Sri Lanka drug regulation bill given cabinet nod; no price controls planned: Minister

COLOMBO (EconomyNext) – Sri Lanka’s cabinet of ministers had approved a draft drug regulation bill but it will not impose price controls, Health Minister Rajitha Senaratne e said, which analysts say will ensure that no shortages are created by the new law.

There had been fears that price controls will be imposed by the state leading to shortages and black markets in some drugs which will hurt poorer patients most.

Price Controls

Price controls could also make it unprofitable for firms to distribute drugs in remote areas and make rural patients travel to major cities at great expense and loss of time to get drugs that are commonly available now at pharmacies even in remote areas.

About 30 years ago it was quite common for people to travel long distances to Colombo or Kandy to buy a drug that was not available in the town pharmacy, when the private pharmaceutical distribution industry only had a few players.

Sri Lanka has a long history of state price controls creating black markets in even basic foods especially in the 1970s. Recent noteworthy shortages created by price controls occurred in rice and cement.

Minister Senaratne told reporters the drug law would force doctors to prescribe drugs by the generic name but they would be allowed to write brand names within brackets if they wanted to until a proper drug testing mechanism was set up.

However no penalties were yet specified against doctors, he said.

There had been fears that doctors would be penalised for prescribing brands that they knew to be effective and safe. (Sri Lanka doctors to be fined for prescribing drugs from reputed firms).

Efficacy Tests

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Though most generics are safe, no efficacy tests are performed on the drugs and even in developed countries generic makers are not required to conduct clinical trials or similar procedures to test the actual effectiveness of their products, as it will make the drugs much more expensive.

Regulatory agencies instead perform tests to gauge the so-called ‘bioequivalence‘ which measures whether the active ingredient in the generic is delivered to the body with a high degree of confidence as that of the pioneer drug.

A doctor who accompanied the Minister to the media conference said there was may be 15 to 20 percent failure rate among generics and testing was needed to ensure that they worked.

Unlike branded drugs, where the brand owner is forced by the market (consumers) to maintain the quality rather than the police in order to protect its brand name, a generic maker is under no such compulsion.

However some large South Asian generics firms have built their own brand names.

Oligopoly

Minister Senaratne said there were plans to reduce the amount of brands available in the market to four or five because at the moment there were more than 20 drugs in some cases.

Reporters pointed out that limiting the number of suppliers will create an oligopolistic condition in the market for a particular drug leading to higher prices.

Doctors who accompanied the minister said though a large number of drugs had been registered by the authorities not all of them were regularly distributed in the market and some firms were registering them to participate in tenders for hospital supplies and they wanted to reduce the number.

Reporters pointed out that it was good for a large numbers of suppliers to be registered as it will create competition and lower prices and limiting suppliers will make it easier to rig tenders and push prices up.

Doctors said the number will not be limited arbitrarily but some criteria will be set in the future.

The discovery in Sri Lanka of a regulatory optimum number of suppliers to produce the thinnest margin – in other words the most efficient market resulting in the cheapest price – could be of interest to the entire economics profession in the world, some analysts believe.

It is not clear whether the committee that drafted the law had an economist within it or not.

Testing Capacity

Asked why the state wanted to restrict competition in drugs and give market power to a few companies, doctors who accompanied the minister said they wanted to limit the number of the drugs because the state did not have the capacity to test a large number of drugs.

In the absence of such testing, the brand name would be allowed be written within brackets in prescriptions for the time being.

Minister Senaratne claimed large number drugs imported by companies resulted in foreign exchange losses. He and some of the doctors also said they wanted set up state enterprises to produce drugs in Sri Lanka.

Reporters suggested that to cut cost of another regulatory agency and save tax payer money that the planned authority piggy-back on the approvals given in tightly regulated markets such as the US or EU.

In those markets, partly due to high regulatory and compliance costs, drugs are much more expensive than in Sri Lanka.

Doctors said that is also a proposal that could be considered in the future.

Minister Seneviratne said after the drug regulation law was passed, drug prices would fall, through some mechanism which was not made very clear.

The drug regulation law was one of the items in the so-called100-day program of the new administration.

President Maithripala Sirisena alleged during his election campaign that the Rajapaksa regime had blocked attempts to bring a drug regulation law and he learned that the pharmaceuticals industry had paid a billion rupee bribe to scuttle the bill he devised as health minister.

Asked whether action will be taken on the case, Senaratne said it was difficult to find evidence, though they were informed by the industry that 25 million rupees were collected from some 400 companies to be given to three members of the last regime.

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