FINANCIAL CHRONICLE – Sri Lanka is at risk of a medicine shortage as the pharmaceutical sector struggles with regulatory constraints that prevent price adjustments despite a declining rupee, according to industry representatives.
Recently, the Sri Lankan rupee has depreciated significantly, with the Central Bank’s indicative exchange rate dropping by 5.6% over the past six months, from 302.6 to 319.5 per US dollar.
The country relies heavily on imported medications, having spent approximately US$ 667 million on drug imports last year, which constitutes around 85% of the overall pharmaceutical market.
According to industry stakeholders, the last price adjustment authorized by the National Medical Regulatory Authority (NMRA) occurred in July 2023.
Shantha Bandara, President of the Sri Lanka Chamber of the Pharmaceutical Industry (SLCPI), stated, “Given the significant increase in the exchange rate, a price increase is necessary for the industry. Prices of all other products have risen, yet medicines have seen a considerable decline. Without this adjustment, we are unable to place new orders.”
The NMRA has guidelines that allow for the review and revision of maximum retail prices (MRPs) if the exchange rate experiences fluctuations of more than 5%, whether up or down.
Bandara also mentioned that the last price adjustment made in July 2023 involved a 16% reduction for select medications. Both the SLCPI and the Sri Lanka Pharmaceutical Manufacturers’ Association (SLPMA) have expressed concerns about the delays in implementing necessary price increases, arguing that the existing controls are “market-blind” and unsustainable for operations.
Nalin Kannangara, president of the SLPMA, noted that the costs of medicines have surged by as much as 25% due to the depreciation of the exchange rate and ongoing instability in the Middle East. “The current crisis in the Middle East could lead to a shortage of finished pharmaceuticals in the market,” Kannangara remarked.
He added that imports are currently facing numerous challenges, including freight issues, insurance complications, and the risks associated with exchange rates.
While a pricing formula exists, stakeholders emphasize that the exchange rate is the primary factor in this equation. Attempts to reach the NMRA for comments were unsuccessful, as they did not respond to inquiries.
However, Health Minister Nalinda Jayatissa acknowledged the difficulties posed by the rupee’s depreciation. “There is a 5% provision. If there is a slight increase in the dollar, a price increase must be considered,” Jayatissa explained. He indicated that the government might permit an increase in the “ceiling price” for drug importers, rather than adjusting the retail price directly.
