Why are medicines so expensive when prices cannot be raised without approval?

As a diabetic patient, 54-year-old Mesbah Uddin (pseudonym) requires insulin shots every day. But he has been struggling with the increased price of the medicine over the last six months or so. "I used to buy the [insulin] vials at Tk1,200-Tk1,300 and now, they cost around Tk1,500-Tk1,600."

When the price of drugs increases, people with long-term diseases such as diabetes, hypertension, cardiovascular disease etc suffer the most, because they need to take these medicines regularly.  

On 29 April, the High Court ordered the Directorate General of Drug Administration (DGDA) and health secretary to take effective measures against the increasing price of medicines in the country, within 30 days. 

The order was given after the Consumer Association of Bangladesh (CAB) filed a writ petition attached to a report by a daily newspaper, according to which "drug prices increased by 7% to 140% in two weeks." 

The report stated that numerous companies have increased the price of medicines, especially antibiotic tablets and insulin. 

According to Section 30, sub-section (4) of the Drugs and Cosmetics Act-2023 "No person or establishment can supply and sell drugs or raw materials at a price higher than the price fixed under this section." 

Therefore, unless the DGDA – the regulatory body fixing medicine prices – approves, the price of medicine cannot be changed. 

Setting a medicine price is a lengthy process, requiring approvals from DGDA and the health ministry, explained Dr Rashid-e-Mahbub, public health expert and Chairman of the Bangladesh Health Rights Movement. 

"In Bangladesh, DGDA provides drug registrations and they set the price of all the medicines produced in the country," he said.  The DGDA has a price-setting committee that evaluates all applications to raise prices by pharmaceutical companies. 

Given that a government body is actively employed to look after the interest of ordinary patients, prices of medicines in Bangladesh should in theory be both moderate and stable. But as the experience of Mesbah Uddin attests to, or for that matter anyone who has ever walked into a drug store knows, it is anything but stable. 

The justification for price hike

Pharmaceutical companies point to the devaluation of the taka against the US dollar, and the increased price of raw materials in the international market, for the recent hike in the prices. 

This year in January, during a meeting with Salman F Rahman, the Prime Minister's Private Industry and Investment Adviser, Bangladesh Association of Pharmaceutical Industries (BAPI) leaders said that drug production costs have increased (up to 30% in the past year) yet the DGDA did not increase the price. 

They said that a failure to adjust prices will lead to losses and even a potential supply shortage in the market, as well as lower drug quality. However, it was not long ago (December 2022) that the DGDA increased the prices of 53 essential drugs in the country. 

Kaiser Kabir, CEO of Renata PLC, said, "The law stipulates that except for 117 products, pharmaceutical companies are free to change prices at will. However, in practice, the DGDA has the final say on this matter. Understandably, during a period of economic crisis, this authority is hesitant in granting permission for price enhancements." 

"In essence, it is very difficult to increase the price of medicines. Due to the competitive nature of the pharmaceutical industry, there is considerable unwillingness to raise prices."

However, he said that when it becomes obvious that costs have increased permanently, companies seek permission for price enhancement. "In other words, the industry rarely reacts to short-term inflation or minor devaluations in the exchange rate."

He further believes that "Medicine prices in Bangladesh are the lowest in the world according to data published by IQVIA."

The reality for ordinary patients

In Bangladesh, 69% of the total health expenditure in the country is paid out-of-pocket by patients. A large chunk of that goes into paying for medication. 

Dr Be-Nazir, former director of Disease Control at the Directorate General of Health Services, said that it is not true that medicine prices in the country are within people's reach. 

"Maybe [the pharma companies] are believing that by looking at their profit and thinking that since people are buying the medicines, things must be alright," he said.  

"When I visit the villages - I sometimes go to villages in Gaibandha - I see many people who are unable to buy medicines, the ones they need regularly. Maybe they buy one tablet instead of the prescribed two, or maybe they take the medicines periodically – all of which increases complications, and even leads to deaths." 

He said that the pharma companies have no instruments to measure these changes, so they cannot strongly affirm that people can afford medicines. "There are no surveys or anything either. Why else does Bangladesh have such a high OOP for medicine purchases? Medicine is a lifesaver; it can't be so expensive." 

According to Dr Rashid-e-Mahbub, the Drugs (Control) Ordinance enacted in 1982 had academics involved in the price fixation committee, which no longer exists. (The ordinance has long been repealed). 

"There are no academicians, no representatives of users or even those who prescribe the drugs," he said, pointing out how the interests of people have been undermined. 

Dr Be-Nazir said that the price of medicine is much higher than the production cost, which can be easily deduced by the discounts pharmacies often provide. 

"You will notice that pharmacies can give medicines at large discounts if they want, which means their margin is so high that they can always take less than the retail price," he said. 

Dr Rashid-e-Mahbub echoed similar sentiments saying that pharmas spend a huge amount of money on marketing and promotion, and if they can cut down on it, it will easily reduce the price. 

"For the law to be followed, the DGDA should play the main role, but their limitations are so great they are not able to do so, including ensuring quality control of medicines. We now see unlabelled medicines have flooded the rural areas. The government has to identify the flaws in the system and work on them, since the law is not being implemented anywhere," he added.