Contents
Chapter
5................................................................................................................................................22
World Trade Organization and TRIPS....................................................................................................22
World Trade Organization and TRIPS....................................................................................................22
Drug Pricing
Medicines are the single most essential
type of goods in healthcare and attaining overall health and well-being. One of
the pillars of universal healthcare is access to medicines for all. The ultimate
demand of every health activist has always been the supply of medicines, free
of cost, in the public sector;however the population utilising the public
sector health facilities is low. Hence,as
an intermediary solution, there is apressing need to work on making medicinesmore
effective, more accessible and less expensive.
Is the
cost of medicines really a burden on
patients
 |
Yes,
cost of medicines is the major component of the overall expenditure on health
by people.
Medicines
in public sector are mostly supplied free of cost. Under the aegis of
National Health Mission, the Central government and governments of all the
states are implementing the free drugs scheme.
|
Different states are at different stages of implementation,
ranging from mere approval by state cabinets to actual on groundimplementation
and execution. At the same time government facilities
are plagued by procurement & supply chain issues; this leads to stock-outs
on a regular basis.
In total, these government facilitiesare used
by only 28% in rural and 21% in urban areas (NSSO 71st round). The
rest of the population, access private care and these private providers charge the patients for medicines.
For this, the patient has to buy medicines either in the hospital itself or
from the large retail market (pharmacy shops/medical shops/medicos).
This phenomenon of spending by an
individual on goods in order to better his/her health status without any form
of support from the government or insurance is known as out of pocket expenditure.
In some cases, patients are unable to afford this expenditure and withdraw from
seeking treatment.
Illustration 1 - Two drawings as a discussion between two people
having a chat where one person is saying that he has gone to government
hospital but could not have medicines available and the other person buying
saying that he has come there from a private hospital
The 71st round of National
Sample Survey Organization (2014-15),had a special emphasis on health expenditure.
It was found that the expenditure on medicines presents the largest portion of
the out of pocket expenditure on health. The survey highlights that out of all the expenditure
on health, around 72% in rural and 68% in urban areas were spent on medicines. 
This burden of expenditure at times is
so huge that, it could push the patient further into poverty. Evidences show
that people have to use up their savings and even sell their valuable assets
such a land, jewellery and cattle in order to buy medicines. It can also be
seen that many suffering from chronic diseases do not access medicines in the
apprehension of inability to afford medications. In fact it was shown that in
rural areas the source of 68% of the health expenditure was household income/
savings and 25% was from borrowings/debt. While in the urban context the source
of 75% was household income/savings and 18% was from borrowings/debt. These
figures once again re-iterate the importance of medicines as commodities and
the need for government to act on this pivotal issue
Who produces medicines?
The indigenous pharmaceutical industry
established itself in the 1970s, post implementation of Indian Patents Act 1970.
This patent act removed product patents and thus made the market harder for
foreign players to dominate. From the 1970s to 1990s, the pharmaceutical
production was carried out by private corporations as well as Public Sector
Units.
Post- liberalization, the major public
sector units were systematically made unprofitable and forced to shut down. At present,
the major producers of medicines are the private players; however,the
government continues to produce medicines on a small scale through the
remaining few Public Sector units (names of them). Indian private sector is
also characterized by the presence of a huge number of small and medium
enterprises in production of medicines apart from the larger more well-known
big players.
A recent trend that is fast becoming the
norm, over the past decade,is the acquisition of indigenous players by the
foreign corporations. Subsequently a sizeable amount of drug production is being
exported out of country. At the moment India is 3rd largest producer
of medicines in the world. Given this historical context, the government, felt
the need of a regulatory mechanism for making medicines accessible and
affordable to the population.
In India medicines are the
responsibility of the Department of Pharmaceuticals under the Ministry of
Chemicals and Fertilizers. The Drug Price Control Order was introduced in the
year 1979 to regulate the prices of medicines. There have been 4 DPCOs till
date in the years 1979, 1987, 1995 and 2012. This DPCO is an order that sets
the maximum limits of pricing of medicine that are brought under control.
