Health and Medicines

GAURI KAMATH

India’s National Pharmaceutical Pricing Authority (NPPA) is on an overdrive. Since June, it has forced several drug companies to reverse price hikes. The Delhi-based watchdog, which directly controls the prices of 74 drugs specified in a 1995 government order, clamped down on drug prices outside its list for the first time since 1998. NPPA’s action covers one supplement for healthy joints, two commonly-prescribed antibiotics, one for irritable bowel syndrome, two anti-ulcerants, and an anti-allergy drug. Just the threat has got 29 companies to cut prices of 49 packs on other medicines. (Every medicine has packs of different doses and deliveries.) Others, says NPPA chairman Ashok Kumar, are being forced by fiat.

But the impact of NPPA’s actions — routine or extraordinary — is likely to be lost on a growing number of Indian patients.

Every year, Mumbai’s Tata Memorial Centre (TMC) treats 12,000 cancer patients for free or at a heavy discount. Medicines account for a chunk of that subsidy. Bulk buying helps the hospital cut an average 30 per cent from the retail price of anti-cancer drugs. Yet, patients find it a stretch, says Rekha Batura, assistant medical superintendent at TMC. Many families sell their land, homes and even wipe out their savings to pay for treatment. “Medicines are the most expensive part of cancer treatment,” she says. “Patients shouldn’t have to hawk their future for a cure.”

India has 2.5 million cancer patients at any given point in time. But the list of 74 doesn’t include any new anti-cancer medicines, nor any recent advances against other chronic and costly-to-treat ailments like HIV, hypertension and heart disease. These account for a growing portion of India’s disease burden. According to the World Health Organization, chronic disease (defined as lasting three months or longer) caused half the country’s deaths in 2005. After three decades of drug price control, most Indians still struggle to pay for life-saving medicines. “We produce all the medicines we need,” says Amit Sengupta, a health expert with the Delhi Science Forum (DSF), a non-profit organisation that works on issues related to science. “The real constraint is economics.”

A 2005 report of the National Commission on Macroeconomics and Health says that wholesale prices of medicines rose faster than all other commodities between 1993 and 2004.

Almost 80 per cent of what India spends on medicines is out-of-pocket (see ‘Bearing The Brunt’). Every Indian household spends half its healthcare budget on medicines. In fact, the number of drugs specified in the Drug Prices (Control) Order (DPCO) has shrunk in phases from 347 in 1979 to 74 now. DPCO drugs are a quarter of the total pharma market. “That list is redundant,” scoffs C.M. Gulhati, editor of Delhi-based review Monthly Index of Medical Specialties and a vocal proponent of price control. “There have only been deletions since the 1990s, no additions.” The pricing of the rest has been kept free in the hope that competition will keep prices in check. “That works in some cases, but in others it doesn’t,” says Sengupta. India’s pricing policy is fast outliving its utility. Compounding matters further is that adding more drugs to the existing list is likely to create more problems than it can solve.

Behind The Times

The prices of some of the drugs are stratospheric. Subhabrata Das, a Mumbai-based BW photographer, recently stumped up over Rs 1,00,000 for injections of Lucentis, a new drug to treat a dangerous eye condition called CNV. Choroidal neovascularisation is the abnormal growth of blood vessels in the eye that, if left untreated, will cause blindness. There were cheaper alternatives, but Das’ doctor felt Lucentis worked best. On the balance, a lakh is a small amount to retain sight. Das, 31, can earn it back. The drug’s maker, Swiss multinational Novartis, supplies it to the eye hospital, thus, cutting out 30 per cent in trader margins. “Still, it’s expensive,” says Das. Like about 900 million Indians, Das had no health cover and had to seek the help of his parents to pay for treatment. Such stories doubtless play out in many Indian homes. But not all end happy.

The NPPA has little say in the pricing of many such life-saving drugs. Like many MNCs, Novartis imports Lucentis (its Swiss parent has the patent). Between 2003 and 2006, around 700 imported finished drugs for diseases ranging from heart disease to HIV to cancer to Parkinson’s had been registered with the Indian drug regulator. But NPPA’s approach as envisaged by the DPCO is limited to setting a mark-up on manufacturing cost for pharma companies. While it routinely calls on local manufacturers to share costs and can verify claims, this is not practical if the producer is from outside the country. All the regulator can then dictate is a margin on the ‘landed cost’ declared by the importer.

One government official told BW on the condition of anonymity that authorities preferred not to ask too many questions. “If we meddle too much, they can cut supplies,” he says. In other words, “There is no control on the pricing of imported drugs,” says Gulhati. This threatens to become a bigger problem than it is currently.




