PRESENTATION MADE TO THE STANDING PARLIAMENTARY COMMITTEE OF THE MINISTRY OF CHEMICALS BY
LOCOST, VADODARA AND JAN SWASTHYA SAHYOG, BILASPUR
ON BEHALF OF
ALL INDIA DRUG ACTION NETWORK.
The Why, The What, The How of Price Regulation: A people’s and Public health perspective:
SECTION I : THE ‘WHY’ OF PRICE REGULATION:
The special nature of the commodity and of the market:
Medicines are an essential commodity (drugs are covered under the Essential Commodities act 1955).
It is the only commodity in the world where the decision of the drug to be purchased is taken not by the consumer but by a third party. The patient pays but does not decide, and the doctor decides but does not pay.
It is a unique commodity where the purchase or non-purchase based on price may mean the choice between life and death. The need for medicines is immediate, obligatory, and involuntary.
It is the only commodity in the world where the patient may have no knowledge of the drug being purchased.
THE IMPERATIVES FOR PRICE REGULATION in INDIA:
1.1 INDIA HAS SOME OF THE POOREST HEALTH INDICATORS IN THE WORLD, AND SOME OF THE HIGHEST DISEASE BURDENS. THE BRUNT OF THIS BURDEN FALLS ON THE POOR, WHICH LEADS TO PREMATURE MORTALITY AND PERPETUATION OF POVERTY.
India still ranks below the top 100 countries of the world in its human development index, partly because of its poor health indicators. The country has the largest number of patients with TB, leprosy, diabetes in the world, the second largest number of patients with HIV disease, the brunt of which is borne by the poor population.
1.2 DISEASES REQUIRE DRUGS FOR THEIR TREATMENT WHICH ARE NOT AVAILABLE IN THE PUBLIC SECTOR AND ARE BECOMING UNAFFORDABLE IN THE PRIVATE HEATLH SECTOR.
India is one of the countries in the world where people incur one of the highest out of pocket expenditures in seeking health care. The private expenditure is 83% while the government contributes a mere 17% of the expenditure on health.
the decentralized Public health service outlets have become practically dysfunctional over large parts of the country… the supply of drugs by the State Governments is grossly inadequate. (National Health Policy 2002)
Spending on drugs constitutes a large part of these expenses. (Share of drugs in total outpatient treatment is 83% in rural and 77% in urban areas). Rising healthcare costs (including on drugs) has increased the number of people who do not seek health care because of financial reasons. Expenses on drugs and health care is one of the most common causes of indebtedness in the rural areas, which is pushing people into debt, premature death, and disability.
As a result of the costs of a single hospitalization, 35% of people fall below the poverty line. out-of-pocket medical costs alone may push 2.2% of the population below the poverty line in one year. (India – Raising the Sights: Better Health Systems for India’s Poor, World Bank May 2001).
The availability of essential drugs in the public health system is poor as has been admitted in the National Health Policy 2002 document. Increasingly the affordability of drugs has become a question.
1.3 COUNTRIES ALL OVER THE DEVELOPED WORLD (WHICH HAVE MARKET ECONOMIES) REGULATE DRUG PRICES, EVEN AS THEY PROVIDE THEM TO THEIR POPULATIONS UNDER SOCIAL INSURANCE
Price regulation in one form or another is the norm in even the developed countries as described below and as was discovered by the Drug Price control Review Committee in 1999.
“ Firstly it was clear Medicines cannot be left to the market and government regulation is essential. The fact that almost all the developed countries in the world have a very strict regulation of prices is enough evidence that governmental regulation is required.”
Regional Advisor, Essential Medicines,WHO South-East Asia Regional Office,New Delhi, in Summary of a workshop on “Medicine Prices in the SEA region” SEAR Pharm Forum, December 2003, Chennai.
Countries regulate not only drug prices , but also profitability of drug companies, and even approval of new drugs to only those drugs which offer a cost and therapeutic advantage over existing drugs.
1.4. A. A Look At The Prices And Trade Margins Of Drugs Which Are Outside Price Control, (And Therefore A Part Of The ‘Free Market) Are The Biggest Evidence Why It Is The Duty, And The Obligation Of The Government To Regulate Drug Prices To Protect The Interests Of The People.
