Killer Taxes, Charges…Lead To Inflation Of Medicines’ Prices By 174%

Killer Taxes, Charges…Lead To Inflation Of Medicines’ Prices By 174%


The high cost of healthcare in the country, which has placed the poor and the vulnerable at a disadvantage, is largely blamed on the increasing high cost of imported medicines.

But players in the pharmaceutical industry attribute the situation to the high taxes and duties for clearing, warehousing and distribution of imported medicines, which amounts to 96% of the actual cost of the medicines.

Research has shown that every imported medicine into Ghana ends up in the hands of patients at a harrowing 174% more than the actual cost the medicine was purchased by importers.

The pharmaceutical industry concedes that medicines are too expensive in the country, and said taxes and other charges alone on imported medicines constitute 40%.

Investigations by The Finder indicate that taxes on pharmaceutical products amount to 35% while other charges also sum up to another 5%.

The breakdown of taxes pharmaceuticals are paying are 10% duty, 17.5% Value Added Tax (VAT) & National Health Insurance Levy (NHIL), 0.5% Economic Community of West African States (ECOWAS) levy, 0.5% network charges, 1% inspection fee, 1% Internal Revenue Service (IRS) tax, Export Development and Agricultural Investment Fund (EDAIF) levy of 0.5%, Social Investment Levy (SIL) 2%, and interest charges of 2%.

All the above-mentioned taxes sum up to 35%. The other charges are clearing charges, transport and haulage, and miscellaneous, which sum up to 5%.

The 40% taxes and charges are paid at the port of entry before conveying the medicines to the warehouse.

It is estimated that imported medicines far outweigh locally produced medicines.

Commenting on the situation, Chief Executive Officer (CEO) of the Chamber of Pharmacy Ghana, Mr Anthony K. Ameka bemoaned the increasing costs of medicines in the country, blaming it on high level of taxes imposed on the importation of medicines.

According to him, recent findings by an ad hoc committee revealed that the total percentage of taxes and charges that pharmaceutical companies incur on imported medicines add up to 96%.

He explained that the situation is further compounded when other expenses such as the galloping cost of supply rate of forex, delay by the National Health Insurance Authority (NHIA) to pay claims on time to the service providers, and the cost of distribution come into the picture.

He stated that the report of the ad hoc committee revealed that hedging against forex exchange fluctuations attracts a 5% tax; cost of finance for four months is 10%; storage cost (for example: warehousing, special storage medicines needing 24 hours power supply) also incurs 5% cost; distribution cost is 5%; gross mark-up is 15%; as well as overhead expenses, for example registration of the product with Food and Drugs Authority salaries and others, attract 11% cost.

“The accumulation of all these costs sums up to 56%. This takes the total percentage of the cost of clearing, warehousing and distribution of an imported medicine to 96%,” he added.

According to Mr Ameka, if these costs are translated into monetary terms, it will mean that any medicine imported into the country at US$100 will cost a retailer to buy the medicines not less than US$196.

“The retailer uses an approximate mark up of 40% to also cater for salaries, rent, professional fees, cost of finance, cost of utilities and regulatory fees, and charges. The medicine, thus, gets to the patient at about US$236.

“This means that for every imported medicine into the country, it ends up in hands of patients at a harrowing 174% of the actual cost the medicine was purchased by importer,” he added.

He commended the firm commitment of ECOWAS to ensuring unification, simplification and harmonisation of customs duties and taxes.

He indicated that in the last two decades, ECOWAS has been consolidating its free trade area through the increased free movement of persons and goods, observance of the right of residents across the community, abolition of entry visas for citizens of the community and the definition of regional sector policies.

Mr Ameka recalled past decisions aimed at ensuring the effective implementation of ECOWAS Common External Tariffs (CET) at its extraordinary session in 2013 of the Authority of ECOWAS Heads of State and Government.

“The Chamber of Pharmacy, Ghana recognises the decision of articles 10, 11 and 12 of the creation of ECOWAS revised treaty creating the ECOWAS Council of Ministers and defining its composition and functions;

“It is also aware of the Decision A/DEC. 17/01/06 on the adoption of the ECOWAS Common External Tariffs (CET) and Conscious of the Decision A/DEC. 14/01/06 on the creation, organisation and functioning of the joint of the ECOWAS-UEMOA Committee for the management of the Common External Tariffs (CET);

“Mindful of Supplementary Act A/SA, 1/06/09 on the amendment to the Decision A/DEC. 17/01/06 of adopting the ECOWAS Common External Tariffs (CET) and Convinced that the Regulation C/REG.1/5/012 on the adoption of the 2012 version of the Harmonised Commodity Description and Coding System (HS),” he added.

He noted that Ghana, desirous to implementing the above provisions on Wednesday, November 19, 2014, presented to Parliament the Budget Statement and Economic Policy for the 2015 financial year.

Minister of Finance, Seth Terkper supported the regional bloc towards the adoption of an ECOWAS Common External Tariff (CET).

The statement further indicated that the CET, which involves the adoption of a uniform regime of customs and related charges, will facilitate free trade and advance greater integration to the level of a Customs Union.

He gave the percentages of the five categories under which CET will be applicable as 0% for Essential goods, 5% for Goods of primary necessity, basic raw materials, and 10% for Intermediate inputs, 20% for finished goods and 35% for Special Goods for Economic Development.

Mr Ameka said the Chamber was, therefore, surprised that the implementation of the ECOWAS CET, as indicated by the Minister of Finance in the 2015 budget statement and economic policy, could not materialise on January 1, 2015 and July 1, 2015 respectively.

He wonders when Ghana would start the implementation of the CET as Benin, Burkina Faso, Cote d’Ivoire, Mali, Senegal and Togo have already implemented it on July 1, 2015 while Niger and Nigeria started the implementation on April 6 and April 11 respectively.
“We call for the adoption of the Decision of Council of Ministers at its Abidjan session on June 30, 2013.

“It is our fervent hope that government and the legislature will expedite action on the implementation of the ECOWAS CET to help alleviate the suffering of the poor and the vulnerable in our society,” he said.

Mr Ameka also commended government for exempting 392 Active pharmaceutical inputs and excipients, as well as 118 selected medicines or pharmaceuticals from Value Added Tax.

Source: 2015-08-24