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Naira depreciation causing drug price hike as imports hit N900bn
The devaluation of the naira means that import prices of pharmaceutical products could reach over N900 billion in 2024, continuing the trend of skyrocketing drug prices.
Nigerians who had struggled with high drug prices in 2023 are expected to face even more pressure as a result of this. The International Trade Centre reports that Nigeria imported pharmaceuticals worth $1.05 billion in 2022. It cost N475.17 billion at the time's exchange rate of N451/$. It will cost N950.81 billion at the February 19, 2024, exchange rate of N902.45 to the dollar.
The United Nations COMTRADE and the National Bureau of Statistics provide data to the multilateral agency, which shares a mandate with the World Trade Organisation and the UN. Since the NBS has not yet released foreign trade records for the fourth quarter of 2023, data for the year is unavailable hence the usage of 2022’s data.
Drugs are only one aspect of pharmaceutical products. Heparin and its salts, as well as other human or animal substances prepared for therapeutic or prophylactic uses, are among the items listed by ITC as "dried glands and other organs for organo-therapeutic uses, whether or not powdered; extracts of glands or other organs or their secretions, for organo-therapeutic uses."
"Medications that are not offered for retail sale or in measured doses, but rather combine two or more ingredients for therapeutic or preventative purposes." drugs made up of unmixed or mixed substances for use in treatment or prevention that are supplied in predetermined dosages (including those intended for transdermal administration) or in formats or packaging intended for retail distribution.
Bandages, wadding, gauze, and similar materials, such as dressings, sticky plasters, poultices, impregnated or coated in medication, or placed for retail sale for medical, surgical, dental or veterinary purposes. Pharmaceutical preparations and products of subheadings, and more…”
Nigeria imports the majority of its pharmaceuticals from Belgium, the Netherlands, China, Malaysia, and India.
Nigeria has continued to import more than $1 billion worth of pharmaceuticals since 2019. It was $2.84 billion in 2020, $1.37 billion in 2021, $1.05 billion in 2022, and $1.45 billion in 2019. Due to some foreign pharmaceutical companies' decision to concentrate on imports this year, this is expected to rise in 2024.
GlaxoSmithKline Consumer Nigeria Plc made plans to close down operations in August 2023 and switch to a third-party direct distribution model for its pharmaceutical product in the nation.
After 51 years of operations in the nation, the business declared, "We revealed in our published Q2 results that the GSK UK Group has informed GlaxoSmithline Consumer Nigeria PLC of its strategic intent to cease commercialization of its prescription medicines and vaccines in Nigeria through the GSK local operating companies and transition to a third-party direct distribution model for its pharmaceutical products.”
A multinational pharmaceutical company based in France, Sanofi, also declared in November 2023 that it would be leaving the nation and switching to a third-party distribution model. According to the statement, its commercial portfolio of medicines will be handled by its third-party distributor starting in February 2024.
Since then, pharmaceutical prices have increased by more than 100%. SBM Intelligence claims that consumers, businesses, and the pharmaceutical industry are all feeling the effects of Nigeria's rising inflation and foreign exchange crisis.
Speaking to the company, Boladele Silva, a professor of pharmaceutical studies at the University of Lagos, noted that foreign exchange volatility posed a significant risk to the Nigerian pharmaceutical industry.
He gave the following explanation for the recent increase in drug costs: "In Nigeria, we have packaging hubs." Imported active pharmaceutical ingredients are utilised by the manufacturers. It renders them extremely susceptible to shocks to the economy.
The selling price of Amoxil experienced the fastest rate of increase in the same period, rising by over 400 percentage points, while the cost price of Ampiclox experienced the largest year-over-year increase, rising by 346 percentage points, according to the data insight firm's analysis. GSK is the company that makes these two medications.
In a recent interview, Sesan Kareem, the founder and CEO of HunPharm Africa, attributed the rise in drug prices to fluctuations in the exchange rate.
He declared, "Price influences come from a variety of sources in our free-market system, so each player can decide how much medication costs on their own. The cost of importing pharmaceutical products and raw materials is greatly impacted by exchange rate fluctuations.
"The costs associated with obtaining these necessary medical supplies increase when the local currency depreciates relative to other currencies, thereby increasing the country's overall drug prices." The situation is made worse by the limited supply of foreign currency.
Pharmaceutical companies and manufacturers of pharmaceuticals both rely heavily on imported materials to manufacture medicines, and the lack of foreign exchange makes it difficult for them to get these materials at stable prices. As a result of this scarcity, manufacturers are compelled to make up for it by increasing the prices of medicines to cover their higher operational costs.”
Drawing the government’s attention to the hike in drug prices, a chieftain of the All Progressive Congress in Osun, Olatunbosun Oyintiloye, tasked the Federal Government to intervene.
Recently, the Lagos State chapter of the Nigeria Medical Association voiced concern about the rising costs of pharmaceuticals and healthcare services.
The NMA's state branch chairman, Dr. Benjamin Olowojebutu, declared, "We need to address the issue of medical services being unaffordable." In a time when healthcare costs are high and money is tight, we need to look into sustainable models that guarantee healthcare organisations' financial stability as well as patients' access to affordable services.
In an effort to address the nation's rising prescription drug costs, President Bola Tinubu recently supported three resolutions during a Federal Executive Council meeting.
"Today at the Federal Executive Council, Mr. President took three far-reaching decisions relating to the health sector," announced Prof. Ali Pate, Coordinating Minister of Health and Social Welfare.
First, there are the growing costs of prescription drugs, the escalation in pharmaceutical prices that many Nigerians cannot afford, life-saving supplies, syringes and needles, and the withdrawal of large corporations from our market.
"The third decision concerns how we address the human resources crisis in the health sector, and those decisions also include regulating the sector to protect human health and well-being."