Cyprus Mail
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Our View: Pharmacists legalised profit margin fleecing consumers

EVERY few months we, the media, report that medicine prices are very high, a couple of politicians express their outrage and then everything is forgotten until the next time someone brings up the issue.

The reality is that nobody wants to change anything because all those involved in the supply chain are happy with the existing regime that protects their substantial profit margins. Consumer associations are totally ineffective and incapable of taking on the interest groups that benefit from the extortionate drug prices.

On Monday, Alithia carried a report comparing Cyprus prices, for a few drugs, to those in Greece and found they were almost 100 per cent dearer. Were medicine prices subsidised in Greece or was the discrepancy down to the fact that much bigger orders, which commanded bigger discounts, were being placed? It could also be because pharmacies and suppliers are not guaranteed big profit margins, by law, as they are in Cyprus. Alithia also offered another explanation – the state pharmaceutical services, which set drug prices, were not carrying out the reference pricing (basing prices on the average wholesale prices of four other countries) that was introduced in 2005 adequately.

The problem of extremely high prices was also faced by the sector. Health minister Petros Petrides said that for certain medicines and medical supplies, Cyprus was paying as much as three times more than Greece. Petrides said that the government was considering placing its drug orders for state hospitals through Greece so as to secure the lower prices, which seems like a good idea. Even if we had to pay Greece a small handling fee, we would still benefit from lower prices.

While this would be a positive development for public finances, it does not address the extortionate prices paid for drugs bought from pharmacies. Nobody dares touch this, because the pharmacy owners are guaranteed a 30 per cent margin on the supply price, which already includes the significant mark-up of the importer. The guaranteed margin is the reason there are so many pharmacies in Cyprus, much more than the population justifies. In effect, we are paying extortionate prices for medicines in order to sustain a pharmacy on every street corner.

When this issue was raised at a House committee, the representative of the pharmacists said that if the profit margin was lowered, many pharmacies would have to close down. But why should people be obliged to pay extortionate prices for medicine they cannot go without to support many more pharmacies than we need? It makes no economic sense.

As there is no competition among pharmacies – there is an obvious agreement not to under-cut each other – the only way to reduce prices is to change the law guaranteeing the 30 per cent margin. But our brave politicians are too frightened to take on vested interests, even if we are in a depression and people cannot afford to pay ridiculous prices for medicines.

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