NAIROBI, Kenya, May 25 – The Pharmaceutical Society of Kenya (PSK) has warned that proposals in the Finance Bill 2026 could drive up medicine prices and weaken local pharmaceutical manufacturing, as Parliament concludes public participation on the tax measures.
In a memorandum submitted to the National Assembly Finance and Planning Committee, PSK said the proposed shift of pharmaceutical inputs from zero-rated to VAT-exempt status would significantly raise production costs for local drug manufacturers, with the burden ultimately passed on to patients.
The lobby, which represents more than 5,000 pharmacists across the country, argued that the proposed tax changes risk undermining Kenya’s efforts to strengthen local manufacturing and improve access to affordable healthcare.
“The proposed transition of inputs and raw materials from zero rated to exempt status will make it impossible for manufacturers of inputs like packaging materials manufactured locally for use by industry to claim any input taxes leading to an overall increase in cost of supplies to the pharmaceutical industry,” PSK said.
“This will lead to a net increase of approximately 7 percent in the cost of input for local pharmaceutical manufacturers, which poses a risk of increasing cost of pharmaceuticals in the country affecting healthcare affordability.”
The Finance Bill 2026 proposes introducing a new paragraph to the VAT Act that would move pharmaceutical inputs and raw materials whether locally sourced or imported from zero-rated to VAT-exempt status upon recommendation by the Health Cabinet Secretary.
PSK says the change would reverse gains made under the current tax regime, where manufacturers and suppliers can recover input taxes, helping lower production costs.
According to the society’s analysis, the proposed framework could increase aggregate production costs for pharmaceutical firms by more than 13 percent once taxes on inputs, packaging materials, utilities, technical services, and operational overheads are factored in.
The pharmacists’ body warned that such increases would not only raise retail drug prices but could also strain reimbursements under the Social Health Insurance Fund (SHIF).
Beyond VAT concerns, PSK also opposed proposals to remove excise duty exemptions on imported printed paper and packaging materials from East African Community partner states, arguing the measures would raise manufacturing costs and undermine regional trade integration.
The society further called for pharmaceutical products, essential medicines, diagnostic technologies, and manufacturing equipment to be reclassified from VAT-exempt to zero-rated supplies to reduce embedded taxes across the supply chain.
PSK said zero-rating pharmaceutical raw materials and equipment would lower medicine costs, support Universal Health Coverage, and strengthen Kenya’s domestic manufacturing capacity.
The memorandum also raised concerns over the implementation of the electronic Tax Invoice Management System (eTIMS) in pharmacies, warning that patient-level pharmaceutical transactions could expose sensitive medical information.
The society wants pharmacy dispensing transactions excluded from mandatory eTIMS invoice requirements, citing obligations under the Data Protection Act and professional confidentiality standards for pharmacists.
