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‘Havoc’ and its ‘Aftermath’: Clinical Trials in India

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Just as the New Year dawned, on January 3, 2013, in an embarrassing indictment to the Government, the bench of honorable justices R.M Lodha and A.R Dave of the Supreme Court reportedly observed that uncontrolled Clinical Trials (CT) are creating ‘havoc’ to human life causing even deaths to patients.

In an interim order, the bench directed to the Government that CTs can be conducted only under the supervision of the Health Secretary of India. Holding the Government responsible, the bench further observed, “You (Government) have to protect health of citizens of the country. It is your obligation. Deaths must be arrested and illegal trials must be stayed,”

Responding to this damning stricture by the Supreme Court, the Government has now reportedly decided that appropriate rules laying down guidelines for pharma companies and other organizations engaging in drug trials in India would be notified within January 2013. It is envisaged that thereafter, the government will also amend the Drugs and Cosmetics Act of India making any violation of prescribed rules and guidelines a punishable offense under the law.

It is worth mentioning that these guidelines have been reportedly worked out after due consideration of around 300 comments received from the stakeholders on the draft proposal circulated by the Ministry of Health in July 2011, couple of rounds of discussion with the members of the Civil Society, expert groups and against reported ‘stiff opposition from the drug companies’.

Better late than never:

In conformance to the well known saying – “better late than never”, it appears that after reportedly around 2,242 deaths related to CT and under immense pressure from the civil society and the Supreme Court, the Government has now left with no options but to bring US$ 500 million CT segment of the country, which is expected to cross US$ 1 Billion by 2016, under stringent regulations.

Experts believe that the growth of the CT segment in India is driven mainly by the overseas players for easy availability of a large patient population with varying disease pattern and demographic profile at a very low cost, as compared to many other countries across the world.

Clinical trial related deaths in India:

As per the Ministry of Health following are the details of deaths related to CTs registered in India from 2008 to August 2012:

Year Total no of deaths CT related deaths  Compensation paid to:
2012 (up to August) 272 12 NA
2011 438 16 16
2010 668 22 22
2009 737 NA NA
2008 288 NA NA

It is estimated that over the last four years, on an average, 10 persons have died every week in India related to CT.

However, looking at the above reported numbers it appears that financial compensation was paid for all registered death related cases however meager such amounts may be.

A huge ruckus:

The subject of CT in India has created a huge ruckus, mainly for wide spread alleged malpractices, abuse and misuse of fragile CT regulations of the country by some players in this field. The issue is not just of GCP or other CT related standards but more of ethical mind-set and reported rampant exploitation of uninformed patients, especially in case of trial related injuries or even death.

The Bulletin of the World Health Organization (WHO) in an article titled, “Clinical trials in India: ethical concerns” reported as follows:

“Drug companies are drawn to India for several reasons, including a technically competent workforce, patient availability, low costs and a friendly drug-control system. While good news for India’s economy, the booming clinical trial industry is raising concerns because of a lack of regulation of private trials and the uneven application of requirements for informed consent and proper ethics review.”

 Inadequate auditing:

It is unfortunate that focus on ‘Clinical Trial Registry’ and even ‘Auditing of Clinical Trials’ has been grossly lacking in India, which are considered so important not only in maintaining credibility of the studies, but also to demonstrate their scientific integrity and ethical values.

Unfortunately, there seems to be many loose knots in the current CT policy, practices, rules and guidelines. All these require to be adequately tightened by the Government to make the system efficient and transparent in the national endeavor of establishing India as a preferred destination for global CT without compromising safety and the health interest of the volunteers.

 Indian Parliament intervened:

On May 8, 2012, the department related ‘Parliamentary Standing Committee (PSC)’ on Health and Family Welfare presented its 59th Report on the functioning of the Indian Drug Regulator – the Central Drugs Standard Control Organization (CDSCO) in both the houses of the Parliament.

The PSC in its report made the following critical findings, besides many others:

  •  A total of 31 new drugs were approved in the period January 2008 to October 2010 without conducting clinical trials on Indian patients.
  • Thirteen drugs scrutinized by the panel are not sold in the United States, Canada, Britain, European Union and Australia, as instructed by their respective regulatory authorities.
  • Sufficient evidence is available on record to conclude that there is collusive nexus between drug manufacturers, some functionaries of CDSCO and some medical experts.
  • Due to the sensitive nature of CTs in which foreign companies are involved in a big way and a wide spectrum of ethical issues and legal angles, different aspects of CTs need a thorough and in-depth review.

 Jolted drug regulator initiates action: 

In response to the high-pitched conundrum and media glare, The Ministry of Health and Family Welfare of the Government of India issued a draft notification on 17th July 2012 seeking stakeholders’ views on:

  • Permission to conduct CT
  • Compensation of the CT victims

The draft notification also says that the licensing authority, only after being satisfied with the adequacy of the data submitted by the applicant in support of proposed clinical trial, shall issue permission to conduct CT, subject to compliance of specified stringent conditions.

However, some experts do apprehend that such stringent system may give rise to significant escalation in the costs of CT for the pharmaceutical players.

Similarly, to assess right compensation for clinical trial related injuries or deaths, following parameters were mooted in the document:

  • Age of the deceased
  • Income of the deceased
  • Seriousness and severity of the disease the subject was suffering at the time of his/her participation into the trial.
  • Percentage of permanent disability

Further, unlike current practices, the government is expected to set up independent registered Ethics Committees under medical institutions for effective and smooth conduct of CTs in India.

Poor patient compensation:

Absolutely unacceptable level of compensation, by any standard, paid by the concerned companies for the lives lost during CTs are mainly attributed to the lackadaisical attitude of the drug regulators to frame rules and laws for patient compensation for such cases in India.

Information reportedly gathered through the ‘Right To Information (RTI) Act’ reveals that one pharmaceutical company paid just Rs. 50,000 each to the families of two patients who died during CT of its cancer drug. Another Ahmedabad-based Clinical Research Organization (CRO) paid a compensation of exactly the same amount to another patient for a CT related death.

The report points out that in 2011 out of 438 CT related deaths in India only 16 families of such patients received any compensation, the quantum of which varied from Rs. 50,000 to Rs. L 3.0  with one exception being of Rs. L 5.

In 2012 till August, 272 more CT related deaths have already been reported.

Higher patient compensation expected:

It has been alleged that currently the pharmaceutical companies are “getting away with arbitrary payments” sometimes as meager as Rs. 50,000, as stated above, in case of loss of life during CT, as there are no set norms for calculating compensation to those patients.

It is expected that the new rules will help putting in place a transparent formula for providing a respectable compensation for CT related serious adverse events like deaths, along with a prescribed provision for minimum compensation amount to such patients.

Increasing public scrutiny:

Over the last few years, CTs in India are increasingly coming under intense public and media scrutiny. As a result, both the concerned pharmaceutical companies as well as the CROs are facing the wrath of various stakeholders including the Supreme Court.

Following are the reported numbers of registered CTs in India from 2009 to 2011:

Year Total Number
2009 181
2010 313
2011 513

Although the total number of CTs registered in India from 2007 to 2011, as per available records, was around 1875, the number of new trials registered in the country had reportedly sharply declined in 2011 over 2010, mainly due to time-consuming regulatory approvals and increasing public scrutiny on alleged unethical practices.

According to www.clinicaltrials.gov – the website of the U.S Government, out of 118,804 human trials conducted in 178 countries, less than 2,000 or 2%, are carried out in India as compared to 9,352 or 8% in China.

It appears, all concerned players now seem to be either willingly or grudgingly waiting for the CT regulatory system to function the way it should. 

Conclusion:

Although the Ministry of Health has already started taking some positive measures, as stated above, there is an urgent need for the players in this field to reassure the Civil Society, in general, and the Government in particular about the high ethical standards that the pharmaceutical companies and CROs would comply with and continuously practice, while conducting clinical research in India.

We all understand, CTs are the core of research-based pharmaceutical industry. No new drug can come into the market without CTs, which involve both potential benefits and risks to the participants. All CTs are conducted with the primary aim of bringing to patients new medicines with a favorable benefit–risk ratio.

Global CTs being relatively new to India, no wonder, there are several misconceptions on the subject. The companies conducting clinical research need to proactively publicize their commitment to protecting the rights, safety and the well being of the trial participants.

That said, the bottom line is, without any selfish interest or pressure to the Government in any form, from within the country or outside, all concerned must ensure that CTs of all types must strictly adhere to the prescribed norms and well laid down procedures of India, as soon as these are put in place.

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 and also do not contribute to any other blog or website with the same article that I post in this website. Any such act of reproducing my articles, which I write in my personal capacity, in other blogs or websites by anyone is unauthorized and prohibited.

 

 

 

The Game Changers in 2012 and A Crystal Gazing into 2013

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Wish You and Your Dear Ones Best of Health, Happiness, Success and Prosperity in The Brand New Year.

Welcome 2013

 The Global Pharmaceutical Industry (GPI), by and large, used to be considered as ‘recession-proof’ for various valid reasons. However, the waves of ‘global economic meltdown’ since last several years prompted the rating service Moody to downgrade its outlook to ‘Negative’ in 2007.

However, on September 24, 2012 the same rating service upgraded the outlook of the GPI to ‘Stable’ from “Negative,” indicating subsiding impact of the wave of drug patent expiration, come 2013.

Various other sources also vindicate that the GPI has in fact now bottomed-out. Available data from IMS Health estimates that the industry will grow from US$ 956 billion in 2011 to around US$ 1004 billion by end 2012 with a growth of approximately 5 percent driven mainly by:

-      Cost optimization

-      Higher  disease prevalence across the world

-      Increasing per capita income

The United States continue to maintain its top slot in the industry followed by the European Union and Japan.

All may not be hunky-dory in the GPI just yet, nevertheless 2013 does point towards some early signs of revival after a very uncertain period, prompting a paradigm shift, especially in the mind-set of the global players. This emerging trend could well form a separate topic of discussion altogether in some other time.

Buoyancy in India:

Back home in India the situation is quite different. The Indian Pharmaceutical Industry (IPI) still remains recession-proof. The market buoyancy continued as ‘PharmaTrac India’ reported a turnover of the domestic pharmaceutical market at around US$ 12.6 billion growing over 15 percent annually.

In this article I shall focus on the domestic pharmaceutical market of India.

