Nigerian Health Insurance companies are encountering mounting challenges on their profit margins due to a recent surge in drug prices. This year has witnessed an alarming increase of over 200 percent in the cost of certain medications, impacting the contractual agreements between Health Management Organisations (HMO) and their network of providers including hospitals and pharmacies. Several providers are demanding a review of rates, further exacerbating the strain on insurers. Tope Adeniyi, the CEO of AXA Mansard Health said HMOs partner with Healthcare Providers to deliver healthcare services to their enrolled clients.
The rise in drug prices is primarily a result of the persisting decline of the Naira in light of a shortage of foreign exchange. Consequently, the expenses associated with importing products and essential materials have soared, thus significantly driving up costs. Gideon Anumba, a doctor and head of operations at Leadway Health Limited, expressed that healthcare providers have been frequently approaching them to discuss revising the previously agreed rate. This increase in requests, now coming in quarterly, is primarily due to the substantial escalation in the expenses associated with drugs and various tools in hospitals.
Rising drug costs exert tremendous strain on HMOs.
Anumba said considering that their policies are annual, the premiums are fixed for the entire year and cannot be altered at any moment, similar to the approach followed by healthcare providers. In the case of policy renewals as well, price sensitivity in the market makes it difficult to implement the necessary premium hikes to cover the rising healthcare expenses. As a result, our profit margins have been significantly impacted, putting certain policies at a loss, he explained. He stated that the Healthcare Industry in Nigeria heavily relies on imports, making the high exchange rate the primary factor driving up costs.
He added that the sole prospect lies in the economic upturn and the stabilization of the naira-to-US Dollar exchange rate. Harrison Okafor, a doctor and director of medical services at MetroHealth HMO, stated that the rising cost of medications exert tremendous strain on HMOs. He said due to the soaring expenses of medications and other medical supplies, numerous health plans provided by HMOs were adversely affected, resulting in financial losses as HMOs had predetermined annual premiums with their clients.
Shortage of FX continues to affect the pharmaceutical chain.
Sam Ohuabunwa, former president of the Pharmaceutical Society of Nigeria, said for years now, the shortage of foreign exchange has been a persistent challenge for the pharmaceutical chain of the health industry. This has significantly hampered the importation of various essential products, particularly crucial raw materials. He remarked that the decrease in imports is not due to the amplification of local Manufacturing influence but instead due to the insufficient dollar supply by the Central Bank of Nigeria, compelling manufacturers to rely on the Black Market for a substantial portion of their foreign exchange requirements.
According to a report by the National Centre for Biotechnology Information (NCBI), Nigeria relies on foreign countries for the provision of active pharmaceutical ingredients and excipients, despite having over 115 registered pharmaceutical manufacturers in the country. It highlighted the lack of emphasis on local production of raw materials, pharmaceutical dosage formulations, and processing equipment, which has led to a decrease in the country’s pharmaceutical manufacturing capability. Emphasizing the significant role of the pharmaceutical industry, it pointed out that it is crucial to carefully address developmental concerns that impact this sector.
Government urged to engage with prominent companies.
Pamela Ajayi, president of the Healthcare Federation of Nigeria, voiced a pressing demand for the elimination of all import-related taxes and duties by the federal government, thereby facilitating equipment importation to bolster local drug production. Drawing attention to the significance of collaboration, Ajayi urged the government to engage with prominent pharmaceutical companies like Emzor and Fidson to drive positive change in the sector. Local production in Nigeria faces obstacles like inadequate Infrastructure and unreliable Power Supply. Given that almost all drugs consumed in the country are imported, it is imperative to support manufacturers in order to boost their production capacity.
