Andrew Hill, Senior Visiting Research Fellow at the University of Liverpool, works with his team on the costs of production of drugs to treat HIV, tuberculosis, viral hepatitis and cancer. In an interview with BusinessLine , Hill says that knowledge of cost of production is crucial to negotiate while procuring drugs. He argues that Indians have always traditionally gone with cost-based pricing and that government think-tank NITI Aayog should not attempt to change this. He says when we know a drug costs a certain amount then we can question so as to why its MRP costs ten, hundred or even sometimes thousand times the cost of production. Excerpts:

Could you give examples of certain drugs that are crucial and expensive but could be sold at a cheaper price?

A classic example would be the treatment for Hepatitis C in the US, in 2014. The list price was $84,000 when we published that the same treatment could be made available for $100. The drug company was charging 840 times more than the cost of production. Likewise for HIV drugs, when the treatment of HIV in the European Union costs $10,000 in 2001, I had said that you could treat HIV with $300 a year — which is $1 dollar a day. A total of 40 million people were affected and there was not enough money in the world to treat HIV. But today, it is possible.

Which drugs are you currently working on?

We are trying to give people a vision on cancer. There are so many drugs for cancer that are incredibly expensive. Monoclonal antibodies, Tyrosine Kinase Inhibitors — the more modern cancer drugs in that category are charged at a crazy price. It is a ridiculous amount of money, reaching up to £4,00,000 a year and we are reaching a stage where there is a relentless inflation in cancer drug pricing.

With our work, we have established a method that involves calculating the cost of production, donors, finding size of demand, looking at diagnostics and up-scaling.

India’s Niti Aayog is strictly against cost-based pricing, arguing it is difficult to track cost of production of drugs in each factory.How do you refute that?

I am not saying that the numbers we come out with are 100 per cent accurate but they are pretty good. We originally predicted that Hepatitis treatment would cost $100 and now it costs $50, so we were actually quoting on the higher side.

People need to understand the difference between the cost of a drug and the price of a drug. If you can just tell the people the two numbers — that the treatment of Hepatitis C costs $100 in the US but you are paying $84,000 — people will understand the price difference. Indians have traditionally gone with cost-based pricing, they need to carry on doing this. Suppose you have a database with cost-based prices, and you put in the retail prices, and you do a simple excel multiplier, you can just look for the outliers. For example, a particular drug costs $1 and is being sold for $100, you can point that out.

UK’s National Institute for Health and Care Excellence (NICE) is known for bargaining hard for patients to get access to expensive drugs, especially cancer. How does NICE achieve this?

Cancer drugs give you very few months of survival. To spend £1,00,000 on a drug that gives you three to four months of survival violates the thresholds of the NICE policy. The National Health Services (NHS) will reject drugs that are expensive, given their benefits. If a pharmaceutical company walks away from the NHS everybody loses, so most companies eventually will agree on a price, but NHS bargains hard. The reason the prices remain confidential is because the UK is used as the reference country. If it becomes publicly known that the price in the UK is very low, then other countries would want to lower their prices too.

India depends a lot on importing Active Pharmaceutical Ingredients (API) from China, what safeguards should we maintain?

China is a world factory for medicines. However one has to be careful about the quality. You can get a pilot batch that looks good but you got to keep testing to make sure that quality is maintained. You should have at least three suppliers active, so you don’t face issues when the Chinese shut their plants.

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