The medicine crisis in Palestine.. Corporate money goes to banks and patients pay the price

Hebron - Ofoq News - The Executive Director of the Union of Medicines and Medical Equipment Suppliers, Muhannad Habash, revealed new developments in the crisis of supplying medicines to Palestinian government health facilities, confirming that there is a relative improvement in supply operations after the start of disbursing financial payments to the supplying companies. However, this improvement is still limited and does not reflect a complete relief of the crisis, in light of the accumulation of debt, the depletion of the financial capabilities of companies, and the high cost of providing essential and life-saving medicines.

Habash announced arrangements to disburse a new financial payment of 30 million shekels during the coming period, divided into two payments of 15 million shekels each, as part of government pledges to pay monthly amounts of no less than 30 million shekels, reaching a total of 150 million shekels until the end of the current year.

On the other hand, he warned that the money that the government transfers to corporate accounts is not fully used to purchase medicines and medical supplies, as banks directly deduct part of it to cover loans, facilities, and interest due, which reduces the amounts available to finance supply operations.

Habash’s statements came during an interview with journalist Adel Gharib, as part of the “Talat Sabah” program, which is broadcast on Ma’an TV, Ma’an Radio Network, and Radio 4. He addressed the drug crisis in Palestine, government financial obligations, priorities for supplying vital medicines, and the large differences in drug prices between the Palestinian market and foreign markets.

150 million shekels until the end of the year... and 30 million reached companies

Habash explained that there are understandings and pledges from the Ministers of Finance and Health to make monthly payments to companies supplying medicines and medical equipment, with the value of the monthly payment not being less than 30 million shekels, with the total amounts paid reaching 150 million shekels by the end of the year.

He indicated that the companies had already received 30 million shekels during last September, in two equal payments. The first was worth 15 million shekels at the beginning of the month, and the second was worth a similar amount during the last week of the month.

He revealed that the Accountant General at the Ministry of Finance informed him that there were arrangements to disburse a new payment worth 30 million shekels, divided into two payments worth 15 million shekels each.

He pointed out that, according to the information he received, these funds are supposed to arrive in the companies’ accounts by the end of next week, constituting the second installment of the agreed-upon monthly obligations.

Habash praised the level of clarity in communication with the Accountant General at the Ministry of Finance, explaining that he informs companies of the available amounts and their disbursement dates, and also frank them when the necessary liquidity is not available.

He stressed that the regularity of payments is an essential factor in enabling companies to restore part of their ability to order and supply medicines, but it is not sufficient alone to address the accumulated crisis.

Banks deduct their dues as soon as the money arrives... and companies face a liquidity crisis

In one of the most prominent points he revealed during the interview, Habash explained that the government amounts transferred to companies’ accounts do not actually reach them at the same value as they are spent, as a result of the companies’ accumulated banking obligations.

He said that during the recent period, companies were forced to rely on loans and bank facilities to finance the purchase of medicines, medical and laboratory supplies, in light of the delay in government dues and the high indebtedness.

He added that banks immediately deduct the interest, fees, and obligations due upon the arrival of financial payments, according to the agreements concluded with companies, which leads to a decline in the remaining cash liquidity to finance new supply operations.

He explained that disbursing 30 million shekels does not necessarily mean that companies are able to supply medicines and medical supplies for the same value, because part of the money goes to cover previous bank obligations.

He stressed that companies had exhausted most of their financial potential and capabilities during the crisis, and were no longer able to continue supplying at previous levels without obtaining regular payments that would enable them to refinance their purchases.

These data reveal a complex aspect of the crisis, as the delay in receivables does not affect companies alone, but rather affects their ability to provide medicines to the government health sector, even when disbursement of part of the delayed funds resumes.

Cancer and life-saving medicines are top priorities

Habash stressed that the supplying companies continue to work to provide high-priority medicines, especially life-saving medicines and treatments for tumors and serious diseases, according to lists determined by the Ministry of Health based on medical needs and available stock levels.

