Press Release: 27 July 2006
MOVE TO BRING ESSENTIAL MEDICINES UNDER PRICE CONTROL HAILED
– All India Drug Action Network (AIDAN) calls for a comprehensive, balanced and rational drug policy
The All India Drug Action Network (AIDAN), which is a national network of a number of organisations who have been working on pharmaceutical policy issues since the early eighties, has hailed the decision of the Union Chemicals and Fertilisers Ministry to bring all the medicines in the National List of Essential Medicines under price control.
RATIONALE FOR PRICE CONTROL
We point out that there is a strong rationale for price control of the essential drugs –
· Medicines are the only commodity in which the payer (the patient) does not decide what to buy and at what cost. The doctor prescribes and the patient pays.
· Unlike other commodities, the purchaser of medicines is extremely vulnerable as they are seeking immediate relief from suffering. Hence even in so-called market economies (except USA) medicine prices are regulated.
· In India, unlike in the developed countries, expenditure on medicines constitutes a large proportion (>50%) of total medical expenditure. 90% of this expenditure is out-of-pocket expenditure by the people, since the government spends a very small proportion on medicine procurement
· Unlike in the developed countries, most Indian patients face the drug industry as hapless individuals because most are not covered by insurance or social security mechanisms.
· Majority of Indians are below or near poverty-line, yet they are forced to spend on unnecessarily costly medicines. This unnecessary expenditure on medicines is a very important cause for indebtedness after hospitalization.
· The track record of the drug industry in India as regards to pricing is extremely reprehensible. The following example would illustrate this point –
The same drug in the same strength manufactured by two trusted companies can vary from 2 times to 20 times in their prices, which has no credible explanation other than overpricing. Levofloxacin used in infections is sold by CIPLA at Rs. 7 per tablet, while Aventis sells it at Rs. 95 per tablet. What is worse is that costlier drugs most often sell more because of more aggressive promotion.
· Lastly, the prices of drugs outside price control are marked by anarchy and price deregulation in the past has increased the prices of drugs. Committees constituted by the Government have clearly documented abnormal rises in prices of drugs after they were taken off the list of price-controlled drugs. For instance –
After price deregulation in 1995, the price of some TB drugs rose by 250%. Yet no action has been taken.
Successive governments had brought down the number of drugs under price control from 347 in 1977 to a projected 25 or so in 2002, due to industry pressure. And it took the Supreme Court of India to take note of the situation and rule that, this would make them out of the reach of ordinary people.
PROFITABILITY vs. PROFITEERING
We believe that ‘price regulation is fully compatible with profitability’, as the real cost of manufacturing a drug is often a very small fraction of the retail price. For instance, Cadila Pharmaceuticals bid for supply of a medicine for worms, Albendazole 400 mg tablets, at a mere 22 paise, while its ZYBEND brand sells for Rs. 11.90 in the market. A drug for hypertension like Atenolol is procured at 12 paise by Delhi State while in the market, the same drug is sold for as much as Rs. 2.50, i.e. over 20 times the cost.
Currently drug prices are unnecessarily high also because the pharma trade too is indulging in profiteering. The trade margins in pharmaceuticals can be astronomical. A study done by VOICE, a consumer education organisation, and supported by the National Pharmaceutical Pricing Authority had shown that the difference in price to the retailer and that to the patient could well be over 400%. For instance, Nimesulide was available at Rs.24 for 10 tablets, while the price to the retailer was just Rs.6 for the same. The trade margin should also be regulated.
Pharmaceutical sector needed to explain to the public how it could afford to sell drugs at even 10% of their MRP to wholesalers and not suffer from loss of profitability and yet complain bitterly whenever the MRP was sought to be lowered by the government? The proposed pricing policy talks of a 150-200% margin on the post-manufacturing expenses for drugs under price control. Surely such a profit margin was adequate for profitability of any manufacturing enterprise,
RESEARCH vs. MARKETING
We disagree with the claims of the drug industry that research would be hit due to price control. In India, pharma companies spend 2% of sales on research and ten times on sales promotion! Pharma industry should divert its expenses from unnecessary sales promotion to research. It has been a part of the pharma policy that any drug developed by indigenous R&D shall be exempt from price control for a period of up to 15 years. But, here have been no claimants!
MORE ACTION REQUIRED
Past experience suggests that in the light of price regulation, the companies switch to production and promotion of alternative drugs, which are often irrational or higher priced alternatives which are outside the list. The government should pre-empt this by bringing all alternative drugs also under price control, if not, at the very least, under a scheme of price monitoring. And with over 649 million people in India lacking regular access to essential medicines (World Medicines Situation Report, 2004; WHO), there is an urgent need to go beyond just price control and to institute a comprehensive, balanced and rational drug policy in the country.