Tag Archives: National Pharmaceuticals Pricing Policy

Pharma Price Control Policy: Unrealistic and Unfair

Economic & Political Weekly (EPW) August 23, 2014 Vol XlIX No 34

S Srinivasan, T Srikrishna, Malini Aisola

Despite the government’s and pharmaceutical lobby’s claims and counterclaims, the Drugs (Prices Control) Order, 2013, which covers only 18% of the total domestic market of Rs 71,246 crore, has had very little positive effect as a price control policy. This article points out that the Order leaves out much that should have been included, while including much that should have been left out. Its provisions have made the playing field more uneven, with multiple ceiling prices, which is very unfair to consumers already dealing with an irrationally priced market

LP_Commentary_23August2014.inddLP_Commentary_23August2014.indd  LP_Commentary_23August2014.indd

Civil society letter on NPPA’s action on price control

Shri Ananth Kumar
Hon’ble Minister of Chemicals and Fertilizers
Udyog Bhavan
New Delhi 11001
 
20 August 2014
 
Dear Ananthji,

 

The National Pharmaceuticals Pricing Authority (NPPA), on July 10, 2014, released a new set of price notifications for 50 cardiovascular and diabetes medicines under paragraph 19 of the Drug Prices Control Order (DPCO), 2013. The notifications for the 108 formulations (two were subsequently withdrawn) of these selected medicines are in addition to the notifications for essential medicines declared under the DPCO 2013. We note that the earlier notifications for essential medicines excluded several dosage forms and strengths because they did not feature in the National List of Essential Medicines (NLEM), 2011. Thus the recent notifications were necessary to cover more of the strengths of medicines than that are listed on the NLEM. In addition, the notifications also covered medicines in the cardiovascular and diabetes therapeutic categories that are not included in the NLEM.

We the undersigned civil society organizations welcome the initiative of the NPPA to cap the prices of formulations involving essential and lifesaving medicines that fall outside the NLEM as a first step towards the institution of a robust, pro-public health policy of drug price control. This is an action that truly interprets the spirit of the Drug Prices Control Order, and its underlying legislation the Essential Commodities Act, 1955. In the past, despite its attention being drawn to the profiteering in medicines not listed in the DPCO, the government had looked the other way.

We are surprised at the misinformation being spread by the Pharmaceutical Industry in this regard, and its efforts to prevent relief to the consumer by filing petitions in the high courts in Mumbai and Delhi. Industry has challenged the legality of fixing the prices of the 50 medicines under Paragraph 19 of the DPCO 2013 when in fact the Government has in successive drug price control orders always retained the power to intervene in prices in the public interest in the light of evidence of overpricing.

Limiting all price regulation only to a list of 348 medicines and specified dosages and strengths in the DPCO 2013 goes against the policy objective of making medicines affordable to the public. The National List of Essential Medicines, a list of 348 rational and cost-effective medicines, is not the basis for production, promotion and prescription in India. In reality the most frequently prescribed and consumed medicines are not listed in the NLEM.

Industry has claimed that this will cause an annual loss of revenues of over Rs.600 crores. NPPA’s action on the market will however be marginal, and nowhere near the doomsday predictions of the industry. It will affect only those brands that were selling at very high prices. We have analysed the impact of the notifications and found that the retail market of Rs.77,526 crores (Moving Annual Total, June 2014) would experience a loss of  Rs. 350 crores (AIOCD-AWACS, PharmaTrac Data, 2014).  This represents a loss of approximately only 2% (Rs. 112 crore) in the anti-diabetic therapy segment and 2.5% (Rs. 238 crore) in the cardiac therapy segment. This in a way establishes the excess profits of the industry in those particular formulations by overcharging the patients.