The Game Changers of 2012:

Looking back, during the year 2012 the ‘Top Five Game Changers’ for the Indian Pharmaceutical Market (IPM), in my opinion, are as follows:

1. A DIFFERENT ‘Drug Policy’ after 10 years:

The ‘National Pharmaceutical Pricing Policy 2012 (NPPP 2012)’ heralds a paradigm shift in the pharmaceutical price control regime of India for the years ahead with a switch from the ‘Cost Based Pricing CBP)’ methodology to ‘Market Based Pricing (MBP)’ and also in its ‘National List of Essential Medicines 2011 (NLEM 2011)’ based span of price control.

The industry has already articulated, though the new policy will make an immediate and significant adverse financial impact on them, market based pricing is directionally prudent for all in the longer term. They feel that MBP is expected to help improving both affordability and availability of medicines.

Such a policy, some stakeholders believe, along with the Government initiative to make essential medicines available free of cost through public hospitals and health centers will benefit all sections of the society, giving a boost to overall consumption of pharmaceutical products in India. It is also good to note that the new policy promises price control exemptions for patented drugs and products with NDDS developed in India through indigenous R&D.

NPPP 2012, is expected to be a game changer for the industry by many, as it will help bringing more stability in the pharma pricing regulation system of India.

However, there is a flip side to this story.

All stakeholders are not equally happy with the NPPP 2012.

In this context, it is worth noting that in an ongoing Public Interest Litigation before the Supreme Court by ‘All India Drug Action Network (AIDAN)’, the petitioner has already drawn the attention of the Court to their ‘Interim Application’ challenging the NPPP 2012 by stating that the ‘policy finalized by the Government will in effect do away with the very notion of price controls’. In response the apex court reportedly had observed that it will consider the averments of AIDAN in the next hearing of January 15, 2013, once the printed Gazette Notification is put on record before the Court by the Government.

2. First ever grant of Compulsory License in India:

On March 12, 2012, Indian Patent Office (IPO), in its landmark ruling, granted its first ever Compulsory License (CL) for Bayer’s patented kidney and liver cancer drug Nexavar (Sorafenib), to the generic pharma player Natco, broadly citing the following reasons:

  • Reasonable requirements of public under Section 84 have not been satisfied.
  • The Patented Drug was not available to the public at a reasonably affordable price as per Section 84 (1) (b).
  • Patented invention is not worked in the territory of India as per Section 84 (1) (c)

The 62 page order of the Controller General of Patents, Designs and Trade Mark (CGPDTM) granted the CL to Natco for the rest of patent life of sorafenib in India at the high end of the UNDP 2001 royalty guidelines at 6 percent.

Though the research based pharmaceutical industry across the world expressed its deep disappointment and anguish over the judgment, many experts and NGOs from different parts of the globe, on the contrary, have reportedly hailed this order as a game changer to improve access to high-priced patented medicines in the country with a firm conviction that the ‘Intellectual Property Rights (IPR)’ and ‘Patients’ Access Issues’ can not tread different paths. They have reportedly opined that CGPDTM has set a right precedence by granting a CL for an exceptionally high-priced sorafenib, which will ensure, in the times to come, that “patent monopolies are kept limited, especially when the patented products are not ‘reasonably affordable’, as stated in the statute”.

Many people, therefore, envisage that if responsible pricing strategy for patented medicines is not followed in India even after the grant of first ever CL by the IPO, one could  well expect other generic players applying for CL mainly for the imported high priced patented medicines purely as a business strategy, but citing the reason of improving patients’ access in the country.

3. First ever Guidelines for Biosimilar Drugs in India: 

Across the world, biologic drugs have a successful record in treating many life threatening and other complicated ailments. Expiration of product patents of the first major group of originators’ biologic molecules has led to the development of products that are designed to be ‘similar’ to the originators’ products, as it is virtually impossible to replicate any protein substances, unlike the ‘small molecule’ drugs. These are ‘Biosimilar Drugs’, which rely, in part, on prior information obtained from the innovators’ products and demonstration of similarity with the originator’s molecule based on detailed and comprehensive product characterization, for their marketing approval.

India has the potential to become one of the key players in the development and manufacture of biosimilar drugs, not only to serve the needs of the local population, but also for export to large developed markets. However, for this dream to materialize, a science-driven ‘Biosimilar Guidelines’ are absolutely necessary. These guidelines provide a regulatory framework or pathway to ensure that ‘Biosimilar Drugs’ are of good quality and demonstrably similar in efficacy, safety and immunogenicity to the original reference products.

Considerable developments have occurred across the globe, in the scientific and regulatory understanding of biosimilar drugs. Nearly all developed nations and many developing countries have now defined appropriate regulatory framework for the same. However, due to lack of such guidelines in India, until recently, there have been instances of so called ‘biosimilar drugs’ being approved for marketing, reportedly with sub-optimal testing and dossiers, thereby putting into question product quality, comparability and patient safety.

Under this back-drop, the need for such a regulatory framework and comprehensive guidelines is even greater in India, mainly in the light of sub-optimal pharmacovigilance system in the country, besides other reasons.

Keeping these issues in view, the Ministries of Health & Family Welfare and the Science and Technology released India’s first “Guidelines on Similar Biologics: Regulatory Requirements for Marketing Authorization in India” in 2012. These Guidelines have been made operational effective September 15, 2012.

Long awaited new ‘Biosimilar Guidelines’ of India, demonstrating an overall similarity in the philosophy and approach with the those in the U.S and Europe, though a belated move by the Government, but certainly yet another game changer of 2012.

I reckon, this critical step will help ‘Made in India’ biosimilar drugs availing opportunities in the emerging biosimilar markets of the world including Europe and America.

4. Increase in National Health Expenditure Budget from 1% to 2.5% of GDP:

This decision of the Government in 2012 could help paving the way to provide basic healthcare services to all citizens of India through “Universal Health Coverage (UHC)”, which has the vast potential to be another game changer in the healthcare space of India.

It is envisaged that UHC will ensure guaranteed access to essential health services for every citizen of the country, including cashless in-patient and out-patient treatment for primary, secondary and tertiary care. All these services will be available to the patients absolutely free of any cost.

Under UHC all citizens of India will be free to choose between Public Sector facilities and ‘contracted-in’ Private Providers for healthcare services. It is envisaged that people would be free to supplement the free of cost healthcare services offered under UHC by opting to pay ‘out of pocket’ or going for private health insurance schemes.

Thus, UHC, I reckon, will also be able to address simultaneously the critical issue of high ‘out of pocket’ healthcare expenses of the common citizens and at the same time increase consumption of overall healthcare, giving a boost to the growth of the pharma industry together with other healthcare sectors.

Implemented sooner, ignoring motivated stalling tactics by the vested interests, if any, could usher-in the dawn of a new healthcare reform process in India for all.

5. Announcement of Distribution of Essential Drugs free of cost to all, from Government Hospitals and Dispensaries:

In July 2012 the Government of India took a landmark ‘Public Healthcare’ related initiative to provide 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 social sector project was expected to roll out, as reported in the media, from October/November 2012 with a cost of around US$ 5 billion during the 12th Five Year Plan period of the country. Considering medicines account for around 70% of the total ‘Out of Pocket’ expenses, this particular initiative is expected to be yet another game changer to benefit, especially the poorer patients of the society.

This new scheme, I reckon, has also the potential to hasten the overall growth of the pharmaceutical industry, as poor patients who could not afford will now have access to essential medicines. On the other hand, rapidly growing middle class population will continue to favor branded generic drugs prescribed by the doctors at the private hospitals and clinics.

Some people are apprehending that generic drug makers will have brighter days as the project starts rolling on. This apprehension is based on the assumption that large branded generic players will be unable to take part in this big ticket drug procurement process of the Government, which seems to be imaginary.

However, in my view, it could well be a win-win situation for all types of players in the industry, where both the generic-generic and branded-generic businesses will continue to grow simultaneously.

That said procedural delays and drug quality issues, while procuring cheaper generics, may pose to be a great challenge for the Government to ensure speedier implementation of this project. Drug regulatory and law enforcing authorities will require to be extremely vigilant to ensure that while sourcing cheaper generic drugs, “Public health and safety” due to quality issues do not get compromised in any way.

A Crystal Gazing into 2013:

While Crystal Gazing into 2013, following seven possible developments come to the top of my mind:

  1. New Drug Policy may get caught in Public Interest Litigation (PIL).
  2. UHC related pilot projects may start coming up.
  3. More stringent regulatory requirements for Clinical Trials, Product Marketing approvals, Pricing of Patented Medicines and Ethical Marketing practices may come into in-force.
  4. Along with public investments more private initiatives, both global and local, are expected in the healthcare infrastructure space including in e-healthcare.
  5. Domestics Pharma Companies could challenge increasing number of patents and may also apply for Compulsory Licenses following the set precedence of 2012.
  6. The Supreme Court judgment on Glivec case could bring more clarity in ‘incremental innovation’ in general and the Section 3(d) in particular.
  7. More consolidation within the pharmaceutical industry may take place with valuation still remaining high.

Conclusion:

The year 2012, especially for the pharmaceutical industry in India, was indeed eventful. The ‘Top Five’ that I have picked-up out of various interesting developments during the year, could in many ways be the ‘Game Changers’ for the industry during the years ahead.

Key measures, both in the public and private space, be it fostering R&D or improving access to healthcare for the general population, fell well short of adequate even in 2012.

My ‘Crystal Gazing into 2013’, if comes true, will make the year even more eventful in India. The new year could signal herald of yet another interesting  paradigm. A paradigm that may churn quite different sets of rapidly evolving issues requiring more innovative honed skill-sets for their speedy redressal, as the time keeps moving on.

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 and also do not contribute to any other blog or website with the same article that I post in this website. Any such act of reproducing my articles, which I write in my personal capacity, in other blogs or websites by anyone is unauthorized and prohibited.

 

‘Old is Always Not Gold’: The Saga of Uncertainty on the New Drug Policy Continues

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Along with the initiation of globalization process of India in 1991, many significant reform oriented steps are being taken by the Government for the pharmaceutical industry as its growth booster.

In tandem with gradual reduction in the span of price control, the government also ensured dereservation of specified drugs only for the public sector and opened it up to the private sector, as well.  During this period, foreign investments through automatic route was first raised from 49 to 74 percent and then to 100 percent.New product patent regime with the introduction of the Patents Act 2005 ushered in a paradigm shift in the pharmaceutical landscape of India, encouraging the domestic industry to invest in R&D. In line with these reforms, weighted deduction on in-house research and development  facility was increased to 200 percent to cover expenditure towards R&D, patent filing, regulatory approvals and clinical trials, over a period of time.

