Arbitrary drug pricing has now become a subject of a raging debate, all over the globe. It involves both patented and generic drugs, as we have recently witnessed in the largest pharma market in the world – the United States.
In many countries the same issue is inviting the direct intervention of the Government to protect health interest of a vast majority of the populations. India, I reckon, belongs to this group of countries.
In this article, I shall discuss this issue, citing examples from both the global and local recent developments.
Most high drug price increases defy logic:
Published in March 2016, the ‘Express Scripts 2015 Drug Trend Report’ points out, in the perspective of the United States, that over the last 30 years more and more dollars are spent on specialty, rather than on traditional medications.
Most drug development and spend in the late ‘80s and early ‘90s, used to be on traditional, mostly small-molecule oral solid drugs, used to treat conditions, such as, peptic ulcer, depression, hypertension and diabetes. Today, 37.7 percent of drug spends go for specialty medications, with the number expected to increase to 50 percent by 2018, and continue to grow further, thereafter.
The report also states that there are 7,000 potential drugs in development, with most aimed at treating the high-use categories of oncology, neurologic disorders and infectious diseases.
High-cost therapies for non-orphan conditions, particularly for cancer, high cholesterol and Alzheimer’s disease, will continue to increase the population of patients with high annual drug expenditures.
‘Express Scripts Exclusive Prescription Price Index’ reveals a brand-price inflation in the United States, nearly doubled between 2011 and 2015, with the greatest impact seen in more recent years. Compared to 2014, brand prices in 2015 were 16 percent higher. Brand medications have increased in price by 164 percent between 2008 and 2015, the report highlighted.
Similar trend, though may not be of similar magnitude and proportion, has commenced in India too. In this emerging situation, the patients with high ‘out of pocket’ expenditure on medicines have started feeling the pinch too. This is becoming more intense as the disease pattern has started shifting from short-term infectious and parasitic diseases to almost lifelong non-infectious chronic ailments.
The pressure started building up:
The drug industry is likely to come under increasing scrutiny on product pricing, to alleviate the ‘pressure cooker’ situation for the patients, in general, especially during chronic and life-threatening disease conditions.
May 10, 2016 issue of ‘Bloomberg’, in an article titled, “Mutual Fund Industry to Drug makers: Stand Up and Defend Yourself”, reported: “In a sign of how U.S. political pressure to rein in drug pricing is weighing on pharmaceutical companies and their investors, a group of major funds called an unusual meeting with top biotech and pharma lobbyists, urging them to do a better job defending their industry.” This is indeed unusual, and I reckon, should happen in India too.
The article also states: “Investors are stepping up pressure on pharma lobbyists at a critical time for the industry, as drug pricing has become a potent political issue on the presidential campaign trail and in Congress. Democratic candidate Hillary Clinton sent biotech stocks tumbling last year when she first talked about ‘price gouging,’ and Donald Trump has suggested that Medicare should negotiate with manufacturers.”
It also reported that responding to this emerging pressure situation, the global pharmaceutical lobbying organizations, such as, PhRMA in the Washington, DC has already set up a dedicated webpage called “Costs in Context” with infographics and fact sheets. It has also tried to peg responsibility on insurance companies for making it hard for patients to access medicines.
Patients’ can no longer be taken for granted:
That patients’ can no longer be taken for granted with costly drugs, backed by high profile marketing campaigns, is evident from a recent study.
In May 2016, Harvard T.H. Chan School of Public Health, published a poll result on “Americans’ Attitudes About Changing Current Prescription Drug & Medical Device Regulation”.
Among many other related issues, the study reflected that around 57 percent of the poll participants believe that pharmaceutical companies should no longer be allowed to advertise prescription drugs on television. This is because of interesting reasons. The respondents believe that ads for prescription medicines sometimes encourage and persuade the patients to ask for costlier drugs that may not be appropriate for them.
In this context, it is worth recapitulating that on November 17, 2015 the American Medical Association (AMA) also called for a ban on direct-to-consumer advertising of prescription drugs and medical devices, including television advertisements.
According to a statement released by the group, “member physicians are concerned about a growing proliferation of ads driving demand for expensive treatments, despite the clinical effectiveness of less costly alternatives.”
Hence, the bottom-line is, even the American patients, most of whom are covered by health insurance of different kinds, are now feeling the bite of increasing medicine prices.
Many patients seem to be realizing that such unfair price increases, driven by the respective pharma manufacturers, are avoidable. This serious concern may assume a snowballing effect, notwithstanding high voltage lobbying and campaigns to negate these general stakeholders’ feelings by the top global pharma lobbying organizations, across the world, India included.
Premium pricing of MNCs’ branded generics arbitrary?
