Aggressive drug pricing is becoming a burning issue in the healthcare space, across the world. The raging debate continues in India too, fueled by many factors.
In this context, it was quite interesting to note, on July 15, 2015, the Supreme Court of India asked the Government to analyze and explain why the controlled price of essential medicines has been fixed at a high level, depriving the poor from getting life-saving drugs at reasonable rates.
Consequently, the Government was compelled to have a relook at the allegedly ‘flawed’ National Pharmaceutical Pricing Policy 2012 (NPPP 2012) and the subsequent Drug Price Control Order 2013 (DPCO 2013) forming an inter-ministerial committee to work out a more robust alternative.
Even thereafter, on November 03, 2015, the editorial column of a business dailyconcluded by advocating, “excessive price control may lead to a shortage of crucial medicines and a gray market.” The editorial has not elaborated though, what it means by “excessive price control,” despite the fact, the current span of drug price control is just around 20 percent of the domestic Indian Pharmaceutical Market.
The most intriguing part in this editorial is, to make affordable health care in general and drugs in particular available to all, though it broached on some ideas in a patchy way, did not suggest any comprehensive pan-India solution, as a viable alternative. It just wrote against DPCO, which too seems to be off the cuff, as many believe.
Such blatant advocacy against DPCO, without being overarching solution centric, could jeopardize patients’ health interests in India. This is primarily because, ‘Out of Pocket’ expenditure on drugs is one of the highest in India, even as compared to its neighboring countries, with very low per capita income.
I discussed in this Blog similar subject on July 13, 2015 in my article titled, “India: Tops The GDP Growth, Remains At The Bottom On Health Care”.
Would abolition of DPCO be foolhardy?
Further, the above editorial comment on the above business daily that “excessive price control may lead to a shortage of crucial medicines and a gray market,” appears hypothetical and not fact based, as many experts in this field have articulated quite in contrary.
Many believe, the bogey that advocates ‘price control causes drug shortages’ is industry sponsored. Whether it is right or wrong, may be a contentious issue. Nevertheless, there is no robust evidence that price control causes drug shortages.
At the same time, this is also true that some price controlled drugs under DPCO 1995 were discontinued by the respective manufacturers. The key reason for the same is product obsolescence, as those drugs were old and newer alternatives were in the market. Those are really product value and prescription demand related issues. To the best of my knowledge, not a single modern drug, has ever faced permanent shortages due to the price control in India. Moreover, there are robust provisions under DPCO 2013 to deal with such artificial drug shortages, as and when happen.
Moreover, after the announcement of Ceiling Prices of DPCO 2013 products, when wholesaler’s margins were initially revised downwards by a number of manufacturers, some wholesalers agitated and refused to buy those drugs causing some shortages. This dispute was mutually resolved since then, jointly by the drug manufacturers and pharma wholesalers. There have been no reported shortages of DPCO 2013 drugs, thereafter.
Be that as it may, I reckon, advocacy by any responsible entity to abolish DPCO in India without suggesting an effective alternative, such as, putting in place a public funded Universal Health Care (UHC) mechanism, would be foolhardy. We have a large number of functioning examples of UHC, across the world, including the OECD and BRICS countries, which makes a policy mechanism like DPCO almost irrelevant.
What happens when ‘no holds barred’ drug pricing is allowed?
Recent incidences of ‘no holds barred’ drug pricing in the largest free-market economy of the world – the United States, have started attracting ire of even the more affluent and mostly health insured American citizens too.
As reported by the Boston Globe on October 16, 2015, this is happening in both patented and generic medicines. A few examples, out of many, of some recent jaw dropping aggressive drug pricing are as follows:
- Average price of a new cancer drug costs around US$ 100,000 a year
- A new hepatitis C drug costs US$84,000 for a course of 12-week treatment
- A generic tetracycline price was increased by 70 fold just within a year
- 5000 percent-plus increase on Turing Pharmaceuticals’ generic Daraprim (pyrimethamine) ant-parasitic tablets
Moreover, on November 6, 2015, The Wall Street Journal reported that three US pharma majors – Eli-Lilly, Merck and Valeant have received inquiries about drug pricing from the Justice Department of the US Government.
