Public Health

‘Removing drug price control will be devastating’

Print edition : March 03, 2017

S. Srinivasan, managing trustee of LOCOST. Photo: BM Kedarnatheshwarswamy

Interview with S. Srinivasan, managing trustee, the generic drug maker Low Cost Standard Therapeutics.

S. Srinivasan is a managing trustee of Low Cost Standard Therapeutics (LOCOST), a Vadodara-based charitable trust that has been manufacturing low-cost, quality generics for more than 32 years. Vehemently opposed to the removal of drug price control measures, he unconditionally believes that the move will “have a devastating impact on the lives of the people of India”.

Opposing the style of functioning of Amitabh Kant, CEO of the National Institution for Transforming India (NITI) Aayog, Srinivasan and others said in a November 30, 2016, affidavit to the Chief Justice of India that Kant had said in an interview that “the business of government should be conducted in a corporate style”. The affidavit added: “A style that is bent on bypassing Parliament, and patients and consumers, and this Hon’ble Court. That the said officer, CEO of the government’s think tank, NITI Aayog, is also out of tune with the conditions of the ordinary people of this country is evident from another reported speech where he has equated the progress of the country with the expansion of luxury goods market in the country.”

He spoke to Frontline on the government’s lack of concern for health care. Excerpts:

Why is drug price control important in India? Industry says competition is good and that it automatically regulates prices, so there is no need for government intervention.

Price control is important because the same drug is available at a range of prices from Re.1 to Rs.10 and Rs.40 in some cases. And under many brands. Many of these are of comparable quality and efficacy. How does a poor patient decide this? He cannot, because he does not have the knowledge or information or the time to consult other sources when he has to decide in a crisis. So he accepts what the doctor prescribes.

Doctors normally prescribe higher-priced drugs in the belief, held genuinely or owing to persuasion from pharmaceutical companies, that costlier brands are better even if a cheaper brand is available from the same company. This is called asymmetry of information in economics.

Whenever there is asymmetry of information there is a market failure and the perfect market (the market-knows-all idea) does not work. Markets are anyway poor arbiters of distributive justice. When there is market failure, when markets are distorted by pharma companies bribing or having the upper hand, competition does not work the way it is supposed to work in perfect markets. Whenever there is a market failure, governments have to intervene and, in democracies, intervene in favour of the patients.

I want to add that one of the consequences and reasons for overpricing of drugs is corruption of doctors and the pharma-medical profession nexus. The other reason for corruption is the privatisation of medical education. Doctors want to recover their “investment” if they have paid crores to get a [medical] seat. Currently, at the height of the chart is Rs.25 crore for an MD Radiology seat, closely followed by MD Orthopaedics. There is no money (or heart) in cardiology.

Those in favour of streamlining drug price control say they are aiming for ease of doing business. Why are you opposing what they call “modernising” of the price control authority?

DPCO 2013 [Drug Price Control Order of 2013] affects only about 2 per cent (maximum of Rs.12,000 crore) of the total domestic market of more than Rs.1 lakh crore. Out of this, less than 50 per cent of the “affected” market (only Rs.6,000 crore) had to actually reduce prices to the ceiling price fixed by the DPCO. About 88 per cent of the market is out of price control.

During the period that DPCO 2013 has been in operation, domestic sales of medicines have increased, from Rs.70,000 crore in 2013 to more than Rs.100,000 crore as of date. Exports are another Rs.100,000 crore. How is ease of [doing] business affected?

If at all the DPCO is to be modernised, it has to be in favour of the patient, as the ceiling price fixation based on simple average pricing is flawed; the most sensible method is the cost plus method. The pharma industry needs to make profits but not profiteer at the expense of the patient.

What is the rationale behind the discussion to disband the National Pharmaceutical Pricing Authority (NPPA), at a meeting that the NITI Aayog participated in? How does this augur for patients and the industry and who stands to gain from this? Besides, if the NPPA is going to be recast in another role, does not control remain in some form?

No rationale but the whim of Amitabh Kant of NITI Aayog and his like. The government and bureaucrats are split along free market fundamentalists, who think the pharma industry should be free of even minimal regulatory mechanisms and should not be questioned, and the older liberal/socialist types who think constitutional rights to life/health should be implemented by the state and that the state should provide free health care services and quality education for all, not to mention roti, kapda aur makaan and toilets and clean water.

The other Secretaries, of Health, the Department of Pharmaceuticals [DoP] and the Department of Industrial Policy and Promotion, went along with Amitabh Kant. They want the NPPA to be diluted and to retain some form of tokenistic price control on what they think are important drugs. After our [LOCOST’s] legal notice to Amitabh Kant and the three Secretaries, they, in an answer to Parliament, denied that they are going to whittle down the NPPA and/or price control.

Is some serious revamping also required in the chain of command? The NPPA comes under the DoP, which comes under the Ministry of Chemicals and Fertilizers and not under the Ministry of Health. What is the update on the pharmaceutical Ministry?

You are right. Price control and the NPPA should be under the Ministry of Health and Family Welfare [MOHFW]. This is a long-standing demand of ours that no one has paid heed to.

The DoP’s control of the pharma industry is seen as a cash cow by politicians and some corrupt bureaucrats. So who would want to disturb this cosy arrangement?

Not that bureaucrats and Ministers in the MOHFW will be immune to this, but may be a little less, and they will not think in terms of industry per se but somewhere along the reality of medical crises (diabetes, asthma, HIV, cardiovascular diseases, communicable diseases and diarrhoeal diseases apart from malnutrition, etc) which will stare them in the face and then they may think of pharma policies as if people also mattered.

The DOP/NPPA structures will not be disturbed until the Uttar Pradesh elections.

There seem to be some contradictory moves by the government. Drug pricing is being decontrolled but medical devices are being brought under price control.

Regarding the medical devices, because of advocacy by some of us, cardiac stents have got focus. Such overpricing seems heartless, even for free market bureaucrats and politicians. I hope it is the beginning of looking into medical devices overpricing.

What happens to the National List of Essential Medicines (NLEM) if the NPPA goes?

NLEM will stay. It has no legal use but can be used as a starting point for price control. We have a critique of the NLEM in our petition of November 30, 2016, in which we said that after the NPPA has been dismantled, price control will be delinked from the list of 370 plus essential drugs of the NLEM 2015. That is, price control will be confined to what the government thinks fit. The move to throw out price control measures will have a devastating impact on the lives of the people of India.

How would you describe the government’s attitude to health care? Is the government tilting towards pharma corporations when it is making policy decisions?

They are not bothered, in general. There is no vision of what constitutes health care access. They conflate insurance with access. Even if I am insured, where are the doctors and medical facilities in much of rural India? Yes, there is a government tilt towards pharma companies.

Are there any good examples within India of drug pricing?

Public procurement prices of the Tamil Nadu Medical Services Corporation and the Rajasthan Medical Services Corporation are exemplary, almost.

Is not the government stepping down from its responsibility in health care and access to medicines by closing down its pharma public sector undertakings and not encouraging new research facilities?

Yes, yes and yes. They are encouraging new research facilities, but it is not with public health in mind, and not directly on pharmaceuticals.

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