National Pharmaceutical Pricing Authority (NPPA) was setup under the Department
of pharmaceuticals in year 1997 to overlook the implementation and enforcement
of DPCO.
Chapter 2
Prices of medicines
Regulation of drug prices and production
of drugs by government are needed due to the fact that health is its responsibility.
The following factors also form a part of the argument for a state role in
manufacturing and regulation of medicines:
1) The
accepted Western discourse is that prices of medicines will be low in a free
market economy due to competition. But thelimitation in context of medicines is
that,consumer does not have choice to choose as he is advised by the
doctor/health professional.
2) Another
reason for high costs is the presence of a globally binding product patent
system wherein some companies have monopoly of a particular drug.
3) All
private organizations have their motives of profits in the name of
answerability towards stakeholders. This is the nature of a private company and
in order to deal with this issue that government should produce the medicines
in the interest of public.
One point of interest that separates
India from other nations in the context of purchase of medicines is that a
large proportion of transaction happens in retail sales (medical
shops/medicos/pharmacists/internet sales etc.) as against institutional sales
(hospital). The percentage of medicines sold in the retail is around 70% and
the remaining 30% is in the institutions. In the developed world, the exact opposite
pattern of sales is seen.
Cost of medicines
The basic cost of a product is set by
the components that are involved in its manufacturing and sale. The following
are the main components forthe price of a drug :
1) Raw
material – the cost of the active ingredient and its content in the final
formulation plus the cost of the bulk drug which in turn are dependent on the
cost of the raw materials used to manufacture them.
2) Packaging
costs – this component is often manufacturer dependent. Fancy packaging is more
expensive than utilitarian packing. Similarly, strip packing or blister
packaging is more expensive than bulk packaging.
3) Manufacturing
cost – these costs include the cost of infrastructure, labor, electricity, water,
etc.
4) Quality
control – manufacturing units are required to carry out in house quality
control, which contributes to the cost of a drug.
5) Yield/loss
– There are losses incurred during manufacturing. The average loss in the case
of tablets or capsules is taken as 2% and in the case of syrups is 5%.
6) Post
manufacturing expenses – under post manufacturing expenses we have the
following sections :
a. Transportation
costs
b. Trade
margins- given to agents/distributors/retailers
c. Promotion
costs –marketing/hiring/incentives
d. Profit
margin – to the manufacturer included as post manufacturing expense
7) Taxes
a) Excise duty on manufacturing,
a) Excise duty on manufacturing,
b) Value Added Tax,
General sales tax, Central sales tax on the sales of drugs.
c)Customs tax- Taxes on
medicines consist of customs tax if the medicine is imported.
Illustration to show different components can be tried- Either text or illustration
Finally the Maximum Retail Price of a
drug is an addition of the three components
a) Ex-Factory
costs
b) Post
manufacturing Expenses
c) Taxes
Chapter - 3
Regulation and Drug price control in India
Drug Price Control Order (DPCO) regulates
the prices of only a fraction of drugs in the market and those drugs whose
prices are controlled are notified in the relevant DPCO. In the case of
remaining drugs, the prices are not controlled and companies are at liberty to
charge accordingly.
Regulation of a Drugcan take place at
two levels when it is notified as controlled.
1.
Bulk Drug- the raw material –
Bulk drugs are regulated by having a
maximum rate of return (profit to manufacturer). This is generally been at
level of 12-14%. In the case of imported bulk drugs, the notified price is the
price at which the bulk drug is imported.
2.
Formulation – finished product
The price of formulations is then
regulated by specifying a Maximum Post Manufacturing Expense, known as MAPE.
This method of fixing the prices of formulations is also called as “cost-plus”
formula. So if the ex-factory cost of a drug is Rs. 1.00 for a drug and the
MAPE allowed is 100%, and then the price fixed is Rs 2.00.
The final MRP of the drug is this cost
plus taxes and duties that are levied by the government.
