eavy taxes introduced in the federal budget for the 2024-25 financial year portend misery for the people in general. These also have severe implications for the health industry where 18 percent sales tax has been levied on raw materials for medicines and medical services, including doctors’ fees and laboratory charges.

The leap from 1 percent to 18 percent GST on active pharmaceutical ingredients will result in higher prices of both over-the-counter and prescribed medicines. The price hike will affect millions of Pakistanis who rely on these products for treatment of their ailments. An 18 percent GST is also effective from July 1 on herbal, homeopathic and nutritional products, including infant formula milk.

The immediate impact will be felt by patients, especially those requiring long-term medication for chronic illnesses such as diabetes, hypertension and heart disease.

The move has raised immediate concern among healthcare professionals, pharmaceutical companies and patients, who fear that the higher costs could make necessary treatments unaffordable for many. The pharmaceutical industry is also wary of the tax. Many in the industry have argued that the increased costs could disrupt the supply chain and hinder the availability of essential drugs.

Sales tax, at the standard 18 percent rate, has been imposed on medical treatment and diagnostic kits/ equipment—cardiology/ cardiac surgery, neurovascular, electrophysiology, endosurgery, endoscopy, oncology, urology, gynaecology, disposables and other equipment.

At the same time, an 18 percent sales tax has been imposed on goods supplied to charitable hospitals with 50 or more beds, as well as commodities imported by non-profit institutions. Moreover, the government has also imposed a 20 percent tax on the import of syringes, needles, catheters, cannulae, blood sample vials and PET blood collection tubes.

The strain on healthcare services and products will hit the poor as well as the middle-income households. Based on lower middle-income poverty rate ($3.2 per day), a World Bank study places Pakistan’s poverty rate at 39.3 percent (about 90 million people living below poverty line). Based on upper middle-income rate ($5.5 per day), the study finds poverty rate at a whopping 78.4 percent, translating to 179 million people.

“Oppressive taxation on medicines and medical services is a death sentence for the poor and low-income and lower-middle classes. It will make healthcare virtually inaccessible to them,” says Noor Muhammad Mahar, a pharmacist, pharma activist and president of Drug Lawyers’ Forum.

Mahar tells The News on Sunday the imposition of 18 percent GST will provide yet another excuse to the pharmaceutical industry to make medicines dearer despite the over 500 percent increase in drug prices over the last six years. “The prices of medicines, despite being a subsidised sector, have been linked with inflation like all other industries, mainly due to the collusion of the pharmaceutical sector and political and bureaucratic circles.”

The imposition of GST on imported finished pharmaceutical products, which previously enjoyed exemptions, will put additional burden on consumers who rely on imported medications that are not produced domestically.

“The new taxation coupled with persistent devaluation of currency has aggravated the situation,” says Mansoor Dilawar, a former chairman of the Pakistan Pharmaceutical Manufacturers Association. The cost of production will increase due to high cost of labour, electricity and import of raw material. “If rates are not raised, essential medicines will disappear from the market,” he adds.

Dr Obaid Ali, a prominent professional and teacher of pharmaceutical quality and regulatory sciences, maintains that the absence of clarity in policies is a double-edged sword. It inhibits growth of the industry in global trade and exploits the helpless patients fighting for breath. “The drug pricing policies are neither transparent nor fair,” he says, adding that like other products including vegetables and airfares the manufacturers and importers should be required to disclose the cost and price simultaneously.

The GST on various medical services provided by doctors, hospitals and diagnostic laboratories will raise the cost for the patients. “Patients seeking consultation from private practitioners will now have to pay an additional percentage as GST on top of the consultation fees,” says Dr Shahid Malik, general secretary of the Pakistan Medical Association-Lahore. This could deter people from seeking timely medical advice, leading to a potential increase in untreated health conditions and preventable mortality. Although it is not yet visible, he says, doctors will likely raise their fees on account of inflation. The additional cost will be borne by the patients.

With the new GST regime in place, diagnostic tests will become more expensive. “The higher cost of diagnostic tests could lead to delayed or skipped tests, impacting the early detection and management of diseases,” he adds. Already a scourge, he says, the high cost of healthcare will open floodgates of quackery and spurious drugs.

“The sales tax on all diagnostic kits will raise the cost of medical tests by 20-25 percent,” says Adnan Siddiqui, vice chairman of Healthcare Devices Association of Pakistan. Unfortunately, the poor and lower middle classes will bear the brunt of this escalation as laboratories will pass the burden on to the consumers.

Pakistan’s healthcare system is already under strain. The new taxes will exacerbate the situation and negatively impact public health outcomes, at a time when Pakistan is struggling to achieve healthcare targets under the Sustainable Development Goals.

The government is apparently trying to achieve some sort of economic stability through these measures. However, these will pose a formidable challenge of ensuring that healthcare remains affordable and accessible to all citizens.

The writer is an investigative journalist associated with The News International, Pakistan. An EWC and GIJN fellow, he contributes to various international media outlets. His X handle: @AmerMalik3