The Hindu Business Line : Fluctuating drug prices: Call for a holistic view

THE Union Chemicals and Fertiliser Minister, Mr Ram Vilas Paswan walks a mine-field as he attempts to "clean up" the inconsistencies in medicine prices across the country.

As attempts are on to put a fix on who makes money on the medicines — pharma companies, traders or chemists — the consumer can hope for some reprieve in medicine prices, if the system does get cleaned up, say industry analysts. But the Government would require a "super-broom" to address issues inter-twined with the overall pricing structure on medicines, they add.

"Trade margins may be the obvious issue. If resolved, it addresses the affordability factor. But what about promotions through gifts to doctors, poor hospital infrastructure for medicine dispensation? These affect availability of medicines," a health-worker points out.

At the core of the Mr Paswan's concern are three key issues — an effort to sell all drugs at the maximum retail price (MRP); to resolve the disparity in prices among generic or chemically-similar medicines and the span of price control that the Government has over medicines.

"It would be beneficial if States agree for a uniform MRP on medicines, as tax on medicines account for about 35 per cent of retail price. Generic drug prices can be addressed through an agreeable formula on margins given to the trade.

But objective studies done on price-controlled and de-controlled drugs have shown that prices have fallen, when controls are off medicines," an industry analyst said.

Trade margins: "A medicine crosses different layers and sub-layers in the trade before it reaches a consumer. In price-controlled drugs, stockists and retailers get an eight to 16 per cent margin, while in a de-controlled drug the trade margins are between 10 and 20 per cent," he added.

"There are over 50,000 formulations in India and different companies have different marketing policies. Some use the ethical route, through medical representatives, doctors, promotional materials, etc. Others may choose the trade route through retailers. Margins here are low because the retailer invests in establishment of stocks, staff and promotion of products ," says Mr Daara Patel, Secretary General, Indian Drug Manufacturers Association. The association is scheduled to meet the Minister this week to voice its concern.

Price control: The Indian Pharmaceutical Association, in its presentations to the Minister, has illustrated the impact of controls on medicine prices and availability.

"A study of price movement for the 12-month period ended March 2003 across the total pharmaceutical market of India for 8,967 brands under top 20 therapeutic groups covering 73 per cent of the market shows that the prices of medicines in totality have declined by 1 per cent during the period," the note said.

Pharma company representatives caution: "If controls are exercised over medicines, companies will find it unviable to produce them. And if the medicine goes out of the market, then it would have to be imported and consumers would have to pay the imported price. Competition is the best controller of price and even the consumer will have a choice."

The IPA note points out: "Prices of many commonly used medicines such as antibiotics (- 9 per cent), antidiabetics (- 4 per cent), Tuberculostatics (- 8 per cent), etc, have declined during the period."

Gifts to doctors: Dr Sanjiv Malik of the Indian Medical Association points out that pharma companies should be encouraged to invest in continuing medical education programmes and journals, rather than give free flight tickets or gifts to doctors to push medicines.

Pharmacists and medical representatives point out that companies undertake trade-practices like "pressure-selling" to meet their targets, forcing distributors to rid stock through unhealthy practices.

"Yes, all of this needs to be looked at. But pharma companies are always the favourite whipping boys. Indian drug prices are lower than even neighbouring Pakistan. Industry has a domestic commitment, but only companies with an export network are able to sustain their profitability these days. The Government should look at making prices affordable and medicines accessible, but not by hurting the industry's efficiency. They should work in partnership, with health insurance companies, hospitals, doctors and pharma companies. Only a holistic view can resolve the fluctuations in medicine prices," states a pharma industry representative.