Over the years different DPCOs have
specified different formulas to regulate the prices of Bulk and Formulations.
|
|
Type of regulation
|
Method
|
Number of drugs under price control
|
Criteria used to be kept under price
control
|
Percentage of market covered
|
|
1979
|
Cost Based pricing
|
Based on the costs of
manufacturing
|
342
|
Essential medicines
|
90%
|
|
1987
|
Cost based pricing
|
142
|
|
70%
|
|
|
1995
|
Cost based pricing
|
76
|
|
50%
|
|
|
2012
|
Market Based pricing
|
As an average of the existing
|
348
|
Essential medicines
|
18-20 %
|
The kind of regulation that took place has
changed dramatically since 2012 and hence we need to look at the History of
DPCOs before and after 2012 separately. It also shows how simple policy changes
are twisted in the favor of private sector and against the interest of people.
Though the DPCOs before 2012 were gradually becoming ineffective, their
methodology was in the right path.
DPCO Regimens before 2012
India was among the first countries in
the developing world to formulate a national drug policy and introduce price
control on pharmaceuticals. In the 1950s, drug prices in India were among the
highest anywhere in the world - a fact commented upon by Kefauver committee (anUSSenate
committee), which said, “As a matter of fact, in drugs generally India ranks
among the highest priced nations in world”. In the 1950s, India was fully
controlled by Multi-National Companies.
In 1951, with the help of W.H.O and
UNICEF, India set up Hindustan Antibiotics and later in the 1961 IDPL ( Indian
Drugs and Pharmaceuticals Limited) was set up with the help of Soviet
technology. With the setting up of the public sector institutions, antibiotic
prices fell by as much as 60 to 70%. In the same period even the Indian private
sector was able to substantially improve their capacities in indigenous
production of medicines. In spite of all these advances, the MNCs were able to
maintain their grip on the market due to their marketing strategies.
In 1974, the governments setup the Committee
On Drugs And Pharmaceuticals, popularly known as ‘Hathi committee’. The committee’s
recommendations are seen as a landmark for drug industry in the third world.
The drug policy of 1978 and the Drug Price
Control Order (DPCO) 1979 were based on recommendations of the committee. For
the first time, price control mechanism was introduced in the country. The 1978
policy led to rapid growth of the Indian sector, which soon gained the
capability of producing most essential drugs as it proactively promoted the
domestic industry – both public, as well as the private sector.
The best part of the policy was that it
replaced the old pre-Independence Patents Act and excluded pharmaceutical
products from product patents. This allowed the domestic companies to introduce
new drugs, which were under patent, into the Indian market within 3-5 years of
their introduction in the global market. This curbed the monopoly of MNCs over
patented medicines.
1979
DPCO
DPCO 1979 was an order which empowered
the government to fix the sale prices of 347 bulk drugs and 4,000 formulations
in the country. These included both bulk and formulations. The DPCO covered up
to 90% of the market. The order classified medicines into four classes and
imposed controls on the first three categories.
|
Category
|
Category
type
|
|
MAPE
|
Percentage
of market covered
|
|
1
|
Life saving
|
Price-controlled
|
40%
|
90%
|
|
2
|
Essential
|
Price-controlled
|
55%
|
|
|
3
|
Less essential
|
Price-controlled
|
100%
|
|
|
4
|
Non-essential/simple remedies
|
Non controlled
|
Not applicable
|
10%
|
In the order there has been a ceiling to
the mark up (MAPE- Maximum Allowable post manufacturing expenses). Additional
limits of “leader prices” were also imposed for formulations in category 1 and
2. Leader prices were based on the most popular brand and manufacturers of
similar formulations could not exceed these. For category 3 formulations,
separate pricing for each product was proposed.
The retail prices of scheduled
formulations were controlled by using a “COST-PLUS” approach. Which meant that
the cost of medicine would be Ex-factory costs along with Mark up andtaxes.
|
Retail price =
|
( MC+CC+PM+PC )
|
* (1+MU/100)
|
+ Excise duty
|
|
|
Ex factory costs
|
( mark up)
|
Tax
|
In 1980s the public sector units such as
Hindustan Antibiotics Limited and Indian Drugs and Pharmaceuticals Limited lost
ground and went into a downward spiral due to gradual withdrawal of the
government support in keeping with the overall policy shift towards a liberal
economy.
