[e-drug] India: Life-saving drugs to be cheaper - background

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

E-DRUG: India: Life-saving drugs to be cheaper - background
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[Here is some more background to the contribution from Dr Gopal Dabade 
September 25 - Life-saving drugs to be cheaper in India. WB]

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

Price regulation of essential medicines
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.)