The Drug Prices Show Enormous (Upto 1000%) Variation In Retail Prices, And Astronomical Margins (Upto 1500%) To The Trade And The Companies, Pointing Clearly To Profiteering In An Essential Commodity.
This Is The Situation, Which Would Exist In All Drugs If Price Regulation Were To Be Abolished.
India is possibly the only country in the world, which has a dual system of having a small list of drugs, which are under price control, and a larger list of drugs, which are outside price control.
THE INDIAN DRUG MARKET : CONTROLLED OR FREE ?
Out of nearly 550 active pharmaceutical ingredients only 74 drugs are under price control (13%).
Out of the top 300 selling brands (ORG MARG DATA) which account for a sale of 18,000 crores, the number of brands of drugs under price control were only 36, (12%)
The anarchy in retail prices (with upto 1000% variations between brands), the large market shares of even the high priced drugs, and the trade margins being offered to the pharmaceutical trade (upto 1500%), and the upto 5000% escalation in cost to the consumer compared to the cost to the government, all .
THE ENORMOUS VARIATION IN RETAIL PRICES OF BRANDS OF WELL KNOWN COMPANIES:
Risperdal (Ethnor): Rs. 27.00 per ta
Respidon (Torrent): Rs. 1.69 per tab.
Tarivid (Aventis): Rs. 31.00 per tablet.
Zo (FDC) : Rs. 3.20 per tablet.
Nolvadex (ICI): Rs. 19.58 per tablet.
Tamodex (Biochem): Rs. 1.95 per tablet.
Amlogard(Pfizer): Rs. 4.81 per tablet.
Amlodac (Zydus Cadila): Rs. 1.38
Atorva (Nicholas Piramal):Rs. 7.72 per tablet.
Zivast (FDC): Rs. 2.40 per tablet.
Not only are drugs marked by enormous price variations, in the free market, the more expensive drugs more often sell more.
The case of ciprofloxacin:
Cifran (Ranbaxy) Rs. 8.96 per tablet: Moving annual turnover Rs. 62.7 crores:
Zoxan ( FDC) : Rs. 2.9 per tablet: Moving annual turnover Rs. 12. Crores
The case of Gliclazide:
Diamicron (Sun) : Rs. 5.9 per tablet: Moving annual turnover Rs.7 crores
Glidiet ( Modi-Mundipharma): Rs.3.1 per tablet: Moving annual turnover Rs.0.66 crores.
How Is It That Two Well Known Companies Can Make The Same Drug With A Retail Price Variation Of 1000%?
Why Does The Government Not Act As Per Its Obligations Under The Drug Policy Statements That It Shall Intervene Whenever There Is Any Abnormal Variation In Prices? If A 1000% Difference Is Not Abnormal What Is?
ASTRONOMICAL TRADE MARGINS, UNHEARD OF IN ANY OTHER COMMODITY:
Cetrizine 10 mg
Ceticad/ Cadila: Price to retailer : Rs. 0.21 , Price to patient : Rs. 2.60 (1238 % margin )
Cetrizet/ Sun pharma: Price to retailer : 16% less than MRP. MRP: Rs. 3.0 per tablet.
Nimesulide 100 mg:
Nicip/ Cipla: Price to retailer : Rs., 0.10 Price to patient : Rs. 1.45 (1450% margin )
Amikacin 500 mg injection:
Amikanex / Alembic: Price to retailer : Rs. 13.50 Price to patient : Rs. 64.25 (475% margin).
If The Pharmaceutical Companies Can Afford To Sell Their Drugs To The Pharmaceutical Trade Even At 10-20% Of The Retail Rate, Then How Does It Affect Their Profitability If The Regulation Of Prices Occurs With The Rationalisation Of The Trade Margins?
“Even if a 100% extra charge is levied at each stage, the price of the medicine must not increase more than four-five times of the production cost. We have found that it is 30 times more in some cases.” Minister Mr. Ramvilas Paswan.
