ECONOMYNEXT – Sri Lanka will expand the current administered prices to 862 drugs in the market, Health Minister Nalinda Jayatissa said expanding state controls brought during the so-called Yahapalana administration.
“We are discussing with importers and local producers, so that they can operate their businesses, and to do justice by the people, to introduce price formulae to 862 drugs,” Minister Jayatissa told reporters on March 11.
“We will start operating that formula in the near future. We will do change in drug prices that people will feel.”
The Yahapalana administration set up the National Medical Regulatory Authority, to control prices of drugs in the name of ‘regulation’ and also promote generics.
Administered prices for a number of goods were abolished as Sri Lanka opened the economy in 1978.
Though analysts called for price formulas for fuel and electricity, which were state monopolies or oligopolies, the Yahapalana administration brought state controls on which there was full competition through bureaucratic calculation giving more room for corruption.
At the time analysts warned that instead of controlling prices of drugs, laws should be brought to control the central bank which was printing money for potential output targeting and 5 percent flexible inflation targeting, which was triggering serial currency crises.
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Under the Yahapalana administration flexible inflation targeting led to a collapse of the currency from 131 to 184 and under the next administration to 360 triggering shortages of drugs due to price controls as well as forex shortages from money printing.
Flexible inflation targeting and potential output targeting then led to a frenzy of foreign borrowings by the central government and Ceylon Petroleum Corporation and eventual sovereign default.
The regulatory agency was then involved in a series of scams as it flexed in regulatory power to limit competition, which critics say a classic example of bureaucratism and regulation in action.
There were also scandals involving deaths of patients through generic drugs in the public health system.
Generic drug makers are not required to do clinical trials to prove their efficacy under current local or international regulations. The only testing that can be done is for bio-equivalence, which is a test on the molecule.
Generic producers also have no brand to protect to maintain public confidence in their product, and charge a premium unlike original or other manufacturers who have built public confidence over many years through branding, analysts say.
There have been revelations on how the health system paid exorbitant prices for drugs which were much cheaper elsewhere.
Minister Jayatissa said action was taken by the new administration to speed up registration of new drugs by the NMRA and boost competition, which will reduce the cost to the health system.
For some drugs there were only one supplier, he said.
“For some drugs there was only one supplier,” Minister Jayatissa said. “They could supply at whatever price they wanted. There was no legal bar against it. It was a question of the political will.
The current administration was looking at the regional prices, and would not buy unless it was in that range, he said.
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