Envío Digital
Central American University - UCA  
  Number 356 | Marzo 2011


El Salvador

Medicines: A Struggle between Rich and Poor

Medicines in El Salvador are sold at the highest prices in Central America. The pharmaceutical companies’ profits are astronomical. There’s an obvious conflict of interest between the pharmaceuticals and powerful political figures. After a nine-year fight for an effective public health service, this situation could soon start to change for the better. This is a quick review of the grassroots effort to achieve this, the biggest and most successful battle of the post war era.

Elaine Freedman

When any older Salvadoran is asked “How are you?” the most common response is “Fine, because I’m well.” This answer shows that one of the most fundamental rights for Salvadorans is the right to health.

Proof of this is that, after the peace accords, the largest and most successful grassroots mobilizations have been motivated by health issues. Today, a landmark medications law is about to be approved whose contents can be added to the victories achieved by organized people.

The “White Marches”

In 1999 the privatizing of state public services was considered unstoppable in El Salvador. The ARENA governments complied almost totally with the structural adjustment measures imposed on the country by the World Bank and the International Monetary Fund (IMF). Neither the unions nor the opposition parties could halt the privatizing ambitions of the Cristiani and Calderón Sol governments. The banking system, the pension fund, exportation of coffee, sugar and cotton, the sugar refineries, oil imports, electricity distribution and the telephone service passed into private hands. And everything indicated that the health service and the distribution of drinking water would go the same way.

The third consecutive ARENA government came into power as this was about to happen. President Francisco Flores revived an initiative, begun in the nineties with the help of the World Bank and the Inter-American Development Bank, to restructure the hospital and health care systems.

The 1999 program focused on outsourcing the medical services provided by the Salvadoran Social Security Institute (ISSS), a form of gradual privatization. The ISSS doctors who had created their own union (SIMETRISSS) two years earlier began a successful strike campaign in 1998 for better salaries and a bigger say in the restructuring process. They immediately joined forces with the ISSS workers’ union (STISSS) to launch a campaign against the attempt to partially privatize the health service. The campaign was very different from the efforts to resist economic policies that decade. The STISSS and the SIMETRISSS formed broad coalitions with other civil society organizations and with the Farabundo Martí National Liberation Front (FMLN).

The first workers’ strike against health privatization began in November 1999 and lasted until March 2000. A dozen marches and mass rallies were organized in the major cities. At some points, more than 50,000 people participated across the country. At the same time other public sector unions organized a dozen strikes in solidarity with their colleagues. NGOs formed an organization called the Civil Society Movement against Privatization (MSCCP) to support the health workers’ strike. Faced with such massive support for the movement opposing the privatization of health, the government had to yield and negotiate with the two unions.

In mid-2002, the ARENA government, in collaboration with the National Association for Private Enterprise (ANEP), tried once again to outsource the ISSS medical services. This triggered the same two unions to promote an even longer strike; it lasted from September 2002 to June 2003. Doctors and health workers once again called on their allies to support the strike and defend the public health system. The Civil Society Forum and Citizens Alliance against the Privatization of Health were joined by NGOs, women’s groups, unions, community organizations, rural cooperatives and students and played a decisive role in mobilizing broad sectors against the privatizing measures. They blocked the country’s main highways and up to 200,000 protesters participated in mass demonstrations known as “White Marches.”

The FMLN, then an opposition party, joined the protests. The whole FMLN parliamentary bench participated in the demonstrations and the party used its weekly meetings, known as Open Court, to call on its members to do the same. Its legislative bench finally managed to introduce a bill prohibiting privatization in the Legislative Assembly. The government was again forced to give up its initiative to outsource the ISSS medical services.

These were the Salvadoran people’s first major victories since the war. It seemed that after a demobilization process during the nineties in which groups fell apart and only had one or two achievements, the grassroots movement had overcome its long hiatus with the fight for public health care.

Drugs: A very profitable business

Major reforms to the health system remained pending, however. One of them is the regulation of the production and sale of medications. El Salvador has the highest pharmaceutical prices in Central America, exceeding those of other countries by as much as 500%. According to a 2007 study by the University of El Salvador’s Center for Health Research and Development, the average profit margin for drugs in this country is 5,200% over the International Reference Price.

