Gov’t looks to settle dues owed to pharma players

Could the government finally settle its debt to the pharma industry? The Unified Procurement Authority will reschedule debt repayments to pharma factories, distributors, and medical and cosmetics suppliers, government sources told EnterpriseAM. This came following a meeting between pharma players and the Madbouly government centered around the owed debt.

Big players will get their money in three years: The authority agreed to settle its dues owed to major pharma players over a three-year period. Ibn Sina Pharma will receive an initial payment of EGP 3 bn (a third of what the government owes to it), while HO Group’s pharma arm Middle East Chemicals will receive EGP 30 bn. Negotiations are still ongoing with distributor PharmaOverseas and Misr Pharma.

Sector players are happy with the arrangement and have agreed to continue supplying the authority with the required meds under existing agreements to keep hospitals stocked, the sources said.

Government arrears owed to pharma companies exceeded EGP 50 bn by the end of 2024, a source from the Federation of Egyptian Industries’ pharma chamber told us, adding that part of the debt has been settled and companies now await the rest of their dues. The government allocated a total of EGP 10 bn to settle a significant portion of debts owed to pharma companies and medical supplies last November.

The domino effect: Pharma players are waiting for their money so they can repay their own debt and make new purchases of raw materials to ramp up production and address supply gaps in the domestic market. The lack of liquidity among sector players has resulted in some shutting down operations and exiting the market or pausing the production of certain products due to their low profit margin, the sources said.

Behind the shortage in supply: Companies have been focused on producing the 3k most in-demand drugs for chronic and non-chronic diseases, prompting a shortage in several other products, including imported meds that have no local alternatives.

Pharma players are once again asking for the green light to raise prices to increase liquidity in the sector. However, the government doesn’t appear to be on board with that, our sources said.

REMEMBER- Some med prices rose by as much as 25% last summer following requests fromlocal pharma producers in response to the EGP float.

The government’s mandatory pricing scheme is currently under review in an effort to further enhance pricing flexibility.

DIVE DEEPER INTO THE SECTOR- We published an Inside Industry diving into the pharma sector’s performance in 2024 earlier this year — check it out here.