The international pharmaceutical industry has found its cash cow in India’s beleaguered consumers. With a minimum wage of Rs.250/day for a government worker, a basic wage worker afflicted with a chronic disease like multi-drug-resistant tuberculosis faces penury. His treatment, with drug combinations, which works out to roughly Rs.1.2-Rs.1.5 lakh, is the equivalent of nearly 4-6 years of savings. Even managing a disease like diabetes can erode much of his monthly income.

Turing Pharmaceuticals, headed by Martin Shkreli, was castigated for buying Daraprim, a drug used to treat HIV patients, and raising its price from $20 to $750 — an increase considered “unjustifiable” even for the drug industry (HIV Medicine Association, September 2015). In India, Glenmark announced an equated monthly instalment scheme for two anti-cancer drugs, Abirapro (250mg; 120 tablet pack is Rs.39,990) and Evermil (10 mg; 10 tablet pack is Rs.29,965). Glivec, another anti-cancer drug, saw its base price rise from Rs.8,500 to over Rs.1 lakh per month over the last decade. A new hepatitis C drug, Sovaldi, is $1,000 per pill. Cortisporin, for ear infections, developed by Glaxo Wellcome and approved in 1975, has had its price rise from $10 to $195 — a pricing that its formulator, Endo Health Solutions, believes is “rational and appropriate” (David Lazarus, American business and consumer columnist, February 2016). Meanwhile, China’s anti-monopoly regulator has fined five domestic drug firms for colluding to raise the prices of allopurinol tablets (China’s National Development and Reform Commission, 2015).

Other arrangements have drawn concern. With Voluntary Licence agreements being signed between Gilead Science and 11 Indian generic drug makers, pricing concerns about critical drugs have arisen. The recent decision to remove customs duty exemption on the imports of ~70 drugs could also have a significant economic impact. With such drug treatments lasting for at least a year, critical illness is now a gold mine.

Health care remains heavily skewed against the poor. Out-of-pocket expenses can comprise up to 80 per cent of all health financing, with 70 per cent of health spending on outpatient treatment devoted primarily to purchasing medicines (Creese A., Kotwani A., Kutzin J., Pillay A., 2004). Access to affordable medicines remains a significant concern; Delhi, at best, offers just 48.8 per cent availability (Anita Kotwani, 2013). This spiralling cost of basic medical drugs has left little for daily life. For instance, unskilled workers need to work an hour in India (it’s 10 minutes in the United Kingdom) to afford basic paracetamol (All India Drug Action Network or AIDAN, 2015).

Drug pricing regime

India’s drug pricing regime has evolved. While the Drugs Order (Display of Prices) 1962 froze medicine pricing, the landmark Hathi Committee Report (1975) led to the Drug Policy (1978) which set up a National Drug Authority and selective price control on medicines. The Drug Price Control Order (DPCO), 2013, brought 348 drugs into India’s National List of Essential Medicines (NLEM) 2011, with significant exclusions made for formulation and presentation (S. Srinivasan, EPW, 2014).

But loopholes remain. While 358 formulations of paracetamol are under price control, over 2,714 combinations (80 per cent of market share) are not (Sourirajan Srinivasan, 2013). Despite price controls, 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. As highlighted by the Supreme Court, India’s current drug pricing policies have tended to fix the maximum price of a medicine above the retail price of the market volume leader (All India Drug Action Network or AIDAN, 2015).
While the National Pharmaceutical Pricing Authority struck down its notification on ceiling prices for 50 non-scheduled medicines in 108 formulation/dosages, the public interest in ensuring affordable access remains (S. Srinivasan, EPW, 2014). India’s pharmaceutical industry suffers from a significant lack of competition. Given significant information asymmetry, customers often buy the priciest product to alleviate an immediate need. India’s drug pricing regime remains ripe for change.

Ensuring affordability

Price controls remain an effective answer to ensuring affordability. Even free markets in the West utilise price, volume and cost-effective controls to mitigate health-care inflation. Canada has its Patented Medicine Prices Review Board, while Egypt has brought all medicines under price control. Lebanon has utilised regressive margin pricing and improved transparency by publishing patient prices on its online Lebanon National Drug Index (AIDAN 2009).
In addition, we must encourage a centralised procurement system, as utilised by Tamil Nadu, for purchasing drugs. A Tamil Nadu government tender for the antiparasitic Albendazole (400 mg) tablets has attracted prices of 35 paisa per tablet; retail prices are quoted at Rs.12 (AIDAN 2009). Unethical and unfair drug selling practices, such as holiday trip offers and fancy gifts, used to influence doctors and key bureaucrats, need to be curbed. As suggested by AIDAN, the NLEM should be revised every 2-3 years, with price regulation based on the therapy considered, instead of a focus on formulation. VAT abolishment on essential medicines can also be considered, as Tajikistan has.

Enabling financing

We need to create an accessible and affordable health-care system that offers scale, multi-generational permanence (multi-generational and is supported by sustainable financing mechanisms to ensure affordability. Along with debt financing, policy interventions like cheaper loans and tax breaks on interest payments could be tried to generate fund flow. Easing the Reserve Bank of India’s rules on external commercial borrowings by health-care projects can help access cheaper funds from a larger credit source; 20 per cent of private equity funds are expected to be invested in health care (PricewaterhouseCoopers, 2012).

Insurance can help as well. The government’s push for low cost “in-patient” insurance, while encouraging, should also incorporate out-patient expenses. Low-cost diagnostic capabilities, generic drug stores (Rajasthan’s “Life Line” drug stores) and low-frills hospitals that provide affordable care (Vaatsalya) can be considered.

Medicines remain overpriced and unaffordable in India. In a country mired in poverty, medical debt remains the second biggest factor for keeping millions back into poverty. With little to no availability of basic health insurance, and a preference for private practitioners, drugs engender poverty. With innovative policymaking, the troika of quality, affordability and access can be achieved.