Supreme Court Intervened…But ‘Price Control’ needs striking a right balance between ‘Affordability’ and ‘Availability’ of medicines for Patients’ Sake

On October 3, 2012, the Supreme Court bench of Justice GS Singhvi and Justice SJ Mukhopadhayareportedly asked the government not to disturb the existing price control mechanism while including all medicines featuring  in the National List of Essential Medicines 2011 (NLEM 2011) therein and posted the matter for further hearing on October 11, 2012.

This happened during the hearing of a Public Interest Litigation (PIL) filed by All India Drugs Action Network (AIDAN) and others, way back in 2003, complaining that the span of price control of only 74 bulk drugs and their formulations under the existing Drugs Prices Control Order, 1995 (DPCO  95) does not include lot many essential medicines, making those drugs unaffordable to the general population.

It is worth mentioning that during earlier hearing on the subject the council of the petitioner had expressed apprehensions to the honorable Supreme Court that the proposed Drug Policy recommending Market Based Pricing may lead to a steep increase in prices of essential medicines in India.

The purpose of ‘Price Control’:

As we know, the key purpose of the Drug Price Control in India is to ensure adequate access to essential medicines for the common man. To achieve this objective meaningfully, the process that the price regulator should follow must always ensure that all such medicines are:

  • Adequately Available
  • Reasonably Affordable

Therefore, maintaining a right balance between ‘affordability’ and ‘availability’ of medicines, while framing any drug policy, is of critical importance.

DPCO 95 does not meet the above two criteria: 

The prevailing price control mechanism has failed to meet the above two critical criteria. This is mainly because the following 26 out of 74 bulk drugs featuring in DPCO 95, though still very important, are not currently manufactured in India due to unremunerative pricing:

No

Molecule

Therapeutic Segment

No.

Molecule

Therapeutic Segment

AMODIAQUIN Anti-Malarial 14. SULPHADIMIDINE Anti-Infective
CAPTOPRIL Anti-Hypertensive 15. SULPHAMOXOLE Anti-Infective
CHLORPROPAMIDE Anti-Diabetic 16. HALOGENATED HYDROXYQUINOLONE Anti-Infective
SALAZOSULPHAPYRINE Gastrointestinal 17. TRIMIPRAMINE Anti-Depressant
MEBHYDROLINE Anti-Histamine 18. LYNESTRANOL Hormone
CHLOROXYLENOLS Anti-Infective 19. METHENDIENONE Steroid
CEPHAZOLIN Anti-Infective 20. DIOSMINE Anti- Haemorrhoidal
PENICILLINS Anti-Infective 21. PYRANTEL Anthelmintic
NALIDIXIC ACID Anti-Infective 22. PYRITHIOXINE Vitamin
STREPTOMYCIN Anti-Infective 23. VITAMIN-B1  (THIAMINE) Vitamin
CHLORPROMAZINE Anti-Psychotic 24. VITAMIN-B2 (RIBOFLAVIN) Vitamin
BECAMPICILLIN Anti-Infective 25. PANTHONATES & PANTHENOLS Vitamin
SULPHADOXINE Anti-Infective 26. VITAMIN E Vitamin

(Source: BDMA-26th May 2012)

This makes one to conclude that the honest attempt of the government to make the above drugs affordable to the patients through DPCO 95 has resulted into their non-availability, making ‘affordability’ irrelevant. Thus, such a mechanism defeats the core purpose of any drug price regulation and should not be continued with.

What happens when NLEM 2011 is included in DPCO 95?

As explained above, if all the essential medicines featuring in the NLEM 2011 are brought under DPCO 95, solely to make them more affordable to patients, there will be a high possibility that market factors, as stated above, may make many of these important medicines unavailable to the patients, as happened in case of so many bulk drugs covered under DPCO 95.

Search for a balancing formula: 

To correct this imbalance between availability and affordability of essential medicines, there is an urgent need to first work out a balancing formula and then build that into the new price control mechanism, jettisoning DPCO 95.

This will help addressing the issue of improving access to essential medicines for the common man in India much more meaningfully.

