Nepal’s Market Creaking Under Outdated Laws

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Nepal’s Market Creaking Under Outdated Laws

--By Sanjeev Sharma

The arrests of the owners of two pharmaceutical companies earlier in March has caused a notable stir. Accusing the companies of selling their medicines at 20-25 percent more than the price fixed by the government, a team led by the Chief District Officer of Kathmandu raided the corporate offices of Deruali Janata Pharmaceuticals Limited (DJPL) and Lomas Pharmaceuticals on March 4. The government team detained two executives of DJPL and arrested Prabal Jung Pandey, Executive Director of Lomus Pharmaceuticals alongside other staff of the two companies. It also seized various documents from the pharmaceutical companies. 

Nevertheless, the companies deny any wrongdoing. “We were detained without any proper documents,” informs Prabal Jung Pandey. “We have not done anything wrong regarding the pricing of the medicines.” According to him, Lomus has not raised the price as alleged by the government. “We have been selling the products which were priced earlier,” he claims. Meanwhile, the government’s action has prompted a strong reaction from the private sector. Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and the Confederation of Nepalese Industries (CNI) issued a joint statement condemning the government’s act as demoralising and disheartening to the Nepali private sector which has been facing various challenges in recent times.  

The pricing of medicines has been a controversial issue in the Nepali pharmaceutical industry. In mid-2015, the Department of Drug Administration (DDA) set prices for 96 essential medicines produced by Nepali pharmaceutical companies. However, producers have opposed the pricing and have gone to the court to resolve the issue. Currently, the case is pending in the Supreme Court. “With the case still in the court, the authorities should have acted responsibly,” says Shanker Ghimire, President of Association of Pharmaceutical Producers of Nepal (APPON). “Engaging in talks to address demands rather than using force would have been helpful.” 

Nepali pharmaceutical producers say that they cannot comply with the government fixed rates. “Given the price of raw materials in the international market and other associated costs, we are unable to sell medicines at the rate fixed by the DDA,” mentions Ghimire.  He says that the medicines imported from other countries are priced much higher than those produced in Nepal.  Though the DDA has set prices for the Nepal made medicines, imported products are sold across the country at higher prices. Pharmacuetical industrialists demand a similar treatment for Nepali medicines. Ghimire says that Nepali companies continued their production while struggling against various odds last year. “We airlifted raw materials and purchased fuel at very high prices just to keep producing life-saving medicines during the crisis,” he informs. “Despite our best efforts, the government’s attitude towards us is very discouraging.” 

Though the government formally accepts the free market system, its actions often contradicts the policies, analysts say. This is primarily due to the half-hearted stance of the government towards the globally accepted economic norms, they state. “In a free market, the government does not fix the price of goods and services. Demand and supply play a key role in determining the prices,” opines Dr Bishwambher Pyakuryal, an economist “The government, however, can suggest minimum prices in times of emergencies.” 

For the current dispute, he suggests a bilateral consensus between the DDA and phamaceuticals producers. 

The pricing dispute of medicines has once again highlighted the drawbacks in the country’s market related laws and regulatory mechanisms. Experts and industry leaders urge the government to replace or ammend the outdated existing laws to ease the regulatory hassels. The government has been pricing medicines according to the Drug Act, 2035 (B.S). “The act was meant to regulate the drug market when there was only one pharmaceutical company in the country. The act is outdated and continuing its use obstructs the growth of the domestic pharmaceuticals industry,”  says APPON President Ghimire.  

Similarly, the act to prevent black marketing has often drawn the ire of the business community and experts. The government assigned market monitoring teams often take action under the Black-marketing and Some Other Social Offences and Punishment Act, 2032 (B.S.). However, the government has largely failed to establish the relevency of the law at present. “The law needs to be updated. The four-decade old legislation has provisions that are not suitable in the present context,” says Dr Pyakuryal. “Also, there are different regulatory bodies for the same area. There is an overlapping in the regulatory mechanism.” 

He suggests a revision of such laws and policies based on a broader consensus between the stakeholders. “Participation of the business community, consumers’ rights advocacy groups and experts is necessary for the revesion of policies,” he opines. Apart from the participation of the stakeholders, a study of similar practices in other countries could also be useful. “This will ensure fair treatment in case of any alleged breach of law. Studies of similar laws at the regional and global level and their practices will prove helpful in this regard,” says Dr Pyakuryal.

 

Corrigendum:

The name of Mr Haribhakta Sharma was inadvertently published in this story in the print and online versions of the April issue of the magazine. The error is greatly regretted.  - Editor

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