PRICES OF DRUGS IN A POOLED PUBLIC PROCUREMENT IN DELHI STATE AND TAMIL NADU: THE GOVERNMENT PAYS A VERY SMALL FRACTION OF WHAT THE POOR PEOPLE OF INDIA HAVE TO PAY:
The prices at which the Government can and does buy if it is determined to do so
Diclofenac 50 mg : Rs. 1.51 vs. Rs. 0.06 ~ (4% of MRP)
Diazepam 5 mg (anxiety): 1.6 vs. Rs. 0.05 ( ~3%)
Albendazole : Rs. 0.22 vs. Rs. 11.90 (~ 2% of MRP)
Amoxycillin (bacterial infections): Rs.5.95 vs. Rs. 0.69 (~11% of MRP)
Ciprofloxacin 500 mg : Rs. 8.96 vs. Rs. 0.94 (~11%.of MRP)
ORS (diarrhea): Rs. 12.53 vs.Rs. 1.49 (~12 %)
· Atenolol 50 mg (hypertension) Rs. 2.21 vs Rs. 0.12. ~5%
Glibenclamide (diabetes): Rs.0.66 vs. Rs. 0.06 (~10%)
Metformin 500 mg : Rs. 0.73 vs. Rs. 0.06 ( ~8%)
If The Pharmaceutical Companies Are Not Averse To Selling Their Drugs To The Government During Tender Procurements At 3-12% Of The Retail Price, Then Why Are They So Averse To Any Kind Of Lowering Of Their Prices To The Consumers?
The CMP says, inter alia, “the UPA Government will take all steps to ensure availability of life-savings drugs at reasonable prices. Special attention will be paid to the poorer sections in the matter of health care.
If the government cannot fulfill its obligation of providing access to essential medicines, should it as a minimum, not protect the consumer from being cheated in this manner, especially in a country where the consumer often liquidates his assets to pay for drug costs.
THESE KIND OF VARIATIONS TRANSLATE INTO UNAFFORDABLE TREATMENT COSTS FOR PATIENTS WHICH COULD HAVE BEEN OTHERWISE MORE AFFORDABLE:
Iron deficiency anemia: a 48 times escalation in cost:
Rs. 3744 for a 6 month course with Dexorange against Rs. 78 with ferrous sulphate+folic acid.
Hypertension: a more than 10 times escalation.
Rs. 766.5 for a year with Atenolol 50 mg vs. Rs. 58.4.
Epilepsy: a nearly 8 times escalation:
Rs. 2014.8 for a year’s drugs vs. Rs. 262.8
Coronary artery disease: more than 5 times escalation:
Rs. 12541.4 for a year’s drugs vs. Rs. 2007.5
Diabetes mellitus: using Metformin 1.5 g per day.
Rs. 1193.5 for a year’s drugs vs. Rs. 219
Tuberculosis: using WHO guidelines for treatment for six months
More than 2.5 times escalation.Rs. 2616 vs. Rs. 1001.6
Drug costs in rational treatment of illnesses expressed in no. of wage days of labor for a person with Rs. 60 per day
Bacterial sore throat ~ 2 days
TB treatment ~ 1.5 months
Iron deficiency anemia ~ 2 months
Coronary artery disease ~ 6 months
Multidrug resistant TB ~ 2 years
1.5. THE IMPERATIVE FOR PRICE REGULATION HAS BECOME MORE ACUTE IN VIEW OF THE TRIPS-CONSISTENT PATENTS REGIME
Under the WTO obligations, we have only to comply with the international agreement on product patents. With regard to price regulation of drugs, we are fully within our rights to continue it as an instrument of public policy, and there is no obligation to the WTO to discontinue the exercise of price control. That is the spirit of the Doha agreement and well as Article 8 and 31(b) among others of WTO/TRIPS.
The evolution and dilution of price control in India:
1960s: DRUG PRICES IN INDIA AMONG THE HIGHEST IN THE WORLD.
1970s :THE GOVERNMENT OF INDIA brings in process patents and implements price control over essential drugs. New (under patent ) drugs become cheaper, essential drugs become more affordable.
1986 : NO. OF DRUGS UNDER PRICE CONTROL REDUCED TO 147.
1994: NO. OF DRUGS UNDER PRICE CONTROL FURTHER REDUCED TO 72.
POST 1995: PRICES OF DRUGS PUT OUTSIDE PRICE CONTROL INCREASE. No interventions on part of the government.
2002: PHARMACEUTICAL POLICY 2002 ANNOUNCED WITH THE STATED INTENTION OF LESSENING THE SPAN OF PRICE CONTROL. NO. OF DRUGS UNDER PRICE CONTROL TO BE approximately LESS THAN 30.
