ECONOMYNEXT - Newly set up domestic producers of generic drugs, who have been given guaranteed deals for up to 15 years by the health ministry, are targeting around 60 percent of the state pharmaceutical budget by 2020, officials said.
State Pharmaceutical Manufacturing Corporation, a state-run drug manufacturer has signed 38 deals with 31 businesses to produce drugs whose production will be brought back for 15-years by the government hospital system through guaranteed long-term deals.
SPMC will supply drug formulations and monitor the companies.
Health Minister Rajitha Senaratne said another 18 companies will produce drugs independently without SPMC involvement and they have been given 10 year buy-back deals.
Two companies located in Kandy and Horana have already started production and a third will start in March, Senaratne said.
The drugs will be bought by the governemtn at cost plus 20 percent profit for the businesses without competitive bidding.
Lohitha Samarawickema, Chairman of the newly set up National Chamber of Pharmaceutical Manufacturers of Sri Lanka said the cost could be higher or lower than the imported drugs.
The advantage is that local firms would be monitored by the regulators unlike foreign ones, Samarawickema said.
Unlike so-called 'original drugs' the efficacy of generic drugs are not proved through clinical trials and the copied drugs may or may not work as well.
The cost will be based on raw material imported labour and other costs and they will be submitted to the government every six months, Samarawickema said.
Samarawikrema said by 2020, the domestic drug companies were targeting to get about 40-60 percent of the government drug budget.
SPMC Chairman Sayura Somasundara said Sri Lanka's state hospital now spent about 400 to 500 million US dollars a year to import drugs.
"It is the vision of the honourable minister (Senaratne) to produce drugs locally as import substitution for the medical supplies division," he said.
On Monday a deal was signed with Malaysian investors to set up a 10 million dollar industrial zone for pharma businesses.
The initial target was to localise 100 million dollars of production and 'save valuable foreign exchange' officials said.
Saving 'valuable foreign exchange' became an overriding economic and political goal in Sri Lanka after a money printing central bank was set up in 1951, abolishing a currency board that has kept the exchange rate fixed and inflation at developed country levels with free capital mobility.
Whenever the domestic operations department of the central bank injected liquidity engaging in expansionary policy, creating excess rupees, foreign exchange shortages occurred.
The unrestrained money printing of the central bank triggered exchange controls, import substitution, import duties and trade controls, which pushed up unemployment to 20 percent in the 1970s in addition to currency collapses and high inflation. There have been calls for the abolition of the central bank and a return to a currency board or a floating rate with inflation targeting. (Colombo/Jan10/2018)