The right medicine

In two related orders issued within 10 days, the Centre has imposed a trade margin cap on 390 brands of anti-cancer medicine, which is expected to lead to an MRP reduction of up to 87 per cent in some cases. According to the National Pharmaceuticals Pricing Authority (NPPA), the rationalisation of trade margins (capped at 30 per cent of the MRP, or conversely a 43 per cent mark-up on the price to the stockist) will lead to an MRP reduction of 50-75 per cent in the case of 124 brands, while in the case of another 121 brands, the reduction will be 25-50 per cent. A fall of over 75 per cent applies to just 38 brands. The NPPA has acted rightly in the consumer interest by clamping down on the margins of these life-saving drugs that do not fall under the ambit of price control. The Drug Prices Control Order, 2013, allows for an annual retail price increase of 10 per cent in the case of these ‘non-scheduled drugs’. The move comes as a relief to 22 lakh cancer patients, whose out-of-pocket (OOP) expenses are, as the Centre notes, 2.5 times more than the corresponding outgo in the case of other diseases. Add to this, the fact that OOP expenses in India account for nearly 70 per cent of total healthcare expenses, with insurance cover still out of reach for most, and there can be no denying that cancer care drags even middle-class households into debt and economic distress.

The view that price controls act as a dampener to the pharma industry is a somewhat exaggerated one. The ₹2-lakh crore industry is growing at over 20 per cent annually. While it is true that the DPCO 2013 expanded the list of price-controlled medicines to about 350 drugs and another 650 or so formulations, from less than 100 that prevailed earlier, the price control now focusses on trade margins, as opposed to the earlier cost-plus formula. In fact, consumer groups have argued that cancer drugs may continue to be unaffordable despite the cap on trade margins, as the manufacturers’ margins remain very high. While it would only be fair to allow producers room to innovate and produce more, with market forces balancing consumer and producer interest, windfall gains such as those arising out of patented medicines need to be critically examined. By permitting Natco Pharma to sell a kidney cancer drug patented by Bayer under a compulsory licence at affordable prices, India’s Patent Office struck an important blow for patient rights.

India’s pharma regulation is well regarded globally for its efforts to reconcile the interests of all stakeholders. Ayushman Bharat and its State level equivalents have helped reduce the costs of critical care. However, the moot point is whether the current capping of prices will erode India’s policy elbowroom with respect to TRIPS (Trade Related Intellectual Property Rights). The compulsory licensing option shouldn’t be sacrificed.

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