He explained that the Ministry of Health periodically sends lists of required medicines, ranked according to their degree of importance and the seriousness of their unavailability, while companies work to respond to these lists according to their financial capabilities and the quantities available in their warehouses or with external sources of supply.

He pointed out that the recent period witnessed great difficulties in providing some necessary medicines, including cancer medicines, but recent supply operations helped improve the availability of some items.

He said that the pharmaceutical situation had witnessed a tangible, albeit limited, improvement, considering that things were still “almost under control” in light of the efforts made to provide the most urgent medications.

However, he warned that the high prices of oncology drugs and specialized treatments make the available amounts insufficient to provide large quantities of them, as limited purchases of these drugs may drain a large portion of the available liquidity.

He stressed that companies give priority to these items due to their direct connection to patients’ lives, and seek to provide quantities that help continue treatment for reasonable periods.

The lack of medicine raises the treatment bill...and medical referrals drain money

Habash touched on the financial repercussions resulting from the unavailability of some medicines in the Ministry of Health’s facilities, noting that the Ministry may have to transfer patients to the private medical sector when it is not possible to provide the required treatment within its facilities.

He explained that these transfers may impose significant additional financial burdens on the government, as a medical treatment that may cost one or two thousand shekels, provided through private treatment, could result in costs amounting to many times that amount.

He considered that this gap in costs represents one aspect of the depletion of financial resources allocated to the health sector, at a time when the regular supply of medicines to government facilities could contribute to reducing the need for some costly treatment transfers.

He pointed out that the timely provision of medicines is not only a medical necessity, but also economically important, because it reduces additional expenses resulting from the search for more expensive treatment alternatives.

$150 million government drug bill annually

Speaking about the volume of pharmaceutical spending, Habash revealed that the Ministry of Health’s purchases of medicines amount to about 150 million dollars annually, considering that this amount can be dealt with through financial planning and providing regular allocations throughout the year.

He explained that this file was the focus of a discussion he recently had with the President of the Federation of Medicines and Medical Equipment Suppliers, Dr. Haitham Masrouji, within the framework of discussing the debt owed to companies and the financial crisis they are facing, and preparing for a meeting with the Prime Minister.

He pointed out that the value of government pharmaceutical purchases must be considered in light of their vital importance to citizens, given that the continued provision of essential medicines constitutes one of the most important requirements for the stability of health services.

He believed that allocating the necessary resources to this sector should be a priority, especially since delayed payments lead to financial and operational complications that may increase the final cost to the government.

Why is medicine in Palestine more expensive than in Egypt and Turkey?

In another aspect of the interview, Habash discussed the large differences in the prices of some medicines between Palestine and countries such as Egypt and Turkey, explaining that the difference in prices is not necessarily related to the profit margins of importing companies, but rather is affected by multiple factors, including manufacturing costs, government support, market size, taxes, and production and licensing agreements.

He explained that some medicines bearing the same trade name are manufactured in different countries under concessions granted by the international companies that own the product, which allows them to be produced locally at lower costs.

He pointed out that the decline in labor wages and the costs of raw materials and industry inputs, in addition to government policies encouraging investment and pharmaceutical industries, contribute to lowering prices in some markets.

He cited the 10 mg drug “Crestor,” explaining that its price in the Palestinian market is, according to his estimates, about 70 shekels, while it can be available in Egypt or Turkey for the equivalent of about 20 shekels.

He stressed that the presence of factories operating under international companies, in addition to the low production costs and support provided to the industry, constitute major factors behind these disparities.

He pointed out that, from his point of view, the economic and political conditions and the size of the Palestinian market do not provide the appropriate environment to attract large-scale global pharmaceutical investments.

Habash: The drug tax in Palestine is 16%, compared to 4% in Jordan

Habash raised the issue of taxes imposed on medicines in the Palestinian market, considering that they represent one of the factors that contribute to their high prices compared to some neighboring countries.

He said that medicines in Palestine are subject to a tax of 16%, compared to 4% in Jordan, according to the numbers he presented during the interview.