IN 2005 THE GOVERNMENT OF INDIA: brings in product patents and (if the policy of 2002 were to be implemented), virtually does away with price control. New patented drugs will become more expensive because of the patents regime, while off-patent but essential drugs will become costlier, because of their removal from the price-controlled list.
Global experience has shown that the introduction of a TRIPS-consistent patent regime for drugs in a developing country results in an across-the-board increase in the cost of drugs and medical services. – EXCERPT FROM THE NATIONAL HEALTH POLICY 2002.
The fear that prices of medicines will spiral is unfounded. In the first place we must realize the fact that 97% of all drugs manufactured in India are off-patent, and so will remain unaffected. These cover all the life-saving drugs, as well as medicines of daily use for common aliments. In the patented drugs also, in most cases there are always alternatives available. In fact a feature of patent protection is that it spurs research, so that constantly alternatives keep appearing in the market – and often the alternatives are better ones. Thus price control is inherently built in. From PIB release of Shri Kamal Nath’s statement on Patents Ordinance, Dec 27,2004
CLARIFICATION REGARDING THE STATEMENT OF THE MINISTER OF COMMERCE:
This assurance of a lack of price rise based on figure of 97% of drugs being off patent is misleading, and is an argument which can lead to erroneous conclusions:
This figure is an arithmetic figure and does not either mean 97% of sales are of drugs which are off patent, and neither means that for the treatment of a particular condition that 97% of the drugs are off-patent. A new drug may be the only effective treatment in a particular condition This has been illustrated in the recent case involving a new drug imanitib besylate (gleevec) for the effective treatment of chronic myeloid leukemia,where the patented drug costs Rs. 120,000 per month of therapy, while the generic substitute which costs more than 10 fold lesser had to stop production because of the exclusive marketing rights awarded to the patent holder.
The statement is liable to be misinterpreted as if 97% of Indian drugs are low cost, as the statement seems to suggest that the price of a drug in India depends on whether it is patented or off-patent. The truth is that drugs are over priced and the drug price and its variation depends only on whether the drug is under price control or not. As stated earlier, only a small fraction of the drugs in the market are under price control.
The sales figures in India repeatedly show that the sales of new drugs, whether analgesics, antibiotics, or cardiovascular drugs,( whether patented or off-patent )soon outperforms the sales of older drugs (of which most of them are off-patent). This is because of the aggressive promotion of the drug companies, in which the cost of the drug is hardly a consideration. In fact the costlier the drug the more aggressive is its promotion.
The government has not notified any mechanism for control of prices of patented drugs, and how it shall safeguard access to newer drugs for India’s public health problems.
It is beyond our comprehension how price control is inherently built into the patents regime, when the newer alternatives mentioned by the minister shall themselves be under patent, and therefore again more expensive than the conventional drugs.
SECTION II: THE “WHAT” OF PRICE REGULATION:
THE NEED FOR A LIST OF DRUGS FOR PRICE CONTROL BALANCING PEOPLE’S NEEDS AND PRIORITIES AND REASONABLE PROFITABILITY OF THE PHARMA SECTOR ,
RATHER THAN ONE BASED ON ECONOMIC CRITERIA AND ORIENTED ONLY TOWARDS THE PHARMA SECTOR.
The policy documents of 1994 and 2002 do not address the question of price control from a people’s or a public health perspective but only from a industry perspective, and base their selection of drugs on turnover based criteria without regard to the nature and use of the drug.
The turnover and market share based criteria of selection followed by the DPCO 1995 produced a highly anomalous list from the point of public health. Most of the public health problems were either under-represented or not represented, only a fraction of the essential drugs came under the list, and many non-essential, outdated, and even hazardous drugs got included.
MAJOR ANOMALIES OF THE DPCO LIST OF 1995:
I . The drugs which should have been included were not included:
In all there were only 42 drugs in the DPCO which were part of the National List of Essential Medicines in 1996. ( a mere 13% of the essential medicines were represented in the DPCO List).
A. There was complete non representation of drugs for many major public health problems:
Iron deficiency Anemia,
Acute diarrhea: ORS
All vaccines and Sera for infectious diseases, snake bite.