Annual sales are around US$300 million, according to data reported in 2007 by the Superintendence of Competition and the Chamber of Commerce. Domestically produced products account for some $100 million and the rest are imported. Of those million domestically produced, $60 million worth are consumed domestically and the rest are exported. When imported drugs, valued at $160 million, are added, it brings the value of pharmaceuticals consumed nationally to over $220 million. A 2008 study by the Spanish Embassy says this sector has been growing an average 5% a year in recent years and the ten companies with the highest billing have had double-digit increases. It’s quite obvious that producing and importing pharmaceuticals is a very lucrative business in El Salvador.

Pharmacies: Another jackpot

The sale of medications in El Salvador is another jackpot for the major entrepreneurs. National or foreign laboratories selling their production to the drug distributors constitute the first commercialization tier.

The drug distributors, which in some cases are related companies, form the second tier of the chain, often also importing other drugs, sometimes as exclusive distributors for foreign based-laboratories. Generally they sell to both private and public pharmacies, which buy directly from them according to the bids they make. These distributors know the market, follow import procedures when necessary and have their own transport and logistics for distribution, as well as strategically placed storage facilities and warehouses. They have significant marketing power compared to the small businesses because they handle a very broad range of products and offer competitive prices.

Finally, 15 national chains handle 80% of the national pharmaceutical market, often acting as wholesalers by distributing drugs to independent pharmacies with less financial capacity. The most prominent pharmaceutical chains are Farmacias Económicas, Farmacias San Nicolás, Farmacias Las Américas, Farmacias San Benito and Farmacias Meykos, with between 18 and 36 branches each. The other 20% are small, traditional pharmacies, with only one or two stores and no capacity to buy large amounts of stock; so they need to buy through the distributors or wholesalers. They have small or medium-sized premises and offer their customers basic services such as giving injections.

According to a study commissioned by the Spanish Embassy, the market as a whole is in ever fewer hands. The distributors monopolize an increasing share of the market, buying up or merging with other distributors that were previously competitors, and are now starting to expand by opening more outlets everywhere. The most recent example was the purchase of Meykos by the Farmacias Económicas business group in January 2011. The study commissioned by the Superintendence of Competition reported that 17 of the 45 existing laboratories control 70% of domestic sales and 90% of exports.

A mole in the Health Ministry

The Ministry of Health and the Social Security Institute use 95% of public health spending. In 2006, the Ministry Invested US$34 million of its budget on purchasing drugs while the ISSS invested US$59 million in the same period.

A 2009 joint study by the University of El Salvador and the Salvadoran Health Promotion Association (ASPS) reveals that in the years before the new government took office, 75% of the Health Ministry’s funds for the purchase of drugs favored
six companies that “belonged to the Saca or Cristiani families.” The Santa Lucía imported drug distributor is owned by former President Alfredo Cristiani, while members of the Saca family own Vijosa Laboratoies and Carosa Laboratories.

Deputy Health Minister Eduardo Espinoza explained that the adjudicating of those contracts “wasn’t illegal” because the process met the stipulated requirements. He even chose to award contracts to these companies because they offered the lowest prices. The irregularity only surfaced a few months after the contracts were signed: the selected companies asked for a 15-20% increase over the amount established, citing a number of difficulties, such as customs procedures. The team in charge of verifying the bids always resolved in favor of those increases. According to Espinoza, “this is a way for them to get a bonus over the two or fewer cents they shaved off” the initial bid.

In June 2009, the new health administration made the first discovery of expired and hidden drugs. They found US$17 million worth of expired drugs (145 tons) in the ISSS warehouses in San Salvador. Almost a year later, another lot of expired medications was found on Ministry of Health property.

Espinoza’s explanation is that “we found that a Ministry of Public Health network in charge of awarding contracts from tenders was completely infiltrated. We’ve purged or changed and restructured this network, which had even let the pharmaceutical industry itself manipulate the lists of the Ministry of Health’s drug requirements.”

Clear conflict of interest

The Higher Council of Public Health (CSSP) is an umbrella body representing the associations of the various health-related professions. It’s made up of watchdog committees for the medical, dental, chemical-pharmaceutical, veterinary, laboratory-clinical, psychology and nursing associations, and its constitutional mandate is to “ensure public health.” It was legitimized on the grounds that the activities of professionals linked to the health sector are so delicate that people could die if they are practiced without due academic, technical and scientific qualifications, so they must be regulated, monitored and controlled by professionals.

In itself, the existence of this body is questionable given that in most countries this is precisely the role of the Ministry of Health or of a body under its authority. Even more questionable is the inclusion on the watchdog board of the chemical-pharmaceutical association given that six of the board’s ten members are linked to that industry as employees, representatives or owners of laboratories involved in drug registration and quality control processes.