With creation of an enabling growth environment, the government helped the domestic industry catapult itself as a major global force to reckon with, in the generic pharmaceutical space of the world.

Unfortunately, in recent times, the policy makers of the country instead of flooring the gas pedal keeping public health interest in mind, seems to have decided to shift its foot on the brake, creating great uncertainty within the industry.

Recent developments: A cause of concern

As reported by the media the recommendations of the Group of Ministers (GoM) on the Draft National Pharmaceutical Pricing Policy 2011 (NPPP 2011) was scheduled for discussion in the Union Cabinet meeting on November 8, 2012.

Meanwhile, the Ministry of Finance (MoF) reportedly sent its views on the same to the Department of Pharmaceuticals (DoP) and also the Prime Minister’s Office (PMO) advocating continuation of the current cost plus pricing policy.

As a result, the media  reported that the NPPP 2011 was eventually removed from the Cabinet Meeting agenda of November 8, 2012, as the PMO referred the policy back to the GoM requesting the Cabinet Secretariat to mandate the Ministers to hold a fresh meeting (now scheduled on November 21, 2012), consider the view of MoF and get back to the Union Cabinet with a final proposal so that an appropriate decision may be taken by the Cabinet on the new Drug Policy before November 27, as stipulated by the Supreme court of India.

With this, the saga of uncertainty on the new Drug Policy continues unabated.

Finance Ministry views: Continue with cost plus formula:

The key recommendations of the Ministry of Finance as reported are as follows:

  1. The proposal to limit the NPPP to control prices of only formulations leaving aside bulk drugs is not ‘supported’.
  2. Top priced brands in many therapy areas are also the brand leaders. As a result, high prices of such drugs while calculating the ceiling prices would push up prices of many low priced drugs significantly.
  3. The current system which is a cost plus system is adequate to cover all legitimate costs for a manufacturer, particularly when the costing is being done annually and should be continued.
  4. The same cost plus system should also apply to other formulations where additional therapeutic elements will be added. Related incremental cost in those cases can be considered to determine the ceiling price of combination formulations.
  5. The Maximum Retail Prices (MRP) for all NLEM 2011 drugs may be fixed by the NPPA accordingly and the pharmaceutical companies would be free to price these NLEM products at any level below the MRP.
  6. Annual indexation of price with WPI is not supported. The cost analysis should determine the quantum of increase.
  7. Data related to prices and market shares should be collected from sources other than IMS even for drugs covered by them. The methodology to be followed by NPPA for evaluating IMS data and for collecting the data for medicines from other sources should be included in the NPPP.
  8. A phased movement towards 100 percent generic manufacturing, as recommended by the Ministry of Health (MoH), for all drugs under the NLEM should be considered.

The industry view: Have a Balanced Approach

As I understand, the industry feels that the Finance Ministry recommendations are continuation of the same old policy, which has failed to address the key issue of providing affordable and quality healthcare, including medicines, to all, since over last four decades.

However, the pharmaceutical industry has supported the recommendations of the GoM on NPPP 2011 as they reckon it will be a positive step to ensure affordability for the patients, ensure adequate availability and at the same time will not cripple the growth of the industry.

As recommended by the GoM, the draft NPPP 2011 would take the Weighted Average Price (WAP) of all brands with greater than 1% market share by volume as the ceiling price. This formula should improve patient affordability as Weighted Average Price (WAP) of all brands will be most representative of the Indian pharmaceutical market.

The GoM-recommended pricing policy, the industry feels, will certainly have an adverse impact on the pharmaceutical industry as price controls will be expanded and prices will now be based on roughly 91 percent of the pharmaceutical market by value. This will result in over 20 percent price reduction in 60 percent of the NLEM medicines. More importantly, the policy will also achieve the objectives of the Government in ensuring essential medicines are available to those who need these most, by managing prices in the retail market and balancing industry growth.

The existing cost-plus policy, industry leaders argue, has significant limitations and has adversely impacted industry and patients, for example, by shifting bulk drug production out of India (to countries like China), reducing innovation in cost control medicines, limiting new introductions and failing to help medicines reach patients located in rural India.

Many stakeholders have written about the negative implications of a cost-plus pricing methodology. Too stringent price control norms would stifle the pharmaceutical industry and may result in serious shortages of essential drugs in the country. An apt example in this case is that the existing price control regime under DPCO 1995 has caused manufacturing to shift away from the country about 27 notified bulk drugs under price control.  In fact, only 47 out 74 bulk drugs under DPCO 1995 are now produced in the country. Such a situation needs, the industry articulates, to be prevented from happening in the future.  It is quite likely the focus of the national pharma industry may shift then to export, defeating the primary purpose of the new policy.

Moreover, the WHO in its feedback on the draft NPPP 2011 welcomed the intent to move away from cost-plus pricing as it has been abandoned elsewhere. Even developing countries typically have no price control on private market (non-government, non-social insurance reimbursement) sales of pharmaceuticals.

Based on a survey of developing countries similar to India, it is seen that the countries that do have price control for private market drugs, employ market based methods e.g. in Brazil cost-based price regulations do not exist outside of government reimbursement, social insurance reimbursement schemes.  In short, essential medicines predominantly seem to be reimbursed either via government or social insurance or provided free by the government.

Since the Government has recognized that a pricing policy alone cannot ensure access to quality medicines, over the last few months, it has undertaken several steps in the right direction to improve access and affordability of medicines.

The Government has already announced that it will spend over US $5.4 billion to provide essential medicines free to patients in government-run hospitals and clinics. The Government is also in the process of putting in place a central procurement authority to purchase medicines for its use, which, if operated on a level playing field, can realize economies of scale and create the conditions necessary to drive down costs through competition. All such policies can enhance access to medicines and also promote healthy competition in the industry. Both the outcomes cannot be achieved with any price control regime alone.

Expanding access to quality medicines at affordable prices is in everyone’s best interest, and the industry seems to have expressed its willingness and keenness to engage in the development and implementation of policies that will make medicines in India more affordable and accessible to all. 

Pharmaceutical industry expressed its support to the key principles of the new pricing policy, essentiality of drugs and market based pricing so as to ensure greater patient sensitized pricing of medicines. As cited by the Economic Advisory Council (EAC) of the Prime Minister, the negligible increase in drug prices over the last 7 years illustrates the intense competition in the Indian Pharmaceutical Market. In comparison, prices of other essential items including food items have increased steeply. Between 2004 and 2012, price rise of drugs has only been 3/8th of all commodities and half of that of manufactured products.

However, in order to make the pricing formula more robust and to prevent prices of lower priced drugs from moving towards the ceiling price, a section of the industry recommended that this formula be combined with price increases limited to Weighted Price Index (WPI) or 10 percent p.a. (the present price increase cap for non-DPCO) whichever is higher, for individual brands. This measure is expected to make it a fool proof pricing mechanism.

New Drug Policy to focus on all-round inclusive growth:

The role and objectives of the NPPP should help accelerating all-round inclusive growth of the Indian pharmaceutical industry and try to make it a force to reckon with, in the global pharmaceutical industry.

The drug policy is surely not formulated just to implement rigorous price control of drugs. The policy includes other key objectives to contribute significantly towards achieving the healthcare objectives of the nation and also to boost the growth of the industry, working closely with other related ministries of the government.

As stated above by the industry, to correct the imbalance between availability and affordability of essential medicines, in 2005, 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 and complex, besides being time consuming in its implementation.

Conclusion:

Unfortunately, the views of the MoF point towards continuation of the same old regime, which has failed to deliver for so many decades.

I therefore reckon, it is about time to recognize that the ‘Old is not always Gold’, at least in this particular issue. The government should in no way allow the saga of uncertainty in the formulation of a vibrant and inclusive Drug Policy to continue. The policy makers should consciously shun away any possibility of taking retrograde steps on this critical matter for the sake of both patients and the pharmaceutical industry of India, alike.

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.

“Bad Pharma: How Drug Companies Mislead Doctors and Harm Patients”: Exploring the book to be released in the Indian context

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The title of today’s article could make some of the readers uncomfortable and angry, just as what I experienced while writing the same, being a long time follower and student of the pharmaceutical industry, both global and local.

Ethical business conduct and value standards, especially of medium, large to very large pharmaceutical corporations both in India and across the world are coming increasingly under stakeholders’ scrutiny, besides being severely criticized for non-compliance in many instances by the regulators, judiciary and public at large. We shall find many such examples over a long period of time even from within our own land.

There is no global consensus, as yet, on what is ethically and morally acceptable ‘Business Ethics and Values’ across the world, although there are some very strong common parameters that can be globally followed.

In many companies’ websites such standards are also available in their minutest details. Unfortunately, even some of those companies are also being reportedly held guilty for blatant violations of their own set standards of ethics and compliance.

This trend could prompt one to believe, sincere attempts are still lacking to ensure effective implementation of such well drafted ‘Business Ethics and Values’ in country-specific ways by many of these companies.

The most challenging obstacle to overcome in this area by the corporates, I reckon, would still remain ‘walking the talk’, owning the responsibility and taking sustainable remedial measures, at least when these violations are conclusively established followed by penal actions.

A new book with graphic details: 

In this context, ‘The Economist’ in its September 29, 2012 reviewed a book titled ‘Bad Pharma: How Drug Companies Mislead Doctors and Harm Patients’, written by Ben Goldacre, a British doctor and science writer. According to Amazon the book is due to be released on January 8, 2013.

In this book the author describes incidences of routine corruption in the healthcare system and brings out to the fore citing details of some of the following areas, how patients’ interests are being continuously and blatantly compromised by many pharmaceutical companies unabated, just for commercial gain:

  1. Pharmaceutical companies bury clinical trials which show bad results for a drug and publish only those that show a benefit.
  2. The trials are often run on small numbers of unrepresentative patients, and the statistical analyses are massaged to give as rosy a picture as possible.
  3. Entire clinical trials are run not as trials at all, but as ‘under-the-counter advertising campaigns’ designed to persuade doctors to prescribe a company’s drug.

Dr. Ben Goldacre does not spare the drug regulators also as he writes, ‘drug regulators, who do get access to some of the hidden results, often guard them jealously, even from academic researchers, seeming to serve the interests of the firms whose products they are supposed to police.’

