Recent price reductions of a number of cardiovascular and diabetes drugs falling outside the National List of Essential Medicines 2011 (NLEM 2011), have attracted fury of the pharma industry . By a notification dated July 10, 2014, the National Pharmaceutical Pricing Authority (NPPA) has invoked Para 19 of the DPCO 2013 for these price changes, the implications of which would indeed be far reaching.
NPPA has now decided to examine inter-brand price variation for single ingredient formulations in eight therapeutic groups, which, besides cardiovascular and diabetic drugs, would include, anti-cancer, HIV/AIDS, anti-TB, anti-malaria, anti-asthmatic and immunological (sera/vaccines). In these therapy areas, the Maximum Retail Price (MRP) of the brand(s) exceeding 25 per cent of the simple average price of all in the same molecular category having 1 percent or above market share, would be capped at the 25 per cent level.
Pharma industry, in general, feels that this ‘unwelcoming decision’ of the NPPA, which allegedly goes beyond the scope and spirit of DPCO 2013, would invite great uncertainty in its business environment.
On the other hand, many consider this price reduction as a ‘Good Omen’ for millions of patients suffering from related life-long ailments. They argue, the purpose of this ‘Bitter Pill” of the NPPA, is to send a clear message to the pharma industry to shape-up with responsible drug pricing.
The new Minister’s recent statement:
It may not be a bad idea to take into consideration the above notification of the NPPA in the light of what the new minister of Chemicals and Fertilizers – Mr. Ananth Kumar said on May 28, 2014. According to media report, the Minister expressed his intent as follows:
“… As far as branded medicines of multinational pharmaceutical companies are concerned, we will talk to all of them and try to bring down prices of essential drugs for poor by 25-40 per cent… The pharmaceutical industry is very important for the health of the country, he added…our main mission will be to ensure the availability of all necessary medicines at affordable prices, especially for poor across the country.”
It is, therefore, quite possible that the NPPA’s decision on price reduction of cardiovascular and diabetes drugs has the Minister’s concurrence.
Industry’s key concern:
This recent decision of the NPPA has reportedly angered the industry, as the Drug Price Control Order 2013 (DPCO 2013) clearly articulates two basic criteria for drug price control in India, as follows:
1. Span of price control:
This was re-defined (from DPCO 1995) on the ‘essentiality criteria’ of the drugs, which in turn is based on the National List of Essential Medicines 2011 (NLEM 2011)
2. Methodology of price control:
This was re-defined (from DPCO 1995) with a clear departure from ‘Cost-Based Price Control’ to the ‘Market-Based Price Control’.
The industry alleges violation of these criteria for the recently announced price reduction of a number of diabetic and cardiovascular drugs, as those do not fall under NLEM 2011.
Price variation is of no-use to patients for prescription drugs:
As the prices of non-scheduled formulations are not fixed by the NPPA, which can virtually be launched at any price to the market, there has been a huge variation of prices between the branded generics within the same chemical entity/entities. Following is a quick example:
|MRP of Lowest Price Brand
|MRP of Highest Price Brand
|Rs. 133 (Brand Leader)
From this chart, one may be able to fathom some basis in the NPPA’s argument that similar price variations in many branded-generics are of no-consequence for prescription drugs, as doctors decide the medicines that a patient would take. If doctors were influenced to prescribe high priced medicines, the patients would require paying more for those drugs, further increasing their Out of Pocket (OoP) expenses. It is also not uncommon that highest price brands are category-leaders too, as indicated in the table above.
Key lacunae in DPCO 2013:
- As highlighted in my earlier blog post titled “Is The New ’Market Based Pricing Model’ Fundamentally Flawed?”, even besides that specific drawback in the methodology of price control in DPCO 2013, NLEM 2011 does not also cover a wide range of essential drugs.
- NLEM 2011 does not cover many combinations of TB drugs, a large number of important drugs for diabetes and hypertension, which I shall deliberate in just a bit.
- Many other critical life saving medicines, such as, anti-cancer drugs, expensive antibiotics and products needed for organ transplantation have been left out of price control. In fact, the prices of a number of these drugs have reportedly gone up after the notification of DPCO 2013.
- The government has now reportedly admitted in an affidavit filed before the Supreme Court that the market value and share of medicines covered by new DPCO 2013, as ‘Essential Drugs’, is a meager 18 per cent of the Indian Pharmaceutical Market (IPM).
- As a result, DPCO 2013 based on NLEM 2011 undermines the entire objective of making essential drugs affordable to all.