A similar situation is found in the CSSP commission responsible for reviewing applications for registering pharmaceutical products. Although the CSSP’s primary duty is to monitor the exercise of its profession, four of its six commissions are related to drug control, reflecting this function’s clear priority over others of vital importance to the regulation of health care practices. There’s a clear conflict of interest throughout this structure.

Entrepreneurs have a lot to lose

Doctor Espinoza, the principal promoter of the drug bill, explains that “if a laboratory comes to register a new drug, it is this board, with six out of ten pharmaceutical entrepreneurs on it, that resolves and determines if the drug is registered or not. Typically, if this new drug will compete with one the chemical-pharmaceutical industry and its salespeople already have on the market, it isn’t registered.”

Business leaders in the chemical-pharmaceutical sector have huge interests to safeguard. More than contributing to
the health of the Salvadoran people, their important contribution has been to the profits of the business class. And the stakeholders’ association has been an important bulwark for the advancement of this sector.

There’s an important Central American association that brings together the majority of transnational companies that do business in the regional pharmaceutical market: the Central American Federation for Pharmaceutical Laboratories (FEDEFARMA). Salvadoran distributors are grouped together in the Pharmaceutical Products Distributors’ Association (DIPROFA). Chemical-Pharmaceutical Industries (INQUIFAR), to which most of the national pharmaceutical companies belong, has been the most active in resisting a new drugs law. Both INQUIFAR and DIPROFA are affiliated to ANEP.

Why not travel to Cuba?

Last October, after two failed attempts, President Mauricio Funes made his first official trip to Cuba, ending a 48-year break in relations between El Salvador and the island. During his stay in Havana, Funes signed agreements on scientific-technical, health and education issues. A delegation of ministers, representatives from all political parties, except ARENA, and a group of 35 businesspeople accompanied the President.

ARENA, ANEP and the Chamber of Commerce and Industry rejected the invitation to accompany the governmental delegation. ANEP’s president, Carlos Araujo, justified this by explaining that “as ANEP we couldn’t participate in a trip to a country where there’s no democracy; where there are no entrepreneurs with whom we could establish a relationship; where it’s clear that they are going to negotiate with the State.”

It isn’t at all clear to what extent his rejection was ideological and to what point it was “good business.” López Laboratories, one of the largest partners in INQUIFAR, has had drug import and export arrangements with Cuba for decades. Gustavo López, its president and a former member of COENA—ARENA’s governing body—once said: “For us as a company, business has no ideologies or borders and, just as we sell to Cuba, we will soon start to manufacture for the United States.”

One drug López Laboratories is currently importing from Cuba is Erythropoietin, used for kidney problems to promote the production of red blood cells. The Ministry of Health was previously forced to buy it from the Santa Lucia Drug Distributors, owned by current COENA president Alfredo Cristiani, because its variant form, manufactured in Cuba, never appeared on the Ministry’s drug list. López Laboratories now sells the Cuban version to the Ministry of Health. By importing it through López Laboratories, the ministry has reduced its annual costs for this drug from US$170,000 to $30,000. Even so, López Laboratories imports each bottle at $9 and sells it to the ministry or the private sector at $24. The Santa Lucía drug distributors sell each bottle at $45. This means that if the Legislative Assembly modifies the Law on Public Administration Procurements and Contracts (LACAP) in order to allow drug tenders from other countries, and/or the El Salvador government makes a bilateral agreement to buy this and other drugs directly from Cuba, the losses for López Laboratories would be significant. It seems obvious that the medicines issue was one of the reasons why ANEP refused to travel to Cuba.

Various drug bills proposed

To right the wrongs done to the Salvadoran people on the subject of medicines, EL Salvador’s Health Action Network (APSAL), a group of NGOs working for grassroots health, submitted a medications bill to the Legislative Assembly in September 2002 to replace the Pharmacies Act, in force since 1927.

Eighteen social and professional health organizations participated in the bill’s formulation. It proposed regulating all aspects of pharmaceutical policy, ensuring the existence, accessibility and rational use of safe, effective and quality drugs for the whole population, as part of national health policy.

The 2002 strike activities in ISSS started only days after the bill’s submission to the Legislative Assembly’s Health Commission. APSAL joined the movement against privatization and together with other civil society organizations formed the Alliance against Health Privatization. When the time came to appear before the Commission to defend the bill, the ARENA representatives on the Commission walked out of the hearing in anger. As a result, the bill was shelved.