HIV and other viral infections,
Coronary artery disease,
B.There was gross underrepresentation of drugs for major public health problems:
II. The drugs which should not have been included were included:
A. There was Inclusion of out-dated and less commonly drugs:
B. There was Inclusion of hazardous drugs:
C. There was inclusion of non-essential drugs: like Vitamin E.
The first objective of the drug policy 1986 was:
“Ensuring abundant availability at reasonable prices of essential and life saving and prophylactic medicines of good quality”
Those medicines which are of proven efficacy, safety, which are most cost-effective and can address the majority of the priority health care needs of a country are called “ Essential Medicines.” The National List of Essential Medicines consists of 27 therapeutic categories and contained 354 drugs in its latest revision in 2003.
It is the list of therapeutic categories and the drugs mentioned in the National List of Essential Medicines which should be under price control.
The drug policy documents in 1994 excluded vaccines and sera and all drugs produced by recombinant DNA technology from price control. This needs to be reviewed urgently because there is a flood of highly expensive vaccines in the market, as well as highly expensive recombinant DNA technology based products
. Recombinant DNA technology is now more than 2 decades old and the costs involved have come down.
THE PHARMACEUTICAL POLICY 2002: Perpetuation of anomalies.
The pharmaceutical policy 2002 shows a complete discordance from the public health challenges mentioned in the National Health Policy 2002. In its formulation it shows a single minded focus on the pharmaceutical industry rather than display any intention to balance this focus with the needs of public health.
From the Pharmaceutical Policy 2002 document:
A reorientation of the objectives of the current policy has also become necessary on account of these issues:-
a.The essentiality of improving incentives for research and development in the Indian pharmaceutical industry, to enable the industry to achieve sustainable growth particularly in view of anticipated changes in the Patent Law; and
b.The need for reducing further the rigours of price control particularly in view of the ongoing process of liberalization.
It is against this backdrop, that Pharmaceutical Policy-2002 is being enunciated”
The pharmaceutical policy perpetuates the anomalous market share based criteria adopted in the DPCO 1995, and would have produced if implemented an even shorter list of essential medicines which would have been put under price control.
The table below lists some of the highly expensive biotechnology products:
Price per vial
In unstable angina
Rs. 19740 per 5 ml vial containing 2 mg per ml.
0.25 mg/kg bolus followed by 0.125microgram/kg/body.wt/min for 12 hours
Rs. 39480 for a 60 kg man
Treatment of anemia of chronic renal failure
Rs. 425 for 1000 i.u.
Initially 50 units/kg 3 times per week
Maintenance 75-300 units/kg per week
Rs. 10,200 for 8 weeks for a 60 kg man
Rs. 1912.5 to 11475 per week for a 60 kg man thereafter long term
Highly active Rheumatoid arthritis , juvenile chronic arthritis,severe seronegative spondyloarhthropathy
Rs. 9065.59 for a vial of 25 mg
25 mg twice weekly
Rs. 18131.18 per week of therapy which has to be taken long term.
In Hairy cell leukemia, Non-Hodgkin’s Lymphoma, Chronic myeloid leukemia
Rs. 1361 for a vial of 3 million units
3 million units daily for durations varying from 8-24 weeks then followed by maintenance therapy of 3 million units 3 times per week which can vary from 6-18 months.
Initial therapy costs of Rs. 43552- Rs 130,656 then maintenance therapy costs of Rs. 106158- Rs.318474
Human diploid cell rabies vaccine
Post exposure prophylaxis against Rabies
Rs. 293 for 1ml vial of 2.5 i.u./ml
5 doses of 1ml each on days 0,3,7,14,28
Rs. 1465 per course
Hepatitis B vaccine
Engerix / Glaxo Smith Kline, Shanvac-B/ Shanta Biotec
Genevac B/ Serum
Prophylaxis against Hepatitis B
Rs. 323 for 1 ml ( Engerix),
Rs. 190 for 1ml (Shanvac)
Rs. 100 for 1ml (Genevac)
3 doses of 1 ml each at 0,1,6 months
Rs. 969 for Engerix B
Rs. 570 for Shanvac B.
