Medicines - The Times Of Central Asia

Viewing results 1 - 6 of 5

Tax Reform

Tax Reform in Kazakhstan Could Lead to Drug Shortages

Kazakhstan’s new tax policy has triggered concerns over potential disruptions in the supply of medicines and medical devices. Industry leaders warn that complexities in administering value-added tax (VAT), along with legal inconsistencies in the updated Tax Code, could destabilize the country's pharmaceutical market. Ruslan Sultanov, chairman of Kazakhstan’s Association of Pharmaceutical and Medical Product Manufacturers, raised concerns during an online meeting with government and business representatives. He said the changes have already led distributors to refuse purchases of several essential medicines. Last year, Kazakhstan adopted a new Tax Code that increased the VAT rate from 12% to 16%. It also introduced zero and reduced VAT rates for specific sectors. During parliamentary discussions, lawmakers proposed exempting essential medicines from VAT and reducing the tax burden on medical institutions. Ultimately, authorities agreed to fully exempt more than 3,000 medicines purchased under the Guaranteed Volume of Free Medical Care (GVFMC) and Compulsory Social Health Insurance (CSHI) programs from VAT. However, Sultanov said these exemptions have not been sufficient to stabilize the market. According to him, the pharmaceutical sector is facing unprecedented administrative pressure. One of the most critical problems is the inconsistent taxation of medical devices procured under the GVFMC and CSHI frameworks. While medical services are completely exempt from VAT, a 5% VAT rate is still applied to medical devices. “As a result, hospitals are in a situation where they cannot offset the tax when purchasing medical equipment. After factoring in administrative costs, companies are losing 5-7%. This affects both domestic and foreign manufacturers,” Sultanov explained. The lack of clear guidance from government agencies has further complicated matters. Socially significant medicines, which were previously taxed at 5%, are now VAT-exempt but ambiguity around the new rules has led to widespread reluctance among distributors to place orders. “The confusion has created a bottleneck. For example, paracetamol is physically available in warehouses, but its movement is being blocked. Without timely clarification, we will face a shortage,” Sultanov warned. To resolve the issue, he proposed eliminating the fragmented VAT structure currently applied to the pharmaceutical sector. Sultanov also highlighted the risks associated with the under-declaration of customs values for imported drugs. He stated that customs officials continue to rely on outdated price data from a year ago, ignoring current market rates. This, combined with delays in approving maximum retail prices by the Ministry of Health, threatens the viability of long-term drug supply contracts signed before January 2026, particularly those involving medicines not produced domestically. His concerns are echoed by pharmacy industry leaders. Talgat Omarov, Chairman of the Kazakhstan Association of Independent Pharmacies, confirmed that the organization has submitted formal appeals to President Kassym-Jomart Tokayev and Senate leadership, calling for the complete exemption of the pharmaceutical sector from VAT, not just medications supplied under state programs. “Every day, customers come into pharmacies, see new price tags, complain, and leave. We hear this negativity constantly. Medicines are socially significant goods, and applying additional taxes in the current climate is dangerous,” Omarov said. To cope with increased taxes...

