High drug prices a problem for rich and poor countries

America and India, one the oldest democracy and the other the largest have a common problem: drug prices are hurting the common citizens in both countries. Ditto in the European Union countries increasingly. 

The Supreme Court has asked the central government why, as per the Drug Price Control Order (DPCO) in 2013, it had shifted, in a surprising and shocking move, the price fixing mechanism of 370 Essential Medicines from the earlier ‘cost-based’ to the present ‘market-based’ model.

In the ‘market-based’ model, the maximum price that a company fixes for a drug under price control is calculated by averaging the prices of brands that hold at least 1% share of the market for the formulation, whereas in the ‘cost-based’ model, the cost of the medicine is determined by the inputs used by the manufacturer.

The government’s decision to introduce market-based price mechanism for drugs is based on the assumption that market forces will automatically bring down the prices. At least in the Indian context, one can say without a doubt that market forces do not bring down drug prices, because consumers do not have a choice over taking medicines, or over what medicines they can take. Somebody else — the doctor — makes that decision for the patient.

As the judge presiding over the case on drug pricing said, medicines are not “sunglasses”. Aptly, the judge referred to sunglasses because when one buys them, the buyer will already have set a budget for it. The same does not hold good for medicines, because there is asymmetry of information. The consumer cannot decide and has to stick to the doctor’s prescription.

Drug prices ultimately play a crucial role in whether medication is accessible or not. Many a time, they decide between life and death. High drug prices result in a vast majority of people being unable to access them, which results in an increase in morbidity and mortality; more so among the poor and vulnerable citizens of a country. In addition, the high cost of healthcare also robs the families of their savings. In many cases, they may have to lose whatever little assets they possess or even go into debt.

In India, due to healthcare payments, every year some 39.5 million individuals fall Below Poverty Line (BPL). This is as per the National Sample Survey Organisation’s 2004 and 2005 data. In addition, the second major cause of debt in rural India is due to expenses on ill-health.

The DPCO does not take the responsibility of regulating the prices of medicines that are patented. The government set up a high-level committee under the Department of Pharmaceuticals (DOP) in 2013 to examine the issue. The report titled “Report of the Committee on Price Negotiations for Patented Drugs”, mentions that “the drug prices are on the higher side in India compared to most countries” (like France, Australia and New Zealand). This breaks the myth that the drug prices are low in India and, to make matters worse, the number of medicines under patents has been rising over the years.

In the US, EU

In the United States, an insignificant incident has unwittingly snowballed into a national debate. In August 2016, the price of ‘EpiPens’ — a drug that is used to manage life-threatening allergic reactions in children — shot up by 500%. This incident created ripples that began in the state of California and is set to spread across the country. It has resulted in a bill on drug pricing that was cleared just last week and which requires drug companies to be transparent in drug pricing.

The bill requires pharma companies to give a 60 days’ notice to state agencies and health insurers when they plan to raise the price of a drug by 16% or more over a period of two years. They would also have to explain why the increase is necessary. The pharma industry lobby tried to scuttle the bill by hiring 45 lobbyists, but it all went in vain. The impact of this bill in one state will spill over and influence the rest of America.

Providing medicines to patients is growing into a major problem even in the European Union (EU) countries, where most governments offer free healthcare, though definitely not to the extent of the problem in Asian countries. Though each European country has the right to regulate drug prices, a study published recently found that the availability and affordability of medicines to the community is unsatisfactory. Unfortunately, there is no common EU policy on drug price regulations.

Considering the economic factors and statistics, it is questionable that the same drug should be more expensive or have a similar price in low and middle-income EU countries as in the richest member-states. So, there is an urgent need for the governments to intervene as EU public health policies are committed to free access to medicines at an affordable price. This can happen only when the EU encourages drug
companies and supports local politicians in their campaigns to reduce drug prices.

While governments of countries all over the world are increasingly faltering in making medicines available at affordable prices to their citizens, profit-driven pharma companies seem to be firmly decided on increasing drug prices. Given this, will the global civil society organisations and human rights groups launch a global campaign on the issue of access to medicines?

(The writer is president, Drug Action Forum, Karnataka)