Ineffective remedy

Print edition : June 09, 2017

A generic drug store at the Victoria Hospital in Bangalore, a file photograph. Prices of drugs have little to do with them being branded or generic. Photo: MANJUNATH KIRAN/AFP

At a Jan Aushadi centre in Vijayawada. The NITI Aayog has suggested a "review of the business model of the Jan Aushadi stores". Photo: V. Raju

The Prime Minister’s plans to enact a law to ensure that doctors prescribed only generic drugs will not have the desired impact without comprehensive action to make medicines affordable to all.

ON April 17, inaugurating a multispecialty hospital in Surat, Gujarat, Prime Minister Narendra Modi announced that his government would soon bring in a law to ensure that the medical fraternity prescribed only generic drugs and not branded ones. The underlying assumption behind this grandiose statement was that generics were cheaper than branded drugs and that the medical community was responsible for foisting exorbitant health costs on patients by prescribing branded drugs. What was missing in the speech, however, was the linkage between a pharma pricing policy and a rational drug policy—something that is viewed as fundamental to drug price regulation and to reducing the common man’s out-of-pocket expenditure on health. The majority of drugs, including several life-saving drugs, are in any case out of the drug price control mechanism.

On May 12, echoing the Prime Minister’s sentiments, Ananth Kumar, Union Minister for Chemicals and Fertilizers and Parliamentary Affairs, announced that health security for all would be achieved through the Pradhan Mantri Jan Aushadhi Pariyojana (PMJAP), which, he said would be “a silent revolution”. He told the media that it was mandatory as per the guidelines of the Medical Council of India (MCI) for registered practitioners to mention prominently the generic names of drugs along with brand names. He did not reply to specific queries regarding bringing all medicines under the National List of Essential Medicines (NLEM). He said there were 1,320 Jan Aushadhi centres in 426 districts where government-procured generic medicines were sold at prices 50-90 per cent lower than the prices of their branded equivalents.

Ironically, the supply and price fixation of medicines at these centres is the responsibility of the Bureau of Pharma PSUs of India (BPPI), located in the complex of the Indian Drugs and Pharmaceuticals Limited (IDPL), the largest pharma Central public sector undertaking (CPSU), which is slated for closure by the Central government. In fact, as reported by Frontline earlier (“Perilous prescription”, February 3, 2017), four more pharma CPSUs have been identified for closure. They include the profit-making Rajasthan Drugs & Pharmaceuticals Limited (RDPL).

Prices of drugs have had little to do with them being branded or generic. The cost-based pricing policy that was in prevalence from 1979 to 2005 ensured that all drugs were priced reasonably and included the cost of raw materials, conversion and marketing, and commissions and other margins. On the recommendations of the Hathi Committee, the government issued the Drug Prices Control Order (DPCO), 1979, under the Essential Commodities Act. This brought all drugs under price control and fixed the prices on the basis of the cost of production. Complementing this, public sector pharmaceutical units and the Indian Patent Act of 1970 enabled the pharmaceutical industry to produce the latest patented medicines using reverse technology.

Circumventing price control

This cost-based pricing mechanism was diluted in favour of a market-based pricing mechanism. First in 1987 and then in 1995, the number of drugs under price control came down while the markups went up. Each time a few medicines were brought under price control and the NLEM was expanded, a lot of publicity was generated. Yet, what went unnoticed was the manner in which pharmaceutical companies circumvented the impact of price control. An industry insider pointed out that as soon as some molecules were brought under price control, the company would stop production of the molecule and shift to its isomer (a molecule with the same molecular formula but with a different chemical structure) having the same property and the same brand name but which was excluded from the DPCO. For example, when the anti-allergic medicine cetirizine was brought under price control, the companies shifted to levocetirizine, an isomer, which was sold at a higher price. Likewise, when salbutamol was brought under price control, companies shifted to levosalbutamol. Moreover, the DPCO 2013 allowed the manufacturers of non-scheduled drugs to raise the prices of their brands or molecules by 10 per cent every year.

The Federation of Medical and Sales Representatives’ Associations of India (FMRAI) stronglycriticised the Prime Minister’s announcement, saying that it was anti-people and anti-poor. According to it, the decision would give a level playing field for patented drugs by breaking the backbone of existing brands. The difference between generic and branded drugs in the Indian context was actually a difference between patented and non-patented drugs, it said. Patented medicines faced competition from branded medicines in India; the latter helped keep the costs somewhat low. All medicines in India were generic but sold under different brand names. The difference was lingual.

J.S. Majumdar, former general secretary of the FMRAI and an office-bearer of the Centre of Indian Trade Unions (CITU), said: “One should ask the Prime Minister how medicine prices are going to stay affordable and cheap if the market is allowed to determine the prices of medicines and the DPCO allows a 10 per cent increase each year. Generics do not translate into cheap medicines. Leading pharma producers determine the prices today. The government is earning huge amounts by way of an 8 per cent excise duty on the maximum retail price, which is much higher than the manufacturing cost. There should be no tax on the consumer for an essential service. Will this mode of taxation get changed under the new tax regime?”

