The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Democratic National Alliance’s (DNA) ex-leader yesterday slammed the imposition of price controls on the pharmaceutical industry as a “back door” admission by the Government that reimposing VAT on medicines was a mistake.

Branville McCartney, whose family own and operate Wilmac’s Pharmacy, told Tribune Business the Davis administration’s bid to seemingly offset the 10 percent levy’s impact by imposing mark-up restrictions threatens to bring the sector to a “standstill” by further eroding already-challenged profit margins.

Arguing that these have already been weakened by the National Prescription Drug Plan, which has left pharmacies effectively “breaking even” on up to 70 percent of their trade, he added that the Government needs to strike a better “balance” between easing the cost of living crisis for Bahamian consumers but letting companies earn enough to remain in business.

Mr McCartney, telling this newspaper that “the chickens are coming home to roost” over the failure of successive administrations to better expand and diversify the economy, argued that businesses must be given hope and enabled to “see the light at the end of the tunnel” given the multiple cost pressures and increases that are hitting them from all angles.

With Bahamas Power & Light’s (BPL) fuel charge increases of up to 163 percent in 2023 threatening to block out that light, the former DNA leader said he had already instructed his company’s accountants to scour the financial books for potential savings and ways to offset the impact from the imposition of price controls on both pharmaceutical retailers and wholesalers.

If the pharmaceutical industry’s retail and wholesale margins are cut too thin, he warned, it threatens to create “a vicious cycle” where industry operators are forced to terminate employees as one of multiple measures to reduce costs and ensure their survival.

“This is another blow to the pharmacy business,” Mr McCartney told Tribune Business. “Now we have price controls on certain drugs. There were price controls, but they’ve restricted the mark-up percentage now. I understand what the Government is trying to do on pharmaceutical and food items. I understand the Government is trying to make it easier on consumers in light of the fact prices have gone up across the board.

“I see what the Government is trying to do and, of course, the increase in the minimum wage which I support. I understand they’re trying to provide some comfort to the general public, but the difficulty with that is it hurts the business people and, by extension what happens to the employees of these establishments? The Government is trying to give some comfort, but it really causes a burden on businesses with all these increases coming into play.

“It’s the overall picture. It’s not just price controls on these items but we have to take into consideration what’s going on and the alarming effect on businesses, especially small businesses, the foundation of the economy.” Besides the BPL fuel charge hikes, which could increase consumers’ overall electricity bills by as much as 80 percent at the summer peak in 2023, and the minimum wage rise there is also likely to be a sharp increase in NIB contributions in the not-too-distant future.

Mr McCartney spoke out after the Davis administration last week unveiled price-controlled mark-ups ranging 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.

The former DNA leader yesterday suggested that the imposition of price controls, which will cut pharmacy margins and could result in some medicines being sold at a loss, in a bid to ease the financial burden for consumers was a tacit admission by the Davis administration that it was mistaken in reimposing 10 percent VAT on such essential commodities.

“That should not have been on pharmaceuticals in the first place,” Mr McCartney said of the tax. “That may be behind their thinking as to why they have put price controls in place. I think they may have realised that putting VAT on pharmaceuticals was certainly not a good idea.

“So they’re coming through the back door by putting price controls on pharmaceuticals. That’s how I see it. I see them coming through the back door with price controls to offset the impact of VAT on pharmaceuticals. A lot of things now have to be adjusted. I have my accountants looking at other ways and trying to recoup or offset the losses we will definitely sustain.”

He argued that all these price-controlled margin and cost pressures are being imposed on the private sector without the Government delivering anything in return via helping to facilitate the expansion and diversification of the Bahamian economy.

Pointing to the bureaucracy and red tape that continues to undermine The Bahamas’ ease of doing business, Mr McCartney said: “It’s a vicious cycle. The Government is trying to give comfort to the population as a whole, but if they don’t stimulate the economy, businesses will go out of business and persons will lose their job.

“When they lose their jobs they don’t have the money to benefit from what the Government is trying to do. It’s a vicious cycle... This will cause a greater loss because the profit margins that are needed to operate and run the business will have been reduced. As a result, the business is not being stimulated and the business almost comes to a standstill to a certain extent, and that makes it very difficult to continue.

“Granted, the price controls are for a limited period [three months until January 17, 2023] but listen, man, we’re just coming out of COVID. Most businesses are still feeling the effects of the pandemic and to add this on to businesses just trying to keep their doors open is just another blow and just makes it extremely difficult taking into consideration all of this coming out of COVID.”

Mr McCartney, telling Tribune Business that entrepreneurs and companies also need to be given hope to stay in business, added: “If we see some light at the end of the tunnel, where the Government is doing some things to enhance business, but BPL is turning out the lights in the tunnel and it looks like they’re not coming on any time soon. Give some hope, give some hope. Soon.

“Everything has to work in tandem. You’re going to give some comfort to the general public, yes, and that’s commendable but for the love of Baby Jesus you have to do something for the country as a whole so that businesses are not sacrificed.”

Detailing the issues with the National Prescription Drug Plan, which he said “almost cut the pharmacy business in half” when it was introduced, Mr McCartney said the profit margins for an initiative that accounts for up to 70 percent of trade are “very, very slim”.

“It’s almost like breaking even,” he said, adding that the impact will now be made worse by the latest price controls unveiled last week. While the Government has narrowed the payment window to two to three weeks, the DNA leader added: “When payment comes in the profit margins are very minimal. You have to buy the drugs in advance, have to wait on the Government for payment of those drugs, and when the payment comes in the margins are minimal.”