Also the market based price fixation being followed by the NPPA, a departure from the long used cost-based price control mechanism, is irrational and means that the ceiling prices are still very high. Many medicines are sold by reputed companies much below the NPPA ceiling price. The ceiling price of atorvastatin 40mg is Rs. 22.02 per tablet while Biochem Pharmaceutical is selling the same at a much lower price of Rs. 14.94 per tablet. The ceiling price of glimepiride 3mg is Rs. 10 per tablet, while Ipca Laboratories is able to sell it for Rs. 6.90 per tablet. As per our calculations only a little over one fourth of packs selling on the market will need to revise their prices downwards because they were originally priced higher than the notified price. This is evidence that there is a scope for significant reduction in NPPA ceiling prices, without affecting the reasonable profits of the industry.

We also note that the notifications have not included fixed dose combinations in the cardiovascular and diabetes therapeutic categories whereas the sales of many combinations exceed those of the single molecule medicines.

We also raise the argument that fixing of ceiling prices of all the other dosage forms of all medicines under NLEM cannot be neglected. Here again the same phenomenon of overcharging remains. NPPA should come out with similar action to cover all dosage forms and fixed dose combinations containing one or more medicines under NELM, and as well as bring other essential and life saving medicines under price control immediately.

Although this notification of NPPA will give some relief to patients in the chronic disease sector in the present context, it should be expanded and rationalized. We request the Government and NPPA to strongly defend its stand and also consider the actions suggested by us to promote public health.

Signed,

All India Drug Action Network (AIDAN)
Jan Swasthya Abhiyan
Low Cost Standard Therapeutics (LOCOST)
Medico Friends Circle
Third World Network- India
All India Peoples Science Network (AIPSN)
National Working Group on Patent Laws

 
Copy to:
Hon’ble Shri Narendra Modi, Prime Minister of India
Hon’ble Shri Dr. Harsh Vardhan, Minister of Health and Family Welfare
Mr. Nripendra Misra, Principal Secretary, Prime Minister’s Office
Mr. Lov Verma, Secretary, Department of Health & Family Welfare, Ministry of Health & Family Welfare
Ms. Aradhana Johri, Secretary, Department of Pharmaceuticals, Ministry of Chemicals & Fertilizers
Mr. Injeti Srinivas, Chairman, National Pharmaceutical Pricing Authority, Department of Pharmaceuticals, Ministry of Chemicals & Fertilizers

 
 
 
For further information, contact:
 

LOCOST
1st Floor, Premanand Sahitya Bhavan
Dandia Bazaar
Vadodara, Gujarat – 390001
Ph: 9998771064
Email: chinusrinivasan.x@gmail.com

Jan Swasthya Abhiyan
National Secretariat
c/o Delhi Science Forum
D-158, Lower Ground Floor
Saket, New Delhi 110017
Ph: (011) 26524323, 26862716
Email: jsasect.delhi@gmail.com

 
 

Draft National Pharmaceuticals Pricing Policy (NPPP-2011) & response

The Draft National Pharmaceuticals Pricing Policy (NPPP-2011) has been released. View it here.

A brief comment on the NPPP-2011 was written by AIDAN member Srinivasan S. and published in The Hindu Business Line, November 8, 2011

Pharma industry gets away lightly

The draft National Pharmaceuticals Pricing Policy (NPPP-2011) declares that all 348 essential medicines (as per the new National List of Essential Medicines, NLEM 2011) will be under price regulation. The shift in focus from market share to whether medicines are essential is to be welcomed. However, the policy still leaves scope for non-essential and irrational medicines to be made. It also has made calculating ceiling prices of the many medicines not in NLEM a tedious, if not impossible, exercise.

In addition to the NLEM 2011, top selling 300 medicines of the IMS could have been covered. The draft policy delinks the ceiling prices of formulations from the price of bulk medicines. Indeed, the arguments given in the draft policy for removing price control of bulk medicines do not make sense. The government should have kept the option of price control on bulk medicines in the event of cartelisation or abnormal increases in price of bulk medicines.

The latter may result in the scarcity of a particular essential medicine formulation unless it is already overpriced relative to the cost of the bulk medicine used. Worse, this may result in the bulk medicine or the formulation not being made within the country.

Secondly, using the WPI (Wholesale Price Index) to revise prices is not a good idea. It adds an inflationary element to the ceiling price automatically every year. The WPI (100 for base year 2004-05) for 2010-11 is 143.3. Most medicine prices have not really increased 43 per cent during the period. It would have made sense to have the ceiling price of a medicine formulation tied directly to the related bulk medicine price increase during the year.

