the free market which the decree represents as “a positive step, says that in isolation it will not relieve the financial burden medicine purchasing places on Egypt’s poorest.
“Under our constitution education and health are free of charge. This is rubbish. In reality it is expensive because no one who can afford to would go to a government hospital.
“This decree should be accompanied by a good health insurance system so that people wouldn’t [have to] pay for their medicines.