Medicine prices likely to soar if GST imposed

Govt proposes 18% sales tax on medicines in next budget on recommendation, Health Ministry official says

M. Waqar Bhatti
Customers buy medicine from a medical supply store in Karachi, Pakistan February 9, 2023. — Reuters
  • Pharmaceuticals will get chance to set preferred prices.
  • GST imposition likely based on IMF recommendations.
  • Experts say medicine prices will be out of people's reach.

ISLAMABAD: Medicine prices in the country are likely to skyrocket following the imposition of an 18% sales tax in the wake of the federal government's decision to deregulate the prices of non-essential medicines.

According to a The News report published on Tuesday, the move will allow pharmaceutical companies to set and sell the prices of medicines as per their will.

"The government has proposed an 18% sales tax on medicines in the next budget on the recommendation of the International Monetary Fund (IMF) as part of a broader effort to rationalise tax policies and increase revenue," an official of the Ministry of National Health Services, Regulations and Coordination (NHS, R&C) told the publication.

Authorities, the official added, have already deregulated the prices of thousands of medicines. Therefore, the prices of medicines will be out of the people's reach when combined with the 18% sales tax.

The officials within the finance circles have claimed that the recommendation to impose an 18% sales tax is part of a set of measures suggested by the IMF to improve Pakistan’s fiscal health, which also includes bringing unprocessed food, petroleum products and stationery under the standard GST rate.

The Washington-based lender's recommendation for taxing medicines, however, comes at a time when the previous caretaker government had already deregulated medicine prices.

It's move ended the Drug Regulatory Authority of Pakistan’s control over fixing prices and allowed pharmaceutical companies in Pakistan to set prices for thousands of medicine molecules and brands on their own.

The increase in GST on medicines, if implemented, could impact the public significantly, particularly due to the already expensive healthcare in the country. Therefore, experts have warned that higher taxes on medicines would likely result in increased prices, making medications less affordable for many people.

"This could exacerbate health disparities, particularly affecting those who are economically disadvantaged and already struggle with the cost of healthcare,” said an expert.

Meanwhile, a renowned public health expert maintained that the imposition of an 18% sales tax at a time when medicine prices have already been deregulated would make people’s lives miserable. The expert called for the constitution of an independent policy board within the DRAP to make decisions in the interest of the public.

"How can a policy board led by a government official, who is the federal secretary of health, take decisions in favour of the people?” the expert questioned, urging the government to include public health experts, patient representatives, and civil society organisations in decisions regarding medicine registration and pricing in Pakistan.

He also warned that the increase in GST on medicines would make diabetes and hypertension medications out of reach for millions, as around 33% of the adult population in Pakistan is diabetic while over 40% are hypertensive and require daily medication to manage their health condition.

"Already, diabetics and hypertensive patients are not taking medicines regularly, while people with mental health issues also require regular medication but cannot afford it," he claimed, asking the government to provide medicines under a health insurance scheme to people below the poverty line.

The expert also called for making medicines available for labourers, journalists and other marginalised segments of society through a health insurance scheme.

"When medicine prices are deregulated, pharmaceutical companies have more freedom to set prices based on market demand rather than regulatory guidelines. Combined with the additional GST, this could lead to substantial price hikes, placing a heavier financial burden on patients,” he warned.

The expert added that although the IMF’s recommendation aims to boost government revenue, it poses significant risks to public health by potentially making essential medicines less accessible to the population.