Egypt's Drug Pricing Decree Amended: 132 Drugs See Price Cuts, 9,000 to Be Reviewed

Drug Pricing Decree Changes

The Egyptian Ministry of Health (MoH) has announced it will be amending the Decree No. 373 pertaining to the process of medicines pricing, with a view to carry out periodic reviews to contain drug prices, while not increasing prices. The changes to the decree also aim to reduce the drug registration and pricing timelines for foreign firms. The new pricing system sets the price of originator brand drugs in accordance with the lowest price in foreign markets, with an additional 10% discount. It also links generic prices in Egypt to the cost of brand name drugs, according to a basket of 36 countries including Switzerland and Sudan. According to MoH spokesman Abdel-Rahman Shahin, cited by Ahram.org, the decree has not yet come into force, but will apply to "newly introduced drugs". Pharmacists' margins will not be affected by the changes to the decrees, as they have a fixed percentage of profit on medicine that is protected by law. The new decree will be reviewed again in two years to assess its efficacy and impact on the industry. The roll-out date is yet to be announced.

Price Cuts Implemented Against 132 Drugs

Approximately 132 drugs will be subject to price cuts of between 10–60%, with 9,000 drugs to be reviewed in the coming months according to an announcement from the Egyptian Drug Authority (EDA), Ahram.org reports. The price cuts are applied to drugs for hepatic and renal disorders, antihypertensives, cardiovascular drugs, and paediatric antibiotics; 93 innovative products will be affected by the cuts. A two-month grace period has been granted to pharmacies to either sell or return their stock of the 93 drugs. Starting from 1 May 2011, 40 medicines will be sold to the public at the lower cost. The remaining 53 medicines will be sold at the cheaper prices by the beginning of July.

Outlook and Implications

The new international reference pricing system annuls the old "cost plus" and negotiation system, which used to determine the price of imported medicines on the basis of raw material, packaging, and marketing costs. The Egyptian government has moved ahead with its drug pricing changes following support from foreign companies operating in the country. This will be a blow to local consumer advocacy organisation, the Egyptian Initiative for Personal Rights (EIPR), and the Egyptian Pharmacists Syndicate (EPS), which previously won an injunction in April 2010 from the Egyptian Court of Administrative Justice suspending previous MoH attempts to implement international reference pricing (see Egypt: 29 April 2010: Egyptian Court Embargoes Government from Implementing International Reference Pricing in Surprise Move). International reference pricing should improve the transparency of drug pricing in the country, where previously good lawyers and government connections were needed to obtain better drug prices at the negotiation phase. Reference pricing will also allow entail greater predictability for companies, which will know the price for their product before the registration process, allowing better marketing strategies and revenue forecasts.

The linking of generic drugs to the originator product should see generic prices rising from the current 42% level to approximately 60% of the brand drug price, improving the profitability of struggling local manufacturers in the country. According to MoH statistics, generic drug sales in Egypt have more than doubled in the past five years, from US$200 million to almost US$500 million in 2009, and are forecast to approach US$1.4 billion by 2019. The Egyptian government's desire to subsidise pharmaceuticals for its population is set to continue. With the implementation of international reference pricing, patients with lifestyle diseases such as cancer and diabetes will have greater access to newer treatments, boosting the Egyptian pharmaceutical market, while Egyptian firms will be able to boost their exports, and more foreign firms will be encouraged to invest in the country through technology transfer and licence agreements. Currently, international pharmaceutical companies supply 65% of the Egyptian market through direct local manufacturing (30%) and licensing agreements (35%), according to AstraZeneca (U.K.).

Comparing drug prices across 36 markets is a complex task, and whether this will lead to delays in drugs entering the market (due to delays in pricing decisions) remains to be seen; an easier reference-pricing system might have excluded higher income countries from the list. Furthermore, using countries like Sudan to reference-price drugs is surprising given the relatively low access to innovative drugs in that country.

The price cuts to 132 drugs is an indication of the government's continuing desire to reduce drug prices in order to increase access for the population and reduce its drug expenditure as it expands national health insurance coverage. It also continues the trend in North Africa for governments cutting drug prices and encouraging local and generic production. These price cuts will affect revenues across all operating entities of the pharmaceutical industry in Egypt, including pharmacies, wholesalers, and pharmaceutical companies, further increasing the profitability hurdles faced by these entities operating in Egypt.