Drug price control does not help consumer

Ranga Iyer | Updated on March 12, 2018

Price control has stifled drug availability for poor patients in particular.

Improving healthcare access via drug price control is akin to bailing out water without plugging the holes in a ship.

Every time the problem of poor healthcare access in India is discussed and solutions sought, ‘price control' of medicines seems to be an automatic choice for many stakeholders.

Conveniently forgotten is the fact that the previous price control regime in India — Drugs (Prices Control) Order 1995 — did not improve patient access to drugs, nor was it a success in other respects. There's little evidence to suggest that price control will work this time around.

The opposite is possible, though. Like in the past, price control could result in reduced availability as pharmaceutical companies increasingly switch to manufacturing non-price controlled drugs and formulations.

IMS data indicate the value share of drugs under price control in India's pharmaceutical market declined from 26 per cent in 2004 to 15 per cent in 2011, while volume share fell from 40 per cent to 35 per cent in the same period.

The average number of players and the number of new introductions per molecule also reduced bulk drugs under price control.

It is a known fact that, out of 74 drugs under price control now, only 47 are being manufactured and companies have discontinued manufacturing the other bulk drugs under price control.

From India to China

Worse, bulk drug manufacture of 25 of the 74 key DPCO molecules moved from India to China. Manufacturers felt there was no incentive to manufacture bulk drugs under price control in India. Indian pharma companies are, therefore, forced to import these bulk drugs from China, where bulk drug manufacturing capabilities have been ramped up significantly.

Key bulk drugs, where Indian manufacturers are forced to rely on import from China include tetracycline, erythromycin, doxycycline prednisolone and penicillin. Price controls have increased our dependence on China for critical molecules.

There are other reasons that do not support increase in span of price control.

As per a 2004 WHO study on annual price change between 1994 and 2004, the annual price rise of drugs outside price control was not significantly higher than that of those under price control. Conducted across 152 ‘essential' formulations, the study comprised 115 non-price-controlled drugs and 37 price-controlled drugs (that is, those under DPCO).

Of the 37 price controlled drugs, 11 showed a price decline/stagnancy over the study period, while 26 showed a rise in prices.

The range of annual price changes was 2.58 per cent to 12.29 per cent, with a mean change of 2.92 per cent only.

Of the 115 non-price-controlled drugs, 34 showed a price decline/stagnancy over the study period, while 79 showed price rise.

The range of annual price changes was 8.4 per cent to 18.2 per cent, with a mean change of 3.75 per cent only. It was apparent that the price rise of non-price-controlled drugs was in line with that of price-controlled drugs.

Patient access issues

Furthermore, price control has not expanded the market into rural areas or improved access to poor patients.

Bringing drugs under price control also does not necessarily mean an increased ability of patients to buy these drugs.

For instance, low prices of anti-HIV drugs have not resulted in improved ability of patients to buy them due to impediments such as few and far-flung Primary Health Centres and the non-availability of drugs.

Compliance rate with the Universal Immunisation Programme is dismally low at below 60 per cent even though the vaccines are provided free under this programme.

Even in semi-urban areas, the share of drugs under price control is declining.

An IMS study showed that sale of DPCO medicines in Class II to Class VI towns had decreased from 47 per cent in 2006 to 45 per cent in 2009.

Price control also is not effective because drug prices in India are already the lowest compared with other developing countries.

A 500 mg ten-pack strip of ciprofloxacin sells for Rs 89 in India, Rs 423 in Pakistan and Rs 393 in Indonesia.

Hurdle to R&D

On other counts too, price control will not achieve the objective of increasing access.

Low-income households in India typically rely upon the public healthcare system.

But inadequate healthcare infrastructure and low availability of drugs in the public system being a perennial problem, price control would in no way enhance a patient's ability to access these drugs.

Conversely, reducing revenues due to price control would affect R&D spends and finally result in fewer introductions of new generic drugs. All this further affects access and the ability of the poor to avail of essential drugs.

Even in the Philippines, while the rich and middle-class enjoyed discounts on drugs they would have anyway purchased even without price caps, the poor were still unable to purchase the drugs needed to control or cure their ailments. In India, Jan Aushadhi stores — a Government initiative selling low-cost generic alternatives to branded medicines — have failed to increase availability and affordability.

Instead of viewing price control as a magic wand, it makes more sense to address drugs industry issues on a case-by-case basis.

(The author is Advisor to PhRMA and Past President, Organisation of Pharmaceutical Producers of India)

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

Published on March 08, 2012
This article is closed for comments.
Please Email the Editor