The serious flaw in the 1978 policy of
not ensuring production while proposing a differential markup led to companies
shifting production away from the controlled categories. Another important
feature of the order was Drug Prices EqualizationAccount (DPEA). This account
was meant to be funded by excess profits earned by companies in categories 1
and 2.
1987
DPCO
However 1986 policy reversed many
features of the 1979 due to pressure from both foreign and India. The result
was lesser government control and a movetowards market based pricing of
essential commodities. The span of price control was drastically reduced, more
profits were allowed in the form of increase in mark up and also imports were
liberalized.
The policy can be viewed as a step
towards de-regulation of the industry in regards to production and price
controls. The 1986 policy applied market related criteria in medicines thereby disabling
the public health criteria. The underlying logic was that medicines which had
more market competition would bring the prices of the medicines down. For this
the policy introduced the criteria of “market competition” and “minimum annual
turnover”
Finally the number of drugs controlled
decreased from 347 to 142. The policy proposed two categories of drugs to be
placed under price control, instead of three. The first being medicines
necessary for national health programs and the second being other essential
drugs.
|
S.no
|
Category
|
MAPE
|
%
of market under control
|
|
1
|
Medicines
used in national programs
|
100%
|
70%
|
|
2
|
Other
essential medicines
|
100%
|
|
|
3
|
Non-essential
medicines
|
Not
applicable
|
30% |
It is estimated that the 1986 policy
brought down the medicines under control from 90% of the market to around 70%.
The 1986 policy reversed other
provisions also. It relaxed sectoral reservation, hence increasing the role of
private sector. Production by the public sector was limited to manufacture of
bulk drugs central to the needs of national programs. Penicillin and polio
vaccine which were reserved for manufacture by public sector in the 1978 policy
were opened to private sector. Later on conditions stipulating the private
sector for mandatory supply of percentage of bulk drug production to
non-associated formulators was also abolished.
In the following two decades, Indian
industry grew considerably but some disturbing trends started to emerge. One
was that the companies were competing to produce costly new medicines in order
to cater to the upper quintiles of the population. Due to this production of
these expensive drugs far outstripped demand while less expensive medicines
were in short supply. Also another worrying trend was the way larger companies
in order to maximize profits started to export most of the indigenous
manufactured medicines. Two of the largest companies, Ranbaxy and Reddy’s lab
were selling 40-50% of their overall production in foreign markets.
1995
DPCO
In 1994 the government announced a new
policy on drugs and pharmaceuticals. This was a continuation of the trend set
by the 1986 policy. The 1994 policy was completely opposite to what the 1978 Hathi
Committee backed policy advocated. This 1994 policy brought in concessions to
industry in the form of lesser price and production controls. It totally moved
away from the public health angle and brought in a paradigm shift by relying
entirely on market based criteria.
The number of drugs reserved for public
sector was reduced to five from the existing fifteen, however this was
completely abolished in the year 1999, by which time Hindustan Antibiotics
Limited and Indian Drugs and Pharmaceuticals Limited had become terminally “sick”. The price control was brought down to 76
drugs and these drugs covered around 50% of the market.
All drugs under price control were now
brought under single category with a uniform MAPE of 100%.
|
S.no
|
Category
|
MAPE
|
% of market under
control
|
|
1
|
Category
1
|
100%
|
50%
|
|
2
|
Category
2
|
Not
applicable
|
|
|
3
|
Category
3
|
Not
applicable
|
|
All through this, plea of the private
sector was that the drug industry should be decontrolled – both with regard to
production and pricing. However, the industry’s claims that profitability was
going down was a false argument as drug companies had consistently shown large
increases in their year-on-year turnovers.
Changes in the drug policy were in
tandem with the state policies in favour of market forces.