Under Indian laws, a pharmaceutical manufacturer was not permitted to advertise and publicly market the products. The Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954, proscribed the direct and indirect promotion of medicines. It provided exemptions in the case of medicines sent to registered medical practitioners (RMPs), hospitals, chemists and pharmacists. The Sales Promotion Employees (Conditions of Service) Act of 1976 legally authorised the promotion of pharmaceutical products by sales promotion employees to RMPs, chemists, hospitals and pharmacists.

Majumdar said there was no term called “branded generics”. This term was used mostly in the Indian context by pharmaceutical companies to describe medicines that were not patented but had an added value which had to be established by trials. A “brand” was not a patented medicine. Nowhere in the Drugs and Cosmetics Act of 1940 was the term “branded generics” used. If at all, it was the government which had to come out with a law that banned the production and sale of medicines as brands. At the May 12 press briefing, Ananth Kumar upheld the right of manufacturers to “brand” their medicines. He said that he “could not stop anyone from buying a patented, branded or generic medicine”.

Alok Ganguli, a former office-bearer of the FMRAI, felt that the emphasis on generics prescription was a diversionary tactic. An artificial distinction between “generics” and “branded” medicines was sought to be made by multinationals eying emerging markets like India especially after the expiry of the term of their patented products. Former Chemicals and Fertilizers Minister Srikant Jena, in a written reply to Parliament in 2011, had stated that there was no distinction between generic and branded drugs. In 2005, the Indian Patent Act was amended to be made compliant with World Trade Organisation (WTO) standards. The earlier law did not allow product patents. Yet an amendment was inserted in Section 3(d) of the Act at the behest of the Left parties. Section 3 (d) restricts the grant of patent to inventions involving new forms of a known substance unless it differs significantly in properties with regard to efficacy. This guaranteed some protection against the misuse of the amended Act.

Renewed concerns have been expressed on negotiations at the Regional Comprehensive Economic Partnership (RCEP), a free trade agreement among 16 Asian and Pacific countries. Gopal Dabade, coordinator with the All India Drug Action Network, told Frontline that access to “life-saving medicines” in most Asian developing countries was under direct threat because of intimidation from RCEP members. He said that one would wonder if it was “recolonisation”.

“There is an increased focus at RCEP negotiations on intellectual property (IP) enforcement. The draft RCEP text on ‘IP enforcement’ omits several procedural guarantees, safeguards and protections available under WTO trade rules and are a blank cheque for abuse, with numerous provisions that will prevent the flow of generic medicines from producer to patient. The changes sought are TRIPS [Trade-Related Aspects of Intellectual Property Rights] plus measures, data exclusivity, removal or dilution of Section 3(d) of the Indian Patent Act and others. All these changes will put several million lives in peril,” he said. India is aptly known as the “pharmacy of developing countries” as it produces medicines at affordable prices for several developing countries. All this would be put to an end through the RCEP negotiations, Dabade told Frontline. The issue has not been discussed in Parliament to date.


The ostensible non-commercial intent in the Prime Minister’s speech was in stark contrast to the section on health in the draft Three Year Action Agenda of the NITI Aayog (2017-18 to 2019-20). In the subsection on access to medicines, the NITI Aayog has recommended that the Drug Price Control Order be delinked from the NLEM. This, apparently, is because a balanced approach towards regulation is required to achieve the twin objectives of access to effective medicines and building a strong pharmaceutical industry. The document also stated that there was a trade-off between lower prices on the one hand and quality medicines and discovery of breakthrough drugs on the other.

Interestingly, the Prime Minister in his speech also referred to the PMJAP which made available medicines at cheap rates. However, the NITI Aayog draft has suggested a “review of the business model of the Jan Aushadhi stores as their rollout had been slow” in ensuring access to essential medicines. It has also recommended an e-pharmacy policy by 2017; upgrading of Schedule ‘M’ of the Drugs and Cosmetics Rules, 1945, to good manufacturing practices (GMP) levels of the World Health Organisation to increase pharmaceutical exports; and modification of the rules for the prescription of generic drugs, a point that was reiterated by Ananth Kumar. More worryingly, it has recommended a re-engineering of the approval process for clinical trials and market authorisation on the grounds that the current process was lengthy and complex, taking around two years compared with three months in Singapore. “Clinical trials also offer a huge commercial opportunity,” it stated.

SJM attacks NITI Aayog

In a significant development, the Swadeshi Jagran Manch (SJM), an affiliate of the Rashtriya Swayamsewak Sangh, shot off an angry letter to the Prime Minister on April 29 that government departments were acting against the promises made by him with regard to affordable medicines for all. The target was the NITI Aayog and the Department of Pharmaceuticals (DOP). Authored by Ashwani Mahajan, co-convener of the SJM, the letter highlighted three concerns: the sale of essential medicines at exorbitant profits; the DOP’s collusion with pharma companies; and the NITI Aayog’s attempts to sabotage the drug price control regime.

The SJM said the formula of drug price fixation was not based on the principle of cost of production but was market-determined. The ceiling price of medicines is determined by calculating the simple average of the prices of brands that have a market share of 1 per cent or more.

