Bitter Pills:Medicines & The Third World Poor | Page 153

compared the import prices that parent companies charged their Colombian
subsidiaries with prices at which the same intermediates could be bought on the
world market. He found that, on average, transnationals were overcharging by
155%. In some cases their transfer prices were up to 50 times higher than the cost
of the same intermediate from other sources.<72>
Fines were imposed on the companies found to be overcharging and a Government
agency was set the task of systematically collecting price information from world
market sources to check against the transnational companies' invoices. According
to UNCTC this monitoring by the Colombian Government led to "a significant
reduction of over-invoicing practices and a corresponding decline in the price of
finished drugs". (73)
Sri Lanka tried a different strategy to tackle high transfer prices. Policymakers
decided that the most effective way to keep down prices of imported raw materials
would be to centralise procurement under Government control. In the face of strong
industry opposition, the State Pharmaceutical Corporation (SPC) took over raw
materials imports in 1973. It achieved major savings over the cost of raw materials
imported in the previous year. Fo r example, the SPC bought chlorpheniramine from
Halewood UK for only 13 % of the price Glaxo had charged its Sri Lankan subsidiary
for the same drug the previous year. Some manufacturers dropped their own prices
massively from one year to the next. For instance Beecham reduced the price to
its subsidiary for cloxacillin and ampicillin to respectively only 22% and 17% of
their previous transfer prices. (74)
The Sri Lankan State Pharmaceutical Corporation monopoly over raw materials
imports was reversed with the change of Government in 1977. But according to
Professor Lionel, Head of the Colombo University Pharmacology Department,
private imports continue to be closely monitored by the Government and the SPC's
low prices provide an incentive to local manufacturers to keep their prices down.
Moreover, Professor Lionel explained that there are now fewer shortages than
when the SPC was the sole importer and private sector prices are much lower than
in countries where controls are weak or non-existent. (751
In attempting to control transfer pricing, the Indian Government has fixed the
prices of eight critical chemical intermediates which it keeps under review. The
state-owned Chemical Pharmaceutical Corporation (CPC) also has a monopoly
on importing some of the most important bulk drugs. These are then distributed
for formulation to both private and state-owned companies. In its 1981 report
the UNCTC states that the Indian CPC has made significant savings by buying
bulk drugs on competitive tender. Moreover, "By supplying foreign subsidiaries,
it has prevented them from importing bulk drugs from their parent companies
at prices fixed by these companies. It has also ensured the regular supply of
important drugs to indigenous companies." (76)

CONTROLS ON MARKETING PRACTICES
A government that introduces comprehensive drug policies, bans private medicine
and restricts doctors to prescribing from the national formulary may find there
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