10 January 2011

Kenya: New Rules to Push Up Cost of Drugs

Nairobi — Fresh regulations by the Pharmacy and Poisons Board are expected to keep the cost of access to pharmaceutical products in the country high.

In a copy of the regulations in the possession of Smart Company, some of the fees payable by players in the industry have been increased. The regulations are premised on the Pharmacy and Poison (registration of drugs) (amendment) Rule, 2010 published in November.

As a result, this will see pharmaceutical firms adjust their prices in line with the new requirements that are said to have taken effect at the beginning of this month.

Thought it prudent

But while the board seems to have thought it prudent to conduct the review in line with Pharmacy and Poison Act, firms have contested some of the new regulations. At the centre of this are claims that the board, as required by law, did not consult with players.

Among the contentious reviews that pharmaceuticals are up in arms against is a new requirement of a two per cent fee charged on the value of freight on board for products imported.

It is this fee that most importers of drugs in Kenya are questioning the rationale behind it noting that if implemented, they will pass the onward cost to customers.

"This fee is supposed to be paid up front and we have not been told what the board is going to use it for. This will definitely increase the cost of products that we sell to Kenyan consumers," said an industry player who sought anonymity.

The effect of this is that if a company is importing pharmaceutical drugs worth Sh150 million, it is expected to pay Sh3 million up front to the board. In addition to the levies paid to the Kenya Revenue Authority, the shelf price of such a product will go up.

As part of the reviews, the board also increased the wholesale dealers in pharmaceutical products license per annum from Sh5,000 to Sh30,000. As part of the concerns that the industry has taken issue with, is the amendment in the definition of the term cosmetic.

According to the board, any substance or mixture of substance manufactured, sold of represented for use in cleansing, improving or altering complexion is now a cosmetic.

"This will include the use of such substance in skin, hair, eyes or teeth and includes deodorants and perfumes," read the new regulations.

This, according to some industry players, will impact on products like toothpaste that have 'whitening' as part of branding.

The Pharmacy and Poisons Board is the Drug Regulatory Authority established under the Pharmacy and Poisons Act, Chapter 244 of the Laws of Kenya. The Board regulates the practice of pharmacy and the manufacture and trade in drugs and poisons.

In the notice, however, the board indicates that the reviews were carried in consultations with the Minister of Medical Services Prof Anyang' Nyong'o.

Cost of access to pharmaceuticals in Kenya has remained high compared to other markets in the region. The large number of the population which does not have any form of health insurance and depend on out of pocket means to buy medicine further complicates this.

At present, 1.6 million Kenyans are covered by the National Hospital Insurance Fund. The figure is, however, projected to be around 10 million Kenyans inclusive of dependants.

On the other hand, another 600,000 Kenyans are on private medical insurance courtesy of their employers. This still leaves about 65 per cent of the country's population without any form of health insurance.

This has created a sizeable market for drug manufacturers and distributors in the country. According to Business Monitor International (BMI) the projection for 2010, for the country's drug market was expected to grow by a double digit.Poor health funding

The monitoring unit indicates that 2009, pharmaceutical sales in Kenya reached a value of Sh17.92 billion, representing a growth of 12.11 per cent.

By 2019, BMI expects the pharmaceutical market to be worth Sh52.65 billion a 2009- 2019 compound annual growth rate of 11.38 per cent in local currency.

A sizeable counterfeiting industry, poor healthcare funding, corruption, regulatory environment deficiencies are some of the factors that have kept the country's drug industry at its low.

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