So far, Indian copycats of most MNC drugs have provided relatively cheaper options. Take, for instance, Hyderabad’s Dr. Reddy’s reverse engineered variant of Swiss drug maker F Hoffmann La Roche’s non-Hodgkin’s lymphoma drug MabThera, which at Rs 2,40,000 for a full course costs about half of what the original would. Similarly, copies of Novartis’ chronic myeloid leukemia drug (CML) Glivec, which cost Rs 1,20,000 a month, are priced at Rs 10,000. In their defence, both companies do give some drugs free to needy patients. But that has its limits. Mumbai’s Cipla has been successful at offering cheaper AIDS drugs. However, some key imported drugs still don’t have copies. Also, since January 2005, India has been awarding product patents on drugs. Copycats patented after a cut-off date can launch only after patent expiry. This should encourage MNCs to launch more breakthrough medicines here. But there is no guarantee that these roll-outs would be affordable to ordinary consumers.

This is just one situation that India’s pricing policy hasn’t envisaged. There are more. The NPPA’s recent actions on drugs outside price control are made possible by a provision that allow it to intervene when companies raise prices beyond 20 per cent in 12 months. But what if it is expensive at launch? Take Neupogen. Roche’s drug shores up white blood cell count of patients on chemotherapy. Launched a decade ago, it was priced at around Rs 5,000 a vial even in the early 2000s. Today, it costs a few hundred rupees, thanks to economies of scale and competition.

A similar case is that of Eli Lilly’s Xigris, a drug for serious blood poisoning that cost Rs 5,00,000 for a dose at the time of its launch in 2002. Lilly cut prices by 40 per cent within two years on the back of a customs duty waiver. This is true of most breakthrough life-saving treatments. They are initially priced high and as the market grows and competition comes in, prices fall. There is hardly any NPPA intervention when prices are at their peak.

By default, India’s price control formula targets top brands thrown up by market research firm ORG-IMS’s surveys for periodic mass consumption. “NPPA does not target sub-segments like therapeutic groups,” says chairman Kumar. That is another reason why such products tend to work under its radar.

But until prices fall, patients who cannot afford these medicines effectively have to do without them. This is what happened in the case of Vandana Gupta, a cancer survivor, who now runs a non-profit centre for cancer patients in Mumbai. About 14 years ago, when Gupta was on chemotherapy, a drug that could help control the resulting nausea cost Rs 1,800 a bob (now it is a fraction of that). “The doctor didn’t prescribe it because he thought I couldn’t afford it,” she recalls.

Even today, says Batura of TMC, doctors tend to prescribe what they think patients can afford. That encourages them to complete treatment. “But should patients be denied medicine just because they can’t pay for them?” asks Dr Purvish Parikh, chief of medical oncology at the same hospital. Some even challenge the $7-billion (Rs 28,700 crore) pharma industry’s stance that competition suffices to keep prices down.

According to Sengupta of DSF, even if there are several copycats of a drug, the most expensive brand (homegrown or MNC) often remains the market leader. He explains that this has something to do with how medicines are sold. “Unlike other products, you don’t shop for the cheapest drug,” he says. The more currency companies have with doctors and chemists, the more likely is their brand to be prescribed or dispensed. The promotional spend shows up in the price. The market leading brand by volumes can be 500-600 per cent pricier than the cheapest copy, says Sengupta. It is anomalies like these that have health activists like Gulhati up in arms against the government and the drugs industry. “The DPCO is defective as it allows a back-door entry to expensive medicines,” he says.

No Easy Answers

But the answer is not to sweep more drugs into it. “What if companies stop producing?” asks Leena Menghaney, an access to medicines campaigner in India for Medicins Sans Frontieres’, echoing the government official’s concern. Companies have systematically reduced their exposure to price-controlled drugs by cutting production, soft-pedalling their marketing and aggressively hawking newer substitutes to doctors. (Indian companies did this better than MNCs since they could copy any and every new drug.) These days, the price-controlled drugs are sourced by institutions like government hospitals who are relatively small buyers of medicines. Take the case of acetyl salicylic acid (ASA), better known as Aspirin. In 2001, India saw a severe shortage of this price-controlled drug, as the NPPA cut prices to a few paise per pill. ASA is not just a painkiller, it is also an effective clotbuster. But leading companies decided to quietly stop production until someone raised a stink.

Successive governments have held the view that too much control is counter-productive. “Rigid price controls result in shortages... there is an unavoidable trade-off between price and availability,” said a report by one of India’s former finance secretaries, Vijay Kelkar, way back in August 1987. This report, which paved the way for gradual decontrol, suggested that life-saving drugs be freely priced. “This is the most progressive report that the industry got,” says D.G. Shah, secretary general of homegrown drug makers’ lobby Indian Pharmaceutical Alliance (IPA) in Mumbai.

