High economic costs of diabetes drugs hurting firms’ viability

By Bernard Gitonga

Medical facilities and pharmaceutical firms want the government to reduce high taxes imposed on their products, saying the current levies are a major hindrance to the achievement of universal healthcare in the country.

The Managing Director of Diabetes Management Medical Center, Pharmacy & Laboratory (DMMC) – a local based online Pharmacy and Diabetes Care Center Duncan Motanya, says tax on diabetes drugs had increased the cost of healthcare – a situation he says is locking out several diabetic patients from accessing treatment.

“This is a discussion that we need to have now, and while our sole target is not to entirely make profits but to save lives, a conducive business environment will be key if players like ourselves are to remain in business,” said Motanya in an interview.

Government had at the beginning of the year announced a host of tax measures including a return of 16 percent Value Added Tax (VAT) and new 15 percent presumptive tax which also came into effect on 1 January.

As a result, the Finance Act of 2020 effectively pushed the prices of certain imports beyond the reach of ordinary Kenyans which also impelled local firms to pass on those costs to the consumers even as government seeks to increase its revenue collection.

“Eventually if the situation persists we could be compelled to pass on the additional costs to the consumers, but it our hope that the ongoing negotiations between organizations representing players like ourselves and relevant government agencies will bear fruits,” said an optimistic Motanya, ahead of the global Diabetes awareness month marked yearly in November 14.

Imports into Kenya are subject to a standard VAT rate of 16 percent, levied on the sum of the CIF value, duty, and other applicable taxes.

High cost and low availability of insulin in Kenya with inadequate patient follow up contribute to poor management.

Although the Kenyan government subsidizes insulin to reduce price for patients, supplies frequently run out and there is miscommunication between local depositories and central medical stores to restock.

Motanya says the current disease burden indicates a need for more resources for prevention and health promotion, with primary healthcare taking greater responsibility for chronic diseases such as Diabetes, but high taxation regime is worsening the situation at a local level.

The cost of drugs generally contributed the most to total direct costs of treatment.

Trading Economics global macro models and analysts’ expectations, believes in the long-term, that the Kenya Personal Income Tax Rate will trend at around 30 percent in 2021, gesturing a dire situation ahead for both sellers and buyers of such drugs, particularly for insulin injection costs in Kenya.

Insulin costs between $25-$100 per vial, while human insulin analogs averages between anywhere $174 and $300. Without insurance, a new insulin pump costs about $6,000 out of pocket, plus another $3,000 to $6,000 annually for ongoing supplies, like batteries and sensors.

The cost varies depending on the features, software, brand, and size of the pump.

DMMC offers a platform to have a constant communication with certified healthcare providers through digital check-ins and virtual visits when patients are under quarantine or on restricted movement.

It is one of the initiatives that was last year selected as a beneficiary of the Mbele Na Biz initiative by the World Bank and the Government of Kenya.