- All these lacunae in the current DPCO 2013 calls for a major revision of NLEM 2011. The Union Health Ministry has reportedly initiated steps to revise the list considering the existing market conditions and usage of drugs by the patients.
Invocation of a ‘Safeguard Provision’ in DPCO 2013:
Probably anticipating this scenario, a key safeguard provision was included in Para 19 of DPCO 2013, which reads as follows:
“Fixation of ceiling price of a drug under certain circumstances:
Notwithstanding anything contained in this order, the Government may, in case of extra-ordinary circumstances, if it considers necessary so to do in public interest, fix the ceiling price or retail price of any Drug for such period, as it may deem fit and where the ceiling price or retail price of the drug is already fixed and notified, the Government may allow an increase or decrease in the ceiling price or the retail price, as the case may be, irrespective of annual wholesale price index for that year.”
It now appears, NPPA could realize the key limitations of DPCO 2013, which was put in place rather hastily, in course of its implementation for over one year. Consequently, the patients’ long standing plight with high drug costs for many common life style diseases that are not featuring in NLEM 2011, prompted the the drug regulator in its above notification to bring 108 non-scheduled formulation packs of diabetic, cardiac and other drugs under Para 19 of DPCO 2013, catalyzing an outcry within the pharmaceutical industry in India. Out of these 108 formulation packs, 50 come under anti-diabetic and cardiovascular medicines.
Many important drugs are outside NLEM 2011:
Following is an example of the important cardiovascular and anti-diabetic drugs, which are not featuring in the NLEM 2011 and have now been brought under Para 19 of DPCO 2013:
Sitagliptin, Voglibose, Acarbose, Metformin hcl, Ambrisentan, Amlodipine, Atenolol, Atorvastatin, Bisoprolol, Bosentan, Gliclazide, Glimepiride, Miglitol, Repaglinide, Pioglitazone, Carvedilol, Clopidogrel, Coumarin, Diltiazem, Dobutamine, Enalapril, Rosuvastatin, Simvastatin, Telmisartan, Terazosin, Torasemide, Trimetazidine and Valsartan, Enoxaparin, Eplerenone, Esatenolol, Fenofibrate, Heparin, Indapamide, Irbesartan, Isosorbide, Ivabradine, Labetalol, Levocarnitine, Lisinopril, Metolazone, Metoprolol, Nebivolol, Nicorandil, Nitroglycerin, Olmesartan, Prasugrel, Prazosin, Propranolol, Ramipril.
More reasons for industry outcry:
As reported in the media, the industry outcry reportedly highlights, besides what I have cited above, the following:
- The price control order under Para 19 has been notified without any prior consultation with the industry.
- The manner and method in which this unilateral decision has been taken is untenable.
- The NPPA’s reasoning, about exploitative pricing by the industry as the reason for such a move, is incorrect given that every product category (in consideration) has approximately 30-70 brand options across price ranges for physicians and patients to choose from. The premise that products are not accessible due to affordability is misplaced. (The above table explains this point).
- Disease environment was same when the government had cleared the policy and no “extraordinary circumstance” has emerged since then for the regulator to invoke Para 19 in public interest.
- NPPA has exceeded its brief and gone into policy-making.
NPPA’s rationale for invoking Para 19 of DPCO 2013:
On the other hand, following reasons were cited by the NPPA for taking this decision:
- The aim of DPCO 2013 is to ensure that essential drugs are available to all at affordable prices. The Supreme Court of India vide its Order dated November 12, 2002 in SLP no. 3668/2003 have directed the Government to ensure that essential and life saving drugs do not fall outside the ambit of price control, which has the force of law.
- The Ministry of Chemicals and Fertilizers has delegated the powers in respect of specified paragraphs of the DPCO 2013, including paragraph 19, to be exercised by the NPPA on behalf of the Central Government in public interest.
- There exist huge inter-brand price differences in branded-generics, which is indicative of a severe market failure as different brands of the same drug formulation identical to each other vary disproportionately in terms of price.
- The different brands of the same drug formulation may sometimes differ in terms of binders, fillers, dyes, preservatives, coating agents, and dissolution agents, but these differences are not significant in terms of therapeutic value.
- The main reason for market failure is that the demand for medicines is largely prescription driven and the patient has very little choice in this regard.
- Market failure alone may not constitute sufficient grounds for Government intervention, but when such failure is considered in the context of the essential role that pharmaceuticals play in the area of public health, such intervention becomes necessary. This assumes greater significance, especially when exploitative pricing makes medicines unaffordable and beyond the reach of most, putting huge financial burden in terms of out-of-pocket expenditure on healthcare.
