Medicines prices to skyrocket if GST imposed amid deregulation

M Waqar Bhatti
Tuesday, May 21, 2024

ISLAMABAD: The prices of medicines are expected to rise exponentially in Pakistan after the imposition of an 18 percent sales tax and the government’s deregulation of prices for non-essential medicines, allowing pharmaceutical companies to set and sell medicines at prices of their choice, it emerged on Monday.

“The government has proposed an 18 percent sales tax on medicines in the next budget on the recommendation of the International Monetary Fund (IMF) as part of a broader effort to rationalise tax policies and increase revenue. Authorities have already deregulated the prices of thousands of medicines, so combined with the 18 percent sales tax, medicine prices will become out of reach for many people,” an official of the Ministry of National Health Services, Regulations and Coordination (NHS, R&C) claimed.

Officials in finance circles claimed that the recommendation to impose an 18 percent sales tax is part of a set of measures suggested by the IMF to improve Pakistan’s fiscal health, which also includes bringing unprocessed food, petroleum products, and stationery under the standard GST rate. However, the IMF’s recommendation for taxing medicines comes at a time when the previous caretaker government had already deregulated medicine prices, ending the Drug Regulatory Authority of Pakistan’s control over fixing prices and allowing pharmaceutical companies in Pakistan to set prices for thousands of medicine molecules and brands on their own. If implemented, this increase in GST on medicines could significantly impact the public, especially given the already high costs of healthcare.

Experts warned that higher taxes on medicines would likely result in increased prices, making medications less affordable for many people. “This could exacerbate health disparities, particularly affecting those who are economically disadvantaged and already struggle with the cost of healthcare,” they said. A renowned public health expert concurred that the imposition of an 18 percent sales tax at a time when medicine prices have already been deregulated would make people’s lives miserable. He called for the constitution of an independent policy board within the DRAP to make decisions in the interest of the public. “How can a policy board led by a government official, who is the federal secretary of health, take decisions in favour of the people?” the expert questioned, urging the government to include public health experts, patient representatives, and civil society organisations in decisions regarding medicine registration and pricing in Pakistan. He warned that the imposition of an 18 percent sales tax on medicines would make diabetes and hypertension medications out of reach for millions, as around 33 percent of the adult population in Pakistan is diabetic while over 40 percent are hypertensive, requiring daily medication to manage their conditions.

“Already, diabetics and hypertensive patients are not taking medicines regularly, while people with mental health issues also require regular medication but cannot afford it,” he claimed, asking the government to provide medicines under a health insurance scheme to people below the poverty line. He also called for making medicines available for laborers, journalists, and other marginalised segments of society through a health insurance scheme.

“When medicine prices are deregulated, pharmaceutical companies have more freedom to set prices based on market demand rather than regulatory guidelines. Combined with the additional GST, this could lead to substantial price hikes, placing a heavier financial burden on patients,” he warned. He said although the IMF’s recommendation aims to boost government revenue, it poses significant risks to public health by potentially making essential medicines less accessible to the population.