Passing the burden

Price controls in medicines extended

The National Pharmaceutical Pricing Authority, or the NPPA, last week cut the prices of about 50 cardiovascular and diabetes medicines by up to 35 per cent. Some estimates suggest that after this order, 58 per cent of cardiovascular medicines and 21 per cent of diabetes medicines will come under price control. The industry says this will burn a hole of Rs 550 crore in its pocket. There is talk that such price controls will be extended to other therapeutic segments as well. When that happens, drug makers could suffer some serious loss of business. Naturally, they are up in arms.

Apart from this, the way the NPPA has gone about cutting prices leaves some questions unanswered. The ministry of health and family welfare had in 2011 compiled the National List of Essential Medicine, which contained 348 drugs covering about 650 formulations. Price caps on these drugs were announced last year. However, the Drug (Prices Control) Order allows the government, if it considers it necessary in public interest, to cap the prices of other drugs also in case of extraordinary circumstances. It is this provision that the NPPA has used to order the latest price cuts. The extraordinary circumstances cited by the NPPA are the wide differences in prices among the various brands of the same generic drug (dosage, strength, etc, included) in the market. This "market failure", according to the NPPA, is because cardiovascular and diabetes care are driven by the doctor's prescription, and the patient has no choice. The underlying assumption is that prescriptions can be influenced by drug makers. When considered in the context of the "role pharmaceuticals play in public health" and the growing instance of lifestyle disorders in the country, this is sufficient ground for intervention, the NPPA has argued.

Two points are worth considering here in the context of the NPPA's argument. One, price differences among various brands of the same molecule have been there for a long time; how has it become an "extraordinary circumstance" now? Two, lifestyle disorders - particularly cardiovascular ailments and diabetes - assumed endemic proportions long time ago; why react to it now? The industry has raised the point that such action can be taken by the department of pharmaceuticals and not the NPPA, which is more like a regulator. Moreover, it seriously undermines the sanctity of the National List of Essential Medicines, which can be revised from time to time by the ministry of health and family welfare. Also, such sporadic action makes the business environment unpredictable. As a concept, price control works when there is evidence of super-normal profits. Various studies have pointed out that this is not the case with Indian drug makers. In fact, India is the most competitive pharmaceutical market in the world with dozens of brands available for each drug.

If it is the government's wish to make inexpensive medicine available to the people, then it can follow the model adopted successfully by Tamil Nadu and to a lesser extent by Rajasthan. These states buy medicines and then make them available through their distribution networks. If medicines for the poor have to be subsidised, why pass the burden on to the drug makers?