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FG eyes bulk buying to tame runaway drug prices

The federal government is exploring pooled procurement as a mechanism to lower the soaring cost of life-saving medicines in response to declining access and availability of affordable drugs in Nigeria.

President Bola Tinubu has approved the creation of an executive order to specifically enable pooled procurement of pharmaceutical products, allowing the local industry to work with cheaper materials, Muhammad Alli Pate, coordinating minister for health and social welfare, said during his first consultative forum with stakeholders in pharmaceutical manufacturing.

Read also: Rising drug prices squeeze health insurers’ margins

“In the next couple of weeks, the president wants to get an executive order that will allow us to foster the local industry to thrive. The attorney general is working hard to fulfil it,” Pate said.

“Pooled procurement of pharmaceuticals for critical medicines will make it easier and subsidise the cost for those who are suffering.”

The forum marked a major step by the Bola Tinubu administration towards resolving the drug production crisis, laying bare the challenges at each stage and their devastating ripple effects on ordinary Nigerians.

From crippling tariffs on essential materials to port gridlock and inconsistent policies, drugmakers warn of dire consequences unless the government collaborates to tackle these multi-pronged issues head-on, ensuring life-saving medicines remain accessible to all Nigerians.

In terms of fiscal policies that currently result in high tariffs, for instance, Okey Akpa, chairman of Pharmaceutical Manufacturers Group of the Manufacturers Association of Nigeria, said pharmaceutical equipment and accessories attract some tariff duty when imported either to modernise factory or to increase capacity, making Nigeria uncompetitive when compared with other African countries that have zero duties on such equipment.

Despite the existence of laws that declare raw materials for pharmaceutical products free of value-added tax, Akpa said the majority of manufacturers do not get this benefit due to the arbitrariness of interpretations by the Nigeria Customs Service, a government body that oversees the facilitation of national and international trade, anti-smuggling and security activities.

The status quo is such that some packaging materials such as gelatin capsules attract 25 percent duty sometimes despite being used strictly for pharmaceutical production.

“Even if we can’t get zero duties on them, moderate the duty in a way that will impact positively on the cost of medicines,” Akpa said.

“We recommend that instead of 25 percent, this specialised equipment should attract zero duties when they are to be used specifically for increasing the capacity for local production.”

The chairman also listed the ineffective implementation of tax incentives for pioneer status for investments in uncharted areas as another challenge.

According to the Nigerian Investment Promotion Commission, the Pioneer Status Incentive was established by the Industrial Development Act, No 22 of 1971 as a tax holiday that grants qualifying industries and products relief from payment of corporate income tax for an initial period of three years, extendable for one or two additional years.

“We also want tax incentives extended to critical and strategic investments in the sector whether manufacturing or other value chain. This will make the local industry attractive to foreign investments and also serve as a boost to those on the ground,” he said.

Concerning clearing conditions at the ports, the group recommended creating a special clearing system to fast-track processes around pharmaceutical materials without compromising existing laws.

The group is also seeking the establishment of a N600 billion Pharmaceutical Manufacturing Development Fund that is overseen either by the Central Bank of Nigeria or the Bank of Industry, with a single-digit interest.

The fund should cater to capital-intensive projects and intervene in critical value chain activities such as importing critical items that Nigeria cannot manufacture.

“You can have specialists qualified from many parts of the world without having the right prescriptions. Medicines need to be available, affordable, and accessible,” Julius Adelusi-Adeluyi, founder and chairman of Juli Pharmacy, said.

“We need an industry that is productive and able to confront the challenges causing drug insecurity.”

Acknowledging their concerns, Pate said the objectives of the government in policy direction, regulatory framework, and the expansion of the country’s influence in the regional market are similar to the demands of the group.

He said efforts have been made to study those who are succeeding at rigorous science research that leads to manufacturing, an ecosystem of entrepreneurs of all scales, regulatory framework, long-term financing, and smart procurement.

“We think it is a whole-of-government approach. But there are things within the sector that we can begin to address. I promise we will take this back to the president,” the minister said, calling for a second consultative forum to be convened by the end of March.

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