Factors affecting access to essential medicines
Many factors contribute to access (availability and affordability) to essential medicines. These include the local production capacity of pharmaceutical companies to meet domestic demands of medicines, tariffs and duties on imported medicines, supply chain and drug distribution system, government budget and expenditure on health, etc. [4, 6]. The key informant interviews showed that the local production of medicines in Nigeria is significantly less than the estimated drug needs of the population of the country. This finding is consistent with the report of Mohiuddin AK (2019) on the experience of Bangladeshi pharma industry that had 75% of its market dominated by imported medicines until the formulation of the nation’s National Drug Policy (NDP) which led to a dramatic positive changes for the country’s local pharmaceutical industry. The report showed tremendous growth in Bangladesh’s pharma sector but also some challenges facing the country’s pharma sector. Some of the challenges include economic development, population blast, and investment scopes [30].
Challenges such as population explosion and macro-economic conditions which drive economic policies including national tax and tariff decisions are not peculiar to Nigeria. In Nigeria, macroeconomic policy is usually implemented through two sets of tools which are fiscal and monetary policy. The impact aim of the macro-economic policy is to stabilize the economy. However, rather than depend on the importation of medicines, countries such as Iran now record upward trends in their local production capacity. As reported by Cheraghali AM (2017), the promotion of the national pharmaceutical industry is one of the main goals of Iran’s NDP. As a result, the share of the national pharmaceutical industry in the local pharmaceutical market has grown to 60%. Iran currently has one of the largest capacities of the production of generic medicines in the Middle East and MENA region [31].
Pakistan is a lower-and-middle-income country like Nigeria and has a double burden of communicable and non-communicable diseases and poor health indices. The country also has in common with Nigeria's reduced health sector investment, poor coverage of health insurance, absence of a strong pharmacovigilance system, and challenges with counterfeit medications. However, the country has a vibrant pharmaceutical sector fulfilling 70% of the local medicine demands and producing finished pharmaceutical products considered acceptable by countries across Asia, Africa, and the United States [32]
Effect of local manufacturing of drugs on price of essential medicines.
One of the drivers of prices of essential medicines and local drug manufacturers’ growth in Nigeria is the dynamics of tariffs on unfinished products and finished products imported into Nigeria. Due to the sub-optimal performance of the petrochemical industry in Nigeria, to the point that it cannot adequately provide raw materials needed for manufacturing in Nigeria, local manufacturers still have to import Active Pharmaceutical Ingredients (APIs) for manufacturing. However, drug importers into Nigeria on the other hand manufacture their products in countries like India and China and import the finished product into Nigeria for distribution and marketing. If the tariff of the importation of finished products is significantly lower than that of those importing APIs and excipients, then the tax regime is invariably inhibiting local pharmaceutical growth.
According to the informants, local manufacturers are confronting myriads of challenges that limit the extent to which they can contribute to the level of essential medicines available in Nigeria. Some of the challenges highlighted include a very high cost of production. The high cost of production makes it difficult for local manufacturers to compete favourably with drug importers. In some cases, as observed in the prices of selected medicines surveyed with the checklist, prices of some locally manufactured drugs are equal or higher than those imported at the retail level where final consumers procure. If the cost of production for local manufacturers can reduce, there will be a reduction in the price of their products, and that price dynamics will help them be at an advantage for competition with importers thereby achieving a reduction in the price of essential medicines in Nigeria [33, 34].
Factors contributing to the high cost of production include infrastructural deficit and epileptic state of power supply. The companies are forced to run on generators and/or other alternative sources of power. Currently, almost all pharmaceuticals (raw materials and finished products) are imported from countries like India and China [17]. In these countries, infrastructural deficits that are experienced in Nigeria do not exist. Bridging the infrastructural gap, especially that of electricity will accelerate progress towards meeting the drug needs of Nigerians. Besides, evidence from developed countries such as the United Kingdom and the United States of America shows that the pharmaceutical industry can add significant value to the nation’s economy which is struggling for recovery and growth [22].
National tax policy and local pharmaceutical production in Nigeria.
The tax environment for the pharmaceutical sector is not friendly. It was found during the interviews that pharmaceutical products are Value Added Tax (VAT) exempt. However, drug importers and local manufacturers pay huge customs duties for importing Active Pharmaceutical Ingredients (APIs), excipients, packaging materials, and finished products. All these add to the cost of the product at the retail level. Apart from customs duties, local manufacturers and stakeholders in the sector also emphasized the challenges of multiple taxations and an inefficient tax system where tax dues are arbitrary.
The 2017 National Tax Policy attempted to simplify and summarize the 2012 National Tax Policy document. It is expected that the new policy document will improve the efficiency of the taxation system in Nigeria. Some of the stakeholders interviewed believe the 2017 policy has improved the taxation system in Nigeria and has led to more IGR for the government. However, others stated categorically that they have not observed any improvement in the taxation system over the years. Another important theme observed was the fact that local pharmaceutical industries are not currently enjoying any tax incentives which could help boost the sector.
It is important to note that Nigeria is a member of the World Trade Organization (WTO) and consequently a signatory to the Trade-Related Aspects of Intellectual Property Rights (TRIPS). TRIPS agreement is the first multilateral agreement to include intellectual property law into the multilateral trading system and remain the most relevant and robust multilateral agreement on intellectual property to date [26, 35, 36]. Furthermore, because TRIPS is a compulsory requirement to join the World Trade Organization, countries interested in benefiting from WTO open international markets must be ready to enact the strict intellectual property laws mandated by TRIPS. TRIPS agreement was intended to stimulate industrial growth and by extension, access to essential medicines through increased innovation and production capacity of the pharmaceutical industry.
A notable limitation of this research is the possibility of interviewer bias by stakeholders interviewed on the impact of previous tax policy on the pharmaceutical sector. Confidence to truthfully respond to questions was ensured by thoroughly explaining the research objectives to the participants. Despite this limitation, this study establishes major linkages between tax policy on the availability and accessibility of essential medicines in a low-and-middle-income sub-Saharan African country. Lessons from this study can be applied to other sub-Saharan and low-and-middle-income countries (LMIC) in the same category thus establishing its external validity.