In the fuller hospitals of Dhaka, it is more common for beds to fill faster than medicine cabinets; one diabetic woman cuts her pills in half. Not because a doctor told her to, but because, in Bangladesh, millions of people have no option to do otherwise: food or treatment, but not both, is all that's on offer. The problem has nothing to do with you personally, but is macroeconomic, and very clear: Bangladesh is over-reliant on imported API (Active Pharmaceutical Ingredient; the primary biologically active component of a medication). Although medicines are produced locally, Bangladesh imports 95 per cent of its API from India and China. Dramatic increases in API import prices during the COVID-19 pandemic and Russia-Ukraine war, caused by global supply chain issues, are then passed on directly to the patient.
Since the bulk of raw chemical ingredients for the drugs are imported, the falling value of the local currency (Taka) against the US dollar raises the cost of the imported raw materials, which is passed on to the consumer. The value of the taka fell against the dollar by 34.8 per cent between 2014 and 2024. In an open economy, currency depreciation directly raises the local price of imported inputs. This is textbook exchange-rate pass-through: the local price of a blood pressure tablet at a neighbourhood pharmacy in Dhaka gets raised due to an increase in the oil price or US interest rate thousands of miles away. One pharmaceuticals CEO reported the cost of producing paracetamol was 40 times higher than two decades ago while the retail price remains fixed by the government at Tk 1.20.
This trend in inflation also holds true. Bangladesh's inflation hovered between 5 and 6 per cent for most of the past decade, but it climbed sharply to 9.75 per cent in 2023 before easing slightly to 8.48 per cent by 2025 - still well above the historical trend. Long-term inflation rates near or above 9 per cent function as an invisible tax that most harms those who spend the highest proportion of their income on non-discretionary goods. This can be illustrated by the near-total inelasticity of demand for life-saving drugs: a diabetic patient cannot reduce his intake of insulin if its price rises. The adjustment instead comes through skipped meals, borrowed money, and sold assets. Figure-1 shows this inflation trend alongside the out-of-pocket health expenditure data points available for Bangladesh.
The scale of this market failure is captured in one figure: by 2023, 74.50 per cent of all health spending in Bangladesh was paid directly out-of-pocket by households - nearly four times the WHO-recommended ceiling of 20 per cent. This exposes a collapse in financial risk-pooling, the mechanism by which insurance systems spread the cost of illness across society so no single family is bankrupted by a health shock. Bangladesh has no meaningful universal health insurance, and the result is brutal arithmetic: in 2022 alone, 6.13 million Bangladeshis were pushed below the poverty line by medical bills.
Table-1 shows the case of a lowest-paid RMG worker with three concurrent NCDs (Non-Communicable Disease): the cost of care would take 4.58 days of wages per month, amounting to 23 per cent of gross monthly income, just on the threshold of catastrophic health expenditure, according to WHO criteria.
Underlying all this is chronic under-investment in public health: public health expenditure in Bangladesh is less than 1 per cent of its gross domestic product (GDP), one of the lowest rates in South Asia and far below the WHO target of 5 per cent. The government's response has been to freeze prices (almost exclusively), instead of using fiscal and monetary measures that could have countered the shock. A drug's retail price is fixed, so if the price of inputs rises, the drug loses profitability, making it more likely that companies will stop making it. So price caps and industry response belong to the same story. One is the cause, the other the consequence. In 2025, over 150 drugs, including epilepsy drugs and psychiatric medications, were suspended from sale by pharmaceutical firms such as Renata as it was no longer economically viable to sell them at a frozen price with rising costs. This pushes patients to even more expensive medications and creates a greater shortage of the very medications these price controls were meant to prevent.
The less visible, less dramatic, but more serious cost is trust. People don't believe things will get cheaper or even stay the same. They will start, as they have already started, taking lower doses, cutting pills in half, and stockpiling any drug they can find. A household doing this looks like a small, sensible way to cope. The problem is, millions, at the same time. Poorly controlled diabetes and poorly controlled hypertension led to strokes and kidney failure and hospitalisations that cost much more than the medicine would have cost, anyway. A macroeconomic shock that starts in the foreign-exchange market ends up, a few years later, as a wave of preventable hospitalisations. A family that sells a rickshaw or a sewing machine or a piece of farmland, anything that can earn money to pay a hospital bill, loses not only the sale value, but the permanently lower income which that ability to earn will never be able to realise. A sick and anxious worker is not an efficient worker. When multiplied by 6.13 million people a year, this shows up in aggregate labour supply, household savings, and growth.
In January 2026, the government finalised National Medicine Pricing Policy 2025 with cost-plus benchmarking. Companies selling at least 25 per cent essential drugs are eligible for approval of new drugs. Drug Pricing Method 2026 sets the maximum retail price of medicines based on the cost of manufacturing active pharmaceutical ingredients (APIs) and a regulated profit margin. On trade, Bangladesh's Least Developed Country (LDC) graduation in November 2026, if not deferred by three years, raises concerns about API prices. But an analysis of RAPID observed TRIPS flexibilities such as compulsory licensing and the 4 per cent royalty cap offer meaningful protection. Nevertheless, without a basic insurance floor in the system, these reforms alone cannot resolve this essentially financing issue. In the short run, the three achievable priorities are: (1) fiscal expansion to align with the WHO recommended 5 per cent spending target, (2) mandatory prescriptions for generics (originator prices are up to 847 per cent higher than generics), and (3) pooled financing: a basic contributory health insurance scheme as in Vietnam and Thailand at similar per capita GDP would bring catastrophic OOPs (Out-of-pocket payments) under a common prepayment system.
Bangladesh has an economy to be proud of - strong garment exports, remittances, and growing per capita incomes. But none of this will save the garment worker who has no money for her blood pressure medication. As a result of our dependence on imports, the price of drugs in this country is determined by the international marketplace. Inflation, however, taxes the sick more than the well. It is also no surprise that the sick go bankrupt, and that these results of our macroeconomic policies have a solution. The ever-increasing health budget is not just about achieving the WHO-recommended 5 per cent of GDP but whether a family can afford to pay for health services today without falling into or perpetuating a debt trap for future generations. Indeed, the cost of inaction exceeds the cost of action when the currency of exchange is preventable suffering instead of takas.
Faria Alam Mohua and Jyotirmoy Gope are Economics Undergraduates from BRAC University. They can be reached at [email protected] and [email protected], respectively
