Yawning gap between mill-gate and retail medicine prices

Factory-gate prices of essential drugs in Bangladesh remained stable for long, though inflated by many accounts, while end-consumers face steep increases at pharmacy counters as regulators look on.
This growing gap between manufacturing-gate prices and market realities has raised serious concerns about the accuracy of the data generated in the Producer Price Index (PPI), a key indicator of mill-gate prices prepared by the Bangladesh Bureau of Statistics (BBS).
The PPI, also a measure of inflation for the manufacturers, tracks factory or mill-gate prices for pharmaceutical products and other major manufactured goods in the country, too.

The national statistical office or BBS conducts monthly survey to measure the PPI for the goods under 143 genres.
The latest PPI shows that over the past 14 months ending May 2024, the PPI for pharmaceuticals has remained unchanged. Belying what lies in the official gauge, retail prices have soared as high as 140 per cent in first few months of 2024 alone, fuelling debates over data transparency.
When the PPI increases, retail prices should also rise, and vice versa. If the PPI remains stable, retail prices should remain stable as well.
Patients pay through their nose for lifesaving medicines but regulators plead ignorance about the market waywardness, as in case of drugs so in other commodities.
For years, a 62-year-old heart patient, Ms Amena Begum, has relied on a strict regimen of medication to manage her condition.
Sitting in her modest living room in Dhaka's Aloo Bazar, she clutches a nearly empty pill bottle, worry etched on her face, shown in a facebook post by her recently and seen by this correspondent
"In recent months, the cost of my medicines has almost doubled," Amena, her voice trembling, told this correspondent when contacted through messenger.
"These drugs are essential for my survival, but now I have to choose between buying medicine and affording food", she goes on.
Hers isn't a unique story of woes, much for a lack of well-built marketing system. Across Bangladesh, many patients are facing similar hardships as retail pharmacies continuously raise prices with little regulatory intervention.
For many, each trip to the pharmacy brings another financial burden, adding to the despair that hangs in the air like a heavy cloud. Pharmacies, once trusted for their essential role, now feel more like a battleground for survival.
An analysis of factory-gate pricing data from the BBS reveals a perplexing scenario of mismatches. The PPI for pharmaceuticals has stayed steady at 141.8 since April 2023, indicating stable manufacturing prices.
However, retail costs tell different. Consumer-rights groups report that pharmacy prices in Dhaka have jumped between 7.0 per cent and 140 per cent in just a few months of 2024.
The Consumers Association of Bangladesh (CAB), a consumer-rights group, notes that the trend extends beyond the capital.
"There is no logical reason for this sharp rise in retail drug prices, when there is stability in factory-gate prices," says CAB Vice-President SM Nazer Hossain.
Economists are raising questions about the gap between factory and retail prices, stressing the need for thorough reforms in data -collection and- analysis methods.
"There's been a 13-percent currency depreciation over the past 14 months, which should have impacted factory-gate prices, given the industry's reliance on imported goods," says Dr M. Masrur Reaz, chairman and CEO of the Policy Exchange of Bangladesh.
"The BBS needs to review its PPI methodology to ensure the data reflects actual market conditions," the economist continues.
Meanwhile, pharmaceutical raw-material imports had fallen by over 10 per cent in fiscal year 2024 due to the dollar crisis-a factor that typically influences production costs and factory prices.
Dr Zahid Hussain, former lead economist of the World Bank, says, "Once the import volume is considered, the cost should have been up."
He emphasizes the need for reform, citing that the national statistics office's data raised many debates.
However, he notes that the present interim government led by Dr Mohammed Yunus is preparing a white paper on the economy, and the BBS's data -production methods are being reviewed for reliability.
Echoing the view on the BBS PPI Abdul Muktadir, chairman of Incepta Pharmaceuticals Limited, argues that the PPI accurately reflects industry stability.
"Our costs have remained stable, which is why factory prices didn't increase," says Mr Muktadir, whose pharma plant is a leading one among Bangladesh's 284 registered firms.
However, Md. Ashraf Hossain, a director at the Directorate General of Drug Administration (DGDA), admits he is not aware of the PPI predicament.
"We focus more on maximum retail prices," says Hossain to parry the moot question.
Pharmacy owners, like Mohammad Ali on RK Mission Road, blame rising operational costs for the retail-price hikes.
"We're not trying to exploit patients," he insists, citing higher rent and utility costs.
But CAB's Nazer Hossain paints a different picture, accusing pharmacies of raising prices with minimal oversight. "Many sell drugs above the MRP, especially in smaller quantities where the price isn't marked," he says, frustration evident in his voice.
The BBS defends its PPI calculations, claiming adherence to international best practices.
"We collect data from 2,000 samples across the country, excluding VAT and subsidies," says Israt Jahan Nasrin, a BBS deputy director.
The issue of divergent prices extends beyond pharmaceuticals. Sectors like textiles and wood manufacturing are also seeing discrepancies between factory and retail prices, raising broader concerns about price monitoring and regulation in the overall market situation.
People familiar with the developments told the FE that the prices of wood required for making furniture have increased at least 20 per cent over the past one year. Similarly, the textile goods also increased on average 20 per cent as they use imported raw materials to make clothing.
When contacted, the Bangladesh Competition Commission (BCC), a public organisation formed to prevent, control and eradicate collusion, monopoly, oligopoly, or abuse of dominant position or any other anti-competitive practices in the market, urged regulatory action, warning that drug prices in Bangladesh are higher than in neighbouring countries.
"The DGDA and the government must address this issue," says BCC member Md. Hafizur Rahman.
His stern tone reflects the urgency of the crisis, as he gestures to documents showing the stark price differences with neighbouring countries.
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