Regulate drugs and doctors too

The problem of unethical and anti-competitive pricing practices by drug-makers, which had promoted the intervention of the National Pharma Pricing Authority, is far from resolved. At issue here is the arbitrary and wide variation in pricing for different brands of the same underlying molecule. The wide differential in the prices of branded formulations of the same underlying drug is clearly a result of the collusion between large drug companies and the medical fraternity. While the Medical Council of India’s Code of Ethics Regulation 2002 mandates doctors to prescribe generics to the extent possible, it is the expensive branded medicines that are thrust upon patients in practice. Unlike in other product markets, the drug consumer isn’t in a position to exercise an informed choice.

In July, the NPPA had imposed restrictions on the selling price of 108 drug formulations, brands of which reflected such arbitrary and mystifying price variations. The problem was that these drugs fell outside the National List of Essential Medicines (NLEM) and therefore were outside the purview of the NPPA. While the law does allow the NPPA to fix the price of any medicine in the “public interest” — which extends to even non-NLEM formulations — this power, conferred under para 19 of the Drug Price Control Order, is exercisable only in extraordinary circumstances. So much so, the NPPA’s July order capping the prices of 108 anti-diabetes and cardiovascular formulations was bound to be legally challenged. Ironically, even as the petition filed by the pharma industry against the NPPA’s order was being heard by the Mumbai and Delhi High Courts, the NPPA altered its position that it was empowered to regulate the prices of non-essential drugs and stated this change was effected “in compliance with the directions received from the Government”. Equally significant was the timing of the move — just ahead of Prime Minister Narendra Modi’s maiden official visit to the US.

While using the NPPA to curb anti-competitive pricing may be a legally grey issue, it is in the industry’s interest to acknowledge the existence and gravity of the problem. One solution is to regularly revise the list of drugs under the NLEM in order to prevent vital drugs from escaping the NPPA’s purview. At the same time, it is imperative that drug-makers voluntarily come out with a code of best practices with regard to pricing. Also, the insidious nexus between the drug industry and medical practitioners needs to be firmly sundered by a mechanism that includes strict penalties. It is best that an independent regulatory body be set up to address these and related issues concerning the drug industry.

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