Giving an example, the report stated that for the nine months ended September 30, sales of the asthma drug Dulera inhalers (containing a combination of formoterol and mometasone) of Merck, rose 17 percent from the year-earlier period to US$383 million.
Is the dictum ‘competition controls prices of generic drugs’ just a myth?
Besides many other examples, the last two of the above four points on 70 fold and 5000 percent price increase for two old generic drugs – tetracycline and pyrimethamine, respectively, in the world’s largest free-market economy, suggests that ‘competition fails to control even generic drug prices’ for various other reasons. The National Pharmaceutical Pricing Authority (NPPA) of India has already termed this phenomenon as ‘market failure’ for medicines.
Adding to it, Elsevier Clinical Solutions reported recently in a White Paper titled, “The Impact of Rising Generic Drug Prices on the U.S. Drug Supply Chain”, as follows:
“Over the past two years, the pharmacy industry has seen unprecedented increases in the prices of generic drugs, causing unexpected cost increases for payers and consumers, and spurring an investigation by the United States Congress.”
A recent survey:
More recently, in October 2015, ‘Kaiser Health Tracking Poll’ of the ‘Kaiser Family Foundation’ of the United States reported that the affordability of prescription drugs continues to be at the top of the public’s priority list for the President and Congress in America. In this study, 77 percent of Americans identified the increasing prices of prescription drugs as their number one health concern.
The top two priorities by majorities across political parties, were reported as follows:
- Making sure that high-cost drugs are affordable to those who need them
- Government action to lower prescription drug prices
Following this report, on November 03, 2015, the ‘Committee on Oversight & Government Reform’ of the U.S. House of Representatives, by a ‘Press Release’, announced that “Top House Democrats Launch Affordable Drug Pricing Task Force.” The members of the newly formed Task Force will suggest meaningful action to combat the skyrocketing costs of pharmaceuticals in the United States, as captured in the survey of the nonpartisan Kaiser Family Foundation.
Does India want to jump into this quagmire?
If DPCO is abolished India because of intense, both direct and indirect advocacy, would India have no alternative but to jump into this quagmire of allowing free-drug pricing to pharma players?
70 fold and 5000 percent obscene price increase in a year for branded generics may not be possible in India, but for non-schedule drugs, there is no cap on the fixation of the launch price either. Any drug manufacturer can first fix a high launch price and then can go for 10 percent price increase every year, putting public health interest in jeopardy. That’s why inter-brand price difference for the same drug molecule in India varies so much and has attracted the attention of even the NPPA.
The unfinished agenda:
There is no denying of the fact that even DPCO is not a comprehensive mechanism to offer affordable health care to all. It is meant primarily for the essential drugs in the prevailing environment, when the out of pocket drug expenditure hovers around 70 percent, being one of the highest in the world.
To offer a viable mechanism for affordable health care to all, India expressed its interest towards Universal Health Coverage (UHC) in 2010, when the erstwhile Planning Commission of India convened a High Level Expert Group (HLEG) to work out a road map for UHC under the chairmanship of Dr. K. Srinath Reddy, the physician of international repute. UHC has still remained an unfinished agenda in the health care space of India.
At that time the HLEG made some important recommendations in its report for effective implementation, the key ones being the following:
- Increasing public financing from the current 1.2 percent of the Gross Domestic Product (GDP) to at least 2.5 percent.
- Outlined an essential health care package for provision through tax funding, supplemented by employer-provided insurance
- Free provision of essential drugs and diagnostics.
- Emphasized prioritized funding for primary health care, with efficient links to secondary and tertiary care.
- Services were to be delivered jointly by strengthened public facilities and contracted private providers.
- Reforms were suggested for improving the health care workforce, strengthening of regulatory systems for quality assurance, and improving governance and accountability.
Change in Government puts UHC back to square one?
Meanwhile, the change of national Government in May 2014, gave a new perspective to the debate over UHC. The incumbent Government that had already promised and announced a “National Health Assurance,” released a draft National Health Policy (NHP) in January 2015 for public discourse...........
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