Drug pricing

Price overdose

Print edition : April 14, 2017

Drugs being produced at a unit on the outskirts of Mumbai. A file picture. Photo: Rafiq Maqbool/AP

The measles-rubella vaccine being administered at a primary health centre in Bengaluru on February 7. Photo: K. MURALI KUMAR

Contrary to widespread expectations, the National Health Policy has failed to provide a clear road map for regulation of the prices of drugs and medical devices.

IN FEBRUARY, when the department of pharmaceuticals announced that the National Pharmaceutical Pricing Authority (NPPA) had put a cap on stent prices, drastically slashing the inflated rates of the two main categories of stents, there was some hope and anticipation that the Union government would take the cue and crack down on all overpriced formulations and medical devices. The ceiling on stent prices had, after all, come in response to a Delhi High Court order.

According to the latest estimates of the National Health Accounts (2013-14), 35.7 per cent of the total health expenditure was on the purchase of medicine. As per the data from the National Sample Survey Office (NSSO), medicines accounted for 71 per cent of the out-of-pocket expenditure burden of the people. High out-of-pocket expenditure is a barrier to accessing good health care, according to the Department of Health and Family Welfare’s 99th Report on Demands for Grants (2017-18). It recommended that the budget allocation for 2017-18 be increased.

Exponential growth

The National Health Policy (NHP) 2017 does contain a few sections on drug pricing and regulation. The section on drug regulation in the policy clearly states that the prices and the availability of drugs are regulated by the Department of Pharmaceuticals. The situational analyses report mentions the government’s heavy investment in the past 25 years in building a positive economic climate for the health care industry, which it says is valued at $40 billion and is expected to grow to $280 billion by 2020. The measures taken by successive governments over the past 25 years to incentivise the private health care industry included lower direct taxes, higher depreciation in medical equipment, income tax exemptions for five years for rural hospitals and customs duty exemptions for life-saving equipment. Other forms of assistance included preferential and subsidised allocation of land, subsidised professional education in government institutions and allowing 100 per cent foreign direct investment (FDI) in the sector. The sector attracted $2 billion of FDI in 2012-13. The Indian private health care industry is the second biggest destination for global investments in health.

The high out-of-pocket expenditure on health in India is a direct consequence of the neoliberal policies. The Union government’s plan, as articulated in the NHP, to “shape the growth of this sector so as to ensure that it is aligned to national health policy goals with regard to equity, access and financial protection” seems unconvincing in the absence of any road map. If any road map exists, it is in the areas of incentivising the private health care sector even more. There are several road maps devoted to involving the private sector in a big way, which is a distinct departure from the draft National Health Policy of 2015. For instance, in line with the government’s “Make in India” objective, the policy suggests that the private domestic manufacturing firms/industry could be engaged to provide customised indigenous medical devices to the health sector and create forward and backward linkages for medical device production. The policy also talks of assured purchase by government health facilities from domestic manufacturers, subject to their meeting quality standards.

According to S. Srinivasan, founder of LOCOST, a Vadodara-based non-profit drug and medicine manufacturing unit, the policy could have laid out a road map for getting rid of irrational fixed drug combinations (FDCs) and for including only those drugs with assured safety and efficacy. “The road map must include thinking creatively of overcoming legal hurdles as the issue is currently in the courts, and not just monitoring of irrational FDCs,” he told Frontline.

On the issue of the assurance of providing free medicines and diagnostic services, Srinivasan said that this ought to be matched with an increased outlay. “The policy has reinforced the idea of free medicines and diagnostics for all. This is a very good development and is achievable. The Central government should provide funding to the tune of Rs.5,000-6,000 crore for achieving this instead of leaving it to the State governments. The replication of systems developed in the Tamil Nadu Medical Services Corporation Limited (TNMSC) and the Rajasthan Medical Services Corporation Limited (RMSC) in terms of inventory management, storage, logistics, and quality control, must be made compulsory,” he said.

The TNMSC and the RMSC are State undertakings whose primary objective is to provide free medicines and diagnostics to government medical institutions throughout the respective State governments.

Srinivasan said it was a tragedy that low-priced iron folic acid tablets/syrups and oral rehydration salts (ORS) were not available in the retail pharmacy shops of India. “This should be one of the goals of the policy. If you go to Bangladesh, even in remote pharmacy shops iron folic acid syrups and tablets are available,” he added.

Srinivasan welcomed the initiative to expand the coverage of the universal immunisation programme (UIP) but cautioned against what he called the “mindless addition” of vaccines to the UIP as a quick fix for all health problems. The policy recommends the commissioning of more research and development for manufacturing new vaccines including those preventing locally prevalent diseases. “It has been difficult for medical professionals in this country to access rotavirus vaccine trial data, so much so that a case is pending in the Supreme Court asking for transparency in clinical trial data of the rotavirus vaccine on the basis of which the vaccine was introduced in the public health system,” he said, pointing to legitimate concerns involved in a burgeoning vaccine industry. In fact, the policy recommends the role of the private sector in immunisation programmes and advocates their continued collaboration.