Later in the year 1997, NPPA (National
Pharmaceutical Pricing Authority) had been formed under the department of
Pharmaceuticals to overlook the matters of pricing of medicines.
Developments in
2003 and its outcome
In the year 2003, AIDAN (All India Drug
Action Network) had petitioned the Supreme Court on the issue of regulation of
medicines and the increasing burden of medicines on the citizens of the
country. Responding to the petition, Supreme Court had directed the government
to devise a policy that would ensure essential medicines are available at costs
that ordinary people can afford. For this, a group of ministers committee was
constituted in the year 2005 and it came out with recommendations in the year
2012 that all medicines in the essential list should be brought under price control.
However the blow came in the form of methodology to be used for deciding price
control. Instead of using the previous methodology of cost based formula, the
GOM suggested a market average which is a name sake exercise with futile
results.
The decision of the GOM to use market
based price control comes in spite of the Supreme Court suggestion to follow
cost based method. This can be attributed to a large extent to the political
and financial clout of the private corporations and the neglect towards public
health in India.
DPCO
2013
The DPCO 2013, keeping in mind the
interests of the pharmaceutical industry, decided to change the formula to a
“market based” mechanism. It calculates the ceiling prices by calculating the
average cost of all brands which own 1% share in the market for the particular
drug.
This came in the backdrop of market,
wherein only 25 medicines were under price control and the rates of rest of the
drugs had sky rocketed. Essentially the DPCO 2013 chose a method which allowed
the pharmaceutical companies to continue exploiting the price elasticity of
healthcare.
The other irony of the DPCO came in the
form of which of the medicines will be controlled. Inspite of having 347 under
the controlled list, it specified that the control applies to specific drugs
with specific dosage mentioned in the essential drug list.Another interesting
fact was that DPCO 2013 was applicable only to the formulations and not bulk
medicines.
For example, Paracetamol 500mg price is
controlled, whereas Paracetamol 650 would not be covered as per the essential list.
While 358 formulations of Paracetamol are under price control, over 2,714
combinations (80 per cent of market share) are not (SourirajanSrinivasan,
2013). This step was the exact opposite of the previous methodology where in
all combinations of the drug with any other drug and all its dosage forms and
delivery forms (injections/tablets/syrups etc) would come under control.
So this step in fact would end up
encouraging irrational usage of medicines/ combinations in order to make higher
margins by avoiding the specifications made under essential medicines list.
As DPCO 2013
is confined to the specified drugs and their dosages indicated in the
Essential Drug List, the span of price control is very modest at best. An
analysis of two drugs (Table 2 below) – Paracetamol and Glibenclamide –shows
that only 20.87 per cent and 35.70 per cent, respectively, of all products
containing these two drugs will be covered by price control. As we had earlierseen,
this will benefit the sale of combination products and non-standard dosage
forms.
In spite of claims to be the contrary,
the Drug (Prices Control) Order, 2013 covers only 18 per cent of the domestic
market (55 per cent is excluded combinations of NLEM drugs), with little
impact.
DPCO 2013 has cleverly diluted the whole
process of price control. It in fact has created numerous escape routes for the
private sector to evade price controls in real sense. This episode has brought
out that the intentions of the government are towards the profits of the
pharmaceutical companies and not the health of its citizens.
Chapter 4
Regulation of prices in various countries
The section deals with
concept of regulation of drug prices at the global level by taking examples
from a few countries. The mechanism of price control could be different in
various countries, but the end result is to see that medicines are accessible
and affordable to the population. Interestingly, most developed countries also
implement price controls.
Below are few criteria used by countries
for regulation of drugs :
1) Clinical
performance
2) Economic
evaluation
3) Cost
of existing treatments for the same condition or disease
4) Cost-plus
( cost of production plus profit margin)
5) Innovative
character of the product
Regulation in OECD countries
Canada
Canada established a system to regulate
prices of patented medicines. The price regulation is intended to ensure that
prices of patented drugs are not excessive. The price increases are limited to
inflation.
