Health ministry works to withdraw increased VAT on medicines: Official

The Ministry of Health and Family Welfare has undertaken steps aimed at removing the latest value-added-tax (VAT) levied on medicines at local level, or at pharmacies and drugstores.

"An initiative has been taken by the Ministry of Health to withdraw the VAT levied on medicines. We are optimistic about addressing the matter," Dr Sayedur Rahman, special assistant at the Ministry of Health and Family Welfare, told The Business Standard.

The ministry is working to ensure the availability of essential medicines, he added.

Earlier, on 9 January, the government issued two ordinances increasing VAT and supplementary duties on over 100 products and services, including medicines, on which VAT was raised from 2.4% to 3%.

Meanwhile, the Bangladesh Association of Pharmaceutical Industries (BAPI) has decided to write to the Ministry of Health and the chief adviser urging a withdrawal of the new VAT imposed on medicines. 

However, though the VAT hike on medicines at the local level came into immediate effect on 9 January, drugstores have not yet started charging extra to align with the price adjustments. 

A visit to some drugstores in the capital's Eskaton on Tuesday revealed that they were selling medicines at the same prices as before.

Staff at the stores told TBS that they have not received any instructions from the pharmaceutical companies regarding any price adjustments.

Abdul Muktadir, president of the Bangladesh Association of Pharmaceutical Industries and managing director of Incepta Pharmaceuticals Ltd, told TBS that an appeal will be made for the withdrawal of the VAT levied on medicines. "We will write to the Ministry of Health and the chief adviser." 

As the latest VAT on medicines has been levied in local trading, health economists say it is meant to be charged to customers at pharmacies, not at the manufacturing level.

Talking to TBS, Dr Syed Abdul Hamid, professor at the Institute of Health Economics, Dhaka University, said, "Ideally, medicines should be exempt from VAT, considering them as a life-saving commodity. Otherwise, common citizens will suffer."

The initiative by the Ministry of Health to remove the VAT [on medicines] would be considered a highly positive move. "The Ministry of Finance should revoke the VAT [on medicines]."

According to 2022 estimates by the World Health Organisation, people in Bangladesh bear 72.5% of their total healthcare expenses from their own pockets.

This burden pushed 61 lakh people into poverty that year, as data from the Bangladesh Institute of Development Studies (BIDS) suggest.

As the BIDS study shows, a substantial portion of out-of-pocket spending across all patient categories goes towards medication. Outpatients allocate 54% of their total expenditure to medicines, while inpatients allocate 25%, it notes.