In the letter, a copy of which is available with Frontline, it was pointed out that the prices of essential medicines were still far too high and that pharmaceutical companies were making 500-4,000 per cent profits even after price controls. The SJM’s points are not new; organisations such as the All India Drug Action Network, the FMRAI, and the Jan Swasthya Abhiyaan have repeatedly demanded the restoration of the 1995 version of the Drug Price Control Order instead of the one in 2013, which introduced the market-based formula for price fixation. The SJM accused pharmaceutical companies of influencing the DOP and causing the change in the price-fixation formula of the DPCO in 2013.

It commended the National Pharmaceutical Pricing Authority (NPPA) for its role in bringing coronary stents under price control and decried the purported attempt of the NITI Aayog to dismantle the NPPA. The letter demanded that the NPPA be made into an autonomous body instead of keeping it as a subordinate body of the DOP. “These activities (of the NPPA) have not been liked by the above-mentioned Ministries and Secretaries, particularly the DOP, and plans are afoot to sabotage the NPPA, possibly by dismantling it altogether,” stated the letter.

The NITI Aayog, it said, was also planning to frame a new drug policy and revamp DPCO 2013. The SJM cautioned that any such move on the part of the government to modify either the drug policy or DPCO 2013 would be ill-advised as the matter of price fixation was sub judice. The NITI Aayog, it said, had a “history of aligning with the vested interests in the relevant Ministries to dismantle the regime of price control and wind up the NPPA”. The SJM also criticised the health component of NITI Aayog’s draft three-year action plan.

“It is now known that, ironically, a Committee for Ensuring Enhanced Accessibility of Drugs to the Poor has been formed on 31 March 2017 and chaired by the Joint Secretary (Pharma Policy), DOP. Its real purpose is to pander to the pharmaceutical companies, undermine the good work done by the NPPA and ultimately to abort any attempt to do effective price control and make medicines affordable in India,” the letter said.

On April 21, as if on cue, the MCI issued a circular to deans and principals of medical colleges, directors of hospitals, State medical councils and State Health Secretaries that all registered medical practitioners were required to comply with Clause 1.5 of the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulation, 2002, amended in 2016, which stated: “Every physician should prescribe drugs with generic names legibly and preferably in capital letters and he/she shall ensure that there is a rational prescription and use of drugs.” Earlier, the clause had offered an option by stating that “every physician should, as far as possible, prescribe….”

Not a single physician has been pulled up since the MCI’s amended notification of September 2016. It is also pointed out that the bulk of prescriptions were irrational and until all formulations, rational or otherwise, were brought under price control, any attempt to bring a law to get doctors to get prescribe generics was futile.

Not surprisingly, doctors and their associations have been guarded in welcoming the Prime Minister’s announcement. The Indian Medical Association (IMA), the largest association representing doctors, in a statement issued by its president following an emergency meeting on the issue of prescription of generic names of medical drugs, spelt out that “the judgement to choose a rational drug and its format vests only with the RMPs…. This right of the medical profession is sacrosanct.” The statement issued by the IMA and the Federation of Medical Associations in India called on the government to strengthen “quality control mechanisms to ensure adherence to good manufacturing practices for patient safety” and added that “for a rational prescription, doctors should choose drugs generic-generic or generic brand-based on quality, efficacy and economy”.

Interestingly, it also recommended that the government should ban the differential pricing of a drug under different brand names (generic-generic, generic-trade or generic brand) by one company, insisting that it should be a case of one chemical drug, one company and one price.

The core issue

The catch, if anything, lies in the price regulation of all drugs and, by implication, the onus is on the government and not on doctors. “Even if I prescribe a generic drug, what is going to prevent the pharmacist from selling the branded version of the same? As long as branded drugs and differential pricing is allowed for the same chemical, the problem will continue. How is the hapless consumer to know which is the most efficacious?” a leading orthopaedic surgeon and director of a private hospital told Frontline. S. Srinivasan of LOCOST, a non-profit medicine manufacturing unit in Vadodara, said that as generic medicines had low margins, it was unlikely that retail pharmacists would stock them. So even if a doctor prescribed a generic drug, there was nothing preventing the pharmacist from selling a branded one. More so, the announcement was nothing new. The government-appointed High Level Expert Committee on Universal Health Coverage had made recommendations to make generic drugs production and prescription more than five years ago. “All drugs have to be brought under price control, like it was earlier,” Dr G.S. Grewal, former president of the Punjab Medical Association, told Frontline.

The Prime Minister’s announcement has been seen as a populist one akin, to his call for demonetisation of high-value notes. It was not long ago that the new National Health Policy was unveiled, which, among other things, highlighted the high out-of-pocket expenditure incurred on health by people. The Prime Minister also mentioned how his government had capped the prices of cardiac stents and brought around 700 medicines under price control. But it is also a fact that stents continue to be sold at high markups despite the price cap set by the NPPA. Prescribing generics alone as a measure to bring down the prices of medicines is at best a chimera. The real issue lies elsewhere.

This article is closed for comments.
Please Email the Editor