Federal Tax Hike on Medical Devices: Healthcare Costs Set to Surge

The federal government of Pakistan has imposed a sales tax on over 200 medical devices, a decision poised to significantly drive up healthcare costs across the country. This new tax, part of the 2024-25 fiscal budget, is expected to escalate the costs of diagnostic and treatment procedures by 25% to 30%, according to experts. The financial burden will be felt most acutely by poor and middle-class patients who rely on public and private healthcare services.

The newly implemented tax affects a wide range of essential medical equipment, including angiography and angioplasty devices, as well as diagnostic kits for various diseases. Masood Ahmed, Chairman of the Healthcare Devices Association of Pakistan, expressed deep concern over the tax, which applies to all imported medical devices and diagnostic kits. He highlighted that 95% of medical devices in Pakistan are imported, indicating a broad impact on the overall healthcare system.

"This tax will severely impact the budgets of public hospitals, leading to a notable reduction in routine operations, angiographies, and angioplasties," Ahmed explained. "Public hospital budgets will be severely affected, and the imposition of this tax may deprive patients relying on charitable hospitals of treatment."

The Healthcare Devices Association of Pakistan has urgently appealed to Prime Minister Shehbaz Sharif and Finance Minister Aurangzeb, requesting the removal of the sales tax. They warn that without intervention, the tax will make essential medical treatments unaffordable for many, particularly those in private hospitals who do not benefit from government subsidies.

Former provincial health minister and current President of the Private Hospitals and Clinics Association, Dr. Syed Junaid Ali Shah, echoed these concerns. He pointed out that a 15% sales tax on diagnostic kits will disproportionately burden the poorest patients. "Healthcare is not a luxury but a necessity," Dr. Shah emphasized. He also noted the additional 3% to 5% duty on previously duty-free healthcare products, which will further increase the operational costs for private hospitals.

During an emergency meeting held by the Private Hospitals and Clinics Association, members unanimously demanded that healthcare providers be granted industry status. They argued that continuous tax increases will exacerbate the financial strain on private hospitals, ultimately resulting in higher costs for patients. Dr. Shah underscored that private hospitals strive to shield patients from these cost hikes, but without subsidies, their ability to absorb these taxes is limited.

Vice President Dr. Bilal Faiz Khan, General Secretary Professor Dr. Farhan Isa, and Joint Secretary Dr. Muhammad Iqbal also participated in the meeting, reinforcing the call for government reconsideration of the imposed taxes. They stressed that such fiscal measures threaten to undermine the accessibility and quality of healthcare, particularly for the most vulnerable segments of society.

In parallel, the Sindh government has introduced a 15% tax on medical services, further compounding the financial burden on patients who rely on private healthcare providers. This tax applies not only to hospital and clinic services but also to educational services provided by tuition centres. The budget document sparked widespread condemnation from doctors' organizations, educationists, and economists, who argued that these measures could stifle investment in human capital.

Dr. Shah and other healthcare leaders have voiced their concern that these combined federal and provincial taxes will significantly hinder the affordability of healthcare. "These taxes are a step backward for our healthcare system," Dr. Shah stated. "We need policies that support, not hinder, access to essential medical services."

The broader implications of these taxes are profound. Public hospitals, which are already stretched thin, will likely see a reduction in routine operations due to budget constraints. This could lead to longer waiting times and reduced access to critical treatments for patients. Meanwhile, private hospitals, facing increased operational costs, may have no choice but to pass these expenses onto patients, further exacerbating healthcare inequities.

The situation calls for urgent dialogue between the government and healthcare stakeholders to find a balanced solution that safeguards both fiscal policy objectives and public health needs. The healthcare community remains hopeful that the government will heed their appeals and reconsider the tax policies to ensure that healthcare remains accessible and affordable for all Pakistanis.

The imposition of new taxes on medical devices and services represents a significant challenge for Pakistan's healthcare system. As experts warn of a 25% to 30% increase in healthcare costs, the most vulnerable populations stand to suffer the most. It is imperative that the government engages with healthcare providers to mitigate the potential adverse effects of these fiscal measures and to ensure that healthcare remains a fundamental right, not a burdensome luxury.

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