“They profited inhumanly”
It has been a month since the republic introduced a 12 percent VAT on the import of medicines and medical products. The Cabinet of Ministers adopted the corresponding resolution at the end of August 2024. In effect, drug suppliers were deprived of the benefits granted to them in 2013.
– The tax exemption was carried out to reduce the sales price of medicines for consumers. However, this did not actually happen. Furthermore, producers and importers, instead of lowering prices, took advantage of this opportunity to increase their profits: this is how the Ministry of Economy and Trade explained the VAT refund initiative during its public debate.
The Ministry of Economy referred to the data of the Antimonopoly Regulation Service, which conducted a study comparing the cost of medicines in the republic, Europe and the CIS countries.
– As a result, it was found that some medicines in Kyrgyzstan are much more expensive than in other countries. The pandemic has shown that wholesale and retail chains are willing to inflate prices at the first opportunity and make inhumane profits, as happened, for example, with medical masks, the department noted.
The Pharmaceutical Union of Kyrgyzstan reacted cautiously to the Ministry of Economy’s proposal. According to the organization’s executive director, Almazbek Altybayev, the accusations of “price gouging” are false.
“There are many obstacles in pricing in the republic’s pharmaceutical market,” he explained to the RG correspondent. – For example, to legally import a medicine into the republic, manufacturers must go through the registration procedure. It is complex and expensive. All approvals can take up to two years and a lot of money. Everything must meet the requirements. If before these were requirements at the republican level, now they are at the EAEU level. As a result, the drug manufacturer incurs costs that it naturally has to compensate. It is not easy to do this in the Kyrgyz market, as it is small compared to Russia. Consequently, the pricing policy in our country is different.
As a result, as noted by Almazbek Altybaev, the markup in pharmacies on the “incoming” cost is on average 20 to 30 percent. “If the VAT exemption is cancelled, more than 10 percent will be added to them,” he said.
The risk remains
Over the month since the introduction of VAT, drug prices in pharmacies have increased, according to the Pharmaceutical Union of the Kyrgyz Republic, by an average of 14 to 16 percent. This seems to coincide with the forecasts of independent experts and the Minister of Health, Alymkadyr Beishenaliev, who, remember, promised: “the cost of medicines will not increase much.”
However, according to Almazbek Altybaev, the risk of this happening remains. After all, there is also such a factor as annual inflation, which, according to the results of 2023, amounted to more than seven percent in the Kyrgyz Republic. In addition, it is still unclear how VAT on the import of medicines will affect the illegal importation of vital products into the republic. Previously, the Farmers Union warned that smuggling could increase by 50 to 60 percent.
Meanwhile, Kyrgyz people discuss rising prices in street pharmacies and on local online forums. Ordinary citizens complain that the prices of some medicines have not increased by even “between 14 and 16 percent.” For example, the cost of one of the most popular medications for hypertension has almost doubled.
The main beneficiary of the introduction of VAT on the import of medicines, if we talk about the material aspect, was the State. Until the end of 2024, according to official data, around one billion soms will additionally enter the state treasury thanks to the value added tax. And in 2025, already four billion.
write a complaint
The government has a tool with which it is possible to contain the increase in drug prices within reasonable limits, when pharmacies can make profits and consumers can buy medicines without much damage to their budgets. It is called “Rules for regulating drug prices in the Kyrgyz Republic”. This document is an annex to the corresponding resolution of the Cabinet of Ministers adopted last year.
According to the rules, the republic sets maximum wholesale and retail prices for medicines from the list of vital medicines. To determine the final cost, the so-called regressive margin scale is used. The lower the base price (BP) of a drug, the more they are allowed to add to it. If the BC varies from 101 to 151 soms, then the total margin can reach a maximum of 46 percent, and if it exceeds 151 soms, then 26. It is these limits, according to the Department of Medicines and Medical Products, that cover the costs incurred by drug sellers and allow them to make profits. And at the same time, they do not reach the pockets of the Kyrgyz.
As the department explained to the RG correspondent, the sale of medicines considered vitally important at prices higher than those registered in Kyrgyzstan is prohibited. Violators will be held responsible under articles 76 and 77 of the Crime Code of the Kyrgyz Republic. The penalty is a fine of 10,000 soms for natural persons and 28,000 soms for legal entities.
A list of medicines (more than 500 items) with established maximum wholesale and retail prices is published on the website of the Department of Drugs and Medical Devices. The department reminds that anyone can read the document and use the information received when purchasing medicines. If the prices in the pharmacy turn out to be too high, you can contact the department with a complaint.
Meanwhile
The Russian group of pharmaceutical companies (GFC) “Pharmasintez” expressed its readiness to finance the purchase of medicines for Kyrgyzstan in the amount of five million soms, including immunosuppressants necessary for liver transplantation in the country. This became known from the results of negotiations between the Minister of Health of the Kyrgyz Republic Alymkadyr Beishenaliev and the CEO of Pharmasyntez Nikita Punia. The parties, according to official data, signed a memorandum of cooperation.
“The agreements reached will help improve the republican system of providing qualified medical care to patients and provide Kyrgyzstanis with effective and high-quality pharmaceutical products, including life-saving medicines,” the Ministry of Health stressed.
“Minister of Health Alymkadyr Beishenaliev expressed readiness to develop cooperation with Pharmasyntez in drug supply and strengthen the confidence of the medical community in GFK products by holding joint conferences, training seminars and other public events “added the department.
Previously, the Ministry of Health of the Kyrgyz Republic announced plans to purchase medicines directly from Russian manufacturers and sell medicines and medical products in state pharmacies, run by the state-owned company Kyrgyzpharmacy, at discounted prices.
More than 90 state pharmacies have already opened in Kyrgyzstan. There, according to the minister, medicines are sold with a five percent surcharge.