Indeed, the scaling down of price controls has coincided with a take-off in the fortunes of India’s pharma industry. For example, in line with the Kelkar report, vaccines were freely priced. Today, India is among the world’s biggest vaccine producers. More recently, Prime Minister Manmohan Singh also spoke out against “irrational” price controls.

The industry for its part is unhappy with the manner in which prices are controlled with no allowances for ability to pay (both the rich and the poor pay the same) or even investment in quality. Ranjit Shahani, vice-chairman and managing director of Mumbai’s Novartis India cites the example of its anti-epilepsy drug Tegretol. The drug, carbamazepine, is under price control. Shahani says that the NPPA has pegged its price to the cost of Chinese raw material that some copycat makers use. But Tegretol, he says, uses more expensive Indian-made material because it contains no traces of bromine, an impurity that is known to trigger epilepsy. “What should I do, buy from China?” he asks.

Companies at the receiving end of the NPPA’s latest notices are crying foul. They believe that free pricing is important to generate funds for drug research. Swati Piramal, director of Mumbai-based drug maker Nicholas Piramal, says that medicines outside control subsidise the ones in it. “Otherwise, where is the money for R&D going to come from?” she asks. Last year, the Rs 2,500-crore Nicholas Piramal spent Rs 130 crore in finding new cures for diseases like cancer in response to India’s move to a drug patents regime. There is another problem says Ramesh Adige, an executive director at Gurgaon-based Ranbaxy Laboratories. The NPPA has revised the 20 per cent permissible increase in price per year to 10 per cent, with retrospective effect. “That is unfair, the industry may have to evaluate options,” says Adige.

The pricing authority’s actions bring to a head a three-year battle that the industry has fought with Union minister for chemicals and fertilizers Ram Vilas Paswan. The minister has been threatening to bring 354 drugs under price control through a new pharma policy. The industry accuses him of trying to earn political dividend by publicly flaying them for profiteering. And it has lobbied hard to preempt the minister from carrying out his threat. “The industry is united against expanded and intrusive price controls,” says Adige. The policy is now out of Paswan’s hands and rests with a group of ministers (GoM) appointed by the PM.

This is not a good sign. Since 1999, the entire pricing debate has been caught in a web of committees. The GoM, led by Union Agriculture Minister Sharad Pawar, is the fourth committee in eight years charged with the task of giving India a workable drug pricing policy.

A study done by the Mumbai-based Forum for Medical Ethics in 2003 revealed that drug companies sponsored weddings and handed out cellphones to doctors if they thought this could get them to prescribe their brand. While the more expensive gifts — such as an exotic cruise — are reserved for high-value prescribers, expensive cutlery, home accessories are handed out as candies to medical practitioners.

Moreover, drug companies take advantage of the practice in India of patients going directly to the drug stores, giving chemists a say in their choice of drugs. Chemists often substitute a doctor’s prescribed brand for another of the same drug if it gets them better margins. This has led some companies to promote medicines directly to the trade at 1,000 per cent margins and keep their maximum retail price unchanged.

This shows up in what the consumer pay. Vending drugs by their scientific name instead of by brand name while keeping the quality unchanged will bring down this cost, say health experts. Ramesh Bhat, a professor at IIM Ahmedabad, cites the example of SEWA, an NGO that has reduced drug prices by 15-20 per cent by running pharmacies that stock ‘generics’.

“Quality drugs are cheaper when purchased under their generic names,” says the website of Vadodara-based Locost, another NGO that makes and supplies generics. Currently, the law does not force doctors to prescribe by generic name, nor chemists to dispense the cheapest drugs available. In a country, where over Rs 20,000 crore of drug brands are sold every year, a shift is unlikely — nor is it practicable — in the foreseeable future.

As consumer groups and producers joust over the price of drugs, neither is happy with the government’s role. For one, just 10 per cent of our population has any health cover. Worse, the government is not a large buyer of medicines and, hence, unable to negotiate with companies against assured volumes. “The consumer is left to fend for himself,” says IPA’s Shah. A 1998 DSF analysis showed that Indians were paying higher prices for some commonly-used medicines than westerners supplied by government programmes. In India, even in diseases like AIDS, where there has been substantial public-funded intervention, some new drugs are reportedly still not part of free or subsidised drug programmes.




Recently, the Clinton Foundation got Indian companies to halve prices of copycats of new AIDS medicines. Yet, this is still too expensive for India to buy, says an official in the capital who is part of the country’s AIDS control programme. Also, government-backed hospitals like TMC, are exceptional. One recent study on corruption in government hospitals saw half the respondents complain that prescribed medicines were not available.

Ultimately, it is only when governments start paying through their nose for medicine do they look for solutions, says Menghaney. “Unless government hurts, it won’t act.”

# posted by Airavat @ 3:21 AM