Five years later, two more bills appeared on the table, one submitted by the National Conciliation Party (PCN) and the other by then-Minister of Health Guillermo Maza, under the auspices of ARENA’s legislative faction. Later that same year the FMLN presented its own bill, which varied only slightly from the earlier APSAL version.

In addition to restating the main guidelines from the APSAL proposal relating to the mechanisms and standards for quality control and price regulation, the FMLN proposal included two other innovations. The first was to reform the Higher Public Health Council. The second said, verbatim: The Ministry of Public Health “shall draft and submit to the Council of Ministers a proposal on national drug production, which will form the basis for a national agreement on the same.” Although the wording left the proposal for a national pharmaceutical company rather weak, similar to Brazil’s, the affected business leaders had a fit. They accused the FMLN of wanting to establish a “state-owned pharmaceutical monopoly.”

What about generic drugs?

The bills drafted by the PCN and ARENA both promoted generic drugs, arguing that they have lower market prices and are more accessible. Coincidently, three important ARENA leaders are the main shareholders in Farrmacias Económicas, the only chain that specializes in selling generic drugs nationally. Miguel Lacayo, president of Farmacias Económicas, was economics minister under the Francisco Flores administration and is currently on the board of the Salvadoran Foundation for Social and Economic Development (FUSADES). Two other important shareholders from this company are former President Flores himself and Juan José Daboub, finance minister under Flores’ administration and now managing director of the World Bank.

Generic drugs in El Salvador are also the most expensive in Central America. According to a report from the Central American Consumers in Action network (ConSuAcción), 15 of the 21 generic drugs analyzed were reported to have the highest or second highest prices in the region. The University of El Salvador’s CENSALUD study says that the the sale of generic drugs results in an average profit of 2,800%. In this context, a law promoting access to generic drugs would be no guarantee of their accessibility, or of their quality, given that the proposed bills don’t touch on the current quality control structure.

Reactions to the official proposal

In February 2010, anticipating the reform to the national health system announced the following September, the health minister, supported by the FMLN legislative bench, submitted a new bill on Medications and Health Products, restating the basic points from the previous proposals by APSAL and its own party, and introducing two major changes.

The first, which went largely unnoticed, was to delete the proposal to start proceedings for founding a National Pharmaceutical Company, given the lack of suitable conditions to win the Legislative Assembly battle at that time and the lack of resources to set this initiative in motion. The second amendment, which became a bone of contention during the discussions throughout 2010, proposed transferring the oversight of drug regulation and control to the Ministry of Health. This proposal seeks to integrate drug regulation into national health policy, freeing it from the chemical-pharmaceutical sector so that these companies cease being judge and jury.

El Salvador is the only country anywhere in Latin America that places drug regulation in the hands of the guilds. A few countries have an autonomous regulatory body, but it always answers to its country’s Ministry of Health. In El Salvador, in contrast, the Health Code instituted by the rightwing governments allowed the monitoring of medicines to be handed over to the CSSP, fully knowing the conflict of interest that involves.

Those expecting a rapid and forceful reaction from the business sector were not disappointed. Carmen Estela Pérez, executive director of INQUIFAR, started the accusations: “With this law they’re trying to take everything away from the CSSP. It would be completely stripped of any powers related to drugs. They’re going to leave the Council, which is a constitutionally formed autonomous body, with nothing to do. Monitoring the professions is the only thing they’ll leave it with.”

They tried unsuccessfully to prove that this measure was unconstitutional, and launched a campaign of complaints against the deputy health minister, calling him “a liar,” “exaggerated,” “unconstitutional” and “disrespectful.” In radio and television interviews and in paid ads, INQUIFAR and ANEP dismissed the proposal as a political manipulation to favor ALBA Med (a project of the Bolivarian Alliance for the Peoples of Our America to reduce drug costs) over domestic production.

A tie-breaker

Another bill appeared before the Legislative Assembly’s Health Commission in October to break the impasse in the legislative debate. The young GANA party, all of whose members are dissidents from the ARENA inner group, saw its proposal for the creation of a new monitoring body that would have autonomy but accede to the Ministry of Health as midway between the grassroots and business proposals.

After extensive legislative debate, it was agreed that this body would be a council consisting of the health minister, the minister of economy, the president of the Consumer Protection Ombudsperson’s office, a representative of the Medical Association, a representative from the chemical-pharmaceutical association on the oversight board and the president of the CSSP. No council member would be allowed to have family or business links with the chemical-pharmaceutical industry for three years prior to taking office or for two years after, in order to preclude the involvement of those presently controlling the CSSP.

