VAT hampers development of Armenia’s pharmaceutical market

PanARMENIAN.Net - All drugstores that operate in Armenia are private, due to which their management defines pricing policy and takes marketing measures aimed at increasing competition.

For example, some drugstores offer 5% discount for pensioners. There is not a regulation in Armenia, under which pensioners can obtain discounts as per an agreement of drugstore with the RA Ministry of Healthcare. At the same time, any policlinic has a list of medicines, which pensioners can receive for free. Unfortunately, these medicines do not reach pensioners often.

To attract consumers, some drugstores announce general discounts. It depends on drugstore’s location and its nearest competitors.

Nevertheless, the process of pricing is rather complicated in Armenia’s medicines market.

First, 20% and up to 32% VAT has been paid since 2001 for import of medicines and food supplements respectively, while this tax is not charged in neighboring Georgia. Due to this, many foreign medical representations have moved their offices to Georgia.

Besides, 25-35% customs expenses should be paid for customs clearance, storage, etc.

Medicines do not reach drugstores immediately, as there are wholesalers. The maximum increase in wholesale price makes 10-20%, while minimum – 5-7%, in exceptional cases – 50%.

Drugstores add another 7-20% to prices. Thus, final prices of medicines in drugstores are 50% higher compared to the prime cost. Meanwhile, abolishment of VAT would allow decreasing prices by 20-30% including for infant’s food, which was VAT-exempt earlier.

Thus, VAT hampers development of Armenia’s pharmaceutical market.