• High prices affecting citizens’ health, prices must reduce: Health TUs
• Patients limiting purchases, considering affordable alternatives: AIPPOA
• Price formula developed post stakeholder discussion awaiting court ruling: NMRA

Amidst exchange rate fluctuations in Sri Lanka, consumers are raising concerns about the apparent lack of correlation between these fluctuations and the prices of essential goods, particularly medicines. 

Despite a notable decrease in the exchange rates over the past year, consumers allege that prices have remained stagnant or even increased, highlighting a disparity that disproportionately affects the poor.

Meanwhile, the price formula for pharmaceuticals developed by health sector authorities is on hold due to a pending court case.

While exchange rates have seen a decline, reflecting a more favourable economic climate, consumers argue that the benefits of this improvement have not been passed on to them. They accuse businesses of capitalising on the situation, reaping extraordinary profits while leaving the public to bear the burden of inflated prices.

The situation is particularly dire in the healthcare sector, where the cost of medicines continues to strain household budgets. Despite the decrease in exchange rates, prices of imported medicines have remained stubbornly high, prompting outcry from consumers who feel they are being exploited for profit.

Central Bank statistics reveal a significant decrease in both buying and selling rates from 28 March 2023 to 28 March 2024, indicating a more favourable economic landscape. However, for many Sri Lankan consumers, this positive shift has yet to translate into tangible relief from the financial pressures they face daily.

According to Central Bank statistics, on Thursday (28), the exchange rates were Rs. 295.5429 for buying and Rs. 305.3339 for selling, whereas exactly a year prior, the rates stood at Rs. 315.8454 for buying and Rs. 332.8711 for selling. 

A comparison of these rates indicates a decrease in both buying and selling rates over the year. The percentage change for buying rates is a decrease of around 6.42% and the percentage change for selling rates is a decrease of approximately 8.27%. The statistics indicate a significant decrease in both buying and selling rates from 28 March 2023 to a year later.

TUs call for reductions

In such a backdrop, health sector trade unions are urging the Government to reduce medicine prices to align with falling exchange rates and other economic indicators.

Speaking to The Sunday Morning, All Ceylon Nurses’ Union (ACNU) President S.B. Mediwatta said the high medicine prices had affected the health of many citizens, who avoided consuming certain medicines which had increased in price.

“It is important to reduce the prices and pass the benefits to the country’s health sector. This affects not only the medicines purchased from pharmacies but all healthcare-related costs,” he stressed, while urging the Health Ministry to take immediate steps to reduce prices.

Speaking to The Sunday Morning, All-Island Private Pharmacy Owners’ Association (AIPPOA) President Chandika Gankanda highlighted the severe impact of the ongoing economic crisis on the purchasing power of consumers: “Many people are now limiting their medical purchases to essential items due to the high cost of living.”

Gankanda emphasised the growing reliance on more affordable medications, particularly in times of necessity.

He explained that failure to meet price expectations could lead companies to withdraw from the market, resulting in a scarcity of quality products. This, he argued, would create a divide where only those who could afford to would access quality medications, while others would be left with cheaper alternatives, exacerbating the crisis.

Gankanda also highlighted the impracticality of controlling prices of only 60 out of approximately 1,200 medicines in Sri Lanka, emphasising on the need for a more comprehensive approach to pricing regulations.

Against this backdrop, the AIPPOA has urged the Government to abolish price controls on 60 specific medicines and adopt a unified pricing mechanism based on their Cost, Insurance, and Freight (CIF) values.

Price controls 

As reported by The Sunday Morning earlier this month, the industry has sought a nearly 12% hike.

However, the price of medicine has not followed this trend. Trade unions allege that the price cap imposed by the Government only applies to 60 items declared by the Government, while the prices of other items have been increased by importers by around 600-800%. Complaints also persist about private hospitals exploiting patients via high charges.

In June last year, the Health Ministry issued a gazette revising the Maximum Retail Price (MRP) of 60 types of medicines. The prices of these medicines were reduced by 16% with effect from 26 June 2023.

The prices of all medicines were revised thrice since 2021 due to exchange rate fluctuations, with increases of 9%, 29%, and 40%, respectively. In 2021, medicine prices saw a 9% increase and in 2022, local pharmaceutical prices were revised twice to address the gap caused by the drastic devaluation of the rupee in 2021. In March 2022, the prices of 60 essential medicines were raised by 29% through an Extraordinary Gazette notification.

Ever since the rupee began to depreciate following Covid-19, pharmaceutical companies have requested a price increase for all essential medicines that is commensurate with the fall of the rupee value. Earlier, the companies requested a nearly 9% hike, after which the prices were revised in June last year. Since then, as reliably learnt by The Sunday Morning, the companies are said to be expecting a nearly 12% hike once again.

Price controls on pharmaceuticals was introduced in 2016 through a gazette notification issued by the Health Ministry, reducing the prices of 48 pharmaceutical medicines, mainly prescribed for Non-Communicable Diseases (NCDs) such as diabetes, high blood pressure, etc., under the National Medicines Regulatory Authority Act No.5 of 2015. At present, the Government controls the prices of 60 medicines.

National health budget 

The Sri Lanka Medical Association (SLMA) reports that the country’s public health expenditure is 1.5% of its GDP, which is similar to the average expenditure of Low- and Middle-Income Countries (LMICs) but higher than its South Asian regional peers. 

In 2017, total health expenditure was approximately Rs. 479 billion, increasing to around Rs. 559 billion in 2018. In 2019, the Government allocated 23% of its healthcare budget, amounting to Rs. 54 billion, for medicines. The total pharmaceutical expenditure in 2022 was estimated at Rs. 163 billion annually, with Rs. 58 billion for the State sector and Rs. 105 billion for the private sector. Capital investments in the health sector stood at Rs. 44.3 billion and Rs. 40.2 billion for 2018 and 2019, respectively. Per capita health expenditure rose from Rs. 22,314 in 2017 to Rs. 25,778 in 2018.

However, Sri Lanka faced challenges in importing essential medicines and supplies, with an annual budget estimate of $ 300 million. As of January 2023, there was a funding gap of $ 220 million, leading to arrears of Rs. 25.7 billion owed to foreign pharmaceutical suppliers. 

The economic crisis resulted in delayed or non-supply of pharmaceuticals due to nonpayment of bills. In the 2021 Budget, the allocation for pharmaceuticals and consumables was reduced by 29% compared to the previous year, receiving Rs. 60.7 billion.

NMRA awaiting court decision 

Meanwhile, the National Medicines Regulatory Authority (NMRA) is awaiting the Supreme Court decision on the petition filed by the Sri Lanka Chamber of the Pharmaceutical Industry (SLCPI) pending in the first week of April to announce the pharmaceutical price formula and thereby revise the prices of medicines.

Speaking to The Sunday Morning, NMRA Chairman Dr. Ananda Wijewickrama said discussions had been held with all stakeholders and the formula developed, but that at present there remained in place an injunction obtained by the SLCPI.

“We are waiting until the next hearing of the case scheduled early next month for the court’s decision before announcing the NMRA’s decision on pharmaceutical prices,” he said.