USA
Defacto regulation takes place in the
case of federal health purchasers (eg- Veterans’ Health Administration) and the
Medicaid social assistance program. Due to the ability to make large volume purchases,
the programs have the power to bargain and push for discounts wherever there
are therapeutic comparators. However, Medicare program for elderly and disabled
cannot do so as the purchase of drugs is decentralized. Add little more on
the overall market)
Australia
It implemented the cost effectiveness
control approach through its Pharmacy Benefits Scheme (PBS), a system of
regulated prices and subsidies. In this scheme, two categories of recipients
are there, the general patients and the concessional patients. The general
patients pay up to 23$ for medicines while the concessional patients pay 3$ for
the medicines listed under PBS. The cost of medicines is essentially subsidized
wherein the government pays the extra charges to the pharmacist.
To be listed under this PBS scheme,
drugs must meet efficacy, safety and quality standards. In addition, the drug
must undergo an economic evaluation for the price to be set.
The Australian PBS is an example of a
scheme incorporating the central objectives of timely access to medicines at
affordable rates along with appropriate standards of quality, safety and
efficacy.
Regulation
in South Asia
Bangladesh
Bangladesh formulated its National Drug
Policy (NDP) and promulgatedthe Drugs Control Ordinance, in 1982, to ensure
access to essential drugs.The Policy identified 150 drugs as essential drugs,
whose prices werecontrolled. The number of drugs under price control was
subsequentlyreduced to 117 in 1993.
Under the 1982 policy, in order to
promote local enterprises,foreign companies were no longer allowed to manufacture
in low technologyareas such as antacids and vitamin preparations for which
there were localmanufacturers. Foreign companies were also barred from
marketing drugsunless they had manufacturing facilities in the country. The
Policy also introduced uniform rates for raw materials and packaging for
eachdrug, and companies could not sell their drugs at prices higher than
theserates.
The positive outcome of the 1982 policy
was that by 2002, all essential medicines were produced locally and out of this
45% was essential medicine production. Total production arose from 1730 million
taka in 1983 to 37,000 million taka in the year 2003. However the country
continues to be dependent on imports for raw materials.
The problem in Bangladesh is that the implementation
of the policy has been diluted over time. Later the reduction in number of
medicines controlled in 1993 led to shifting of production away from essential
medicines.
Revised drug policy 2005 – The policy of
2005 was a complete reversal of the 1982 policy. In this even foreign companies
without production facilities in Bangladesh were allowed to manufacture under
licensing agreement with any partner of their choice. Policy allowed MNCs to
manufacture and sell medicines in low technology areas too. The policy also
reversed the 1982 policy of promotion of generic names.
Inspite of reversals, the 1982 policy is
a successful example of how a policy can be formed in the interests of the
country and its citizens.
Pakistan
Like India, Pakistan also has a high
spending on medicines ( around 80% of the total health expenditure). In
Pakistan, the drug act of 1976 regulates the pharmaceutical industry. Under
this the federal government may
1) Fix
the maximum price at which a drug can be sold.
2) Specify
a certain percentage of profits on manufacturing of medicines that shall be
utilised for research purpose.
However this policy lacked in
implementation and price regulation was not effective. Later, the government
set up a Drug Regulatory Authority (DRA) in the year 2006 to ensure supply of
quality medicines to the people. This drug regulatory authority made the
following proposals for price controls
a) First
category – essential drugs fall under this category and the prices would be
strictly controlled.
b) Second
category – non essential medicines fall under this category and the prices
control would be based on competition.
c) Third
category – new formulations fall under this category and the onus of
certification is on the seller to show the pricing letter indicating the price
charged in Pakistan is equal or lower than comparable marketing areas in the
world.
d) Fourth
category – Off the counter drugs fall under this category.
e) Fifth
category – drugs which could be out of drugs category registration like food
supplements and vitamins etc.
Sri Lanka
In Sri Lanka, government health
facilities account for 95% of inpatient and 50% of the outpatient care. Sri
Lanka has very little local manufacture of medicines and depends on the exports
(mainly from India).
