High-priced drugs generate huge revenue for the government


Top 20 drug makers double VAT payment

Increased API production can lower prices: experts

| Updated:
01 September 2022 16:06:22

The pharmaceutical sector in Bangladesh has grown faster in the past five years with product diversification, next-generation drug innovation and rising trend in drug consumption, generating higher revenue for the pharmaceutical industry. government.

Health economists, however, highlight the flip side of a rapidly growing drug market, as they claim that the consumption of expensive drugs has increased to cure non-communicable diseases such as high blood pressure which leads to cardiovascular, stroke and kidney disease.

The strong growth in the consumption of drugs or pharmaceutical products is also reflected in the collection of consumption taxes by the government.

The top twenty pharmaceutical companies paid more than double the VAT worth 34.83 billion taka to the Treasury in the 2021-22 financial year compared to 18.79 billion taka in the fiscal year 2017-18, according to data from the National Board of Revenue (NBR).

The collection of value added tax (VAT) increased by 11.20% last year from major pharmaceuticals compared to the previous year.

Sick people, on the other hand, have to pay through their nose. Currently, consumers must pay a total of 17.4% VAT (inclusive) on pharmaceutical products: 15% at the production stage and 2.4% at the sales stage.

Officials say drug prices have remained unchanged for the past five fiscal years.

The Directorate General for Drug Administration (DGDA) increased the prices of 53 essential drugs after seven years last July. Before that, the prices were revised in 2015.

However, reports indicate that the prices of many drugs increase most often at the marketing level.

Dr. Abdur Razzaque Sarkar, a health economist and researcher at the Bangladesh Institute of Development Studies (BIDS), says that the footprint of new pharmaceuticals and the cautious marketing strategies of pharmaceutical industries have contributed to the overall growth of this sector.

“Pharmaceutical industries have changed their business model, focusing on NCDs where drugs are more expensive,” he adds.

He thinks the consumption of drugs is higher in Bangladesh because people can buy them at home without a doctor’s prescription.

Dr. Nazneen Ahmed, senior researcher at BIDS, suggests that bottlenecks to the smooth operation of active pharmaceutical ingredient (API) parks should be removed immediately.

“Drug prices could come down if local pharmaceutical industries could produce APIs and lab reagents,” she says.

The country should be prepared to push for the extension of the TRIPS (Trade-Related Aspects of Intellectual Property Rights) waiver after the country graduates from Least Developed Country (LDC) status in 2026 to benefit from the advantages of the patent, she adds.

Among the major companies subject to VAT, Square Pharmaceuticals ranks first by paying Tk 5.83 billion last year. Payment by the company increased by 14.44% last year compared to the corresponding year, data from the Large Taxpayer Unit (LTU) under the VAT wing revealed.

Incepta Pharmaceuticals Company Limited ranks second with Tk 4.67 billion paid in VAT, up 19.91% year on year.

Renata Limited paid Tk 3.28 billion to sand afterwards. The payment of VAT by the company increased by 7.09% last year.

Healthcare Pharmaceuticals Limited paid 3.35 billion taka to the public treasury. The pharmaceutical company’s VAT payment rose 34.80 percent in FY22, compared to the same period last year, the highest among any drugmaker.

The owners of ACME Laboratories Ltd paid Tk 2.81 billion in VAT, an increase of 11.35% over the corresponding period.

ACI Limited’s payment of VAT increased by 10.18% last year. The company paid Tk 2.02 billion.

Aristopharma Limited paid 1.72 billion taka and Drug International 1.07 billion taka.

Eskayef Bangladesh Ltd paid 15.92% additional VAT amounting to Tk 2.45 billion to the public treasury last year.

Pharmaceutical industry insiders say the COVID-19 pandemic has created the need to manufacture new products, including masks, PPE and other safety gear.

Executive Director of Square Pharmaceuticals Limited (Chemicals Division), Md Mizanur Rahman, found the average growth of the pharmaceutical industry impressive, as evidenced by the consumption tax payment.

He said that along with new products being launched every year, existing products have also marked significant growth.

Kaiser Kabir, Managing Director and Chief Executive Officer of Renata Limited, said improved sales, marketing and product quality contributed to the company’s increased pharmaceutical sales.

Industry insiders say there is now a need to invest in a biotech drug production plant to reduce import reliance on vaccines, insulin, cancer drugs and other life-saving drugs.

Globally, 80% of pharmaceutical investments are in biotech medicine factories, while Bangladesh has only a few.

“We have to think about investing in a biotech factory to build an import substitution industry after 10 years,” said one, preferring anonymity.

Responding to the question, Mr. Kaiser Kabir points out that the country has no regulations for the production of biotech drugs. “Some industries produce biotech drugs on their whim, which is unpredictable.”

Mohammad Shafiqul Islam, senior managing director (marketing) of Popular Pharmaceuticals Limited, said the company launched 52 new products last year.

He said the company has established itself as a pioneer in hormone injection, saline and the production of other import substitution drugs during its past 16 years of operation in the Bangladesh.

Currently, there are 200 registered pharmaceutical companies in Bangladesh, according to the Bangladesh Association of Pharmaceutical Industries (BAPI).

The market size was 1.73 billion taka in 1981 and increased to 16.99 billion taka in 2000, according to IQVIA, formerly known as MIS Health.

However, the pharmaceutical industry recorded a leap forward from 2010 to 2021. In 2010, the market size was Tk 68.0 billion, which increased to Tk 231.84 billion in 2019, 262.85 billion of Tk in 2020.

In 2021, the pharmaceutical sector faced negative growth due to the Covid pandemic, causing the nominal market size to fall to Tk 261.63 billion.

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