Taxes and tariffs deny patients access to medicines, says new study.

Bangkok, 14 July 2004 -- According to a new study issued by the Campaign for Fighting Diseases, tariffs and VAT in many poor countries are a significant factor in determining the end-user price of drugs, driving them up, sometimes by as much as 55%. But VAT and tariffs are not the only Local Price Inflators or LPIs. Others include: port charges, clearance and freight, importer’s margins, central, regional and local government taxes, wholesaler margins and pharmacy margins – many of which are driven up by regulations and other government-imposed restrictions on competition.

According to one study, total duties and taxes (customs duty + VAT + other duties) vary from a low of 0.01% in Malaysia to a high of 55% in India, with a global average of 18%. This probably underestimates the true impact of government on the cost of medicines because it fails to account for the regulatory barriers.

Tariffs on pharmaceuticals can have a devastating effect on consumers, especially the poorest and most vulnerable. It is morally reprehensible that governments which seek to produce pharmaceuticals locally, in the name of ‘access’ currently limit access by imposing all manner of taxes, tariffs and other restrictions on the supply of medicines.

During the Uruguay Round of trade negotiations, 22 countries signed the WTO Pharmaceutical Agreement, which has led to the reciprocal elimination of tariffs (dubbed ‘zero-for-zero’) on approximately 7,000 products. But poor countries are not signatories and the poorest countries, many of which have horrendous public health problems, tariffs continue to be applied to imports of pharmaceuticals. The result is that patients in these countries are being priced-out of treatment by their own governments.

According to a 2003 study by the EU Commission, which examined pharmaceutical products used in the treatment of communicable diseases in 57 countries, a large majority apply low tariff rates but the countries with the highest rates included Nigeria, Pakistan, India and China. Perhaps most disturbing was the finding that VAT (Value Added Tax) rates averaged 12.4%.

The author of the CFD Background paper, Ben Irvine (Director of International Policy Network’s Health Project), commented:

“It is sad that the majority of media-savvy activists appear unwilling openly to criticise the governments of poor countries. They should be exerting pressure on these governments to reform policies which constitute a regressive, unwarranted tax on the sick and an unwanted barrier to treatment; de facto condemning swathes of their populations to death through taxation.”

The report is available at: http://www.fightingdiseases.org/pdf/taxes-tariffs-access.pdf

For more information on the Campaign for Fighting Diseases visit
www.fightingdiseases.org