Medicines required for the state are
sector are decided taking the EDL as a guide. An estimate of medicines consumed
show that vital medicines constitute 10% (US $ 5.6 million), essential
medicines 54% (US $ 30.24 million) and non-essential 36% (US $ 20.16 million).
State Pharmaceuticals Corporation was
established in 1971 to be the sole supplier of pharmaceuticals, surgical and
consumable equipment to all institutions under the health ministry. Due to its
large demand of goods, it undertook strategic purchasing. Even after coming
into an open economy, SPC continued to operate as an institution holding about
30% of private sector.
National Drugs And Medicines Policy was
formulated in the year 2005. Drug prices in Sri Lanka are controlled through a
scheme where the permitted price is C.I.F (cost insurance freight) price plus
an allowed percentage.
Highlights of the 2006
policy (2006 or 2005)
§ Inclusion
of Need and Cost Effectiveness as criteria for drug registrationin addition to
quality, safety and efficacy.
§ Pricing
policy/ mechanism should be adopted to ensure affordability
§ Legislation
requiring generic prescribing and allowing cost effective substitution
§ National
Medicinal Drug Regulatory Authority (NMRDA) should have authority to limit the
number of new chemical entities of a particular class of drugs as well as the
number of products of a particular chemical entity.
§ Promotion
of medicines should be regulated through the Sri Lankan Association Ethical
criteria for Medical Drug promotion.
§ Promotion
and sale of medicinal drugs based on financial or other incentives should be
prohibited.
Other recommendations
§
Retail pricing should
be based on dispensing fee rather than cost+markup.
§
Medicines including raw
materials (both local and imported) should be free of taxes and excise duties.
§
The responsibility of
ensuring a continuous supply of medicines is a shared public/private sector responsibility.
§
The State
Pharmaceuticals Corporation (SPC) and the State Pharmaceuticals Manufacturing Corporation
(SPMC) should be amalgamated into one corporation, owned and runsolely by
government. The medical supplies division should give preference to
pharmaceuticals manufactured by this corporation for procurement. This would
ensure a minimum market for the state owned unit.
Chapter 5
World Trade Organization and TRIPS
Most of
the countries in the world are members of world trade organization. This
organization deals with trade related matters between various countries. W.T.O
binds countries with a set of agreements as part of making it a member nation.
Important
of these agreement in the context of access to medicines is Trade Related Aspects
of Intellectual Property Rights –TRIPS. TRIPS agreement mandates all WTO
members to adapt their laws for the Intellectual Property Rights protection and
to look into the enforcement of IPR.
This agreement ensures that patent protection
be given to pharmaceutical products also, thereby allowing the monopoly over
newly invented medicines by originator manufacturers . In total, this agreement
is set to worsen the access to vital new medicines by having a upward effect on
prices and making them unaffordable to the developing countries.
TRIPS
is also responsible to be having negative effect on the local manufacture of medicines
and generic in particular due to the IPR related clause. In addition, countries
are being pressurised to implement a stricter version of TRIPS under the name
of “TRIPS plus”.
An
organization under U.N by name World Intellectual Property Organization (WIPO)
aids countries in following the rules and regulations set by TRIPS.
The
discourse of W.T.O/ TRIPS/WIPO gives an impression that trade is more important
than the access to healthcare.
Chapter 6
Recommendations
for a fair pricing policy
The Jan
SwasthyaAbhiyan demands that the new Pharma Pricing Policy be withdrawn and
prices be calculated on the basis of actual manufacturing costs, and not on the
rigged prices set by the private Pharma makers. The JSA also demands that the practice of fixing bulk drug prices
not be discontinued. We further have some suggestions specific to the issue of
price control:
§ No Essential Medicines should be given exemptions
from price-control:
The New Draft Pricing Policy stipulates that essential medicines
having weighted average price less than or equal to Rs 3/- per unit would be
exempted from Price-Control. If this is done, it will give leeway to drugs that
cost much less to produce (for example cetrizine or iron folic acid). Secondly
many low-priced drugs will move towards the Rs 3/- level. That is Rs 30 per
strip of 10 would become the norm. In today’s world with high internet
connectivity; it is easy to calculate ceiling price of all the 348 Essential
Medicines. No exemptions should be made.