- There is very high incidence of diabetes in the country, which affects around 61 million persons and the figure is expected to cross 100 million by 2030 as per the projection of the International Diabetes Federation; and it is estimated that every year nearly 1 million people in the country die due to diabetes and hypertension.
- The drug regulator categorically mentions that In accordance with the guidelines issued by the NPPA, after approval of the ‘Competent Authority’, these price fixations of non-scheduled formulations under Para 19 of DPCO 2013 have been made.
Constituents of the same Ministry with conflicting view points:
Though both NPPA and the Department of Pharmaceuticals (DoP) come under Mr. Ananth Kumar, the new Minister of Chemicals and Fertilizers, both these constituents seem to have conflicting views on this important issue.
The pharma industry reportedly has sought the DoP’s intervention in this matter. The DoP, in turn, is learnt to have requested for the opinion of the Ministry of Law on using ‘Para 19′ provision in favor of public interest by the NPPA, invoking the power assigned to the drug regulator.
Another route for the industry is to legally challenge the said notification of the NPPA. However, one should keep in mind that a PIL is still pending before the Supreme Court questioning the validity DPCO 2013.
The arguments for and against:
Taking all the above points into consideration, the following two important areas of debate have now emerged on this NPPA notification, both in favor and also against:
A. Nothing has materially changed since DPCO 2013 was put in place:
Industry sources highlight that he following two points, that triggered NPPA’s invoking Para 19, have been there for a long time, including the period when the National Pharmaceutical Pricing Policy 2012 (NPPP 2012) was formulated:
- Huge price differences among various branded generics of the same molecule
- Cardiovascular ailments and diabetes have assumed endemic proportion
The other group counters that, if mistakes were made while formulating the NPPP 2012 because of intense pressure from vested interests in the erstwhile regime, why corrective actions can’t be taken now?
B. NPPA has exceeded its brief:
Industry sources question, how could NPPA possibly issue such notification of price reduction for non-scheduled formulations, as it is not a policy maker?
Others counter with equal zest: Of course NPPA is not a policy maker, it is a drug price regulator… And as a price regulator, it has implemented Para 19 of DPCO 2013 in the right earnest with the requisite powers conferred on it.
According to published data, after the latest price revisions of diabetic and cardiovascular drugs, around 21 per cent of the anti-diabetic drug market faces the ceiling price, while the total market of cardiovascular medicines under price control is now estimated at around 58 per cent, with an overall adverse impact of reportedly Rs 550 Crore on the Indian Pharmaceutical Market. Overall price reduction for these two categories would range between 5 and 35 per cent, the average being around 12 per cent.
MNCs seem to have been hit harder:
An additional bad news for the MNCs is that the scope of Para 19 has now gone beyond the generic space and included even patented product.
For the first time a patented product Sitagliptin has been brought under the purview of Drug price Control order. This decision could give an unprecedented handle to the NPPA to regulate prices of even patented drugs through invocation of Para 19 of DPCO 2013 in future. Moreover, many high-priced branded generics of MNCs are brand leaders too. Thus, in a relative yardstick, invocation of Para 19 would hit the MNCs harder, creating an uncertainty in their business environment.
Drug prices are cheapest in India in dollar terms, claims the pharma industry. Does this claim hold much water? May be not, because it should be realistically seen in terms of Purchasing Power Parity (PPP) and Per Capita Income in India. In that sense many would argue that drug prices in India, on the contrary, are not cheaper at all.
Moreover, it is important to take into cognizance the huge inter-brand price differences in branded-generics due to a flawed system, as patients have no role to play in choosing a drug (within the same molecule) that they would need to buy. It is the doctor who is the sole prescription decision maker, where price, per se, may not play a very significant role.
In a situation like this, despite the anger of the industry, many would ponder whether or not NPPA’s engagement and reasoning, on behalf of the Government, to bring some sense in the madness of drug pricing in India be just wished away?
Cheaper medicines in general and generic drugs in particular, would always make the patients and the payor happy, leaving the industry mostly angry.
Keenly observing the recent series of events and taking note of a number of highly credible viewpoints, besides a couple of seemingly spoon-fed, ill-informed and run-of-the mill type editorials, this is about time for the stakeholders to judge without any bias what is right for the country, its people and of course the business to work out a win-win solution, dousing the likes of ‘Fire in The Blood‘, once and for all.
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.