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Pharma cos ‘spend 29.36pc of turnover on marketing’

Study says compliance measures at RMG factories make workers feel safer

| Updated: December 04, 2019 13:24:58

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Pharmaceutical companies spend 29.36 per cent of their annual turnover on marketing, according to a latest study.

Marketing cost has also been identified as one of the top five pricing determinants (PDs).

The survey listed the value of imported raw materials -- 29.33 per cent of price -- as top PD followed by government policy, product quality, domestic market competition and marketing cost.

Another study findings revealed that compliance standards taken in readymade garment (RMG) factories after Rana Plaza building collapse have had a positive impact on workers' perception on feeling safer at workplace.

But compliance measures taken in RMG factories have no significant impact on other issues like productivity, total output and market access.

The study findings were presented at the Research Almanac 2019 organised by the Bangladesh Institute of Development Studies (BIDS) at a city hotel on Sunday.

According to the study, the prices of drugs in the country is higher because the medicine manufacturing companies pay money or gifts to doctors for prescribing their medicines to the patients.

Sometimes the companies even send the whole family of doctors abroad for holiday celebration or to big seminars to convince the physicians to prescribe the medicines of their respective companies, revealed the study that asked questions to medical representatives.

More than 60 per cent of the employees of the pharmaceutical companies consist of sales and medical representatives, the study found.

Moreover, the companies also give gifts to the doctors or arrange a big amount of money for the doctors so that they prescribe their medicines, said Nazneen Ahmed, senior research fellow at BIDS, while presenting the findings of the study titled 'Pharmaceutical Industry of Bangladesh: Prospects and Challenges'.

The drug prices go up in the domestic market when the medicine manufacturing companies convert the gifts into the cost of production, she explained.

Sometimes, the prices of drugs belonging to the same generic group vary significantly just because of doctors' prescription, she said.

As patients follow doctors' prescription, they do not verify the prices, she said.

For instance, the price of a tablet produced by a small company is Tk 5, but the consumers purchase the same medicine produced by a big company at Tk 15 although both tablets are under the same generic group, she added.

The size of the pharmaceutical industry in Bangladesh in 2018 was Tk 200 billion, the survey revealed.

Monzur Hossain, senior research fellow at BIDS, presented the findings of another study titled 'Impact of Compliance Standards on Firm Performance and Risks of Workplace Hazards: Evidence from the RMG industry in Bangladesh'.

"We did not find any significant impact of compliance on labour productivity, total output, market access of firms and on crisis like labour unrest, accidents and injuries faced by firms after remediation in the period from 2013 to 2018," he said.

The study was conducted on some 508 garment factories, 255 of which are listed with the western buyers' platforms -- Accord and Alliance -- and the local platform National Initiative for Safety Assessment and Remediation.

The remaining factories are not listed with any of the three initiatives.

Investing more on fire safety cost (proportion of expenses used in ensuring fire safety to total cost of firm) has negative impact on labour productivity and total output, the study showed.

The growth of output (five years' growth from 2013 to 2018) is significantly higher for listed firms compared to non-listed firms.

The findings, however, showed that compliance or remediation measures have positive effects on workers' perceptions on building safety, fire safety and electrical safety at workplaces.

The intensity of risk against building safety, fire safety and electrical safety perceived by the workers of firms listed with Accord, Alliance and National Initiative is lower than the intensity of risk perceived by workers of firms not listed with any of the three initiatives after remediation, it showed.

Dr Khondaker Golam Moazzem, research director of Centre for Policy Dialogue (CPD), and Dr Selim Raihan, executive director of South Asian Network on Economic Modelling (SANEM), spoke as panel discussants.

As per the study findings, profits of factories -- especially the large units -- listed with the three initiatives have increased.

The study also showed that profits of non-listed large factories increased while the same for small and medium ones decreased in 2018.

Mr Raihan said in many cases compliances in the factories are only in name, but not in practice.

"Compliances cannot be a choice in the factories, compliance is a must for running the business," he said.

Talking about the quality of drugs in Bangladesh, he raised a question, saying that the Thai doctors prescribe one paracetamol tablet for fever while doctors in Bangladesh prescribe two paracetamol tablets.

Mr Moazzem, however, said there is a slowdown in demands for apparel items globally.

As a result, the prices of garment items declined to some extent not only in case of Bangladesh but also for other countries, he said.

It should be investigated whether big pharmaceuticals companies are manipulating the drug prices in the local markets as 10 such companies have more than 70 per cent of the local market share.


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