Dr. Pronab Sen Committee Report vindicates the point:

In 2005, to explore this possibility, the government constituted a special taskforce, which is widely known as ‘Dr. Pronab Sen Committee’. This committee was mandated to recommend options other than existing methodology of price control (DPCO 95) for achieving the objective of making available life-saving and essential drugs at reasonable prices.

In its report, the committee did suggest an alternative measure at that time, concluding that the present price control system (DPCO 95) is inappropriate, inadequate, cumbersome and time consuming.

High transaction costs make essential medicines more expensive:

Current transaction costs of medicines in India are over 50 percent of their ex-factory cost, excluding Excise Duty (ED). The various components of the transaction cost include ED, VAT, CST etc. and distribution (trade) margin.

As the Honorable Supreme Court arrives at the final decision on price control measures for NLEM 2011, there is a need for the government to abolish all duties and taxes like ED, VAT, CST etc. levied on such medicines for the sole benefits of the patients.

For an important policy decision involving essential drugs, all ‘patient centric’ cost-cuts, in my considered view, should be shared by both the government and the Pharmaceutical Industry together.

‘Drug Price’ control alone cannot improve access to medicines significantly: 

It is a recognized fact that to improve access to medicines, the Governments even in countries like, Germany, Spain, UK, Korea, Brazil and China have recently mulled strict price control measures in their respective countries.

However, it is equally important to note that in India, we have witnessed since almost the past four decades that drug price control alone could not improve access to modern medicines for the common man very significantly, especially in the current socioeconomic and healthcare environment of the country. Thus, there is a dire need to augment other healthcare access related initiatives in tandem for a holistic approach.

Recently the Government of India has taken ‘Public Health Interest’ oriented a landmark initiative of providing unbranded generic formulations of all essential drugs, featuring in the ‘National List of Essential Medicines 2011’, free of cost to all patients from the public hospitals and dispensaries, across the country. This laudable step could well address the issue of availability and affordability of essential drugs for a vast majority of the population in India.

Taming drug price inflation only has not helped improving access to medicines: 

It is quite clear from the following table that food prices impact health more than medicine costs:

Year

Pharma Price Increases

Food Inflation

2008

1.1%

5.6%

2009

1.3%

8.0%

2010

0.5%

14.4%

(Source: CMIE)

Exploring a realistic approach:

Imbibing the direction, as provided in ‘Dr. Pronab Sen Committee Report’ and considering other pros and cons of the key methodologies of price control of formulations featuring in NLEM, I wouldreemphasize that a middle path with a win-win strategy to overcome the weaknesses of DPCO 95 effectively, would be in the best interest of both patients and the industry alike, in the current situation. This path, I reckon, may be explored as follows with a four step approach:

  • The inclusion criteria for price control in the new Drug Policy should be based on the ‘essentiality’ criteria of the drugs, which will mean all formulations featuring in the NLEM, as announced by the Ministry of Health from time to time, will come under price control.
  • Take ‘Weighted Average Price’ of each formulation featuring in the National List of Essential Medicines (NLEM) based on Maximum Retail Prices (MRP) of all brands of high, medium and low, above a certain cut-off point, if required.
  • Abolish all duties and taxes like ED, VAT, CST etc. as currently being levied on essential medicines and rationalize high trade margins of total 24 percent to further improve affordability of such drugs to the patients.
  • Put in place effectively enough checks and balances to ensure proper availability of NLEM drugs for all and also to avoid any possible situation of artificial shortages of such drugs. 

Conclusion:

Come October 11, 2012, let us hope that the honorable Supreme Court of India will pass an order related to drug price control, which will help striking a right balance between ‘availability’ and ‘affordability’ of essential medicines in India and the government will rationalize the transaction costs of such medicines thereafter.

In that case, it will be a win-win solution both for the patients and the industry alike, paving the way for improving access to essential medicines for the entire population of India along with other related strategic initiatives towards this goal. Such measures are absolutely essential, especially when medicines contribute around 72 percent of the total ‘Out of Pocket Expenses’ of the common man of the country.

That said, it is important to realize that there is no single or only right way to arrive at the ‘affordable price’ of any medicine, essential or otherwise. However, how much the government or an apex court will allow the pharmaceutical manufacturers to charge for a drug to make the prices ‘reasonably affordable’, will continue to remain an important, complex and a difficult task, both locally and globally.

By: Tapan 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.

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