The author also writes that ‘many studies published in reputed medical journals are written by the commercial ghostwriters, who are paid by the pharmaceutical companies and are not written by those whose names appear as the author of those studies. He laments that based on such clinical trial reports blitzkrieg expensive marketing campaigns are conducted to influence doctors prescribing such drugs.

None of the above instances is unreported in India, may be in forms which are many shades worse than what has been described by Dr. Ben Goldacre in his above book.

‘The Economist’ recommends that ‘this is a book that deserves to be widely read, because anyone who does read it cannot help feeling both uncomfortable and angry’.

India can’t delay tightening its belt any further:

The concerns of Dr. Ben Goldacre are also being expressed in India quite vocally, almost in all the areas as mentioned above. Thus India needs to tighten its regulatory systems and ensure proper implementation of all its policies, and if required framing some new ones, so that the country can come out of this quagmire which severely hurts the patients’ interests at large.

Among many others, two critical areas where such alleged corporate malpractices are being continuously reported are as follows:

I. Clinical Trials

II. Marketing Practices 

I. Ethical concerns over Clinical Trial in India are not getting mitigated:

Clinical trial system still remains a critical area of concern in India. The Bulletin of the World Health Organization (WHO) in an article titled, “Clinical trials in India: ethical concerns” reported as follows:

“Drug companies are drawn to India for several reasons, including a technically competent workforce, patient availability, low costs and a friendly drug-control system. While good news for India’s economy, the booming clinical trial industry is raising concerns because of a lack of regulation of private trials and the uneven application of requirements for informed consent and proper ethics review.”

Because of this reason, on October 8, 2012 the Supreme Court reportedly asked the government to provide details of clinical trials being conducted across the country, which will include drug side effects and clinical trial related deaths, in which case compensation, if any, paid to the victims or to their family members.

This direction came from the apex court of the country while hearing a Public Interest Litigation (PIL) alleging Indian citizens are being used as guinea pigs during clinical trials by the pharmaceutical companies all over the country, mainly due to lack of informed consent of the enrolled patients and thereafter short changing their interest citing various reasons.

Clinical-trials process of the country is now, therefore, under intense scrutiny of the government, NGOs and also of the judiciary after a number of scandals focusing on malpractices, somewhat similar to what Dr. Ben Goldacre has highlighted in his book, as mentioned above. These series of events have recently prompted the regulators to come out with proposals of reforms in this important area, for all concerned.

The Parliament intervened:

Recently the department related ‘Parliamentary Standing Committee (PSC)’ on Health and Family Welfare presented its 59th Report on the functioning of the Indian Drug Regulator – the Central Drugs Standard Control Organization (CDSCO) in both the houses of the Parliament on May 08, 2012.

The PSC in its report made, the following critical findings, besides others:

  • “A total of 31 new drugs were approved in the period January 2008 to October 2010 without conducting clinical trials on Indian patients.
  • Thirteen drugs scrutinized by the panel are not allowed to be sold in the United States, Canada, Britain, European Union and Australia.
  • Sufficient evidence is available on record to conclude that there is collusive nexus between drug manufacturers, some functionaries of CDSCO and some medical experts.
  • Due to the sensitive nature of clinical trials in which foreign companies are involved in a big way and a wide spectrum of ethical issues and legal angles, different aspects of clinical trials need a thorough and in-depth review.”

Regulators woke-up:

In response to the prevailing conundrum, ‘The Ministry of Health and Family Welfare’ of the Government of India issued a draft notification on 17th July, 2012 seeking stakeholders’ views on the ‘Permission to conduct Clinical Trial’.

The draft notification says that the licensing authority only after being satisfied with the adequacy of the data submitted by the applicant in support of proposed clinical trial, shall issue permission to conduct clinical trial, subject to compliance of specified stringent conditions.

However, some experts do apprehend that such stringent system could give rise to significant escalation in the costs of clinical trials for the pharmaceutical players.

Similarly to assess right compensation for clinical trial related injuries or deaths following parameters were mooted in the document:

  • Age of the deceased
  • Income of the deceased
  • Seriousness and severity of the disease, the subject was suffering at the time of his/her participation into the trial.
  • Percentage of permanent disability.

 II. Ethical concerns on marketing malpractices in India: 

This issue has no longer remained a global concern. Frequent reports by Indian media have already triggered a raging debate in the country on the subject, involving even the Government and also the Parliament. It has been reported that a related case is now pending with the Supreme Court for hearing in not too distant future.

In 2010, ‘The Parliamentary Standing Committee on Health’ expressed its deep concern that “the evil practice” of inducement of doctors continued because the Medical Council of India (MCI) had no jurisdiction over the pharma industry and it could not enforce the code of ethics on it.’

It was widely reported that the letter of the Congress Member of Parliament, Dr. Jyoti Mirdha to the Prime Minister Dr. Manmohan Singh, attaching a bunch of photocopies of the air tickets to claim that ‘doctors and their families were beating the scorching Indian summer with a trip to England and Scotland, courtesy a pharmaceutical company’, compelled the Prime Minister’s Office (PMO) to initiate inquiry and action on the subject.

The letter had claimed that as many as 30 family members of 11 doctors from all over India enjoyed the hospitality of the pharmaceutical company.

In addition Dr. Mirdha reportedly wrote to the PMO that “The malpractice did not come to an end because while medical profession (recipients of incentives) is subjected to a mandatory code, there is no corresponding obligation on the part of the healthcare industry (givers of incentives). Result: Ingenious methods have been found to flout the code.”

The report also indicated at that time that the Department of Pharmaceuticals (DoP) is trying to involve the Department of Revenue under the Ministry of Finance to explore the possibilities in devising methods to link the money trail to offending companies and deny the tax incentives.

Incidences of such alleged malpractices related to financial relationship between the pharmaceutical companies and the medical profession are unfolding reasonably faster now. All these issues are getting increasingly dragged into the public debate where government can no longer play the role of a mere bystander.

Taking the first step closer to that direction, Central Board of Direct Taxes (CBDT), which is a part of Department of Revenue in the Ministry of Finance has now decided to disallow expenses on all ‘freebies’ to Doctors by the Pharmaceutical Companies in India.

A circular dated August 1, 2012 of the CBDT that the any expenses incurred by the pharmaceutical companies on gifts and other ‘freebies’ given to the doctors will no longer be allowed as business expenses. 

Conclusion:

Statistics of compliance to ‘The Codes of Business Ethics & Corporate Values’ are important to know, but demonstrable qualitative changes in the ethics and value standards of an organization should always be the most important goal to drive any business corporation, the pharmaceutical industry being no exception.

The need to formulate ‘Codes of Business Ethics & Values’ and even more importantly their compliance are gradually gaining importance and relevance in the globalized business environment.

However, quite in conflict with the above initiative, at the same time, many pharmaceutical corporations across the world are being increasingly forced to come to terms with the heavy costs and consequences of ‘unethical behavior and business practices’ by the respective governments and judiciary. Unfortunately the Juggernaut still keeps moving, perhaps arising out of intense pressure for corporate business performance.

I am not quite sure though, whether such an expectation for ‘Corporate Ethics and Values’ is ‘utopian’ for the pharmaceutical industry or can be translated into reality with some amount of sincere efforts and commitment. However, if it does not happen, sooner than later, the ‘Bad Pharma’ image of the pharmaceutical industry across the world, as enunciated by Dr. Ben Goldacre in his book, will continue to linger inviting increasingly fierce public wrath along with stringent government regulatory controls and judicial interventions.

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.

A Kaleidoscope of Drug Price Control Spanning Across the World and Its Relevance to India

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How much to charge for a drug?

While there is no single or only right way to arrive at the price of a medicine, how much the pharmaceutical manufacturers will charge for a drug still remains an important, yet complex and difficult task, both locally and globally.

A paper titled, “Pharmaceutical Price Controls in OECD Countries”, published by the US Department of Commerce, after examining the drug price regulatory systems of 11 OECD countries concluded that all of them enforce some form of price controls to limit spending on pharmaceuticals.

The report also indicated that the reimbursement prices in these countries are often treated as the de facto market price. Moreover, some OECD governments regularly cut prices of even those drugs, which are already in the market.

An evolving rational system of drug pricing:

The values of health outcomes and pharmacoeconomic analysis are gaining increasing importance for drug price negotiations/control by the healthcare regulators even in various developed markets of the world.

In countries like, Australia and  within Europe in general, health outcomes data analysis is almost mandatory to establish effectiveness of a new drug over the existing ones.

Even in the US, where the reimbursement price is usually negotiated with non-government payors, many health insurers have now started recognizing the relevance of such data.

Such price negotiations at times take a long while and may also require other concessions by manufacturers, for example:

  • In the UK, a specified level of profitability may constrain the manufacturers.
  • Spain would require a commitment of a sales target from the manufacturers, who are made responsible to compensate for any excess sales by paying directly to the government either the incremental profit or by reducing the product price proportionately.

Pharmacoeconomic Based or Value-Based Pricing (PBP/VBP):

Pharmacoeconomics, as we know, is a scientific model of setting price of a medicine commensurate to the economic value that the drug/therapy would offer.  Pharmacoeconomic principles, therefore, intend to maximize the value obtained from expenditures towards medicines through a structured evaluation of products costs and disease outcomes.

PBP/VBP is widely considered to offer the ‘best value for money’ spent to buy a medicine, as it is ‘the costs and consequences of one treatment compared with the costs and consequences of alternative ones’.

A contrarian view:

Let me hasten to add that some shortcomings in PBP/VBP system have already been highlighted by some experts and are being debated threadbare. The key question that is being mooted now is, how to quantify the value of a saved life or relief of intense agony of patients while arriving at a price of a drug based on PBP/VBP model.

PBP/VBP could help ‘freeing-up’ resources to go to front-line healthcare: 

As per the Department of Health, UK, ‘Value-Based Pricing (VBP)’ ‘will help creating a world-class NHS that saves thousands more lives every year by freeing up resources to go to the front line, giving professionals power and patients choice, and maintaining the principle that healthcare should be delivered to patients on the basis of need, not their ability to pay’.

Pharmaceutical Price Control has assumed global importance:

Pricing of pharmaceutical products has now become one of the most complex and a very sensitive area of the business, like never before. This is mainly because of the concerns on the impact of medicine prices to access of medicines, especially, in the developing markets, like India and the cost containment pressure of the governments as well as the healthcare providers in the developed markets of the world.