The policy recommends the “education of the public on branded and non-branded drugs”, but fails to express a statement of concern on the huge price margins of even generic drugs. It talks about promoting the development of the pharmaceutical industry but refrains from specifying whether it means private or public. The recent decision to close the pharmaceutical units in the public sector—Indian Drugs & Pharmaceuticals Ltd (IDPL) and Rajasthan Drugs and Pharmaceuticals Ltd (RDPL)—and pursue the “strategic sale” of Hindustan Antibiotics Ltd (HAL) and Bengal Chemicals and Pharmaceuticals Ltd (BCPL) have raised legitimate concerns about the government’s intention to boost pharmaceuticals in the public sector (“Perilous prescription”, Frontline, January 27, 2017). The decision to close down the profit-making RPDL, which manufactures life-saving medicines, was taken even as it had undertaken measures to make its operations compliant with the World Health Organisation’s system of good manufacturing practices (GMP).

On drug pricing, the policy is ambivalent. It says: “The regulatory environment around pricing requires a balance between the patients concern for affordability and industry’s concern for adequate returns on investment for growth and sustainability”. It talks about a “timely revision of the National List of Essential Medicines [NLEM] along with appropriate price control mechanisms”, which shall remain a “key strategy for decreasing costs of care for all those patients seeking care in the private sector”.

G.S. Grewal, former president of the Punjab Medical Council who exposed the prevalence of “ghost faculty” in private medical colleges, said the health policy should address all aspects related to health care, drug pricing and the medical profession. He said all drugs should be part of the NLEM. “The point is: when the manufacturer through the distributor and retailer can give an item at a hospital rate, why is there a huge gap between the hospital price and the maximum retail price [MRP]? There should be no difference in hospital prices and the MRP. Drugs and investigations form the bulk of health care costs. Hospital and bed charges constitute around 30 per cent of the bills. It is imperative that all medicines are brought under the NLEM. There should be absolute transparency in drug pricing. Unnecessary diagnostic tests are prescribed. A CT scan is recommended where an X-ray would suffice. The drug policy should be a subject of the Health and Family Welfare Ministry. Why it is a part of the Department of Pharmaceuticals is a mystery to me,” he told Frontline.

Quotations of eyes lenses, knees and hip implants, anti-cancer drugs and other generic drugs offered by manufacturers show huge differences between the hospital prices offered and the MRP. In the case of one anti-cancer drug produced by a leading industrial group offering a range of oncology products, the MRP is more than twice the hospital price. The organisation, belonging to an industrial house with interests in oil and telecommunications, claims to be a “new millennium research-led initiative addressing opportunities in the domain of medical, specifically in the areas of stem cells, tissue engineering, therapeutic proteins, drug discovery, oncology formulations, plasma proteins and advanced wound management products”. The Mumbai-based research-led initiative claims that it had “received endorsements from various health/quality authorities who had approved our research and manufacturing facility” including EU-GMP (good manufacturing practice for the European Union) approval for its API (active pharmaceutical manufacturing) facility.

Srinivasan said: “All drugs mentioned in the policy, for a variety of communicable and non-communicable diseases, must be under price control as also all life-saving drugs that are not in the NLEM 2015. The commonly pointed infirmities in the Drug Price Control Order 2013, and subject of discourse in a couple of cases in the Supreme Court, must be eliminated. For instance, all presentations and strengths of NLEM and life-saving drugs, therapeutic and chemical equivalents of NLEM drugs and all FDCs of NLEM must be under price control. The proactive use of Para 19 of the DPCO to put more drugs under price control must be encouraged. The courts have cleared the use of Para 19 after the usual resistance by pharmaceutical lobbies. The policy promises that a host of medical devices will come under price control, as has been the case with cardiac stents. This is welcome even as there is a need for clarity in the methodology to be adopted. The methodology for clinical trials of medical devices also could do with ample discussion.”

Patent problem

While the policy is committed to supporting programmes for the prevention of blindness, deafness, oral health, endemic diseases such as fluorosis, sickle cell anaemia and thalassemia, many drugs used in treating such ailments, for instance thalassemia, are patented, he pointed out.

“Several critical drugs for cancer and HIV and many biologicals are under patent. They are costly, unaffordable, not manufactured in the country or not in sufficient supply by the originator. In all such cases these drugs need to be issued a compulsory licence (CL) for encouraging local production and accessibility and affordability,” he added.

On the prices of medical devices, Srinivasan said that most hearing aids and spectacles are prohibitively expensive, as are intraocular lens used in cataract surgery. The policy needs to address these issues as well, apart from the pricing of patented drugs that needs resolution on a priority basis. Voluntary licence of patented drugs prohibits the application of a CL while keeping the prices of drugs prohibitively high, he said.

In 2014, the average amount of money spent per childbirth in private hospitals was nine times higher than what is spent in public hospitals for both rural and urban areas across all quintiles, according to the situational analyses report. There is an urgent need to regulate the private health care sector and industry. The policy does not have a clear road map for the regulatory framework of prices of drugs, medical devices and all related health care issues. The centrality of the role of the government needs to be underscored for stemming “catastrophic health expenditure” even if the health policy does not.