Price war in Sh450bn drugs trade lifts cap on ailing healthcare

A tug of war has erupted over control of the drugs industry in Kenya that is estimated to be worth over Sh450 billion a year. PHOTO/FILE

What you need to know:

  • At the centre of raging storm is secretive pricing regime of drugs by firms and how some importers could be making billions at the expense of the sick

A tug of war has erupted over control of the drugs industry in Kenya that is estimated to be worth over Sh450 billion a year.

The battle pits local pharmaceutical companies against agents of multinational firms. The fight is likely to lift the lid on the secretive pricing regime of medicine in the country and how some pharmaceuticals could be making billions at the expense of the sick.

At the centre of the controversy is the parallel importation of medicine and pharmaceutical products into the country by Kenya Pharmaceutical Distribution Association (KPDA). Agents of multinational drug companies in Kenya are represented under the Kenya Association of Pharmaceutical Industry (KAPI).

KPDA represents a group of practitioners who have their eyes set on exploiting Section 58 (2) of the Industrial Property Act which allows trading in branded pharmaceuticals.

A parallel import is defined as a non-counterfeit product shipped from another country without the permission of the intellectual property owner.

KPDA represents about 200 local pharmacists and importers of medicines whose quality and pricing is now being disputed by agents of multinational pharmacies in the country.

Over-pricing medicine

KPDA has been accusing agents of multinational drug makers of exploiting Kenyans by over-pricing medicines. This, the association says, is pushing up the cost of healthcare.

The war seems to point at a possibility that the industry is riding on unjustifiably high profit margins.

“Walk to any local pharmacy and compare the price of similar brand of drugs (generic) with what is sold by some of these agents (‘original’). The difference is unbelievably high,” said KPDA chairman, Mr Kamamia wa Murichu, in an interview.

Mr Murichu said some agents of multinational pharmacies sell a single anti-cancer injection as high as Sh360,000, yet through parallel importation from the same source, the same dose is sold at less than half that price.

KAPI however holds that their local business rivals could be exploiting loopholes in the parallel importation licences to ship substandard products, thereby pricing them cheaply and putting the health of millions of users on the line.

KAPI notes that the pricing of its drugs and/or medicine is based on quality and has nothing to do with exploitation or a quest to gain high profits.

The two associations have been embroiled in a war of words for some time now over who is responsible for the high cost of medicine in the country and an influx of counterfeit drugs.

The latest in the duel is a letter written by KPDA to the President and Deputy President seeking their protection from what it terms “underhand machinations” by KAPI in its alleged attempts to exclusively control the market.

Monopolistic

In the letter, KPDA said the multinationals have been pursuing a monopolistic agenda by pressurising the registrar of Pharmacy and Poisons Board to stop issuing import licence to their (KPDA) members.

“Multinational drug companies are exerting too much pressure on Pharmacy and Poisons Board registrar through threats and intimidation so as to have him stop issuing permits for drug importation under parallel importation,” Mr Murichu said in the letter dated December 2.

Smart Company could, however, not verify the assertions as attempts to reach the registrar of Pharmacy and Poisons Board, Mr Kipkerich Koskei, on his mobile phone were unsuccessful.

In the letter, Mr Murichu also said that the multinationals’ agents have been trying to persuade KPDA into forming a drug importation cartel alongside KAPI to reap maximum returns.

KAPI members in the country are affiliated to multinationals such as AstraZeneca, Bayer East Africa, Beta Healthcare and Boehringer Ingelheim.

Others are Eli Lilly and Company, GlaskoSmithKline (GSK), Harleys, Highchem, Mcnaughton, Laborex Kenya, Norvatis, Phillips Pharmaceuticals and Pfizer among similar others.

Sub-standard

Reached for comment, KAPI denied accusations of pressuring the Pharmacy and Poisons Board registrar, but said it had been complaining about how permits for drug imports are issued.

“Our feeling is that the process of issuing permits for parallel importation of drugs is being abused, which has seen a rise in sub-standard medicines in the market that threaten the health of Kenyans,” KAPI chairman, Mr William Mwatu, said in a telephone interview.

Mr Mwatu added that the “flawed” licensing of importers has created an unfair competition to KAPI members as the imported drugs end up retailing at much lower prices.

Last week, however, Lords Healthcare Ltd, which is a member of KAPI, was caught in a counterfeit drug importation fiasco in an ongoing court case.

Indian drug maker, Cipla, got High Court orders barring Lords Healthcare — its former Kenyan agent for over 40 years — from importing or selling any drugs under its (Cipla’s) registration certificate.

Lords Healthcare is facing accusation of using an expired drug registration certificate from Cipla to import counterfeit medicines and selling them to unsuspecting consumers.

A taskforce formed by the Pharmacy and Poisons Board to examine the challenges facing parallel importation of drugs noted that the lack of a strong regulatory framework exposes the sensitive business to abuse.

The taskforce held that parallel importation was key to bringing down the cost of medicine through fostering competition, although it can facilitate an influx of counterfeits if left unchecked.

Limited supply

According to the Isaac Kibwage-led taskforce, the pharmaceutical industry in Kenya is dominated by KAPI leading to harmful, monopolistic effects such as high prices of medicine amid limited supplies.

“We are not trying to create a monopoly, but parallel importation of pharmaceuticals as practised now impacts negatively on the process of drug registration,” Mr Mwatu said.

KPDA, however, argued that its members source drugs from the same places that KAPI registered entities get theirs only that the latter is “fixated on a far higher markup of up to 700 per cent”.

Price control

“All multinational companies have factories in India, China and Bangladesh where the cost of production is very low, yet we do not see similar lowering of prices by their agents here,” KPDA’s Mr Murichu noted.

He said price control for pharmaceutical is now necessary in Kenya to protect the citizens.

KPDA has since petitioned the President and his deputy to reign in on the alleged excesses by agents of multinational drug firms to ensure that Kenyans access cheap medicine from any pharmacy.