Evolving Pharmaceutical pricing models:

Pharmaceutical pricing mechanism has undergone significant changes across the world. The old concept of pharmaceutical price being treated as almost given and usually determined only by the market forces with very less regulatory scrutiny is gradually but surely giving away to a new regime.

Currently in many cases, the prices of even patented medicines differ significantly from country to country across the globe, reflecting mainly the differences in their healthcare systems and delivery, along with income status and economic conditions.

Global pharmaceutical majors, like GSK and Merck (MSD) have already started following the differential pricing model, based primarily on the size of GDP and income status of the people of the respective countries. This strategy includes India, as well.

Reference pricing model is yet another such example, where the pricing framework of a pharmaceutical product will be established against the price of a reference drug in the reference countries.

The reference drug may be of different types, for example:

  1. Another drug in the same therapeutic category
  2. A drug having the same clinical indications available in the country of interest e.g, Canada fixes the drug prices with reference to prices charged for the same drug in the US and some European Union countries.

A Kaleidoscope of Drug Price Control across the world:

In most of the countries around the world drug price control in some form or the other has been put in place by the respective governments. Following are just a few examples:

Price Control in Germany:

In not so distant past pharma companies operating in Germany could fix any price for both patented and generic medicines. As a result, the drug prices in Germany have since long been among the highest in Europe.

‘The Act on the Reform of the Market for Medicinal Products (AMNOG)’ that came into effect in January 2011 to regulate the price of new prescription drugs in Germany, is expected to assist in the overall effort to curb in exploding costs for the country’s public health insurance system.

Under the new law, as reported by ‘InPharm’ dated November 12, 2010, pharmaceutical manufacturers in Germany, after the launch of a new drug, will have a one-year window to negotiate prices with health insurers. In case there happens to be no positive outcome of such negotiations, German Health Ministry would set a maximum price for the drug, which would then undergo a cost/benefit analysis by Germany’s ‘Health Technology Assessment (HTA)’ body IQWiG. Thereafter, the price will be fixed for the said new drug accordingly.

Price Control in Spain:

In Spain the local law has made HTA mandatory to ascertain the efficacy, cost, efficiency, effectiveness, safety, and therapeutic utility of different alternatives for the treatment of a disease condition.

After marketing approval of a new drug, either by the European Medicines Agency (EMEA) or the Spanish Medicine Agency (AEMPS),  the Ministry of Health (MSC) invites the manufacturer to provide all relevant information to allow the ‘Inter-Ministerial Pricing Commission (CIPM)’, chaired by the MSC, to decide the right price of the product. After negotiation, if the outcome is positive for inclusion of the product in the national reimbursement list, the decision is implemented across the country.

Effective June 2010, price cuts have been imposed by Spain on reimbursed patented drugs with rebates of 7.5% of sales, under the National Health System (NHS).

Effective July 2010, an average 25% cut has also been implemented for generic medicines in the country.

New Price Control mechanism in the UK:

Quite like US, UK has been one of those western countries, which allows pharmaceutical manufacturers to set their own prices. However, after the expiry of the current ‘Pharmaceutical Price Regulation Scheme (PPRS)’ in 2013, despite many concerns, as decided by the ‘National Institute of Health and Clinical Excellence (NICE)’,  ‘Value-based pricing (VBP)’ is expected to be followed for pharmaceutical product pricing in the UK.  VBP will be worked out ‘by the maximum affordable cost per ‘Quality Adjusted Life Years (QALY)’ generated by the use of new medicines.’

To arrive at VBP for a new product, pharmaceutical manufacturers will require furnishing enough evidence, based on clinical trial, to establish superiority of a new drug over the ones already available in the market.

However, VBP will be followed only for the new prescription drugs and not for the existing ones or generic medicines, with the main regulatory focus being on profit rather than on price control of drugs.

Price Control in France:

As per ISPOR, in France the price control of pharmaceutical products is implemented as follows:

“All registered pharmaceuticals are subjected to Evaluation of Therapeutic Benefit (Amelioration du Service Medical Rendu, or ASMR) by ‘Commission de Transparence (Transparency Commission)’, which is expressed as a classification between 1 & 6, as follows:

  1. Innovative product of significant therapeutic benefit
  2. Product of therapeutic benefit, in terms of efficacy and/or reduction in side effect profile
  3. Already existing product, where equivalent pharmaceuticals exist; moderate improvement in terms of efficacy and/or reduction in side effect profile
  4. Minor improvement in terms of efficacy and/or utility
  5. No improvement but still granted recommendations to be listed
  6. Negative opinion regarding inclusion on the reimbursement list

The ASMR evaluation is based on the expert judgment of the Transparency Commission of the Pharmaceutical Agency ‘(Agence du Medicament)’. Subsequently, a reimbursement price negotiated with ‘Comité Economique du Médicament (CEM)’. The price negotiated with CEM becomes the price at which the drug is sold throughout the country, even for private prescriptions.”

As a part of the 2011 Social Security Budget Bill, France has decided to significantly reduce its healthcare cost by enforcing price cuts including parallel import of drugs.

Price Control in Australia:

Just as many OECD countries, Australia also use drug price control mechanisms to contain its healthcare expenditure. The Australian government manages their healthcare expenditure through the Pharmaceutical Benefits Scheme (PBS), where the pharma companies are required to prove the cost-effectiveness of their drugs for subsequent pricing negotiations with the government.

Price Control in China:

In China, since 2007, ”The National Development and Reform Commission (NDRC)’ controls drug prices in the country. There was, however, a significant re-engineering of the system in  November 2010, when NDRC drastically reduced the prices of essential drugs manufactured locally in partnership with global pharma majors like, Novartis, Pfizer and Roche. In March 2011 prices were slashed for over 1,000 drugs in China.

Patented and imported products enjoyed relatively free-market pricing in China, for some time. However, recently to increase the coverage of ‘Universal Healthcare’, the Chinese pricing authorities have initiated price control measures for many pharmaceutical products in the country.

Pricing mechanism in Singapore:

Singapore also follows a free-market pricing approach for pharmaceutical products, which is, reportedly, to recognize the value and importance of patented products in the country. Though Singapore Government provides ‘Universal Healthcare’ to its residents, individuals are required to share the costs of healthcare services they consume.

This has made the cost of healthcare in Singapore rather expensive, especially for the retired persons and low-income citizens of the country. As a consequence of which, many individuals who would require regular treatment with medicines, very often go to nearby Malaysia to buy those medicines at much lesser prices, probably causing a revenue loss to the Singapore market.

Price control in Japan:

In Japan, the Ministry of Health, Labor, and Welfare (MHLW) follows a system of pricing where the new drugs prices are determined based on those comparable drugs, which are already available in the country. However, in those cases where MHLW cannot find any comparable drug for assessment ‘cost based pricing’ system is followed. The new drugs which are assessed as innovative by the MHLW may attract a premium based on pre-determined criteria.

Price Control in Brazil:

In Brazil, the government controls the drug prices through designated agencies. The ‘Agência Nacional de Vigilância Sanitária (ANVISA)’ is responsible for the marketing approval of new drugs and the ‘Câmara de Regulação do Mercado de Medicamentos (CMED)’ is responsible not only for determining the prices of new drugs, but also for any subsequent price changes for all drugs in the market.

Price Control in Russia:

Currently pricing regulations are applicable to only ‘essential drugs’ in Russia. However, ‘thepharmaletter’ in its January 25, 2011 edition reported that ‘Federal Commission on Safety of Medical Business (FCSMB)’ of Russia has proposed a quick introduction of the government control over prices of all drugs in the domestic market costing more than 100 Roubles (US$3.34).

FCSMB believes that the current system of drug pricing in Russia offers a distinct advantage to the global pharmaceutical players. Hence, the agency feels, the state regulation on all drug prices is necessary in the country.

A damning article from “Los Angeles Times”:

Though United States of America (USA) still remains a free-market even for pharmaceutical product pricing, increasing number of voices are now being heard in favor of pharmaceutical price control even in that country.

‘Los Angeles Times’ in its October 10, 2009 edition commented, “Healthcare reform without drug price controls? That’s sick”.

While, acknowledging high cost of pharmaceutical research, the article continued to state, ”In fact, the companies’ actual research costs are one of the industry’s most closely guarded secrets. In the 1970s and 1980s, pharmaceutical companies waged a decade-long legal battle to keep even government auditors from reviewing those costs, leaving it unclear whether they include non- scientific costs such as promotion”.

The article stated that the bigger issue that has largely escaped public scrutiny is that “Over the last 30 years, the industry hasn’t focused its efforts on discovering those truly amazing innovations that can change the practice of medicine. Instead, the companies have taken the easy path, ordering their scientists to turn out mostly rehashes of medicines already being sold. It’s far cheaper to copy a medicine — tweaking a molecule just enough so it gets its own patent — than it is to do the years of work needed to find new and better cures”.

The author further highlighted, “This focus on copycat medicines is apparent in the list of drugs approved by the Food and Drug Administration. Of the medicines approved between 1990 and 2004, only 16% were what government reviewers deemed to be actually new and significant. The rest were medicines we were already using in a slightly different form. This explains why our pharmacies are stocked with a multitude of medicines that reduce cholesterol in the same exact way. With no price controls, the industry gets away with charging exorbitant amounts — even for drugs that barely work.”

High out-of-pocket expenses for health makes price control relevant in India: 

Medicines are essential for all and constitute a significant cost component of modern healthcare systems, globally. However, in India, overall healthcare system is fundamentally different from many other countries, including China.

Around 80% of expenses towards healthcare, including medicines, are reimbursed either by the Governments or through Health Insurance or similar other mechanisms in many countries.

However, in India the situation is just the reverse, more than 70% of overall healthcare costs are private or out-of-pocket expenses, incurred by the individuals/families. In addition, out of the total 70% out-of-pocket expenses, medicines contribute around 71%, making the life more difficult for many. (Reference: ‘High Level Expert Group Report on Universal Health Coverage for India’ Instituted by Planning Commission of India).

Thus the issue of price control of ‘Essential medicines’ is extremely relevant in the country, more so when pharmaceuticals come under its Essential Commodities Act.

Conclusion:

It is now widely believed that pharmaceutical products, which play a pivotal role in keeping the population of any nation healthy and disease free to the extent possible, should not be exploited by anyone.

Pharmaceutical companies are often criticized in this area by those stakeholders who are genuinely concerned with the well-being of particularly ailing poor and underprivileged population across the world.

