Pharma must sell 25% essential drugs for new medicine approval, govt mandates

Highlights:

• Government mandates 25% essential drug sales for pharmaceutical companies
• Non-compliant firms barred from approval of new medicines
• Essential medicines list expanded to 295 drugs, prices regulated
• Industry criticises policy as unrealistic, loss-making, poorly consulted
• Experts warn rigid price controls may disrupt quality and supply
• Government says pricing reform will boost affordability, access nationwide

Alongside expanding the essential medicines list, the government is set to introduce a new pricing policy mandating pharmaceutical companies to ensure at least 25% of their annual sales from these essential drugs.

Under the new policy, companies that fail to meet the 25% threshold will be barred from seeking approval for new drugs, as applications will not be considered by the authorities. 

The policy has been approved by the health ministry and is now awaiting gazette notification.

The government on 8 January announced the expansion of the National Essential Medicines List, adding 135 drugs and raising the total to 295, and said their prices will be fixed soon. It also announced that the National Medicine Pricing Policy 2025 has been finalised.

While officials describe the move as a major step towards improving access and affordability, pharmaceutical industry leaders have sharply criticised the policy, calling the mandatory supply requirement unrealistic and detached from market realities. 

Manufacturers also allege that they were not meaningfully consulted during the formulation of either the expanded essential medicines list or the new pricing framework.

Industry representatives said that although their association submitted position papers and supporting documents to the pricing committee, these were not reflected in the final policy.

Infograph: TBS

Why manufacturers avoid essential drugs

Dr Md Zakir Hossain, secretary general of the Bangladesh Association of Pharmaceutical Industries (BAPI), told The Business Standard that no pharmaceutical company in Bangladesh produces only essential medicines.

"Some companies produce just 5–10% essential drugs, while many newer firms produce none at all," he said. "Imposing a 25% requirement without revising prices would inevitably lead to financial losses or even factory closures."

He noted that the previous list of 117 essential medicines had remained largely unchanged for decades, with prices revised only twice in the last 32–33 years, making production commercially unviable.

"At current regulated prices, manufacturers incur heavy losses. This is why many companies avoid producing essential medicines," he said.

Dr Zakir warned that several saline manufacturers have already shut down due to compulsory pricing policies and pointed to regulatory bottlenecks in importing raw materials, which require multiple layers of approval. He added that companies have yet to receive official guidance on how the new pricing framework will be implemented.

Syed S Kaiser Kabir, chief executive officer and managing director of Renata, echoed similar concerns, describing the policy as disconnected from ground realities.

"The decision to mandate at least 25% of total production as essential medicines was taken without consulting the industry and bears no relation to the current market structure," he told The Business Standard.

"This reflects a command-economy mindset," he said. "If the government fixes prices below production costs, no company will manufacture the product. That is basic economics."

Questioning the demand assumptions, he added: "Where is the market for 25% of my total output to be essential drugs? Should companies manufacture excess products and stockpile them? No product can be produced without demand."

Abdul Muktadir, president of BAPI, said the health ministry had excluded industry stakeholders from the pricing process altogether.

"We were not consulted at any stage, and even now we do not know whether this policy will ultimately benefit or damage the pharmaceutical sector," he said.

Public health experts urge caution

Dr Md Abu Zafor Sadek, a pharmacist and former World Bank consultant, welcomed the expansion of the essential medicines list, calling it a positive step for public health. However, he cautioned that rigid price controls could undermine quality, disrupt supply continuity and discourage future investment.

He said collaborative pricing mechanisms, rather than unilateral price fixation, were more likely to serve patients effectively. On the proposed 25% production requirement, he added that business decisions tend to function best when guided by market demand rather than compulsion.

Government calls policy a 'landmark decision'

Announcing the updated essential medicines list on 8 January, Md Sayedur Rahman, special assistant to the chief adviser for the health ministry, said essential medicines address nearly 80% of common diseases.

He said price regulation of these medicines would directly improve affordability and availability for the majority of the population, describing the initiative as a "landmark decision".

According to him, a task force spent the past 14 months consulting manufacturers, researchers, international organisations and other stakeholders on the pricing framework.

"Not everyone agreed, and reaching full consensus is difficult," he said. "But the policy reflects broad-based consultation."

Once gazetted, all essential medicines will fall under price regulation, with no exceptions, he added.

'Win-win situation', says task force member

Syed Abdul Hamid, professor of health economics at Dhaka University and a member of the task force on the National Essential Medicines List, said prices of essential medicines were rarely adjusted after 1994, causing manufacturers to gradually abandon them.

"As companies shifted towards medicines with indicative prices, doctors prescribed those more frequently, forcing patients to buy relatively expensive alternatives," he said.

He argued that the new formula-based pricing system would bring essential medicines back into the market at affordable prices. By way of example, he said a drug that should have cost Tk2 was previously unavailable, forcing consumers to pay Tk10 for substitutes.

"Companies will still earn profits, but these will be regulated profits," he said, adding that the system would also curb aggressive marketing, as additional promotional costs could no longer be passed on to consumers.

"If implemented properly, this policy can create a win-win situation for both the public and the pharmaceutical industry," he said.

Cost-plus pricing for essential medicines

Under the new rules, essential medicines will be priced using a cost-plus benchmarking method to determine the maximum retail price (MRP), excluding VAT.

The government-nominated committee or the DGDA will set MRPs based on the cost of raw materials – including active pharmaceutical ingredients (API) and excipients – as well as primary packaging and class-based markups.

Primary packaging costs will be included as they come into direct contact with medicines, while secondary and tertiary packaging costs will be excluded to prevent unnecessary price escalation.

Reference pricing for non-essential medicines

For non-essential medicines, manufacturers will propose the MRP, subject to DGDA approval.

If seven or more companies produce a medicine, the median market price will be used as the benchmark under the Internal Reference Pricing system. If fewer than seven companies manufacture the drug, the lower of the internal or international reference price will apply.

In all cases, the approved MRP must remain within 15% of the benchmark price.

For imported finished medicines, prices will be set based on the C&F value, prevailing exchange rate and a predetermined markup.

New generics, biologics and API import rules

Patent-free new generic medicines not previously marketed in Bangladesh will be priced using a benchmarking method that includes raw material costs, primary packaging, secondary and tertiary packaging, and a 1.30 markup for essential medicines.

Biologics — including vaccines, insulin injections and gene therapies — will be priced based on an objective assessment of production costs and a regulated, sector-priority profit margin.

To promote domestic API production, importers will be required to obtain a no-objection certificate (NOC) from the DGDA before importing APIs.

An NOC will be granted if the importer can demonstrate that the API is either not produced locally in sufficient quantity or that domestic prices exceed international reference prices by more than 20%. The DGDA is required to issue the NOC within seven working days of receiving a complete application.