Rs. 300 for Genevac B
Human Actrapid/ Knoll
Insulin dependent diabetes mellitus, Non-insulin dependent diabetes mellitus for control
40i.u per ml, 10 ml vial Rs. 145
Average consumption could be 1.5 -2 vials per month (~ Rs. 200-300 per month), to be used in conjunction with a longer acting insulin*
SECTION III: THE “HOW”OF PRICE CONTROL:
Formulate policy which is pro-public health and pro-equity.
Address the priorities of public health,
Address availability and affordability of essential drugs and incorporate safeguards on the likely fallout of TRIPS on drug prices and availability
Make new drug approval contingent to demonstration of cost and therapeutic advantage like in Australia, UK.
Create a single regulatory authority to look into all drug related issues:
SUGGESTIONS FOR THE LIST OF DRUGS TO BE PUT UNDER PRICE CONTROL: ( excerpts from the submission to the Sandhu committee)
1. Should be based on disease conditions prevailing and emerging: Along with communicable diseases should also address non-communicable diseases.
2. Should bring vaccines and sera under price control.
3. The National List of Essential Medicines should be the reference list.
4. There are two options that the govt.can use.
Option I: 17 Key therapeutic categories under price control:
Core List of drugs for price control
Supplementary List for rigorous monitoring of prices.
5. Should cover all salts, isomers,dosage forms, formulations of the drugs, and all fixed dose combinations of the drugs.
6. Should cover all drugs under patent, which are introduced in the Indian market.
7. MAPE percentage: Drugs under price control to have a MAPE of 100% over basic cost of manufacture. Incentives to promote manufacture of essential drugs at bulk stage.
8. Drugs to be monitored for unfair pricing, trading practices, and changing patterns of production.
9. Price movements in a year:
a,more than 10% change without any evidence of increase in bulk prices.
b. No changes despite significant change in bulk prices.
c. Price variation between brands: > 33% difference between brands.
10. Market share and sales: if the market share of a company is more than 10% or the drug figures in the top 300 drugs, or the 10 top brands in its therapeutic group.
11. Periodic revision: every 2 years.
12.Fiscal incentives for production of essential drugs
ORG reports, excise returns, consumer organizations, Tender rates of quality conscious pooled procurements like TNMSC, voluntary organizations
India’s public health crisis
Health Indicators :
Infant mortality rate: 69/1000 live births (compare with Thailand: 24/1000)
Under Five mortality rate: 96/1000 : Thailand 29/1000
Maternal mortality rate: 498/100000 : Sri lanka: 60/100000
Grade III and IV undernutrition: 37%
Anemia: 74% of children 6-35 months of age,49-56% of women (NFHS data)
Burden of Diseases:
Tuberculosis: 1/3 of world’s cases. 15 million cases with 2.2 added every year. 450,000 deaths per year.
HIV/AIDS: 2nd highest in the world with more than 3.5 million cases.
Acute Respiratory disease: 950,000 deaths per year.
Acute diarrhea: 19 crore illness episodes per year in age below 5 years.
Leprosy: 2/3 of the world’s cases.
Malaria : 2-3 million per year
Hypertension: 20-40% in urban areas,12-17% in rural areas.
Diabetes mellitus: largest number in the world. (estimates from 19.7 million to 32.7 million)
Coronary artery disease: ~ 10% in adults > 30 years in urban areas.
Chronic respiratory diseases: 65 million cases.
Cancer: 7 lac per year.
(ref: Burden of non-communicable diseases in South Asia. British Medical Journal, April 2004.)
Between 1975 and 1997, out of 1,223 new chemical entities, only 13 (1 per cent) were for the treatment of tropical diseases
In India, in view of a large segment of the population being poor, the reach of the health coverage being inadequate, non-availability of appropriate medical insurance coverage, price inelastic demand, market imperfections and inadequate consumer awareness, the Committee considers it necessary to continue formal regulation of the prices of pharmaceutical products and medicines for some more time till public expenditure on health care for those who cannot afford is increased and an alternative system is developed for others.” (DPCRC Report, )
Price regulation is an absolute imperative in light of the reality of the drug market, the crisis of public health and of the public health system in India,
Of the reality of drug prices in the decontrolled category.
of the realities of our public health problems including India’s healthcare system,
the realities of the economic predicament of our people
and, and the new patents regime
Of the past experience with price deregulation, and of the worldwide intervention in drug prices.