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— M. Karunakaran

Less than 60 per cent of the children are vaccinated despite being provided free by the Government.

Even after 60 years of Independence, 65 per cent of our population does not have access to modern medicine. The situation is worse in villages where around 70 per cent of our population lives. About 80 per cent of doctors, 75 per cent of dispensaries and 60 per cent of hospitals are located in urban areas.

In comparison, in China, only 15 per cent of the population does not have access to modern medicine.

The pharmaceutical policy is aimed at providing high quality medicines at affordable prices. But do price controls serve this purpose? Do cheaper medicines make healthcare more accessible to our people as increasing access to medicines is one of the key healthcare objectives of any nation?

Pharmaceutical pricing in India is quite intriguing. Like crude oil for petroleum products, material costs form a key component of pharmaceutical products. Therefore, with everything else remaining the same, the price of the finished products will depend primarily on material costs. If any significant increase in such input costs cannot be neutralised in time, the business for the products concerned could be in jeopardy.

Recently, in the petroleum industry, two major private sector players were compelled to close down their domestic retail oil business. Petroleum retail business is now being run only by public sector oil companies under huge government subsidy.

A similar situation has now arisen in the pharmaceutical industry as well, due to rapid surge in prices of active pharmaceutical ingredients (APIs) and key excipients for which the Indian industry has been heavily dependent on China.

The recent stringent pollution control measures imposed by China have led to the closure of many manufacturing units exporting APIs, triggering a steep increase in prices of APIs and intermediates imported by the Indian industry.

Unlike other industries which can neutralise such increase in input costs through commensurate increase in price, the pharma industry needs approval of the regulator, the National Pharmaceutical Pricing Authority (NPPA), to raise prices.

It may come as a surprise to many that all the ethical pharmaceutical products (that is, those that are not OTC) marketed in India come under governmental price control. In other words, 100 per cent of ethical pharmaceuticals are price controlled or regulated. The pharma sector has remained an exception to economic liberalisation and reform process that have changed the face of every other industry in India since the 1990s.

As per the Drugs (Prices Control) Order enacted in 1995, 74 basic drugs and their formulations (medicines in the form of tablets, capsules and injections) come under price control.

These formulations account for about 20 per cent of the Indian pharmaceutical market in value. The remaining 80 per cent were brought under a price monitoring system in April 2006 which does not allow more than an annual 10 per cent increase in prices.

The Government has an effective surveillance system that monitors prices of pharmaceuticals. When API prices fall, it acts immediately by issuing a notification to reduce formulation prices. Similarly, when material costs rise, the NPPA does not seem to resort to similar offsetting measures to maintain equity in its decision-making process.

In such cases, companies are required to follow a bureaucratic procedure by moving applications to the NPPA seeking an increase in formulation price and that too only after purchasing three lots of APIs at the higher price. The Government is expected to revert to such applications within two months.

Moreover, the share of medicines in the total healthcare spend is only 15 per cent. And about 60 per cent of the medicine price goes towards taxes and trade margins. According to ORG-IMS data, pharmaceutical prices have risen at a lower rate than the inflation rate in recent years. In most cases, prices have been reined in by tough competition.

Although the main objective of the Government for following such stringent price control measures is undoubtedly to increase access to medicine in our country, the question that needs to be addressed is: Have these measures helped the country to increase access to medicine at all?

It is a myth that prices of pharmaceuticals are standing in the way of access to healthcare. According to WHO, less than 60 per cent of Indian children undergo primary vaccination, which is provided free by the Government.

Two hundred million women and more than 80 per cent of the children in India are anaemic despite the fact that iron supplements cost only one rupee.

Again, recent data from the National AIDS Control Organisation (NACO) indicate that India has 24.70 lakh people with HIV, but those registered at ART (anti-retroviral therapy) clinics for free treatment is 4.20 lakh, that is, 17 per cent of the country’s HIV population.

However, the number of patients actually taking ART therapy, which is free, is only 1.46 lakh, making just 5.9 per cent of the HIV population.

This shows that the real problem lies mainly in the healthcare infrastructure, delivery and financing systems of the country and not just in the costs of medicine. Even within multi-component integrated healthcare process, medicine is just one of the many.

The Government has reiterated several times that its two key priority areas of investment are education and healthcare. However, the Government has not ‘walked the talk’.

India spends relatively little on healthcare, which accounts for 4.8 per cent of India’s GDP. Of this, 3.6 per cent is contributed by the private sector and only the balance 1.2 per cent by the Government. Compared to the neighbouring countries, the Government’s spend on healthcare as a per cent of GDP is one of the lowest.

Further, a recent WHO report indicates that India spends just 17 per cent of its public expenditure on health while the corresponding percentages for Pakistan, Bangladesh, China and Brazil are 20, 28, 38 and 54, respectively.

Does the current price control regime help improve access to modern medicines to poor patients of the country? The fact is that despite various measures by the Government over the last 60 years, as many as 650 million people of our country still do not have access to modern medicine.

The current policy of price control just diverts the attention of civil society from key issues such as poor healthcare infrastructure, delivery and financing. Such price control systems merely subsidise medicines for those who can afford to pay, with little benefit to the poor.

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