A combination of hoarding and price gouging has sent drug prices to record highs following the exit of GlaxoSmithKline (GSK) from Nigeria.
While the country’s devalued currency and high tariffs on pharmaceutical imports have already worsened drug pricing woes, middlemen have capitalised on the scarcity of GSK products, driving up prices and raking in bumper profits.
BusinessDay’s findings show that some middlemen make more than 100 percent profits on drugs such as Seretide, which jumped from N7,000 in the first quarter of 2023 to as much as N70,000 in November.
Seretide is like the second line of action for asthmatic patients when Ventolin, also a brand of GSK, no longer does the job.
People are also embarking on parallel imports to reap from the bubble while it lasts. This means GSK products legally manufactured in other countries are imported into the Nigerian market, with some brought in as personal effects.
“What you have is that people who have stocked up this product in the past or people who were lucky enough to buy, probably a week before GSK stopped bringing in their drugs, have stock,” Samuel Okwuada, CEO and co-founder of Remedial Health, a digital procurement platform for pharmacies, patent medicine vendors and hospitals, told BusinessDay in an exclusive interview.
“They (middlemen) know some of these drugs are no longer available in the market and not many people have them. They can command whatever price they want for it. This is why you have prices skyrocketing with these kinds of margins.”
A source who leads one of Nigeria’s largest retail pharmaceutical stores also confirmed to BusinessDay that there is a full-blown exploitation going on under the guise of GSK’s exit amid a foreign exchange crisis, leading to significant hardship for many patients who rely on these essential medications.
The source forecasts that things will begin to settle down by the first quarter of next year when the availability of GSK products will erode the scarcity.
“Hoarding and price gouging are the norm in Nigeria at the moment, unfortunately. But GSK items will come in by the end of the first quarter of 2024,” the source said.
The British multinational pharmaceutical company has yet to announce the third-party distributor of its consumer healthcare products since it went public with its plans to quit in August, after 51 years of operation in Nigeria.
The Haelon Group, one of the world’s largest consumer healthcare businesses, which used to manage distribution for GSK Consumer Nigeria Plc, has terminated its agreement, blocking direct sourcing of medicines from the company.
What it means for many Nigerians who are already used to the efficacy of their products is that access is limited as essential medicines turn to luxury.
It has particularly imposed financial constraints on many, leaving them to scramble for more funds to afford medicine amid widespread poverty and soaring food inflation.
The price of Ampiclox jumped from N1,000 to N13,000, marking a 1,200 percent increase; Ventolin inhaler moved from N2,800 to N8,000, a 300 percent hike; while Augmentin (625mg) soared from an average of N4,500 to N25,000, a 455.5 percent increase.
“I bought it (Seretide) N72,000 for my cousin two weeks ago on that Island. Delivery brought it to N77,000,” Talata-Obi, a user of X, formerly known as Twitter, said.
Frederick Ichekwai, GSK’s secretary, said in a statement that the board concluded that there was no alternative but to cease operations.
Patients are facing a surge in the costs of other medicines and treatments that were previously cheaper.
As drug prices surge unabated, healthcare providers are also lamenting that they have begun to see an increased pattern of patients who micro-manage medicines due to a lack of funds.
Abiola Oduwole, a professor of Paediatric Endocrinology, who looks after children with diabetes at the Lagos University Teaching Hospital, said a lot of patients are declining visits to the hospital because they cannot afford prescription medicines.
“An adult with diabetes must check their blood sugar at least twice daily. Children check four to five times a day. Now, the reagent strips are so expensive that most of them cannot afford it. It cost about N9,000 Insulin now costs about N15,000,” Oduwole said.
Analysts say the major bone of contention remains the unresolved FX crisis, the exorbitant cost of drug importation, and the high cost of doing business, fuelled by the cost of energy.
For instance, the value of finished imported drugs grew from N6.4 billion in 2018 to N12.1 billion in 2021, according to data from the National Agency for Food and Drug Administration and Control.
Given the heavy reliance of the pharmaceutical sector on importation, which renders it highly susceptible to currency devaluation shocks, stakeholders said the government must take proactive measures to dismantle all obstacles impeding the ease of doing business locally.
The most important component in the structure for most drugs is active pharmaceutical ingredients (APIs), which accounts for 80 percent.
APIs are imported from big pharmaceutical manufacturing hubs such as India, China, Germany, and the UK.
Kelvin Emmanuel, chief executive officer of Dairy Hills Limited, in an analysis of the challenge, said that for companies like GSK and Sanofi to manufacture (considering poor power supply and logistics), they need to open letters of credit (LCs) to import 95 percent of these components.
He noted that banks are struggling to open LCs because the Central Bank of Nigeria is not liquid enough to fund patient capital.
Emmanuel said: “So the boards of these companies sit down and ask themselves, coupled with the external risk of currency devaluation and depreciation impacting their internal rate of return, what is the incentive of spending 6 to 12 months to jostle for USD to fund dividend remittances to shareholders abroad?
“If the Nigerian government wants to fight inflation, it needs to circle back to the question: how can we help companies set up different horizontals or verticals for enterprise manufacturing across key sectors? Enterprise manufacturing is your key to ensuring the consumer manufacturers can keep inflation at bay and are shielded from the fangs of a wobbling exchange rate.”