[e-drug] Price regulation of essential medicines in India

["E-Drug" <e-drug@healthnet.org>]

E-DRUG: Price regulation of essential medicines in India
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[The Hindu on Access to Essential Medicines in India. For the first time
with an estimate of drug promotion expenditure of Indian Pharma. Maybe more
emphasis could be given to controlling all medicines prices as squeezing
only the Essential Medicines prices means ballooning out of other medicines
prices with a big margin for promo. PS 1 crore = 10 million. Copied as fair
use. WB]

Date:17/10/2006 
http://www.thehindu.com/2006/10/17/stories/2006101702601000.htm 
 
Opinion - Leader Page Articles 

Price regulation of essential medicines 

By Anurag Bhargava & S. Srinivasan 

Will the pharmaceutical policy again ignore the predicament of patients, the
Indian experience of the free market, and the real costs of drugs? 

INDIA HAS the largest number of people, an estimated 649 million, without
regular access to essential medicines although it has a large pharmaceutical
industry, according to the WHO's World Medicines Situation Report of 2004.
This is because of poor availability of drugs in the public health sector
and poor affordability in the private system. India has one of the world's
most privatised health care systems, with patients incurring more than 80
per cent of the expenditure. According to data from the National Sample
Survey's 55th consumer expenditure survey, more than two thirds of
outpatients' expenses goes towards the purchase of drugs. There has been a
progressive decline in the number of drugs under price control - from 347 in
1977 to only 74 in 1995. Over the last 12 years no drug has been placed
under price control, although many new ones have been introduced. So we have
antibiotics that cost a few thousands of rupees a day of treatment,
cardiovascular drugs that cost thousands per vial, and cancer drugs that can
cost hundreds of thousands a year. Deregulation of drug prices has
contributed to increasing costs of healthcare and pushed millions into debt.


Moreover the pharmaceutical policy has deviated significantly from public
health priorities. The present list of drugs under price control does not
include any vaccines or any drug for anaemia or cancer or even a life-saving
medicine like oral rehydration salts. It also excludes most drugs for
hypertension, diabetes, coronary artery disease, tuberculosis, malaria, and
all the higher antibiotics. 
A pharma policy released by the previous government in 2002 would have
reduced this list to less than 30 drugs. A Karnataka High Court judgment
stayed the implementation of that policy. In 2003, a group of experts
evolved the National List of Essential Medicines (354 in all), which could
take care of most of the healthcare needs of Indians. The present Government
has taken the unusual step of releasing the draft Pharmaceutical Policy 2006
in instalments. Part A of the policy, containing issues other than statutory
price control, was released in December 2005. In its introduction, it
mentioned "price regulation of essential medicines is an important component
of this policy." Part B, which was to deal with price regulation, has still
not appeared in the public domain. 

After long deliberations on price regulation of drugs over the past three
years (involving one committee and one task force), the Minister of
Chemicals in July 2006 circulated a draft policy to the Cabinet, which
planned to regulate the prices of the 354 essential medicines in the
National List. This welcome, and long overdue, correction in the policy,
would have greatly improved access to essential medicines. Surprisingly it
faced opposition from within the Cabinet. A new joint committee of 14
members, of which 11 represent the industry and three the government, has
been constituted to again consider the draft policy and price regulation.
How this industry-dominated committee will reflect the public need is
anybody's guess. 

The Minister of Chemicals announced on October 2, 2006, measures aimed at
reducing prices of certain categories of drugs, by curbing trade margins.
These completely ignore the issue of regulation of the inflated retail
prices of branded drugs, which comprise the majority of drugs prescribed and
sold in the market. The top 300 brands alone sell for more than Rs.18,000
crore annually. On the other hand, they seek to regulate trade margins of
"generic generic" medicines, which comprise less than 5 per cent of the
market, and those of "branded generic" medicines (a term which is itself a
misnomer, and lacks any legal definition). These measures do not specify how
many essential medicines' prices will be reduced. 

Price regulation according to the July draft would have allowed a margin of
up to 200 per cent of the basic cost of manufacture, which is healthy enough
for the profitability of any trade. In fact the policy would curb only
profiteering, which is currently rampant. The industry has argued that if
price regulation is implemented, units will close down, spurious drugs will
increase, exports and R&D will decline, and the country will face drug
scarcities. Pharma policies have long provided for drugs developed by
indigenous R&D to be excluded from the ambit of price control, but there
have been no claimants so far. 