He criticized the tax treatment of medicine as an ordinary consumer good, despite its direct connection to the health and lives of citizens.

He explained that the tax difference between the two markets amounts to 12 percentage points, considering that tax policies and government support directly affect the final prices borne by the citizen.

He pointed out that government support for medicine in Palestine mainly consists of providing a list of essential medicines through the facilities of the Ministry of Health, but these medicines may not be available on a regular basis as a result of fluctuations in supply, lack of liquidity, and high debt owed to companies.

He stressed that addressing the drug price crisis requires consideration of various factors affecting the cost, including taxes, import conditions, market size, and production costs.

Paris Agreement and standards for drug registration

Habash discussed the regulatory framework for importing medicines and registering them in Palestine, explaining that there is a common belief that medicines registered in Israel are automatically considered registered in Palestine.

He considered this understanding to be inaccurate, noting that the medicines protocol associated with the Paris Economic Agreement imposes the application of certain registration standards to medicines in the Palestinian market.

He explained that the approved standards affect the nature of medicines that can be introduced to the market, and the possibility of benefiting from pharmaceutical products manufactured in Arab, Asian and African markets.

He pointed out that these requirements are also related to the level of control over the quality of medicines and their approval standards, considering that the issue is not related to prices alone, but rather to the regulatory requirements that govern the registration and circulation of pharmaceutical products.

Huge price differences... Hepatitis C treatment experience

Habash reviewed a historical example of the large differences in the prices of some medicines, recalling the experience of treating viral hepatitis C, which he said at one point its price in the United States amounted to about $150,000, while it was available in Egypt for about $150.

He explained that the example dates back to an earlier period, and that the difference in prices was linked, according to the information he referred to, to international support mechanisms and methods for providing treatments at reduced prices in developing and lower-income countries.

He pointed out that some international pharmaceutical companies contribute to financing and support programs aimed at reducing the cost of certain treatments in countries facing economic and health challenges, which helps expand access to them and limit the spread of diseases.

He stressed that the difference in prices between countries may be related to subsidy and pricing programs, and not necessarily to the difference in the brand name of the drug.

The limited Palestinian market limits pharmaceutical investment opportunities

Speaking about the size of the pharmaceutical market, Habash explained that the Palestinian market is much smaller than neighboring markets, which is reflected in the ability of companies to negotiate, attract investments, and obtain manufacturing privileges.

He referred to historical data that he reviewed dating back to 2006, in which the size of the Palestinian pharmaceutical market, both governmental and private, was estimated at about 180 to 200 million dollars, compared to about 2.3 billion dollars for the Israeli market, according to the numbers he reviewed.

He explained that these numbers reflect the large difference in the size of the markets, noting that the Palestinian market constituted, according to those estimates, about 8% of the size of the Israeli market.

In rough estimates of the current situation, he indicated that government purchases of medicines amount to about $150 million annually, while he put forward an assumption that private sector purchases may reach about half a billion dollars, raising the hypothetical total size of the market to about $700 million.

In the context of his speech, he stressed the importance of market size in the decisions of international companies related to investment, manufacturing, and granting concessions, in light of the high costs and the difficulty of attracting major industrial investments to the Palestinian market.

Available funds are not sufficient for all required items

At the conclusion of his speech, Habash returned to the essence of the crisis related to the companies’ ability to provide all the medicines required by the Ministry of Health and Military Medical Services.

He explained that companies face a dilemma represented by the multiplicity of required items and the limited amounts available to purchase them, as the company may be required to provide about 20 pharmaceutical items, while the available liquidity is not sufficient to cover the needs of all of these items.

He added that giving priority to life-saving medicines may exhaust the bulk of the amounts allocated for supply, which limits the ability to provide the rest of the medicines in the required quantities.

He pointed out that companies are trying to balance the importance of the drug, the level of inventory, and the therapeutic need, with the aim of directing limited resources to the most urgent items.

He stressed that the amounts allocated to purchase the required medicines from the Ministry of Health and Military Medical Services are not always sufficient to provide the necessary quantities for all patients, even when the required quantities are modest.