Drug pricing: Pawar & Co out to burn our hearts and pockets

The Supreme Court has yet again come to the rescue of the people of the country, when the UPA government was set to drop a bombshell that could have severely affected our healthcare costs.

Chiding the government for its long delay in acting on the issue of essential drugs and their price control, the Court has asked the government not to touch the existing pricing policy.

It has also asked the government to get back within a week with its new list of essential drugs, failing which it will intervene and pass interim orders.

The indifference of the government on the issue came in for flak as well:  “we are certainly greatly concerned. Nine years have passed since the petition was filed. It is engaging attention only when we said that the order will be passed. The court cannot run the government. But at times, we are forced to step in.”

It’s indeed baffling how Sharad Pawar and his Empowered Group of Ministers could propose such a policy that evidently favours the pharma industry than the people who send them to the Parliament. Under the new policy, the prices of essential drugs (drugs that are crucial for majority of the population), will be capped at the average of the market prices of the top brands (brands with more than 1% market share in each segment).

While prescribing this formula, what Sharad Pawar and Co choose to ignore is the massive price difference between the top selling brands and lesser selling ones. PTI

Activists say this will translate to the top three brands while eliminating the lower-priced drugs and generics.

The existing policy, that the government wants to change, uses the manufacturing cost of the drugs as the base. Common sense would tell us that asking the drug companies not to charge beyond a reasonable profit margin over the manufacturing price is definitely better than choosing the average price of their top selling brands.

Evidently, the first one favours people and prevents excessive profiteering on life-saving drugs; the second one leaves sufficient room for the drug industry to play with. Here the might of the market decides what is the best price for the country’s poor majority who are among the sickest in the world in every disease-category.

But then, the government would tell us that it has expanded the list of essential drugs from 77 to 348 as well.

Is it a big deal? Not at all!

The WHO had raised the number of essential drugs to 320 a full ten years ago, whereas India hasn’t added a single medicine to its 27-year old list of 77. Public health activists say that even the new proposed list leaves out many life-saving drugs including those for hypertension, diabetes and cancer.

When the price control is pegged to the whims of market, the government is essentially succumbing to unfair practices of the drug lobby, which is not necessarily happy with a level playing field. The difference between the manufacturing costs and retail prices, on many cases, is huge, sometimes as high as 1000 percent; and to top the market drug companies spend exorbitant amounts of money (mostly commissions/incentives/gifts to doctors and hospitals as well as margins to retailers).

Therefore fixing fair prices based on an unfairly captured market-share is grossly unfair to people. Instead of helping people, it would legitimise the existing higher prices. Even if one believes the drug industry’s claim that the new regime will reduce prices by 17%, real facts in the filed show that there is room for drastic changes.

While prescribing this formula, what Sharad Pawar and Co choose to ignore is the massive price difference between the top selling brands and lesser selling ones. The price difference gets steeper if one compares the prices of brands with the generic versions.

In a 2006 article, Dr Anurag Bhargava and S Srinivasan (THE HINDU, 17 October), highlighted the situation with examples: “Two reputed companies manufacture the same medicine, in the same strength, with a retail price difference of more than 1000 percent. 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”

Shocking, isn’t it?

On the huge advantage of the generics, that seems overlooked in the new policy, they further add: “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 percent 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.”

This is one of the reasons why Amir Khan had spoken out in support of generics. Amir Khan could have done a more pro-people job than Manmohan Singh’s ministers. It’s so easy and simple if one doesn’t pander to vested interests.

The government is certainly not sincere on this — had it been, it could have continued with the existing policy of cost-based control and expanded the essential list to include many more drugs than 348.

“In the guise of imposing price control, what the government is actually doing is lifting price control completely and institutionalising profit maximisation. This whole exercise is designed to mislead the nation. The government must go by the 1995 order, expand the list of NLEM (national list of essential medicines) without change the pricing policy,” Livemint qouted Colin Gonsalvez, lawyer for AIDAN.

India has one of the world’s highest per capita out of pocket health expenditure and two third of it goes into drug prices. Despite the Prime Minister’s firm early commitments, the government has gone back on its promise of universalisation of healthcare.

Now, with a flawed policy, they were out to burn a hole in our pockets, heart and lungs. But we are still not a hopeless nation because we have our courts and an increasingly vigilant civil society.

Updated Date: Oct 04, 2012 15:16 PM

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