The Gordian knot:
Price regulations

With agreements reached about the drug regulation council and quality control mechanisms, there was still the Gordian knot of price regulations, a point of honor for the civil society organizations that promote popular health. This issue has always been present in the APSAL, FMLN and Ministry of Health bills.

It’s also a critical issue for INQUIFAR, whose inflexible position was expressed by Mario Ancalmo, its president and owner of Laboratorios Ancalmo: “Fixing drug prices isn’t the way out.” Over and over again he added his declarations to those of Enrique Valdez, an ARENA representative in the Legislative Assembly’s Health Commission: “The law is looking for a state controller and inquisitor because it’ll be the State that will arbitrarily decide on fixed prices. This could lead to shortages of products accessible to the ordinary citizen and also force the companies to hand over information that’s exclusively theirs. Therefore, it infringes on free trade.”

According to Miguel Orellana, director of the Salvadoran Association for the Promotion of Health (ASPS), the ARENA, PDC and PCN benches have been steadfast in stating that they won’t vote for a drug law that incorporates the grassroots spirit of the draft proposals. However, the FMLN and GANA votes together provide the simple majority needed to pass the law, which is why the FMLN representatives are working with GANA’s on a joint draft of the law’s 120 articles.

What will GANA win or lose?

Like other rightwing parties, GANA has very important leadership figures linked to the chemical-pharmaceutical industry. The family of this party’s unofficial leader, former President Saca, is a pillar of the industry with at least two important laboratories in El Salvador. That’s why many were surprised when the party sought popular solutions that will free up the law.

Why did it do it? The unofficial campaigning for the 2012 elections has already started and Margarita Posada, leader of the Citizen’s Alliance against Health Privatization, sees it as tying up loose ends: “Right now they’re facilitating a lot of things because they want to grow electorally. Those who support drug regulation will have a good chance of getting a lot of publicity for themselves on health, which is a very sensitive issue for the Salvadoran people.”

As could be expected, the Medications Law places GANA in a conflict of interests: their political ones vs. their economic ones. When the time comes to vote the law up or down, which of these interests will win out? No one knows. Miguel Orellana recalls a recent occasion when “everything was ready for approval in a plenary session and suddenly the GANA representatives withdrew, taking their votes with them.” FMLN representative Mata Bennett agrees: “They may appear willing but sometimes a phone call can change things.”

“We’ll keep on fighting and
they’ll have to consult us”

Nine years have passed since APSAL introduced the first bill favoring the Salvadoran people’s health. In these nine years the Citizens’ Alliance against Privatization has worked hard to raise awareness, organize and mobilize the population. There’s a health related organization in each of the country’s 14 departments and there have been constant actions of different kinds, including outreach forums to inform and raise awareness; research on the issue; the presentation of documents (legal initiatives) and meetings with the Legislative Assembly’s Health Commission and with different political benches. There have also been marches and demonstrations targeting strategic entities such as the Higher Council for Public Health, the Legislative Assembly, the Santa Lucía Drug Distributors and INQUIFAR; and the blocking of streets in the capital and in different parts of the country. During the current “White Marches” they have succeeded in mobilizing civil society organizations to join demonstrations that, although not as massive, evoke the white marches of the last decade.

What have they accomplished? “We’ve put health on the Legislative Assembly’s agenda and before the eyes of the general public,” says Margarita Posada. “We’ve also forced the Legislative Assembly to bring the issue before the public and not to debate and decide behind their backs.”

One crucial grassroots rally went to demonstrate at an exclusive restaurant at the San Salvador volcano where the Health Commission was about to have a “retreat” to discuss and make agreements shortly after the Health Ministry submitted its bill. People blocked the representatives’ access, leaving no doubt that the “nation’s fathers” would have to consult the public on this issue.

President Funes: “Be clear about it!”

Even President Funes has become an active supporter of the Medications Law. He has called on representatives to pass it swiftly and has challenged the private chemical-pharmaceutical industry: “Say openly that you don’t want this law approved because you want to continue protecting your monopoly on the import and distribution of drugs in order to keep drug prices in the country high. Be clear about it.”

Orellana adds that “all the progress we’ve made so far—and it isn’t small because we’re at the point of having a law—has happened as a result not of the political will of the parties but of different civil society activities.” The struggle for approval of the Medications Law shows that even in these very confusing times for the social movement Salvadorans are capable of defending their strategic interests and going toe to toe with our country’s entrepreneurial class.

Elaine Freedman is a grassroots educator and the envío correspondent in El Salvador.

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