Naira Depreciation: Drug Imports May Hit Over N900bn
Drug prices are set to remain high in 2024 as import prices of pharmaceutical products may hit over N900bn due to the depreciation of the naira.
This is set to further put pressure on Nigerians who had grappled with high drug prices in 2023. According to data from the International Trade Center, Nigeria imported $1.05bn worth of pharmaceutical products in 2022. At the exchange rate of the time (N451/$), it cost N475.17bn. At the exchange rate of February 19, 2024, (N902.45/$), it will cost N950.81bn.
The multilateral agency, which has a joint mandate with the World Trade Organisation and the United Nations, gets its data from the National Bureau of Statistics and the United Nations COMTRADE, and since the NBS is yet to release foreign trade records for the fourth quarter of 2023, data for the year is unavailable hence the usage of 2022’s data.
Pharmaceutical products involve more than drugs. According to ITC, it include, “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; heparin and its salts; other human or animal substances prepared for therapeutic or prophylactic uses.
“Medicaments consisting of two or more constituents mixed together for therapeutic or prophylactic uses, not in measured doses or put up for retail sale. Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses “incl. those for transdermal administration” or in forms or packings for retail sale.
“Wadding, gauze, bandages and the like, e.g. dressings, adhesive plasters, poultices, impregnated or covered with pharmaceutical substances or put up for retail sale for medical, surgical, dental or veterinary purposes. Pharmaceutical preparations and products of subheadings, and more…”
Nigeria imports most of its pharmaceutical products from India, China, Malaysia, Netherlands, and Belgium.
Since 2019, Nigeria’s pharmaceutical imports have remained above the $1bn mark. It was $1.45bn in 2019, $2.84bn in 2020, $1.37bn in 2021, and $1.05bn in 2022. This is set to increase in 2024 following the move of some foreign drug companies to focus on importation this year.
In August 2023, GlaxoSmithKline Consumer Nigeria Plc announced plans to shut down its operations in the country and transition to a third-party direct distribution model for its pharmaceutical product.
The company which had operated in the country for 51 years said, “In our published Q2 results we disclosed that the GSK UK Group has informed GlaxoSmithKline 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.”
In November 2023, Sanofi, a French pharmaceutical multinational also announced plans to exit and adopt a third-party distribution model in the country. It stated that its third-party distributor will begin to handle its commercial portfolio of medicines from February 2024.
Since then, the cost of drugs has surged above 100 per cent. According to SBM Intelligence, Nigeria’s climbing inflation and foreign exchange crisis are a strain on businesses and consumers, with the pharmaceutical industry not left out.
Read Also:
A pharmaceutical professor at the University of Lagos, Boladele Silva, who spoke to the firm, explained that Nigeria’s pharmaceutical industry was very exposed to shocks from foreign exchange volatility.
Explaining the recent hike in the prices of medicines, he said, “In Nigeria, what we have are packaging hubs. The active pharmaceutical ingredients used by the manufacturers are imported. That makes them very vulnerable to economic shocks.”
In its analysis, the data insight firm stated that on a year-on-year basis, the cost price of Ampiclox recorded the highest rate of increase between 2022 and 2023, jumping by 346 percentage points, while the selling price of Amoxil recorded the fastest rate of increase in the same period, jumping by over 400 percentage points. These two drugs are both manufactured by GSK.
In a recent interview, the Founder and Chief Executive Officer of HunPharm Africa, Sesan Kareem, blamed the exchange rate for surging drug prices.
He said, “In our free-market system, prices are subject to influence from diverse factors, allowing each player to independently determine the cost of medicines. The fluctuating exchange rates significantly impact the cost of importing pharmaceutical products and raw materials.
“When the local currency weakens against foreign currencies, the expenses incurred in procuring these essential medical supplies rise, consequently driving up the overall prices of medicines in the country. The scarcity or limited availability of foreign exchange exacerbates the situation.
“Pharmaceutical companies heavily rely on importation of medicines and pharma manufacturers also rely heavily on imported materials for manufacturing medicines, and the scarcity of forex hampers their ability to acquire these materials at stable prices. This scarcity creates a ripple effect, forcing manufacturers to compensate 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.
The Nigeria Medical Association, Lagos State chapter, recently expressed concern over the increasing prices of drugs and medical services.
The Chairman of the state branch of the NMA, Dr Benjamin Olowojebutu, said, “The unaffordability of medical services must be addressed. In an era of expensive healthcare and budget constraints, we must explore sustainable models that ensure both the financial stability of healthcare institutions and the affordability of services for patients.”
President Bola Tinubu, at a recent Federal Executive Council meeting, endorsed three resolutions to tackle rising cost of pharmaceuticals in the country.
Announcing it, the Coordinating Minister of Health and Social Welfare, Prof. Ali Pate, said, “Today at the Federal Executive Council, Mr. President took three far-reaching decisions relating to the health sector.
“The first is on the rising cost of pharmaceuticals, the hike in prices that we have in the pharmaceutical, which is going beyond the reach of many Nigerians, life-saving commodities, devices like syringes and needles, and the exit of major companies from our market.
“Those decisions also include the regulation of the sector to protect the health and well-being of humans and the third decision is regarding how we deal with the crisis of human resources in the health sector.”