While looking through the ‘Kaleidoscope of Drug Price Control’ spanning across the world, it appears quite obvious that the raging debate on improving access to modern medicines will continue to revolve round the pharmaceutical pricing mechanism in almost all countries of the world. India is no exception, in any way.

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.

“Indian Drug Regulator Accords Primacy to Pharma Industry Instead of Safegurding Public Health and Safety” – Parliamentary Committee

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The Department Related Parliamentary Committee on Health and Family Welfare presented its 59th Report of 118 pages in total on the functioning of the Indian Drug Regulator – the Central Drug Standards Control Organization (CDSCO) in both the houses of the Parliament on May 08, 2012.

Regulations and the Regulator for the Pharmaceutical Industry of India – A snapshot:

The pharmaceutical industry in India is regulated, broadly, in the following ways:

  • Drugs and Cosmetics Act of India 1940 together with Drugs and Cosmetics Rules regulate the Pharmaceutical Industry across the country for all types of drugs, irrespective of the fact whether these are locally produced or imported from other countries of the world.
  • The office of the Drug Controller General of India (DCGI) is primarily responsible for effective enforcement of most of these laws and rules across the country.
  • All issues related to clinical trials, product approval and standards, import licenses and introduction of new drugs are the direct responsibilities of the DCGI’s office.
  • Health being a state subject in India, on the ground, Foods and Drugs Administrations (FDA) of the State Governments enforce laws related to approvals for setting up pharmaceutical production facilities and obtaining licenses to stock and sell drugs in their respective states.
  • A valid license from the Drug Regulator is necessary for location-wise manufacturing of each type of drugs in the country with a mandatory requirement of periodic renewal of such licenses, as specified therein.

A key point to ponder from the Report:

The report begins with the following observations:

Medicines apart from their critical role in alleviating human suffering and saving lives have very sensitive and typical dimensions for a variety of reasons. They are the only commodity for which the consumers have neither a role to play nor are they able to make any informed choices except to buy and consume whatever is prescribed or dispensed to them because of the following reasons:

  • Drug regulators decide which medicines can be marketed
  • Pharmaceutical companies either produce or import drugs that they can profitably sell
  • Doctors decide which drugs and brands to prescribe
  • Consumers are totally dependent on and at the mercy of external entities to protect their interests.

In this prevailing condition, the committee felt that effective and transparent drug regulation, free from all commercial influences, is absolutely essential to ensure safety, efficacy and quality of drugs keeping just one objective in mind, i.e., welfare of patients.

Quite in congruence with this critical requirement the Committee examined in detail the functioning of CDSCO, which includes the office of the DCGI, as well, to ascertain whether applicable rules and laws are being implemented efficiently and honestly for the best interest of patients by the Drug Regulator of India.

Why is the ‘Mission Statement’ of CDSCO industry oriented and not patient focused?

Very interestingly, the report highlights with the following examples, how out of line the ‘Mission Statement’ of CDSCO is as compared to the same of other countries by being blatantly industry oriented instead of safeguarding Public Health and safety:

Drug Regulator

The ‘Mission Statement’
1

CDSCO, India

 Meeting the aspirations…. demands and requirements of the pharmaceutical industry.
2.

USFDA, USA

 Protecting the public health by assuring the safety, efficacy, and security of human and veterinary drugs.
3.

MHRA, UK

 To enhance and safeguard the health of the public by ensuring that medicines and medical devices work, and are acceptably safe.
4.

TGA, Australia

 Safeguarding public health & safety in Australia by regulatingMedicines…

Consequently, the Committee took a very strong exception for such utter disregard and continued neglect of patients’ interest by the Drug Regulator of India and recommended immediate amendment of the ‘Mission Statement’ of CDSCO incorporating in very clear terms that the existence of the organization is solely for the purpose of protecting the best interest of patients and their safety. It is needless to say that thereafter, it will require stringent conformance with the same with high precision.

Some very critical findings:

The committee in its report made the following critical findings, besides others:

  • “A total of 31 new drugs were approved in the period January 2008 to October 2010 without conducting clinical trials on Indian patients.
  • Thirteen drugs scrutinized by the panel are not allowed to be sold in the United States, Canada, Britain, European Union and Australia.
  • Sufficient evidence is available on record to conclude that there is collusive nexus between drug manufacturers, some functionaries of CDSCO and some medical experts.
  • When it comes to approving new drugs, too much is left to the absolute discretion of the CDSCO officials.
  • The Central Government can either issue directions under Section 33P to states to withdraw the licenses of FDCs granted without prior DCGI approval or the Central Government can itself ban such FDCs under Section 26A.
  • Though the Ministry is forming Drug Approval Committees, which are given very important powers, there is no transparent procedure for the selection of experts of such Committees.
  • Accurate information on drugs for patients is absolutely essential to prevent inappropriate use more particularly in children, elderly, during pregnancy and lactation.
  • Due to the sensitive nature of clinical trials in which foreign companies are involved in a big way and a wide spectrum of ethical issues and legal angles, different aspects of Clinical trials need a thorough and in-depth review.”

The Report named some pharmaceutical companies:

While arriving at these points, the report indicted some pharmaceutical companies, both national and international as follows (in alphabetical order):

Company Company Company
1. Bayer 8. Lundbeck 15. Ranbaxy
2. Cipla 9. Macleods 16. Sanofi
3. Centaur 10. Mars 17. Sun Pharmaceuticals
4. Emcure 11. Merck 18. Themis
5. Eli Lilly 12. Novartis 19. Theon
6. GlaxoSmithKline 13. Pharmacia (acquired by Pfizer) 20. UCB
7. Hetero 14. Phamasset Inc. (a subsidiary of Gilead) 21. Venus

A scathing remark against CDSCO:

The report made the following scathing remarks on CDSCO in its point 2.2:

“The Committee is of the firm opinion that most of the ills besetting the system of drugs regulation in India are mainly due to the skewed priorities and perceptions of CDSCO. For decades together it has been according primacy to the propagation and facilitation of the drugs industry, due to which, unfortunately, the interest of the biggest stakeholder i.e. the consumer has never been ensured.”

Allegation of possible collusion needs to be thoroughly probed:

The report also deliberates not only on the utter systemic failure of CDSCO along with the DCGI’s office to enforce law effectively, but also towards a possible collusion between CDSCO and the pharmaceutical industry to implement a self-serving agenda by hoodwinking the system. This is a very serious allegation, which needs to be thoroughly probed and the findings of which should be made public for everybody’s satisfaction.

Parliamentary Committee Report is a ‘considered advice and of persuasive value’:

Though any report of such Parliamentary Committee has been stated to have a persuasive value and be treated as considered advice given by the Committee, which in this case is to CDSCO, DCGI, Ministry of Health and also the industry.

Some probes already initiated:

Reuters in its publication of May 9, 2012 indicated that this Parliamentary Committee Report has prompted greater scrutiny even from the US regulators, which are reportedly investigating a number of drug companies under the Foreign Corrupt Practices Act (FCPA).

Initial reports also indicate that both the Indian Government and some large international pharmaceutical companies have announced detail probe based on this report at their respective ends.

Some remedial measures - Mashelkar Committee Recommendations:

Considering all these, besides taking appropriate remedial measures related to Clinical Trials of drugs in India, it is about time to reconsider the recommendations of Dr. R. A. Mashelkar Committee on the subject and make amendments in the Act accordingly to facilitate creation of a ‘Central Drugs Authority (CDA)’ introducing, along with other measures, a centralized licensing system for the manufacture, sale, export and distribution of drugs.

Why does India need CDA?

I firmly believe that the formation of the ‘Central Drugs Authority (CDA)’ will provide the following significant benefits to the Industry and also to the Government for the best interest of public health and safety:

  1. Achieving uniform interpretation of the provisions of the Drugs & Cosmetics Act & Rules
  2. Standardizing procedures and systems for drug control across the country
  3. Enabling coordinated nationwide action against spurious and substandard drugs
  4. Upholding uniform quality standards with respect to exports to foreign countries from anywhere in India
  5. Implementing uniform enforcement action in case of banned and irrational drugs
  6. Creating a pan-Indian approach to drug control and administration
  7. Evolving a single-window system for pharmaceutical manufacturing and research undertaken anywhere in the country.

Conclusion:

As a consequence of the above report of the Parliamentary Committee identifying gross irregularities in the functioning of the CDSCO, the Minister of Health and Family Welfare (MoHFW) of India Mr. Ghulam Nabi Azad has already announced constitution of a three-member committee to probe into the matter in depth.

Following well-known experts have been named as members of this high powered committee, which will submit its report and recommendations in two months’ time:

  • Dr. V.M. Katoch: Director General, Indian Council of Medical Research (ICMR),
  • Dr. P.N. Tandon: President, National Brain Research Centre
  • Dr. S.S. Aggarwal: Former Director, Sanjay Gandhi Postgraduate Institute of Medical Sciences, Lucknow

The committee has been mandated to:

  • Examine the validity of the scientific and statutory basis adopted for approval of new drugs without clinical trials
  • Outline appropriate measures to bring about systemic improvements in the processing and grant of statutory approvals
  • Suggest steps to institutionalize improvements in other procedural aspects of functioning of the CDSCO

The outcome of the report of this high powered committee, internal probes voluntarily initiated by some pharmaceutical companies and possible implementation of the ‘Mashelkar Committee’ recommendations on the formation of CDA in the country will hopefully bring in some systemic changes in the drug regulatory system of India, for patients’ sake.

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.

The New Drug Policy of India enters into the final lap of a Marathon Run

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Final working out and thereafter announcement of much awaited and long overdue the new ‘Drug Policy’ of India has now entered into a very interesting stage. This is mainly because of the unique combination of the following three key reasons:

1. 2002 Drug Policy was challenged in the Karnataka High Court, which by its order dated November 12, 2002 issued stay on the implementation of the Policy. This order was challenged by the Government in the Supreme Court, which vacated the stay vide its order dated March 10, 2003 but ordered as follows: “We suspend the operation of the order to the extent it directs that the Policy dated 15.2.2002 shall not be implemented. However we direct that the petitioner shall consider and formulate appropriate criteria for ensuring essential and lifesaving drugs not to fall out of the price control and further directed to review drugs, which are essential and lifesaving in nature till 2nd May, 2003”.

