A cure for the disease

Even though she never came anywhere close to the Supreme Court, 70-year-old Uma Devi typifies why the apex court was angry with the government for dragging its feet on fixing drug prices.

. A widow for the last five years, she survives on family pension and interest earned on bank deposits. With chronic problems like diabetes, thyroid disorder and arthritis, besides a heart ailment, that necessitates daily medication, she struggles hard every month to pay her medicine bill. She shivers at the thought of getting admitted in a hospital in case of any other ailment.

Like her, thousands of others from middle class and lower middle class background are finding it increasingly hard to pay their medical bills, bulk of which goes to buying medicines. Impoverishment due to out-of-pocket expenditure on health is on the rise in India since 1993-94 but its rate increased at the turn of the millennium

. Going by the government estimates, almost 80 per cent of total funds spent on health care is out-of-pocket expenditure and 70 per cent of which is used in buying medicines. The biggest beneficiary is pharmaceutical companies, which are doing brisk business. “Pharma industry is galloping despite recession,” says Arun Panda, joint secretary at the Union Health Ministry.

The Central Government first controlled drug prices way back in 1960s following the Chinese aggression. Subsequently, prices of a large number of drugs were kept under control through timely government orders. For instance, in 1979 when prices of 347 molecules were brought under price control, there were around 400 molecules in the market. As a result, bulk of the medicines had a cap on selling price.

With economic liberalisation, the number of drugs under price control reduced over the years and finally came to 74 bulk drugs (1,577 formulations of different dosages) as per the Drug Policy of 1994 and Drug Price Control Order 1995.

In 2000, with further liberalisation of economy, the government proposed to remove control on more molecules and kept it for only 35 drugs. At that point, a non-governmental organisation thought enough is enough and moved the Karnataka High Court challenging the proposal.

When the High Court asked the government on what basis it is including and excluding drugs from the National List of Essential Medicine (NLEM), the government did not have any answer. The High Court struck down the draft policy.

When the decision was challenged in the Supreme Court, it asked the Centre to “formulate appropriate criterion for ensuring essential and life-saving drugs not to fall out of the price control,” reasoning that since drugs are linked to life and death, their prices should be under control to ensure Right to Life as guaranteed under the Constitution. The apex court asked the government to frame a policy and revise the NLEM.

“But the new National Pharmaceutical Pricing Policy, 2011 is flawed, irrational and prima-facie tilted in favour of the industry,” said Chandra Mohan Gulhati, a former consultation to the World Health Organisation (WHO).

The new policy revolves around the concept of essential medicines and market-based pricing, both of which came under attack from industry observers.

Even though 348 drugs are brought under price control, it will only be one-third of the total number of molecules sold in Indian market. Controlling price of one or two drugs from a class of medicines will achieve nothing as doctors will be “encouraged” by drug companies to prescribe other higher-priced medicines from the same class that are not under control.

Medicine is the only item purchased by a person in which a third party (the doctor) decides what to buy. If the two -- the doctor and pharmaceutical companies-- join hands, there is little option left for the common man. “Unless all drugs are brought under control, the very purpose will be defeated as doctors are unlikely to prescribe drugs under price control,” Gulhati says.

Unfortunately, the well-intentioned nomenclature of “essential drug” coined by WHO for public procurement purpose (used by most of the people, most of the time) is being twisted by the pharma industry to claim drugs not in the essential list should be outside price control. “Nothing could be more unethical and inhuman because all drugs are essential for specific patient,” he notes.

With the Centre proposing to provide free medicines at government health care centres, the industry is now pitching hard for providing high-quality generic drugs, with the hope that bulk procurement from the government will open up a new market for them. What is left unstated is that only 20 per cent of those who seek health care go to a government facility, whereas the preferred destination for remaining 80 per cent is the private sector where the manufacturer-chemist-doctor nexus rule will continue.

The market-based pricing mechanism is another contentious area. Instead of cost-based pricing in which manufacturers are permitted to add a mark-up or MAPE (maximum allowable post-marketing expenses) on the production cost to take care of packing, transport, distribution and promotion, the new policy suggests price of a particular drug will be decided after taking weighted average of the top three selling brands.

This would be counter-productive because top selling brands are normally most expensive brands. Companies spend a fortune in promoting those brands among doctors. If a government sanctioned price is notified, the cheaper brands will also hike the price. “The health ministry favours cost-based pricing,” says Panda. “For consumers, cost-based pricing is better option any day but that’s not how the industry works,” said an executive with one of the India’s top pharmaceutical MNC.

The pharma industry is known for widely flouting norms. In June, a government study carried out by the ministry of corporate affairs found leading pharmaceutical companies like GlaxoSmithkline, Pfizer and Ranbaxy sell their products with an “exorbitantly high” profit margin.

The survey found drug companies add a MAPE between 203 per cent and 1,123 per cent in violation of rules, raising questions on the role played by various government agencies. A recent Parliamentary Standing Committee report clearly highlighted the unholy alliance between pharma companies, bureaucrats and drug regulators.

“Even if you consider a MAPE of 200 or 300 per cent, retail prices of many drugs are far above than even those high margins,” points out S Shrinivasan from All India Drug Action Network, which filed the petition in the court in 2003.

“The most serious shortcoming of the policy is patented and monopoly drugs are not covered. Partial regulation will hurt patients and domestic industry and help exclusively multinational companies,” feels Congress MP Jyoti Mirdha, who argued in favour of price control before a group of ministers on pharmaceutical price headed by Union Agriculture Minister Sharad Pawar in May.

An inter-ministerial group (IMG) was set up in December 2006 to look into pricing of patented medicines. It took six long years to give its recommendations in August 2012. The recommendation was to base the prices of patented medicines on purchasing power parity of various currencies, which everybody agrees, is a fair formula. However, the IMG recommendations have to cross two major hurdles within the department of pharmaceuticals and the Cabinet, before coming to effect.

The inordinate delay in controlling drug prices angered the Supreme Court. “We live in a country where cost of monthly treatment of common ailments like blood pressure, sugar, etc exceeds monthly salaries of a sizable population. Disposal of dead bodies is cheaper, in fact,” remarked a bench of Justices G S Singhvi and S J Mukhopadhaya.

Shrinivasan felt NPPP 2011 was made in haste, which is now on its way out. “The GoM should frame a new policy and price-calculation formula,” he says. However, the Supreme Court had given a small time window for the government to act. The next hearing has been fixed on September 27.Over to the Supreme Court.

A cure for the disease

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