RELIANCE ON MARKET

The arguments for totally relying on market-based pricing (MBP) of formulations apparently do not recognise the fact that there exists a wide range of prices in the market of the same formulation and that prescribers, and therefore patients, tend to place more value on the costlier brands of the same formulation. In medicines, unlike say soaps or cars, the brand leader is also the price leader. The proposals of market-based pricing, therefore, legitimise higher prices. The key para in the draft policy is para 4.7: “The Ceiling Price would be fixed on the basis of Weighted Average Price (WAP) of the top three brands by value (MAT value) of a single ingredient formulation medicine from the NLEM on per standard dosage basis.”

The WAP idea means that it will end up legitimising high prices, especially if the top three brands are overpriced: top selling brands — with a few exceptions — would be the costliest.

That is the norm of the medicines sector, thanks to asymmetry between consumer and prescriber/manufacturer. It means that that regardless of overpricing and profiteering, if the market “accepts” it, the price is ok. Never mind if the patient may get poorer in the process. It also legitimises the mistaken notion that higher priced medicines are of better quality. In our case, for example, albendazole selling above Rs 12-13 per tablet (price of current market leaders) would seem fine.

A comparision of medicine prices

A comparision of medicine prices

Ceiling prices need to have a clear relationship with the cost of the raw material at least. The WAP formula has, in effect, no relation with the cost of raw material, let alone the cost of other inputs. The MRP to raw material ratio is about 3000-5000 per cent in quite a few essential medicines. Should a government legitimise such super profits? Most retail pharmacies do not keep cheaper versions because of lesser margins; eventually all lower-priced brands will move towards the higher ceiling price even as ‘premium’ prices, including that of overpriced imported medicines such as Novartis’ Glivec, will take a hit with the WAP formula.

MEDICINES OUTSIDE NLEM

The draft policy gives a formula to discourage non-standard dosages. The same thinking could have been applied to discourage irrational and unscientific medicines outside the NLEM. One can discourage irrational combinations, and attempts to circumvent the ceiling price, by taking the cue from the Pronab Sen Task force Report — from which many of the recommendations have been taken anyway — which says, “For formulations containing a combination of a medicine in the NLEM and any other medicine, the ceiling price applicable to the essential medicine would be made applicable.” Sales tax and excise duty could be higher for medicines outside NLEM 2011 and zero for NLEM medicines. The draft policy could also take another recommendation from the Pronab Sen Committee: debrand, that is remove brand names, to ensure true competition among generics.

The draft policy lists certain exemptions which, again, are inexplicable: all medicines costing less than Rs 3 per unit are to be exempt. This again legitimises overpricing of medicines which cost 10-20 paise, and begs them to be priced near Rs 3. An example is cetrizine, which costs less than 15 paise per tablet to make, but the brand leaders are available near Rs 3. Why should this be condoned? Should much-needed iron plus folic acid tablets, which cost less than 10 paise per tablet to produce, be given leeway to sell at or near Rs 3? Most retailers will give only a strip of 10, even when one needs a couple of tablets only.

THE ALTERNATIVE

So, what is a better pricing policy? That will be one that brings down the prices of overpriced medicines; that has some linkage to the actual cost of production, and therefore to the cost of the raw material; and does not legitimise overpricing of medicines. Nominally reducing the price of the top-selling brand is tokenism.

A good starting point would be to take as reference price the prices of well-run public procurement systems and take a multiple, say 4 to 6, of the reference price as the ceiling price. The present WAP procedure will make the ceiling price 20 to 70 times the public procurement price — which is a little rich.

The draft policy gives the impression of a policy cobbled to satisfy perfunctorily the Supreme Court Orders of March 2003 and October 2011, one that will leave major players mostly unaffected. A policy with some bark and a little bite.

(The author is associated with the All-India Drug Action Network and LOCOST, Vadodara. blfeedback@thehindu.co.in)

(This article was published on November 8, 2011)