2. A live court case on the new draft ‘Drug Policy’ with the ‘essentiality criteria’ for price control is pending before the Supreme Court of India with its next hearing scheduled in the last week of July 2012. In this court case an independent network of several ‘Non-Government Organizations (NGOs)’ known as ‘All India Drug Action Network (AIDAN)’ is arguing against the ‘flawed’ draft ‘National Pharmaceutical Pricing Policy 2011 (NPPP 2011)’, mainly on the following grounds:

  • ‘Market Based Pricing (MBP)’ methodology calculated on the ‘Weighted Average Price (WAP)’ of top three brands, as specified in the ‘Draft NPPP 2011’ would not only lead to increase in the prices of medicines, but also legitimize higher drug prices.
  • To keep the drug prices under check effectively, the ‘Ceiling Prices (CP)’ of Medicines should be based on ‘Cost based Pricing (CBP)’ model rather than MBP.
  • Adequate control mechanism is lacking in the NPPP 2011 to prevent the manufacturer from avoiding price control by tweaking with the formulations featuring in the National list of Essential Medicine 2011 (NLEM 2011).

3. In this scenario, a Group of Ministers (GoM) of the Union Cabinet has started deliberating on this issue since April 25, 2012 taking all key stakeholders on board to give its recommendations to the Union Cabinet on the scope, form, structure and the basic content of the new Drug Policy.

The bone of contentions:

The methodology and the span of price control of the draft NPPP 2011 have still remained the key bone of contentions for the new ‘Drug Policy’ of India. Suggested three key methodologies: From the responses received on the draft NPPP 2011, it appears that following three are the  suggested key methodologies to arrive at the CP of price controlled NLEM 2011 formulations:

  • Cost Based Pricing
  • Market based pricing

-  WAP of top 3 brands             -  WAP of bottom 3 brands

  • The formula suggested by the Economic Advisory Council of the Prime Minister of lesser of (i) the price paid by the median consumer + 25% and (ii) price paid by the 80th percentile consumer.

ARGUMENTS IN FAVOR AND AGAINST OF EACH: A. Cost based Pricing: Besides AIDAN, other reported key supporters of the CBP are the Ministry of Health and All India Chemists Associations. ARGUMENTS IN FAVOR: The current drug price control regime (DPCO 1995) is based on cost-plus pricing model, where Maximum Retail Prices (MRPs) of price controlled formulations are worked out as per the formula given in ‘para 7’ of DPCO, 1995 as follows: R.P. = [M.C. +C.C. +P.M. +P.C.] x [1+MAPE/100] +E.D. Where,

  • R.P:  Retail price
  • M.C:  Material cost, including process loss
  • C. C.: Conversion cost
  • P.M: Packing material
  • P.C: Packing Charges
  • MAPE : Maximum Allowable Post manufacturing Expenses of 100 percent
  • E.D.: Excise duty

The proponents of CBP believe that it is:

  • Transparent
  • Most beneficial to the patients
  • Fair, with a decent profit margin allocation for the manufacturers

ARGUMENTS AGAINST: Many others do not believe in CBP. They argue that price-inflation of non-price controlled drugs is much less than the price-controlled ones, which clearly vindicates that market competition works better than price control of drugs and thus is more beneficial to the patients. The following table shows the trend of general inflation against the drug price inflation from 1992 to 2011 period, as follows:

Type of Inflation

Inflation (in Index)
1. General Inflation

403
2. Price-controlled molecules

151
3. Non Price-Controlled Molecules

112

(Source: IMS data, RBI CPI average yearly inflation) This school of thought quotes the example of discontinuation of manufacturing in India 29 out of 74 Active Pharmaceutical Ingredients (APIs) under DPCO 1995 due to financial non-viability on account of CBP. Moreover, CBP is considered by them as a process, which is:

  • Intrusive
  • Lacking in transparency
  • Discretionary
  • Discouraging for innovation, high quality & efficiency
  • Not followed by any major country in the world
  • Not supported by even WHO. It says other countries are moving away from Indian type of CBP

B. Market Based Pricing (MBP): MBP in general is considered by its proponents as a system which is:

  • Transparent
  • Non-Discretionary
  • Encourages growth & investment
  • Rewards innovation
  • Promotes efficiency

The two variants of MBP under discussion are:

- WAP of top 3 brands

- WAP of bottom 3 brands

ARGUMENTS IN FAVOR:

1. WAP of top 3 brands:

  • It is a transparent system and will reduce the prices of medicines
  • With adequate checks and balances in place the method will not lead to increase in prices because of the following reasons:

- All price increases are subject to WPI              – Market competition will not permit any price increases              – Companies in low-price segments will create pressure to reduce prices further

2. WAP of bottom 3 brands: This group argues that instead of WAP of top 3 brands, if the same for the bottom three brands is considered, ceiling prices will come down very significantly, benefiting patients much more than what WAP of top three brands will do.

ARGUMENTS AGAINST:

1. WAP of top three brands:

  • Would lead to overall increase in the prices of many medicines
  • Below ceiling price brands would raise their price upto the ceiling price level immediately
  • Would legitimize high drug prices

2. WAP of bottom 3 brands:

  • Not representative of the market, as only the brands with a low market presence will be considered for WAP calculations
  • The Bottom 3 priced brands factor in only ~17% of the market
  • Likely to have an adverse overall impact on patients as many small brands with lowest acceptable quality standards will be considered for WAP calculations, which may ultimately push high quality formulations out of the market.

C. Formula suggested by EAC of the Prime Minister: ARGUMENTS IN FAVOR:

Will ensures affordable drug prices for the patients by:

  • Encouraging and rewarding high market competition
  • Discouraging monopolistic or oligopolistic market situation

ARGUMENTS AGAINST:

  • EAC criteria for insufficient competition are based on the 1994 Policy
  • The situation is different today as the market has grown 9 times since then
  • The number of brands tends to be low in lower volume turnover molecule segments mainly due to low disease prevalence. Thus bringing these molecules under CBP will be irrational
  • Instead of implementing CBP where lesser number of brands exists in many generic segments, EAC formula should encourage competition even in these lower value turnover molecule segments to bring the prices further down

That said, ‘Drug Price’ has always remained one of the critical factors to ensure greater access to medicines, especially in the developing economies like India, where predominantly individuals are the payors. This point has also been widely accepted by the international community, except perhaps by the diehard ‘self-serving’ vested interests. Important Points to Ponder:

A. ‘Drug Price’ control alone can not improve access to medicines significantly:

To improve access to medicines, even the Governments in countries like Germany, Spain, UK, Korea and China have recently mulled strict price control measures in their respective countries. However, it is important to note and as we have seen above, though the drug prices are indeed one of the critical factors to improve access to modern medicines, there is a need to augment other healthcare access related initiatives in tandem for a holistic approach.

In India, we have witnessed through 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.

B. 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 practical approach: Considering pros and cons of the key methodologies of price control of formulations featuring in NLEM 2011, as I had written in this blog in April 2, 2012, I would like to reemphasize that a middle path with a win-win strategy to resolve this deadlock effectively would be in the best interest of both patients and the industry alike, in the current situation. The middle path, I reckon, may be explored as follows:

  1. Calculate ‘Weighted Average Price’ for each formulation based on prices of all brands – high, medium and low, applying some realistic exclusion criteria.
  2. When inclusion criteria for price control in the draft NPPP 2011 is ‘essentiality’ of drugs, it sounds quite logical that price control should be restricted to NLEM 2011 only.
  3. Enough non-price control checks and balances to be put in place to ensure proper availability of NLEM 2011 drugs for the common man and avoidance of any possible situation of shortages for such drugs.

Conclusion:

Conforming to the directive of the honorable Supreme Court of India on price control of essential medicines in the country, the GoM should now help resolving the issue of putting in place a robust new National Pharmaceutical Pricing Policy, without further delay, taking the key stakeholders on board.

In any case, it has to be a win-win solution both for the patients and the industry alike, paving the way for improving access to modern medicines for the entire population of India, together with other strategic initiatives in this direction. This is absolutely essential, especially when medicines contribute around 72 percent of the total ‘Out of Pocket Expenses’ of the common man of the country.

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.

The New Drug Policy is languishing in a labyrinth

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Drug Price Control has remained the key feature of all Drug Policies of India, since their inception in early 70’s. Most of these policies continued to remain behind their times consistently, without any exception.

That said, the Drug Policy 1994 and the consequent Drug Price Control Order 1995 (DPCO  ’95) have now become the largest ‘Dinosaur’ of all Drug Policies. However, the most intriguing point though, both these have still been kept operational by the government and the very concept of a new and a more contemporary one is languishing in a labyrinth since over a decade, for reasons of anybody’s guess.

Drug Price Control system in India:

It appears that the drug price control system in India is here to stay, at least in the short to medium term and that too in a seemingly best case scenario.

The key reasons:

As we know, the key reasons of price control for pharmaceuticals in India are the following:

  • To contain cost of medicines, particularly the essential ones, at a reasonably affordable level, which is a very important part of the total healthcare expenditure of the common man.
  • To provide greater access to medicines to all, especially in view of very high  ‘out of pocket expenditure’ for health for a vast majority of population in the country.

The economic factors:

Some of the economic factors, which may cause impediments in achieving these objectives are the following:

  • Sub optimal public healthcare infrastructure, leaky delivery system and high cost of  private healthcare services
  • This is fueled by, as stated above, unabated increase in ‘out-of-pocket expenses’ on healthcare in general and medicines in particular at 78 per cent, as compared to 61 per cent in China, 53 per cent in Sri Lanka, 31 percent in Thailand, 29 per cent in Bhutan and 14 per cent in Maldives (Source: The Lancet)
  • High expenses on drugs for outpatient care

Though very important, drug cost alone, however, does not determine quality of access to healthcare.

Global scenario for drug price control:

As per published reports, all 34 developed nations of the world have ‘Universal Health Coverage’ mechanism in place in various different forms, including mandatory medical insurance requirements, to effectively address the issue of high access to healthcare including pharmaceuticals in their respective countries, significantly reducing ‘out of pocket expenses’ towards health.

All these 34 countries belong to ‘Organization for Economic Co-operation and Development (OECD)’, the governments of which, in some way or the other control and regulate drug prices.

The Governments/payors of most of these countries implement the price control measures by playing the role of a dominant market force directly, while negotiating a favorable price from the manufacturers, which are much lower than their equivalent free market prices.

Many other OECD governments set the drug reimbursement prices right at the time of introduction of new drugs through hard negotiation, which are also well below free market prices and acts as the bench mark market prices, in many ways.

In addition to all these mechanisms, the governments in many OECD countries periodically reduce the prices of already marketed drugs quite significantly.

