The Hindu Business Line : A prescription that won’t work

Rather than drug price control, fostering private sector competition and enhancing the presence of the public sector may work to lower healthcare costs

The Government’s approach to laying down a preferential regime of price control on essential drugs is flawed on more than one count. The policy contemplates allowing companies with a higher research intensity to mark up the price of essential drugs beyond the limit that might be prescribed by the Government for other companies. It seeks to classify companies as those possessing a ‘gold standard’ (presumably on research intensity) and those without it.

While there can be no argument about incentivising companies to pursue research and development, the Ministry’s choice of criteria is fraught with legal and administrative complications. There is, for instance, the issue of laying down five per cent of the turnover as the minimum R&D expenditure for securing the ‘gold standard’ status. The choice of setting a minimum number on scientists who would be engaged in such pursuits is another. Then the stipulation that the company’s manufacturing facilities must be certified by at least two foreign authorities is, besides reflective of a colonial mindset, no less contentious. Each one of these is liable to drag the Government in endless rounds of litigation by companies aggrieved by some aspect of decision-making. Additionally, they are certain to end up as apt devices for breeding corruption in the administration of a price control regime in essential drugs.

Of course, rising healthcare cost is a problem. The national income data on household spends on healthcare clearly testify to it even as the public hospitals languish without enough funds. Medicines are also not a discretionary item of consumption in a householder’s budget for the state to be indifferent to rising expenditure on this count.

However, price control on drugs is a complex issue. For no other reason but the fact that a patient, unlike consumers of other goods, is by no means the ‘king’. The choice of the drug and how much to take is made by the doctor attending on him and, increasingly now, by the chemist. Compounding the problem of controlling the healthcare costs is the role of a doctor who holds a position of trust vis-À-vis patients and the choice of medicines that he prescribes is not dictated by any pecuniary considerations — a situation made more onerous by the fact that spurious and sub-standard drugs are an ugly facet of the healthcare industry in the country. In the circumstances, applying a traditional prescription such as ‘price control’ may not quite work. Fostering private sector competition and enhancing the presence of the public sector as a credible alternative agent for delivering healthcare is the only one that would.

Related Stories:
Pharma cos with R&D focus may get leeway in pricing
Concern over delay in finalising pharmaceutical policy
Forum for cap on margins of non-branded generic drugs

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