Medicines are unlike any other consumer goods, because patients procure them
under stressful, if not life-threatening, circumstances, on the advice of a
third party (the doctor), and with little personal knowledge of their
nature. They are such a critical and essential commodity that governments
all over the world, even in so-called market economies, regulate their
prices. The anarchic retail prices of drugs outside price control provide
the clearest evidence of the need for price regulation. Two reputed
companies manufacture the same medicine, in the same strength, with a retail
price difference of more than 1000 per cent. Aventis charges Rs.95 for a
500mg tablet of the antibiotic levofloxacin, while CIPLA charges only
Rs.6.80 for the same tablet. Drug companies charge six times in the case of
anti-hypertensive and anti-diabetic drugs, 15 times for psychiatric drugs,
and 18 times for anti-cancer drugs, without any intervention by the
government. Companies are unable to give a credible explanation how such
variations are possible, and yet complain against any regulation of retail
prices. 

Price regulation implies that the retail price of a drug should bear some
logical relation to its manufacturing cost. The real manufacturing cost is
often a very small fraction of the retail price. This is revealed by the
prices of drugs in competitive tenders, by trade margins that companies
offer, and by the huge amounts they spend on drug promotion. The consumers
at the retail counter pay many times more than the price at which the drugs
are provided to the traders or to the government. They pay heavily for the
wasteful, often unethical expenses of drug promotion, and the high profit
margins. In quality-conscious bulk procurement processes (for example, those
in Delhi and Tamil Nadu), the tender rates for drugs are as low as 2-20 per
cent of the market rate. This is unheard of in any other commodity. An
example: in Tamil Nadu a company bids to supply a medicine for worms
(Albendazole 400 mg tablets), at a mere 35 paise per tablet, while brands of
this drug sell for Rs.12.00 in the market. 

In this light, the recent offer of the industry to offer drugs to the
government at just 50 per cent of the MRP is gratuitous (for procurement
prices of the Tamil Nadu Government see www.tnmsc.com) . Profit margins for
the company and trade margins in pharmaceuticals are often astronomical, and
both need to be controlled by regulating the maximum retail price in
relation to cost of manufacture. An antibiotic injection like Amikacin made
by a reputed company has a retail price of Rs.64, while the retailer can buy
it at Rs.13.50. Two years ago the Ministry of Chemicals investigated trade
margins in three commonly used drugs - Cetrizine, Nimesulide, and Omeprazole
- and found trade margins of over 1000 per cent. According to The Economic
Times intelligence group, in 2004 the top 50 pharmaceutical companies alone
spent Rs.5340 crore on drug marketing. 

Past experiments with drug price deregulation have led to abnormal price
increases of essential medicines. In 1995, for example, the price of a
preparation for anaemia rose by 177 per cent, while the price of anti-TB
drugs rose by nearly 90 per cent. Moreover, when drugs are placed under
price control, drug companies begin producing and promoting irrational or
higher priced alternatives that are not on the list. The government should
pre-empt this by bringing all alternative drugs at least under a scheme of
intensive price monitoring. 

Price regulation is clearly a national policy matter, and in no way
incompatible with TRIPS. Apart from the prices of drugs, the policy needs to
address numerous other pending issues like conduct of clinical trials,
regulation of new drug approvals, drug quality, drug promotion, availability
of unbiased drug information, removal of unsafe and irrational drugs, and
utilisation of the flexibilities under TRIPS/WTO to protect public health.
If telephone tariffs, insurance premiums, electricity rates, and trading of
shares are regulated in India, surely the regulation of drug prices is no
less important. The industry is offering a number of complicated suggestions
to the government to escape the scrutiny of price regulation. If the
government turns back on its commitment to regulate the prices of essential
medicines, the implications for public health will be grave. 

(Anurag Bhargava, an AIIMS trained physician, is with Jan Swasthya Sahyog,
Bilaspur. S. Srinivasan, an IIT/IIM graduate is an expert on drug pricing
and the Managing Trustee of Low Cost Standard Therapeutics, Vadodara.)