A contrarian view on Drug Price Control:

Some industry experts feel that there is a hidden consequence for the ‘Drug Price Control System’, especially with the cost based one.

The cost based price control as is currently practiced by the government in India compels the pharmaceutical manufacturers to restrict to:

  • Minimum acceptable quality standard rather than maximum possible quality standards for the patients
  • Does not encourage innovation in formulation development like novel galenic formulations for better patient acceptance and compliance
  • Indirectly discourage innovation in product packaging
  • Ceiling Price mechanism does not encourage advanced anti-counterfeit measures for patients’ safety

These experts also feel that adverse consequences of price control will have a significant negative impact on the pharmaceutical players to plough back fund towards R&D projects to meet the unmet needs of the patients and thereby reducing the range of treatments that could be made available to the patients in the years ahead.

What is China doing?

On March 28, 2011 Reuters reported that China had cut the maximum retail price for more than 1,200 types of antibiotics and the drugs for the circulatory system by an average of 21 percent.

It has also been reported that the Chinese Government has put a cap on the prices of about 300 drugs featuring in their ‘National List of Essential Medicines (NLEM).’

Supreme Court directive on ‘Price Control’ of ‘Essential Medicines’:

It is worth noting in this context that in 2003, the Supreme Court of India, while setting aside the Drug Policy 2002 directed the government to work out effective mechanism to bring all essential and life-saving medicines under price control.

HLEG recommends ‘Price Control’ of ‘Essential Medicines’:

Even in its report the ‘High Level Expert Group (HLEG)’ on ‘Universal Health Coverage (UHC)’ in India, set up by the Planning Commission of India under the chairmanship of the well-known medical professional Prof. K. Srinath Reddy, under recommendation no. 3.5.1, postulated price control and price regulation on essential drugs, which is quite in line with the draft National Pharmaceutical Pricing Policy 2011 (NPPP 2011).

The HLEG report says:

“We recommend the use of ‘essentiality’ as a criterion and applying price controls on formulations rather than basic drugs. Direct price control applied to formulations, rather than basic drugs, is likely to minimize intra-industry distortion in transactions and prevent a substantial rise in drug prices. It may also be necessary to consider caps on trade margins to rein in drug prices while ensuring reasonable returns to manufacturers and distributors. All therapeutic products should be covered and producers should be prevented from circumventing controls by creating nonstandard combinations. This would also discourage producers from moving away from controlled to non-controlled drugs. At the same time, it is necessary to strengthen Central and State regulatory agencies to effectively perform quality and price control functions.”

Types of drug price regulations in India:

  1. Cost based price control: e.g. as specified in the Drug Price Control Order 1995 (DPCO 95)
  2. Marked based price control: e.g. as was suggested by ‘The Pronab Sen Committee’ in 2005
  3. Price Monitoring with a cap on annual price increase: e.g. as is currently followed by the National Pharmaceutical Pricing Authority (NPPA) for all products which are outside DPCO ’95

The weaknesses of cost based pricing mechanism:

The key criticism of cost based pricing mechanism flows from the following arguments:

  • This system is not followed by any developed or developing countries worth mentioning, which follow drug price control mechanism in any form
  • A Complex, intrusive and inefficient system of pricing medicines
  • Does not consider important variations in the level of GMP standards and the quality of input costs
  • The conversion cost and packing norms are determined through a sample survey of less than one per cent of pharmaceutical manufacturing units

Pronab Sen Committee report – the basis of price control in the draft NPPP 2011:

The draft NPPP 2011 is based on the ‘Recommendations of the Task Force constituted under the Chairmanship of Dr. Pronab Sen to explore issues beyond Price Control to make available Life-saving Drugs at reasonable prices’ to all.

‘Pronab Sen Committee’ suggested the following principles of Price regulation to achieve part of the above objective:

1.       The National List of Essential Medicines (NLEM) should form the basis of drugs to be considered for intensive price monitoring, ceiling prices and for imposition of price controls, if necessary.

2.       The government should announce the ceiling price of the drugs contained in the NLEM (other than the drugs procured by hospitals directly and which an individual does not have to purchase from the market) on the basis of the weighted average prices of the top three brands by value of single ingredient formulations prevailing in the market as on 01.04.2005. In cases where there are less than three brands, the weighted average of all the existing brands would be taken. The Org–IMS data set can be used for this purpose initially with a 20 per cent retail margin provided. There is, however, a need to improve the available data coverage, which should be taken up with ORG-IMS or any other data provider.

3.       For drugs which are not reflected in ORG-IMS data, the NPPA should prepare the necessary information based on market data collection.

4.       During the transition period (i.e. till the time ceiling prices are fixed and notified) prices of all essential drugs may be frozen.

5.       The Government should specify the reference product in terms of strength and pack size for each product which would form the basis for price determination. The price ceiling would be specified on a per dosage basis, such as per tablet/per capsule or standard volume of injection. Where syrups and liquids are sold in bottles the ceiling price may be fixed on individual pack size.

6.       Price relaxations may be permitted for non-standard delivery systems, packaging and pack sizes through applications to the negotiations committee, which should become applicable for all similar cases.

7.       In the case of formulations which involve a combination of more than one drug in the NLEM, the ceiling price would be the weighted average of the applicable ceiling prices of its constituents.

8.       For formulations containing a combination of a drug in the NLEM and any other drug, the ceiling price applicable to the essential drug would be made applicable. However, the company would be free to approach the price negotiations committee for a relaxation of the price on the basis of evidence proving superior therapeutic effectiveness for particular disease conditions.

9.       In order to determine the reasonableness of the ceiling prices fixed as above, the prices quoted in bulk procurement by Government and other designated agencies may be examined for use, provided that the system of bulk procurement meets certain minimum prescribed standards. Recognizing that retail distribution has costs not reflected in bulk procurement, a markup of 100 per cent over this reference price is recommended.

10.    NPPA should set up a computer based system which would scan the price data provided by companies against the ceiling prices determined as above and identify formulations which breach the relevant price ceiling. The company manufacturing or marketing such a product would be required to reduce its price or to face penal action.

11.    Companies should be permitted to represent for any price increase on valid grounds, which should then become applicable to the entire class of products.

12.   The NLEM should be revised periodically, say every 5 years, in order to reflect new drugs and significant changes in pattern of drug sales within the therapeutic categories. However till the time the new list is finalized the existing list will continue to be valid for the purpose of price control.

13.   In the case of drugs not contained in the NLEM, intensive monitoring should be carried out of all drugs falling into a pre-specified list of therapeutic categories. Any significant variation in the prices (say above 10 per cent) would be identified for negotiation.

The stakeholders’ comments on NPPP 2011:

About 60 stakeholders have commented by now on the draft NPPP 2011. The views are quite divergent though. It is interesting to note that the new draft pricing policy, in its current form, has been rejected by all key stakeholders, like the Industry, Ministry of Health, Expert Groups, WHO, NGOs and reportedly even by the Economic Advisory Council of the Prime Minister, on quite different grounds.

As widely reported in the media, the pharmaceutical industry, though in favor of the marked based pricing  mechanism, feels that the draft NPPP 2011 will increase the span of drug price control to over 60 per cent of the Indian Pharmaceutical Market (IPM). This means over eight times increase in the span of price control from its current level, making the task unwieldy for even the NPPA.

Majority of other stakeholders including the Ministry of Health, on the contrary, are arguing in favor of cost based price control. They commented that the price control system of the draft policy would give legitimacy to high drug prices in India, leading to increase in the overall prices of medicines. This group feels that the top three brands in majority of cases will be the most expensive ones.

Two interesting observations by the World Health Organization (WHO) on ‘Trade Margin’:

The WHO  in their observations on the draft NPPP 2011 has made the following interesting comments:

  1. “The new price regulation uses a margin of16% to calculate the retail prices. This is a lower margin than currently – based on the market data 1.1 and 3.3 I calculated a current retail margin of 22%. So the new price regulation implies a margin reduction of 6%, alternatively the CP might be set at a 6% lower price than currently is the case.”

If the WHO observation is correct, there is a scope to reduce the price of essential medicines by 6 per cent only through proper regulation of the trade margin.

  1. WHO also comments that IMS data, the basis of all such calculations by the NPPA, has severe limitations as “Their data does not take into account the discounts, rebates and bundling deals and when the data is collected at the level of the wholesaler they estimate the retailer and patient prices”.

If such is the case, what could possibly be the basis of all calculations as captured in the draft NPPP 2011? 

Observation of a distinguished Parliamentarian: 

Dr. Jyoti Mirdha , a Member of the Lower House of the Parliament (Lok Sabha) commented as follows:

“Under this policy the weighted average of three top selling brands will be the ceiling price. There is no logic in restricting the formula to just three brands. Why not five? Why not 10 to arrive at a more representative and reasonable figure? Besides why base on sales figures? In any pricing policy the parameter should be the price. Why not weighted average of 10 least priced brands?”

This could well be a pertinent question.

How to break the logjam now?

Taking on from Dr. Mirdha’s argument , WHO observations and Pronab Sen Committee report, one could possibly try to resolve this logjam by exploring various other available alternatives like for example, the following broad points, to ascertain whether a win-win situation can be created for all through the new drug policy:

  1. What happens if ‘Weighted Average Price’ is calculated based on all brands, instead of top three or bottom three with some exclusion criteria, if required?
  2. When inclusion criteria for price control in the new draft NPPP 2011 is ‘essentiality’ of drugs, it sounds logical that price control should be restricted to National List of Essential Medicines 2011 (NLEM 2011). Only possible extension could perhaps be taking the entire molecule, instead of specified strengths of the same molecule.
  3. Enough non-price control checks and balances to be put in place to ensure proper availability of NLEM 2011 drugs to the common man and avoidance of any possible situation of shortages for such drugs.
  4. As commented by WHO, trade margin should be rationalized, the MRP needs to be reduced accordingly and the consequential benefits to be passed on to the patients.

Conclusion:

The issue of the new National Pharmaceutical Pricing Policy should be resolved sooner than later and that too by conforming to the directive given by the Supreme Court on essential medicines. At the same time, all the stakeholders must feel comfortable with the new drug policy.

The four points, as mentioned above, are just an illustration for choosing an alternative solution. If it works, let us move on. If it does not, let us search for the pathfinder who can break the decade old labyrinth rather quickly, without losing the way yet again.

However, the bottom-line remains that the solution should be a win-win one, both for the patients and the industry alike, benefiting the healthcare space of the country in the years ahead.

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.