The Tribune

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

A Cabinet minister yesterday warned "we will not tolerate people disregarding the law" as food stores openly defied the Government's November 1 deadline to implement expanded price controls while many pharmacies closed.

Michael Halkitis, minister of economic affairs, said before the weekly Cabinet meeting that ongoing consultation and negotiations between the Government and private sector does not necessarily mean enforcement of a particular law and/or regulations will be suspended as he signalled that action could be taken to force pharmacies to re-open.

The Bahamas Pharmaceutical Association (BPA) on Monday advised its members to close yesterday so that they would not be fined for not implementing the Davis administration's price control reforms, which would significantly expand the number of items where prices are capped as well as slash retail and wholesale mark-ups.

Admitting that the Association's action took the Government by surprise, Mr Halkitis pointed out that the price control regime expansion is supposed to be temporary, lasting only three months for the pharmaceutical industry and some six months for the food sector although the Government has the ability to extend both.

“During that time we would look at working towards methods where we can have a more permanent solution," Mr Halkitis said. "In the case of the pharmaceuticals, out of the three months now we’re already two-and-a-half weeks into that and we’re still having talks about continued consultations. We think it's more constructive for pharmacies to open and we expect them to open.”

While the Association is complaining that it sent proposed alternatives to the Government, but has yet to get a response, Mr Halkitis countered that they have not given the Davis administration enough time to assess its merits.

“We are in a position that maybe we will answer them on some of the issues, but that does not mean that we stop, or we freeze, because that is the danger when we use this word consultation and you see what happens; we get in this seemingly endless back and forth," the minister added.

“Then you have people going to newspapers saying we will disregard the law, and they think that that is a way that they can do that. We will not tolerate people disregarding the law.” The Government also has a plan to deal with pharmacies closing indefinitely in protest against the new price controls.

Mr Halkitis said: “Under the Pharmacy Act there’s certain responsibilities and obligations to act in the public interest, and we hope it doesn’t come to that. But we think that our commitment to them is if you are implementing, but you're not completely implemented, we will not come with a hard enforcement.

"But we cannot tolerate people saying due to the effort of government to bring relief to the consumers, they’re saying they’re not doing it. That's not something we're prepared to contemplate.”

There is nothing in the Pharmacy Act that would provide for the government forcing a pharmacy to open. However, Part IV section (3) does allow for disciplinary action to be taken against pharmacies that “abandon” their patients, but there is nothing that allows the Government to force a private pharmacy to open.

Mr Halkitis said: “I think the best bet is for them to go to their stores, open their stores, provide a service to the public. We are not unreasonable. We are not unique in terms of being buffeted by inflation; the consumers have taken it on the chin.

"The Government has done its part, we believe, by reducing Customs duties, eliminating Customs duties. We get to this point because we have yet to see those savings being passed down to the public, and this is an effort to do that. This is one tool in our toolkit and we believe we are being reasonable.

“We’ve foregone enforcement for a couple of weeks. We believe that the right stance is to begin to implement and, if you have issues, you can easily say to us: 'I’ve reached a certain percentage of implementation'. We can understand that. But to take this issue that we are not complying at all, and we are freezing, that is not tenable and that is not something we're willing to accept.”

Price controls have always been a controversial instrument among the private sector, especially those companies and businesses impacted by them. They were imposed by the Government decades ago to prevent what it viewed as an unscrupulous merchant class from exploiting lower income Bahamians by unreasonably hiking the price of food staples and other essential products, thus placing them out of reach while undermining living standards.

However, opponents argue they are an anachronism that have no place in a modern 21st century economy. The private sector views price controls as an inefficient, distortionary mechanism that creates more unintended consequences than the supposed problems they solve.

They can result in product shortages through retailers and wholesalers refusing to stock loss-making items, while these firms also have to increase prices and margins on non-price controlled items to compensate for selling these goods as effective “loss leaders”.

Under the Government’s initial proposal, price-controlled mark-ups range from 15 percent to 18 percent for pharmaceutical wholesalers. For retailers, the range is from 35 percent to 40 percent. The medicines covered include vaccines, anti-diabetic drugs, decongestants, laxatives, contraceptives, antacids, anti-hypertension medicines, cough preparations, cardiovascular agents and serums.