Medicines

Kazakhstanis Face Drug Shortages and Soaring Prices

Kazakhstanis are paying significantly more for medicines than residents of many other countries, and often struggle to find essential drugs at all. According to the Agency for Protection and Development of Competition (APDC), rising prices, supply disruptions, and an inefficient procurement system are driving a worsening healthcare crisis. Price Hikes Kazakhstan’s medicine procurement system is complex. In principle, essential drugs should be available to patients free of charge under the guaranteed volume of medical care and mandatory social health insurance. In practice, many face shortages or receive lower-quality substitutes. As a result, patients are often forced to buy medicines themselves, an increasingly unaffordable burden. According to the APDC, inflated prices are caused by several factors. One is the lack of pricing transparency. Previously, drug prices were pegged to the highest prices in reference countries, figures submitted by suppliers without verification. As a result, generics sometimes cost nearly as much as original-brand drugs. Another issue is procurement through intermediaries. Up to 45% of state-purchased medicines are bought not from manufacturers but from local distributors, who add their own markups. Costs are also inflated by expensive inspections. To enter the market, companies must pay for production inspections, fees set independently by a state agency that can reach millions of tenge. These costs are passed on to consumers. To address these problems, the APDC has recommended switching to average reference-country prices, limiting inspections on products from countries with stringent regulations, and transferring inspection services to a state monopoly with controlled rates. It also urges more direct procurement from manufacturers and better verification of supplier costs. Tax Reforms Threaten Further Price Increases Despite already high prices, medicines will soon be subject to new taxes. Under Kazakhstan’s revised Tax Code, beginning in 2026, medical services and the sale of medicines and medical products will be subject to value-added tax (VAT), initially at 5%, rising to 10% from January 1, 2027. An exception will apply to medicines and services provided under the guaranteed medical care package and mandatory health insurance. However, as noted earlier, many patients struggle to access these programs in practice. Pharmaceutical companies warn that these VAT changes will drive prices even higher and lead to fresh shortages. Industry leaders also point to the planned 16% VAT on pharmaceutical raw materials, equipment, and components, calling it a distortion of tax policy and a threat to the sector’s stability. “The market is on the edge. Many drugs are already unprofitable and are being withdrawn. The introduction of VAT will accelerate the outflow. The number of registered medicines in Kazakhstan has already dropped from 12,000 to 6,900,” said Marina Durmanova, President of the Association for the Support and Development of Pharmaceutical Activity. “If no measures are taken, the country could face shortages of key drugs and further monopolization of the pharmacy sector,” she warned. Kazakhstan produces few essential medicines domestically, meaning prices continue to rise month by month. When Medicines Vanish, So Do Lives Price increases are only part of the crisis. Vital medicines frequently disappear...

Tax Policy

Kazakh MPs Propose Differentiated Taxation for Medicines and Healthcare

Kazakh lawmakers are pushing for a differentiated tax policy on medicines and healthcare services to maintain their affordability amid upcoming tax reforms. Askhat Aimagambetov, a deputy of the Mazhilis (Kazakhstan’s lower house of parliament), has proposed exempting certain essential medicines from value-added tax (VAT) and reducing the tax burden on medical institutions. Proposed VAT Adjustments Kazakhstan is currently debating a new Tax Code that would increase the VAT rate from 12% to 16%, while introducing zero and reduced rates for specific industries. Aimagambetov, writing on social media, noted that a group of Mazhilis deputies had repeatedly advocated for differentiated taxation of medicines and medical services even before discussions on the VAT hike began. He stressed that applying the full 16% VAT rate to all medical services and pharmaceuticals would lead to a sharp rise in costs and reduce access to healthcare for the population. Tax Exemptions for Essential Medicines To mitigate this impact, lawmakers propose VAT exemptions for drugs treating socially significant diseases such as: Cancer Rare diseases Palliative care Diabetes Autoimmune diseases “The specific list is still under discussion and will be expanded,” Aimagambetov stated. “This measure will prevent a sharp increase in drug prices for those who need them most, socially vulnerable groups.” For other medicines, a reduced VAT rate of 10% is under consideration. Impact on Medical Services Currently, medical services in Kazakhstan are not subject to VAT. However, under the new Tax Code, the government proposes introducing a 10% VAT rate. Aimagambetov and his colleagues initially suggested reducing this to 5%, but discussions are now focused on exempting certain socially significant medical services from VAT entirely. These include: Oncology treatments Palliative care (hospices) Stroke treatment Potentially obstetrics and other critical medical services For other medical services, a 10% VAT rate may be introduced. Changes to Corporate Tax in Healthcare In addition to VAT adjustments, the government plans to raise the corporate income tax for medical institutions. Currently, this sector benefits from a zero-tax rate, but under the proposed reforms, a 10% corporate tax would be applied. Consultations with Businesses Ongoing As previously reported by The Times of Central Asia, the government plans to finalize the list of industries eligible for the 10% VAT rate following consultations with the business community.