• Independent
mechanism of Data Collection:
In order to be able to track the
pharmaceutical market the Government needs to set up its own mechanism of
collecting data on the market for medicines.
• Monitoring of Entire Therapeutic Category:
When an essential drug is under price
control, a continuous monitoring of the therapeutic segment to which the drug
belongs to, should also be carried out. It is not enough to bring only one medicine
under price control out of the range of medicines in the category to which this
medicine belongs. Otherwise Pharma companies would mislead and entice the
doctors in to prescribing these ‘me too’ drugs. ‘Me too drugs’ should have the
same price ceiling namely the ceiling of the original drug[1]
• Tax Reduction:
All price controlled drugs should attract
Excise Duty of 8%, i.e. half of what is now levied.
• Weed out Irrational Drugs:
To
make price controls more effective the Ministry of Health needs to urgently
weed out such drugs from the Market. The issue of irrational drugs will
increase in order to evade falling under price control.
• Registration of New Drugs:
The
DGCI must be much more judicious in allowing registration of new drugs, keeping
in mind public health benefits and risks.
• Voluntary Price Control of New Drugs:
Manufacturers
of any new drug which is registered should be asked to provide cost data, and
even if the drug is not under price control they should be asked to conform to
a voluntary regulation where, in no case, is the mark up over costs, more than
150%.
• Price Fixation of Drugs:
While
computing the price to be fixed, the cost of manufacture of generic drugs
should be taken into account. In no case should the notified price be more than
the average price of generic manufacture.
• Strengthening of NPPA:
NPPA needs to be strengthened and provided with more
teeth.
• Penal Provisions in DPCO:
It
needs to be examined if provision can be made in the Essential Commodities
Act/DPCO for compounding of offences and for levy of fines and penalties for
violation of provisions of the DPCO.
Finally,
the Jan Swasthya Abhiyan makes the following broad recommendations that, while
not directly linked to the draft pricing policy, need to be pursued urgently to
complement price regulation mechanisms with a view to securing access to all
essential medicines.
§ Regulate
Unethical marketing & Drug Promotion, the cost ofwhich has to be paid for
by the consumers.
§ Ensuring
Good Manufacturing Practices, as well as adverse drug reaction monitoring as it
is the consumers who pay with their health aswell as high prices.
•
Revival of Public Sector Units
(PSUs):
Public
Sector Units can play the role of a bulwark against high prices charged by
private companies and can also be used to fill in gaps when Private Companies
stop production of essential medicines because their prices are controlled. The
revival of PSUs in the pharmaceutical sector is an urgent necessity.
•
Pooled Purchasing to Minimise Costs in
the Public Sector:
In the past decades some
states (especially Tamil Nadu) have put in place mechanisms like “pooled
purchasing” in order to reduce the costs of drug procurement in the public
sector. The experience in using such mechanisms should be studied in order to
arrive at a set of recommended practices that all state governments and the
central government can follow.
• Rational
Drug Prescribing and Use:
The
Ministry of Health should prepare Standard Treatment Guidelines for common
illnesses; and prescriber information and an annual National formulary need to
reach every registered practitioner in the country free of cost.
[1] For example out a range of
medicines in the category of ‘ACE-inhibitors’ it is not enough to bring only
enalapril (used for the treatment of high blood pressure) under price control.
All other ‘ACE-inhibitors’ should also be under price-control Lisinopril,
ramipril, perindopril belong to the same class - ‘ace-inhibitors’. Though there
is hardly any difference amongst these 4 medicines as regards effects,
side-effects, there is a huge price-difference between enalapril and others.
Generic version of enalapril 5 mg costs Rs. 5 per strip of 10 tablets; its
branded version costs around Rs. 25. In contrast, the branded versions of
lisinopril, ramipril and perindopril for equivalent dose are priced Rs. 38,
Rs.67 and Rs.79 respectively per strip!
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