One gets its reflection even in the Indian branded generic market, where the MNCs usually market their generic single molecule or FDC brands at a huge premium price. Such high priced products are backed by intense marketing of all kinds. The MNCs’ justification of charging a high premium stand on the promise of adherence to world-class drug quality standards, unlike many domestic generic manufacturers.
There are not enough evidences either to accept or ignore this claim. However, it has received a big jolt even recently, raising similar suspicion as I briefly raised in my article titled, “Ease of Doing Pharma Business in India: A Kaleidoscopic View”, published in this blog on March 28, 2016.
On May 12, 2016 Reuters reported that Central Drugs Standard Control Organization (CDSCO) of India, in the notices posted on its website in February and also in April, has made it public that it has found some batches of Sanofi’s ‘Combiflam’ (FDC of paracetamol and ibuprofen) to be “not of standard quality”, as they failed disintegration tests.
According to the US-FDA, this particular test is used as an integral part of quality-assurance measure in pharmaceuticals, and its non-conformance makes the drug ‘sub-standard’.
Hence, huge premium charged for all those branded generics, which are outside DPCO, and mostly by the MNCs, may be construed by many as baseless and arbitrary.
Premium pricing, with payment to doctors is a winner?
This has again been vindicated in a recent study.
A paper, published in the May 09, 2016 issue of JAMA Internal Medicine, establishes that: ‘Pharmaceutical industry payments to physicians may affect prescribing practices and increase costs, if more expensive medications are prescribed.’
Although no such credible study has been published in the Indian context, it is widely believed, the prevailing situation in this regard, within the country, is no different. Nevertheless, arbitrarily high drug pricing, even for the branded generics, is considered as a winning strategy by many pharma companies.
When the Government steps in:
It happened in India recently, yet again.
As we know, the ‘National List of Essential Medicines 2011 (NLEM 2011)’ came under intense public criticism, as it did not include many modern drugs for chronic and lifesaving diseases under its fold, for inclusion in the drug price control order of the Government.
The Experts Committee formed for this purpose recommended addition of a number of drugs for a variety of serious diseases, such as, cancer, hepatitis C, diabetes, cardiovascular, and HIV in the NLEM, to make them more affordable to patients.
Acting on this proposal, the Union Ministry of Health replaced the NLEM 2011 by NLEM 2015 in December 2015. This increased the span of drug price control from 684 to 875 medicines.
According to the well-reputed pharma market research organization – AIOCD Pharmasofttech AWACS Pvt Ltd., with NLEM 2015, still only 18 percent of Indian Pharmaceutical Market (IPM) by value will now come under price control, against 17 percent with NLEM 2011.
On May 12, 2016 the ‘National Pharmaceutical Pricing Authority (NPPA)’ started with revising prices of 54 recently included essential medicines in the NLEM 2015, in some cases bringing them down up to 55 percent, in conformance with the DPCO. Again on May 19, 2016 another set of 27 formulations, which, among others, include the treatment for epilepsy, infections and diabetes, were brought under price control.
Does ‘free market economy’ work in pharma industry?
As the NPPA has articulated a number of times, with umpteen number of examples, that arbitrary and wide variation in pricing for the same kind of branded generics is a result of ‘market failure’.
We all are living in a unique situation, where the consumers are unable to participate in the process of an affordable drug selection, much unlike any other consumer goods in a ‘free economy’.
I deliberated this issue in my article titled, “Does ‘Free-Market Economy’ Work For Branded Generic Drugs In India?”, published in this Blog on April 27, 2015.
Arbitrary drug pricing is increasingly attracting the ire of many Governments, other payers, patients and even some important investors, as we have seen in the United States. Most Indian fund houses and other investors are probably taking stock of the possible emerging situation. A large number of them are, by and large, going by the same old and traditional way of evaluating a pharma business.
Pharma companies, across the world, instead of trying to find out an innovative way to douse this fire for the benefit of all concerned, are getting more and more desperate to rationalize their arbitrary drug pricing, in whatever way they possibly can.
The approach taken by them is convincing none, instead, adding further fuel to the fire. Getting favorable views from some handful of seemingly spoon-fed write-ups, would possibly not help resolve this raging issue or protect public health interest, in any way.
All concerned should try to realize that a utopian ‘free market economy for medicines’, with patients exercising their informed choices, backed by active support from the treating doctor, does not exist in the real world, not just yet.
Thus, arbitrary pricing for essential drugs, where market competition is made irrelevant by many drug makers, allegedly by unethically influencing the prescribers in various ways, merits state intervention, unquestionably, solely to protect patients’ health interest.
By: Tapan J. Ray
Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.